Mar 31, 2011
1. Accounting Concepts:
The Company follows the mercantile system of accounting and recognises income and expenditure on accrual basis except for insurance claims, which is accounted for on cash basis. The accounts are prepared on historical cost basis as a going concern and are consistent with generally accepted accounting principles. The financial statements have been prepared to comply in all material respects with the notified Accounting Standard under Companies Accounting Standard Rules, 2006.
2. Use of Estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operation during the reporting period end. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from estimates.
3. Fixed Assets:
Fixed Assets are stated at cost less depreciation. Cost of fixed assets is inclusive of incidental expenses incurred upto the date of commissioning of project, interest on borrowings up to the date of capitalization. Exchange losses or gains arising on specific foreign currency loans taken for acquiring the assets and cancellation of forward exchange contract relating to the acquisition of fixed assets charged to profit and loss account.
Depreciation is provided on pro-rata basis under straight- line method in accordance with Schedule XIV of the Companies Act, 1956 Depreciation on electrical installation and factory equipments is provided at accelerated rate of 5.28%. Wherever revision in cost has occurred due to increase or decrease in long term liability on account of exchange fluctuation, changes in duties or similar factors, the depreciation on the revised unamortised depreciable amount is provided prospectively over the remaining useful life of the assets.
5. Impairment Assets:
In accordance with Accounting Standard 28 - Impairment of Assets issued by ICAI, the carrying amounts of assets are reviewed, if there is any impairment indicator, at each balance sheet date in order to ascertain impairment based on internal / external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is greater of the assets net selling price and value in use.
Investments are stated at cost less provision for permanent diminution in value, if any.
7. Segmental Reporting:
As per the requirement of the Accounting Standard 17 - 'Segment Reporting' issued by ICAI, the segmental reporting has been provided in Notes on Accounts.
8. Foreign Currency Transactions:
Initial Recognition: Transactions in foreign currency entered during the year are recorded at the exchange rates prevailing on the date of the transaction.
Conversions: Monetary assets and liabilities denominated in foreign currency are translated into rupees at exchange rate prevailing on the date of Balance sheet.
Exchange Differences: All exchange rate differences relating to monetary items are dealt with in the profit and loss account.
Finished Goods Valued at lower of estimated average (Manufactured) cost and net realisable value.
Finished Goods Valued at lower of cost and net (Traded) realisable value.
Raw Materials At Cost (FIFO) Work-in-progress and Processed Yarn Valued at estimated average cost.
Consumables At Cost (FIFO)
Import License At net realisable value
Waste Scrap At net realisable value
Cost of Inventories: The cost of inventories comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
Net realisable value: 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.
10. Taxes on Income:
(a) The tax payable method is followed for providing current tax liability. The difference between provisions and payments, if any, are recognised in the year in which assessment is completed.
(b) Deferred tax benefit or expenses is recognised on timing difference between taxable income and accounting income that originate in one period and are capable reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted upto the balance sheet date.
11. Earning Per Share:
Basic earning per share is computed by dividing net profit or loss after tax by the weighted average number of equity shares outstanding for the period.
Diluted earnings per share is computed by dividing net profit or loss after tax by the weighted average number of equity shares considered for deriving basic earning per share and also the weighted average number of equity shares that couid have been issued upon conversion of all dilutive potential equity shares.
A provision is recognised when the Company has a present obligation as a result of past event, it is probable that outflow of resources will be required to settle obligation in respect of which a reliable estimate can be made.
13. Cash and Cash equivalents:
Cash and Cash equivalents in the cash flow statements comprise cash at bank and in hand and short term investments with an original maturity of Six months or less and include dividend account balance, which is not available for Company's use.
14. Recognition of Revenue:
Revenue from sale of goods is recognised on dispatch. Sales are net of rebates and price concession. Export sales are recognised on the basis of bill of lading. Income, Expenditure and Export Incentives / Benefits are accounted for on accrual basis.
15. Repairs & Replacements:
Repairs and Replacement expenses are charged to profit and loss account as and when incurred.
16. Prior Year Adjustments:
Besides the debit / credit in previous year adjustment account, amounts related to previous year, raised / settled during the year have been debited / credited to respective heads of accounts.
17. Miscellaneous Expenditure:
a) Preliminary Expenses are being written off over a period of 10 years.
b) Public Issue Expenses are amortised and being written off over a period of 10 years.
c) Market Development expenses are amortised and being written off over a period of 10 years.
d) Share Capital Increase expenses are amortised and being written off over a period of 5 years.
18. Employee Benefit:
a) Provident Fund: All the employees of the Company are entitled to receive benefits of the provident fund, a defined contribution plan managed by or recognized fund management Company in which both employees and the Company contributed at a stipulated monthly rate. The Company has no liability for future provident fund benefits other than its annual contribution as an expenses in the year it is incurred.
b) Gratuity: The Company provides for the gratuity, a defined benefit retirement plan covering all employees. The plan managed by or recognized fund management Company provides for lump sum payments to employees at retirement, death while in employment or termination of employment. The Company account for liability of future gratuity benefits based on an actuarial valuation on projected unit credit method carried out annually for assessing liability at the balance sheet date as per revised AS-15.
c) Leave Encashment: Short term compensated absences are provided based on estimates. Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per revised AS-15. Actuarial gain / losses are immediately taken to profit and loss account.
19. Research and Development:
Expenses related to the sample developments, improvement in the quality of the current products and innovation of new products and cost of processes related thereto are included in Research and Development including human resources and cost of in-house developed fabrics reduced by the amount received of samples, if any.
Accounting policies, which are not specifically referred to, are consistent with generally accepted accounting practices.