Accounting Policies of Gem Spinners India Ltd. Company

Mar 31, 2015

1. CORPORATE PROFILE:

Gem Spinners India Limited was incorporated as a Public Limited Company on 18th October 1990. The Company's shares are listed in Bombay Stock Exchange.

The Company has set up a plant for the Manufacture of Cotton yarn and Grey Fabrics at No.14 Mangalam Village, Kancheepuram District, Tamil Nadu.

2. BASIS OF PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS

i) The financial statements have been prepared under the historical cost concept and in accordance with Generally Accepted Accounting Policies, the mandatory Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 and relevant provisions of Companies Act, 2013, as adopted consistently by the Company.

ii) The company generally follows mercantile system of accounting and recognizes significant items of income and expenditure on accrual basis.

iii) All inventories and stores & spares are valued at cost or net realizable value whichever is lower.

3. USES OF ESTIMATES

The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from these estimates in the future period.

4. FIXED ASSETS

i) Tangible fixed assets are stated at cost of acquisition (net of CENVAT/ VAT wherever applicable) less accumulated depreciation/ amortization and impairment losses if any, except free hold land which is carried at cost less impairment losses if any. The cost comprises purchase prices, borrowing cost if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Subsequent expenditure relating to an item of fixed asset is added to its book value only if it increases the future benefits from the asset beyond its previous assessed standard of performance. All other expenses on 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 as and when they occur.

ii) Depreciation on Fixed Assets is provided on Straight Line Method at the rates prescribed in Schedule II of the Companies Act, 2013.

iii) Gains or losses arising from disposal of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of such assets are recognized in the statement of Profit and loss.

5) INVENTORIES

Stores and Spares are valued at cost.

6) REVENUE RECOGNITION

i) Sales of Goods

Revenue is recognized to the extent that is probable that the economic benefits will flow to the company and the revenue can be reliably measured. Sale of products is recognized when the significant risk and reward of ownership of the goods have been passed to the buyer. Sale value excludes excise duty, education cess, secondary and higher education cess, CST and VAT.

ii) Interest:

Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.

iii) Export Benefits:

Export entitlements in the form of Duty Drawback and other schemes are recognized in the statement of Profit and loss when the right to receive credit as per the terms of the scheme is established in respect of exports made and when there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.

7) BORROWING COST

Borrowing Costs directly attributable to acquisition and construction of qualifying assets are capitalized as a part of the cost of such assets as per Accounting Standard 16. All other borrowing costs are charged to revenue.

8) DEPRECIATION

Depreciation on Fixed Assets is provided on Straight Line Method at the rates prescribed in Schedule II of the Companies Act, 2013 except Plant & Machinery based on useful life ascertained for such asset.

9) EMPLOYEE BENEFITS

Short Term

Short term employee benefits viz., salaries and wages are recognized as expense at the undiscounted amount in the statement of Profit and loss for the year in which the related service is rendered.

Long Term Post Retirement

Provident Fund

Provident Fund is a defined contribution scheme and the contributions is recognized as an expenses in the Profit & Loss Account for the year in which the employees have rendered services. The company contributes to provident fund administered by the Government on a monthly basis at 12% of employees basic salary. There are no other obligation other than the above defined contribution plan.

State Defined Contribution Plans

Employees' Pension Scheme 1995

The Provident Fund and the State Defined Contribution Plans are operated by the Regional Provident Fund Commissioner.

Gratuity

Gratuity is a defined benefit retirement plan. The Company contributes to the Scheme with Life Insurance Corporation of India based on actuarial valuation done by them as at the close of the financial year.

Leave Encashment

The Company normally allows its employees to utilize the leave.

10) FOREIGN CURRENCY TRANSACTION

Foreign Currency Transactions are recorded at the rate of exchange prevailing on the date of the transaction. Exchange differences arising on actual payment / realization referred are adjusted in the statement of Profit & loss.

11) PROVISIONS, CONTINGENT LIABILITES AND CONTINGENT ASSETS

1. Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as result of past events and it is probable that there will be outflow of resources.

2. Contingent Liabilities (Service Tax & Sales Tax): Rs.70.02 Lakhs (Rs.61.52 Lakhs)

3. Contingent Assets are not recognized.

12) SEGMENT REPORTING :

The Company is engaged in the business of manufacture and export of cotton yarn and grey fabrics and also trade in the same commodity and accordingly trading is considered as a segment.

13) IMPAIRMENT :

Consideration is given at each balance sheet to determine whether there is any indication of impairment of the carrying amount of the company's fixed assets. If any indication exists an asset's recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of an asset exceeds recoverable amount.

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Mar 31, 2014

A) GENERAL

The financial statements are prepared in accordance with Indian General Accepted Accounting Principles ("GAAP") under the historical cost convention (except for certain revalued fixed assets) on the accounting principles of a going concern and the Company follows mercantile system of accounting and recognizes income and expenditure on accrual basis except those with significant uncertainties

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent liabilities on the date of financial statements. The recognition, measurement, classification and disclosures of an item or information in the financial statements are made relying on these estimates. Any revision to accounting estimates is recognized prospectively.

B) FIXED ASSETS

All fixed assets are stated at cost (net of CENVAT / Value Added Tax) and adjusted by revaluation in case of certain Land, Building, Plant & Machinery and Electrical Installations, less accumulated depreciation and impairment loss, if any.

In accordance with AS 28 on ‘Impairment of Assets'' where there is an indication of impairment of the Company''s assets related to cash generating units, the carrying amounts of such assets are reviewed at each Balance Sheet date to determine whether there is any impairment. The recoverable amount of such assets is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized in the Profit and Loss Account whenever the carrying amount of such assets exceeds its recoverable amount.

C) INVENTORIES

Raw Materials, Stores and Spares are valued at cost.

Finished Goods are valued at lower of cost or net realizable value.

Stock-in- process is valued at estimated cost.

Waste is valued at net realizable value.

D) SALES

Revenue is recognized when the goods and all the significant risks and rewards of ownership are transferred to the buyer and no significant uncertainty exists regarding the amount of consideration. Export Sales are inclusive of deemed exports. Local sales are net of sales tax.

E) BORROWING COST

F) DEPRECIATION

Depreciation is provided on straight line method at the rates prescribed under Schedule XIV of the Companies Act, 1956, for all assets except plant and machinery and electrical installations which have been considered as continuous process of plant as defined in Schedule XIV to the Companies Act, 1956, on technical assessment and accordingly depreciation is provided.

Depreciation is provided after adjusting for the exchange fluctuation arising due to repayment / reinstatement as at the balance sheet date.

G) EMPLOYEE BENEFITS PROVIDENT FUND

Provident Fund is a defined contribution scheme and the contributions are charged to the Profit & Loss Account as incurred. STATE DEFINED CONTRIBUTION PLANS EMPLOYEES’ Pension Scheme 1995

The Provident Fund and the State Defined Contribution Plans are operated by the Regional Provident Fund Commissioner. GRATUITY

Gratuity is a defined benefit retirement plan. The Company contributes to the Scheme with Life Insurance Corporation of India based on actuarial valuation done by them as at the close of the financial year.

LEAVE ENCASHMENT

The Company normally allows its employees to utilize the leave and no encashment leave has been demanded.

H) FOREIGN CURRENCY TRANSACTION

Assets and Liabilities related to foreign currency transaction remaining unsettled at the end of the year are translated at the relevant rates of exchange prevailing at the year-end. In case of the long term borrowing for the acquisition of fixed assets, the gains or losses on transaction are adjusted to the cost of such assets.

I) DEFERRED TAX

The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax on assets are recognized and carried forward only if there is a virtual / reasonable certainty of realization of such assets in near future and are reviewed for their appropriateness of their respective carrying value at each Balance Sheet date.

J) PROVISIONS, CONTINGENT LIABILITES AND CONTINGENT ASSETS

1. A provision is made based on a reliable estimate when it is probable that an outflow of resources embodying economic benefits will be required to settle an obligation. Contingent liabilities are disclosed in the notes to accounts and are determined based on the management perception

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Mar 31, 2012

A) GENERAL

i). The financial statements are prepared in accordance with Indian General Accepted Accounting Principles ("GAAP") under the historical cost convention (except for certain revalued fixed assets) on the accounting principles of a going concern and the Company follows mercantile system of accounting and recognizes income and expenditure on accrual basis except those with significant uncertainties

ii). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent liabilities on the date of financial statements. The recognition, measurement, classification or disclosures of an item or information in the financial statements are made relying on these estimates. Any revision to accounting estimates is recognized prospectively.

B) FIXED ASSETS

i. All fixed assets are stated at cost (net of CENVAT/ Value Added Tax) and adjusted by revaluation in case of certain Land, Building, Plant & Machinery and Electrical Installations, less accumulated depreciation and impairment loss, if any. Expenditure during construction period in respect of new project/expansion is allocated to the respective fixed assets on their being ready for intended use.

ii. In accordance with AS 28 on 'Impairment of Assets' where there is an indication of impairment of the Company's assets related to cash generating units, the carrying amounts of such assets are reviewed at each Balance Sheet date to determine whether there is any impairment. The recoverable amount of such assets is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized in the Profit and Loss Account whenever the carrying amount of such assets exceeds its recoverable amount.

C) INVESTMENTS

Long term Investments are stated at cost and provision is made to recognize any decline, other than temporary, in the value of such investments.

D) INVENTORIES

i. Raw Materials, Stores and Spares are valued at cost.

ii. Finished Goods are valued at lower of cost or net realizable value.

iii. Stock-in- process is valued at estimated cost.

iv. Waste is valued at net realizable value.

E) SALES

Revenue is recognized when the property and all the significant risks and rewards of ownership are transferred to the buyer and no significant uncertainty exists regarding the amount of consideration. Export Sales are inclusive of deemed exports. Local sales are net of sales tax.

F) BORROWING COST

Borrowing Costs directly attributable to acquisition and construction of qualifying assets are capitalized as a part of the cost of such asset upto the date when such asset is ready for its intended use. Other borrowing costs are charged to Profit & Loss Account.

G) DEPRECIATION

i. Depreciation is provided on straight line method at the rates prescribed under Schedule XIV of the Companies Act, 1956, for all assets except plant and machinery and electrical installations which have been considered as continuous process of plant as defined in Schedule XIV to the Companies Act, 1956, on technical assessment and accordingly depreciation is provided.

ii. Depreciation is provided after adjusting for the exchange fluctuation arising due to repayment/ reinstatement as at the balance sheet date.

H) EMPLOYEE BENEFITS

i. PROVIDENT FUND

Provident Fund is a defined contribution scheme and the contributions are charged to the Profit & Loss Account as incurred.

ii. STATE DEFINED CONTRIBUTION PLANS EMPLOYEES' Pension Scheme 1995 The Provident Fund and the State Defined Contribution Plans are operated by the Regional Provident Fund Commissioner.

iii. GRATUITY

Gratuity is a defined benefit retirement plan. The Company contributes to the Scheme with Life Insurance Corporation of India based on actuarial valuation done by them as at the close of the financial year.

iv. LEAVE ENCASHMENT

The Company normally allows its employees to utilize the leave and no encashment leave has been demanded.

I) FOREIGN CURRENCY TRANSACTION

Assets and Liabilities related to foreign currency transaction remaining unsettled at the end of the year are translated that the relevant rates of exchange prevailing at the year-end. In case of the long term borrowing for the acquisition of fixed assets, the gains or losses on transaction are adjusted to the cost of such assets.

J) DEFERRED TAX

The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax on assets are recognized and carried forward only if there is a virtual/reasonable certainty of realization of such assets in near future and are reviewed for their appropriateness of their respective carrying value at each Balance Sheet date.

K) PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

i. A provision is made based on a reliable estimate when it is probable that an outflow of resources embodying economic benefits will be required to settle an obligation. Contingent liabilities are disclosed in the notes to accounts and are determined based on the management perception

ii. Contingent Liabilities: NIL (Nil)