Accounting Policies of Hisar Spinning Mills Ltd. Company

Mar 31, 2014

(a) Basis of preparation

The financial statements have been prepared under the historical cost convention on accrual basis of accounting and in accordance with accounting principles generally accepted in India and comply with the accounting standards notified by the Central Government of India under the Companies (Accounting Standard) Rules, 2006, the provisions of the Companies Act, 2013 (to the extent notified) and the Companies Act. 1956 (to the extent applicable).

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 or cash equivalents, the company has ascertained its operating cycle as twelve months for the purpose of current - non current classification of assets and liabilities.

(b) 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 amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting year end. Although these estimates are based upon management''s best knowledge of current events and actions, actual results could differ from these estimates.

(c) Revenue recognition

Revenue from sale of manufactured goods and sale of waste is recognised on transfer of all significant risks and rewards of ownership to the buyer which coincides with dispatch of goods to the customers. Revenue from sale of manufactured goods and sale of waste is disclosed net of returns, if any.

(d) Employee benefits

(i) Short-term employee benefits

Short-term employee benefits are recognised as an expense at the undiscounted amount in the statement of profit and loss of the year in which the related service is rendered.

(ii) Defined contribution plan - provident fund and pension fund

The contribution to provident fund and pension fund are considered as defined contribution plans and are charged to the statement of profit and loss as they fall due, based on the amount of contribution required to be made.

(iii) Compensated absences

Based on the leave rules of the company, employees are not permitted to accumulate leave. Any unavailed privileged leave to the extent encashable is paid to the employees and charged to the statement of profit and loss for the year.

(iv) Defined benefit plan - gratuity

Liability for gratuity is provided through a policy taken from Life Insurance Corporation of India (LIC) by a trust formed for the purpose. The net present value of obligation towards gratuity to employees is actuarially determined as at the balance sheet date based on the Projected Unit Credit (PUC) Actuarial Method. Actuarial gains and losses are recognised in the statement of profit and loss for the year.

(e) Fixed assets

Fixed assets have been stated at cost less accumulated depreciation. The cost of an asset comprises its purchase price including duties and taxes (other than those subsequently recoverable by the company from the taxing authorities) and any directly attributable costs of bringing the asset to working condition for its intended use. When assets are sold or discarded their cost and accumulated depreciation are removed from the accounts and any gain or loss resulting from their disposal is included in the statement of profit and loss.

Advances paid towards the acquisition of fixed assets outstanding at the balance sheet date are disclosed as ''Capital advances'' under the note of ''Long-term loans and advances'' and the cost of fixed assets not ready for their intended use before such date are disclosed under ''Capital work- in-progress''.

(f) Depreciation

Depreciation on tangible fixed assets has been provided on written down value method at the rates and in the manner specified in Schedule - XIV to the Companies Act, 1956.

(g) Impairment of assets

At each balance sheet date an assessment is made whether any indication exists that an asset has been impaired. If any such indication exists, an impairment loss i.e., the amount by which the carrying amount of an asset exceeds its recoverable amount is provided in the books of account.

(h) Inventories

Inventories (other than saleable waste) have been valued at lower of cost and net realisable value However, raw 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. The cost in respect of various items of inventory is computed as under:

* in case of raw material, stores and spares, diesel and packing material at first-in-first-out (FIFO) cost method plus direct expenses.

* in case of work-in-progress at raw material cost (determined on FIFO cost method) plus appropriate portion of conversion cost and other overheads incurred depending upon the stage of completion.

* in case of finished goods at raw material cost (determined on FIFO cost method) plus conversion cost, packing cost and other overheads incurred to bring the goods up to their present condition and location.

Saleable waste has been valued at estimated net realisable value.

(i) Effects of change in foreign exchange rates

Foreign currency transactions are initially recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and foreign currency at the date of the transaction. At each balance sheet date foreign currency monetary items are reported using the closing rate. Exchange differences arising on the settlement of monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognised as income or as expense in the year in which they arise.

(j) Government grants

Government grants related to revenue have been deducted from related expense which they are intended to compensate. Government grants of the nature of promoters'' contribution have been credited to Capital Reserve.

(k) Borrowing costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets, A qualifying asset is one that takes necessarily substantial period of time to get ready for intended use. All other borrowing costs are recognised as an expense in the statement of profit and loss

(l) Tax expense

Tax expense comprises current and deferred tax. Provision for current tax is made in accordance with the provisions of Income-tax Act, 1961. Deferred tax resulting from timing differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods is accounted for using the tax rates and laws that are enacted or substantively enacted as on the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. However, deferred tax assets arising on account of brought forward losses and unabsorbed depreciation are recognised only when there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realised.

Minimum Alternate Tax (MAT) 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 specified period. In the year in which the MAT credit becomes eligible to be recognised as an asset in accordance with the recommendations contained in the Guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the statement of profit and loss and shown as MAT credit entitlement. The company reviews the same at each balance sheet date and writes down the carrying amount of MAT credit entitlement to the extent there is no longer convincing evidence to the effect that company will pay normal Income Tax during the specific period.

(m) Segment reporting

The company operates only in one business segment viz., ''yarn'' which is the reportable segment in accordance with the requirements of Accounting Standard (AS) -17 ''Segment Reporting'' notified under the Companies (Accounting Standard) Rules, 2006.

(n) Provisions, contingent liabilities and contingent assets

Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognised but are disclosed in the notes. Contingent assets are neither recognised nor disclosed in the financial statements.

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Mar 31, 2013

(a) Basis of preparation

The financial statements have been prepared under the historical cost convention on accrual basis of accounting and in accordance with accounting principles generally accepted in India and comply with the accounting standards notified by the Central Government of India under the Companies (Accounting Standard) Rules, 2006 and 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 or cash equivalents, the company has ascertained its operating cycle as twelve months for the purpose of current - non current classification of assets and liabilities.

(b) 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 amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements'' and the results of operations during the reporting year end. Although these estimates are based upon management''s best knowledge of current events and actions, actual results could differ from these estimates.

(c) Revenue recognition

Revenue from sale of manufactured goods and sale of waste is recognised on transfer of all significant risks and rewards of ownership to the buyer which coincides with dispatch of goods to the customers. Revenue from sale of manufactured goods and sale of waste is disclosed net of returns, if any.

(d) Employee benefits

(i) Short-term employee benefits

Short-term employee benefits are recognised as an expense at the undiscounted amount in the statement of profit and loss of the year in which the related service is rendered.

(ii) Defined contribution plan - provident fund and pension fund

The contribution to provident fund and pension fund are considered as defined contribution plans and are charged to the statement of profit and loss as they fall due, based on the amount of contribution required to be made.

(iii) Compensated absences

Based on the leave rules of the company, employees are not permitted to accumulate leave. Any unavailed privileged leave to the extent encashable is paid to the employees and charged to the statement of profit and loss for the year.

(iv) Defined benefit plan - gratuity

Liability for gratuity is provided through a policy taken from Life Insurance Corporation of India (LIC) by a trust formed for the purpose. The net present value of obligation towards gratuity to employees is actuarially determined as at the balance sheet date based on the Projected Unit Credit (PUC) Actuarial Method. Actuarial gains and losses are recognised in the statement of profit and loss for the year.

(e) Fixed assets

Fixed assets have been stated at cost less accumulated depreciation. The cost of an asset comprises its purchase price including duties and taxes (other than those subsequently recoverable by the company from the taxing authorities) and any directly attributable costs of bringing the asset to working condition for its intended use. When assets are sold or discarded their cost and accumulated depreciation are removed from the accounts and any gain or loss resulting from their disposal is included in the statement of profit and loss.

Advances paid towards the acquisition of fixed assets outstanding at the balance sheet date are disclosed as ''Capital advances'' under the note of ''Long-term loans and advances'' and the cost of fixed assets not ready for their intended use before such date are disclosed under ''Capital work-in-progress''.

(f) Depreciation

Depreciation on tangible fixed assets has been provided on written down value method at the rates and in the manner specified in Schedule - XTV to the Companies Act, 1956.

(g) Impairment of assets

At each balance sheet date an assessment is made whether any indication exists that an asset has been impaired. If any such indication exists, an impairment loss i.e., the amount by which the carrying'' amount of an asset exceeds its recoverable amount is provided in the books of account. (h) Inventories

Inventories (other than saleable waste) have been valued at lower of cost and net realisable value. However, raw 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. The cost in respect of various items of inventory is computed as under :

- in case of raw material, stores and spares, diesel and packing material at first-in-first-out (FIFO) cost method plus direct expenses. v

- in case of work-in-progress at raw material cost (determined on FIFO cost method) plus appropriate portion of conversion cost and other overheads incurred depending upcn the stage of completion.

- in case of finished goods at raw material cost (determined on FIFO cost method) plus conversion cost, packing cost and other overheads incurred to bring the goods up to their present condition and location.

Saleable waste has been valued at estimated net realisable value.

(i) Effects of change in foreign exchange rates

Foreign currency transactions are initially recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and foreign currency at the date of the transaction. At each balance sheet date foreign currency monetary items are reported using the closing rate. Exchange differences arising on the settlement of monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognised as income or as expense in the year in which they arise.

(j) Government grants

Government grants related to revenue have been deducted from related expense which they are intended to compensate. Government grants of the nature of promoters'' contribution have been credited to Capital Reserve.

(k) Borrowing costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that takes necessarily substantial period of time to get ready for intended use. All other borrowing costs are recognised as an expense in the statement of profit and loss.

(I) Tax expense

Tax expense comprises current and deferred tax. Provision for current tax is made in accordance with the provisions of Income-tax Act, 1961. Deferred tax resulting from timing differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods is accounted for using the tax rates and laws that are enacted or substantively enacted as on the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. However, deferred tax assets arising on account of brought forward losses and unabsorbed depreciation are recognised only when there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realised.

Minimum Alternate Tax (MAT) 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 specified period. In the year in which the MAT credit becomes eligible to be recognised as an asset in accordance with the recommendations contained in the Guidance Note issued'' by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the statement of profit and loss and shown as MAT credit entitlement. The company reviews the same at each balance sheet date and writes down the carrying amount of MAT credit entitlement to the extent there is no longer convincing evidence to the effect that company will pay normal Income Tax during the specific period.

(m) Segment reporting

The company operates only in one business segment viz., ''yarn'' which is the reportable segment in accordance with the requirements of Accounting Standard (AS) - 17 ''Segment Reporting'' notified under the Companies (Accounting Standard) Rules, 2006.

(n) Provisions, contingent liabilities and contingent assets

Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources Contingent liabilities are not recognised but are disclosed in the notes. Contingent assets are neither recognised nor disclosed in the financial statements.

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Mar 31, 2011

A) Basis of preparation and presentation of financial statements The accounts are prepared on accrual basis under the historical cost convention in accordance with generally accepted accounting principles and the accounting standards referred to in section 211(3C) of the Companies Act, 1956 and other relevant provisions of the said Act.

b) Inventories Inventories have been valued at lower of cost and net realisable value. The cost in respect of various items of inventory is computed as under:

- in case of raw material, stores, spares, diesel and packing material at first in first out (FIFO) cost method plus direct expenses.

- in case of work in process at raw material cost plus conversion cost depending upon the stage of completion.

- in case of finished goods at raw material cost plus conversion cost, packing cost and other overheads incurred to bring the goods up to their present condition and location.

c) Revenue Recognition Sales of goods is recognised at the point of dispatch of goods to the customers and is disclosed net of returns, if any.

d) Fixed Assets

The Fixed assets have been stated at original cost including inward freight, other incidental costs relating to acquisition and installation thereof and duties and taxes less modvat/cenvat credit and value added tax credit, if any, and less depreciation up to date.

e) Depreciation

Depreciation on fixed assets has been provided on written down value method at the rates and in the manner specified in Schedule - XIV to the Companies Act, 1956.

f) Effects of changes in foreign exchange rates Transactions in foreign currency are recorded on initial recognition in the reporting currency amount based on the exchange rate between the reporting currency and foreign currency at the date of transaction. At each balance sheet date foreign currency monetary items are reported at closing rates. Exchange differences arising on restatement of monetary items at closing rates have been provided during the year under consideration.

g) Government Grants Government grants related to revenue have been deducted from related expense which they are intended to compensate. Government grants of the nature of promoters' contribution have been credited to Capital Reserve.

h) Employee Benefits

(i) Provident Fund and Pension Fund

All eligible employees receive benefits from a provident fund, which is a defined contribution plan. Both the employee and the company make monthly contributions to the fund, which is equal to a specified percentage of the covered employee's basic salary and the contribution made by the company to such fund is charged to the profit and loss account. The company has no further obligations under this plan beyond its monthly contributions.

(ii) Leave with Wages

Provision for leaves, if any, is made on the basis of leaves accrued to the employees during the year.

(iii) Gratuity

Liability for gratuity is provided through a policy taken from Life Insurance Corporation of India (LIC) by a trust formed for the purpose. The liability is provided on the basis of actuarial valuation made by LIC as at the close of the year to cover the year's liability and such liability is charged to the profit and loss account.

i) Borrowing Costs

Borrowing costs that are directly attributable to qualifying asset are capitalised as part of the cost of the asset. Other borrowing costs are recognised as an expense in the period in which they are incurred.

j) Accounting for Taxes on Income

Provision for current income tax is made in accordance with the provisions of Income-tax Act, 1961. In accordance with Accounting Standard (AS) - 22 "Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India, deferred tax resulting from timing differences between book and tax profit is accounted for at the tax rates substantively enacted by the Balance Sheet date to the extent that the timing differences are expected to crystalise. Deferred tax assets are recognised only when there is virtual certainty of sufficient future profits available to realise such assets.

k) Impairment of Assets

The Company has considered all the external sources of information and internal sources of information indicating whether an individual asset or a cash-generating unit of the company has impaired. On the basis of those sources of information, no indication of a potential impairment loss is present, as such no formal estimate of recoverable amount has been made at the balance sheet date.

l) Provisions and Contingent Liabilities

Provisions are recognised for present obligations of uncertain timing or amount arising as a result of a past event where a reliable estimate can be made and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. Where it is not probable that an outflow of resources embodying economic benefits will be required or the amount can not be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of resources embodying economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain events are also disclosed as contingent liabilities unless the probability of outflow of resources embodying economic benefits is remote.

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Mar 31, 2010

A) Basis of preparation and presentation of financial statements

The accounts are prepared on accrual basis under the historical cost convention in accordance with generally accepted accounting principles and the accounting standards referred to in section 211(3C) of the Companies Act, 1956 and other relevant provisions of the said Act.

b) Inventories

Inventories have been valued at lower of cost and net realisable value. The cost in respect of various items of inventory is computed as under:

- in case of raw material, stores, spares, diesel and packing material at first in first out (FIFO) cost method plus direct expenses.

- in case of work in process at raw material cost plus conversion cost depending upon the stage of completion.

- in case of finished goods at raw material cost plus conversion cost, packing cost and other overheads incurred to bring the goods up to their present condition and location.

c) Revenue Recognition

Sales of goods is recognised at the point of dispatch of goods to the customers and is disclosed net of returns, if any.

d) Fixed Assets

The Fixed assets have been stated at original cost including inward freight, other incidental costs relating to acquisition and installation thereof and duties and taxes less modvat/cenvat credit and value added tax credit, if any, and less depreciation up to date.

e) Depreciation

Depreciation on fixed assets has been provided on written down value method at the rates and in the manner specified in Schedule - XIV to the Companies Act, 1956.

f) Effects of changes in foreign exchange rates

Transactions in foreign currency are recorded on initial recognition in the reporting currency amount based on the exchange rate between the reporting currency and foreign currency at the date of transaction. At each balance sheet date foreign currency monetary items are reported at closing rates. Exchange differences arising on restatement of monetary items at closing rates have been provided during the year under consideration.

g) Government Grants

Government grants related to revenue have been deducted from related expense which they are intended to compensate. Government grants of the nature of promoters contribution have been credited to Capital Reserve.

h) Employee Benefits

(i) Provident Fund and Pension Fund

All eligible employees receive benefits from a provident fund, which is a defined contribution plan. Both the employee and the company make monthly contributions to the fund, which is equal to a specified percentage of the covered employees basic salary and the contribution made by the company to such fund is charged to the profit and loss account. The company has no further obligations under this plan beyond its monthly contributions.

(ii) Leave with Wages

Provision for leaves, if any, is made on the basis of leaves accrued to the employees during the year.

(iii) Gratuity

Liability for gratuity is provided through a policy taken from Life Insurance Corporation of India (LIC) by a trust formed for the purpose. The liability is provided on the basis of actuarial valuation made by LIC as at the close of the year to cover the years liability and such liability is charged to the profit and loss account.

i) Borrowing Costs

Borrowing costs that are directly attributable to qualifying asset are capitalised as part of the cost of the asset. Other borrowing costs are recognised as an expense in the period in which they are incurred.

j) Accounting for Taxes on Income

Provision for current income tax is made in accordance with the provisions of Income-tax Act, 1961. In accordance with Accounting Standard (AS) - 22 "Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India, deferred tax resulting from timing differences between book and tax profit is accounted for at the tax rates substantively enacted by the Balance Sheet date to the extent that the timing differences are expected to crystalise. Deferred tax assets are recognised only when there is virtual certainty of sufficient future profits available to realise such assets.

k) Impairment of Assets

The Company has considered all the external sources of information and internal sources of information indicating whether an individual asset or a cash-generating unit of the company has impaired. On the basis of those sources of information, no indication of a potential impairment loss is present, as such no formal estimate of recoverable amount has been made at the balance sheet date.

l) Provisions and Contingent Liabilities

Provisions are recognised for present obligations of uncertain timing or amount arising as a result of a past event where a reliable estimate can be made and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. Where it is not probable that an outflow of resources embodying economic benefits will be required or the amount can not be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of resources embodying economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain events are also disclosed as contingent liabilities unless the probability of outflow of resources embodying economic benefits is remote.