Accounting Policies of Kitex Garments Ltd. Company
Mar 31, 2023
Significant Accounting Policies
1.1 Basis of Accounting and Preparation of Standalone Financial Statements
(i) Statement of compliance
The Standalone financial statements which comprise the Balance Sheet, the Statement of Profit and Loss (including
Other Comprehensive Income), the Cash Flow Statement, and the Statement of Changes in Equity ("financial
statements") have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the
Section 133 of the Companies Act, 2013 ("the Act"), Companies (Indian Accounting Standards) Rules, 2015,
along with relevant amendment rules issued thereafter and other relevant provisions of the Act, as applicable.
Accounting policies were 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.
The standalone financial statements have been prepared on a historical cost basis on the accrual basis of accounting,
except for the following -
(a) Certain financial assets and liabilities (including derivative instruments) that is measured at fair value;
(b) Defined benefit plans - plan assets measured at fair value;
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
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.
(iii) Rounding off amounts
All amounts disclosed in standalone financial statements and notes have been rounded off to the nearest thousands
as per requirement of Schedule III of the Act, unless otherwise stated.
(iv) Use of estimates and judgement
In the preparation of standalone financial statements, the management makes estimates and assumptions in
conformity with the Generally Accepted Accounting Principles in India. Such estimates and assumptions are made
on reasonable and prudent basis taking into account all available information. However, actual results could differ
from these estimates and assumptions and such differences are recognised in the period in which results are
ascertained. The estimates and underlying assumptions are reviewed on an ongoing basis.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are
significant to the standalone financial statements are disclosed in Note 1.21.
1.2 Current versus 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 realised or intended to be sold or consumed in normal operating cycle;
⢠Held primarily for the purpose of trading;
⢠Expected to be realised 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 other assets are classified as non-current.
A liability is classified as 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.
All other liabilities are classified as non-current. Deferred tax assets and liabilities are classified as non-current assets and
liabilities.
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 III to the Companies Act, 2013. Based on the nature of products and the
time between the acquisition of assets for processing and their realization in cash and cash equivalents, the company
has ascertained its operating cycle as 12 months for the purpose of current - noncurrent classification of assets and
liabilities.
1.3 Property, Plant & Equipment
Property, plant and equipment (except freehold land) are stated at cost of acquisition less accumulated depreciation and
impairment if any. Freehold land is carried at historical cost. The company is adopting the cost model for determining
gross carrying amount. Cost comprises of purchase price, inward freight, duties, taxes and any attributable cost of
bringing the assets to its working condition for its intended use.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items (major components). The cost of replacement spares/ major inspection relating to property, plant and equipment
is capitalised only when it is probable that future economic benefits associated with these will flow to the company and
the cost of the item can be measured reliably.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed by the
management at each financial year and adjusted prospectively, if appropriate.
Capital work-in-progress comprises of the cost of fixed assets that are not yet ready for their intended use at the
reporting date.
On transition to Ind AS, the company has elected to continue with the carrying value of all of its property, plant
and equipment recognised as at April 01, 2016 measured as per the previous GAAP and use that carrying value as
the deemed cost of the property, plant and equipment, with corresponding adjustments to recognise the amount of
unamortised deferred grant income as at the date of the transition.
Depreciation methods, estimated useful lives
Depreciation on property, plant and equipment is provided on Straight Line Method at the useful lives based on a review
by the management at the year end as under:
(a) Assets (other than capital spares) - based on useful lives prescribed under Schedule II of the Companies Act, 2013.
(b) Capital spares - based on useful life of each replaced part (2 - 5 years).
Depreciation on addition to property plant and equipment is provided on pro-rata basis from the date of acquisition.
Depreciation on sale/deduction from property plant and equipment is provided up to the date preceding the date of
sale, deduction as the case may be. Gains and losses on disposals are determined by comparing proceeds with carrying
amount. These are included in Statement of Profit and Loss under ''Other Income''.
Cost of software is capitalised as intangible asset and amortised on a straight-line basis over the economic useful life of
three years.
The residual values, useful lives and methods of depreciation of intangible assets are reviewed by the management at
each financial year and adjusted prospectively, if appropriate.
1.5 Investment in Subsidiaries and Associates
Investment in subsidiaries and associate is measured at cost less provision for impairment.
Inventories are valued at lower of cost or net realisable value. For this purpose, the cost of bought-out inventories
comprises of the purchase cost of the items, net of applicable tax/duty credits and cost of bringing such items into the
factory on First-In, First-Out (FIFO) basis. Cost of Inventory comprises Cost of Purchase, Cost of Conversion and other
Costs incurred to bring them to their respective present location and condition. The net realisable value of bought-out
inventories is taken at their current replacement value. The cost of manufactured inventories comprises of the direct cost
of production plus appropriate fixed and variable production overheads.
Difference between the purchase price for normal credit terms and the amount paid for deferred settlement terms, if
any, is recognised as an expense.
1.7 Foreign Currency Transactions
(a) Functional and presentation currency
Items included in the standalone financial statements of the entity are measured using the currency of the primary
economic environment in which the entity operates ("functional currency"). The standalone financial statements
are presented in Indian Rupees ("INR"), which is the functional currency and presentation currency of the Company.
(b) Transactions and balances
Foreign exchange transactions are recorded at the functional currency adopting the exchange rate prevailing on
the dates of respective transactions. Monetary assets and liabilities denominated in foreign currencies existing
as on the Balance Sheet date are translated at the functional currency exchange rate prevailing as at the Balance
Sheet date. The exchange difference arising from the settlement of transactions during the period and effect of
translations of assets and liabilities at the Balance Sheet date are recognised in the Statement of Profit and Loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss
arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the
gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or
loss is recognised in Other Comprehensive Income or profit and loss are also recognised in Other Comprehensive
Income or profit and loss, respectively).
(c) Derivative instruments and hedge accounting
The company uses foreign currency derivative contracts to hedge its risks associated with foreign currency
fluctuations relating to certain firm commitments and highly probable forecasted transactions. The company
designates these as cash flow hedges applying the recognition and measurement principles set out in Ind AS 109
- Financial Instruments.
The use of foreign currency and derivative contracts is governed by the Company''s policies approved by the Board
of Directors which provide written principles on the use of such financial derivatives consistent with the Company''s
risk management strategy. The company does not use derivative financial instruments for speculative purposes.
Foreign currency derivative instruments are initially measured at fair value and are re-measured at subsequent
reporting dates. Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit
and loss, except for the effective portion of cash flow hedges, which is recognised in Other Comprehensive Income
in the cash flow hedge reserve and later reclassified to profit and loss when the hedge item affects profit and loss.
Hedge accounting is discontinued when the hedge instrument expires or is sold, terminated, or exercised, or no
longer qualifies for hedge accounting.
The Company, at the inception of a contract, assesses whether the contract is a lease or not lease. A contract is, or
contains, a lease if the contract conveys the right to control the use of an identified asset for a time in exchange for a
consideration. This policy has been applied to contracts existing and entered into on or after April 01,2019.
The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset
is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made
at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and
remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives
received. The right-of-use asset is subsequently amortised using the straight-line method from the commencement date
to the end of the lease term. The lease liability is initially measured at the present value of the lease payments that are
not paid at the commencement date, discounted using the Company''s incremental borrowing rate. It is remeasured
when there is a change in future lease payments arising from a change in an index or rate, if there is a change in
the Company''s estimate of the amount expected to be payable under a residual value guarantee, or if the Company
changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability
is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is
recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Company has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease
term of 12 months or less and leases of low-value assets. The Company recognises the lease payments associated with
these leases as an expense over the lease term.
Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that takes a
substantial period of time to get ready for its intended use are added to the cost of those assets, until such time as the
assets are substantially ready for their intended use or sale. Other borrowing costs are recognised as expenditure in the
period in which they are incurred.
Government grants are not recognised until there is reasonable assurance that the Company will comply with the
conditions attaching to them and that the grants will be received. Government grants shall be recognised in profit and
loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the
grants are intended to compensate.
Government grants related to depreciable assets are presented in the Balance Sheet by setting up the grant as deferred
income and are recognised in profit and loss over the periods and in the proportions in which depreciation expense on
those assets is recognised and are presented under Other Income.
A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose
of giving immediate financial support to the entity with no future related costs are recognised in profit and loss of the
period in which it becomes receivable and are presented under Other Income/deducted from the related heads of
expenditure.
1.11 Financial Instruments
(a) Financial asset
(i) Initial recognition and measurement
At initial recognition, financial asset is measured at its fair value plus, in the case of a financial asset not at fair
value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial
asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or
loss.
(ii) Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in following categories:
(a) at amortized cost; or
(b) at fair value through other comprehensive income; or at fair value through profit or loss.
Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows
represent solely payments of principal and interest are measured at amortized cost. Interest income
from these financial assets is included in finance income using the effective interest rate method (EIR).
Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual
cash flows and for selling the financial assets, where the assets'' cash flows represent solely payments
of principal and interest, are measured at fair value through other comprehensive income (FVOCI).
Movements in the carrying amount are taken through OCI, except for the recognition of impairment
gains or losses, interest revenue and foreign exchange gains and losses which are recognized in
Statement of Profit and Loss. When the financial asset is derecognized, the cumulative gain or loss
previously recognized in OCI is reclassified from equity to Statement of Profit and Loss and recognized
in other gains/ (losses). Interest income from these financial assets is included in other income using the
effective interest rate method.
Fair value through profit or loss (FVTPL): Assets that do not meet the criteria for amortized cost or FVOCI
are measured at fair value through profit or loss. Interest income from these financial assets is included
in other income.
(iii) Derecognition of financial assets
The Company derecognises a financial asset 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 party.
Financial liabilities are initially recognised at fair value plus any transaction cost that are attributable to the
acquisition of the financial liabilities except, financial liabilities at fair value through profit or loss which are initially
measured at fair value.
After initial recognition at fair value net of directly attributable transaction costs, interest-bearing borrowings,
finance lease liabilities, Trade payables and other financial liabilities are subsequently measured at amortised cost
using the effective interest rate method. Gains and losses are recognised in profit and loss when the liabilities are
de-recognised as well as through the amortisation of effective interest.
Amortised cost for financial liabilities represents amount at which financial liability is measured at initial recognition
minus the principal repayments, plus or minus the cumulative amortisation using the effective interest method of
any difference between that initial amount and the maturity amount.
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires.
Derivative financial instruments
Derivative instruments not designated as Cash flow hedges
The Company enters into derivative financial instruments to manage its exposure to foreign exchange rate risks,
like foreign exchange forward contracts. Derivatives are initially recognised at fair value at the date the derivative
contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period.
The resulting gain or loss is recognised in the statement of profit and loss immediately unless the derivative is
designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss
depends on the nature of the hedging relationship and the nature of the hedged item.
The Company derives revenues primarily from sale of manufactured fabric and readymade garments.
Revenue is recognized on satisfaction of performance obligation upon transfer of control of promised products to
customers in an amount that reflects the consideration the Company expects to receive in exchange for those products.
The Company does not expect to have any contracts where the period between the transfer of the promised goods or
services to the customer and payment by the customer exceeds one year. As a consequence, it does not adjust any of
the transaction prices for the time value of money.
Other operating revenue - Export incentives: Export Incentives under various schemes are accounted upon fulfilling
the conditions established by respective regulations as applicable to the Company and as amended from time to time.
Income is recognised at the value or rate prescribed by respective regulations.
Current tax is determined as the amount of tax payable in respect of taxable income for the year computed in accordance
with the provisions of the Income Tax Act, 1961. Taxable income differs from ''profit before tax'' as reported in the
Statement of Profit and Loss because of items of income or expense that are taxable or deductible in other years and
items that are never taxable or deductible. The Company''s current tax is calculated using tax rates that have been
enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the
standalone financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax
liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for
all deductible temporary differences to the extent that it is probable that taxable profits will be available against which
those deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent
that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be
recovered. Any such reduction shall be reversed to the extent that it becomes probable that sufficient taxable profit will
be available.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the
liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted
by the end of the reporting period.
Current and deferred tax are recognised in the Statement of Profit and Loss, except when they relate to items that are
recognised in other comprehensive income or items related to equity, in which case, the current and deferred tax are
also recognised in other comprehensive income or directly in equity respectively.
(a) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12
months after the end of the period in which the employees render the related service are recognised in respect of
employees'' services up to the end of the reporting period and are measured at the amounts expected to be paid
when the liabilities are settled.
(b) Defined contribution plans
The company has defined contribution plans for employees comprising of Provident Fund and Employee''s State
Insurance. The contributions paid/payable to these plans during the year are recognised as employee benefit
expense in the Statement of Profit and Loss for the year.
(c) Defined benefit plans: Gratuity
The net present value of the obligation for gratuity benefits are determined by independent actuarial valuation,
conducted annually using the projected unit credit method.
The retirement benefit obligations recognised in the Balance Sheet represents the present value of the defined
benefit obligations reduced by the fair value of plan assets. All expenses represented by current service cost, past
service cost, if any, and net interest on the defined benefits are recognised immediately in Statement of Profit
and Loss as past service cost, if any, and net interest on the defined benefit liability/(asset) are recognised in the
Statement of Profit and Loss.
Remeasurements of the net defined benefit liability/(asset) comprising actuarial gains and losses and the return on
the plan assets (excluding amounts included in net interest), are recognised in Other Comprehensive Income. Such
remeasurements are not reclassified to the Statement of Profit and Loss in the subsequent periods.
(d) Long-term employee benefits: Compensated absences
The company has a scheme for compensated absences for employees, the liability of which is determined based
on an independent actuarial valuation carried out at the end of the year, using the projected unit credit method.
Actuarial gains and losses are recognised in full in the Statement of Profit and Loss for the period in which they
occur.
Operating Segments are reported in a manner consistent with the internal reporting provided to the Chief Operating
Decision Maker (CODM) of the Company. The CODM is responsible for allocating resources and assessing performance
of the operating segments of the Company.
Basic/diluted earnings per share is calculated by dividing the net profit and loss for the year attributable to equity
shareholders (after deducting attributable taxes) by the weighted average number of equity shares/diluted potential
equity shares outstanding as at the end of the year, as the case may be.
1.17 Impairment of Non-Financial Assets
The Company assesses at each year end whether there is any objective evidence that a non-financial asset or a group
of non-financial assets is impaired. An asset or a cash generating unit is treated as impaired, when the carrying value of
assets exceeds its recoverable amount. The recoverable amount of an asset or a cash-generating unit is the higher of its
fair value less costs of disposal and its value in use. Based on such assessment, impairment loss if any is recognised in
the Statement of Profit and Loss for the period in which the asset is identified as impaired.
Cash flows are reported using indirect method, whereby net profits before tax is adjusted for the effects of transactions
of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments and items of income or
expenses associated with investing or financing cash flows. The cash flows from regular revenue generating (operating
activities), investing and financing activities of the Company are segregated.
1.19 Cash and Cash Equivalents
Cash and cash equivalent in the Balance Sheet comprise cash at banks, cash on hand and short-term deposits net of
bank overdraft with an original maturity of three months or less, which are subject to an insignificant risk of changes in
value.
Mar 31, 2018
1 Significant Accounting Policies
1.1 Basis of preparation of financial statements
These financial statements are prepared in accordance with the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Companies Act 2013 and notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended).
For all periods up to and including the year ended 31st March 2017, the company prepared its financial statements in accordance with the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 ("Previous GAAP"). These financial statements for the year ended 31st March 2018 are the first financial statements prepared by the company in accordance with Ind AS. See Note 2.43 for an explanation on how the transition from previous GAAP to Ind AS has affected the company''s financial position, financial performance and cash flows.
The financial statements have been prepared on a historical cost basis on the accrual basis of accounting, except for the following -
a. Financial assets and liabilities that is measured at fair value,
b. defined benefit plans - plan assets measured at fair value; Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. 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.
1.2 Current versus 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 realised or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realised 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 other assets are classified as non-current.
A liability is classified as 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
All other liabilities are classified as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities.
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 III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the company has ascertained its operating cycle as 12 months for the purpose of current -noncurrent classification of assets and liabilities.
1.3 Use of Estimates
In the preparation of financial statements, the management makes estimates and assumptions in conformity with the Generally Accepted Accounting Principles in India. Such estimates and assumptions are made on reasonable and prudent basis taking into account all available information. However actual results could differ from these estimates and assumptions and such differences are recognized in the period in which results are ascertained. The estimates and underlying assumptions are reviewed on an on-going basis.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 1.19.
1.4 Inventories
Inventories are valued at lower of cost or net realisable value. For this purpose, the cost of bought-out inventories comprise of the purchase cost of the items, net of applicable tax/duty credits and cost of bringing such items into the factory on First-In, First-Out (FIFO) basis. Cost of Inventory comprises Cost of Purchase, Cost of Conversion and other Costs incurred to bring them to their respective present location and condition. The net realizable value of bought out inventories is taken at their current replacement value. The cost of manufactured inventories comprises of the direct cost of production plus appropriate fixed and variable production overheads. Difference between the purchase price for normal credit terms and the amount paid for deferred settlement terms, if any, is recognised as an expense.
1.5 Income Tax
Current tax is determined as the amount of tax payable in respect of taxable income for the year computed in accordance with the provisions of the Income Tax Act, 1961. Taxable income differs from ''profit before tax'' as reported in the Statement of Profit and Loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company''s current tax is calculated using
tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Any such reduction shall be reversed to the extent that it becomes probable that sufficient taxable profit will be available.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Current and deferred tax are recognised in the Statement of Profit and Loss, except when they relate to items that are recognised in other comprehensive income or items related to equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.
1.6 Property, Plant & Equipment
On transition to Ind AS, the company has elected to continue with the carrying value of all of its property, plant and equipment recognised as at 1st April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment, with corresponding adjustments to recognise the amount of unamortised deferred grant income as at the date of the transition.
Property, plant and equipment (except freehold land) are stated at cost of acquisition less accumulated depreciation and impairment if any. Freehold land is carried at historical cost. The company is adopting the cost model for determining gross carrying amount. Cost comprises of purchase price, inward freight, duties, taxes and any attributable cost of bringing the assets to its working condition for its intended use.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components). The cost of replacement spares/ major inspection relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the company and the cost of the item can be measured reliably.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed by the management at each financial year and adjusted prospectively, if appropriate.
Capital work in progress comprises of the cost of fixed assets that are not yet ready for their intended use at the reporting date.
Depreciation on Property, plant and equipment is provided on Straight Line Method at the useful lives based on a review by the management at the year-end as under:
a) Assets (other than capital spares) - based on useful lives prescribed under Schedule II of the Companies Act, 2013
b) Capital Spares- based on useful life of each replaced part (2 - 5 years).
On disposal of an item of property, plant and equipment, the difference between the disposal proceeds and its carrying amount is recognised in the Statement of Profit and Loss
1.7 Intangible Assets
On transition to Ind AS, the company has elected to continue with the carrying value of all of intangible assets recognised as at 1st April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of intangible assets.
Cost of software is capitalised as intangible asset and amortised on a straight-line basis over the economic useful life of three years.
The residual values, useful lives and methods of depreciation of intangible assets are reviewed by the management at each financial year and adjusted prospectively, if appropriate.
1.8 Financial assets
All financial assets are initially measured at fair value and transaction cost that is attributable to the acquisition of the financial asset is also adjusted.
Financial assets are classified using the following measurement categories:
- To be measured subsequently at fair value (either through other comprehensive income or through profit and loss), and;
- To be measured at amortised cost.
a. Trade Receivable
(i) Trade receivables are recognized initially at fair value and subsequently measured at amortised cost using effective interest method, less provision for impairment.
(ii) For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 11 and Ind AS 18, provision for bad and doubtful debts is based on the simplified approach of impairment of trade receivables permitted by Ind AS 109 Financial instruments which requires lifetime expected credit losses to be recognized excepting those which are contractually not due as per the terms of the contract or those which are considered realizable based on a case to case review. The expected credit loss is computed based on a provision matrix which takes into account historical credit loss experience and is adjusted for forward looking information and also takes into account available external and internal credit risk factors. The company has identified customer segments for assessing historical credit loss since experience shows significantly different loss patterns for the different customer segments.
If the credit risk on the trade receivables has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. 12-month expected credit losses are portion of the lifetime expected credit losses and represent the lifetime cash shortfalls that will result if default occurs within the
12 months after the reporting date and thus, are not cash shortfalls that are predicted over the next 12 months.
b. Investments
Investments in Associate Enterprise : The Company''s investment in equity instruments in associate enterprises are accounted for at cost. Where the carrying amount of an investment is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount and the difference is transferred to the Statement of Profit and Loss. On disposal of investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to the Statement of Profit and Loss.
Others : Investments which are held for trading are classified as ''at fair value through Other comprehensive income'' and all changes are recognized in the Other comprehensive income.
b. Other loans and receivables
Other loans and receivables are measured at amortised cost, using the effective interest method less impairment. Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
c. Derecognition of financial asset
The Company derecognises a financial asset 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 party.
1.9 Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit and loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the Effective interest rate method. Gains and losses are recognised in profit and loss when the liabilities are derecognised as well as through the amortisation of effective interest.
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
1.10 Government grants
Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received. Government grants shall be recognised in profit and loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grants are intended to compensate. Government grants related to depreciable assets are presented in the balance sheet by setting up the grant as deferred income and are recognised in profit and loss over the periods and in the proportions in which depreciation expense on those assets is recognised and are presented under Other Income.
A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs are recognised in profit and loss of the period in which it becomes receivable and are presented under Other Income/ deducted from the related heads of expenditure.
1.11 Revenue Recognition
Revenue from operations comprise the fair value of the consideration received or receivable for the sale of goods and rendering of services in the ordinary course of the the company''s activities. The Company recognises revenue when the amount of revenue and related cost can be reliably measured, when it is probable that the collectability of the related receivable is reasonably assured and when the specific criteria for each of the company''s activities are met as follows -
a. Sale of Goods:
Sales are recognised when significant risks and rewards of ownership of goods have been passed to the buyer.
b. Export benefits/incentives:
Export incentives are recognized on exports on accrual basis, except when there are significant uncertainties, based on the estimated realizable value of such entitlements.
c. Other incomes:
Other incomes are recognised on accrual basis except when there are significant uncertainties.
Interest income is recognised on accrual basis using effective interest rate method.
1.12 Employee Benefits
a) Short Term Employee Benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as shortterm employee benefits and recognized in the period in which the employee renders the related service.
b) Defined Contribution Plans
The company has defined contribution plans for employees comprising of Provident Fund and Employee''s State Insurance. The contributions paid/payable to these plans during the year are recognised as employee benefit expense in the Statement of Profit and Loss for the year.
c) Defined Benefit Plans: Gratuity
The net present value of the obligation for gratuity benefits are determined by independent actuarial valuation, conducted annually using the projected unit credit method.
The retirement benefit obligations recognised in the Balance Sheet represents the present value of the defined benefit obligations reduced by the fair value of plan assets. All expenses represented by current service cost, past service cost, if any, and net interest on the defined benefits are recognised immediately in Statement of Profit and Loss as past service cost, if any, and net interest on the defined benefit liability/(asset) are recognised in the Statement of Profit and Loss.
Remeasurements of the net defined benefit liability/ (asset) comprising actuarial gains and losses and the return on the plan assets(excluding amounts included in net interest), are recognised in Other Comprehensive Income. Such remeasurements are not reclassified to the Statement of Profit and Loss in the subsequent periods.
d) Long Term Employee Benefits: Compensated absences
The company has a scheme for compensated absences for employees, the liability of which is determined on the basis of an independent actuarial valuation carried out at the end of the year, using the projected unit credit method. Actuarial gains and losses are recognised in full in the Statement of Profit and Loss for the period in which they occur.
1.13 Borrowing Costs
Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that takes a substantial period of time to get ready for its intended use are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Other borrowing costs are recognized as expenditure in the period in which they are incurred.
1.14 Foreign Currency Transactions
Items included in the financial statements of the entity are measured using the currency of the primary economic environment in which the entity operates ("functional currency"). The financial statements are presented in Indian Rupees ("INR"), which is the functional currency and presentation currency of the Company.
a. Foreign Currency Transactions:
Foreign exchange transactions are recorded at the functional currency adopting the exchange rate prevailing on the dates of respective transactions. Monetary assets and liabilities denominated in foreign currencies existing as on the Balance Sheet date are translated at the functional currency exchange rate prevailing as at the Balance Sheet date. The exchange difference arising from the settlement of transactions during the period and effect of translations of assets and liabilities at the Balance Sheet date are recognized in the Statement of Profit and Loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in Other Comprehensive Income or profit or loss are also recognised in Other Comprehensive Income or profit and loss, respectively).
b. Derivative instruments and hedge accounting:
(i) The company uses foreign currency derivative contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and highly probable forecasted transactions. The company designates these as cash flow hedges applying the recognition and measurement principles set out in the Ind AS 109- Financial Instruments.
The use of foreign currency and derivative contracts is governed by the Company''s policies approved by the Board of directors which provide written principles on the use of such financial derivatives consistent with the Company''s risk management strategy. The company does not use derivative financial instruments for speculative purposes.
Foreign currency derivative instruments are initially measured at fair value and are re-measured at subsequent reporting dates. Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit and loss, except for the effective portion of cash flow hedges, which is recognised in Other Comprehensive Income in the cash flow hedge reserve and later reclassified to profit and loss when the hedge item affects profit and loss.
Hedge accounting is discontinued when the hedge instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting.
1.15 Leases
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the company is classified as a finance lease. All other leases are classified as operating leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
1.16 Segment Reporting
Operating Segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM) of the Company. The CODM is responsible for allocating resources and assessing performance of the operating segments of the Company.
1.17 Earnings per share
Basic/diluted earnings per
share is calculated by dividing the net profit and loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares/diluted potential equity shares outstanding as at the end of the year, as the case may be.
1.18 Impairment of Non-financial Assets
The Company assesses at each Balance Sheet date whether there is any indication that an asset or a cash generating unit may be impaired. An asset or a cash generating unit is treated as impaired, when the carrying value of assets exceeds its recoverable amount. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs of disposal and its value in use. Based on such assessment, impairment loss if any is recognized in the Statement of Profit & Loss for the period in which the asset is identified as impaired. The impairment loss recognised in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.
1.19 Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised when the company has a present obligation (legal or constructive) as a result of a past event, for which it is probable that a cash outflow will be required and a reliable estimate can be made of the amount of the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, it''s carrying amount is the present value of those cash flows(when the effect of time value of money is material). These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. When the company expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
Contingent Liabilities are disclosed when the company has a possible obligation or a present obligation and it is probable that an outflow of resources will not be required to settle the obligation or the amount of obligation cannot be measured with sufficient reliability.
Contingent assets are not recognized in the books of account. If it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognised in the financial statements of the period in which the change occurs. If an inflow of economic benefits has become probable, an entity discloses the contingent asset
1.20Critical accounting estimates, assumptions and judgements
The Company makes judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources in the application of the Company''s accounting policies that are described in Note 1. Estimates and judgements are continually evaluated and are based on historical experience and other factors that are considered to be relevant under the circumstances. Actual results may differ from the estimates.
Key sources of estimation uncertainty
i. Useful lives of property, plant and equipment and intangible assets:
As described in the significant accounting policies, the Company reviews the estimated useful lives of property, plant and equipment and intangible assets at the end of each reporting period.
ii. Actuarial Valuation:
The determination of Company''s liability towards defined benefit obligation to employees is made through independent actuarial valuation including determination of amounts to be recognised in the Statement of Profit and Loss and in other comprehensive income. Such valuation depend upon assumptions determined after taking into account inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market. Information about such valuation is provided in notes to the financial statements.
iii. Impairment of Assets:
The evaluation of applicability of indicators of impairment of assets requires assessment of several external and internal factors which could result in deterioration of recoverable amount of the assets.
iv. Recoverability of advances/receivables:
Management reviews its receivables for objective evidence of impairment at least quarterly. Significant financial difficulties of the debtor, the probability that the debtor will enter bankruptcy, and default or significant delay in payments are considered objective evidence that a receivable is impaired. In determining this, management makes judgement as to whether there is observable data indicating that there has been a significant change in the payment ability of the debtor, or whether there have been significant changes with adverse effect in the technological, market, economic or legal environment in which the debtor operates in.
Where there is objective evidence of impairment, management makes judgements as to whether an impairment loss should be recorded as an expense. In determining this, management uses estimates based on historical loss experience for assets with similar credit risk characteristics.
1.21 Recent accounting pronouncements
Appendix B to Ind AS 21, Foreign currency transactions and advance consideration:
On March 28, 2018, Ministry of Corporate Affairs ("MCA") has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment will come into force from April 1, 2018. The Company has evaluated the effect of this on the financial statements and the impact is not material.
Ind AS 115- Revenue from Contract with Customers:
The Ministry of Corporate Affairs ("MCA") has notified the Ind AS 115, Revenue from Contract with Customers on 28th March 2018. The standard replaces existing revenue recognition standards Ind AS 11 Construction Contracts and Ind AS 18 Revenue. An entity should recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity''s contracts with customers.
The standard permits two possible methods of transition:
- Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8- Accounting Policies, Changes in Accounting Estimates and Errors
- Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach) The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018.
The Company is in the process of evaluating the impact on application of Ind AS 115.
2.08A During the year, TOYS "R" US, Inc. ,one of the customers of the Company filed a petition in the Bankruptcy Court in The United States of America to wind down its US operation and the process is pending. A motion is pending in the said court regarding claims of its creditors which would establish streamlined procedures and forms for asserting those types of claims, which is set to be heard on 24th May 2018. The management is waiting on the court to enter the order on that motion so that the claim of the Company is consistent with the procedures set by the Court. The Company has to recover trade receivables from them aggregating to Rs.1,735.15 Lakhs (US$ 26.62 Lakhs) and the Company also holds merchandise/other materials in stock for them in inventory . The Company has engaged the services of Attorneys and Counselors at Law ,M/s Nelson Mullins Riley & Scarborough LLP, USA to file the claim for recovery of all its dues and no shortfall is anticipated thereon by the management at this stage. However as a prudential measure, an estimated provision of Rs. 347.03 Lakhs has been made in the said accounts towards loss, if any on recovery of receivables.
2.13.1 Terms/rights attached to Equity Shareholders
The company has only one class of shares referred to as equity shares with a face value of Re. 1/- each. Each holder of equity share is entitled to one vote per share. The company declares and pays dividends in Indian Rupees. The dividend proposed/declared by the Board of Directors is subject to approval/regularisation of the shareholders'' in the 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, in proportion to the number of equity shares held by the shareholders.
2.14.3 Description of Nature and Purpose of each Reserve
a. Capital Reserve : Capital reserve denotes investment subsidy received by the company amounting to Rs.22.10 Lakhs (Rs.22.10 Lakhs).
b. General Reserve : General Reserve is created from time to time by way of transfer of profits from retained earnings for appropriation purposes. General Reserve is created by a transfer from one component of equity to another and is not an item of comprehensive income.
c. Cash Flow Hedging Reserve: The cash flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the designated portion of hedging instruments that are recognised and accumulated under the heading cash flow reserve will be reclassified to statement of profit and loss only when the hedged transaction affects the profit or loss.
d. Equity Instruments through Other comprehensive income: This represents the cumulative gains and losses arising on the revaluation of equity instruments measured at fair value through other comprehensive income, under an irrevocable option, net of amounts reclassified to retained earnings when such assets are disposed off.
2.20.1 The company has taken steps to identify the suppliers who qualify under the definition of micro and small enterprises, as defined under the Micro, Small and Medium Enterprises Development Act 2006. Intimations have been received from some of the suppliers regarding their status under the said Act as at 31.03.2018, based on which, principal amount unpaid to such suppliers as at the yearend aggregating to Rs.69.40 Lakhs (Rs.111.53 Lakhs) has been included under Trade payables. In the opinion of the management, the impact of interest, if any, which may be payable in accordance with the provisions of the Act, is not expected to be material.
2.26.1 The company is in receipt of the Government Grant/Assistance as defined under Ind AS 20 - ''Accounting for Government Grants and Disclosure of Government Assistance'' as under:
1. Grants in the nature of Merchandise Export Incentive Scheme, Refund of State Levies, Duty Drawback and Service Tax Refund are disclosed under the head ''Export Incentive'' in Other Operating Revenue.
2. Grants in the nature of The Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) Scheme and Pradhan Mantri Paridhan Rojgar Protsahan Yojana Scheme (PMPRPY) being re-imbursement of employer''s contribution to Employee Provident Fund is deducted in the Employee Benefits Expense amounting to Rs.127.88 Lakhs (Rs.14.43 Lakhs)
3. Grants in the nature of re-imbursement of cost towards capital asset under the Technology Upgradation Fund Scheme (TUFS) and Integrated Skill Development Scheme (ISDS) Project which is disclosed as Deferred Grant. The amount is disclosed under the head ''Other Income'' in the proportions in which depreciation expense on those assets is recognised.
4. Grants in the nature of re-imbursement of interest cost on borrowings under the TUFS is disclosed under the head ''Other Income''.
5. Grants in the nature of re-imbursement of expenditure under the ISDS Project is deducted from the heads of related expenses.
2.32.3 Details of expenses on corporate social responsibility activities :
(a) Gross amount required to be spent by the company during the year Rs.303.62 Lakhs (Rs.267.75 Lakhs)
(b) Amount spent during the year on :
2.33A During the year 19,000,000 bonus shares were allotted in the ratio of 2:5 and accordingly the basic and diluted earnings per share for the current period and previous periods have been restated retroactively for comparative purposes in the manner required by Indian Accounting Standard (Ind AS) 33 "Earnings Per Shareâ.
2.34 In accordance with Ind AS 108 on "Operating Segments", the company operates in one business segment viz. Textiles Business and hence has only one reportable segment.
2.34A Information about products and services: The company earns revenue from only a single group of product and service viz. Textile business comprising of sale of garments and fabrics products.
2.34B Revenues from external customers attributed to the Company''s country of domicile and attributed to all foreign countries from which the Company derives revenues :
2.35 Disclosure of transactions with related parties as required by Ind AS-24 ''Related Party Disclosures'':
Related parties and nature of relationship Related parties with whom transactions have taken place during the year: a Key Managerial Personnel:
i Sabu M Jacob, Managing Director having control over the enterprise
ii Sindhu Chandrasekhar, Whole time director
b Enterprise owned or significantly influenced by key management personnel or their relatives:
i Kitex Childrenswear Limited
ii Kitex Limited
iii Anna Aluminium Company Private Limited
iv Kitex Herbals Limited
v Kitex Apparels Limited
vi Kitex Infantswear Limited c Associate Enterprise
i Kitex USA LLC
The following table provides the total amount of transactions that have been entered into with related parties for the relevant financial year:
2.36 Lease Accounting
Lease expenses for cancellable operating leases :
The Company''s leasing arrangements in respect of operating leases for residential quarters and equipment. Residential quarters and Equipment are hired on operating lease. The lease term is renewable every year by mutual consent on mutual agreement terms
2.38 Software under development disclosed under ''Intangable Assets under development'' represents expenditure on implementation of an integrated ERP System covering all functional areas/transactions including inventories, which is in progress; and pending implementation of the same, The Company has alternate internal controls over financial reporting in place.
2.39 Fair Value Measurement
Fair value of the financial instruments is classified in various fair value hierarchies based on the following three levels:
Level 1: Quoted prices (unadjusted) in active market for identical assets or liabilities.
Level 2: Inputs other than quoted price included within level 1 that are observable for the asset or liability, either directly.
Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The fair value of current trade receivables, current trade payables and other Current financial assets and liabilities is considered to be equal to the carrying amounts of these items due to their shortterm nature.
There were no transfers between Level 1 and Level 2 during the year.
2.39C Financial instrument measured at amortised cost
The carrying amount of financial assets and financial liabilities measured at amortised cost in the financial statements are a reasonable approximation of their face values since the Company does not anticipate that the carrying cost would be significantly different from the values that would eventualy be received or settled.
2.40 Financial Risk Management - Objectives and Policies
The Company has a well- managed risk management framework, anchored to policies and procedures and internal financial controls aimed at ensuring early identification, evaluation and management of key financial risks (such as liquidity risk, market risk, credit risk and foreign currency risk) that may arise as a consequence of its business operations as well as its investing and financing activities. Accordingly, the Company''s risk management framework has the objective of ensuring that such risks are managed within acceptable risk parameters in a disciplined and consistent manner and in compliance with applicable regulation.
Mar 31, 2017
1.1.1 Basis of Accounting
The financial statements are prepared under the historical cost convention in accordance with the Generally Accepted Accounting Principles in India and the provisions of the Companies Act, 2013.
1.1.2 Use of Estimates
The presentation of financial statements in conformity with the generally accepted accounting principles require estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual result and estimates are recognized in the period in which the results are known /materialized.
1.1.3 Inventories
Inventories are valued at lower of cost or net realisable value. For this purpose, the cost of bought-out inventories comprise of the purchase cost of the items, net of applicable tax/duty credits and cost of bringing such items into the factory on First-In, First-Out (FIFO) basis. Cost of Inventory comprises Cost of Purchase, Cost of Conversion and other Costs incurred to bring them to their respective present location and condition. The net realizable value of bought out inventories is taken at their current replacement value. The cost of manufactured inventories comprises of the direct cost of production plus appropriate fixed and variable production overheads.
1.1.4 Revenue Recognition
Revenue is recognized when significant risks and rewards of ownership of goods have been passed to the buyer. Export incentives are recognized on exports on accrual basis, except when there are significant uncertainties, based on the estimated realisable value of such entitlements. Other income is recognized on accrual basis, except when there are significant uncertainties.
1.1.5 Tangible Assets (Property, Plant and Equipment)
Property, Plant and Equipment are stated at cost less accumulated depreciation and impairment in value if any. Cost includes purchase price, (inclusive of import duties and non -refundable purchase taxes, after deducting trade discounts and rebates), other costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and an initial estimate of the costs of dismantling, removing the item and restoring the site on which it is located, if any.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components).
The cost of replacement spares/ major inspection relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the company and the cost of the item can be measured reliably.
The cost of Assets not ready for use as at the Balance Sheet date are disclosed under Capital Work-In-Progress.
1.1.6 Intangible Assets
Intangible assets are recorded at the cost of acquisition of such assets and are carried at cost less accumulated amortisation and impairment, if any.
1.1.7 Leased Assets
Operating Leases: Rentals are recognised as an expense with reference to lease terms and other considerations.
Finance Leases: The lower of the fair value of the leased assets at the inception of the lease and present value of the minimum lease rentals is capitalized as fixed assets with corresponding amount shown as lease liability. The principal component in the lease rental is adjusted against the lease liability and the interest component is charged to the Statement of Profit and Loss.
1.1.8 Depreciation and Amortisation
Depreciation on Fixed Assets is provided on Straight Line Method at the useful lives based on a review by the management at the year-end as under:
a) Assets (other than capital spares)- based on useful lives prescribed under Schedule II of the Companies Act, 2013
b) Capital Spares- based on useful life of each replaced part (2 - 5 years).
Software costs treated as Intangible Assets is amortised over a period of three years.
1.1.9 Foreign Currency Transactions
Transactions denominated in foreign currency are recorded at the rate of exchange prevailing on the date of transaction.
Monetary assets and liabilities denominated in foreign currencies outstanding at the year end are restated at the rate of exchange prevailing at the year-end and the gain or loss, is recognized in the Statement of Profit and Loss.
Exchange differences arising on actual payments/ realizations and year-end restatements are recognized in the Statement of Profit and Loss.
1.1.10 Forward Contracts
The Company enters into foreign exchange forward contracts to hedge its exposure to movements in foreign exchange rates. The company does not use the foreign exchange forward contracts for trading or speculation purposes.
Premium or discount arising at the inception of a forward exchange contract is amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the Statement of Profit and Loss in the reporting period in which the exchange rates change.
1.1.11 Government Grants
Government Grants are recognized where there is reasonable assurance that the Company has complied with the conditions attached to them and that the Grant will be received. Grant relating to depreciable fixed assets is reduced from the gross value of Fixed Assets. Grants/Subsidies in the nature of revenue are recognized as income over the period necessary to match them with the related costs which they are intended to compensate.
1.1.12 Investments
Long-term Investments made by the Company are stated at cost and provision for diminution in the value of long-term investments is made only if such a decline is other than temporary.
1.1.13 Employee Benefits
Short Term Employee Benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits and recognized in the period in which the employee renders the related service.
Defined Contribution Plans
The contributions remitted to government administered Provident and Employee State Insurance on behalf of its employees in accordance with the relevant statute are charged to the Statement of Profit and Loss as and when due. The Company has no further obligations for future Provident/ Pension fund benefits other than its monthly contributions.
Defined Benefit Plans
The net present value of the obligation for gratuity benefits as determined on independent actuarial valuation, conducted annually using the projected unit credit method, as adjusted for unrecognized past services cost, if any, is recognised in the books of account. Actuarial gains and losses are recognised in full in the Statement of Profit and Loss for the period in which they occur.
I ong Term Employee Benefits:
Compensated Absences:
The company has a scheme for compensated absences for employees, the liability of which is determined on the basis of an independent actuarial valuation carried out at the end of the year, using the projected unit credit method. Actuarial gains and losses are recognized in full in the Statement of Profit and Loss for the period in which they occur.
Post-employment and other long term employee benefits are recognised as an expense in the Statement of Profit and Loss for the year in which the employee has rendered services. The expenses are recognised at the present value of the amount payable determined using actuarial valuation techniques.
1.1.14 Borrowing Costs
Borrowing Costs directly attributable to the acquisition, construction and production of qualifying assets are capitalised as part of the Cost of such assets. All other borrowing costs are charged to the Statement of Profit and Loss.
1.1.15 Taxation
Income tax is accounted in accordance with Accounting Standard on Accounting for Taxes on Income (AS-22), which includes current taxes and deferred taxes.
Current tax is provided on the basis of estimated taxable income in accordance with the Income Tax Act, 1961 using the applicable tax rates and tax laws.
Deferred tax assets and liabilities arising on account of timing difference and which are capable of reversal in subsequent periods, are recognized using the tax rates and tax laws that have been 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, except that deferred tax assets arising due to unabsorbed depreciation and losses are recognised if there is a virtual certainty that sufficient future taxable income will be available to realise the same.
1.1.16 Earnings per share
Basic /diluted earnings per share is calculated by dividing the net profit/loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares/diluted potential equity shares outstanding as at the end of the year, as the case may be.
1.1.17 Impairment of Assets
The Company assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. An asset is treated as impaired, when the carrying value of assets exceeds its recoverable value. Based on such assessment, impairment loss if any is recognized in the Statement of Profit & Loss for the period in which the asset is identified as impaired. The impairment loss recognised in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.
1.1.18 Provisions, Contingent Liabilities and Contingent Assets.
Provisions are recognised when the company has a present obligation as a result of a past event, for which it is probable that a cash outflow will be required and a reliable estimate can be made of the amount of the obligation. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the correct management estimates.
Contingent Liabilities are disclosed when the company has a possible obligation or a present obligation and it is probable that a cash flow will not be required to settle the obligation.
Contingent assets are neither recognized nor disclosed in the accounts.
Mar 31, 2015
1.2.1 Basis of Accounting
The financial statements are prepared under the historical cost
convention in accordance with the Generally Accepted Accounting
Principles in India and the provisions of the Companies Act, 2013.
2.2.2 Use of Estimates
The preparation of financial statements requires the management to make
estimates and assumptions considered in the reported amounts of assets
and liabilities (including contingent liabilities) as on the date of
the financial statements and the reported income and expenses during
the reporting period. The estimates and assumptions used in the
financial statements are based upon the Management''s evaluation of the
relevant facts and circumstances as on the date of financial
statements. Management believes that the estimates used in the
preparation of the financial statements are prudent and reasonable.
Future results may vary from these estimates.
2.2.3 Inventories
Inventories are valued at cost or net realisable value, whichever is
lower. Cost of Inventory comprises of Cost of Purchase, Cost of
Conversion and other Costs incurred to bring them to their respective
present location and condition. Costs of Raw Materials and Packing
Materials are determined on FIFO basis.
2.2.4 Revenue Recognition
Revenue is recognized when the significant risks and rewards of
ownership of goods have been passed to the buyer. Sales are recognized
on inwarding of goods at customer''s end, where applicable as per terms
of sale (for domestic) and on the date of bill of lading (for exports).
Income arising on disposal of scrap/waste is recognized on receipt
basis.
2.2.5 Own Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation. The cost
includes purchase consideration, financing costs till commencement of
commercial production and other directly attributable costs incurred to
bring an Asset to its working condition for its intended use. Subsidy
towards specific assets is reduced from the cost of fixed assets. Fixed
assets taken on Finance Lease are capitalized.
The costs of Assets not ready for use as at the Balance Sheet date are
disclosed under Capital Work-In-Progress.
2.2.6 Leased Assets
Operating Leases: Rentals are recognised as an expense with reference
to lease terms and other considerations.
Finance Leases: The lower of the fair value of the leased assets at the
inception of the lease and present value of the minimum lease rentals
is capitalised as fixed assets with corresponding amount shown as lease
liability. The principal component in the lease rental is adjusted
against the lease liability and the interest component is charged to
the Statement of Profit and Loss.
2.2.7 Depreciation and Amortisation
Depreciation on Fixed Assets is provided based on the useful life of
the asset in the manner prescribed in Schedule II to the Companies Act,
2013. Capitalised Software costs is amortised over a period of three
years.
2.2.8 Foreign Currency Transactions
Transactions denominated in foreign currency are recorded at the rate
of exchange prevailing on the date of transaction.
Monetary assets and liabilities denominated in foreign currencies
outstanding at the year end are re-stated at the rate of exchange
prevailing at the year-end and the gain or loss, is recognized in the
Statement of Profit and Loss.
Exchange differences arising on actual payments/ realizations and
year-end restatements are recognized in the Statement of Profit and
Loss.
2.2.9 Forward Contracts
The Company enters into foreign exchange forward contracts to hedge its
exposure to movements in foreign exchange rates. The company does not
use the foreign exchange forward contracts for trading or speculation
purposes.
Premium or discount arising at the inception of a forward exchange
contract is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognised in the
Statement of Profit and Loss in the reporting period in which the
exchange rates change.
2.2.10 Government Grants
Government Grants are recognized where there is reasonable assurance
that the Company has complied with the conditions attached to them and
that the Grant will be received. Grant relating to depreciable fixed
assets is reduced from the gross value of Fixed Assets. Revenue Grants
are recognized in the Statement of Profit and Loss and are shown under
Other Income.
2.2.11 Investments
Long-term Investments made by the Company are stated at cost and
provision for diminution in the value of long- term investments is made
only if such a decline is other than temporary.
2.2.12 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.
The contributions remitted to government administered Provident and
Pension Fund on behalf of its employees in accordance with the relevant
statute are charged to the Statement of Profit and Loss as and when
due. The Company has no further obligations for future Provident/
Pension fund benefits other than its monthly contributions.
Post employment and other long term employee benefits are recognised as
an expense in the Statement of Profit and Loss for the year in which
the employee has rendered services. The expenses are recognised at the
present value of the amount payable determined using actuarial
valuation techniques.
2.2.13 Borrowing Costs
Borrowing Costs directly attributable to the acquisition, construction
and production of qualifying assets are capitalised as part of the Cost
of such assets. All other borrowing costs are charged to the Statement
of Profit and Loss.
2.2.14 Taxation
Provision for taxation is made for both current and deferred taxes.
Current tax is provided on the basis of estimated taxable income in
accordance with the Income Tax Act, 1961 using the applicable tax rates
and tax laws.
Deferred tax assets and liabilities arising on account of timing
difference and which are capable of reversal in subsequent periods, are
recognized using the tax rates and tax laws that have been enacted or
substantively enacted as on the Balance Sheet date.
Deferred Tax Assets are recognized and carried forward only if there is
a virtual certainty that they will be realised and are reviewed for the
appropriateness of their respective carrying values at each Balance
Sheet date.
2.2.15 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.
Mar 31, 2014
1. Corporate Information
Kitex Garments Limited is a public company incorporated in India under
the provisions of the Companies Act, 1956. Its shares are listed on the
Bombay Stock Exchange, the National Stock Exchange and the Cochin Stock
Exchange. The Company is engaged in the manufacture of fabric and
readymade garments. The readymade garments manufactured are exported.
2. Basis of Preparation
2.1 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 the Companies (Accounting Standards) Rules, 2006, (as amended)
and the relevant provisions of the Companies Act, 1956. 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 Summary of Significant accounting policies
2.2.1 Basis of Accounting
The financial statements are prepared under the historical cost
convention in accordance with the Generally Accepted Accounting
Principles in India and the provisions of the Companies Act, 1956.
2.2.2 Use of Estimates
The preparation of financial statements requires the management to make
estimates and assumptions considered in the reported amounts of assets
and liabilities (including contingent liabilities) as on the date of
the financial statements and the reported income and expenses during
the reporting period. The estimates and assumptions used in the
financial statements are based upon the Management''s evaluation of the
relevant facts and circumstances as on the date of financial
statements. Management believes that the estimates used in the
preparation of the financial statements are prudent and reasonable.
Future results may vary from these estimates.
2.2.3 Inventories
Inventories are valued at cost or net realisable value, whichever is
lower. Cost of Inventory comprises of Cost of Purchase, Cost of
Conversion and other Costs incurred to bring them to their respective
present location and condition. Costs of Raw Materials and Packing
Materials are determined on FIFO basis.
2.2.4 Revenue Recognition
Revenue is recognized when the significant risks and rewards of
ownership of goods have been passed to the buyer. Sales are recognized
on in warding of goods at customer''s end, where applicable as per terms
of sale (for domestic) and on the date of bill of lading (for exports).
Income arising on disposal of scrap/waste is recognized on receipt
basis.
2.2.5 Own Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation. The cost
includes purchase consideration, financing costs till commencement of
commercial production and other directly attributable costs incurred to
bring an Asset to its working condition for its intended use. Subsidy
towards specific assets is reduced from the cost of fixed assets. Fixed
assets taken on Finance Lease are capitalized.
The costs of Assets not ready for use as at the Balance Sheet date are
disclosed under Capital Work-In-Progress.
2.2.6 Leased Assets
Operating Leases: Rentals are recognised as an expense with reference
to lease terms and other considerations.
Finance Leases: The lower of the fair value of the leased assets at the
inception of the lease and present value of the minimum lease rentals
is capitalised as fixed assets with corresponding amount shown as lease
liability. The principal component in the lease rental is adjusted
against the lease liability and the interest component is charged to
the Statement of Profit and Loss.
2.2.7 Depreciation and Amortisation
Depreciation on Fixed Assets is provided on Straight Line Method (SLM)
at the rates and in the manner prescribed in Schedule XIV to the
Companies Act, 1956. Capitalised Software costs is amortised over a
period of three years.
2.2.8 Foreign Currency Transactions
Transactions denominated in foreign currency are recorded at the rate
of exchange prevailing on the date of transaction.
Monetary assets and liabilities denominated in foreign currencies
outstanding at the yearend are re-stated at the rate of exchange
prevailing at the year-end and the gain or loss, is recognized in the
Statement of Profit and Loss.
Exchange differences arising on actual payments/ realizations and
year-end restatements are recognized in the Statement of Profit and
Loss.
The Company enters into foreign exchange forward contracts to hedge its
exposure to movements in foreign exchange rates. The company does not
use the foreign exchange forward contracts for trading or speculation
purposes.
Premium or discount arising at the inception of a forward exchange
contract is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognised in the
Statement of Profit and Loss in the reporting period in which the
exchange rates change.
2.2.9 Government Grants
Government Grants are recognized where there is reasonable assurance
that the Company has complied with the conditions attached to them and
that the Grant will be received. Grant relating to depreciable fixed
assets is reduced from the gross value of Fixed Assets. Revenue Grants
are recognized in the Statement of Profit and Loss and are shown under
Other Income.
2.2.10 Investments
Long-term Investments made by the Company are stated at cost and
provision for diminution in the value of long-term investments is made
only if such a decline is other than temporary.
2.2.11 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.
The contributions remitted to government administered Provident and
Pension Fund on behalf of its employees in accordance with the relevant
statute are charged to the Statement of Profit and Loss as and when
due. The Company has no further obligations for future Provident/
Pension fund benefits other than its monthly contributions.
Post employment and other long term employee benefits are recognised as
an expense in the Statement of Profit and Loss for the year in which
the employee has rendered services. The expenses are recognised at the
present value of the amount payable determined using actuarial
valuation techniques.
2.2.12 Borrowing Costs
Borrowing Costs directly attributable to the acquisition, construction
and production of qualifying assets are capitalised as part of the Cost
of such assets. All other borrowing costs are charged to the Statement
of Profit and Loss.
2.2.13 Taxation
Provision for taxation is made for both current and deferred taxes.
Current tax is provided on the basis of estimated taxable income in
accordance with the Income Tax Act, 1961 using the applicable tax rates
and tax laws.
Deferred tax assets and liabilities arising on account of timing
difference and which are capable of reversal in subsequent periods, are
recognized using the tax rates and tax laws that have been enacted or
substantively enacted as on the Balance Sheet date.
Deferred Tax Assets are recognized and carried forward only if there is
a virtual certainty that they will be realised and are reviewed for the
appropriateness of their respective carrying values at each Balance
Sheet date.
2.2.14 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.
d Terms/rights attached to equity shares.
The company has only one class of equity shares having par value of Re.
1 per share. Each holder of equity share is entitled to one vote per
share. The company declares and pays dividend in Indian rupees.
The dividend proposed is as recommended by the Board of Directors and
subject to the approval of the shareholders in the ensuing
Annual General Meeting.
For the year ended 31.03.2014, the amount of dividend per share
recognised as distributions to equity shareholders is Rs. 1 (31 March
2013: Re.0.80 )
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive the realised value of the assets of
the Company, remaining after payment of all preferential dues. The
distribution will be in proportion to the number of equity shares held
by the shareholders.
II
1 Indian Rupee Term loans from Banks (Other than Vehicle loans) are
Secured by:
i Primary Security:
State Bank of India Term Loan Account no 32331339891 - First charge in
favour of State bank of India on the entire fixed assets, present and
future, of the Company and including:
a Equitable Mortgage over 19.24 acres of Land , Building and Plant and
Machinery of the Backward integration project in Re.Sy no. 122/ 9/4 ,
112/5 , 112/1 , 108/2/2 , 108/10/2 , 108/2 , 108/10 , 112/4 , 122/9/3 ,
108/1/2 , 122/7 ,121/1/1 in Block 27 of Pattimattom Village ,
Kunnathunadu taluk , Puthencruz sub district, Ernakulam belonging to
the Company.
b Equitable Mortgage over 244.629 cents of Land in Re Sy No 76/3 in
Block no 27 of Kizhakkambalam, Puthencruz sub district, Ernakulam
belonging to the Company.
ii Collateral Security:
a Second charge in favor of State Bank of India, on the entire current
assets of the Company, both present and future.
b Second charge in favor of State Bank of India, on the entire Fixed
assets of the Company, both present and future other than Fixed assets
charged as primary security.
c First charge in favor of State bank of India, over Equitable
Mortgage on 3.75 Acres of land & building in Re. Sy No. 81/1 at
Pattimattom Village, Kunnathunadu Taluk (Kizhakkambalam), Puthen cruz
Sub-district, Ernakulam belonging to the Company.
iii Personal Guarantee of Mr. Sabu M Jacob, Managing Director.
2 Vehicle loans are secured by hypothecation of the concerned vehicles.
1 Terms of repayment of Packing Credits:
Packing credit from Bank is repayable on demand and carries interest @
7.45%. (Current rate for State Bank of India)
2 Working capital Limits from Bank is secured by (i) Primary Security:
First charge in favor of State bank of India over the entire Current
Assets of the Company, both present and future.
(ii) Collateral Security:
Second charge, in favor of State bank of India on the entire Fixed
Assets of the Company (excluding vehicles purchased under the Hire
Purchase), of which includes:
a First charge in favor of State bank of India over Equitable Mortgage
on 3.75 Acres of land & building in Re. Sy No. 81/1 at Pattimattom
Village, Kunnathunadu Taluk (Kizhakkambalam), Puthen cruz Sub-district,
Ernakulam belonging to the Company.
b Second charge over Equitable Mortgage on 19.24 acres of land,
building and plant & machinery of the fabric processing plant at
Kizhakkambalam.
c Second charge over EM on 244.629 cents of Land in Re Sy No 76/3 in
Block no 27 of Kizhakkambalam, Puthencruz sub district, Ernakulam
belonging to the Company.
(iii) Personal Guarantee on Mr. Sabu M Jacob, Managing Director.
Mar 31, 2013
1.2.1 Basis of Accounting
The financial statements are prepared under the historical cost
convention in accordance with the Generally Accepted Accounting
Principles in India and the provisions of the Companies Act, 1956.
1.2.2 Use of Estimates
The preparation of financial statements requires the management to make
estimates and assumptions con- sidered in the reported amounts of
assets and liabilities (including contingent liabilities) as on the
date of the financial statements and the reported income and expenses
during the reporting period. The estimates and assumptions used in the
financial statements are based upon the Management''s evaluation of the
relevant facts and circumstances as on the date of financial
statements. Management believes that the estimates used in the
preparation of the financial statements are prudent and reasonable.
Future results may vary from these estimates.
1.2.3 Inventories
Inventories are valued at cost or net realisable value, whichever is
lower. Cost of Inventory comprises of Cost of Purchase, Cost of
Conversion and other Costs incurred to bring them to their respective
present location and condition. Costs of Raw Materials and Packing
Materials are determined on FIFO basis.
1.2.4 Revenue Recognition
Revenue is recognized when the significant risks and rewards of
ownership of goods have been passed to the buyer. Sales are recognized
on in warding of goods at customer''s end, where applicable as per terms
of sale (for domestic) and on the date of bill of lading (for exports).
Income arising on disposal of scrap/waste is recognized on receipt
basis.
1.2.5 Own Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation. The cost
includes purchase consideration, financing costs till commencement of
commercial production and other directly attributable costs incurred to
bring an Asset to its working condition for its intended use. Subsidy
received towards specific assets is reduced from the cost of fixed
assets. Fixed assets taken on Finance Lease are capitalized.
The costs of Assets not ready for use as at the Balance Sheet date are
disclosed under Capital Work-In-Progress.
1.2.6 Leased Assets
Operating Leases: Rentals are recognised as an expense with reference
to lease terms and other considerations. Finance Leases: The lower of
the fair value of the leased assets at the inception of the lease and
present value of the minimum lease rentals is capitalised as fixed
assets with corresponding amount shown as lease liability. The
principal component in the lease rental is adjusted against the lease
liability and the interest component is charged to Statement of Profit
and Loss.
1.2.7 Depreciation and Amortisation
Depreciation on Fixed Assets is provided on Straight Line Method (SLM)
at the rates and in the manner prescribed in Schedule XIV to the
Companies Act, 1956. Capitalised Software costs is amortised over a pe-
riod of three years.
1.2.8 Foreign Currency Transactions
Transactions denominated in foreign currency are recorded at the rate
of exchange prevailing on the date of transaction.
Monetary assets and liabilities denominated in foreign currencies
outstanding at the yearend are re-stated at the rate of exchange
prevailing at the year-end and the gain or loss, is recognized in the
Statement of Profit and Loss.
Exchange differences arising on actual payments/ realizations and
year-end restatements are recognized in the Statement of Profit and
Loss.
1.2.9 Government Grants
Government Grants are recognized where there is reasonable assurance
that the Company has complied with the conditions attached to them and
that the Grant will be received. Grant relating to depreciable fixed
assets is reduced from the gross value of Fixed Assets. Revenue Grants
are recognized in the Statement of Profit and Loss and are shown under
Other Income.
1.2.10 Investments
Long-term Investments made by the Company are stated at cost and
provision for diminution in the value of long-term investments is made
only if such a decline is other than temporary.
1.2.11 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.
The contributions remitted to government administered Provident and
Pension Fund on behalf of its employees in accordance with the
relevant statute are charged to the Statement of Profit and Loss as and
when due. The Company has no further obligations for future Provident/
Pension fund benefits other than its monthly contributions.
Post employment and other long term employee benefits are recognised as
an expense in the Statement of Profit and Loss for the year in which
the employee has rendered services. The expenses are recognised at the
present value of the amount payable determined using actuarial
valuation techniques.
1.2.12 Borrowing Costs
Borrowing Costs directly attributable to the acquisition, construction
and production of qualifying assets are capitalised as part of the
Cost of such assets. All other borrowing costs are charged to the
Statement of Profit and Loss.
1.2.13 Taxation
Provision for taxation is made for both current and deferred taxes.
Current tax is provided on the basis of estimated taxable income in
accordance with the Income Tax Act, 1961 using the applicable tax rates
and tax laws.
Deferred tax assets and liabilities arising on account of timing
difference and which are capable of reversal in subsequent periods, are
recognized using the tax rates and tax laws that have been enacted or
substantively enacted as on the Balance Sheet date.
Deferred Tax Assets are recognized and carried forward only if there is
a virtual certainty that they will be realised and are reviewed for
the appropriateness of their respective carrying values at each Balance
Sheet date.
1.2.14 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.
Mar 31, 2012
1. Corporate Information
Kitex Garments Limited is a public company incorporated in India under
the provisions of the Companies Act, 1956. Its shares are listed on
Bombay Stock Exchange and Cochin Stock Exchange. The Company is engaged
in the manufacture of fabric and readymade garments. The readymade
garments manufactured are exported.
2. 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 the Companies (Accounting Standards) Rules, 2006, (as amended)
and the relevant provisions of the Companies Act, 1956. 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.
2.1 Presentation and disclosure of Financial Statements
For the year ended 31 March 2012, the revised Schedule VI notified
under the Companies Act, 1956, has become applicable to the Company,
for preparation and presentation of its Financial Statements. The
adoption of revised Schedule VI does not impact recognition and
measurement principles followed for preparation of financial
statements. However, it has significant impact on presentation and
disclosures made in the financial statements. The company has also
reclassified the previous year figures in accordance with the
requirements applicable in the current year.
2.2 Summary of Significant accounting policies
2.2.1 Basis of Accounting
The financial statements are prepared under the historical cost
convention in accordance with the Generally Accepted Accounting
Principles in India and the provisions of the Companies Act, 1956.
2.2.2 Use of Estimates
The preparation of financial statements requires the management to make
estimates and as- gumptions considered in the reported amounts of
assets and liabilities (including contingent liabilities) as on the
date of the financial statements and the reported income and expenses
during the reporting period. The estimates and assumptions used in
the financial statements are based upon the Management's evaluation of
the relevant facts and circumstances as on the date of financial
statements. Management believes that the estimates used in the
preparation of the financial statements are prudent and reasonable.
Future results may vary from these estimates.
2.2.3 Inventories
Inventories are valued at cost or net realizable value, whichever is
lower. Cost of Inventory com- prises of Cost of Purchase, Cost of
Conversion and other Costs incurred to bring them to their respective
present location and condition. Costs of Raw Materials and Packing
Materials are determined on FIFO basis.
2.2.4 Revenue Recognition
Revenue is recognized when the significant risks and rewards of
ownership of goods have been passed to the buyer. Sales are recognized
on in warding of goods at customer's end, where applicable as per
terms of sale (for domestic) and on the date of bill of lading (for
exports). Income arising on disposal of scrap/waste is recognized on
receipt basis.
2.2.5 Own Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation. The cost
includes purchase con- side ration, financing costs till commencement of
commercial production and other directly at- attributable costs incurred
to bring an Asset to its working condition for its intended use.
Subsidy received towards specific assets is reduced from the cost of
fixed assets. Fixed assets taken on Finance Lease are capitalized.
The costs of Assets not ready for use as at the Balance Sheet date are
disclosed under Capital Work- In-Progress.
2.2.6 Leased Assets
Operating Leases: Rentals are recognized as an expense with reference
to lease terms and other considerations.
Finance Leases: The lower of the fair value of the leased assets at the
inception of the lease and present value of the minimum lease rentals
is capitalized as fixed assets with corresponding amount shown as lease
liability. The principal component in the lease rental is adjusted
against the lease liability and the interest component is charged to
Statement of Profit and Loss.
2.2.7 Depreciation and Amortization
Depreciation on Fixed Assets is provided on Straight Line Method (SLM)
at the rates and in the manner prescribed in Schedule XIV to the
Companies Act, 1956. Capitalized Software costs is amortized over a
period of three years.
2.2.8 Foreign Currency Transactions
Transactions denominated in foreign currency are recorded at the rate
of exchange prevailing on the date of transaction.
Monetary assets and liabilities denominated in foreign currencies
outstanding at the year end are re-stated at the rate of exchange
prevailing at the year-end and the gain or loss, is recognized in the
Statement of Profit and Loss.
Exchange differences arising on actual payments/ realizations and
year-end restatements are recognized in the Statement of Profit and
Loss.
2.2.9 Government Grants
Government Grants are recognized where there is reasonable assurance
that the Company has complied with the conditions attached to them and
that the Grant will be received. Grant relating to depreciable fixed
assets is reduced from the gross value of Fixed Assets. Revenue Grants
are recognized in the Statement of Profit and Loss and are shown under
Other Income.
2.2.10 Investments
Long-term Investments made by the Company are stated at cost and
provision for diminution in the value of long-term investments is made
only if such a decline is other than temporary.
2.2.11 Employee Benefits
Short term employee benefits are recognized as an expense at the
undiscounted amount in the Statement of Profit and Loss of the year in
which the related service is rendered.
The contributions remitted to government administered Provident and
Pension Fund on behalf of its employees in accordance with the relevant
statute are charged to the Statement of Profit and Loss as and when
due. The Company has no further obligations for future Provident/ Pen-
sion fund benefits other than its monthly contributions.
Post employment and other long term employee benefits are recognized as
an expense in the Statement of Profit and Loss for the year in which
the employee has rendered services. The ex- lenses are recognized at
the present value of the amount payable determined using actuarial
valuation techniques.
2.2.12 Borrowing Costs
Borrowing Costs directly attributable to the acquisition, construction
and production of qualifying assets are capitalized as part of the
Cost of such assets. All other borrowing costs are charged to the
Statement of Profit and Loss.
2.2.13 Taxation
Provision for taxation is made for both current and deferred taxes.
Current tax is provided on the basis of estimated taxable income in
accordance with the Income Tax Act, 1961 using the applicable tax rates
and tax laws.
Deferred tax assets and liabilities arising on account of timing
difference and which are capable of reversal in subsequent periods, are
recognized using the tax rates and tax laws that have been enacted or
substantively enacted as on the Balance Sheet date.
Deferred Tax Assets are recognized and carried forward only if there is
a virtual certainty that they will be realized and are reviewed for the
appropriateness of their respective carrying values at each Balance
Sheet date.
2.2.14 Provisions, Contingent Liabilities and Contingent Assets.
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognized but are disclosed in the
Notes. Contingent Assets are neither recognized nor disclosed in the
financial statements.
C Operating Lease: Company as Lessee
The Company has taken various residential and office premises under
operating lease agreements. These agreements are generally for a period
of 11 months. The Company has also taken equipments on rent for shorter
duration during the year. Minimum lease payments charged during the
year to the Statement of Profit and Loss aggregated to Rs. 66,23,419.34
(Previous year - Rs. 67,78,208.28)
Mar 31, 2011
1. Basis of Accounting
The financial statements are prepared under the historical cost
convention in accordance with the Generally Accepted Accounting
Principles in India and the provisions of the Companies Act, 1956.
2. Inventories
Inventories are valued at cost or net realisable value, whichever is
lower. Cost of Inventory comprises of Cost of Purchase, Cost of
Conversion and other Costs incurred to bring them to their respective
present location and condition. Costs of Raw Materials and Packing
Materials are determined on FIFO basis.
3. Revenue Recognition
Sale is recognised at the point of despatch of goods to the customer.
4. Own Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation. The cost
includes purchase consideration, financing costs till commencement of
commercial production and other directly attributable costs incurred to
bring an Asset to its working condition for its intended use.
The costs of Assets not ready for use as at the Balance Sheet date are
disclosed under Capital Work-in-Progress.
5. Leased Assets
Operating Leases: Rentals are recognised as an expense with reference
to lease terms and other considerations.
Finance Leases: The lower of the fair value of the leased assets at the
inception of the lease and present value of the minimum lease rentals
is capitalised as fixed assets with corresponding amount shown as lease
liability. The principal component in the lease rental is adjusted
against the lease liability and the interest component is charged to
Profit and Loss Account.
6. Depreciation
Depreciation on Fixed Assets is provided on Straight Line Method (SLM)
at the rates and in the manner prescribed in Schedule XIV to the
Companies Act, 1956. Capitalised Software costs is written off over a
period of three years.
7. Foreign Currency Transactions
Transactions denominated in foreign currency are recorded at the rate
of exchange prevailing on the date of transaction.
Monetary items denominated in foreign currencies at the year end are
re-stated at year end rates.
Any income or expense on account of exchange rate difference, either on
the settlement or on translation is recognised in the Profit and Loss
Account.
In respect of financial statement of foreign branch:
i) Revenue items other than depreciation are translated using average
exchange rate prevailed during the accounting period.
ii) Fixed Assets are translated using exchange rate prevailing on the
date of acquisition of asset.
iii) Current Assets and Current Liabilities on the balance sheet date
are translated using exchange rate prevailing at the year end.
8. Government Grants
Government Grants are recognised where there is reasonable assurance
that the Company has complied with the conditions attached to them and
that the Grant will be received. Grant relating to depreciable fixed
assets is reduced from the gross value of Fixed Assets. Revenue Grants
are recognised in the Profit and Loss Account and are shown under Other
Income.
9. Investments
Long-term Investments made by the Company are stated at cost and
provision for diminution in the value of long-term investments is made
only if such a decline is other than temporary.
10. Employee Benefits
Short term employee benefits are recognised as an expense at the
undiscounted amount in the Profit and Loss Account of the year in which
the related service is rendered.
Post employment and other long term employee benefits are recognised as
an expense in the profit and loss account for the year in which the
employee has rendered services. The expenses are recognised at the
present value of the amount payable determined using actuarial
valuation techniques.
11. Borrowing Costs
Borrowing Costs directly attributable to the acquisition, construction
and production of qualifying assets are capitalised as part of the Cost
of such assets. All other borrowing costs are charged to the Profit and
Loss Account.
12. Taxation
Provision for taxation is made for both current and deferred taxes.
Current tax is provided on the basis of estimated taxable income in
accordance with the Income Tax Act, 1961 using the applicable tax rates
and tax laws.
Deferred tax assets and liabilities arising on account of timing
difference and which are capable of reversal in subsequent periods, are
recognized using the tax rates and tax laws that have been enacted or
substantively enacted as on the Balance Sheet date.
Deferred Tax Assets are recognized and carried forward only if there is
a virtual certainty that they will be realised and are reviewed for the
appropriateness of their respective carrying values at each Balance
Sheet date.
13. 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.
Mar 31, 2010
1. GENERAL
The Company follows the mercantile system of accounting and recognizes
Income and Expenditure on accrual basis. The accounts are prepared on
historical cost basis, as going concern, and are consistent with
generally accepted accounting principles.
2. INVENTORY VALUATION
Inventories are valued as under:
a. Raw materials and Stores & Spares are valued at cost under FIFO
basis.
b. Finished goods are valued at cost or net realizable value whichever
is lower.
3. CASH FLOW STATEMENT
The cash flow statement is prepared under "indirect method" and the
same is annexed.
4. CONTINGENT LIABILITIES
These are disclosed by way of notes on the Balance Sheet. Provision is
made in the accounts in respect of those contingencies which are likely
to materialize into liabilities after the year end, till the
finalisation of accounts and have material effect on the position
stated in the Balance Sheet.
5. DEPRECIATION
a. Depreciation has been charged on Fixed Assets under straight-line
method at the rates and in the manner given under Schedule XIV of the
Companies Act, 1956.
b. Computer software has been written off over a period of three
years.
6. REVENUE RECOGNITION
The company recognises sale at the point of despatch of goods to the
customer.
Other revenue/income are generally accounted on accrual basis as and
when they are earned.
7. FIXED ASSETS
Fixed Assets are stated at cost less accumulated depreciation. Assets
under installation or construction as at the Balance Sheet date are
shown as capital work in progress. Expenditure during construction
period in respect of new project/expansion is allocated to the
respective fixed assets on their being ready for commercial use.
Fixed Assets include Vehicles Rs 1,20,17,337 & Software Rs 50,20,132
(Previous year Vehicle Rs 79,51,159/ - & Software 55,01,145), which are
purchased under Hire purchase credit.
8. FOREIGN CURRENCY
a. Transactions denominated in foreign currencies are normally
recorded at the exchange rate prevailing at the time of transaction.
b. Any income or expense on account of exchange rate difference is
recognized in the Profit and Loss account.
c. In respect of financial statement of foreign branch:
i) Revenue items other than depreciation are translated using average
exchange rate prevailed during the accounting period.
ii) Fixed Assets are translated using exchange rate prevailing on the
date of acquisition of asset.
iii) Current Assets and Current Liabilities on the balance sheet date
are translated using exchange rate prevailing at the year end.
9. GOVERNMENT GRANTS
Government Grants are recognized when there is reasonable assurance
that the same will be received. Capital Grants relating to specific
assets are reduced from the gross value of the fixed assets. Revenue
Grants are recognized in the profit & loss account under other income.
10. INVESTMENTS
Investments are valued at acquisition cost.
11. RETIREMENT BENEFITS
The liability for gratuity and leave encashment are provided on the
basis of actuarial valuation carried out by an independent actuary.
Contributions to Provident Fund and Family pension fund are funded as a
percentage of salary/wages.
12. BORROWING COST
Borrowing costs that are attributable to the acquisition or
construction of qualifying asset are capitalized as part of the cost of
such asset up to the date when such asset is ready for its intended
use. All other borrowing costs are charged off to revenue.
17. INCOME TAX
a. Provision for Taxation is made on the basis of the taxable income
computed for the current accounting period in accordance with the
Income Tax Act, 1961.
b. Deferred Tax on account of timing difference between taxable and
accounting income is provided considering the tax rates and tax laws
enacted or substantially enacted by the Balance Sheet date, in
accordance with Accounting Standard - 22 of the Institute of Chartered
Accountants of India.
18. IMPAIRMENT OF ASSETS
No material impairment of Assets has been identified by the company and
as such no provision is required as per Accounting Standard (As-28)
issued by Institute of Chartered Accountants of India.
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