Accounting Policies of Lux Industries Ltd. Company
Mar 31, 2023
1. Reporting entity
Lux Industries Limited (''the Company'') is a public company domiciled and headquartered in India, having its registered office situated at 39, Kali Krishna Tagore Street, Kotkata. The Company has its shares listed on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The Company is primarily engaged in the manufacturing and sales of knitwears. The Company has operations in India and caters to both domestic and international markets. The Company also has a subsidiary in India in the name of Artimas Fashions Private Limited. The Manufacturing units of the Company are located in Kotkata (West Bengal), Ludhiana (Punjab) and Tirupur, in the state of Tamil Nadu.
2. Basis of preparation of Standalone financial statements
(a) Statement of compliance
These Standalone financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) notified under Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) notified under Section 133 of the Companies Act, 2013 (''Act'') and other relevant provisions of the Act and guidelines issued by the Securities and Exchange Board of India (''SEBI''), as applicable.
The Standalone financial statements were approved for issue by the Board of Directors of the Company at their meeting held on May, 30, 2023. The details of the Company''s accounting policies are included in Note 3.
(b) Functional and presentation currency
These Standalone financial statements are presented in Indian Rupees (H), which is also the Company''s functional currency. AH amounts have been rounded off to the nearest crores, unless otherwise indicated.
(c) Basis of measurement
The Standalone financial statements have been prepared on historical cost convention on the accrual basis, except for the following items:
(i) Certain financial assets and financial liabilities measured at fair value;
(ii) Assets held for sale-measured at the lower of its carrying amount and fair value less costs to sett; and
(iii) Employee''s defined benefit plan as per actuarial valuation.
Fair value is the price that would be received on the sate of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions, regardless of whether that price is directly observable or estimated using another valuation technique. In determining the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.
(d) Use of estimates and judgments
The preparation of the Company''s Standalone financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Estimates and underlying assumptions are reviewed on an ongoing basis. Uncertainty about these assumptions and estimates coutd result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. The application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these Standalone financial statements have been disclosed betow. Accounting estimates coutd change from period to period. Actuat resutts coutd differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. The changes in the estimates are reflected in the Standalone financial statements in the period in which changes are made and, if materiat, their effects are disctosed in the notes to the Standatone financiat statements.
Critical accounting estimates and key sources of estimation uncertainty: Key assumptions
(i) Useful lives of Property, plant and equipment
The Company uses its technical expertise along with historical and industry trends for determining the economic life of an asset/ component of an asset. The useful lives are reviewed by management periodically and revised, if appropriate. In case of a revision, the unamortized depreciable amount is charged over the remaining useful life of the assets. See note 3(d) and 4 for details.
(ii) Fair value measurement of financial instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value measured on initial recognition of financial asset or financial liability. The transaction costs directly attributable to the acquisition of financial assets and financial liabilities at fair value through profit and loss are immediately recognized in the statement of profit and loss. See note 3(r) and 38 for details.
(iii) Defined benefit plan
The cost of the defined benefit plan includes gratuity and leave encashment. The present value of the obligations are determined using actuarial valuations using Projected unit method. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. See note 3(g) and 35 for details.
(iv) Recognition of current tax and deferred tax
Current taxes are recognized at tax rates (and tax laws) enacted or substantively enacted by the reporting date and the amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which they can be used. See note 3(k) and 29 for details.
(v) Recognition and measurement of provisions and contingencies
The certain key assumptions about the likelihood and magnitude of an outflow of resources. Provision is towards known contractual obligation, litigation cases and pending assessments in respect of taxes, duties and other levies in respect of which management believes that there are present obligations and the settlement of such obligations are expected to result in outflow of resources, to the extent provided for. See note 3(h) and 31 for details.
(e) Measurement of fair values
A number of the Company''s accounting policies and disclosures require the measurement of fair values, for financial assets and financial liabilities. The Company has an established control framework with respect to the measurement of fair values. The management has overall responsibility for overseeing all significant fair value measurements and it regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which the valuations should be classified. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date;
Level 2: Inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3: No significant observable inputs for the asset or liability. Some observable inputs used in fair value measurement are discounted cash flows, market multiple method etc. When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. Further information about the assumptions made in measuring fair values is included in Note 39.
3. Significant accounting policies
(a) Current and non-current classification
All assets and liabilities are 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 Act.
Assets
An asset is classified as current when it satisfies any of the following criteria:
(i) it is expected to be realized in, or is intended for sale or consumption in, the Company''s normal operating cycle;
(ii) it is held primarily for the purpose of being traded;
(iii) it is expected to be realized within 12 months after the reporting date; or
(iv) it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date. Current assets include current portion of non-current financial assets. All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any of the following criteria:
(i) it is expected to be settled in the Company''s normal operating cycle;
(ii) it is held primarily for the purpose of being traded;
(iii) it is due to be settled within 12 months after the reporting date; or
(iv) the Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. T erms of a liability that could, at the option of the counterparty, result i n its settlement by the issue of equity instruments do not affect its classification. Current liabilities include current portion of non-current financial liabilities. All other liabilities are classified as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Operating cycle
For the purpose of current/ non-current classification of assets and liabilities, the Company has ascertained its normal operating cycle as twelve months. This is based on the nature of business and the time between the acquisition of assets for processing and their realization in cash and cash equivalents.
(b) Foreign currency transactions
Transactions in foreign currencies are translated into the functional currency of the Company at the exchange rates prevailing at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognized in Statement of Profit and Loss.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary assets and liabilities that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Exchange differences are recognized in the Statement of Profit and Loss in the period in which they arise.
(c) Financial instruments
(i) Recognition and initial measurement
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, which are not at fair value through profit or loss, are added to the fair value on initial recognition. Regular way purchase and sale of financial assets are accounted for at trade date.
(ii) Classification and subsequent measurement Financial assets
(a) Financial assets at amortized cost
A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(b) Financial assets at FVOCI
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in other comprehensive income based on its business model.
(c) Financial assets at FVTPL
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.
Financial liabilities: Classification, subsequent measurement and gains and losses
Financial liabilities are subsequently carried at amortized cost using the effective interest method. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
(iii) Derecognition Financial assets
The Company derecognizes a financial asset:
- when the contractual rights to the cash flows from the financial asset expire, or
- it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset.
Financial liabilities
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. In this case, a new financial liability based on the modified terms is recognized at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognized in Statement of Profit and Loss.
(iv) Off setting
Financial assets and financial liabilities are off set and the net amount presented in the balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.
(d) Property, plant and equipment & Intangible assets
(i) Recognition and measurement
⢠Tangible assets and Capital Work in Progress
Items of property, plant and equipment are measured at cost, less accumulated depreciation and accumulated impairment losses, if any. The cost of an item of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of bringing the item to its working condition for its intended use and estimated costs of dismantling and removing the item and restoring the site on which it is located.
Borrowing costs directly attributable to the acquisition or construction of those qualifying property, plant and equipment, which necessarily take a substantial period of time to get ready for their intended use, are capitalized.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate components of property, plant and equipment.
A fixed asset is eliminated from the financial statements on disposal or when no further benefit is expected from its use and disposal. Any gain or loss on disposal of an item of property, plant and equipment is recognized in Statement of Profit and Loss.
Property, plant and equipment under construction and not yet ready for their intended use are disclosed as Capital work-in- progress.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as ''Capital Advances'' under other ''Non-Current Assets''.
⢠Intangible assets:
Intangible Assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortized on a straight line basis over their estimated useful lives. The amortization period and the amortization method are reviewed at least at each financial year end. If the expected useful life of the assets is significantly different from previous estimates, the amortization period is changed accordingly. The Intangible assets include Computer Software. Amortization of Intangible Assets is made based on management''s evaluation of duration of life cycle of intangible assets.
(ii) Subsequent expenditure
Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company. Ongoing repairs and maintenance are expensed as incurred.
(iii) Depreciation & Amortization
Depreciation and amortization for the year is recognized in the Statement of Profit and Loss. Depreciation is calculated on cost of items of property, plant and equipment less their estimated residual values over their estimated useful lives using the straight line method in the manner specified in Part C of Schedule II to the Companies Act, 2013. Depreciation for the assets purchased/ sold during a period is proportionately charged.
Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted prospectively, if appropriate. The estimated useful lives of the assets are as follows:
|
Class of assets |
Useful lives of the assets (Years) |
|
Factory buildings |
30 |
|
Non factory buildings |
60 |
|
Plant and equipment |
10 to 15 |
|
Computer and data processing equipment |
3 |
|
Office equipment |
5 |
|
Furniture and fixtures |
10 |
|
Vehicles |
8 to 10 |
|
Computer software |
2.5 |
(e) Inventories
Inventories comprise raw materials, work-in progress, finished goods and packing materials and are measured at the lower of cost and net realizable value.
The cost of inventories is based on the weighted average cost method, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their present location and condition and are net of input tax credits. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The net realizable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials, components and other supplies held for use in the production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realizable value. The comparison of cost and net realizable value is made on an item-by-item basis.
Assessment of net realizable value is made at each subsequent reporting date. When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of the write-down is reversed.
(f) Impairment
(i) Impairment of financial instruments: financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. A financial asset is ''credit-impaired'' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivable with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized is recognized as an impairment gain or loss in Statement of Profit and Loss.
In case of trade receivables, the Company follows the simplified approach permitted by Ind AS 109 ''Financial Instruments'' for recognition of impairment loss allowance. The application of simplified approach does not require the Company to track changes in credit risk. The Company calculates the expected credit losses on trade receivables using a provision matrix on the basis of its historical credit loss experience.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company''s historical experience and informed credit assessment and including subsequent information.
(ii) Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) fair value less costs of disposal and its value in use. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.
Impairment losses of continuing operations, including impairment on inventories, are recognized in the Statement of Profit and Loss.
A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit or loss.
(g) Employee benefits
(i) Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid e.g., under short-term cash bonus, if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the amount of obligation can be estimated reliably.
(ii) Defined contribution plans
The Company makes specified monthly contributions to employee provident fund to Government administered provident fund scheme, which is a defined contribution plan. Obligations for contributions to defined contribution plans are recognized as an employee benefit expense in Statement of Profit and Loss in the periods during which the related services are rendered by employees.
(iii) Defined benefit plans
For defined benefit retirement schemes the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuation being carried out at each balance sheet date. Re-measurement gains and losses of the net defined benefit liability/ (asset) are recognized immediately in other comprehensive income. The service cost, net interest on the net defined benefit liability/ (asset) is treated as a net expense within employment costs.
Past service cost is recognized as an expense when the plan amendment or curtailment occurs or when any related restructuring costs or termination benefits are recognized, whichever is earlier.
(iv) Other long term employee benefits
The Company treats accumulated leaves expected to be carried forward beyond twelve months, as long term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the end of each financial year. The Company presents the leave as current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement beyond 12 months after the reporting date. Where the Company has unconditional legal and contractual right to defer the settlement for the period beyond 12 months, the same is presented as non-current liability. Actuarial gains/losses are immediately taken to the Statement of Profit and Loss and are not deferred.
(h) Provision, Contingent Liabilities and Contingent Assets
A provision is recognized if, as a result of past event, the Company has a present obligation that can be estimated
reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recognized at the best estimate of the expenditure required to settle the present obligation at the balance sheet date. The provisions are measured on an undiscounted basis.
Provisions in respect of loss contingencies relating to claims, litigation, assessment, fines, penalties, etc. are recognized when it is probable that a liability has been incurred, and the amount can be estimated reliably.
During the financial year the company has made provision for doubtful debts and doubtful advances to the extent of 100% of the total amount identified as doubtful debts and advances.
A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote. Contingent assets are neither recognized nor disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognized in the period in which the change occurs.
(i) Revenue from contract with customer
Revenue from contracts with customers is recognized when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Revenue is measured at the fair value of the consideration received or receivable, net of returns, discounts, volume rebates, and goods and service tax. The Company recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Company regardless of when the payment is being made.
The specific recognition criteria described below must also be met before revenue is recognized.
Sale of Products
Revenue from sale of products is recognized when the Company transfers the control of goods to the customer as per the terms of contract. The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price, the Company considers the effects of variable consideration, the existence of significant financing component, non-cash considerations and consideration payable to the customer (if any). In case of domestic sales, the company believes that the control gets transferred to the customer on dispatch of the goods from the factory/ depots and in case of exports, revenue is recognized on passage of control as per the terms of contract / incoterms.
Variable consideration in the form of volume rebates is recognized at the time of sale made to the customers and are offset against the amounts payable by them.
Rendering of Services
Revenue from services is recognized as the service performed based on agreements/ arrangements with the concerned parties.
Contract balances Trade receivables
A receivable represents the Company''s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
Refund Liabilities
A refund liability is the obligation to refund some or all of the consideration received (or receivable) from the customer and is measured at the amount the Company ultimately expects it will have to return to the customer. The Company updates its estimates of refund liabilities (and the corresponding change in the transaction price) at the end of each reporting period.
Dividend income is recognized in Statement of Profit and Loss on the date on which the Company''s right to receive payment is established. Interest income is recognized using the effective interest method.
All other income are recognized on accrual basis.
(j) Government Grants
The Company recognizes government grants only when there is reasonable assurance that the conditions attached to them shall be complied with and the grants will be received. Grants related to assets are deducted from the cost of the asset. Grants related to income are recognized on a systematic basis over the periods necessary to match them with the related costs which they are intended to compensate and are deducted from the expense in the statement of profit & loss.
(k) Income tax
Income tax expense comprises of current tax and deferred tax. Current tax and deferred tax is recognized in the Statement of Profit and Loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.
(i) Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. It is measured using tax rates (and tax laws) enacted or substantively enacted by the reporting date.
Current tax assets and current tax liabilities are offset only if there is a legally enforceable right to set off the recognized amounts, and it is intended to realize the asset and settle the liability on a net basis or simultaneously.
(ii) Deferred tax
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes (tax base). Deferred tax is also recognized in respect of carried forward tax losses and tax credits. Deferred tax is not recognized for:
- temporary differences arising on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction;
- temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets - unrecognized or recognized, are reviewed at each reporting date and are recognized/ reduced to the extent that it is probable/ no longer probable respectively that the related tax benefit will be realized.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
(l) Borrowing costs
Borrowing costs are interest and other costs (including exchange differences relating to foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs) incurred in connection with the borrowing of funds. Borrowing costs directly attributable to acquisition or construction of an asset which necessarily take a substantial period of time to get ready for their intended use are capitalized as part of the cost of that asset. Other borrowing costs are recognized as an expense in the period in which they are incurred.
(m) Dividends
Final dividends on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Board of Directors of the Company.
(n) Cash and cash equivalents
Cash and cash equivalents include cash and cash-on deposit with banks. The Company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.
(o) Statement of Cash flows
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
(p) Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
(q) Operating segment
Based on the synergies, risks and returns associated with business operations and in terms of Ind AS-108, the Company''s operating operation comprises of only one primary segment viz. manufacturing and sale of Knitwears. The Company also believes that even geographically, the product of the Company faces similar risk and returns and there is no separate segment that can be identified for the purpose of reporting under Ind AS 108 on âSegment Reporting".
(r) Fair value measurement
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
In the principal market for the asset or liability, or
In the absence of a principal market, in the most advantageous market for the asset or liability
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date;
Level 2: Inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3: No significant observable inputs for the asset or liability. Some observable inputs used in fair value measurement are discounted cash flows, market multiple method etc. When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible.
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
(s) Business combinations
Business combinations are accounted for using the acquisition method, except for common control business combinations. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the Company elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree''s identifiable net assets. Acquisition-related costs are expensed as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their acquisition date fair values. For this purpose, the liabilities assumed include contingent liabilities representing present obligation and they are measured at their acquisition fair values irrespective of the fact that outflow of resources embodying economic benefits is not probable.
When the Company acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. Any contingent consideration to be transferred by the acquirer is recognized at fair value at the acquisition date.
(t) Ind AS 116 - Leases Standards
Pursuant to adoption of Ind AS 116, the Company recognized right-of-use assets and lease liabilities for those leases which were previously classified as operating leases, except for short-term leases and leases of low-value assets.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
i) Right-of-use assets
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:
Land & Building 2 to 10 years
Leasehold Land is amortized over the period of lease ranging from 30 to 99 years.
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment.
ii) Lease liabilities
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on
an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
The Company''s lease liabilities are included in Interest-bearing loans and borrowings
iii) Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low value assets are recognized as expense on a straight-line basis over the lease term.
Company as a lessor
Leases in which the Company does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.
The company as a lessor classifies a lease either as an operating lease or a finance lease. Leases are classified as finance lease whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
(u) Recent Accounting Pronouncements
Ministry of Corporate Affairs (âMCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On March 31, 2023, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2023, as below. The effective date for adoption of this amendment is annual periods beginning on or after April 1, 2023.
Ind AS 1 - Presentation of Financial Statements - This amendment requires the entities to disclose their material accounting policies rather than their significant accounting policies.
Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors - This amendment has introduced a definition of ''accounting estimates'' and included amendments to Ind AS 8 to help entities distinguish changes in accounting policies from changes in accounting estimates.
Ind AS 12 - Income Taxes - This amendment has narrowed the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences.
Based on preliminary assessment, the Company does not expect the amendments listed above to have any significant impact in its financial statements
Mar 31, 2022
Lux Industries Limited (''the Companyâ) is a public company domiciled and headquartered in India, having its registered office situated at 39, Kali Krishna Tagore Street, Kolkata. The Company has its shares listed on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The Company is primarily engaged in the manufacturing and sales of knitwearâs. The Company has operations in India and caters to both domestic and international markets. The Company also has a subsidiary in India in the name of Artimas Fashions Private Limited. The Manufacturing units of the Company are located in Kolkata (West Bengal), Ludhiana and Tirupur, in the state of Tamil Nadu.
NOTE: 2BASIS OF PREPARATION OF STANDALONE FINANCIAL STATEMENTS
(a) Statement of compliance
These Standalone financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) notified under Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) notified under Section 133 of the Companies Act, 2013 (''Actâ) and other relevant provisions of the Act and guidelines issued by the Securities and Exchange Board of India (''SEBIâ), as applicable.
The Standalone financial statements were approved for issue by the Board of Directors of the Company at their meeting held on May 30, 2022. The details of the Companyâs accounting policies are included in Note 3.
(b) Functional and presentation currency
These Standalone financial statements are presented in Indian Rupees (H), which is also the Companyâs functional currency. All amounts have been rounded off to the nearest crores, unless otherwise indicated.
The Standalone financial statements have been prepared on historical cost convention on the accrual basis, except for the following items:
(i) Certain financial assets and financial liabilities measured at fair value;
(ii) Assets held for sale-measured at the lower of its carrying amount and fair value less costs to sell; and
(iii) Employeeâs defined benefit plan as per actuarial valuation.
Fair value is the price that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions, regardless of whether that price is directly observable or estimated using another valuation technique. In determining the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.
(d) Use of estimates and judgments
The preparation of the Companyâs Standalone financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Estimates and underlying assumptions are reviewed on an ongoing basis. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. The application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these Standalone financial statements have been disclosed below. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. The changes in the estimates are reflected in the Standalone financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the Standalone financial statements.
Critical accounting estimates and key sources of estimation uncertainty: Key assumptions
(i) Useful lives of Property, plant and equipment
The Company uses its technical expertise along with historical and industry trends for determining the economic life of an asset/ component of an asset. The useful lives are reviewed by management periodically and revised, if appropriate. In case of a revision, the unamortized depreciable amount is charged over the remaining useful life of the assets. See note 3(d) and 4 for details.
(ii) Fair value measurement of financial instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value measured on initial recognition of financial asset or financial liability. The transaction costs directly attributable to the acquisition of financial assets and financial liabilities at fair value through profit and loss are immediately recognized in the statement of profit and loss. See note 3(r) and 39 for details.
The cost of the defined benefit plan includes gratuity and leave encashment. The present value of the obligations are determined using actuarial valuations using Projected unit method. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. See note 3(g) and 36 for details.
(iv) Recognition of current tax and deferred tax
Current taxes are recognized at tax rates (and tax laws) enacted or substantively enacted by the reporting date and the amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which they can be used. See note 3(k) and 30 for details.
(v) Recognition and measurement of provisions and contingencies
The certain key assumptions about the likelihood and magnitude of an outflow of resources. Provision is towards known contractual obligation, litigation cases and pending assessments in respect of taxes, duties and other levies in respect of which management believes that there are present obligations and the settlement of such obligations are expected to result in outflow of resources, to the extent provided for. See note 3(h) and 32 for details.
(e) Measurement of fair values
A number of the Companyâs accounting policies and disclosures require the measurement of fair values, for financial assets and financial liabilities. The Company has an established control framework with respect to the measurement of fair values. The management has overall responsibility for overseeing all significant fair value measurements and it regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which the valuations should be classified. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date;
Level 2: Inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3: No significant observable inputs for the asset or liability. Some observable inputs used in fair value measurement are discounted cash flows, market multiple method etc. When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. Further information about the assumptions made in measuring fair values is included in Note 40.
NOTE: 3SIGNIFICANT ACCOUNTING POLICIES
(a) Current and non-current classification
All assets and liabilities are classified as current or non-current as per the Companyâs normal operating cycle and other criteria set out in the Schedule III to the Act.
An asset is classified as current when it satisfies any of the following criteria:
(i) it is expected to be realized in, or is intended for sale or consumption in, the Companyâs normal operating cycle;
(ii) it is held primarily for the purpose of being traded;
(iii) it is expected to be realized within 12 months after the reporting date; or
(iv) it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date. Current assets include current portion of non-current financial assets. All other assets are classified as non-current.
A liability is classified as current when it satisfies any of the following criteria:
(i) it is expected to be settled in the Companyâs normal operating cycle;
(ii) it is held primarily for the purpose of being traded;
(iii) it is due to be settled within 12 months after the reporting date; or
(iv) the Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification. Current liabilities include current portion of non-current financial liabilities. All other liabilities are classified as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities.
For the purpose of current/ non-current classification of assets and liabilities, the Company has ascertained its normal operating cycle as twelve months. This is based on the nature of business and the time between the acquisition of assets for processing and their realization in cash and cash equivalents.
(b) Foreign currency transactions
Transactions in foreign currencies are translated into the functional currency of the Company at the exchange rates prevailing at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognized in Statement of Profit and Loss.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary assets and liabilities that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Exchange differences are recognized in the Statement of Profit and Loss in the period in which they arise.
(i) Recognition and initial measurement
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, which are not at fair value through profit or loss, are added to the fair value on initial recognition. Regular way purchase and sale of financial assets are accounted for at trade date.
(ii) Classification and subsequent measurement Financial assets
(a) Financial assets at amortized cost
A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(b) Financial assets at FVOCI
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in other comprehensive income based on its business model.
(c) Financial assets at FVTPL
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.
Financial liabilities: Classification, subsequent measurement and gains and losses
Financial liabilities are subsequently carried at amortized cost using the effective interest method. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
(iii) Derecognition Financial assets
The Company derecognizes a financial asset:
- when the contractual rights to the cash flows from the financial asset expire, or
- it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset.
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. In this case, a new financial liability based on the modified terms is recognized at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognized in Statement of Profit and Loss.
Financial assets and financial liabilities are off set and the net amount presented in the balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.
(d) Property, plant and equipment & Intangible assets
(i) Recognition and measurement
¦ Tangible assets and Capital Work in Progress
Items of property, plant and equipment are measured at cost, less accumulated depreciation and accumulated impairment losses, if any. The cost of an item of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of bringing the item to its working condition for its intended use and estimated costs of dismantling and removing the item and restoring the site on which it is located.
Borrowing costs directly attributable to the acquisition or construction of those qualifying property, plant and equipment, which necessarily take a substantial period of time to get ready for their intended use, are capitalized.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate components of property, plant and equipment.
A fixed asset is eliminated from the financial statements on disposal or when no further benefit is expected from its use and disposal. Any gain or loss on disposal of an item of property, plant and equipment is recognized in Statement of Profit and Loss.
Property, plant and equipment under construction and not yet ready for their intended use are disclosed as Capital work-in- progress.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as ''Capital Advancesâ under other ''Non-Current Assetsâ.
¦ Intangible assets:
Intangible Assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortized on a straight line basis over their estimated useful lives. The amortization period and the amortization method are reviewed at least at each financial year end. If the expected useful life of the assets is significantly different from previous estimates, the amortization period is changed accordingly. The Intangible assets include Computer Software. Amortization of Intangible Assets is made based on managementâs evaluation of duration of life cycle of intangible assets.
Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company. Ongoing repairs and maintenance are expensed as incurred.
(iii) Depreciation & Amortization
Depreciation and amortization for the year is recognized in the Statement of Profit and Loss. Depreciation is calculated on cost of items of property, plant and equipment less their estimated residual values over their estimated useful lives using the straight line method in the manner specified in Part C of Schedule II to the Companies Act, 2013. Depreciation for the assets purchased/ sold during a period is proportionately charged.
Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted prospectively, if appropriate. The estimated useful lives of the assets are as follows:
|
Class of assets |
Useful lives of the assets (Years) |
|
Factory buildings |
30 |
|
Non factory buildings |
60 |
|
Plant and equipment |
10 to 15 |
|
Computer and data processing equipment |
3 |
|
Office equipment |
5 |
|
Furniture and fixtures |
10 |
|
Vehicles |
8 to 10 |
|
Computer software |
2.5 |
Inventories comprise raw materials, work-in progress, finished goods and packing materials and are measured at the lower of cost and net realizable value.
The cost of inventories is based on the weighted average cost method, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their present location and condition and are net of input tax credits. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The net realizable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials, components and other supplies held for use in the production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realizable value. The comparison of cost and net realizable value is made on an item-by-item basis.
Assessment of net realizable value is made at each subsequent reporting date. When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of the write-down is reversed.
(i) Impairment of financial instruments: financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. A financial asset is ''credit-impaired'' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivable with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized is recognized as an impairment gain or loss in Statement of Profit and Loss.
In case of trade receivables, the Company follows the simplified approach permitted by Ind AS 109 Financial Instruments for recognition of impairment loss allowance. The application of simplified approach does not require the Company to track changes in credit risk. The Company calculates the expected credit losses on trade receivables using a provision matrix on the basis of its historical credit loss experience.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Companyâs historical experience and informed credit assessment and including subsequent information.
(ii) Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash-generating unitâs (CGU) fair value less costs of disposal and its value in use. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.
Impairment losses of continuing operations, including impairment on inventories, are recognized in the Statement of Profit and Loss.
A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the assetâs recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit or loss.
(i) Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid e.g., under short-term cash bonus, if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the amount of obligation can be estimated reliably.
(ii) Defined contribution plans
The Company makes specified monthly contributions to employee provident fund to Government administered provident fund scheme, which is a defined contribution plan. Obligations for contributions to defined contribution plans are recognized as an employee benefit expense in Statement of Profit and Loss in the periods during which the related services are rendered by employees.
For defined benefit retirement schemes the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuation being carried out at each balance sheet date. Re-measurement gains and losses of the net defined benefit liability/ (asset) are recognized immediately in other comprehensive income. The service cost, net interest on the net defined benefit liability/ (asset) is treated as a net expense within employment costs.
Past service cost is recognized as an expense when the plan amendment or curtailment occurs or when any related restructuring costs or termination benefits are recognized, whichever is earlier.
(iv) Other long term employee benefits
The Company treats accumulated leaves expected to be carried forward beyond twelve months, as long term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the end of each financial year. The Company presents the leave as current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement beyond 12 months after the reporting date. Where the Company has unconditional legal and contractual right to defer the settlement for the period beyond 12 months, the same is presented as non-current liability. Actuarial gains/losses are immediately taken to the Statement of Profit and Loss and are not deferred.
(h) Provision, Contingent Liabilities And Contingent Assets
A provision is recognized if, as a result of past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recognized at the best estimate of the expenditure required to settle the present obligation at the balance sheet date. The provisions are measured on an undiscounted basis.
Provisions in respect of loss contingencies relating to claims, litigation, assessment, fines, penalties, etc. are recognized when it is probable that a liability has been incurred, and the amount can be estimated reliably.
During the financial year the company has made provision for doubtful debts and doubtful advances to the extent of 100% of the total amount identified as doubtful debts and advances.
A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote. Contingent assets are neither recognized nor disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognized in the period in which the change occurs.
(i) Revenue from contract with customer
Revenue from contracts with customers is recognized when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Revenue is measured at the fair value of the consideration received or receivable, net of returns, discounts, volume rebates, and goods and service tax. The Company recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Company regardless of when the payment is being made.
The specific recognition criteria described below must also be met before revenue is recognized.
Revenue from sale of products is recognized when the Company transfers the control of goods to the customer as per the terms of contract. The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price, the Company considers the effects of variable consideration, the existence of significant financing component, non-cash considerations and consideration payable to the customer (if any). In case of domestic sales, the company believes that the control gets transferred to the customer on dispatch of the goods from the factory/ depots and in case of exports, revenue is recognized on passage of control as per the terms of contract / incoterms.
Variable consideration in the form of volume rebates is recognized at the time of sale made to the customers and are offset against the amounts payable by them.
Revenue from services is recognized as the service performed based on agreements/ arrangements with the concerned parties.
Contract balances Trade receivables
A receivable represents the Companyâs right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
A refund liability is the obligation to refund some or all of the consideration received (or receivable) from the customer and is measured at the amount the Company ultimately expects it will have to return to the customer. The Company updates its estimates of refund liabilities (and the corresponding change in the transaction price) at the end of each reporting period.
Dividend income is recognized in Statement of Profit and Loss on the date on which the Companyâs right to receive payment is established. Interest income is recognized using the effective interest method.
All other income are recognized on accrual basis.
(j) Government Grants
The Company recognizes government grants only when there is reasonable assurance that the conditions attached to them shall be complied with and the grants will be received. Grants related to assets are deducted from the cost of the asset. Grants related to income are recognized on a systematic basis over the periods necessary to match them with the related costs which they are intended to compensate and are deducted from the expense in the statement of profit & loss.
Income tax expense comprises of current tax and deferred tax. Current tax and deferred tax is recognized in the Statement of Profit and Loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. It is measured using tax rates (and tax laws) enacted or substantively enacted by the reporting date.
Current tax assets and current tax liabilities are offset only if there is a legally enforceable right to set off the recognized amounts, and it is intended to realize the asset and settle the liability on a net basis or simultaneously.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes (tax base). Deferred tax is also recognized in respect of carried forward tax losses and tax credits. Deferred tax is not recognized for:
- temporary differences arising on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction;
- temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets - unrecognized or recognized, are reviewed at each reporting date and are recognized/ reduced to the extent that it is probable/ no longer probable respectively that the related tax benefit will be realized.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
Borrowing costs are interest and other costs (including exchange differences relating to foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs) incurred in connection with the borrowing of funds. Borrowing costs directly attributable to acquisition or construction of an asset which necessarily take a substantial period of time to get ready for their intended use are capitalized as part of the cost of that asset. Other borrowing costs are recognized as an expense in the period in which they are incurred.
Final dividends on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Board of Directors of the Company.
(n) Cash and cash equivalents
Cash and cash equivalents include cash and cash-on deposit with banks. The Company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings
per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
(q) Operating segment
Based on the synergies, risks and returns associated with business operations and in terms of Ind AS-108, the Companyâs operating operation comprises of only one primary segment viz. manufacturing and sale of Knitwearâs. The Company also believes that even geographically, the product of the Company faces similar risk and returns and there is no separate segment that can be identified for the purpose of reporting under Ind AS 108 on "Segment Reporting".
(r) Fair value measurement
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability
A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date;
Level 2: Inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3: No significant observable inputs for the asset or liability. Some observable inputs used in fair value measurement are discounted cash flows, market multiple method etc. When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible.
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
Business combinations are accounted for using the acquisition method, except for common control business combinations. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the Company elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquireeâs identifiable net assets. Acquisition-related costs are expensed as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their acquisition date fair values. For this purpose, the liabilities assumed include contingent liabilities representing present obligation and they are measured at their acquisition fair values irrespective of the fact that outflow of resources embodying economic benefits is not probable.
When the Company acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. Any contingent consideration to be transferred by the acquirer is recognized at fair value at the acquisition date.
(t) Ind AS 116 - Leases Standards
Ind AS 116 supersedes Ind AS 17 Leases including its appendices. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to recognize most leases on the balance sheet.
The Company has adopted Ind AS 116 using the modified retrospective method on the date of initial application . Pursuant to adoption of Ind AS 116, the Company recognized right-of-use assets and lease liabilities for those leases which were previously classified as operating leases, except for short-term leases and leases of low-value assets.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:
Land & Building 2 to 10 years
Leasehold Land is amortized over the period of lease ranging from 30 to 99 years.
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment.
ii) Lease liabilities
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
The Companyâs lease liabilities are included in Interest-bearing loans and borrowings
iii) Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low value assets are recognized as expense on a straight-line basis over the lease term.
Company as a lessor
Leases in which the Company does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.
The company as a lessor classifies a lease either as an operating lease or a finance lease. Leases are classified as finance lease whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
(u) Recent Accounting Pronouncements
On March 23, 2022 the Ministry of Corporate Affairs issued, The Companies (Indian Accounting Standards) Amendments Rules, 2022, notifying amendments to the following accounting standards. The amendments would be effective from April 1,2022.
1. Ind AS 103, Business Combination
The amendments specify that to qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must meet the definitions of assets and liabilities in the Conceptual Framework for Financial Reporting under Indian Accounting Standards (Conceptual Framework) issued by the Institute of Chartered Accountants of India at the acquisition date. These changes do not significantly change the requirements of Ind AS 103. The Company does not expect the amendment to have any impact in its financial statements.
2. Ind AS 16, Property, Plant And Equipment
The amendments mainly prohibit an entity from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, an entity will recognise such sales proceeds and related cost in profit or loss. The Company does not expect the amendments to have any impact in its recognition of its property, plant and equipment in its financial statements.
Mar 31, 2021
REPORTING ENTITY
Lux Industries Limited (âthe Company'') is a public company domiciled and headquartered in India, having its registered office situated at 39, Kali Krishna Tagore Street, Kolkata. The Company has its shares listed on National Stock Exchange of India Limited (NSE) and BSE Limited (BSE). The Company is primarily engaged in the manufacturing and sales of knitwears. The Company has operations in India and caters to both domestic and international markets. The Company also has a subsidiary in India in the name of Artimas Fashions Private Limited. The Manufacturing units of the Company are located in Kolkata (West Bengal), Ludhiana (Punjab), Ghaziabad (Utter Pradesh) and Tirupur (Tamil Nadu).
NOTE:2BASIS OF PREPARATION OF STANDALONE FINANCIAL STATEMENTS(a) Statement of compliance
These Standalone financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) notified under Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) notified under Section 133 of the Companies Act, 2013 (âAct'') and other relevant provisions of the Act and guidelines issued by the Securities and Exchange Board of India (âSEBI''), as applicable.
The Standalone financial statements were approved for issue by the Board of Directors of the Company at their meeting held on May 25, 2021. The details of the Company''s accounting policies are included in Note 3.
(b) Functional and presentation currency
These Standalone financial statements are presented in Indian Rupees (H), which is also the Company''s functional currency. All amounts have been rounded off to the nearest crores, unless otherwise indicated.
The Standalone financial statements have been prepared on historical cost convention on the accrual basis, except for the following items:
(i) Certain financial assets and financial liabilities measured at fair value;
(ii) Assets held for sale-measured at the lower of its carrying amount and fair value less costs to sell; and
(iii) Employee''s defined benefit plan as per actuarial valuation.
Fair value is the price that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions, regardless of whether that price is directly observable or estimated using another valuation technique. In determining the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.
(d) Use of estimates and judgments
The preparation of the Company''s Standalone financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Estimates and underlying assumptions are reviewed on an ongoing basis. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. The application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these Standalone financial statements have been disclosed below. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. The changes in the estimates are reflected in the Standalone
financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the Standalone financial statements.
Critical accounting estimates and key sources of estimation uncertainty: Key assumptions
(i) Useful lives of Property, plant and equipment
The Company uses its technical expertise along with historical and industry trends for determining the economic life of an asset/ component of an asset. The useful lives are reviewed by management periodically and revised, if appropriate. In case of a revision, the unamortized depreciable amount is charged over the remaining useful life of the assets. See note 3(d) and 4 for details.
(ii) Fair value measurement of financial instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value measured on initial recognition of financial asset or financial liability. The transaction costs directly attributable to the acquisition of financial assets and financial liabilities at fair value through profit and loss are immediately recognized in the statement of profit and loss. See note 3(r) and 39 for details.
(iii) Defined benefit plan
The cost of the defined benefit plan includes gratuity and leave encashment. The present value of the obligations are determined using actuarial valuations using Projected unit method. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. See note 3(g) and 36 for details.
(iv) Recognition of current tax and deferred tax
Current taxes are recognized at tax rates (and tax laws) enacted or substantively enacted by the reporting date and the amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which they can be used. See note 3(k) and 30 for details.
(v) Recognition and measurement of provisions and contingencies
The certain key assumptions about the likelihood and magnitude of an outflow of resources. Provision is towards known contractual obligation, litigation cases and pending assessments in respect of taxes, duties and other levies in respect of which management believes that there are present obligations and the settlement of such obligations are expected to result in outflow of resources, to the extent provided for. See note 3(h) and 32 for details.
(e) Measurement of fair values
A number of the Company''s accounting policies and disclosures require the measurement of fair values, for financial assets and financial liabilities. The Company has an established control framework with respect to the measurement of fair values. The management has overall responsibility for overseeing all significant fair value measurements and it regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which the valuations should be classified. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date;
Level 2: Inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3: No significant observable inputs for the asset or liability. Some observable inputs used in fair value measurement are discounted cash flows, market multiple method etc. When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. Further information about the assumptions made in measuring fair values is included in Note 40.
NOTE:3SIGNIFICANT ACCOUNTING POLICIES(a) Current and non-current classification
All assets and liabilities are 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 Act.
Assets
An asset is classified as current when it satisfies any of the following criteria:
(i) it is expected to be realized in, or is intended for sale or consumption in, the Company''s normal operating cycle;
(ii) it is held primarily for the purpose of being traded;
(iii) it is expected to be realized within 12 months after the reporting date; or
(iv) it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at
least 12 months after the reporting date. Current assets include current portion of non-current financial assets. All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any of the following criteria:
(i) it is expected to be settled in the Company''s normal operating cycle;
(ii) it is held primarily for the purpose of being traded;
(iii) it is due to be settled within 12 months after the reporting date; or
(iv) the Company does not have an unconditional right to defer settlement of the liability for at least 12
months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification. Current liabilities include current portion of non-current financial liabilities. All other liabilities are classified as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Operating cycle
For the purpose of current/ non-current classification of assets and liabilities, the Company has ascertained its normal operating cycle as twelve months. This is based on the nature of business and the time between the acquisition of assets for processing and their realization in cash and cash equivalents.
(b) Foreign currency transactions
Transactions in foreign currencies are translated into the functional currency of the Company at the exchange rates prevailing at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognised in Statement of Profit and Loss.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary assets and liabilities that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Exchange differences are recognized in the Statement of Profit and Loss in the period in which they arise.
(i) Recognition and initial measurement
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, which are not at fair value through profit or loss, are added to the fair value on initial recognition. Regular way purchase and sale of financial assets are accounted for at trade date.
(ii) Classification and subsequent measurement Financial assets
(a) Financial assets at amortized cost
A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(b) Financial assets at FVOCI
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in other comprehensive income based on its business model.
(c) Financial assets at FVTPL
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.
Financial liabilities: Classification, subsequent measurement and gains and losses
Financial liabilities are subsequently carried at amortized cost using the effective interest method. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
(iii) Derecognition Financial assets
The Company derecognizes a financial asset:
- when the contractual rights to the cash flows from the financial asset expire, or
- it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset.
Financial liabilities
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. In this case, a new financial liability based on the modified terms is recognized at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognized in Statement of Profit and Loss.
(iv) Off setting
Financial assets and financial liabilities are off set and the net amount presented in the balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.
(d) Property, plant and equipment & Intangible assets
(i) Recognition and measurement
⢠Tangible assets and Capital Work in Progress
Items of property, plant and equipment are measured at cost, less accumulated depreciation and accumulated impairment losses, if any. The cost of an item of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of bringing the item to its working condition for its intended use and estimated costs of dismantling and removing the item and restoring the site on which it is located.
Borrowing costs directly attributable to the acquisition or construction of those qualifying property, plant and equipment, which necessarily take a substantial period of time to get ready for their intended use, are capitalized.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate components of property, plant and equipment.
A fixed asset is eliminated from the financial statements on disposal or when no further benefit is expected from its use and disposal. Any gain or loss on disposal of an item of property, plant and equipment is recognized in Statement of Profit and Loss.
Property, plant and equipment under construction and not yet ready for their intended use are disclosed as Capital work-in- progress.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as âCapital Advances'' under other âNon-Current Assets''.
⢠Intangible assets:
Intangible Assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortized on a straight line basis over their estimated useful lives. The amortization period and the amortization method are reviewed at least at each
financial year end. If the expected useful life of the assets is significantly different from previous estimates, the amortization period is changed accordingly. The Intangible assets include Computer Software. Amortization of Intangible Assets is made based on management''s evaluation of duration of life cycle of intangible assets.
(ii) Subsequent expenditure
Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company. Ongoing repairs and maintenance are expensed as incurred.
(iii) Depreciation & Amortization
Depreciation and amortization for the year is recognized in the Statement of Profit and Loss. Depreciation is calculated on cost of items of property, plant and equipment less their estimated residual values over their estimated useful lives using the straight line method in the manner specified in Part C of Schedule II to the Companies Act, 2013. Depreciation for the assets purchased/ sold during a period is proportionately charged.
Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted prospectively, if appropriate. The estimated useful lives of the assets are as follows:
|
Class of assets |
Useful lives of the assets (Years) |
|
Factory buildings |
30 |
|
Non factory buildings |
60 |
|
Plant and equipment |
10 to 15 |
|
Computer and data processing equipment |
3 |
|
Office equipment |
5 |
|
Furniture and fixtures |
10 |
|
Vehicles |
8 to 10 |
|
Computer software |
2.5 |
(e) Inventories
Inventories comprise raw materials, work-in progress, finished goods and packing materials and are measured at the lower of cost and net realizable value.
The cost of inventories is based on the weighted average cost method, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their present location and condition and are net of input tax credits. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The net realizable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials, components and other supplies held for use in the production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realizable value. The comparison of cost and net realizable value is made on an item-by-item basis.
Assessment of net realizable value is made at each subsequent reporting date. When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of the writedown is reversed.
(f) Impairment
(i) Impairment of financial instruments: financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. A financial asset is âcredit-impaired'' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivable with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized is recognized as an impairment gain or loss in Statement of Profit and Loss.
In case of trade receivables, the Company follows the simplified approach permitted by Ind AS 109 Financial Instruments for recognition of impairment loss allowance. The application of simplified approach does not require the Company to track changes in credit risk. The Company calculates the expected credit losses on trade receivables using a provision matrix on the basis of its historical credit loss experience.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company''s historical experience and informed credit assessment and including subsequent information.
(ii) Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) fair value less costs of disposal and its value in use. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.
Impairment losses of continuing operations, including impairment on inventories, are recognized in the Statement of Profit and Loss.
A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit or loss.
(g) Employee benefits
(i) Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid e.g., under shortterm cash bonus, if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the amount of obligation can be estimated reliably.
(ii) Defined contribution plans
The Company makes specified monthly contributions to employee provident fund to Government administered provident fund scheme, which is a defined contribution plan. Obligations for contributions to defined contribution plans are recognized as an employee benefit expense in Statement of Profit and Loss in the periods during which the related services are rendered by employees.
(iii) Defined benefit plans
For defined benefit retirement schemes the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuation being carried out at each balance sheet date. Re-measurement gains and losses of the net defined benefit liability/ (asset) are recognized immediately in other comprehensive income. The service cost, net interest on the net defined benefit liability/ (asset) is treated as a net expense within employment costs.
Past service cost is recognized as an expense when the plan amendment or curtailment occurs or when any related restructuring costs or termination benefits are recognized, whichever is earlier.
(iv) Other long term employee benefits
The Company treats accumulated leaves expected to be carried forward beyond twelve months, as long term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the end of each financial year. The Company presents the leave as current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement beyond 12 months after the reporting date. Where the Company has unconditional legal and contractual right to defer the settlement for the period beyond 12 months, the same is presented as non-current liability. Actuarial gains/losses are immediately taken to the Statement of Profit and Loss and are not deferred.
(h) Provision, Contingent Liabilities And Contingent Assets
A provision is recognized if, as a result of past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recognized at the best estimate of the expenditure required to settle the present obligation at the balance sheet date. The provisions are measured on an undiscounted basis.
Provisions in respect of loss contingencies relating to claims, litigation, assessment, fines, penalties, etc are recognized when it is probable that a liability has been incurred, and the amount can be estimated reliably.
During the financial year the company has made provision for doubtful debts and doubtful advances to the extent of 100% of the total amount identified as doubtful debts and advances.
A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote. Contingent assets are neither recognized nor disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognized in the period in which the change occurs.
(i) (a) Revenue Recognition
(i) Revenue from contract with customer
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Revenue is measured at the fair value of the consideration received or receivable, net of returns, discounts, volume rebates, and goods and service tax. The Company recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Company regardless of when the payment is being made.
The specific recognition criteria described below must also be met before revenue is recognised.
(ii) Sale of Products
Revenue from sale of products is recognized when the Company transfers the control of goods to the customer as per the terms of contract. The Company considers whether there are other promises in the
contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price, the Company considers the effects of variable consideration, the existence of significant financing component, non-cash considerations and consideration payable to the customer (if any). In case of domestic sales, the company believes that the control gets transferred to the customer on dispatch of the goods from the factory/ depots and in case of exports, revenue is recognised on passage of control as per the terms of contract / incoterms.
Variable consideration in the form of volume rebates is recognised at the time of sale made to the customers and are offset against the amounts payable by them.
(iii) Rendering of Services
Revenue from services is recognized as the service performed based on agreements/ arrangements with the concerned parties.
(i) (b) Contract balances
(i) Trade receivables
A receivable represents the Company''s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
(ii) Refund Liabilities
A refund liability is the obligation to refund some or all of the consideration received (or receivable) from the customer and is measured at the amount the Company ultimately expects it will have to return to the customer. The Company updates its estimates of refund liabilities (and the corresponding change in the transaction price) at the end of each reporting period.
Dividend income is recognized in Statement of Profit and Loss on the date on which the Company''s right to receive payment is established. Interest income is recognized using the effective interest method.
All other income are recognized on accrual basis.
(j) Government Grants
The Company recognizes government grants only when there is reasonable assurance that the conditions attached to them shall be complied with and the grants will be received. Grants related to assets are deducted from the cost of the asset. Grants related to income are recognized on a systematic basis over the periods necessary to match them with the related costs which they are intended to compensate and are deducted from the expense in the statement of profit & loss.
(k) Income tax
Income tax expense comprises of current tax and deferred tax. Current tax and deferred tax is recognized in the Statement of Profit and Loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.
(i) Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. It is measured using tax rates (and tax laws) enacted or substantively enacted by the reporting date.
Current tax assets and current tax liabilities are offset only if there is a legally enforceable right to set off the recognized amounts, and it is intended to realize the asset and settle the liability on a net basis or simultaneously.
(ii) Deferred tax
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes (tax base). Deferred tax is also recognized in respect of carried forward tax losses and tax credits. Deferred tax is not recognized for:
- temporary differences arising on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction;
- temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets - unrecognized or recognized, are reviewed at each reporting date and are recognized/ reduced to the extent that it is probable/ no longer probable respectively that the related tax benefit will be realized.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
(l) Borrowing costs
Borrowing costs are interest and other costs (including exchange differences relating to foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs) incurred in connection with the borrowing of funds. Borrowing costs directly attributable to acquisition or construction of an asset which necessarily take a substantial period of time to get ready for their intended use are capitalized as part of the cost of that asset. Other borrowing costs are recognized as an expense in the period in which they are incurred.
Final dividends on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Board of Directors of the Company.
(n) Cash and cash equivalents
Cash and cash equivalents include cash and cash-on deposit with banks. The Company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.
(o) Statement of Cash flows
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
(p) Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
(q) Operating segment
Based on the synergies, risks and returns associated with business operations and in terms of Ind AS-108, the Company''s operating operation comprises of only one primary segment viz. manufacturing and sale of Knitwear''s. The Company also believes that even geographically, the product of the Company faces similar risk and returns and there is no separate segment that can be identified for the purpose of reporting under Ind AS 108 on "Segment Reportingâ.
(r) Fair value measurement
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date;
Level 2: Inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3: No significant observable inputs for the asset or liability. Some observable inputs used in fair value measurement are discounted cash flows, market multiple method etc. When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible.
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
(s) Business combinations
Business combinations are accounted for using the acquisition method, except for common control business combinations. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the Company elects whether to measure the non-controlling interests in the
acquiree at fair value or at the proportionate share of the acquiree''s identifiable net assets. Acquisition-related costs are expensed as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their acquisition date fair values. For this purpose, the liabilities assumed include contingent liabilities representing present obligation and they are measured at their acquisition fair values irrespective of the fact that outflow of resources embodying economic benefits is not probable.
When the Company acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. Any contingent consideration to be transferred by the acquirer is recognized at fair value at the acquisition date.
The merger of J M Hosiery & Co. Limited (JMHL) and Ebell Fashions Private Limited (Ebell) has been accounted under the âpooling of interests'' method in accordance with Appendix C of IND AS 103 âBusiness Combinations'' and comparatives have been restated for merger from the beginning of the preceding year i. e. April 1, 2019. Refer Note 44 for details.
(t) Ind AS 116 - Leases Standards
Ind AS 116 supersedes Ind AS 17 Leases including its appendices. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to recognise most leases on the balance sheet.
The Company has adopted Ind AS 116 using the modified retrospective method on the date of initial application . Pursuant to adoption of Ind AS 116, the Company recognised right-of-use assets and lease liabilities for those leases which were previously classified as operating leases, except for short-term leases and leases of low-value assets.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
i) Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:
Land & Building 2 to 10 years
Leasehold Land is amortised over the period of lease ranging from 30 to 99 years.
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment.
ii) Lease liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that
depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
The Company''s lease liabilities are included in Interest-bearing loans and borrowings
iii) Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low value assets are recognised as expense on a straight-line basis over the lease term.
Company as a lessor
Leases in which the Company does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.
The company as a lessor classifies a lease either as an operating lease or a finance lease. Leases are classified as finance lease whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Mar 31, 2018
(a) current and non-current classification
All assets and liabilities are classified as current or non-current as per the Companyâs normal operating cycle and other criteria set out in the Schedule III to the Act.
Assets
An asset is classified as current when it satisfies any of the following criteria:
(i) it is expected to be realised in, or is intended for sale or consumption in, the Companyâs normal operating cycle;
(ii) it is held primarily for the purpose of being traded;
(iii) it is expected to be realised within 12 months after the reporting date; or
(iv) it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date. Current assets include current portion of non-current financial assets. All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any of the following criteria:
(i) it is expected to be settled in the Companyâs normal operating cycle;
(ii) it is held primarily for the purpose of being traded;
(iii) t is due to be settled within 12 months after the reporting date; or
(iv) the Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification. Current liabilities include current portion of non-current financial liabilities. All other liabilities are classified as non-current. Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.
Operating cycle
For the purpose of current/ non-current classification of assets and liabilities, the Company has ascertained its normal operating cycle as twelve months. This is based on the nature of business and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents.
(b) Foreign currency transactions
Transactions in foreign currencies are translated into the respective functional currency of the Company at the exchange rates prevailing at the dates of the transactions.
(c) Financial assets at FVTPL
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.
Financial liabilities: Classification, subsequent measurement and gains and losses
Financial liabilities are subsequently carried at amortized cost using the effective interest method. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
(i) Derecognition Financial assets
The Company derecognizes a financial asset:
- when the contractual rights to the cash flows from the financial asset expire, or
- it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset.
Financial liabilities
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognises a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in Statement of Profit and Loss.
(ii) Off setting
Financial assets and financial liabilities are off set and the net amount presented in the balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously
(d) Property, plant and equipment
(i) Recognition and measurement
- Tangible assets and Capital Work in Progress
Items of property, plant and equipment are measured at cost, which includes capitalised borrowing costs, less accumulated depreciation and accumulated impairment losses, if any. The cost of an item of property plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of bringing the item to its working condition for its intended use and estimated costs of dismantling and removing the item and restoring the site on which it is located.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary assets and liabilities that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Exchange differences are recognised in the Statement of Profit and Loss in the period in which they arise.
Foreign currency denominated monetary assets and liabilities are translated at exchange rates in effect at the Balance Sheet date. The gains and losses resulting from such translation are included in the statement of profit and loss. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transactions.
- Financial instruments
(a) Recognition and initial measurement
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, which are not at fair value through profit or loss, are added to the fair value on initial recognition. Regular way purchase and sale of financial assets are accounted for at trade date.
(b) Classification and subsequent measurement Financial assets
(I) Financial assets at amortised cost
A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(II) Financial assets at FVOCI
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in other comprehensive income based on its business model.
Borrowing costs directly attributable to the acquisition or construction of those qualifying property plant and equipment, which necessarily take a substantial period of time to get ready for their intended use, are capitalised.
If significant parts of an item of property plant and equipment have different useful lives, then they are accounted for as separate components of property, plant and equipment.
A fixed asset is eliminated from the financial statements on disposal or when no further benefit is expected from its use and disposal. Any gain or loss on disposal of an item of property, plant and equipment is recognised in Statement of Profit and Loss.
Property plant and equipment under construction and not yet ready for their intended use are disclosed as Capital working- progress.
- Intangible assets & amortization:
Intangible Assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortized on a straight line basis over their estimated useful lives. The amortization period and the amortization method are reviewed at least at each financial year end. If the expected useful life of the assets is significantly different from previous estimates, the amortization period is changed accordingly. The Intangible assets include Computer Software. Amortization of Intangible Assets is made based on managementâs evaluation of duration of life cycle of intangible assets. The amortization rate used are:
Asset %
Computer Software 40.00
(ii) Transition to Ind AS
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 1, 2016, measured as per the previous GAAP, and use that carrying value as the deemed cost of such property, plant and equipment. See note 4 for details.
(iii) Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company. Ongoing repairs and maintenance are expensed as incurred.
(iv) Depreciation
Depreciation and amortization for the year is recognized in the Statement of Profit and Loss. Depreciation is calculated on cost of items of property, plant and equipment less their estimated residual values over their estimated useful lives using the straight line method in the manner specified in Part C of Schedule II to the Companies Act, 2013. Depreciation for the assets purchased/ sold during a period is proportionately charged.
Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted as appropriate.
(e) Inventories
Inventories which comprise raw materials, work-in progress, finished goods and packing materials are measured at the lower of cost and net realizable value.
The cost of inventories is based on the Weighted Average Cost method, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their present location and condition. The Company has valued inventory net of input tax benefits. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The net realisable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials, components and other supplies held for use in the production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realisable value. The comparison of cost and net realisable value is made on an item-by-item basis.
Assessment of net realizable value is made at each subsequent reporting date. When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in net realisable value because of changed economic circumstances, the amount of the write-down is reversed.
(f) Impairment
(i) Impairment of financial instruments: financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. A financial asset is âcredit-impairedâ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivable with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognised as an impairment gain or loss in Statement of Profit and Loss.
In case of trade receivables, the Company follows the simplified approach permitted by Ind AS 109 Financial Instruments for recognition of impairment loss allowance. The application of simplified approach does not require the Company to track changes in credit risk. The Company calculates the expected credit losses on trade receivables using a provision matrix on the basis of its historical credit loss experience.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Companyâs historical experience and informed credit assessment and including subsequent information.
(ii) Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash-generating unitâs (CGU) fair value less costs of disposal and its value in use. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the Statement of Profit and Loss.
A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the assetâs recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit or loss.
(g) Employee benefits
(i) Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid e.g., under shortterm cash bonus, if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the amount of obligation can be estimated reliably
(ii) Defined contribution plans
The Company makes specified monthly contributions to employee provident fund to Government administered provident fund scheme, which is a defined contribution plan. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in Statement of Profit and Loss in the periods during which the related services are rendered by employees.
(iii) Defined benefit plans
For defined benefit retirement schemes the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuation being carried out at each balance sheet date. Re-measurement gains and losses of the net defined benefit liability/ (asset) are recognized immediately in other comprehensive income. The service cost, net interest on the net defined benefit liability/ (asset) is treated as a net expense within employment costs.
Past service cost is recognized as an expense when the plan amendment or curtailment occurs or when any related restructuring costs or termination benefits are recognized, whichever is earlier
(h) Provision, Contingent Liabilities And Contingent Assets
A provision is recognized if, as a result of past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recognized at the best estimate of the expenditure required to settle the present obligation at the balance sheet date. The provisions are measured on an undiscounted basis.
Provisions in respect of loss contingencies relating to claims, litigation, assessment, fines, penalties, etc are recognized when it is probable that a liability has been incurred, and the amount can be estimated reliably.
During the financial year the company has made provision for doubtful debts and doubtful advances to the extent of 100% of the total amount identified as doubtful debts and advances.
A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote. Contingent assets are neither recognized nor disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognized in the period in which the change occurs.
(i) Revenue recognition
(a) Sale of goods
Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and quantity discounts and exclusive of Sales tax, Value added tax (VAT), Goods and Service Tax (GST). Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing effective control over, or managerial involvement with, the goods, and the amount of revenue can be measured reliably. The timing of transfers of risks and rewards varies depending on the individual terms of sale.
(b) Revenue from services
Revenue from services is recognized as the service performed based on agreements/ arrangements with the concerned parties.
(c) Other income
Dividend income is recognised in Statement of Profit and Loss on the date on which the Companyâs right to receive payment is established. Interest income is recognised using the effective interest method.
All other income are recognised on accrual basis.
(j) Government Grants
The Company recognizes government grants only when there is reasonable assurance that the conditions attached to them shall be complied with and the grants will be received. Grants related to assets are treated as deferred income and are recognized as other income in the Statement of profit & loss on a systematic and rational basis over the useful life of the asset. Grants related to income are recognized on a systematic basis over the periods necessary to match them with the related costs which they are intended to compensate and are deducted from the expense in the statement of profit & loss.
(k) Income tax
Income tax expense comprises of current tax and deferred tax. Current tax and deferred tax is recognised in the Statement of Profit and Loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI.
(i) current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. It is measured using tax rates (and tax laws) enacted or substantively enacted by the reporting date.
Current tax assets and current tax liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
(ii) Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes (tax base). Deferred tax is also recognised in respect of carried forward tax losses and tax credits. Deferred tax is not recognized for:
- temporary differences arising on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction;
- temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets - unrecognised or recognised, are reviewed at each reporting date and are recognised/ reduced to the extent that it is probable/ no longer probable respectively that the related tax benefit will be realised.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously
(l) Borrowing costs
Borrowing costs are interest and other costs (including exchange differences relating to foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs) incurred in connection with the borrowing of funds. Borrowing costs directly attributable to acquisition or construction of an asset which necessarily take a substantial period of time to get ready for their intended use are capitalised as part of the cost of that asset. Other borrowing costs are recognised as an expense in the period in which they are incurred.
(m) Dividends
Final dividends on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Board of Directors of the Company.
(n) Cash and cash equivalents
Cash and cash equivalents include cash and cash-on deposit with banks. The Company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.
(o) Cash flow statement
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
(p) Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
(q) Operating segment
Based on the synergies, risks and returns associated with business operations and in terms of Ind AS-108, the Companyâs operating operation comprises of only one primary segment viz. manufacturing and sale of Knitwearâs. The Company also believes that even geographically, the product of the Company faces similar risk and returns and there is no separate segment that can be identified for the purpose of reporting under Ind AS 108 on âSegment Reportingâ.
(r) Fair value measurement
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability
A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date;
Level 2: Inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3: No significant observable inputs for the asset or liability. Some observable inputs used in fair value measurement are discounted cash flows, market multiple method etc. When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
(s) Business combinations
Business combinations are accounted for using the acquisition method, except for common control business combinations. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the Company elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquireeâs identifiable net assets. Acquisition-related costs are expensed as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their acquisition date fair values. For this purpose, the liabilities assumed include contingent liabilities representing present obligation and they are measured at their acquisition fair values irrespective of the fact that outflow of resources embodying economic benefits is not probable.
When the Company acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date.
(t) Recent Accounting pronouncements
Ind AS 115 - Revenue from Contracts with Customers
The Company is currently evaluating the impact of implementation of Ind AS 115 âRevenue from Contracts with Customersâ which is applicable to it w.e.f 01.04.2018. However, based on the evaluation done so far and based on the arrangement that the Company has with its customers for sale of its products, the implementation of Ind AS 115 will not have any significant recognition and measurement impact.
Ind AS 21 - The Effect of Changes in Foreign Exchange Rates
The amendment clarifies on the accounting of transactions that include the receipt or payment of advance consideration in a foreign currency. The appendix explains that the date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt. The Company is evaluating the impact of this amendment on its financial statements.
Mar 31, 2017
1. SIGNIFICANT ACCOUNTING POLICIES:
a) Nature of Operation
Lux Industries Limited (the âCompanyâ) is engaged in the business of manufacturing & sale of knitwears. The Manufacturing units of the company are located in Kolkata (Dankuni, Dulagarh), West Bengal and Tirupur, in the state of Tamilnadu. The Company is a Public Limited Company and its shares are listed on the National Stock Exchange of India Limited, BSE Ltd, Calcutta Stock Exchange Limited in India. The Company has operations in India and caters to both domestic and international markets.
b) Basis of Preparation of Accounts
The financial statements have been prepared to comply with the Generally Accepted Accounting Principles in India (Indian GAPP) under the historical cost convention on the accrual basis. GAAP comprises mandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 (âthe Actâ) read with rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). The accountings policies have been consistently applied by the company with those used in the previous year except where a newly issued Accounting Standard is initially adopted or a revision to an existing accounting standard/law requires a change in the accounting policy hitherto in use. The financial statements are presented in Indian rupees rounded off to the nearest rupees in lakhs.
All assets and liabilities have been classified as current or noncurrent as per the Companyâs normal operating cycle and other criteria set out in the schedule III to the act. Based on the nature of products and the time between 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.
c) Use of Estimates
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires the management to make judgments, estimates and assumptions that affect the reported amounts of Assets and Liabilities and disclosure of Contingent Liabilities on the date of the Financial Statements and the reported amounts of revenue and expenses during the reporting period. Examples of such estimates include provision for doubtful debts, future obligations under employee retirement benefit plans, income taxes and useful life of intangible assets. Although these estimates are based on the managementâs best knowledge, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.
d) Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
a) Sale of Goods: Sales are recognized when goods are supplied and are net of Sales Return.
b) Revenue from Services: Revenue from services is recognized as the service is performed based on agreements/arrangements with the concerned parties.
c) Interest: Interests on Investments are recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.
d) Dividends: Revenue is recognized when the Companyâs right to receive payment is established by the balance sheet date.
e) Export Benefits: Export Entitlements in the form of Duty Drawback are recognized in the Profit and Loss account when the right to receive credit as per the terms of the scheme is established in respect of exports made and when there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
Export benefits under Focus Licence Scheme are recognized in the year of export itself provided there are no uncertainties as to the amount of duty entitlement. Such export benefits are booked separately as revenue by creating a claim against it on the assets side.
Export benefits in the form of Rebate of State Levies on Export of Garments (ROSL) are recognized in the year of export itself and the amount of rebate is calculated using FOB value and the rates and caps of rebate specified in ROSL scheme.
e) Accounting of Claims
(a) Claims receivable are accounted for at the time when reasonable certainty of receipt is established. Claims payable are accounted for at the time of acceptance.
(b) Claim raised by Government Authorities regarding taxes and duties, which are disputed by the Company, are accounted based on merits of each claim.
f) Expenditure
Expenses are accounted for on accrual basis and provision is made for all known losses and liabilities.
g) Government Grant:
The company receives sales tax incentive under the WBIP (A.I. Units) Schemeâ1994 and the same is recognized as revenue in the period in which these are accrued and shown as income under the head âOther Operating revenueâ. The Company has not received any non-monetary asset at concessional rate or free of cost as Government Grant.
In respect of capital subsidy on special machinery from government (under TUF-Scheme) the grant is shown as deduction from the value of assets, when subsidy is received from the government.
h) Fixed Assets
(a) Tangible Assets and Capital Work in Progress: Tangible Assets are stated at their original cost less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price(net of modvat) and any attributable cost of bringing the asset to its working condition for its intended use. Financing costs relating to the acquisition of fixed assets are also included to the extent they relate to the period till such assets are ready to be put to use.
Subsequent expenditure related to an item of Tangible Asset are added to its book value only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance. Capital work in progress comprises the cost of fixed assets that are not yet ready for their intended use at the reporting date.
(b) Intangible Assets & amortization: Intangible Assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortized on a straight line basis over their estimated useful lives. The amortization period and the amortization method are reviewed at least at each financial year end. If the expected useful life of the assets is significantly different from previous estimates, the amortization period is changed accordingly. The Intangible Assets include Computer Software. Amortization of Intangible Assets is made based on managementâs evaluation of duration of life cycle of intangible assets. The amortization rate used are :
Asset %
Computer Software: 40.00
(c) Depreciation: Depreciation on fixed assets is provided on Straight Line method (SLM) over the useful lives of assets in the manner specified in Part C of schedule II to the Companies Act, 2013. Depreciation for assets purchased / sold during a period is proportionately charged.
i) Investments
Trade investments are investments made to enhance the Companyâs business interest.
Investments are classified as Current and Noncurrent on the management''s intention. Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. Provision is made for any diminution in the market value of long term investment where such diminution is considered permanent in nature.
j) Valuation of Inventories
Raw materials including packing materials are carried at the lower of cost and net realizable value. Cost is determined on Weighted Average Cost method. Work in progress is carried at the lower of cost and net realizable value. Finished goods produced or purchased by the company are carried at lower of cost and net realizable value. Cost of finished goods and process stock includes cost of conversion and other costs incurred in bringing the inventories to their present locations and conditions. The company has valued inventory net of modvat benefits. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
Change In Accounting Policies:
During the year the Company has revised its accounting policy of inventory valuation from the FIFO to the Weighted Moving Average Method consistent with the best accounting practices. The change in the above accounting policy has resulted decrease in value of inventories by Rs,96.19 lakhs. Consequently the net profit for the year is lower by the said amount. Had the Company followed the FIFO method of inventory valuation, the surplus for the year ended would have been higher by Rs,96.19 lakhs.
k) Retirement benefits to employees Gratuity:
The Company provides for gratuity, a defined benefit retirement plan covering eligible employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death or termination of employment, of an amount based on the respective employeeâs salary and the tenure of employment with the company. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each Balance Sheet date using the projected unit credit method. The Company recognizes the net obligation of the gratuity as per actuarial valuation report in the Balance sheet in accordance with Accounting Standard (AS) 15, âEmployee Benefitsâ. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the statement of Profit and Loss in the period in which they arise.
Provident Fund:
Eligible employees receive benefits from provident fund, which is a defined plan. Both the eligible employee and the Company make monthly contribution to the provident fund plan equal to a specified percentage of the covered employeeâs salary. The Company also contributes a specific amount out of total contribution payable, to the government administered pension fund.
I) Taxes on Income
Income taxes are accrued in the same period that the related revenue and expenses arise. A provision is made for income tax, based on the tax liability computed, after considering tax allowances and exemptions.
Provisions are recorded when it is estimated that a liability due to disallowances or other matters is probable.
Minimum Alternative Tax (MAT) paid in accordance with the tax laws , which gives rise to future economic benefits in the form of tax credit against future income tax liability, is recognized as an asset in the Balance Sheet if there is convincing evidence that the company will pay normal tax after the tax holiday period and the resultant asset can be measured reliably.
Deferred taxes are recognized, subject to the consideration of prudence, on timing differences, being the difference between taxable incomes and accounting income that originates in one period and are capable of reversal in one or more subsequent periods.
Deferred tax Assets & Liabilities are measured using the Tax Rates & Tax Laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred Tax Assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available.
Advance Taxes and Provisions for current taxes are presented in the Balance sheet after offsetting advance taxes paid and income tax provisions arising in the same tax jurisdiction and where the Company is able to and intends to settle the assets and liability on a net basis.
m) Provision, Contingent Liabilities And Contingent Assets
A provision is recognized if, as a result of past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recognized at the best estimate of the expenditure required to settle the present obligation at the Balance Sheet date. The provisions are measured on an undiscounted basis.
Provisions in respect of loss contingencies relating to claims, litigation, assessment, fines, penalties, etc are recognized when it is probable that a liability has been incurred, and the amount can be estimated reliably.
During the financial year the company has made provision for doubtful debts and doubtful advances to the extent of 100% of the total amount identified as doubtful debts and advances.
A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote. Contingent assets are neither recognized nor disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognized in the period in which the change occurs.
n) Borrowing Cost
Borrowing Cost relating to acquisition or construction of fixed assets which take substantial period of time to get ready for its intended use are capitalized as part of the cost of a qualifying asset to the extent they relate to the period till such assets are ready to be put to use. Other Borrowing Costs are recognized as an expense in the year in which they are incurred.
o) Foreign Currency Transaction
Foreign currency denominated monetary assets and liabilities are translated at exchange rates in effect at the Balance sheet date. The gains or losses resulting from such translations are included in the statement of profit and loss. Non monetary assets and non monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transactions.
p) Segment Reporting Policies:
Based on the synergies, risks and returns associated with business operations and in terms of Accounting Standard-17, the Companyâs operating operation comprises of only one primary segment viz. manufacturing and sale of Knitwearâs. The Company also believes that even geographically, the product of the Company faces similar risk and returns and there is no separate segment that can be identified for the purpose of reporting under AS 17 on âSegment Reportingâ.
However, due to greater transparency and providing complete information to the stake holder / financial statements user in analyzing and understanding the Companyâs financial statements, the management of the company has provided additional information in respect of geographical segment. Such details have been given in Note No. 31.
q) Earnings per Share (Basic & Diluted)
Basic earnings (loss) per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split (consolidation of shares).
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
r) Impairment of assets:
Impairment loss is recognized wherever the carrying amount of an assets is in excess of its recoverable amount and the same is recognized as an expenses in the statement of Profit & Loss and carrying amount of the assets is reduced to its recoverable amount.
Reversal of impairment losses recognized in prior year is recovered when there is an indication that the impairment losses recognized for the asset no longer exist or have decreased.
s) Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before tax is adjusted for the effects transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from Operating, Financing and Investing activities of the Company are segregated. Cash and cash equivalents in the Balance Sheet comprises cash at bank, cash/cheques in hand and unpaid deposit account.
Note: A sub division of shares was approved at the share holders meeting held on 25th May, 2016. Accordingly ordinary shares of the Company was sub divided from face value of Rs,10/- each to face value of Rs,2/- each. The Sub-divided shares commenced trading on 6th June, 2016.
Mar 31, 2016
a) Nature of Operation
Lux Industries Limited (the "Company") is engaged in the business of manufacturing & sale of knitwear''s. The Manufacturing units of the Company are located in Kolkata (West Bengal) and Tirupur, in the state of Tamilnadu .The Company is a public Limited company and its share is listed on the National Stock Exchange of India Limited, Bombay Stock Exchange Limited, Calcutta Stock Exchange Limited and Ahmadabad Stock Exchange Limited in India.
b) Basis of Preparation of Accounts
The financial statements have been prepared to comply with the Generally Accepted Accounting Principles in India (Indian GAAP) under the historical cost convention on the accrual basis. GAAP comprises mandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 ("the Act") read with rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act ( to the extent notified ) and guidelines issued by the Securities and Exchange Board of India (SEBI). The accounting policies have been consistently applied by the company with those used in the previous year except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard/ Law requires a change in the accounting policy hitherto in use. The financial statements are presented in Indian rupees rounded off to the nearest rupees in lakhs.
All assets and liabilities have been classified as current or noncurrent as per the Company''s normal operating cycle and other criteria set out in the schedule III to the Act. Based on the nature of products and the time between 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.
c) Use of Estimates
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires the management to make judgments, estimates and assumptions that affect the reported amounts of Assets and Liabilities and disclosure of Contingent Liabilities on the date of the Financial Statements and the reported amounts of revenue and expenses during the reporting period. Examples of such estimates include provision for doubtful debts, future obligations under employee retirement benefit plans, income taxes and useful life of intangible assets. Although these estimates are based on the management''s best knowledge, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.
d) Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
i. Sale of Goods: Sales are recognized when goods are supplied and are net of Sales Return.
ii. Revenue from Services : Revenue from services is recognized as the service is performed based on agreements/arrangements with the concerned parties.
iii. Interest: Interests on Investments are recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.
iv. Dividends: Revenue is recognized when the Company''s right to receive payment is established by the balance sheet date.
v. Export Benefits: Export Entitlements in the form of Duty Drawback are recognized in the Profit and Loss account when the right to receive credit as per the terms of the scheme is established in respect of exports made and when there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
Exports benefits under Focus License Scheme are recognized in the year of export itself provided there are no uncertainty as to the amount of duty entitlement. Such export benefits are booked separately as revenue by creating a claim against it on the assets side.
e) Accounting of Claims
i. Claims receivable are accounted for at the time when reasonable certainty of receipt is established. Claims payable are accounted for at the time of acceptance.
ii. Claim raised by Government Authorities regarding taxes and duties, which are disputed by the Company, are accounted based on merits of each claim.
f) Expenditure
Expenses are accounted for on accrual basis and provision is made for all known losses and liabilities.
g) Government Grant
The company receives sales tax incentive under the WBIP (A.I. Units) Scheme 1994 and the same is recognized as revenue in the period in which these are accrued and shown as income under the head "Other Operating Revenue". The Company has not received any non-monetary assets at concessional rate or free of cost as Government Grant.
In respect of capital subsidy on special machinery from government (under TUF-Scheme). The grant is shown as deduction from the value of assets, when subsidy is received from the government.
h) Fixed Assets
i. Tangible Assets and Capital Work in Progress:
Tangible Assets are stated at their original cost less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price(net of modvat) and any attributable cost of bringing the asset to its working condition for its intended use. Financing costs relating to the acquisition of fixed assets are also included to the extent they relate to the period till such assets are ready to be put to use. Subsequent expenditure related to an item of Tangible Asset are added to its book value only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance.
Capital work in progress comprises the cost of fixed assets that are not yet ready for their intended use at the reporting date.
ii. Intangible Assets & amortization
Intangible Assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortized on a straight line basis over their estimated useful lives. The amortization period and the amortization method are reviewed at least at each financial year end. If the expected useful life of the assets is significantly different from previous estimates, the amortization period is changed accordingly. The Intangible assets include Computer Software and Web Site Development cost. Amortization of Intangible Assets is made based on management''s evaluation of duration of life cycle of intangible assets. The amortization rate used are :
Website Development cost: 33.33
iii. Depreciation
Depreciation on fixed assets is provided on Straight Line Method (SLM) over the useful lives of assets as prescribed in schedule II to the Companies Act, 2013. Depreciation for assets purchased / sold during a period is proportionately charged.
i) Investments
Trade investments are investments made to enhance the Company''s business interest.
Investments are classified as Current and Noncurrent on the management''s intention. Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. Provision is made for any diminution in the market value of long term investment where such diminution is considered permanent in nature.
j) Valuation of Inventories
Raw materials including packing materials are carried at the lower of cost and net realizable value. Cost is determined on FIFO Basis. Work in progress is carried at the lower of cost and net realizable value. Finished goods produced or purchased by the Company are carried at lower of cost and net realizable value. Cost of finished goods and process stock includes cost of conversion and other cost incurred in bringing the inventories to their present locations and conditions. The Company has valued inventory net of modal benefits. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
k) Retirement benefits to employees Gratuity:
The Company provides for gratuity, a defined benefit retirement plan covering eligible employees. The Gratuity plan provides a lump sum payment to vested employees at retirement, death or termination of employment, of an amount based on the respective employee''s salary and the tenure of employment with the company. Liabilities with regard to the Gratuity plan are determined by actuarial valuation, performed by an independent actuary, at each Balance Sheet date using the projected unit credit method. The company recognizes the net obligation of the gratuity as per actuarial valuation report in the Balance sheet in accordance with Accounting Standard (AS) 15, "Employee Benefits". Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the statement of Profit and Loss in the period in which they arise.
Provident Fund:
Eligible employees receive benefits from a provident fund, which is a defined plan. Both the eligible employee and the company make monthly contribution to the provident fund plan equal to a specified percentage of the covered employee''s salary. The company also contribute a specific amount out of total contribution payable to the government administered pension fund.
l) Taxes on Income
Income taxes are accrued in the same period that the related revenue and expenses arise. A provision is made for income tax, based on the tax liability computed, after considering tax allowances and exemptions. Provisions are recorded when it is estimated that a liability due to disallowances or other matters is probable.
Minimum Alternative Tax (MAT) paid in accordance with the tax laws , which gives rise to future economic benefits in the form of tax credit against future income tax liability, is recognized as an asset in the Balance Sheet if there is convincing evidence that the company will pay normal tax after the tax holiday period and the resultant asset can be measured reliably.
Deferred taxes is recognized, subject to the consideration of prudence, on timing differences, being the difference between taxable incomes and accounting income that originates in one period and are capable of reversal in one or more subsequent periods.
Deferred tax Assets & Liabilities are measured using the Tax Rates & Tax Laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred Tax Assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available.
Advance Taxes and Provisions for current taxes are presented in the Balance sheet after offsetting advance taxes paid and income tax provisions arising in the same tax jurisdiction and where the company is able to and intends to settle the assets and liabilities on a net basis.
m) Provision, 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 by way of notes on accounts. Contingent Assets are neither recognized nor disclosed in the financial statements. During the financial year the company has made provision for doubtful debts and doubtful advances to the extent of 100% of the total amount identified as doubtful debts and advances.
n) Borrowing Cost
Borrowing Cost relating to acquisition or construction of fixed assets which take substantial period of time to get ready for its intended use are capitalized as part of the cost of a qualifying asset to the extent they relate to the period till such assets are ready to be put to use. Other Borrowing Costs are recognized as an expense in the year in which they are incurred.
o) Foreign Currency Transaction
Foreign currency denominated monetary assets and liabilities are translated at exchange rates in effect at the Balance Sheet date. The gains or losses resulting from such translations are included in the statement of profit and loss. Non monetary assets and non monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transactions.
p) Segment Reporting Policies:
Based on the synergies, risks and returns associated with business operations and in terms of Accounting Standard-17, the Company''s operating operation comprises of only one primary segment viz. manufacturing and sale of Knitwear''s.
Up to last year, the analysis of geographical segment was based on geographical location of the customers ie Sales within India and Sales outside India.
During the current financial year, based on legal opinion, the company believes that risk and rewards associated with manufacture and sale of such products are not distinguishable across economies. The Company also believes that quality of the product, name including brand name etc. does not change and price of the products is market driven and is determined by demand - supply relationship which varies from country to country. Therefore, even geographically, the product of the company faces similar risk and returns and there is no separate segment that can be identified for the purpose of reporting under AS 17 on "Segment Reporting".
However, due to greater transparency and providing complete information to the stake holders/ financial statements users in analyzing and understanding the Company''s financial statements, the management of the company has provided additional information in respect of geographical segment. Such details has been given in Note no. 31.
q) Earnings per Share (Basic & Diluted)
Basic earnings (loss) per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split (consolidation of shares).
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
r) Impairment of assets:
Impairment loss is recognized wherever the carrying amount of an assets is in excess of its recoverable amount and the same is recognized as an expenses in the statement of Profit & Loss and carrying amount of the assets is reduced to its recoverable amount.
Reversal of impairment losses recognized in prior year is recovered when there is an indication that the impairment losses recognized for the asset no longer exist or have decreased.
s) Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before tax is adjusted for the effects transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from Operating, Financing and Investing activities of the Company are segregated. Cash and cash equivalents in the balance sheet comprise cash at bank, cash/cherubs in hand and unpaid deposit account
Mar 31, 2015
A) Nature of Operation
Lux Industries Limited (the "Company") is engaged in the business of
manufacturing & sale of knitwear's. The Manufacturing units of the
company are located in Kolkata (West Bengal) and Tirupur, in the state
of Tamilnadu.The Company is a public Limited company and its share is
listed on the Kolkata and Ahmedabad stock Exchanges in India.
b) Basis of Preparation of Accounts
The financial statements have been prepared to comply with the
generally accepted Accounting Principles in India (Indian GAPP),
including the Accounting Standards notified under the relevant
provisions of the Companies Act, 2013. The financial statements have
been prepared under the historical cost convention on an accrual basis.
The accountings policies have been consistently applied by the company
with those used in the previous year except where a newly issued
accounting standard is initially adopted or a revision to an existing
accounting standard/ Law requires a change in the accounting policy
hitherto in use. The financial statements are presented in Indian
rupees rounded off to the nearest rupees in lakhs.
Change in accounting Policy
Up to the year ended March, 2014, the company had been accounting for
depreciation on tangible fixed assets based on the written down value
method. During the current year, the company has revised its
accounting policy of providing for depreciation from written down value
method to straight line method. The change in the accounting policy
has resulted in a surplus of Rs.1.62 lakhs. Consequently, the net
profit for the current year is higher by Rs.1.62 lakhs .Had the company
followed the written down value basis of depreciation accounting, the
charge for the year end would have been higher by the same amount. .
c) Use of Estimates
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles requires the management to make
judgments, estimates and assumptions that affect the reported amounts
of Assets and Liabilities and disclosure of Contingent Liabilities on
the date of the Financial Statements and the reported amounts of
revenue and expenses during the reporting period. Examples of such
estimates include provision for doubtful debts, future obligations
under employee retirement benefit plans, income taxes and useful life
of intangible assets. Although these estimates are based on the
management's best knowledge, uncertainty about these assumptions and
estimates could result in the outcomes requiring a material adjustment
to the carrying amounts of assets or liabilities in future periods.
Changes in estimates are reflected in the financial statements in the
period in which changes are made and, if material, their effects are
disclosed in the notes to the financial statements.
d) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
a) Sale of Goods : Sales are recognized when goods are supplied and are
net of Sales Return.
b) Revenue from Services : Revenue from services is recognized as the
service is performed based on agreements/arrangements with the
concerned parties.
c) Interest : Interests on Investments are recognized on a time
proportion basis taking into account the amount outstanding and the
rate applicable.
d) Dividends : Revenue is recognized when the Company's right to
receive payment is established by the balance sheet date.
e) Export Benefits : Export Entitlements in the form of Duty Drawback
are recognized in the Profit and Loss account when the right to receive
credit as per the terms of the scheme is established in respect of
exports made and when there is no significant uncertainty regarding the
ultimate collection of the relevant export proceeds.
Exports benefits under DEPB/Focus Licence Scheme are recognized in the
year of export itself provided there are no un certainity as to the
amount of duty entitlement. Such export benefits are booked separately
as revenue by creating a claim against it on the assets side.
e) Accounting of Claims
(a) Claims receivable are accounted for at the time when reasonable
certainty of receipt is established. Claims payable are accounted for
at the time of acceptance.
(b) Claim raised by Government Authorities regarding taxes and duties,
which are disputed by the Company, are accounted based on merits of
each claim.
f) Expenditure
Expenses are accounted for on accrual basis and provision is made for
all known losses and liabilities.
g) Government Grant:
The company receives sales tax incentive under the WBIP (A.I. Units)
Scheme'1994 and the same is recognized as revenue in the period in
which these are accrued and shown as income under the head "Other
Operating revenue". The Company has not received any non-monetary
assets at concessional rate or free of cost as Government Grant.
In respect of capital subsidy on special machinery from government
(under TUF-Scheme), The grant is shown as deduction from the value of
assets, when subsidy is received from the government.
h) Fixed Assets
(a) Tangible Assets : Tangible Assets are stated at their original cost
less accumulated depreciation and impairment losses, if any. Cost
comprises the purchase price(net of modvat) and any attributable cost
of bringing the asset to its working condition for its intended use.
Financing costs relating to the acquisition of fixed assets are also
included to the extent they relate to the period till such assets are
ready to be put to use.
Subsequent expenditure related to an item of Tangible Asset are added
to its book value only if they increase the future benefits from the
existing asset beyond its previously assessed standard of performance.
(b) Intangible Assets & amortization : Intangible Assets are stated at
acquisition cost, net of accumulated amortisation and accumulated
impairment losses, if any. Intangible assets are amortised on a
straight line basis over their estimated useful lives. The amortization
period and the amortization method are reviewed at least at each
financial year end. If the expected useful life of the assets is
significantly different from previous estimates, the amortization
period is changed accordingly. The Intangible assets include Computer
Software and Web Site Development cost. Amortization of Intangible
Assets is made based on management's evaluation of duration of life
cycle of intangible assets. The amortization rate used are :
Asset %
Computer Software: 40.00
Website Development cost: 33.33
(c) Capital Work-in-progress : Capital work-in-progress comprises the
cost of fixed assets that are not yet ready for their intended use at
the reporting date.
(d) Depreciation : Depreciation on fixed assets is provided on Straight
Line method (SLM). Depreciation is provided based on useful life of
the assets as prescribed in schedule II to the Companies Act, 2013.
Individual Assets costing below Rs. 5,000 are fully depreciated in the
year of acquisition.
i) Investments
Investments are classified as Current and Non current. Investments
that are readily realizable and intended to be held for not more than a
year are classified as current investments. All other investments are
classified as long-term investments. Current investments are carried at
lower of cost and fair value determined on an individual investment
basis. Long- term investments are carried at cost. Provision is made
for any diminution in the market value of long term investment where
such diminution is considered permanent in nature.
j) Valuation of Inventories
Raw materials including packing materials are carried at the lower of
cost and net realizable value. Cost is determined on FIFO Basis. Work
in progress is carried at the lower of cost and net realizable value.
Finished goods produced or purchased by the company are carried at
lower of cost and net realizable value. Cost of finished goods and
process stock includes cost of conversion and other cost incurred in
bringing the inventories to their present locations and conditions.
The company has valued inventory net of modvat benefits. Net realizable
value is the estimated selling price in the ordinary course of
business, less estimated costs of completion and estimated costs
necessary to make the sale.
k) Employee Benefits
(a) Defined Contribution Schemes such as provident fund, pension and
employee's state insurance is charged to the Profit & Loss Accounts of
the year when the contribution to the respective funds are due.
(b) Defined Benefit Plan - the cost of providing benefits is determined
using the projected unit credit method with actuarial valuations being
carried out at each Balance sheet date. Actuarial gain or losses are
recognized in full in the statement of profit and loss for the period
in which they occur.
(c) Short Term benefit are recognized in the Profit & Loss A/c relating
to the year in which the employee has rendered services.
(d) Liability on account of other long term employees benefit are
accounted for as and when such Liability arises as per the relevant
legislation in force in India.
l) Taxes on Income
Tax expense comprises current and deferred Tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act. Deferred taxes is
recognized, subject to the consideration of prudence, on timing
differences, being the difference between taxable incomes and
accounting income that originates in one period and are capable of
reversal in one or more subsequent periods.
Deferred tax Assets & Liabilities are measured using the Tax Rates &
Tax Laws that have been enacted or substantively enacted by the Balance
Sheet date. Deferred Tax Assets are recognized only to the extent that
there is reasonable certainty that sufficient future taxable income
will be available.
Advance Taxes and Provisions for current taxes are presented in the
Balance sheet after offsetting advance taxes paid and income tax
provisions arising in the same tax jurisdiction and where the company
is able to and intends to settle the assets and liability on a net
basis.
m) Provision, 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 by way of
notes on accounts. Contingent Assets are neither recognized nor
disclosed in the financial statements. During the financial year the
company has made provision for doubtful debts and doubtful advances to
the extent of 100% of the total amount identified as doubtful debts and
advances.
n) Borrowing Cost
Borrowing Cost relating to acquisition or construction of fixed assets
which take substantial period of time to get ready for its intended use
are capitalized as part of the cost of a qualifying asset to the extent
they relate to the period till such assets are ready to be put to use.
Other Borrowing Costs are recognized as an expense in the year in which
they are incurred.
o) Foreign Currency Transaction
(a) Initial Recognition : Foreign currency transactions are recorded in
the reporting currency, by applying to the foreign currency amount the
exchange rate between the reporting currency and the foreign currency at
the date of the transaction.
(b) Conversion : Foreign currency monetary items are reported using the
closing rate. Non-monetary items which are carried in terms of
historical cost denominated in a foreign currency are reported using
the exchange rate at the date of the transaction.
(c) Exchange Differences : Exchange differences arising on the
settlement of monetary items or on reporting company's monetary items
at rates different from those at which they were initially recorded
during the year, or reported in previous financial statements, are
recognized a income or as expenses in the year in which they arise.
(d) Forward Exchange : Contracts (Derivative Instruments) not intended
for trading or speculation purpose: The Company uses forward exchange
forward contracts to hedge its risk associated with foreign currency
fluctuations. The premium or discount on the forward exchange contract
is not recognized separately. Exchange difference on such contracts is
recognized in the statement of profit and loss in the year in which the
exchange rates change. Any profit or loss arising on cancellation or
renewal of forward exchange contract is recognized as income or as
expenses for the year.
p) Segment Reporting Policies:
Identification of Segments:
Primary Segment
Business Segment : The Company's operating operation comprises of only
one primary segment viz. manufacturing and sale of knitwear's.
Secondary Segment
Geographical Segment : The analysis of geographical segment is based on
the geographical location of the customers.
* Sales within India include sales to customers located within India.
* Sales outside India include sales to customers located outside India.
q) Earnings per Share (Basic & Diluted)
Basic earnings (loss) per share are calculated by dividing the net
profit or loss for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding during the
period is adjusted for events of bonus issue; bonus element in a rights
issue to existing shareholders; share split; and reverse share split
(consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
r) Impairment of assets:
Impairment loss is recognized wherever the carrying amount of an assets
is in excess of its recoverable amount and the same is recognized as an
expenses in the statement of Profit & Loss and carrying amount of the
assets is reduced to its recoverable amount.
Reversal of impairment losses recognized in prior year is recovered
when there is an indication that the impairment losses recognized for
the asset no longer exist or have decreased.
s) Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before
tax is adjusted for the effects transactions of a non-cash nature and
any deferrals or accruals of past or future cash receipts or payments.
The cash flows from operating. Financing and investing activities of
the Company are segregated. Cash and cash equivalents in the balance
sheet comprise cash at bank, cash/cheques in hand and unpaid deposit
account.
Mar 31, 2014
A) Nature of Operation
Lux Industries Limited (the "Company") is engaged in the business of
manufacturing & sale of knitwear's. The Manufacturing units of the
company are located in Kolkata (West Bengal) and Tirupur, in the state
of Tamilnadu.The Company is a public Limited company and its share is
listed on the Kolkata and Ahmedabad stock Exchanges in India.
b) Basis of Preparation of Accounts
The financial statements have been prepared to comply in all material
aspects with the notified accounting standards by Companies Accounting
Standards Rules, 2006, the provisions of the Companies Act,2013(to the
extent notified) , the Companies Act, 1956 (to the extent applicable),
along with the pronouncement /guidelines of the Institute of Chartered
Accountants of India and of the Securities and Exchange Board of
India(SEBI). The financial statements have been prepared under the
historical cost convention on an accrual basis. The accountings
policies have been consistently applied by the company with those used
in the previous year 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.
c) Use of Estimates
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles requires the management to make
judgments, estimates and assumptions that affect the reported amounts
of Assets and Liabilities and disclosure of Contingent Liabilities on
the date of the Financial Statements and the reported amounts of
revenue and expenses during the reporting year. Examples of such
estimates include provision for doubtful debts, future obligations
under employee retirement benefit plans, income taxes and useful life
of intangible assets. Although these estimates are based on the
management's best knowledge, uncertainty about these assumptions and
estimates could result in the outcomes requiring a material adjustment
to the carrying amounts of assets or liabilities in future periods.
Changes in estimates are reflected in the financial statements in the
period in which changes are made and, if material, their effects are
disclosed in the notes to the financial statements.
d) Revenue Recognition
Revenue is recognized to the extent that it is probable that
the economic benefits will flow to the Company and the revenue can be
reliably measured.
a) Sale of Goods: Sales are recognized when goods are supplied and are
net of Sales Return.
b) Revenue from Services: Revenue from services is recognized as the
service is performed based on agreements/arrangements with the
concerned partiess
c) Interest: Interests on Investments are recognized on a time
proportion basis taking into account the amount outstanding and the
rate applicable.
d) Dividends: Revenue is recognized when the Company's right to receive
payment is established by the balance sheet date.
e) Export Benefits: Export Entitlements in the form of Duty Drawback
are recognized in the Profit and Loss account when the right to receive
credit as per the terms of the scheme is established in respect of
exports made and when there is no significant uncertainty regarding the
ultimate collection of the relevant export proceeds.
Exports benefits under DEPB/Focus License Scheme are recognized in the
year of export itself provided there are no un certainty as to the
amount of duty entitlement. Such export benefits are booked separately
as revenue by creating a claim against it on the assets side.
e) Accounting of Claims
(a) Claims receivable are accounted for at the time when reasonable
certainty of receipt is established. Claims payable are accounted for
at the time of acceptance.
(b) Claim raised by Government Authorities regarding taxes and duties,
which are disputed by the Company, are accounted based on merits of
each claim.
f) Expenditure
Expenses are accounted for on accrual basis and provision is made for
all known losses and liabilities.
g) Government Grant
The company receives sales tax incentive under the WBIP (A.I. Units)
Scheme'1994 and the same is recognized as revenue in the period in
which these are accrued and shown as income under the head "Other
Operating revenue". The Company has not received any non-monetary
assets at concessional rate or free of cost as Government Grant.
In respect of capital subsidy on special machinery from government
(under TUF-Scheme), The grant is shown as deduction from the value of
assets, when subsidy is received from the government.
h) Fixed Assets
(a) Tangible Assets: Tangible Assets are stated at their original cost
less accumulated depreciation and impairment losses, if any. Cost
comprises the purchase price(net of modvat) and any attributable cost
of bringing the asset to its working condition for its intended use.
Financing costs relating to the acquisition of fixed assets are also
included to the extent they relate to the period till such assets are
ready to be put to use.
(b) Intangible Assets & amortization: Intangible Assets are stated at
acquisition cost, net of accumulated Amortisation and accumulated
impairment losses, if any. Intangible assets are amortized on a
straight line basis over their estimated useful lives. The amortization
period and the amortization method are reviewed at least at each
financial year end. If the expected useful life of the assets is
significantly different from previous estimates, the amortization
period is changed accordingly. The Intangible assets include Computer
Software and Web Site Development cost .Amortization of Intangible
Assets is made based on management's evaluation of duration of life
cycle of intangible assets. The amortization rate used are :
Asset %
Computer Software: 40.00
Website Development cost: 33.33
c) Capital Work-in-progress: Capital work-in-progress comprises the
cost of fixed assets that are not yet ready for their intended use at
the reporting date.
(d) Depreciation: Depreciation on fixed assets is provided on Written
down Value method (pro-rata on addition and disposed of during the
period) at the rates and in the manner prescribed in Schedule XIV of
the Companies Act, 1956. Individual Assets costing below Rs.5,000 are
fully depreciated in the year of acquisition..
i) Investments
Investments are classified as Current and Noncurrent.
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long- term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. Provision is made for any diminution in the market value of long
term investment where such diminution is considered permanent in
nature.
j) Valuation of Inventories
Raw materials including packing materials are carried at the lower of
cost and net realizable value. Cost is determined on FIFO Basis. Work
in progress is carried at the lower of cost and net realizable value.
Finished goods produced or purchased by the company are carried at
lower of cost and net realizable value. Cost of finished goods and
process stock includes cost of conversion and other cost incurred in
bringing the inventories to their present locations and conditions. The
company has valued inventory net of modvat benefits. Net realizable
value is the estimated selling price in the ordinary course of
business, less estimated costs of completion and estimated costs
necessary to make the sale.
k) Employee Benefits
(a) Defined Contribution Schemes such as provident fund, pension and
employee's state insurance is charged to the Profit & Loss Accounts of
the year when the contribution to the respective funds are due.
(b) Defined Benefit Plan - the cost of providing benefits is determined
using the projected unit credit method with actuarial valuations being
carried out at each Balance sheet date. Actuarial gain or losses are
recognized in full in the statement of profit and loss for the period
in which they occur.
(c) Short Term benefit are recognized in the Profit & Loss A/c relating
to the year in which the employee has rendered services.
(d) Liability on account of other long term employees benefit are
accounted for as and when such Liability arises as per the relevant
legislation in force in India.
l) Taxes on Income
Tax expense comprises current and deferred Tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act. Deferred taxes is
recognized, subject to the consideration of prudence, on timing
differences, being the difference between taxable incomes and
accounting income that originates in one period and are capable of
reversal in one or more subsequent periods.
Deferred tax Assets & Liabilities are measured using the Tax Rates &
Tax Laws that have been enacted or substantively enacted by the Balance
Sheet date. Deferred Tax Assets are recognized only to the extent that
there is reasonable certainty that sufficient future taxable income
will be available.
Advance Taxes and Provisions for current taxes are presented in the
Balance sheet after offsetting advance taxes paid and income tax
provisions arising in the same tax jurisdiction and where the company
is able to and intends to settle the assets and liability on a net
basis.
m) Provision, 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 by way of
notes on accounts. Contingent Assets are neither recognized nor
disclosed in the financial statements. During the financial year the
company has made provision for doubtful debts and doubtful advances to
the extent of 100% of the total amount identified as doubtful debts and
advances.
n) Borrowing Cost
Borrowing Cost relating to acquisition or construction of fixed assets
which take substantial period of time to get ready for its intended use
are capitalized as part of the cost of a qualifying asset to the extent
they relate to the period till such assets are ready to be put to use.
Other Borrowing Costs are recognized as an expense in the year in which
they are incurred.
o) Foreign Currency Transaction
(a) Initial Recognition: Foreign currency transactions are recorded in
the reporting currency, by applying to the foreign currency amount the
exchange rate between the reporting currency and the foreign currency
at the date of the transaction.
(b) Conversion: Foreign currency monetary items are reported using the
closing rate. Non-monetary items which are carried in terms of
historical cost denominated in a foreign currency are reported using
the exchange rate at the date of the transaction.
(c) Exchange Differences: Exchange differences arising on the
settlement of monetary items or on reporting company's monetary items
at rates different from those at which they were initially recorded
during the year, or reported in previous financial statements, are
recognized a income or as expenses in the year in which they arise.
(d) Forward Exchange: Contracts (Derivative Instruments) not intended
for trading or speculation purpose: The Company uses forward exchange
forward contracts to hedge its risk associated with foreign currency
fluctuations. The premium or discount on the forward exchange contract
is not recognized separately. Exchange difference on such contracts is
recognized in the statement of profit and loss in the year in which the
exchange rates change. Any profit or loss arising on cancellation or
renewal of forward exchange contract is recognized as income or as
expenses for the year.
p) Segment Reporting Policies:
Identification of Segments:
Primary Segment
Business Segment: The Company's operating operation comprises of only
one primary segment viz. manufacturing and sale of knitwear's.
Secondary Segment
Geographical Segment: The analysis of geographical segment is based on
the geographical location of the customers.
- Sales within India include sales to customers located within India.
- Sales outside India include sales to customers located outside India.
q) Earnings per Share (Basic & Diluted)
Basic earnings (loss) per share are calculated by dividing the net
profit or loss for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding during the
period is adjusted for events of bonus issue; bonus element in a rights
issue to existing shareholders; share split; and reverse share split
(consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
r) Impairment of assets
Impairment loss is recognized wherever the carrying amount of an assets
is in excess of its recoverable amount and the same is recognized as an
expenses in the statement of Profit & Loss and carrying amount of the
assets is reduced to its recoverable amount.
Reversal of impairment losses recognized in prior year is recovered
when there is an indication that the impairment losses recognized for
the asset no longer exist or have decreased.
s) Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before
tax is adjusted for the effects transactions of a non-cash nature and
any deferrals or accruals of past or future cash receipts or payments.
The cash flows from operating. Financing and investing activities of
the Company are segregated. Cash and cash equivalents in the balance
sheet comprise cash at bank, cash/cheques in hand and unpaid deposit
account.
The Company has only one class of equity shares with a par value ofRs.
10/- per share. Each holder of equity shares is entitled to one vote
per share held. The Company declares and pays dividends in Indian
rupees. The dividend proposed by the Board of Directors is subject to
the approval of the shareholders in the ensuing Annual General Meeting.
In the event of liquidation of the Company, the holders of equity
shares are entitled to receive the remaining assets of the Company,
after meeting all liabilities and distribution of all preferential
amounts, in proportion to their shareholding.
Mar 31, 2013
A. Nature of Operation
Lux Industries Limited (the "Company") is engaged in the business of
manufacturing & sale of knitwear's. The Manufacturing units of the
company are located in Kolkata (West Bengal) and Tirupur, in the state
of Tamilnadu. The Company is a public Limited company and its share is
listed on the Kolkata and Ahmedabad stock Exchanges in India.
b. Basis of Preparation of Accounts
The financial statements have been prepared to comply in all material
aspects with the notified accounting standards by Companies Accounting
Standards Rules, 2006 and the relevant provisions of the Companies Act,
1956, along with the pronouncement /guidelines of the Institute of
Chartered Accountants of India and of the Securities and Exchange Board
of India. The financial statements have been prepared under the
historical cost convention on an accrual basis. The accounting policies
have been consistently applied by the company with those used in the
previous year.
All assets and liabilities have been classified as current or non
current as per the operating cycle criteria set out in the revised
schedule VI to the Companies Act, 1956.
c. Use of Estimates
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles requires the management to make
judgments, estimates and assumptions that affect the reported amounts
of Assets and Liabilities and disclosure of Contingent Liabilities on
the date of the Financial Statements and the reported amounts of
revenue and expenses during the reporting year. Although these
estimates are based on the management's best knowledge, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
d. Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
a. Sale of Goods: Sales are recognized when goods are supplied and are
net of Sales Return.
b. Revenue from Services: Revenue from services is recognized as the
service is performed based on agreements/arrangements with the concerned
parties.
c. Interest: Interests on Investments are recognized on a time
proportion basis taking into account the amount outstanding and the
rate applicable.
d. Dividends: Revenue is recognized when the shareholders' right to
receive payment is established by the balance sheet date.
e. Export Benefits: Export Entitlements in the form of Duty Drawback
are recognized in the Profit and Loss account when the right to receive
credit as per the terms of the scheme is established in respect of
exports made and when there is no significant uncertainty regarding the
ultimate collection of the relevant export proceeds.
Exports benefits under DEPB/Focus Licence Scheme are recognized in the
year of export itself provided there are no uncertainity as to the
amount of duty entitlement. Such export benefits are booked separately
as revenue by creating a claim against it on the assets side.
e. Accounting of Claims
a. Claims receivable are accounted for at the time when reasonable
certainty of receipt is established. Claims payable are accounted for
at the time of acceptance.
b. Claim raised by Government Authorities regarding taxes and duties,
which are disputed by the Company, are accounted based on merits of
each claim.
f. Expenditure
Expenses are accounted for on accrual basis and provision is made for
all known losses and liabilities.
g. Government Grant
The company receives sales tax incentive under the WBIP (A.I. Units)
Scheme'1994 and the same is recognized as revenue in the period in
which these are accrued and shown as income under the head "Other
Operating revenue". The Company has not received any non-monetary
assets at concessional rate or free of cost as Government Grant.
In respect of capital subsidy on special machinery from government
(under TUF-Scheme), The grant is shown as deduction from the value of
assets, when subsidy is received from the government.
h. Fixed Assets
a. Tangible Assets: Tangible Assets are stated at their original cost
less accumulated depreciation and impairment losses, if any. Cost
comprises the purchase price(net of modvat) and any attributable cost of
bringing the asset to its working condition for its intended use.
Financing costs relating to the acquisition of fixed assets are also
included to the extent they relate to the period till such assets are
ready to be put to use.
b. Intangible Assets: Intangible Assets are stated at acquisition
cost, net of accumulated amortisation and accumulated impairment
losses, if any. Intangible assets are amortised on a straight line
basis over their estimated useful lives. The amortization period and
the amortization method are reviewed at least at each financial year
end. If the expected useful life of the assets is significantly
different from previous estimates, the amortization period is changed
accordingly. The Intangible assets include Computer Software and Web
Site Development cost .Amortization of Intangible Assets is made based
on management's evaluation of duration of life cycle of intangible
assets. The amortization rate used are :
Asset %
Computer Software: 40.00
Website Development cost: 33.33
c. Depreciation: Depreciation on fixed assets is provided on Written
down Value method (pro-rata on addition and disposed off during the
period) at the rates and in the manner prescribed in Schedule XIV of
the Companies Act, 1956. Individual Assets costing below ' 5,000 are
fully depreciated in the year of acquisition.
i. Investments
Investments are classified as Current and Non current. Investments
that are readily realizable and intended to be held for not more than a
year are classified as current investments. All other investments are
classified as long-term investments. Current investments are carried
at lower of cost and fair value determined on an individual investment
basis. Long-term investments are carried at cost. Provision is made for
any diminution in the market value of long term investment where such
diminution is considered permanent in nature.
j. Valuation of Inventories
Raw materials including packing materials are carried at the lower of
cost and net realizable value. Cost is determined on FIFO Basis. Work in
progress is carried at the lower of cost and net realizable value.
Finished goods produced or purchased by the company are carried at lower
of cost and net realizable value. Cost of finished goods and process
stock includes cost of conversion and other cost incurred in bringing
the inventories to their present locations and conditions. The company
has valued inventory net of modvat benefits. Net realizable value is the
estimated selling price in the ordinary course of business, less
estimated costs of completion and estimated costs necessary to make the
sale.
k. Employee Benefits
a. Defined Contribution Schemes such as provident fund, pension and
employee's state insurance is charged to the Profit & Loss Accounts of
the year when the contribution to the respective funds are due.
b. Defined Benefit Plan - the cost of providing benefits is determined
using the projected unit credit method with actuarial valuations being
carried out at each Balance sheet date. Actuarial gain or losses are
recognized in full in the statement of profit and loss for the period
in which they occur.
c. Short Term benefit are recognized in the Profit & Loss A/c relating
to the year in which the employee has rendered services.
d. Liability on account of other long term employees benefit are
accounted for as and when such Liability arises as per the relevant
legislation in force in India.
l. Taxes on Income
Tax expense comprises current and deferred Tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance withthe Indian Income Tax Act. Deferred taxes is
recognized, subject to the consideration of prudence, on timing
differences, being the difference between taxable incomes and
accounting income that originates in one period and are capable of
reversal in one or more subsequent periods.
Deferred tax Assets & Liabilities are measured using the Tax Rates &
Tax Laws that have been enacted or substantively enacted by the Balance
Sheet date. Deferred Tax Assets are recognized only to the extent that
there is reasonable certainty that sufficient future taxable income
will be available.
Advance Taxes and Provisions for current taxes are presented in the
Balance sheet after offsetting advance taxes paid and income tax
provisions arising in the same tax jurisdiction and where the company is
able to and intends to settle the assets and liability on a net basis.
m. Provision, 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 by way of
notes on accounts. Contingent Assets are neither recognized nor
disclosed in the financial statements. During the financial year the
company has made provision for doubtful debts and doubtful advances to
the extent of 100% of the total amount identified as doubtful debts and
advances.
n. Borrowing Cost
Borrowing Cost relating to acquisition or construction of fixed assets
which take substantial period of time to get ready for its intended use
are capitalized as part of the cost of a qualifying asset to the extent
they relate to the period till such assets are ready to be put to use.
Other Borrowing Costs are recognized as an expense in the year in which
they are incurred.
o. Foreign Currency Transaction
a. Initial Recognition: Foreign currency transactions are recorded in
the reporting currency, by applying to the foreign currency amount the
exchange rate between the reporting currency and the foreign currency
at the date of the transaction.
b. Conversion: Foreign currency monetary items are reported using the
closing rate. Non-monetary items which are carried in terms of
historical cost denominated in a foreign currency are reported using
the exchange rate at the date of the transaction; and non - monetary
items which are carried at fair value or other similar valuation
denominated in a foreign currency are reported using the exchange rates
that existed when the values were determined.
c. Exchange Differences: Exchange differences arising on the
settlement of monetary items or on reporting company's monetary items
at rates different from those at which they were initially recorded
during the year, or reported in previous financial statements, are
recognized as income or as expenses in the year in which they arise
except those arising from investments in non - integral operations.
d. Forward Exchange: Contracts (Derivative Instruments) not intended for
trading or speculation purpose: The Company uses derivative financial
instruments including forward exchange contracts to hedge its risk
associated with foreign currency fluctuations. The premium or discount
arising at the inception of forward exchange contracts is amortized as
expense or income over the life of the contract. Exchange difference on
such contracts is recognized in the statement of profit and loss in the
year in which the exchange rates change. Any profit or loss arising on
cancellation or renewal of forward exchange contract is recognized as
income or as expenses for the year.
p. Segment Reporting Policies
Identification of Segments:
Primary Segment
Business Segment: The Company's operating operation comprises of only
one primary segment viz. manufacturing and sale of knitwear's.
Secondary Segment
Geographical Segment: The analysis of geographical segment is based on
the geographical location of the customers.
* Sales within India include sales to customers located within India.
* Sales outside India include sales to customers located outside India.
q. Earnings per Share (Basic & Diluted)
Basic earnings (loss) per share are calculated by dividing the net
profit or loss for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding during the
period is adjusted for events of bonus issue; bonus element in a rights
issue to existing shareholders; share split; and reverse share split
(consolidation of shares). For the purpose of calculating diluted
earnings per share, the net profit or loss for the period attributable
to equity shareholders and the weighted average number of shares
outstanding during the period are adjusted for the effects of all
dilutive potential equity shares.
r. Impairment of assets
Impairment loss is recognized wherever the carrying amount of an assets
is in excess of its recoverable amount and the same is recognized as an
expenses in the statement of Profit & Loss and carrying amount of the
assets is reduced to its recoverable amount.
Reversal of impairment losses recognized in prior year is
recovered when there is an indication that the impairment losses
recognized for the asset no longer exist or have decreased.
s. Cash Flow Statement
Cash fl ows are reported using indirect method, whereby profi t before
tax is adjusted for the eff ects transactions of a noncash nature and
any deferrals or accruals of past or future cash receipts or payments.
Th e cash fl ows from operating. Financing and investing activities of
the Company are segregated. Cash and cash equivalents in the balance
sheet comprise cash at bank, cash/cheques in hand and short-term
investments with an original maturity of three months or less.
Mar 31, 2012
A) Nature of Operation
The Company is engaged in the business of manufacturing & sale of
knitwears.
b) Basis of Preparation ofAccounts
The financial statements have been prepared to comply in all material
aspects with the notified accounting standards by Companies Accounting
Standards Rules, 2006 and the relevant provisions of the Companies Act,
1956. The financial statements have been prepared under the historical
cost convention on an accrual basis. The accountings policies have been
consistently applied by the company with those used in the previous
year. All assets and liabilities have been classified as current or
non- current as per the operating cycle criteria set out in the Revised
Schedule VI to the Companies Act, 1956.
c) Use of Estimates
The preparation of financial statements in conformity with
GenerallyAccepted Accounting Principles requires the management to
makejudgments, estimates and assumptions that affect the reported
amounts of Assets and Liabilities and disclosure of Contingent
Liabilities on the date of the Financial Statements and the reported
amounts of revenue and expenses during the reporting year. Although
these estimates are based on the management's best knowledge,
uncertainty about these assumptions and estimates could result in the
outcomes requiring a material adjustment to the carrying amounts of
assets or liabilities in future periods.
d) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
a) Sale of Goods : Sales are recognized when goods are supplied and are
net of Sales Return.
b) Revenue from Services : Revenue from services is recognized as the
service is performed based on agreements/ arrangements with the
concerned parties
c) Interest: Interest on investments are recognized on a time
proportion basis taking into account the amount outstanding and the
rate applicable.
d) Dividends : Revenue is recognized when the shareholders' right to
receive payment is established by the balance sheet date.
e) Export Benefits : Export Entitlements in the form of Duty
Drawbacks are recognized in the Statement of Profit and Loss when the
right to receive credit as per the terms of the scheme is established
in respect of exports made and when there is no significant uncertainty
regarding the ultimate collection ofthe relevant export proceeds.
Exports benefits under DEPB/Focus Licence Scheme are recognized in the
year of export itself provided there are no uncertainity as to the
amount of duty entitlement. Such export benefits are booked separately
as revenue by creating a claim against it on the assets side.
e) Accounting ofClaims
(a) Claims receivable are accounted for at the time when reasonable
certainty of receipt is established. Claims payable are accounted for
at the time of acceptance.
(b) Claim raised by GovernmentAuthorities regarding taxes and duties,
which are disputed by the Company, are accounted based on merits of
each claim.
f) Expenditure
Expenses are accounted for on accrual basis and provision is made for
all known losses and liabilities.
g) Government Grant
The Company receives sales tax incentive under the WBIP (A.I. Units)
Scheme 1994 and the same is recognized as revenue in the period in
which these are accrued and shown as income under the head "Other
Operating Revenue". The Company has not received any non-monetary
assets at concessional rate or free of cost as Government Grant.
In respect of capital subsidy on special machinery from government
(under TUF-Scheme) The grant is shown as deduction from the value of
assets, when subsidy is received from the government.
h) Fixed Assets
(a) Tangible Assets : Tangible Assets are stated at their original cost
less accumulated depreciation and impairment losses, if any. Cost
comprises the purchase price(net of modvat) and any attributable cost
of bringing the asset to its working condition for its intended use.
Financing costs relating to the acquisition of fixed assets are also
included to the extent they relate to the period till such assets are
ready to be put to use.
(b) Intangible Assets : Intangible Assets are stated at acquisition
cost, net of accumulated amortisation and accumulated impairment losses,
if any. Intangible assets are amortised on a straight line basis over
their estimated useful lives. The amortization period and the
amortization method are reviewed at least at each financial year end. If
the expected useful life of the assets is significantly different from
previous estimates, the amortization period is changed accordingly. The
Intangible assets include Computer Software and Web Site Development
cost. Amortization of IntangibleAssets is made based on management's
evaluation of duration of life cycle of intangible assets. The
amortization rate used are:
Asset %
Computer Software: 40.00
Website Development cost: 33.33
(c) Depreciation : Depreciation on fixed assets is provided on Written
down Value method (pro-rata on addition and disposed off during the
period) at the rates and in the manner prescribed in Schedule XIV of
the Companies Act, 1956. Individual Assets costing below Rs. 5,000 are
fully depreciated in the year of acquisition..
i) Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. Provision is made for any diminution in the market value of long
term investment where such diminution is considered permanent in
nature.
j) Valuation of Inventories
Raw materials, packing material, work in progress and finished goods are
valued at lower of cost and net realizable value. The cost of
inventories comprise of all costs of purchase, cost of conversion &
other cost incurred in bringing the inventories to their present
location & conditions. Excise duty on finished goods lying in factories
is considered for valuation of inventories, as per the guidelines of the
ICAI, The company has valued inventory net of modvat benefits. When
there is a decline in the price of materials & it is estimated that cost
of the finished goods will exceed net realizable value, the materials
are written down to net realizable value and in such circumstances the
replacement cost of the materials are taken as net realizable value.
However, raw materials and other items held for use in the production of
inventories are not written down below cost if the finished products in
which they will be incorporated are expected to be sold at or above
cost. Cost is determined on FIFO basis. Net realizable value is the
estimated selling price in the ordinary course of business, less
estimated costs of completion and estimated costs necessaryto make the
sale.
k) Employee Benefits
(a) Defined Contribution Schemes such as provident fund, pension and
employees state insurance is charged to the Profit & Loss Accounts of
the year when the contribution to the respective funds are due.
(b) Defined Benefit Plan - the present value of the obligation under
such plan is determined based on an actuarial valuation made on 23rd
April, 2012 using the projected unit credit method. Actuarial gain and
losses arising on such valuation are recognized immediately in Profit
and Loss Account.
Under the PUC method a 'projected accrued benefit' is calculated at the
beginning of the year and again at the end of the year for each benefit
that will accrue for all active members of the plan
(c) Short Term benefit are recognized in the Statement of Profit & Loss
relating to the year in which the employee has rendered services.
(d) Liability on account of other long term employees benefit are
accounted for as and when such Liability arises as per the relevant
legislation in force in India.
l) Taxes on Income
Tax expense comprises current and deferred Tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act. Deferred taxes is
recognized, subject to the consideration of prudence, on timing
differences, being the difference between taxable incomes and
accounting income that originates in one period and are capable of
reversal in one or more subsequent periods.
Deferred taxAssets & Liabilities are measured using theTax Rates & Tax
Laws that have been enacted or substantively enacted by the Balance
Sheet date. Deferred TaxAssets are recognized only to the extent that
there is reasonable certainty that sufficient future taxable income
will be available.
m) Provision, Contingent Liabilities And ContingentAssets
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 by way of
notes on accounts. Contingent Assets are neither recognized nor
disclosed in the financial statements. It is the policy of the company
to make provision for doubtful debts and doubtful advances to the extent
of 50% of the total amount identified as doubtful advances.
n) Borrowing Cost
Borrowing Cost relating to acquisition or construction of fixed assets
which take substantial period of time to get ready for its intended use
are capitalized as part of the cost of a qualifying asset to the extent
they relate to the period till such assets are ready to be put to use.
Other Borrowing Costs are recognized as an expense in the year in which
they are incurred.
o) Foreign CurrencyTransaction
(a) Initial Recognition: Foreign currencytransactions are recorded in
the reporting currency, by applying to the foreign currency amount the
exchange rate between the reporting currency and the foreign currency
at the date of the transaction.
(b) Conversion: Foreign currency monetary items are reported using the
closing rate. Non-monetary items which are carried in terms of
historical cost denominated in a foreign currency are reported using
the exchange rate at the date of the transaction; and non-monetary
items which are carried at fair value or other similar valuation
denominated in a foreign currency are reported using the exchange rates
that existed when the values were determined.
(c) Exchange Differences : Exchange differences arising on the
settlement of monetary items or on reporting company's monetary items
at rates different from those at which they were initially recorded
during the year, or reported in previous financial statements, are
recognized a income or as expenses in the year in which they arise
except those arising from investments in non-integral operations.
(d) Forward Exchange : Contracts (Derivative Instruments) not intended
for trading or speculation purpose: The Company uses derivative
financial instruments including forward exchange contracts to hedge its
risk associated with foreign currency fluctuations. The premium or
discount arising at the inception of forward exchange contracts is
amortized as expense or income over the life of the contract. Exchange
difference on such contracts is recognized in the statement of profit
and loss in the year in which the exchange rates change. Any profit or
loss arising on cancellation or renewal of forward exchange contract is
recognized as income or as expenses for the year.
p) Segment Reporting Policies
Identification of Segments
Primary Segment
Business Segment: The Company's operating operation comprises of only
one primary segment viz. manufacturing and sale of knitwear's.
Secondary Segment
Geographical Segment: The analysis of geographical segment is based on
the geographical location of the customers.
* Sales within India include sales to customers located within India.
* Sales outside India include sales to customers located outside India.
q) Earnings per Share (Basic & Diluted)
Basic earnings (loss) per share are calculated by dividing the net
profit or loss for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding during the
period is adjusted for events of bonus issue; bonus element in a rights
issue to existing shareholders; share split; and reverse share split
(consolidation of shares). For the purpose of calculating diluted
earnings per share, the net profit or loss for the period attributable
to equity shareholders and the weighted average number of shares
outstanding during the period are adjusted for the effects of all
dilutive potential equity shares.
r) Impairment of assets:
Impairment loss is recognized wherever the carrying amount of an assets
is in excess of its recoverable amount and the same is recognized as an
expenses in the statement of Profit & Loss and carrying amount of the
assets is reduced to its recoverable amount.
Reversal of impairment losses recognized in prior year is recovered
when there is an indication that the impairment losses recognized for
the asset no longer exist or have decreased.
s) Cash Flow Statement
Cash Flows are reported using indirect method, whereby profit before
tax is adjusted for the effects transactions of a non-cash nature and
any deferrals or accruals of past or future cash receipts or payments.
The cash flows from operating financing and investing activities of the
Company are segregated. Cash and cash equivalents in the Balance Sheet
comprise cash at bank, cash/cheques in hand and short-term investments
with an original maturity of three months or less.
The Company has only one class of equity shares with a par value of
Rs.10/- per share. Each holder of equity shares is entitled to one vote
per share held. The Company declares and pays dividends in Indian
rupees. The dividend proposed by the Board of Directors is subject to
the approval of the shareholders in the ensuing Annual General Meeting.
In the event of liquidation of the Company ,the holders of equity share
are entitled to receive the remaining assets of the Company, after
meeting all liabilities and distribution of all preferential amounts,
in proportion to their shareholding.
Mar 31, 2011
1. Nature of Operation
The Company is engaged in the business of manufacturing & sale of
knitwear's.
2. Basis of Preparation of Accounts
The financial statements have been prepared to comply in all material
aspects with the notified accounting standards by Companies Accounting
Standards Rules, 2006 and the relevant provisions of the Companies Act,
1956. The financial statements have been prepared under the historical
cost convention on an accrual basis. The accountings policies have been
consistently applied by the company except for the change in accounting
policy discussed more fully below and are consistent with those used in
the previous year.
3. Use of Estimates
The preparation of financial statements requires 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. Actual
results could differ from those estimates. Any revision to accounting
estimates is recognized in accordance with the requirements of the
respective accounting standard.
4. Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
(a) Sale of Goods: Sales are recognized when goods are supplied and are
net of Sales Return.
(b) Job Charges: Job Charges are recognized as and when the products
are ready for dispatch in packed condition.
(c) Interest: Interests on Investments are recognized on a time
proportion basis taking into account the amount outstanding and the
rate applicable.
(d) Dividends: Revenue is recognized when the shareholders' right to
receive payment is established by the balance sheet date.
(e) Export Benefits: Export Entitlements in the form of Duty Drawback
are recognized in the Profit and Loss account when the right to receive
credit as per the terms of the scheme is established in respect of
exports made and when there is no significant uncertainty regarding the
ultimate collection of the relevant export proceeds.
5. Accounting of Claims
(a) Claims receivable are accounted for at the time when reasonable
certainty of receipt is established. Claim payable are accounted at the
time of acceptance.
(b) Claim raised by Government Authorities regarding taxes and duties,
which are disputed by the Company, are accounted based on merits of
each claim.
6. Expenditure
Expenses are accounted for on accrual basis and provision is made for
all known losses and liabilities.
7. Government Grant:
The company receives sales tax incentive under the WBIP (A.I. Units)
Scheme'1994 and the same is recognized as revenue in the period in
which these are accrued and shown as income under the head "Other
Income" under Schedule 10. The Company has not received any
non-monetary assets at concessional rate or free of cost as Government
Grant.
8. Fixed Assets
(a) Tangible Assets: Fixed Assets are stated at their original cost
less accumulated depreciation and impairment losses, if any. Cost
comprises the purchase price and any attributable cost of bringing the
asset to its working condition for its intended use. Financing costs
relating to the acquisition of fixed assets are also included to the
extent they relate to the period till such assets are ready to be put
to use.
(b) Intangible Assets: Intangible Assets are recognized only if it is
possible that the future economic benefits that are attributable to the
enterprise and the costs of assets can be measured reliably. The
Intangible assets are recorded at cost and are carried at cost less
accumulated amortization and accumulated impairment losses, if any.
(c) Depreciation / Amortization: Depreciation on fixed
assets is provided on Written down Value method (pro-rata on addition
and disposed off during the period) at the rates and in the manner
prescribed in Schedule XIV of the Companies Act, 1956. Fixed Assets
costing below Rs. 5,000 are fully depreciated in the year of
acquisition. Amortization is made based on management's evaluation of
duration of life cycle of intangible assets.
9. Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. Provision is made for any diminution in the market value of long
term investment where such diminution is considered permanent in
nature.
10. Valuation of Inventories
Raw materials, packing material, work in progress and finished goods
are valued at lower of cost and net realizable value. The cost of
inventories comprise of all costs of purchase, cost of conversion &
other cost incurred in bringing the inventories to their present
location & conditions. When there is a decline in the price of
materials & it is estimated that cost of the finished goods will exceed
net realizable value, the materials are written down to net realizable
value and in such circumstances the replacement cost of the materials
are taken as net realizable value. However, raw materials and other
items held for use in the production of inventories are not written
down below cost if the finished products in which they will be
incorporated are expected to be sold at or above cost. Cost is
determined on FIFO basis. Net realizable value is the estimated selling
price in the ordinary course of business, less estimated costs of
completion and estimated costs necessary to make the sale.
11. Employee Benefits
(a) Defined Contribution Plan such as provident fund, pension and
employees state insurance is charged to the Profit & Loss Accounts of
the year when the contribution to the respective funds are done.
(b) Defined Benefit Plan - the present value of the obligation under
such plan is determined based on an actuarial valuation made on May
3rd, 2010 using the projected unit credit method. Actuarial gain and
losses arising on such valuation are recognized immediately in Profit
and Loss Account.
Under the PUC method a 'projected accrued benefit' is calculated at the
beginning of the year and again at the end of the year for each benefit
that will accrue for all active members of the plan.
(c) Short Term benefit are recognized in the Profit & Loss A/c relating
to the year in which the employee has rendered services.
(d) Liability on account of other long term employees benefit are
accounted for as and when such liability arises as per the relevant
legislation in force in India.
12. Taxes on Income
Tax expense comprises current and deferred Tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act. Deferred taxes is recognized,
subject to the consideration of prudence, on timing differences, being
the difference between taxable incomes and accounting income that
originates in one period and are capable of reversal in one or more
subsequent periods. Deferred tax Assets & Liabilities are measured using
the Tax Rates & Tax Laws that have been enacted or substantively enacted
by the Balance Sheet date. Deferred Tax Assets are recognized only to
the extent that there is reasonable certainty that sufficient future
taxes income will be available.
13. Provision, 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 by way of
notes on accounts. Contingent Assets are neither recognized nor
disclosed in the financial statements. It is the policy of the company
to make provision for doubtful debts and doubtful advances to the
extent of 50% of the total amount identified as doubtful advances.
14. Deferred Revenue Expenditure
Share issue expenses are amortized over a period of five years.
15. Borrowing Cost
Borrowing Cost relating to acquisition or construction of fixed assets
which take substantial period of time to get ready for its intended use
are capitalized as part of the cost of a qualifying asset to the extent
they relate to the period till such assets are ready to be put to use.
Other Borrowing Costs are recognized as an expense in the year in which
they are incurred.
16. Foreign Currency Transaction
(a) Initial Recognition: Foreign currency transactions are recorded in
the reporting currency, by applying to the foreign currency amount the
exchange rate between the reporting currency and the foreign currency
at the date of the transaction.
(b) Conversion: Foreign currency monetary items are reported using the
closing rate. Non monetary items which are carried in terms of
historical cost denominated in a foreign currency are reported using
the exchange rate at the date of the transaction; and non - monetary
items which are carried at fair value or other similar valuation
denominated in a foreign currency are reported using the exchange rates
that existed when the values were determined.
(c) Exchange Differences : Exchange differences arising on the
settlement of monetary items or on reporting Company's monetary items
at rates different from those at which they were initially recorded
during the year, or reported in previous financial statements, are
recognized as a income or as expenses in the year in which they arise
except those arising from investments in non - integral operations.
(d) Forward Exchange: Contracts (Derivative Instruments) not intended
for trading or speculation purpose: The Company uses derivative
financial instruments including forward exchange contracts to hedge its
risk associated with foreign currency fluctuations. The premium or
discount arising at the inception of forward exchange contracts is
amortised as expense or income over the life of the contract Exchange
difference on such contracts is recognized in the statement of profit
and loss in the year in which the exchange rates change. Any profit or
loss arising on cancellation or renewal of forward exchange contract is
recognized as income or as expenses for the year.
17. Segment Reporting Policies
(a) Identification of Segments
Primary Segment
Business Segment: The Company's operating operation comprises of only
one primary segment viz. manufacturing and sale of knitwear's.
Secondary Segment
Geographical Segment: The analysis of geographical segment is based on
the geographical location of the customers.
* Sales within India include sales to customers located within India.
* Sales outside India include sales to customers located outside India.
(b) Allocation of Common Costs
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
(c) Unallocated Items
The Corporate and other segment include general corporate income and
expense items, which are not allocated to any segment.
18. Earnings per Share (Basic & Diluted)
Basic earnings (loss) per share are calculated by dividing the net
profit or loss for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding during the
period is adjusted for events of bonus issue; bonus element in a rights
issue to existing shareholders; share split; and reverse share split
(consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
19. Impairment of assets:
Impairment loss is recognized wherever the carrying amount of an assets
is in excess of its recoverable amount and the same is recognized as an
expenses in the statement of Profit & Loss and carrying amount of the
assets is reduced to its recoverable amount.
Reversal of impairment losses recognized in prior year is recovered
when there is an indication that the impairment losses recognized for
the asset no longer exist or have decreased.
20. Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before
tax is adjusted for the effects transactions of a non-cash nature and
any deferrals or accruals of past or future cash receipts or payments.
The cash flows from operating. Financing and investing activities of
the Company are segregated. Cash and cash equivalents in the balance
sheet comprise cash at bank, cash/cheques in hand and short-term
investments with an original maturity of three months or less.
21. Proposed Dividend
Dividend proposed by the Board of Directors is provided for in the
accounts, pending approval at the Annual General Meeting.
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