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Accounting Policies of Oswal Spinning & Weaving Mills Ltd. Company

Mar 31, 2014

A. Accounting Conventions

The company''s financial statements have been prepared in accordance with the historical cost convention on accrual basis of accounting , as applicable to going concern, in accordance with Generally Accepted Accounting Principles (GAAP) in India, mandatory Accounting Standards prescribed in The Companies (Accounting Standards) Rules 2006, issued by Central Government, in consultation with the provisions of Companies Act, 1956 to the extent applicable. The financial statements are presented in Indian Rupees.

All assets and liabilities have been classified as current or non current, as per company''s normal operating cycle and other criteria set out in the Revised Schedule VI of Companies Act, 1956.

B. Use of Estimates

The preparation of financial statements requires the management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to the contingent liabilities as at the date of the financial statements and reported amounts of income and expenses during the year. Example of such estimates include provision for doubtful debts, employees benefits, provision for income tax, the useful lives of depreciable fixed assets and provision for impairment.

C. Revenue Recognition

1 Sales :-

Sales Revenue is recognised on dispatch of goods net of trade discount and sales tax when :

(i) All the significant risks and rewards of ownership have been transferred to the buyer and the company retains no effective control of the goods transferred to a degree usually associated with ownership.

(ii) No significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of the goods.

2 Export Benefits :-

The Revenue in respect of Export benefits is recognised on post export basis at the rate, at which the entitlement accrues. Such amount is included under the head sales

3 Interest is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

D. Fixed Assets

- Fixed assets are stated at cost of acquisition inclusive of inward freight, duties & taxes & incidental expenses related to acquisition, net of depreciation to date except Land at Jugiana which was acquired before 01-04-1987 and has been stated at revalued amount.

- Capital work in progress includes, cost of assets at site and pre-operative expenditure, pending allocation to fixed assets.

E Inventory Valuation

Inventories are valued at cost or net realizable value whichever is lower except scrap at net realisable value. The cost formula used for valuation of inventories are:-

1 In respect of raw material on specific identification method i.e. specific costs are attributed to identified items of inventory.

2 In case of stores and spares at FIFO basis plus direct expenses.

3 In respect of work in process at raw material cost plus conversion cost depending on stage of completion.

4 Finished goods are valued at weighted average of raw material cost plus conversion cost, packing cost and other overheads incurred to bring the inventory to their present condition and location.

F. Depreciation

(i) Depreciation has been provided in accordance with Schedule XIV of the Companies Act, 1956. The Depreciation has been provided on SLM.

(ii) Depreciation on addition to assets costing Rs. 5000/- or below has been charged on 100% basis.

G. Taxes on Income

The accounting treatment followed for taxes on income is to provide for current tax and deferred tax. Current tax is the amount of tax payable in respect of taxable income for a period. Deferred tax is the effect of timing differences being the difference between taxable income and accounting income that originate in one period and are capable of reversal on one or more subsquent periods. Deferred Tax Assets on unabsorbed depreciation or carry forward of losses under tax laws are not recognised, unless there is virtual certainty supported by convincing evidence that sufficiant future taxable income will be available against which such deferred tax assets can be realised. In other cases deferred tax assets is recognised and carried forward to the extent there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

H. Retirement Benefits

i) Short Term Employee Benefits :

Short Term Employee benefits are recognised on an undiscounted basis in the Profit & Loss Statement of the year in which the related service is rendered.

ii) Post Employment Benefits :

a) Provident Fund

Benefits to employees are provided for by contribution to Provident and other funds in accordance with provisions of Employee Provident Fund and Miscellaneous Provisions Act, 1952 , the payment of which are accounted for on accrual basis.

b) Gratuity

Provision for gratuity liability to employees is made on the basis of actuarial valuation as at the end of the period.

c) Leave With Wages

Provision for leave with wages is made on the basis of actuarial valuation as at the end of the period.

I. Foreign Currency Transactions

(I) All foreign currency transactions are recorded at the exchange rate prevailing on the date of transaction. Assets & Liabilities related to Foreign Currency transactions remaining unsettled during the period are converted into rupees at exchange rates prevailing on the balance sheet date, except those covered by the forward contracts. Gain or Losses on transaction of current assets and current liabilities is adjusted in the profit and loss statement for the year.

(ii) Exchange difference on Forward exchange contract is recognised in the Statement of Profit & Loss in the reporting period in which the exchange rate changes. Profit or Loss arising on cancellation or renewal of such contract is recognised as income or expense in the period in which such Profit or Loss arises.

J. Impairment of Assets

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

K. Contingent Liabilities

Contingent liability is disclosed in case of:

a) a present obligation arising from a past event when it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or

b) a possible obligation, unless the probability of outflow in settlement is remote.

L. Investments

Long term investments are considered "at Cost" on individual investment basis, unless there is a decline, other than temporary, in value thereof, in which case adequate provision is made against such diminution in the value of investments.

M. Borrowing Costs

Borrowing costs that are directly attributable to acquisition or construction of qualifying assets, are treated as part of cost of capital assets. Other borrowing costs are treated as expenses for the period, in which they are incurred.

N. Earning Per Share

Basic earning 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.

O. Operating Lease

Assets acquired on leases wherein a significant portion of the risks and rewards of ownership are retained by the lesser are classified as operating leases. Lease rentals paid for such leases are recognised as an expense on systematic basis over the term of lease.

(f) Rights, preferences and restrictions attached to shares

Equity Shares: The company has one class of equity shares having a par value of Re.1 per share. Each shareholder is eligible for one vote per share held. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

0.1% Cumulative Redeemable preference shares: 171,031,450, 0.1% Cumulative Redeemable preference shares of Re.1 each were issued in November 2007, redeemable in five equal installments starting from 11th year from date of allotment i.e 12.11.2007. However, the company has the option to redeem them earlier at their Net Present Value.


Dec 31, 2011

A. ACCOUNTING CONVENTIONS

The Accompanying Financial Statements have been prepared on accrual basis in accordance with the historical cost convention and in accordance with the accounting standards referred to in section 211 (3C) of the Companies Act, 1956

B. REVENUE RECOGNITION

(i) Sales

Sales Revenue is recognized on dispatch of goods net of trade discount, cash discount and sales tax when

i. all the significant risks and rewards of ownership have been transferred to the buyer and the company retains no effective control of the goods transferred to a degree usually associated with ownership.

ii. No significant uncertainly exists regarding the amount of the consideration that will be derived from the sale of the goods

(ii) Export Benefits

The Revenue in respect of Export benefits is recognized on post export basis at the rate, at which the entitlement accrues. Such amount is included under the head sales.

(iii) Interest

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

C. INVENTORY VALUATION

Inventories are valued at cost or net realisable value, whichever is lower. The cost in respect of following items is computed as under: -

a) In case of Raw Material on specific identification method i.e specific costs are attributed to identified items of inventory.

b) In case of stores and spares at FIFO plus direct expenses.

c) In case of Work-in-Process at raw material cost plus conversion cost depending on the stage of completion.

In case of Finished Goods, at weighted average of raw material cost plus conversion cost, packing cost 1 and other overheads incurred to bring the inventory to their present condition and location.

D. FIXED ASSETS

Fixed assets are stated at cost of acquisition inclusive of inward freight, duties and taxes & incidental expenses related to acquisition except Land at Jugiana which was acquired before 01-04-1987, has been stated at revalued amount. In respect of project involving construction, related pre-operational expenses form part of the value of Assets capitalised.

E. DEPRECIATION

a) Depreciation has been provided in accordance with Schedule XIV of the Companies Act, 1956. The Depreciation has been provided on SLM basis except for Vanaspati unit where it is on WDV basis.

Besides relying upon expert opinion obtained by the management, depreciation on specified items of plant & machinery has been provided at the rates prescribed for continuous process plant.

b) Depreciation on addition to assets costing Rs. 5000/- or below has been charged on 100% basis.

F. INVESTMENT

Investments are valued at cost less any diminution in their value, which is of permanent nature.

G. RETIREMENT BENEFITS

a) Short Term Employee Benefits

Short Term Employee benefits are recognized on an undiscounted basis in the Profit & Loss Account of the year in which the related service is rendered.

b) Post Employment Benefits

(i) Provident Fund

Benefits to employees are provided for by contribution to Provident and other funds in accordance with provisions of Employee Provident Fund and Miscellaneous Provisions Act, 1952 , the payment of which are accounted for on accrual basis.

(ii) Gratuity

Provision for gratuity liability to employees is made on basis of actuarial valuation as at the year end.

(iii) Leave With Wages

Provision for Leave with wages is on basis of actuarial valuation as at the year end.

H. BORROWING COST

Borrowing costs that are directly attributable to acquisition or construction of qualifying assets are treated as part of cost of capital asset Other borrowing cost is treated as expenses for the period in which they are incurred.

I. FOREIGN CURRENCY TRANSACTIONS

All foreign currency transactions are recorded at the exchange rate prevailing on the date of transaction. Assets & Liabilities related to Foreign Currency transactions remaining unsettled during the period are converted into rupees at exchange rates prevailing on the balance sheet date, except those covered by forward contracts. Gain or losses on transaction of current assets and current liabilities is adjusted in the Profit & Loss Account for the year.

J. TAXES ON INCOME

The accounting treatment followed for taxes on income is to provide for current tax and deferred tax. Current tax is the amount of tax payable in respect of taxable income for a period. Deferred tax is the effect of timing differences being the difference between taxable income and accounting income that originate in one period and are capable of reversal on one or more subsequent periods. Deferred tax assets are not recognized, unless there is virtual certainty that sufficient future taxable income will be available against which, such deferred tax assets can be realised

K. IMPAIRMENT OF ASSETS

Fixed Assets subject to amortization/depreciation, are reviewed at each balance sheet date for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount, by which the assets carrying amount exceeds its recoverable amount viz the higher of the assets fair value less costs to sell and value in use.

L. CONTINGENT LIABILITIES

Contingent liability is disclosed in case of

a) a present obligation arising from a past event when it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or

b) a possible ordination, unless the property of out now in settlement is remote.


Sep 30, 2010

A. ACCOUNTING CONVENTIONS:

The accompanying financial statements have been prepared on accrual basis in accordance with the historical cost conventions.

B. REVENUE RECOGNITION

(i) Sales Revenue is recognized on dispatch of goods net of trade discount, cash discount and sales tax.

(ii) The Revenue in respect of Export benefits, is recognized on post export basis at the rate, at which the entitlement accrues. Such amount is included under the head sales.

C. INVENTORY VALUATION

Inventories are valued at cost or net realisable value whichever is lower. The cost in respect of following items is computed as under:

(i) In case of Raw Material and Stores & Spares on FIFO basis plus direct expenses, except in case of Oswal Cotton Spinning Mills on specific identification method.

(ii) In case of Work-in-Process at raw material cost plus conversion cost depending on the stage of completion.

(iii) In case of Finished Goods, at weighted average of raw material cost plus conversion cost, packing cost and other overheads incurred to bring the inventory to their present condition and location.

D. FIXED ASSETS

Fixed assets are stated at cost of acquisition inclusive of inward freight, duties and taxes & incidental expenses related to acquisition except Land at Jugiana which was acquired before 01-04-1987, has been stated at revalued amount. In respect of project involving construction, related pre-operational expenses form part of the value of Assets capitalised

E DEPRECIATION

i) Depreciation has been provided in accordance with Schedule XIV of the Companies Act, 1956. The Depreciation has been provided on SLM basis except for Vanaspati unit where it is on WDV basis. Besides relying upon expert opinion obtained by the management, depreciation on specified items of plant & machinery has been provided at the rates prescribed for continuous process plant.

ii) Depreciation on addition to assets costing below Rs. 5000/- has been charged on 100% basis.

F INVESTMENTS

Investments are valued at cost less any diminution in their value, which is of permanent nature.

G RETIREMENT BENEFITS:

A) SHORT TERM EMPLOYEE BENEFITS:

Short Term Employee benefits are recognized on an undiscounted basis in the Profit & Loss Account of the year in which the related service is rendered.

B) POST EMPLOYMENT BENEFITS:

(i) PROVIDENT FUND

Benefits to employees are provided for by contribution to Provident and other funds, the payment of which are accounted for on accrual basis.

(ii) GRATUITY

Provision for gratuity liability to employees is made on basis of actuarial valuation as at the year end.

(iii) LEAVE WITH WAGES

Provision for Leave with wages is on basis of actuarial valuation as at the year end.

H. BORROWING COST:

Borrowing costs that are directly attributable to acquisition or construction of qualifying assets are treated as part of cost of capital asset. Other borrowing cost is treated as expenses for the period in which they are incurred.

I. FOREIGN CURRENCY TRANSACTIONS:

All foreign currency transactions are recorded at the exchange rate prevailing on the date of transaction. Assets & Liabilities related to Foreign Currency transactions remaining unsettled during the period are converted into rupees at exchange rates prevailing on the balance sheet date, except those covered by forward contracts. Gain or losses on transaction of current assets and current liabilities is adjusted in the profit & loss account for the year.

J. TAXES ON INCOME

(i) The accounting treatment followed for taxes on income is to provide for current tax and deferred tax. Current tax is the amount of tax payable in respect of taxable income for a period. Deferred tax is the effect of timing differences being the difference between taxable income and accounting income that originate in one period and are capable of reversal on one or more subsequent periods. Deferred tax assets are not recognized, unless there is virtual certainty that sufficient future taxable income will be available against which, such deferred tax assets can be realised.

K. IMPAIRMENT OF ASSETS

1. Fixed Assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount, by which the assets carrying amount exceeds its recoverable amount viz the higher of the assets fair value less costs to sell and value in use.

2) Cumulative Redeemable Preference Shares are redeemable in five equal annual installments starting from 11th year from date of allotment i.e. 12.11.2007. However, the company has option to redeem these Cumulative Redeemable Preference Shares earlier at their Net Present Value.

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