Mar 31, 2015
A) BASIS OF PREPARATION
These financial statements of the Company have been prepared in
accordance with the generally accepted accounting principles in India
under the historical cost convention on accrual basis. Pursuant to
section 133 of the Companies Act, 2013 read with Rule 7 of the
Companies (Accounts) Rules, 2014, till the standards of accounting or
any addendum thereto are prescribed by Central Government in
consultation and recommendation of the National Financial Reporting
Authority, the existing Accounting Standards notified under the
erstwhile Companies Act, 1956 shall continue to apply. Consequently,
these financial statements have been prepared to comply in all material
aspects with the accounting standards notified under Section 211(3C)
{Companies (Accounting Standards) Rules, 2006 as amended} and other
relevant provisions of the Companies Act, 2013.
b) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon management's best
knowledge of current events and actions, actual results could differ
from these estimates. Difference between the actual results and
estimates are recognized in the period in which the results are known /
materialized.
c) REVENUE RECOGNITION SALE OF GOODS
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. Revenue is recognized in respect of export sales on the basis of
bill of lading.
ii. Inter unit sales comprising of sale of yarn from spinning unit to
dyeing unit is reduced from gross turnover in deriving net turnover.
iii. Income and export incentives / benefits are accounted for on
accrual basis and as per principles given under AS-9 - Revenue
recognition.
REVENUE FROM REAL ESTATE ACTIVITY
Revenue from real estate activity ("the project") is recognised on the
transfer of all significant risks and rewards of ownership to the
customers and it is not unreasonable to expect ultimate collection and
no significant uncertainty exists regarding the amount of
consideration.
The freehold land under real estate development planned for sale, is
converted from fixed assets into stock-in-trade at rate as assessed by
the management of the Company. The difference between the as assessed
rate and cost of that part of freehold land is credited to capital
reserve and is released to the Statement of Profit and Loss in the
proportion of revenue recognized under the percentage of completion
method on entering into an agreement/ contract for sale.
Revenue from real estate development activity where the Company still
has obligations to perform substantial acts even after the transfer of
all significant risks and rewards, is recognised on the ''Percentage of
Completion Method''. Revenue is recognised in relation to the sold
areas, on the basis of percentage of actual cost incurred, including
land, development and construction costs as against the total estimated
cost of project. Revenue is recognised, if the cost incurred is in
excess of 25% of the total estimated cost and the outcome of the
project can be reliably ascertained. The Company recognize revenue in
accordance with the Revised Guidance Note issued by the Institute of
Chartered Accountants of India on "Accounting for Real Estate
transactions (Revised 2012)"
Cost of construction/development (including cost of land) incurred is
charged to the statement of profit and loss proportionate to area sold
and the balance cost is carried over under Inventory as part of
development work-in- progress. Cost of construction/ development
includes all costs directly related to the Project and other
expenditure as identified by the management which are reasonably
allocable to the project.
Unbilled revenue, if any , disclosed under other non-current assets
represents revenue recognized over and above amount due as per payment
plans agreed with the customers. Progress billings which exceed the
costs and recognized profits to date on projects under construction are
disclosed as advance received from customers under other current
liabilities. Any billed amount that has not been collected is disclosed
under trade receivables.
Interest free maintenance security (IFMS) and Community Club fees
received by the company from real estate customers will be treated as
part of liabilities till such time the relavant facilities are not
provided by the Company.
The estimates of saleable area and cost of construction are revised
periodically by the management. The effect of such changes to estimates
is recognised in the period such changes are determined. The estimated
cost of construction as determined is based on management's estimate of
the cost expected to be incurred till the final completion and includes
cost of materials, service and other related overheads. Unbilled costs
are carried as real estate development work in progress.
Determination of revenues under the percentage of completion method
necessarily involves making estimates by the Company, some of which are
of a technical nature, concerning, where relevant, the percentages of
completion, costs to completion, the expected revenues from the
project/ activity and the foreseeable losses to completion.
DIVIDENDS
Revenue in respect of dividends is recognized when the shareholders'
right to receive payment is established by the balance sheet date.
INTEREST
Interest in come is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head 'other income' in statement
of profit and loss.
INSURANCE CLAIM
Claims with insurance companies are accounted on accrual basis to the
extent, these are measurable and ultimate collection is reasonably
certain.
d) INVENTORIES
i. Finished goods and work in progress are valued at lower of
historical cost or net realizable value. Cost of inventories comprises
of cost of purchase, cost of conversion and other costs incurred in
bringing them to their respective present location and condition. By
products are valued at net realizable value.
ii. Stores, spares and raw materials are valued at lower of historical
cost or net realizable value. However materials & other items held for
use in the production of inventories are not written below cost if the
finished products in which they will be incorporated are expected to be
sold at or above cost.
iii. Cost is determined on the basis of weighted average method.
iv. 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.
e) 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. Long-term
investments are carried at cost individually. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments in case of long term investments.
f) FIXED ASSETS Tangible assets
Fixed assets are stated at historical cost less accumulated
depreciation and impairment loss if any. Historical cost comprises the
purchase price (net of cenvat / duty credits wherever applicable) and
all direct costs attributable to bringing the asset to its working
condition for intended use.
Intangible assets
Capital expenditure on purchase and development of identifiable
non-monetary assets without physical substance is recognized as
intangible assets in accordance with principles given under AS-26 -
Intangible assets. These are grouped and separately shown under the
schedule of fixed assets. These are amortized over their respective
expected useful lives.
g) DEPRECIATION & AMORTIZATION
Depreciation on fixed assets is provided on the basis of useful life of
assets prescribed in Schedule II to the Companies Act, 2013. All
assets costing ' 5,000 or below are fully depreciated in the year of
addition.
Asset description Useful Life (Years)
Plant & machinery
- continous process 25
- others 7.50 -15
Other equipment 5 - 10
Computers and Equipements 3 - 6
Vehicle 8
Factory building 3 - 30
Other than factory building 60
Furniture & fixtures 10
However in some of the assets the company has reassessed the estimated
useful life of its fixed assets through an independent Chartered
Engineers. In such cases the company has not opted for the rates as
given by the schedule II of the Companies Act, 2013.
Intangible assets are amortized over a period not exceeding ten years
on a straight-line basis. Land on lease is amortized over the period of
the lease.
h) IMPAIRMENT OF ASSETS
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/ external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset's net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life. Previously
recognised impairment losses are reversed to the extent the recoverable
amount exceeds the carrying amount.
i) FOREIGN EXCHANGE TRANSACTIONS/TRANSLATION
i. 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.
ii. 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.
iii. Exchange Differences
Exchange differences arising on a monetary item that, in substance,
form part of the company's net investment in a non- integral foreign
operation is accumulated in a foreign currency translation reserve in
the financial statements until the disposal of the net investment, at
which time they are recognized as income or as an expense.
Exchange differences arising on the settlement of monetary items not
covered above, or on reporting such monetary items of company 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.
iv. Forward exchange contracts not intended for trading or speculation
purposes
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 differences on such contracts are 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 expense for the
year.
j) RESEARCH AND DEVELOPMENT
Revenue expenditure on research and development including salaries,
consumables and power & fuel is charged to statement of profit and loss
under respective heads of expenditure. Capital expenditure is shown as
addition to fixed assets.
k) EMPLOYEE BENEFITS
Expenses and liabilities in respect of employee benefits are recorded
in accordance with Accounting Standard 15 - Employee benefits.
i. Provident Fund & ESI
The Company makes contribution to Statutory Provident Fund and Employee
State Insurance in accordance with Employees Provident Fund and
Miscellaneous Provisions Act, 1952 and Employee State Insurance Act,
1948 which is a defined contribution plan and contribution paid or
payable is recognized as an expense in the period in which services are
rendered by the employee.
ii. Gratuity
Gratuity is a post employment benefit and is in the nature of a defined
benefit plan. The liability recognised in the balance sheet in respect
of gratuity is the present value of the defined benefit/obligation at
the balance sheet date less the fair value of plan assets, together
with adjustment for unrecognized actuarial gains or losses and past
service costs. The defined benefit/ obligation is calculated at or near
the balance sheet date by an independent actuary using the projected
unit credit method. Actuarial gains and losses arising form past
experience and changes in actuarial assumptions are charged or credited
to the statement of profit and loss in the year to which such gains or
losses relate.
iii. Leave encashment
Liability in respect of leave encashment becoming due or expected after
the balance sheet date is estimated on the basis of an actuarial
valuation performed by an independent actuary using the projected unit
credit method.
iv. Superannuation benefit
The Company makes contribution to superannuation fund which is a post
employment benefit in the nature of a defined contribution plan &
contribution paid or payable is recognized as an expense in the period
in which services are rendered by the employee.
v. Other short term benefits
Expense in respect of other short term benefits is recognized on the
basis of the amount paid or payable for the period during which
services are rendered by the employee.
l) LEASES
Finance leases, which transfer to the Company substantially all the
risks and benefits incidental to ownership of the leased item, are
capitalised at the inception of the lease at the fair value of the
leased asset or, if lower, at the present value of the minimum lease
payments. Lease payments are apportioned between the finance charges
and reduction of the lease liability so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance charges
are charged directly against income.
Leases where the lessor retains substantially all the risks and
benefits of ownership of the asset are classified as operating leases.
Operating lease payments are recognised as an expense in the income
statement on a straight-line basis over the lease term.
m) TAXES ON INCOME
Tax expense comprises of current and deferred. Tax provision for
current tax is made in accordance with the provisions of Income Tax
Act, 1961.
In accordance with Accounting Standard AS-22 'Accounting for Taxes on
Income' as notified by Companies (Accounting Standards) Rules, 2006
deferred tax liability/ asset arising from timing differences between
book and income tax profits is accounted for at the current rate of tax
to the extent these differences are expected to crystallize in later
years. However, deferred tax assets are recognized only if there is a
reasonable/ virtual certainty of realization thereof. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date
n) GOVERNMENT GRANTS AND SUBSIDIES
Grants and subsidies from the Government are recognized when there is
reasonable assurance that the grant/subsidy will be received and all
attaching conditions will be complied with.
When the grant or subsidy relates to an expense item, it is recognized
as income over the periods necessary to match them on a systematic
basis to the costs, which it is intended to compensate.
Where the grant or subsidy relates to an asset, its value is deducted
from the gross value of the asset concerned in arriving at the carrying
amount of the related asset.
o) BORROWING COST
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur. Borrowing costs consist of interest
and other costs that an entity incurs in connection with the borrowing
of funds
p) PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
A provision is recognized when there is a present obligation as a
result of a past event and it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of obligation. A
contingent liability is recognized for:
i. a present obligation that arises from past events but is not
recognized as a provision because either the possibility that an
outflow of resources embodying economic benefits will be required to
settle the obligation is remote or a reliable estimate of the amount of
the obligation cannot be made; and
ii. a possible obligation that arises from past events and the
existence of which will be confirmed only by the occurrence or
non-occurrence of one or more uncertain future events not wholly within
the control of the company. Contingent assets are neither accounted for
nor disclosed in the financial statements.
q) EARNING PER SHARE
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they were entitled to participate in dividends relative to
a fully paid equity share during the reporting period. 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) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in hand, demand deposits with
banks, other short-term highly liquid investments with original
maturities of three months or less.
Mar 31, 2013
1.1 USE OF ESTIMATES
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon management''s best
knowledge of current events and actions, actual results could differ
from these estimates. Difference between the actual results and
estimates are recognized in the period in which the results are known /
materialized.
1.2 REVENUE RECOGNITION
SALE OF GOODS
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) Revenue is recognized in respect of export sales on the basis of
bill of lading.
(ii) Inter-Unit sales comprising of sale of yarn from Spinning Unit to
Dyeing Unit is reduced from gross turnover in deriving net turnover.
(iii) Income and Export Incentives / benefits are accounted for on
accrual basis and as per principles given under AS-9- ÂRevenue
Recognition''.
DIVIDENDS
Revenue in respect of dividends is recognized when the shareholders''
right to receive payment is established by the balance sheet date.
1.3 INVENTORIES
(i) Finished goods and work in progress are valued at lower of
historical cost or net realizable value. Cost of inventories comprises
of cost of purchase, cost of conversion and other costs incurred in
bringing them to their respective present location and condition. By
products are valued at net realizable value.
(ii) Stores, Spares and Raw Materials are valued at lower of historical
cost or net realizable value. However materials & other items held for
use in the production of inventories are not written below cost if the
finished products in which they will be incorporated are expected to be
sold at or above cost.
(iii) Cost is determined on the basis of weighted average method.
(iv) 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.
1.4 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. Long-term
investments are carried at cost individually. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments in case of long term investments.
1.5 FIXED ASSETS
Tangible Assets
Fixed assets are stated at historical cost less accumulated
depreciation and impairment loss, if any. Historical cost comprises the
purchase price (net of CENVAT / duty credits wherever applicable) and
all direct costs attributable to bringing the asset to its working
condition for intended use.
Intangible Assets
Capital Expenditure on purchase and development of identifiable
non-monetary assets without physical substance is recognized as
Intangible Assets in accordance with principles given under AS-26-
ÂIntangible Assets''. These are grouped and separately shown under the
schedule of Fixed Assets. These are amortized over their respective
expected useful lives.
1.6 DEPRECIATION & AMORTIZATION
Depreciation is provided on fixed assets over the useful lives of the
assets estimated by the management, which are equivalent to the rates
prescribed in Schedule XIV to the Companies Act, 1956 as per the
straight line method. Intangible assets are amortized over a period
not exceeding ten years on a straight-line basis.
1.7 IMPAIRMENT OF ASSETS
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/ external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset''s net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
Previously recognised impairment losses are reversed to the extent the
recoverable amount exceeds the carrying amount.
1.8 FOREIGN EXCHANGE TRANSACTIONS/TRANSLATION
(i) 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.
(ii) 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.
(iii) Exchange Differences
Exchange differences arising on a monetary item that, in substance,
form part of the Company''s net investment in a non- integral foreign
operation is accumulated in a foreign currency translation reserve in
the financial statements until the disposal of the net investment, at
which time they are recognized as income or as expenses.
Exchange differences arising on the settlement of monetary items not
covered above, or on reporting such monetary items of Company 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.
(iv) Forward Exchange Contracts not intended for trading or speculation
purposes
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 differences on such contracts are 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 expense for the
year.
1.9 RESEARCH AND DEVELOPMENT
Revenue Expenditure on research and development including salaries,
consumables and power & fuel is charged to Statement of Profit and Loss
under respective heads of expenditure. Capital expenditure is shown as
addition to fixed assets.
1.10 EMPLOYEE BENEFITS
Expenses and liabilities in respect of employee benefits are recorded
in accordance with AS-15- ÂEmployee Benefits''.
(i) Provident Fund & ESI
The Company makes contribution to Statutory Provident Fund and Employee
State Insurance in accordance with Employees Provident Fund and
Miscellaneous Provisions Act, 1952 and Employee State Insurance Act,
1948 which is a defined contribution plan and contribution paid or
payable is recognized as an expense in the period in which services are
rendered by the employee.
(ii) Gratuity
Gratuity is a post employment benefit and is in the nature of a defined
benefit plan. The liability recognised in the balance sheet in respect
of gratuity is the present value of the defined benefit/obligation at
the balance sheet date less the fair value of plan assets, together
with adjustment for unrecognized actuarial gains or losses and past
service costs. The defined benefit/ obligation is calculated at or near
the balance sheet date by an independent actuary using the projected
unit credit method. Actuarial gains and losses arising from past
experience and changes in actuarial assumptions are charged or credited
to the Statement of Profit and Loss in the year to which such gains or
losses relate.
(iii) Leave Encashment
Liability in respect of leave encashment becoming due or expected after
the balance sheet date is estimated on the basis of an actuarial
valuation performed by an independent actuary using the projected unit
credit method.
(iv) Superannuation Benefit
The Company makes contribution to superannuation fund which is a post
employment benefit in the nature of a defined contribution plan &
contribution paid or payable is recognized as an expense in the period
in which services are rendered by the employee.
(v) Other Short Term Benefits
Expense in respect of other short term benefits is recognized on the
basis of the amount paid or payable for the period during which
services are rendered by the employee.
1.11 LEASES
Where the Company is the lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of the ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Statement of Profit and Loss on a straight-line basis over the
lease term.
Where the Company is the lessor
Assets subject to operating leases are included in fixed assets. Lease
income is recognized in the Statement of Profit and Loss on a
straight-line basis over the lease term. Costs, including depreciation
are recognized as an expense in the Statement of Profit and Loss.
Initial direct costs such as legal costs, brokerage costs, etc. are
recognized immediately in the Statement of Profit and Loss.
1.12 TAXES ON INCOME
Tax expense comprises of current and deferred. Provision for Current
Tax is made in accordance with the provisions of Income Tax Act, 1961.
In accordance with Accounting Standard AS-22- ÂAccounting for Taxes on
Income'' as notified by Companies (Accounting Standards) Rules, 2006,
Deferred Tax Liability/ Asset arising from timing differences between
book and income tax profits is accounted for at the current rate of tax
to the extent these differences are expected to crystallize in later
years. However, Deferred Tax Assets are recognized only if there is a
reasonable/ virtual certainty of realization thereof. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date.
1.13 GOVERNMENT GRANTS & SUBSIDIES
Grants and subsidies from the government are recognized when there is
reasonable assurance that the grant/subsidy will be received and all
attaching conditions will be complied with.
When the grant or subsidy relates to an expense item, it is recognized
as income over the periods necessary to match them on a systematic
basis to the costs, which it is intended to compensate.
Where the grant or subsidy relates to an asset, its value is deducted
from the gross value of the asset concerned in arriving at the carrying
amount of the related asset.
1.14 BORROWING COST
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur. Borrowing costs consist of interest
and other costs that an entity incurs in connection with the borrowing
of funds.
1.15 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
A provision is recognized when there is a present obligation as a
result of a past event and it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of obligation. A
contingent liability is recognized for:
(i) a present obligation that arises from past events but is not
recognized as a provision because either the possibility that an
outflow of resources embodying economic benefits will be required to
settle the obligation is remote or a reliable estimate of the amount of
the obligation cannot be made; and
(ii) a possible obligation that arises from past events and the
existence of which will be confirmed only by the occurrence or non-
occurrence of one or more uncertain future events not wholly within the
control of the Company.
Contingent assets are neither accounted for nor disclosed in the
financial statements.
1.16 EARNING PER SHARE
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they were entitled to participate in dividends relative to
a fully paid equity share during the reporting period. 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.
1.17 CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in hand, demand deposits with
banks, other short-term highly liquid investments with original
maturities of three months or less.
Mar 31, 2012
1.1 PRESENTATION AND DISCLOSURE OF FINANCIAL STATEMENTS
During the year ended 31st March 2012, the revised Schedule VI notified
under the Companies Act 1956, has become applicable to the company, for
preparation and presentation of its financial statements. The adoption
of revised Schedule VI does not impact recognition and measurement
principles followed for preparation of these financial statements.
However, it has significant impact on presentation and disclosures made
in the financial statements. The company has also reclassified the
previous year figures in accordance with the requirements applicable in
the current year.
1.2 USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon management's best
knowledge of current events and actions, actual results could differ
from these estimates. Difference between the actual results and
estimates are recognized in the period in which the results are known/
materialized.
1.3 REVENUE RECOGNITION
SALE OF GOODS
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) Revenue is recognized in respect of export sales on the basis of
bill of lading and in respect of domestic sales on dispatch from
factory.
(ii) Inter-Unit sales comprising of sale of yarn from Spinning Unit to
Dyeing Unit is reduced from gross turnover in deriving net turnover.
(iii) Income and Export Incentives / benefits are accounted for on
accrual basis and as per principles given under AS-9 - Revenue
Recognition.
DIVIDENDS
Revenue in respect of dividends is recognized when the shareholders'
right to receive payment is established by the balance sheet date.
1.4 INVENTORIES
(i) Finished goods and work in progress are valued at lower of
historical cost or net realizable value. Cost of inventories comprises
of cost of purchase, cost of conversion and other costs incurred in
bringing them to their respective present location and condition. By
products are valued at net realizable value. Cost is determined on a
weighted average basis.
(ii) Stores, Spares and Raw Materials are valued at lower of historical
cost or net realizable value. However materials & other items held for
use in the production of inventories are not written 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 a weighted average basis.
(iii) Historical cost is determined on the basis of weighted average
method.
(iv) 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.
1.5 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. Long-term
investments are carried at cost individually. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments in case of long term investments.
1.6 FIXED ASSETS
Tangible Assets
Fixed assets are stated at historical cost less accumulated
depreciation and impairment loss, if any. Historical cost comprises the
purchase price (net of CENVAT / duty credits wherever applicable) and
all direct costs attributable to bringing the asset to its working
condition for intended use.
Intangible Assets
Capital Expenditure on purchase and development of identifiable
non-monetary assets without physical substance is recognized as
Intangible Assets in accordance with principles given under AS-26 -
Intangible Assets. These are grouped and separately shown under the
schedule of Fixed Assets. These are amortized over their respective
expected useful lives.
1.7 DEPRECIATION & AMORTIZATION
Depreciation is provided on fixed assets over the useful lives of the
assets estimated by the management, which are equivalent to the rates
prescribed in Schedule XIV to the Companies Act, 1956 as per the
straight line method.
Intangible assets are amortized over a period not exceeding ten years
on a straight line basis.
1.8 IMPAIRMENT OF ASSETS
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal / external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset's net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
Previously recognised impairment losses are reversed to the extent the
recoverable amount exceeds the carrying amount.
1.9 FOREIGN EXCHANGE TRANSACTIONS / TRANSLATION
(i) 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.
(ii) 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.
(iii) Exchange Differences
Exchange differences arising on a monetary item that, in substance,
form part of the company's net investment in a non-integral foreign
operation is accumulated in a foreign currency translation reserve in
the financial statements until the disposal of the net investment, at
which time they are recognised as income or as expenses.
Exchange differences arising on the settlement of monetary items not
covered above, or on reporting such monetary items of company 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.
(iv) Forward Exchange Contracts not intended for trading or speculation
purposes
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 differences on such contracts are 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 expense for the
year.
1.10 RESEARCH AND DEVELOPMENT
Revenue Expenditure on research and development including salaries,
consumables and power & fuel is charged to Profit and Loss Account
under respective heads of expenditure. Capital expenditure is shown as
addition to fixed assets.
1.11 EMPLOYEES BENEFITS
Expenses and liabilities in respect of employee benefits are recorded
in accordance with Accounting Standard 15 - "Employee Benefits."
(i) Provident Fund & ESI
The Company makes contribution to statutory provident fund and Employee
State Insurance in accordance with Employees Provident Fund and
Miscellaneous Provisions Act, 1952 and Employee State Insurance Act,
1948 which is a defined contribution plan and contribution paid or
payable is recognized as an expense in the period in which services are
rendered by the employee.
(ii) Gratuity
Gratuity is a post employment benefit and is in the nature of a defined
benefit plan. The liability recognised in the balance sheet in respect
of gratuity is the present value of the defined benefit / obligation at
the balance sheet date less the fair value of plan assets, together
with adjustment for unrecognized actuarial gains or losses and past
service costs. The defined benefit / obligation is calculated at or
near the balance sheet date by an independent actuary using the
projected unit credit method. Actuarial gains and losses arising form
past experience and changes in actuarial assumptions are charged or
credited to the Profit and Loss Account in the year to which such gains
or losses relate.
(iii) Leave Encashment
Short term benefits are provided for on accrual basis on the basis of
management estimates.
(iv) Superannuation Benefit
The Company makes contribution to superannuation fund which is a post
employment benefit in the nature of a defined contribution plan &
contribution paid or payable is recognized as an expense in the period
in which services are rendered by the employee.
(v) Other Short Term Benefits
Expense in respect of other short term benefits is recognized on the
basis of the amount paid or payable for the period during which
services are rendered by the employee.
1.12 LEASES
Where the Company is the lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of the ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss account on a straight line basis over the lease
term.
Where the Company is the lessor
Assets subject to operating leases are included in fixed assets. Lease
income is recognized in the Profit and Loss Account on a straight-line
basis over the lease term. Costs, including depreciation are recognized
as an expense in the Profit and Loss Account. Initial direct costs
such as legal costs, brokerage costs, etc. are recognized immediately
in the Profit and Loss Account.
1.13 SEGMENT ACCOUNTING & REPORTING
The Company has only one segment of Textile (Yarn) and accordingly the
disclosure requirement as prescribed in the Accounting Standard AS -17
on "Segment Reporting" as notified by Companies (Accounting Standard)
Rules, 2006 is not applicable.
1.14 TAXES ON INCOME
Tax expense comprises of current and deferred. Provision for Current
Tax is made in accordance with the provisions of Income Tax Act, 1961.
In accordance with Accounting Standard AS-22 "Accounting for Taxes on
Income" as notified by Companies (Accounting Standards) Rules, 2006
Deferred Tax Liability/ Asset arising from timing differences between
book and income tax profits is accounted for at the current rate of tax
to the extent these differences are expected to crystallize in later
years. However, deferred Tax Assets are recognized only if there is a
reasonable/ virtual certainty of realization thereof. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date.
1.15 GOVERNMENT GRANT & SUBSIDIES
Grants and subsidies from the government are recognized when there is
reasonable assurance that the grant / subsidy will be received and all
attaching conditions will be complied with.
When the grant or subsidy relates to an expense item, it is recognized
as income over the periods necessary to match them on a systematic
basis to the costs, which it is intended to compensate.
Where the grant or subsidy relates to an asset, its value is deducted
from the gross value of the asset concerned in arriving at the carrying
amount of the related asset.
1.16 BORROWING COST
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs
are expensed in the period they occur. Borrowing costs consist of
interest and other costs that an entity incurs in connection with the
borrowing of funds.
1.17 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
A provision is recognized when there is a present obligation as a
result of a past event and it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of obligation. A
contingent liability is recognized for:- (i) A present obligation that
arises from past events but is not recognized as a provision because
either the possibility that an outflow of resources embodying economic benefits will be required to settle the obligation is remote or a
reliable estimate of the amount of the obligation cannot be made.
(ii) A possible obligation that arises from past events and the
existence of which will be confirmed only by the occurrence or
non-occurrence of one or more uncertain future events not wholly within
the control of the company.
(iii) Contingent assets are neither accounted for nor disclosed in the
financial statements.
1.18 EARNING PER SHARE
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they were entitled to participate in dividends relative to
a fully paid equity share during the reporting period. 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.
1.19 CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in hand, demand deposits with
banks, other short-term highly liquid investments with original
maturities of three months or less.
Mar 31, 2011
1. Basis of preparation
The Financial Statements have been prepared to comply in all material
respects with the Accounting Standards notified by Companies
(Accounting Standards) Rules, 2006, (as amended) and the relevant
provisions of the Companies Act, 1956. The Financial Statements have
been prepared under the Historical Cost Convention on an accrual basis
except certain expenses & interest on calls in arrears which are
accounted for on payment basis, in view of uncertainty involved in
ascertaining the final amount. The accounting policies have been
consistently applied by the Company and are consistent with those used
in the previous year.
2. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon management's best
knowledge of current events and actions, actual results could differ
from these estimates. Difference between the actual result and
estimates are recognised in the period in which the results are known/
materialized.
3. Fixed Assets
Fixed assets are stated at 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.
Intangible assets are recognised on the basis of recognition criteria
as set out in the relevant Accounting Standard.
4. Depreciation/Amortisation
Depreciation is provided on fixed assets over the useful lives of the
assets estimated by the management, which are equivalent to the rates
prescribed in Schedule XIV to the Companies Act, 1956 as per the
straight line method.
Intangible assets are amortised over a period not exceeding ten years
on a straight-line basis.
5. Impairment of Assets
The carrying amounts of assets are reviewed at each Balance Sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset's net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
Previously recognised impairment losses are reversed to the extent the
recoverable amount exceeds the carrying amount.
6. Leases
Where the Company is the lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payment is recognised as an expense
in the Profit & Loss account on a straight line basis over the lease
term.
Where the Company is Lessor
Assets subject to operating leases are included in fixed assets. Lease
income is recognised in Profit & Loss Account on a straight-line basis
over the lease term. Cost, including depreciation is recognised as an
expense in the Profit & Loss Account. Initial direct costs such as
legal costs, brokerage costs, etc. are recognised immediately in the
Profit & Loss Account.
7. Government grants & subsidies
Grants and subsidies from the Government are recognized when there is
reasonable assurance that the grant/subsidy will be received and all
attaching conditions will be complied with.
When the grant or subsidy relates to an expense item, it is recognized
as income over the periods necessary to match them on a systematic
basis to the costs, which it is intended to compensate.
Where the grant or subsidy relates to an asset, its value is deducted
from the gross value of the asset concerned in arriving at the carrying
amount of the related asset.
8. Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs
are expensed in the period they occur. Borrowing costs consist of
interest and other costs that an entity incurs in connection with the
borrowing of funds.
9. Employee Benefits
A. Gratuity
Provision for Gratuity is Employee Gratuity Fund Scheme which is
managed by a trust in the nature of Defined Benefits.
Obligation is considered on the basis of revised AS-15 'Employee
Benefits' on Actuarial Valuation. The discount rate and other financial
assumptions are based on the parameters defined in the Accounting
Standard. The expenses are charged to Profit & Loss Account. Actuarial
gain and losses are immediately taken to Profit and Loss Account and
are not deferred.
B. Superannuation
The liability in respect of employees covered under the scheme is
provided through a policy taken from the Life Insurance Corporation of
India.
C. Provident Fund
Contribution to the Provident Fund is deposited in accordance with the
provisions of Employees Provident Fund Act,1952 and charged to the
Profit & Loss Account.
D. Leave with wages
Short term benefits are provided for on accrual basis on the basis of
management estimates.
10. Inventories
a) Finished goods are valued at lower of cost or net realizable value.
By-products are valued at net realizable value. Cost includes direct
materials and labour and a proportion of manufacturing overheads based
on normal operating capacity. Cost is determined on a weighted average
basis.
b) Work in progress is valued at lower of cost or net realizable value.
Cost is determined on a weighted average basis.
c) Stores, Spares and Raw Materials are valued at lower of cost or net
realisable value. However materials & other items held for use in the
production of inventories are not written 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 a weighted average 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. Investments
Investments that are readily realisable 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 for
each category separately. Long term investments are carried at cost on
individual investment basis. However, provision for diminution in
value is made to recognise a decline other than temporary in the value
of the investments in case of long term investments.
12. 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.
Sale of goods
Revenue is recognised when the significant risks and rewards of
ownership of the goods have passed to the buyer. Excise Duty deducted
from turnover (gross) are the amount that is included in the amount of
turnover (gross) and not the entire amount of liability arised during
the year. Sale is net of trade discount and Sales Tax. Export sales are
recognized at the time of making Bill of Lading.
Dividends
Revenue is recognised when the shareholders' right to receive payment
is established by the Balance Sheet date.
Insurance Claim
Claims lodged with the insurance companies are accounted on accrual
basis to the extent these are measurable and ultimate collection is
reasonably certain.
Export Benefits
The revenue in respect of export benefits is recognised on post export
basis.
13. Foreign Currency Transactions
(i) 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.
(ii) 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.
(iii) Exchange Differences
Exchange differences arising on a monetary item that, in substance,
form part of the company's net investment in a non-integral foreign
operation is accumulated in a Foreign Currency Translation Reserve in
the Financial Statements until the disposal of the net investment, at
which time they are recognised as income or as expense.
Exchange differences arising on the settlement of monetary items not
covered above, or on reporting such monetary items of company 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 expense in the year in which they arise.
(iv) Forward Exchange Contracts not intended for trading or speculation
purposes
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 differences on such contracts are recognised 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 recognised as income or expense for the
year.
14. Cenvat
Cenvat credit on Excise Duty paid on inputs is reduced from the cost of
related inputs. The same related to Excise Duty on capital items is
reduced from the cost of related items.
15. Income Taxes
Tax expense comprises of current and deferred. 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 Income Tax reflects
the impact of current year timing differences between taxable income
and accounting income for the year and reversal of timing differences
of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the Balance Sheet date. Deferred
tax assets and deferred tax liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on income levied by same governing
taxation laws. Deferred tax assets are recognised only to the extent
that there is reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be
realised. In situations where the company has unabsorbed depreciation
or carry forward tax losses, all deferred tax assets are recognised
only if there is virtual certainty supported by convincing evidence
that they can be realised against future taxable profits.
At each Balance Sheet date the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
The carrying amount of deferred tax assets are reviewed at each Balance
Sheet date. The Company writes down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Minimum Alternative Tax (MAT) credit is recognised as an asset only
when and to the extent there is convincing evidence that the company
will pay normal income tax during the specified period. In the year in
which the MAT credit becomes eligible to be recognized as an asset in
accordance with the recommendations contained in Guidance Note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the Profit and Loss Account and shown as
MAT Credit Entitlement. The Company reviews the same at each Balance
Sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the
effect that Company will pay normal Income Tax during the specified
period.
16. Earnings Per Share
Basic Earnings per Share are calculated by dividing the net Profit or
Loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they were entitled to participate in dividends relative to
a fully paid equity share during the reporting period. 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.
17. Provisions, Contingent Liabilities & Contingent Assets
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the Balance Sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
Contingent Liabilities are shown by the way of Notes to Accounts in
respect of obligations where based on the evidence available, their
existence at the Balance Sheet date is considered not probable.
Contingent Assets are neither recognized nor disclosed.
18. Cash and Cash Equivalents
Cash and cash equivalents for the purposes of Cash Flow Statement
comprise Cash at Bank and in Hand.
Mar 31, 2010
1. (a) Accounting Convention
The accounts are prepared on accrual basis, under the historical cost
convention, in accordance with the Accounting Standards referred to in
Section 211(3C) of the Companies Act, 1956 and other relevant
provisions of the said Act.
(b) Sales
Sales of goods is recognized at the point of dispatch of finished goods
to the customers and includes excise duty but net of returns. Export
sale is recognized at the time of making of bill of lading. Turnover
net of excise duty is also disclosed.
(c) Export Benefits
The revenue in respect of export benefits is recognized on post export
basis.
2. Retirement Benefits
a. Gratuity
Provision for Gratuity is for Employees Gratuity Fund Scheme which is
managed by a trust and is in the nature of defined benefit obligation.
It is considered on the basis of revised (AS)-15 on Actuarial
Valuation. The discount rate and other financial assumptions are based
on the parameters defined in the Accounting Standard. The expenses are
charged to Profit & Loss Account.
b. Superannuation
The liability in respect of employees covered under the scheme is
provided through a policy taken from Life Insurance Corporation of
India.
c. Provident Fund
Contribution to the Provident Fund is deposited in accordance with the
provisions of Employees Provident Fund & Miscellaneous Provisions Act,
1952 and charged to the Profit and Loss Account.
d. Leave with Wages
Short term benefits are provided for on accrual basis on the basis of
Management estimates.
3. Fixed Assets
All fixed assets are stated at historical cost. In respect of new
projects, direct & indirect expenditure including interest paid/payable
during construction period upto date of commencement of commercial
production is capitalized to the relevant assets in the ratio of cost
of respective assets.
4. Depreciation
Depreciation on fixed assets in respect of
(a) All fixed assets, except intangibles, is charged by applying the
straight line method as per the rates and in the manner prescribed in
Schedule XIV to the Companies Act, 1956.
(b) Intangible Assets are amortized over their useful lives not
exceeding ten years.
5. Inventories
Inventories are valued at cost or net realizable value whichever is
lower. The cost in respect of various items of inventory is computed as
under :
# In case of raw materials at weighted average cost plus direct
expenses.
# In case of stores & spares at weighted average cost plus direct
expenses.
# In case of work in process at raw material cost plus conversion cost
depending upon the stage of completion.
6. Revenue Recognition
Revenues/income and cost/ expenditure are accounted for on accrual
basis as they are earned/incurred except leave travel allowance,
medical reimbursement and interest on calls in arrears which are
accounted for an payment/realization basis, in view of uncertainty
involved in ascertaining the final amount.
7. Government Grants/ Subsidies
Capital Subsidies are taken into consideration on receipt basis.
Revenue grants are recognized when it is reasonably certain that the
ultimate collection will be made.
8. Investments
Long term investments are carried at cost less provision, if any, for
diminution in value other than temporary. Current Investments are
carried at lower of cost or market value/ fair value.
9. Foreign Currency Transactions
Foreign currency transactions are recorded at the rate of exchange
prevailing on the date of transaction. Forign currency denominated
assets/liabilities are translated at the year end exchange rates and
resultant gains/losses are recognised in the Profit and Loss Account
for the year except exchange differences on liabilities related to
acquisition of fixed assets are capitansec/ with the cost of relevant
fixed assets. Foreign currency gain/loss relating to net investment in
non-integral foreign operation is recognised in the Foreign Currency
Translation Reserve Account. In case of forward foreign exchange
contracts, exchange difference are dealt within the Profit and Loss
account over the life of the contract.
10. CENVAT
CENVAT credit on excise duty paid inputs is reduced from the cost of
related inputs. The same related to excise duty on capital items is
reduced from the cost of related items.
11. Borrowing Costs
Borrowing Costs that are directly attributable to qualifying asset are
capitalized as part of the cost of the asset. Other borrowing costs are
recognized as an expense in the period in which they are incurred.
12. Accounting for Taxes on Income
Provision for Current Income Tax is made in accordance with the
provisions of Income Tax Act, 1961 in accordance with Accounting
Standard (AS) - 22 Accounting for Taxes on Income" issued by the
Institute of Chartered Accountants of India, deferred tax resulting
from timing differences between book & tax profit is accounted for at
the tax rates substantively enacted by the Balance Sheet date to the
extent that the timing differences are expected to crystallize.
Deferred tax assets are recognized only when there is
reasonable/virtual certainty of sufficient future profits available to
realize such assets.
13. Miscellaneous Expenditure
Expenses included under the head miscellaneous expenditure are
amortized over the period of estimated future benefits.
14. Intangible Assets
Intangible Assets are recognized on the basis of recognition criteria
as set out in Accounting Standard (AS) - 26 Intangible Assets issued
by the Institute of Chartered Accountants of India.
15. Impairment of Assets
Specified assets are reviewed for impairment wherever events or changes
in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognized for the amount for which
the assets carrying amount exceeds its recoverable amount being higher
of assets net selling price and its value in use. Value in use is based
on the present value of the estimated future cash flows relating to the
assets. For the purpose of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows (i.e. Cash Generating Units).
Previously recognized impairment losses, relating to assets other than
goodwill, are reversed where recoverable amount increases because of
favorable changes in the estimates used to determine the recoverable
amount since the last impairment was recognized. A reversal of an
assets impairment loss is limited to its carrying amount that would
have been determined (Net of depreciation or amortization) had no
impairment loss been recognized in prior years.
16. Provisions, Contingent Liabilities & Contingent Assets
Provisions are recognized for present obligations of uncertain timing
or amount arising as a result of a past event where a reliable estimate
can be made and it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation. Where it
is not probable that an outflow of resources embodying economic
benefits will be required or the amount cannot be estimated reliably,
the obligation is disclosed as a contingent liability, unless the
probability of outflow of resources embodying economic benefits is
remote. Possible obligations, whose existence will only be confirmed by
the occurrence or non-occurrence of one or more uncertain events are
also disclosed as contingent liabilities unless the probability of
outflow of resources embodying economic benefits is remote.