Accounting Policies of Koutons Retail India Ltd. Company

Mar 31, 2012

(a) BASIS OF PREPARATION

The Financial statements have been prepared under the historical cost convention and in accordance with applicable Accounting Standards issued by the Institute of Chartered Accountants of India and relevant disclosure requirements of Companies Act, 1956 as adopted consistently by the Company. The accounting policies have been consistently applied by the company and are consistent with those used in the previous year except in the case of valuation of inventory. The revised schedule vi has become effective from 1st April 211 and has been used for preparation of this annual statement.

(b) PRESENTATION AND DISCLOSURE OF FINANCIAL

During the year ended 31 March 2012, the revised schedule VI notified under the Companies Act 1956, has become applicable to the company, for preparation and presentation of its financial statement. The adoption of revised VI does not impact recognition and measurement principles followed for preparation of financial statements. The company has also reclassified the previous year figures in accordance with the requirements applicable in the current year.

(c) Uses of estimates

The preparation of financial statements requires the management of the company 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 includes provisions for employee benefits, provision for income taxes and the expected useful life of fixed assets.

(d) FIXED ASSETS & DEPRECIATION FIXED ASSETS

Fixed Assets are stated at the cost of acquisition/installation less accumulated depreciation and include directly attributable cost including installation and freight charges for bringing the assets to its working conditions for its intended use.

DEPRECIATION

Depreciation on fixed assets is provided on WDV method at the rate prescribed under schedule XIV of the Companies Act, 1956. Proportionate depreciation is charged for additions/deletions during the year. Individual asset costing less than Rs. 5,000/- are depreciated in full in the year of purchase.

(e) IMPAIRMENT OF ASSETS

The management reviews the carrying amounts of assets at each Balance Sheet date for any indication of impairment based on internal/external factors in accordance with Accounting Standard 28 "Impairment of Assets". An asset is treated as impaired when the carrying cost of the assets exceed its recoverable value. An impairment loss, if any, is charged to the Profit and Loss Account in the year, in which an asset is identified as impaired.

(f) 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 costand fair value on an individual investment basis. Longterm investments are carried at cost. Provision for diminution in the value of long term investment is made only if such a decline is other than temporary in the opinion of the management.

(g) INVENTORIES

Raw materials, consumables, stores and spares are valued at lower of cost and net realisable value as certified by the management.

Work-in-Progress is valued at direct raw material cost and appropriate cost of completed process.

Finished goods are valued at lower of cost and net realisable value as certified by the management. Finished goods include cost of conversion and other costs incurred in bringing the inventories to their present location and condition.

Cost of inventories is computed on FIFO basis. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and to make the sale.

(h) REVENUE RECOGNITION

Revenue is recognised 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

(a) Consignment Sales: Revenue is recognised when consignee agents make the sales. Sales are recorded at net realized value i.e. net of all discounts & sales tax.

(b) Direct Sales: Revenue is recognised when goods are delivered which coincide with risk and rewards of ownership of goods have been passed to buyer.

ii. INTEREST

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

(i) FOREIGN CURRENCY TRANSACTIONS

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 of exchange at the end of the year. Non monetary items, like fixed assets are carried in terms of historical cost using the exchange rate at the date of the transaction.

c) Exchange Differences

(i) Any gain or losses on account of exchange difference either on settlement or on translation is recognized in the Profit and Loss Account except in cases where they relate to the acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.

(ii) Foreign currency assets & liabilities are translated at the year end rates and resultants gains / losses on foreign exchange transaction other than those relating to fixed assets are recognized in the profit and loss account.

(iii) Non-monetary foreign currency items are carried at cost.

(j) TAXATION

Income tax expense comprises of current tax and deferred tax charge or credit.

The deferred tax asset and deferred tax liability is calculated by applying tax rate and tax laws that have been enacted or substantively enacted by the Balance Sheet Date. Deferred tax assets arising from timing differences are recognised, subject to consideration of prudence to the extent there is reasonable certainty that these would be realised in future. At each Balance Sheet date, the carrying amount of deferred tax assets is reviewed to reassure realisation.

(k) EMPLOYEE RETIREMENT BENEFITS

i. DEFINED CONTRIBUTION PLAN

The Company makes defined contribution to Provident Fund, which are recognised in the Profit and Loss Account on accrual basis.

ii. DEFINED BENEFIT PLAN

i) The Company''s liability under Payment of Gratuity Act is determined on the basis of actuarial valuation made at the end of financial year and accounted for on accrual basis.

ii) Provision for leave entitlement is accrued and provided for at the end of the financial year but the same is not being determined on actuarial valuation basis.

(I) BORROWING COST

Borrowing cost that are attributable to the acquisition or construction of qualified assets are, capitalised as a part of the cost of such assets up to the date when such assets are ready for its intended use. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing cost are charged to revenue. However during the current financial year no borrowing cost has been capitalized.

(m) OPERATING LEASES

The Company takes premises for it''s showroom/godown for various duration Lease/License period with Lock-in- period of One to Three Years. Escalation Clause is variable between 5% to 15% after every three years and 30-45 days rent free time is taken from the date of possession given by the landlord.

(n) CASH FLOW STATEMENT

The cash flow statement is prepared by the indirect method set out in Accounting Standard 3 on cash flow statements and presents the cash flows By Operating, Investing and Financing activities of the company. Cash and cash equivalents presented in cash flow statement consists of cash in hand, cheques in hand, bank balances & demand deposits with Banks.

(o) MISCELLANEOUS EXPENSES

i. PRELIMINARY EXPENSES

The expenses incurred on formation of Company are amortised over a period of 10 years.

ii. DEFERRED REVENUE EXPENDITURE

Expenditure incurred -on factory license fees, Trade mark fee and rental paid for pre commencement of retail stores, factories are treated as Deferred revenue Expenditure and are amortized over the life period of concerned item in accordance with the Accounting Standard 26 (Intangible Assets) issued by the ICAI.

(p) PROVISIONS

A provision is recognised when the Company 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 each balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimate.

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Mar 31, 2011

(a) BASIS OF PREPARATION

The Financial statements have been prepared under the historical cost convention and in accordance with applicable Accounting Standards issued by the Institute of Chartered Accountants of India and relevant disclosure requirements of Companies Act, 1956 as adopted consistently by the Company. The accounting policies have been consistently applied by the company and are consistent with those used in the previous year.

(b) Uses of estimates

The preparation of financial statements requires the management of the company 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 includes provisions for employee benefits, provision for income taxes, and the expected useful life of fixed assets

(c) FIXED ASSETS & DEPRECIATION

FIXED ASSETS

Fixed Assets are stated at the cost of acquisition/installation less accumulated depreciation and include directly attributable cost including installation and freight charges for bringing the assets to its working conditions for its intended use.

DEPRECIATION

Depreciation on fixed assets is provided on WDV method at the rate prescribed under schedule XIV of the Companies Act, 1956. Proportionate depreciation is charged for additions/deletions during the year. Individual asset costing less than Rs. 5,000/- are depreciated in full in the year of purchase.

(d) IMPAIRMENT OF ASSETS

The management reviews the carrying amounts of assets at each Balance Sheet date for any indication of impairment based on internal/external factors in accordance with Accounting Standard 28 "Impairment of Assets". An asset is treated as impaired when the carrying cost of the assets exceed its recoverable value. An impairment loss, if any, is charged to the Profit and Loss Account in the year, in which an asset is identified as impaired.

(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 on an individual investment basis. Long term investments are carried at cost. Provision for diminution in the value of long term investment is made only if such a decline is other than

(f) INVENTORIES

Raw materials, consumables, stores and spares are valued at lower of Post and net realisable value as certified by the management. Work-in-Progress is valued at direct raw material cost and appropriate cost of completed process. Finished goods are valued at lower of cost and net realisable value as certified by the management. Finished goods include cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost of inventories is computed on FIFO basis. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and to make the sale.

(g) REVENUE RECOGNITION

Revenue is recognised 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

(a) Consignment Sales: Revenue is recognised when consignee agents make the sales. Sales are recorded at net realized value i.e. net of all discounts & sales tax.

(b) Direct Sales: Revenue is recognised when goods are delivered which coincide with risk and rewards of ownership of goods have been passed to buyer.

ii. INTEREST

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

(h) FOREIGN CURRENCY TRANSACTIONS

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 of exchange at the end of the year. Non monetary items, like fixed assets are carried in terms of historical cost using the exchange rate at the date of the transaction.

c) Exchange Differences

(i) Any gain or losses on account of exchange difference either on settlement or on translation is recognized in the Profit and Loss Account except in cases where they relate to the acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.

(ii) Foreign currency assets & liabilities are translated at the year end rates and resultants gains / losses on foreign exchange transaction other than those relating to fixed assets are recognized in the profit

(iii) Non-monetary foreign currency items are carried at cost.

(i) TAXATION

Income tax expense comprises of current tax and deferred tax charge or credit.

The deferred tax asset and deferred tax liability is calculated by applying tax rate and tax laws that have been enacted or substantively enacted by the Balance Sheet Date. Deferred tax assets arising from timing differences are recognised, subject to consideration of prudence to the extent there is reasonable certainty that these would be realised in future. At each Balance Sheet date, the carrying amount of deferred tax assets is reviewed to reassure realisation.

(j) EMPLOYEE RETIREMENT BENEFITS

i. DEFINED CONTRIBUTION PLAN

The Company makes defined contribution to Provident Fund, which are recognised in the Profit and Loss Account on accrual basis.

ii. DEFINED BENEFIT PLAN

i) The Company's liability under Payment of Gratuity Act is determined on the basis of actuarial valuation made at the end of financial year and accounted for on accrual basis.

ii) Provision for leave entitlement is accrued and provided for at the end of the financial year but the same is not being determined on actuarial valuation basis.

(k) BORROWING COSTS

Borrowing costs that are attributable to the acquisition or construction of qualified assets are, capitalised as a part of the cost of such assets up to the date when such assets are ready for its intended use. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue. However during the current financial year no borrowing cost has been capitalized.

(l)OPERATING LEASES

The Company takes premises for it's showroom/go down for various duration Lease/License period with Lock- in-period of One to Three Years. Escalation Clause is variable between 5% to 15% after every three years and 30-45 days rent free time is taken from the date of possession given by the landlord.

(m) CASH FLOW STATEMENT

The cash flow statement is prepared by the indirect method set out in Accounting Standard 3 on cash flow statements and presents the cash flows By Operating, Investing and Financing activities of the company. Cash and cash equivalents presented in cash flow statement consists of cash in hand, cheques in hand, bank balances & demand deposits with Banks.

(n) MISCELLANEOUS EXPENSES

i. PRELIMINARY EXPENSES

The expenses incurred on formation of Company are amortised over a period of 10 years.

Koutons Retail India Limited EmESSEffi

ii. DEFERRED REVENUE EXPENDITURE

Expenditure incurred on factory license fees, Trade mark fee and rental paid for pre commencement of retail stores, factories are treated as Deferred revenue Expenditure and are amortized over the life period of concerned item in accordance with the Accounting Standard 26(Intangible Assets) issued by the ICAI.

(o) PROVISIONS

A provision is recognised when the Company 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 each balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimate.

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Mar 31, 2010

(a) BASIS OF PREPARATION

The Financial statements have been prepared under the historical cost convention and in accordance with applicable Accounting Standards issued by the Institute of Chartered Accountants of India and relevant disclosure requirements of Companies Act, 1956 as adopted consistently by the Company. The accounting policies have been consistently applied by the company & are consistent with those used in the previous year.

(b) Uses of estimates

The preparation of financial statements requires the management of the company 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 provisions for employee benefits, provision for income taxes, and the expected useful life of fixed assets.

(c) FIXED ASSETS & DEPRECIATION

FIXED ASSETS

Fixed Assets are stated at the cost of acquisition/installation less accumulated depreciation and include directly attributable cost including installation and freight charges for bringing the assets to its working conditions for its intended use.

DEPRECIATION

Depreciation on fixed assets is provided on WDV method at the rate prescribed under schedule XIV of the Companies Act, 1956. Proportionate depreciation is charged for additions/deletions during the year. Individual asset costing less than Rs. 5,000/- are depreciated in full in the year of purchase.

(d) IMPAIRMENT OF ASSETS

The management reviews the carrying amounts of assets at each Balance Sheet date for any indication of impairment based on internal/external factors in accordance with Accounting Standard 28 “Impairment of Assets”. An asset is treated as impaired when the carrying cost of the assets exceed its recoverable value. An impairment loss, if any, is charged to the Profit and Loss Account in the year, in which an asset is identified as impaired.

(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 on an individual investment basis. Long term investments are carried at cost. Provision for diminution in the value of long term investment is made only if such a decline is other than temporary in the opinion of the management.

(f) INVENTORIES

Raw materials, consumables, stores and spares are valued at lower of cost and net realisable value as certified by the management.

Work-in-Progress is valued at direct raw material cost and appropriate cost of completed process.

Finished goods are valued at lower of cost and net realisable value as certified by the management. Finished goods include cost of conversion and other costs incurred in bringing the inventories to their present location and condition.

Cost of inventories is computed on FIFO basis. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and to make the sale.

(g) REVENUE RECOGNITION

Revenue is recognised 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

(a) Consignment Sales: Revenue is recognised when consignee agents make the sales. Sales are recorded at net realisable value i.e. net of all discounts & sales tax.

(b) Direct Sales: Revenue is recognised when goods are delivered which coincide with risk and rewards of ownership of goods have been passed to buyer.

ii. INTEREST

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

(h) FOREIGN CURRENCY TRANSACTIONS

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 of exchange at the end of the year. Non monetary items, like fixed assets are carried in terms of historical cost using the exchange rate at the date of the transaction.

c) Exchange Differences

i) Any gain or losses on account of exchange difference either on settlement or on translation is recognized in the Profit and Loss Account except in cases where they relate to the acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.

ii) Foreign currency assets & liabilities are translated at the year end rates and resultants gains / losses on foreign exchange transaction other than those relating to fixed assets are recognized in the profit and loss account.

iii) Non-monetary foreign currency items are carried at cost.

(i) TAXATION

Income tax expense comprises of current tax and deferred tax charge or credit.

Provision for current tax is made on the basis of estimated taxable income for the current accounting year in accordance with the provisions of Income Tax Act, 1961 as applicable to the relevant assessment year.

The deferred tax asset and deferred tax liability is calculated by applying tax rate and tax laws that have been enacted or substantively enacted by the Balance Sheet Date. Deferred tax assets arising from timing differences are recognised, subject to consideration of prudence, to the extent there is reasonable certainty that these would be realised in future. At each Balance Sheet date, the carrying amount of deferred tax assets is reviewed to reassure realisation.

(j) EMPLOYEE RETIREMENT BENEFITS

i. DEFINED CONTRIBUTION PLAN

The Company makes defined contribution to Provident Fund, which are recognised in the Profit and Loss Account on accrual basis.

ii. DEFINED BENEFIT PLAN

i) The Companys liability under Payment of Gratuity Act is determined on the basis of actuarial valuation made at the end of financial year and accounted for on accrual basis.

ii) Provision for leave entitlement is accrued and provided for at the end of the financial year but the same is not being determined on actuarial valuation basis.

(k) BORROWING COSTS

Borrowing costs that are attributable to the acquisition or construction of qualified assets are, capitalised as a part of the cost of such assets up to the date when such assets are ready for its intended use. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue. However during the current financial year no borrowing cost has been capitalized.

(l) OPERATING LEASES

The Company takes premises for its showroom/godown for various duration Lease/License period with Lock-in- period of One to Three Years. Escalation Clause is variable between 5% to 15% after every three years and 30-45 days rent free time is taken from the date of possession given by the landlord.

(m) CASH FLOW STATEMENT

The cash flow statement is prepared by the indirect method set out in Accounting Standard 3 on cash flow statements and presents the cash flows By Operating, Investing and Financing activities of the company. Cash and cash equivalents presented in cash flow statement consists of cash in hand, cheques in hand, bank balances & demand deposits with Banks.

(n) MISCELLANEOUS EXPENSES

i. PRELIMINARY EXPENSES

The expenses incurred on formation of Company are amortised over a period of 10 years.

ii. DEFERRED REVENUE EXPENDITURE

Expenditure incurred on factory license fees, Trade mark fee and rental paid for pre commencement of retail stores, factories are treated as Deferred revenue Expenditure and are amortised over the life period of concerned item in accordance with the AS 26(Intangible Assets) issued by the ICAI.

(o) PROVISIONS

A provision is recognised when the Company 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 each balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimate.