Accounting Policies of S Kumars Nationwide Ltd. Company

Mar 31, 2012

1. Corporate Information

S. Kumars Nationwide Limited (the Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Company's shares are listed on two stock exchanges in India. The Company is engaged in textile business and operates in several product categories including blended suitings, high value fine cotton ("HVFC"), uniform fabrics, work-wear, home textiles and furnishings and ready-to-wear garments and in all fibre categories (natural, blended and man-made fibers). The Company caters to both domestic and international markets.

2. Basis of Preparation of Financial Statements

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material aspects with the accounting standards notified under the Companies (Accounting Standards) Rules 2006, (as amended) and the relevant provisions of the Companies Act, 1956. The Financial statements have been prepared on an accrual basis and under the historical cost convention, except for freehold land, Building and Plant & Machinery having revalued amount as disclosed in Note -11 of the Financial Statements. The accounting policies adopted in the preparation of Financial Statements are consistent with those of previous year.

3. Use of Estimates

The presentation of financial statements requires estimates and assumptions to be made that affect the value of assets and liabilities as well as revenues and expenses as reported in the financial statements. The difference between the actual result and estimates are recognized during the period in which they are materialized / known.

4. Tangible Assets

Tangible Assets are stated at their original cost, net of Cenvat/value added tax and includes amounts added on revaluation, less accumulated depreciation and impairment loss, if any. The cost includes interest, financial charges, freight, taxes and other incidental expenses incurred for acquisition and installation of the assets. Tangible Assets revalued are stated at values determined by the independent valuers.

5. Intangible Assets

Intangible assets are recognised when it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably.

6. Depreciation and Amortisation

a) Depreciation on Tangible Assets including revalued assets have been provided on Straight Line Method at the rates and in the manner prescribed in the Schedule XIV to the Companies Act, 1956. Depreciation on additions to Tangible Assets is provided for on pro-rata basis from the date of addition/acquisition till the end of the year and on assets sold/discarded/demolished to the date of disposal. The depreciation on revalued portion of assets is adjusted against the revaluation reserve.

b) Depreciation on assets whose actual cost does not exceed Rs. 5,000/- each is provided at 100% of the cost as specified in Schedule XIV to the Companies Act, 1956.

c) Computer software/System Development: Amortised over a period of five years.

7. Capital Work-In-Progress

Projects under commissioning and other capital work-in-progress are carried at cost, comprising direct cost, related incidental expenses, interest and other financing costs payable on funds specifically borrowed to the extent they relate to the period till assets are ready for intended use.

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 greater of the assets 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.

9. Valuation of Inventories

a) Raw materials (including goods-in-transit) are valued at cost, on first-in-first-out basis.

b) Work-in-process is valued at cost. Cost for this purpose includes direct cost and attributable overheads.

c) Finished goods are valued at lower of cost or net realisable value. Cost for this purpose includes direct cost, attributable overheads and excise duty.

d) Stores, fuel, dyes, chemicals and packing materials are valued at cost on first-in-first-out basis.

10. Cash and Cash Equivalents

Cash and cash equivalents for the purpose of cash flow statement comprise cash at bank, cash in hand and short- term investments with an original maturity of three months or less.

11. Recognition of Income and Expenditure

a) Domestic sales are recognized on transfer of risk and reward which generally coincides with dispatch of goods to the customers.

b) Export sales are accounted for on the basis of date of bill of lading.

c) Sales are inclusive of dyeing charges, conversion charges and are net of shortage and discounts, excluding value added tax.

d) Interest income is recognized on time proportion basis taking into account the amount outstanding and the rate applicable.

e) Cost/expenditure is recognized on accrual, as they are incurred except payments of leave travel allowances and reimbursement of medical expenses to the staff, being immaterial, are accounted for on cash basis.

f) The claims against the company are accounted for on acceptance basis.

12. Foreign Exchange Transactions

Transactions in foreign currencies are accounted for at the exchange rate prevailing on the date of transaction. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognized in the Statement of profit and loss. In case of forward contracts (non speculative), the exchange differences are dealt with in the statement of profit and loss over the period of contracts.

13. Employee Benefits

a) Employee benefits comprise both defined contribution and defined benefit plans.

Defined contribution plan :

Contribution to defined contribution plans are recognised as expenses in the Statement of Profit and Loss, as they are incurred.

Defined benefit plan :

The Company's liability towards gratuity & leave encashment is accounted for on the basis of an actuarial valuation, applying Projected Unit Credit Method done at the year end and is charged to Statement of profit and loss.

b) All short term employee benefits are accounted for on undiscounted basis during the accounting period based on services rendered by employees.

14. Research & Development

Revenue expenditure, including overheads on Research and Development, is charged off as an expense in the year in which incurred. Expenditure which results in the creation of capital assets during development stage is taken as Fixed assets.

15. Investments

Investments are classified into Current and Non Current Investments. Current Investments are stated at lower of cost and fair value. Non Current Investments are stated at cost. A provision for diminution is made to recognise a decline, other than temporary, in the value of Non Current Investments.

16. Borrowing costs

Borrowing costs, which are directly attributable to acquisition, construction or production of a qualifying asset, are capitalized as a part of the cost of the asset. Other borrowing costs are recognised as expenses in the period in which they are incurred.

17. Operating Lease

Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the leased term are classified as operating leases. Operating lease rentals are recognized as an expense, as applicable, over the lease period.

18. Segment Reporting

The Company is engaged in manufacturing (in house and outsourced) fabrics, ready to wear garments and home textiles. Considering the overall nature, the management is of the opinion that the entire operation of the Company falls under one reportable business segment i.e. Textiles and as such there are no separate reportable business segments for the purpose of disclosures as required under Accounting Standard-17 "Segment Reporting".

19. Earnings per share

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

20. Income Tax

Tax expense comprises of current tax and deferred tax. Current tax and deferred tax are accounted for in accordance with Accounting Standard 22 on 'Accounting For Taxes on Income", issued by the Institute of Chartered Accountants of India. Current tax is measured at the amount expected to be paid to the tax authorities, using the applicable tax rates. Deferred income taxes reflect the impact of the current period timing differences between taxable income and accounting income for the period and reversal of timing differences of earlier years / period. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available except that deferred tax assets arising on account of unabsorbed depreciation and losses are recognised if there is virtual certainty that sufficient future taxable income will be available to realise the same. Deferred Tax is measure based on the tax rate and tax laws, enacted or substantively enacted at the Balance Sheet date.

21. Employee Stock Option Schemes

The Company has granted Stock Options to its employees under Employees Stock Option Scheme, 2007 - Series 'A ("ESOP, 2007"). In respect of Options granted under the Employees Stock Options Plan, in accordance with guidelines issued by the SEBI and in compliance with the Guidance Note on Accounting for Employee Share-based Payments issued by the Institute of Chartered Accounts of India in the year 2005 and applicable for the period on or after 1st April 2005, the cost of stock options granted to employees are accounted by the Company using the intrinsic value method and the cost based on excess of market value over the exercise price is recognized in Statement of Profit & Loss, over vesting period on time proportion basis and included in the 'Employee benefit expenses' in Note 24 of the Financial Statements. Should any employee leave in the subsequent year, before exercise of the Option, the value of Option accrued in their favour is written back to the General Reserve.

22. Provisions and Contingent Liabilities

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 embodying economic benefit 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. A contingent liability is disclosed, unless the possibility of an outflow of resources embodying the economic benefit is remote.

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Mar 31, 2011

1. Basis of Preparation of Financial Statements

The financial statements have been prepared under the historical cost convention, except where impairment is made and on accrual basis in accordance with accounting principles generally accepted in India and the provisions of the Companies Act, 1956 and comply with Accounting Standards as notified by the Companies (Accounting Standards) Rules, 2006. Accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.

2. Use of Estimates

The presentation of financial statements requires estimates and assumptions to be made that affect the value of assets and liabilities as well as revenues and expenses as reported in the financial statements. The difference between the actual result and estimates are recognised during the period in which they are materialized / known.

3. Fixed Assets

Fixed Assets are stated at their original cost net of cenvat/value added tax and includes amounts added on revaluation, less accumulated depreciation and impairment loss, if any. The cost includes interest, financial charges, freight, taxes and other incidental expenses incurred for acquisition and installation of the assets. Assets revalued are stated at values determined by the valuers.

4. Intangible Assets

Intangible assets are recognised when it is probable that the future economic benefits that are attributable to the asset will fow to the enterprises and the cost of the asset can be measured reliably.

5. Depreciation and Amortisation

a) Depreciation on fixed assets including revalued assets have been provided on Straight Line Method at the rates and in the manner prescribed in the Schedule XIV to the Companies Act, 1956. Depreciation on additions to Fixed Assets is provided for on pro-rata basis from the date of addition/acquisition till the end of the year and on assets sold/discarded/demolished to the date of disposal. The depreciation on revalued portion of assets is adjusted against the revaluation reserve.

b) Depreciation on assets whose actual cost does not exceed Rs. 5,000/- each is provided at 100% of the cost as specified in Schedule XIV to the Companies Act, 1956.

c) Computer software/System Development: Over a period of five years.

6. Capital Work-In-Progress

Projects under commissioning and other capital work-in-progress are carried at cost, comprising direct cost, related incidental expenses, interest and other financing costs payable on funds specifically borrowed to the extent they relate to the period till assets are ready for intended use.

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 recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets 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.

8. Valuation of Inventories

a) Raw materials (including goods in transit) are valued at cost, on first-in-first-out basis.

b) Work-in-process is valued at cost. Cost for this purpose includes direct cost and attributable overheads.

c) Finished goods are valued at lower of cost or net realisable value. Cost for this purpose includes direct cost, attributable overheads and excise duty.

d) Stores, fuel, dyes, chemicals and packing materials are valued at cost on first-in-first-out basis.

9. Recognition of Income and Expenditure

a) Domestic sales are recognised on transfer of risk and reward which generally coincides with dispatch of goods to the customers.

b) Export sales are accounted for on the basis of date of bill of lading.

c) Sales are inclusive of excise duty, dyeing charges, conversion charges and are net of shortage and discounts excluding value added tax.

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

e) Cost/expenditure is recognised on accrual, as they are incurred except payments of leave travel allowances and reimbursement of medical expenses to the staff, being immaterial, are accounted on cash basis.

f) The claims against the company are accounted on acceptance basis.

10. Foreign Exchange Transactions

Transactions in foreign currencies are accounted at the exchange rate prevailing on the date of transaction. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised in the Profit and loss account. In case of forward contracts (non speculative), the exchange differences are dealt with in the Profit and loss account over the period of contracts.

11. Employee Benefits

a) Employee benefits comprise both defined contribution and defined benefit plans.

Defined contribution plan :

Contribution to defined contribution plans are recognised as expenses in the Profit and Loss Account, as they are incurred.

Defined benefit plan :

The Company's liability towards Gratuity & Leave encashment is accounted for on the basis of an actuarial valuation done at the year end and is charged to the Profit and loss account.

b) All short term employee benefits are accounted for on undiscounted basis during the accounting period based on services rendered by employees.

12. Research & Development

Revenue expenditure, including overheads on Research and Development, is charged out as an expense in the year in which incurred. Expenditure which results in the creation of capital assets is taken as Fixed assets.

13. Investments

Investments are classified into Current and Long-term Investments. Current Investments are stated at lower of cost and fair value. Long-term Investments are stated at cost. A provision for diminution is made to recognise a decline, other than temporary, in the value of Long-term Investments.

14. Borrowing costs

Borrowing costs, which are directly attributable to acquisition, construction or production of a qualifying asset, are capitalized as a part of the cost of the asset. Other borrowing costs are recognised as expenses in the period in which they are incurred.

15. Operating Lease

Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the leased term are classified as operating leases. Operating lease rentals are recognised as an expense, as applicable, over the lease period.

16. Segment Reporting

Business Segment is identified and reported taking into account the nature of products and services, the different risks and returns and the internal business reporting systems. The identification of geographical segment is based on the areas in which major operating divisions of the Company operate.

17. Earnings per share

Basic earnings per share are calculated by dividing the net Profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net Profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

18. Income Tax

Tax expense comprises of current tax and deferred tax. Current tax and Deferred tax are accounted for in accordance with Accounting Standard 22 on "Accounting For Taxes on Income", issued by the ICAI. Current tax is measured at the amount expected to be paid to the tax authorities, using the applicable tax rates. Deferred income taxes reflect the impact of the current period timing differences between taxable income and accounting income for the period and reversal of timing differences of earlier years / period. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available except that deferred tax assets arising on account of unabsorbed depreciation and losses are recognised if there is virtual certainty that sufficient future taxable income will be available to realise the same.

19. Employee Stock Option Schemes

The Company has granted Stock Options to its employees under Employees Stock Option Scheme, 2007 - Series 'A' ("ESOP, 2007"). In respect of Options granted under the Employees Stock Options Plan, in accordance with guidelines issued by the SEBI and in compliance with the Guidance Note on Accounting for Employee Share-based Payments issued by the Institute of Chartered Accounts of India in the year 2005 and applicable for the period on or after 1st April 2005, the cost of stock options granted to employees are accounted by the Company using the intrinsic value method and the cost based on excess of market value over the exercise price is recognised in Profit & Loss Account, over vesting period on time proportion basis and included in the 'Salaries, wages, bonus etc' in Schedule "L" of the Financial Statements. Should any employee leave in the subsequent year, before exercise of the Option, the value of Option accrued in their favour is written back to the General Reserve.

20. Provisions and Contingent Liabilities

A provision is recognised when an enterprise has a present obligation as a result of past event; it is probable that an outfow of resources embodying economic benefit 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. A contingent liability is disclosed, unless the possibility of an outfow of resources embodying the economic benefit is remote.

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Mar 31, 2010

1. Basis of Preparation of Financial Statements

a) The Financial Statements have been prepared under the historical cost convention, on the basis of a going concern, in accordance with generally accepted accounting principles and provisions of the Companies Act, 1956 as adopted consistently by the Company.

b) The Company follows the mercantile system of accounting in general and recognizes income and expenditure on accrual basis except otherwise stated.

2. Use of Estimates

The presentation of financial statements requires estimates and assumptions to be made that affect the value of assets and liabilities as well as revenues and expenses as reported in the financial statements. The difference between the actual result and estimates are recognized during the period in which they are materialized / known.

3. Fixed Assets

a) Fixed Assets are stated at their original cost net of cenvat/value added tax and includes amounts added on revaluation, less accumulated depreciation and impairment loss, if any. The cost includes interest, financial charges, freight, taxes and other incidental expenses incurred for acquisition and installation of the assets. Assets revalued are stated at values determined by the valuers.

b) Assets include assets given on lease. In respect of assets taken on lease, rentals are charged to revenue on accrual basis.

4. Intangible Assets and amortisation

Intangible assets are recognised when it is probable that the future economic benefits that are attributable to the asset will flow to the enterprises and the cost of the asset can be measured reliably. Intangible assets are amortised as follows:

a) Leasehold improvement: Over the period of lease.

b) Computer software : Over a period of five years.

5. Depreciation

a) Depreciation on fixed assets including revalued assets have been provided on Straight Line Method at the rates and in the manner prescribed in the Schedule XIV to the Companies Act, 1956. Depreciation on additions to Fixed Assets is provided for on pro-rata basis from the date of addition/acquisition till the end of the year and on assets sold/discarded/demolished to the date of disposal. The depreciation on revalued portion of assets is adjusted against the revaluation reserve.

b) Depreciation on assets whose actual cost does not exceed Rs.5,000/- each is provided at 100% of the cost as specified in Schedule XIV to the Companies Act, 1956.

6. Capital Work-in-Progress

Projects under commissioning and other capital work-in-progress are carried at cost, comprising direct cost, related incidental expenses, interest and other financing costs payable on funds specifically borrowed to the extent they relate to the period till assets are ready for intended use.

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 assets 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.

8. Inventories

a) Raw materials (including stock in transit) are valued at cost on first-in-first-out basis.

b) Work-in-process is valued at cost. Cost for this purpose includes direct cost and attributable overheads.

c) Finished goods are valued at lower of cost or net realisable value. Cost for this purpose includes direct cost and attributable overheads.

d) Stores, fuel, dyes, chemicals and packing materials are valued at cost on first-in-first-out basis.

9. Recognition of income and expenditure

a) Domestic sales are recognized on transfer of risk and reward which generally considers with dispatch of goods to the customers.

b) Export sales are accounted for on the basis of dates of bill of lading.

c) Sales are inclusive of dyeing charges, conversion charges, overdue charges and are net of shortage and trade discounts excluding value added tax.

d) Interest income is recognized on time proportion basis taking in to account the amount outstanding and the rate applicable.

e) Cost/expenditure is recognized on accrual, as they are incurred except payments of leave travel allowances and reimbursement of medical expenses to the staff, being not material, are accounted on cash basis.

f) The claims against the company are accounted on acceptance basis.

10. Foreign Exchange Transactions

Transactions denominated in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. Any income or expense on account of exchange differences either on settlement or on translation of transactions is recognized in the Profit & Loss account.

11. Employee Benefits

a) Employee benefits comprise both defined contribution and defined benefit plans.

b) All short term employee benefits are accounted for on undiscounted basis during the accounting period based on services rendered by employees.

c) Provident fund is a defined contribution plan

Each eligible employee and the Company make an equal contribution at a percentage of the basic salary specified under the Employees Provident Funds and Miscellaneous Provisions Act, 1952. The Company has no further obligations under the plan beyond its periodic contributions.

d) Gratuity and Leave Encashment is a defined benefit plan

The Companys liability towards Gratuity & Leave encashment is accounted for on the basis of an actuarial valuation done at the year end and is charged to the Profit and Loss account.

12. Research & Development

Revenue expenditure, including overheads on Research and Development, is charged out as an expense in the year in which incurred. Expenditure which results in the creation of capital assets is taken as Fixed assets.

13. Investments

Investments are classified into Current and Long-term Investments. Current Investments are stated at lower of cost and fair value. Long-term Investments are stated at cost. A provision for diminution is made to recognise a decline, other than temporary, in the value of Long-term Investments.

14. Borrowing costs

Financing costs relating to construction of fixed assets are included in costs to the extent they relate to the period till such assets are ready to be put to use. Financing costs not relating to construction of fixed assets are charged to the income statement.

15. Operating Lease

Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the leased term are classified as operating leases. Operating lease rentals are recognized as an expense, as applicable, over the lease period.

16. Segment

The Company is engaged in manufacturing (in house and outsourced) fabrics, ready-to-wear garments and home textiles. Considering the overall nature, the management is of the opinion that the entire operation of the Company falls under one segment i.e. Textiles and as such there are no separate reportable segments for the purpose of disclosures as required under Accounting Standard-17 "Segment Reporting".

17. Earnings per share

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

18. Income Tax

a) Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income tax Act, 1961. Deferred income taxes 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.

b) Deferred tax assets and liabilities are determined based on the difference between the financial statements and tax bases of assets and liabilities, as measured by the enacted / substantively enacted tax rates. Deferred tax Expense / Income is the result of changes in the net deferred tax assets and liabilities.

c) Deferred tax assets are recognized only if there is a virtual certainty backed by convincing evidence of realisation of such assets. Deferred tax assets are reviewed as at each Balance Sheet date and are appropriately adjusted to reflect the amount that is reasonably or virtually certain to be realised.

19. Employee Stock Option Schemes

The Company has granted Stock Options to its employees under Employee Stock Option Scheme, 2007 - Series A ("ESOP 2007"). In respect of Options granted under the Employees Stock Options Plan, in accordance with guidelines issued by the SEBI and in compliance with the Guidance Note on Accounting for Employee Share-based Payments issued by the Institute of Chartered Accounts of India in the year 2005 and applicable for the period on or after 1st April, 2005, the cost of stock options granted to employees are accounted by the Company using the intrinsic value method and the cost based on excess of market value over the exercise price is recognized in Profit & loss Account, over vesting period on time proportion basis and included in the Salaries, wages, bonus etc in Schedule L of the Financial Statements. Should any employee leave in the subsequent year, before exercise of the Option, the value of Option accrued in their favour is written back to the General Reserve.

20. Provisions and Contingent Liabilities

The Company creates a provision when there is present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required, and a reliable estimate can be made of the amount required to settle the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.