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Accounting Policies of Sambandam Spinning Mills Ltd. Company
Mar 31, 2025
2. Material Accounting Policies:
This note provides a list of the material accounting policies adopted in the preparation of these financial
statements. These policies have been consistently applied to all the years presented, unless otherwise
stated.
a) Basis of Preparation of Financial Statements
(i) Compliance with Indian Accounting Standards (IND AS)
These financial statements of the Company have been prepared in accordance with Indian Accounting
Standards (âInd ASâ) notified under Section 133 of the Companies Act, 2013 (the Act) read with Companies
(Indian Accounting Standards) Rules 2015, as amended and other relevant provisions of the Act. The
financial statements comply in all material aspects with Ind AS notified under the Act read with other
relevant provisions of the Act.
The accounting policies are applied consistently to all the periods presented in the financial statements.
(ii) Historical Cost Convention
The financial statements have been prepared on a historical cost basis, except the following:
* Certain financial assets and liabilities that are measured at fair value.
* Defined benefit plans - plan assets measured at fair value.
The fair value measurements are categorized into Level 1,2, or 3 based on the degree to which the inputs to
the fair value measurements are observable and the significance of the inputs to the fair value
measurement in its entirety, as described below:
Level 1 -Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset/liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable
inputs)
(iii) Current and Non - Current Classification
All assets and liabilities have been classified as current or non current as per the Company''s normal
operating cycle and other criteria set out in the Schedule III to the Companies Act 2013.
Deferred Tax assets and liabilities are classified as Non-current assets and liabilities.
The company has identified Twelve months for the classification as current and non current.
(iv) Rounding of amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest two
decimal places of lakhs as per the requirement of Schedule III, unless otherwise stated.
Statement of Material Accounting Policies forming part of the Standalone Financial Statements for the
year ended March 31,2025 (Contd...)
b) Foreign Currency Translation
(i) Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic
environment in which the entity operates (''the functional currency''). The financial statements are presented
in Indian Rupee (Rs), which is the Company''s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the
dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at
year end exchange rates are generally recognized in the Statement of Profit and Loss.
c) Revenue Recognition
Revenue from contracts with customers is recognised on transfer of control of promised goods or service to
a customer at an amount that reflects the consideration to which the company is expected to be entitled to in
exchange for those goods or services. The company recognises the revenue at the amount of transaction
price on the satisfaction of performance obligation. Revenue towards satisfaction of a performance
obligation is measured at the amount of transaction price (net of variable consideration) allocated to that
performance obligation. The transaction price of goods sold and services rendered is net of variable
consideration on account of various discounts and schemes offered by the Company as part of the contract.
Revenue is recognised only to the extent that is highly probable that the amount will not be subject to
significant reversal when uncertainty relating to its recognition is resolved.
Sale of products
Timing of recognition - Revenue from sale of products is recognized when the performance obligations are
satisfied and the control of the products is transferred to customers based on the terms of contract.
Revenue is recognised when collectability of the resulting receivable is reasonably assured.
Measurement of revenue -Revenue is measured based on the transaction price, which is the consideration,
net of customer incentives, discounts, variable considerations, payments made to customers as specified
in the terms of contract with customers. A receivable is recognized when the goods are dispatched,
delivered or upon formal customer acceptance depending on terms of contract with the customer.
Rendering of services
Revenue from services is recognized in accordance with the specific terms of contract on performance
when the collectability of the resulting receivable is reasonably assured.
Income from energy generated
Revenue from energy generated through windmills is recognised based on the contractual rates with the
customers and the credit granted by the regulatory authorities to the said customers for units generated.
Other Operating revenues
Other operating revenues comprise of income from ancillary activities incidental to the operations of the
company and is recognised when the right to receive the income is established as per the terms of the
contract.
d) Other Income
Other income comprising of interest income and rental income are accounted on accrual basis.
Dividend income from investments is recognised when the company''s right to receive payment has been
established (provided that it is probable that the economic benefits will flow to the company and the amount
of income can be measured reliably).
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective
interest rate applicable (provided that it is probable that the economic benefits will flow to the Company and
the amount of income can be measured realiably).
e) Government Grants
Grants from the government (including export incentives) are recognised only where there is a reasonable
assurance that the grant will be received and the Company will comply with all attached conditions.
Government grants are recognised in profit and loss account on a systematic basis over the periods in
which they accrue. Income is deferred in case the Income is recognized in future periods.
f) Current Tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the
taxation authorities.
Current tax is the amount of income tax payable in respect of taxable profit for the year. The Company''s
current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the
reporting period. The Management periodically evaluates positions taken in the tax returns with respect to
situations in which applicable tax regulations are subject to interpretation and establishes provisions where
appropriate.
Deferred Tax
Deferred tax is provided using the balance sheet method on temporary differences between the tax bases
of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax
credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that
taxable profit will be available against which the deductible temporary temporary differences, and the carry
forward of unused tax credits and unused tax losses can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax
asset to be utilized. Unrecognised deferred tax assets are re-assessed at each reporting date and
recognised to the extent that it has become probable that future taxable profits will allow the deferred tax
asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when
the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or
substantively enacted at the reporting date. Deferred tax is recognised in Statement of Profit and Loss,
except to the extent relates to items recognised in Other Comprehensive Income, in which case, it is
recognised in Other Comprehensive Income. 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
taxes relate to the same taxable entity and the same taxation authority.
g) Leases
As a lessee :
The Company recognizes a right-of-use asset (ROU) and a corresponding lease liability for all lease
arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term
leases)and low value leases. For these short-term and low value leases, the Company recognizes the
lease payments as an operating expense on a straight -line basis over the term of the lease. Certain lease
arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU
Assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any
initial direct costs less any lease incentives.
They are subsequently measured at cost less accumulated depreciation and impairment losses. Right-
ofuse assets are depreciated from the commencement date on a straight -line basis over the shorter of the
useful life of the asset or the balance lease term of the underlying asset. Right of use assets are evaluated
for recoverability whenever events or changes in circumstances indicate that their carrying amounts may
not be recoverable.
The lease liability is initially measured at amortized cost at the present value of the future lease payments.
The lease payments are discounted using the interest rate implicit in the lease or, if not readily
determinable, using the incremental borrowing rates in the country of domicile of the leases. Lease
Liabilities are re-measured with a corresponding adjustment to the related right of use asset if the company
changes its assessment if whether it will exercise an extension or a termination option. Lease liability and
ROU asset shall be separately presented in the Balance Sheet and Lease payments shall be classified as
financing cash flows.
As a lessor :
The Company classifies the lease when it does not transfer substantially all the risks and rewards of
ownership of an asset as operating leases. The rental income under operating lease is recognised in the
Statement of Profit and Loss on a straight-line basis over the term of the lease. Initial direct costs incurred in
negotiating and arranging an operating lease are added to the carrying amount of the leased asset and
recognised over the lease term.
h) Property, Plant and Equipment
Property, Plant and Equipment are measured at cost net of tax / duty credit availed less accumulated
depreciation and accumulated impairment losses, if any. Freehold land is not depreciated.
Cost includes related taxes, duties, freight, insurance etc., attributable to acquisition and installation of
assets and borrowing cost incurred up to the date of commencing operations, but excludes duties and taxes
that are recoverable from taxing authorities.
Subsequent cost are included in the asset''s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefit associated with the item will flow to the
company and the cost of the item can be measured reliably. The carrying amount of any component
accounted for as a separate asset is derecognised when replaced. Cost in the nature of repairs and
maintenance are recognised in the Statement of Profit and Loss during the reporting period in which they
are incurred.
Assets which are not ready for their intended use and other capital work in progress are carried at cost,
comprising direct cost, related incidental expenses and attributable interest. Advances given towards
acquisition of Property, Plant and Equipment outstanding at each balance sheet date are disclosed as
Capital Advances under Other Non-Current Assets.
Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all its property,
plant and equipment.
Depreciation/Amortisation methods, estimated useful lives and residual value
Depreciation is calculated using the straight-line basis and the rates arrived are based on the useful lives
prescribed in Schedule ll to the Companies Act, 2013, except in respect of the following assets, where
useful life is different than those specified in Schedule II to the Companies Act are used:
Derecognition
An item of Property, plant and equipment is derecognised upon disposal / when no future economic benefits
are expected to arise from the continued use of assets. Gains or losses on disposal are determined by
comparing proceeds with the carrying amount.
i) Intangible assets
i) Recognition
Intangible assets are recognised only when future economic benefits arising out of the assets flow to the
enterprise and are amortised over their useful life.
ii) Amortization methods and periods
The Company amortizes intangible assets on a straight line method over their estimated useful life not
exceeding 5 years. Software is amortised over a period of three years.
j) Impairment of Assets
Property, plant and equipment and intangible assets are tested for impairment annually whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. An Impairment loss is
recognised for the amount by which the asset''s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of
assets (cash-generating units). Non- financial assets other than good that suffered an impairment are
reviewed for possible reversal of the impairment at the end of each reporting period.
k) Biological Assets:
Livestock - Cattles
Livestock are measured at fair value less cost to sell. Costs to sell include the transportation charges for
transporting the cattle to the market but excludes finance costs and income taxes. Changes in fair value of
livestock are recognised in the Statement of Profit and Loss. Costs such as vaccination, fodder and other
expenses are expensed as incurred.
l) Cash Flow Statement & Cash and Cash Equivalents
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of
transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments.
The cash flows from operating, investing and financing activities of the Company are segregated based on
the available information.
For the purpose of presentation in the Cash flow statement, cash and cash equivalents includes cash on
hand, deposits held at call with financial institutions, other short-term highly liquid investments with original
maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
m) Trade Receivables
Trade receivables are recognised initially at transaction price.
n) Inventories
Raw materials and stores, work-in-progress, finished goods are stated at the lower of cost and net
realizable value.
Cost of raw materials comprise of cost of purchase.
Cost of work-in-progress and finished goods comprises direct materials, direct labour and an appropriate
proportion of variable and fixed overhead expenditure, the later being allocated on the basis of normal
operating capacity.
Cost of inventories also include all other cost incurred in bringing the inventories to their present location
and condition. Costs are assigned to individual items of inventory on weighted average basis. Costs of
purchased inventory are determined after deducting rebates and discounts.
Net realizable value is the estimated selling price in the ordinary course of business less the estimated
costs of completion and the estimated costs necessary to make the sale.
o) Investment in Associates
The investment in associates are carried in the financial statements at historical cost except when
the investment is classified as held for sale in which case it is accounted in accordance with Ind AS 105 -
"Non - current assets held for sale and discontinued operations".
Investments in associates carried at cost are tested for impairment in accordance with Ind AS 36. Any
impairment loss reduces the carrying value of the investment. The impairment losses so recognised is
limited to the carrying value of the investment.
p) Financial Instruments
A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or
equity instrument of another entity. Financial assets and financial liabilities are recognised when the
Company becomes a party to the contractual provisions of the relevant instrument.
Financial Instruments are initially measured at fair value other than trade receivables which is recognized at
transaction value. Transaction costs that are directly attributable to the acquisition or issue of financial
assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit
or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial
assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
Financial Assets
i.) Classification
The company classifies its financial assets in the following measurement categories:
a) those to be measured subsequently at fair value (either through other comprehensive income, or
through profit or loss), and
b) those measured at amortised cost.
The classification depends on the entity''s business model for managing the financial assets and the
contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in Statement of profit or loss or
other comprehensive income. For investments in debt instruments, this will depend on the business model
in which the investment is held. For investments in equity instruments, this will depend on whether the
Company has made an irrevocable election at the time of initial recognition to account for equity investment
at fair value through other comprehensive income.
The Company reclassifies debt investments only when its business model for managing those assets
changes.
ii) Initial Recognition
All financial assets are recognised initially at fair value, plus in the case of financial assets not at recorded at
fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the
financial assets. However, trade receivables that do not contain a significant financing component are
measured at transaction price.
iii) Subsequent measurement
Subsequent measurement of debt instruments depends on the Company''s business model for managing
the assets and the cash flow characteristics of the asset. There are three measurement categories into
which the Company classifies its debt instruments:
Amortised cost :
Assets that are held for collection of contractual cash flows where those cash represents the solely
payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that
is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit
or loss when the asset is derecognized or impaired. Interest income from these financial assets is included
in finance income using the effective interest rate method.
Fair Value through Other Comprehensive Income (FVOCI) :
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the
asset''s cash flows represent solely payments of principal and interest, are measured at fair value through
other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except
for the recognition of impairment gains or losses, interestrevenue and foreign exchange gains and losses
which are recognised in profit and loss. When the financial asset is derecognized, the cumulative gain or
loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains /
(losses). Interest income from these financial assets is included in other income using the effective interest
rate method.
Fair Value through Profit or Loss (FVTPL) :
Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or
loss. A gain or loss on debt investment that is subsequently measured at fair value through profit or loss is
recognised in profit or loss and presented net in the statement of profit and loss in the period in which it
arises. Interest income from these financial assets is included in other income.
Equity instruments :
The Company subsequently measures all equity investments (other than investment in associates) at fair
value. Dividends from such investment are recognised in profit or loss as other income when the
Company''s right to receive payments is established.
Changes in the fair value of financial assets at fair value through profit or loss are recognised in the
other income.
iv) Impairment of Financial Assets
The Company assesses the expected credit losses associated with its assets carried at amortised cost in
accordance with Ind AS 109. The Company recognises impairment losses on its financial assets based on
whether there has been a significant increase in credit risk. The Company applies the simplified approach in
accordance with Ind AS 109 Financial Instruments on trade receivables, where lifetime impairment losses
is recognised at each reporting date, right from initial recognition of the receivables.
The Company recognises impairment loss on other financial assets measured at fair value at amortised
cost, the Company determines if there has been a significant increase in credit risk of the financial asset
since initial recognition. If the credit risk has not increased significantly, an amount equal to 12 month
expected credit losses is measured as loss allowance. However, if credit risk has increased significantly, an
amount equal to lifetime expected credit losses is measured and recognised as loss allowance.
v) Derecognition of Financial Assets
A financial asset is derecognized only when
a) The company has transferred the rights to receive cash flow from the financial asset or
b) The rights to receive the cash flows of the financial assets have expired
q) Derivatives
The Company enters into certain derivative contracts to hedge risks which are not designated as
hedges. Such contracts are accounted at fair value through profit or loss and are included in profit and loss
account.
r) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is
a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis
or realize the asset and settle the liability simultaneously. The legally enforceable right must not be
contingent on future events and must be enforceable in the normal course of business and in the event of
default, insolvency or bankruptcy of the Company or the counter party.
Financial Liabilities
Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as
equity in accordance with the substance of the contractual arrangements and the definitions of a financial
liability and an equity instrument.
Initial Recognition and Measurement
All financial liabilities are initially recognised at the value of respective contractual obligations. The
Company''s financial liabilities includes loans and borrowings, trade and other payables are recognised
at net of directly attributable transaction costs
Subsequent Measurement
All financial liabilities are subsequently measured at amortised cost using the effective interest rate
mehtod.
Derecognition of Financial Liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or
expires. When an existing financial liability is replaced by another financial liability from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as the de-recognition of the original financial liability and the
recognition of a new financial liability. The difference in the respective carrying amounts is recognised in the
Statement of Profit and Loss.
s) Borrowing costs
General and specific borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset are capitalized during the period of time that is required to complete and
prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a
substantial period of time to get ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure
on qualifying assets is deducted from the borrowing cost eligible for capitalization.
Other borrowings costs are expensed in the period in which they are incurred.
Mar 31, 2024
2. Material Accounting Policies:
This note provides a list of the material accounting policies adopted in the preparation of these financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
a) Basis of Preparation of Financial Statements
(i) Compliance with Indian Accounting Standards (IND AS)
These financial statements of the Company have been prepared in accordance with Indian Accounting Standards (âInd ASâ) notified under Section 133 of the Companies Act, 2013 (the Act) read with Companies (Indian Accounting Standards) Rules 2015, as amended and other relevant provisions of the Act. The financial statements comply in all material aspects with Ind AS notified under the Act read with other relevant provisions of the Act.
The accounting policies are applied consistently to all the periods presented in the financial statements.
(ii) Historical Cost Convention
The financial statements have been prepared on a historical cost basis, except the following:
* Certain financial assets and liabilities that are measured at fair value.
* Defined benefit plans - plan assets measured at fair value.
The fair value measurements are categorized into Level 1,2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, as described below:
Level 1 -Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset/liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs)
(iii) Current and Non - Current Classification
All assets and liabilities have been classified as current or non current as per the Company''s normal operating cycle and other criteria set out in the Schedule III to the Companies Act 2013.
Deferred Tax assets and liabilities are classified as Non-current assets and liabilities.
The company has identified Twelve months for the classification as current and non current.
(iv) Rounding of amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest two decimal places of lakhs as per the requirement of Schedule III, unless otherwise stated.
b) Foreign Currency Translation
(i) Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (''the functional currency''). The financial statements are presented in Indian Rupee (Rs), which is the Company''s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in the Statement of Profit and Loss.
c) Revenue Recognition
Revenue from contracts with customers is recognised on transfer of control of promised goods or service to a customer at an amount that reflects the consideration to which the company is expected to be entitled to in exchange for those goods or services. The company recognises the revenue at the amount of transaction price on the satisfaction of performance obligation. Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation. The transaction price of goods sold and services rendered is net of variable consideration on account of various discounts and schemes offered by the Company as part of the contract.
Revenue is recognised only to the extent that is highly probable that the amount will not be subject to significant reversal when uncertainty relating to its recognition is resolved.
Sale of products
Timing of recognition - Revenue from sale of products is recognized when the performance obligations are satisfied and the control of the products is transferred to customers based on the terms of contract. Revenue is recognised when collectability of the resulting receivable is reasonably assured.
Measurement of revenue -Revenue is measured based on the transaction price, which is the consideration, net of customer incentives, discounts, variable considerations, payments made to customers as specified in the terms of contract with customers. A receivable is recognized when the goods are dispatched, delivered or upon formal customer acceptance depending on terms of contract with the customer.
Rendering of services
Revenue from services is recognized in accordance with the specific terms of contract on performance when the collectability of the resulting receivable is reasonably assured.
Income from energy generated
Revenue from energy generated through windmills is recognised based on the contractual rates with the customers and the credit granted by the regulatory authorities to the said customers for units generated.
Other Operating revenues
Other operating revenues comprise of income from ancillary activities incidental to the operations of the company and is recognised when the right to receive the income is established as per the terms of the contract.
d) Other Income
Other income comprising of interest income and rental income are accounted on accrual basis.
Dividend income from investments is recognised when the company''s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the company and the amount of income can be measured reliably).
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured realiably).
e) Government Grants
Grants from the government (including export incentives) are recognised only where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions.
Government grants are recognised in profit and loss account on a systematic basis over the periods in which they accrue. Income is deferred in case the Income is recognized in future periods.
f) Current Tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities.
Current tax is the amount of income tax payable in respect of taxable profit for the year. The Company''s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. The Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred Tax
Deferred tax is provided using the balance sheet method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognised deferred tax assets are re-assessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. Deferred tax is recognised in Statement of Profit and Loss, except to the extent relates to items recognised in Other Comprehensive Income, in which case, it is recognised in Other Comprehensive Income. 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 taxes relate to the same taxable entity and the same taxation authority.
g) Leases
As a lessee :
The Company recognizes a right-of-use asset (ROU) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases)and low value leases. For these short-term and low value leases, the Company recognizes the lease payments as an operating expense on a straight -line basis over the term of the lease. Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU Assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives.
They are subsequently measured at cost less accumulated depreciation and impairment losses. Right-ofuse assets are depreciated from the commencement date on a straight -line basis over the shorter of the useful life of the asset or the balance lease term of the underlying asset. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of the leases. Lease Liabilities are re-measured with a corresponding adjustment to the related right of use asset if the company changes its assessment if whether it will exercise an extension or a termination option. Lease liability and ROU asset shall be separately presented in the Balance Sheet and Lease payments shall be classified as financing cash flows.
As a lessor :
The Company classifies the lease when it does not transfer substantially all the risks and rewards of ownership of an asset as operating leases. The rental income under operating lease is recognised in the Statement of Profit and Loss on a straight-line basis over the term of the lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term.
h) Property, Plant and Equipment
Property, Plant and Equipment are measured at cost net of tax / duty credit availed less accumulated depreciation and accumulated impairment losses, if any. Freehold land is not depreciated.
Cost includes related taxes, duties, freight, insurance etc., attributable to acquisition and installation of assets and borrowing cost incurred up to the date of commencing operations, but excludes duties and taxes that are recoverable from taxing authorities.
Subsequent cost are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefit associated with the item will flow to the company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. Cost in the nature of repairs and maintenance are recognised in the Statement of Profit and Loss during the reporting period in which they are incurred.
Assets which are not ready for their intended use and other capital work in progress are carried at cost, comprising direct cost, related incidental expenses and attributable interest. Advances given towards acquisition of Property, Plant and Equipment outstanding at each balance sheet date are disclosed as Capital Advances under Other Non-Current Assets.
Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all its property, plant and equipment.
Depreciation/Amortisation methods, estimated useful lives and residual value
Depreciation is calculated using the straight-line basis and the rates arrived are based on the useful lives prescribed in Schedule ll to the Companies Act, 2013, except in respect of the following assets, where useful life is different than those specified in Schedule II to the Companies Act are used:
The company follows the policy of charging depreciation on pro- rate basis on the assets acquired during the year. Leasehold asset''s are amortised over the period of lease or useful life whichever is less. The residual values are not more than 5% of the original cost of the asset. The assets'' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Dercognition
An item of Proprty,plant and equipment is derecognised upon disposal / when no future economic benefits are expected to arise from the continued use of assets. Gains or losses on disposal are determined by comparing proceeds with the carrying amount.
i) Intangible assets
i) Recognition
Intangible assets are recognised only when future economic benefits arising out of the assets flow to the enterprise and are amortised over their useful life.
ii) Amortization methods and periods
The Company amortizes intangible assets on a straight line method over their estimated useful life not exceeding 5 years. Software is amortised over a period of three years.
j) Impairment of Assets
Property, plant and equipment and intangible assets are tested for impairment annually whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An Impairment loss is recognised for the amount by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non - financial assets other than good that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
k) Biological Assets:
Livestock - Cattles
Livestock are measured at fair value less cost to sell. Costs to sell include the transportation charges for transporting the cattle to the market but excludes finance costs and income taxes. Changes in fair value of livestock are recognised in the Statement of Profit and Loss. Costs such as vaccination, fodder and other expenses are expensed as incurred.
l) Cash Flow Statement & Cash and Cash Equivalents
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
For the purpose of presentation in the Cash flow statement, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
m) Trade Receivables
Trade receivables are recognised initially at transaction price.
n) Inventories
Raw materials and stores, work-in-progress, finished goods are stated at the lower of cost and net realizable value.
Cost of raw materials comprise of cost of purchase.
Cost of work-in-progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the later being allocated on the basis of normal operating capacity.
Cost of inventories also include all other cost incurred in bringing the inventories to their present location and condition. Costs are assigned to individual items of inventory on weighted average basis. Costs of purchased inventory are determined after deducting rebates and discounts.
Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
o) Investment in Associates
The investment in associates are carried in the financial statements at historical cost except when the investment is classified as held for sale in which case it is accounted in accordance with Ind AS 105 -"Non - current assets held for sale and discontinued operations".
Investments in associates carried at cost are tested for impairment in accordance with Ind AS 36. Any impairment loss reduces the carrying value of the investment. The impairment losses so recognised is limited to the carrying value of the investment.
p) Financial Instruments
A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the relevant instrument.
Financial Instruments are initially measured at fair value other than trade receivables which is recognized at transaction value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
Financial Assets i.) Classification
The company classifies its financial assets in the following measurement categories :
a) those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
b) those measured at amortised cost.
The classification depends on the entity''s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in Statement of profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for equity investment at fair value through other comprehensive income.
The Company reclassifies debt investments only when its business model for managing those assets changes.
ii) Initial Recognition
All financial assets are recognised initially at fair value, plus in the case of financial assets not at recorded at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial assets. However, trade receivables that do not contain a significant financing component are measured at transaction price.
iii) Subsequent measurement
Subsequent measurement of debt instruments depends on the Company''s business model for managing the assets and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:
Amortised cost :
Assets that are held for collection of contractual cash flows where those cash represents the solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
Fair Value through Other Comprehensive Income (FVOCI) :
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the asset''s cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interestrevenue and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognized, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains / (losses). Interest income from these financial assets is included in other income using the effective interest rate method.
Fair Value through Profit or Loss (FVTPL) :
Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on debt investment that is subsequently measured at fair value through profit or loss is recognised in profit or loss and presented net in the statement of profit and loss in the period in which it arises. Interest income from these financial assets is included in other income.
Equity instruments :
The Company subsequently measures all equity investments (other than investment in associates) at fair value. Dividends from such investment are recognised in profit or loss as other income when the Company''s right to receive payments is established.
Changes in the fair value of financial assets at fair value through profit or loss are recognised in the other income.
iv) Impairment of Financial Assets
The Company assesses the expected credit losses associated with its assets carried at amortised cost in accordance with Ind AS 109. The Company recognises impairment losses on its financial assets based on whether there has been a significant increase in credit risk. The Company applies the simplified approach in accordance with Ind AS 109 Financial Instruments on trade receivables, where lifetime impairment losses is recognised at each reporting date, right from initial recognition of the receivables.
The Company recognises impairment loss on other financial assets measured at fair value at amortised cost, the Company determines if there has been a significant increase in credit risk of the financial asset since initial recognition. If the credit risk has not increased significantly, an amount equal to 12 month expected credit losses is measured as loss allowance. However, if credit risk has increased significantly, an amount equal to lifetime expected credit losses is measured and recognised as loss allowance.
v) Derecognition of Financial Assets
A financial asset is derecognized only when
a) The company has transferred the rights to receive cash flow from the financial asset or
b) The rights to receive the cash flows of the financial assets have expired
q) Derivatives
The Company enters into certain derivative contracts to hedge risks which are not designated as hedges. Such contracts are accounted at fair value through profit or loss and are included in profit and loss account.
r) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counter party.
Financial Liabilities
Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Initial Recognition and Measurement
All financial liabilities are initially recognised at the value of respective contractual obligations. The Company''s financial liabilities includes loans and borrowings, trade and other payables which are recognised at net of directly attributable transaction costs
Subsequent Measurement
All financial liabilities are subsequently measured at amortised cost using the effective interest rate mehtod.
Derecognition of Financial Liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another financial liability from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original financial liability and the recognition of a new financial liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
s) Borrowing costs
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing cost eligible for capitalization.
Other borrowings costs are expensed in the period in which they are incurred.
Mar 31, 2018
1. Corporate Information
Sambandam Spinning Mills Limited (âthe Companyâ) is a listed Public Company domiciled in India and is incorporated under the provisions of the Companies Act 2013, as applicable in India. The registered office headquartered in Salem, India. The Company is principally engaged in production of cotton yarn.
2. Basis of preparation of financial statements
Compliance with Indian Accounting Standards (Ind AS):
The financial statements of the Company have been prepared in accordance with the Ind AS notified under the Companies (Indian Accounting Standards) Rules, 2015 and the relevant provisions of the Companies Act, 2013 (âthe 2013 Actâ), as applicable. Upto the year ended 31st March, 2017, the Company prepared its financial statements in accordance with the requirements of previous GAAP, which includes Standards notified under the Companies (Accounting Standards) Rules, 2006. These are the Company''s first Ind AS Financial statements. The date of transition to Ind AS is April 1, 2016.
First time adoption:
In accordance with Ind AS 101 on First time adoption of Ind AS, the Company has prepared its first Ind AS financial statements which include:
(i) Three Balance sheets namely, the opening Balance sheet as at April 1, 2016 (the transition date) by recognising all assets and liabilities whose recognition is required by Ind AS, not recognising assets or liabilities which are not permitted by Ind AS, by reclassifying assets and liabilities from previous GAAP as required by Ind AS, and applying Ind AS in measurement of recognised assets and liabilities; and Balance sheets as at March 31, 2018 and 2017.
(ii) Two statements each of profit and loss; cash flows and changes in equity for the years ended March 31, 2018 and 2017 together with related notes.
The same accounting policies have been applied for all the periods presented except when the Company has made use of certain exceptions and/ or exemptions.
The financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/ or disclosure purposes in these financial statements is determined on such a basis, except for leasing transactions that are within the scope of Ind AS 17 and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 or value in use in Ind AS 36.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
- Level 3 inputs are unobservable inputs for the asset or liability.
All assets and liabilities have been classified as current or non-current as per the company''s normal operating cycle and other criteria set out in the revised schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the company has determined its operating cycle as twelve months for the purpose of current and noncurrent classification of assets and liabilities.
The Ind AS Financial Statements are presented in Indian Rupees (Rs).
The Ind AS Financial Statements were approved for issue by the Board of Directors on 27th May 2018.
3. Revenue recognition
Revenue is measured at the fair value of consideration received or receivable.
Sale of Goods
Revenue from sale of products is recognized when the goods are despatched or appropriated as per the terms sales at which time the title and significant risks and rewards of ownership pass to the customer. Revenue is recognised when collectability of the resulting receivable is reasonably assured. Revenue is exclusive of Goods and service tax, as applicable and is reduced for estimated customer returns, commissions, rebates and discounts, and other similar allowances.
Rendering of Services
Revenue from services is recognized in accordance with the specific terms of contract on performance when the collectability of the resulting receivable is reasonably assured.
Income from energy generated
Revenue from energy generated through windmills is recognized based on the contractual rates with the customers and the credit granted by the regulatory authorities to the said customers for units generated.
Other operating revenues
Other operating revenues comprise of income from ancillary activities incidental to the operations of the company and is recognized when the right to receive the income is established as per the terms of the contract.
4. Other Income
Other Income comprises of Dividend, Interest and rental income and are accounted on accrual basis.
Dividend income from investments is recognised when the Company''s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).
5. Foreign currency transactions
Foreign currency transactions (including booking/cancellation of forward contracts) are recorded at the rates prevailing on the date of the transaction. Monetary assets and liabilities in foreign currency, other than those covered by forward exchange contracts, are translated at year end foreign exchange rates. Exchange differences arising on settlements are recognized in the Statement of Profit and Loss. In case of forward exchange contracts which are entered into hedge the foreign currency risk of a receivable/payable recognized in these financial statements, premium or discount on such contracts are amortised over the life of the contract and exchange differences arising thereon in the reporting period are recognised in the Statement of Profit and loss. Forward exchange contracts which are arranged to hedge the foreign currency risk of a firm commitment is marked to market at the year end and the resulting losses, if any, are charged to the Statement of Profit and loss.
6. Employee benefits
(i) Short term employee benefit obligations are estimated and provided for. A liability is recognised for benefits accruing to employees in respect of salaries, wages, performance incentives, medical benefits and other short term benefits in the period the related service is rendered, at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date;
(ii) Retirement Benefit plans and Post-employment benefits
Payments to defined contribution plans i.e., Company''s contribution to provident fund, superannuation fund and other funds and employee state insurance are determined under the relevant schemes and/ or statute and charged to the Statement of Profit and Loss in the period of incurrence when the services are rendered by the employees.
For defined benefit plans i.e. Company''s liability towards gratuity (funded), other retirement/ terminations benefits and compensated absences, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Defined benefit costs are comprised of:
- service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
- net interest expense or income; and
- re-measurement
The Company presents the first two components of defined benefit costs in profit or loss in the line item ''Employee benefits expense''. Curtailment gains and losses are accounted for as past service costs.
Re-measurement of net defined benefit liability/ asset pertaining to gratuity comprise of actuarial gains/ losses (i.e. changes in the present value resulting from experience adjustments and effects of changes in actuarial assumptions) and is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Re-measurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to profit or loss.
7. Property, Plant and Equipment
Cost:
Property, plant and equipment held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost (net of duty/ tax credit availed) less accumulated depreciation and accumulated impairment losses. Cost of all civil works (including electrification and fittings) is capitalised with the exception of alterations and modifications of a capital nature to existing structures where the cost of such alteration or modification is Rs.10000 and below.
Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Company''s accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
Fixtures, plant and equipment (including patterns and dies) where the cost exceeds Rs.10,000 and the estimated useful life is two years or more, is capitalised and stated at cost (net of duty/ tax credit availed) less accumulated depreciation and accumulated impairment losses.
Deemed cost on transition to Ind AS:
The Company has elected to continue with the carrying value of all of its property, plant and equipment recognised as of April 1, 2016 (the transition date) measured as per the previous GAAP and use such carrying value as its deemed cost as of the transition date.
Depreciation/amortization:
Depreciation is recognised so as to write off the cost of assets (other than properties under construction) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Depreciation is provided based on useful life of the assets as prescribed in Schedule 11 to the Companies Act, 2013 except in respect of the following assets, where useful life is different than those prescribed in Schedule II are used:
De-recognition:
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss
8. Intangible Assets
The Company has elected to continue with the carrying value of all of its intangible assets recognised as of April 1, 2016 (the transition date) measured as per the previous GAAP and use such carrying value as its deemed cost as of the transition date.
Intangible assets with finite useful lives that are acquired separately, where the cost exceeds Rs.10,000 and the estimated useful life is two years or more, is capitalised and carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
De-recognition of intangible assets:
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from de-recognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, is recognised in profit or loss when the asset is derecognised.
Estimated useful life of Intangible assets - (i) Computer software - over a period of 5 years; (ii) Trade name - Over a period of 5 years.
9. Impairment of assets
The carrying amount of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss will be recognised in the Statement of Profit and Loss wherever the carrying amount of an asset exceeds its estimated recoverable amount. When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss. Provision for impairment will be reviewed periodically and amended depending on changes in circumstances.
10. Inventories
Inventories (other than process waste) are stated at lower of cost and net realisable value.
Cost of raw materials, stores, spares and consumables comprises cost of purchases and includes taxes and duties and is net of eligible credits under applicable schemes.
Cost of work-in-progress, work-made components and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overheads, which is allocated on a systematic basis.
Cost of inventories also includes all other related costs incurred in bringing the inventories to their present location and condition.
Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale
The cost for the said purpose is determined as follows:
(i) in the case of stores and spare parts, the weighted average cost (net of credit, if any),
(ii) in the case of cotton in process and manufactured yarn, is the cost adopting the absorption costing method, and without deduction of the adjustment made for power generated through Wind energy converters and adjusted against the cost of power purchased from state electricity board.
(iii) Process waste is valued at net realizable value.
Provision is made for obsolete, slow moving and damaged items of inventory, if any.
11. Government grants
Government grants (including export incentives) are recognised only when there is reasonable assurance that the Company will comply with the conditions attaching to them and the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate.
12. Borrowing costs
Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are charged to the Statement of Profit and Loss in the period in which they are incurred.
13. Research and development
Revenue expenditure on research and development is charged to the Statement of Profit and Loss as and when incurred. Capital expenditure on research and development, where the same represents cost of Property, Plant and Equipment, if any, is given the same accounting treatment as applicable to other capital expenditure.
14. Income Taxes
Income tax expense represents the sum of the tax currently payable and deferred tax. Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.
Current Tax:
Current tax is determined on taxable profits for the year chargeable to tax in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961 including other applicable tax laws that have been enacted or substantively enacted
Deferred Tax:
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax asset is recognised for the carry forward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities
15. Provisions and contingencies
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursements will be received and the amount of the receivable can be measured reliably.
A disclosure of a contingent liability is made when there is a possible obligation that may, but probably will not, require outflow of resources. Where there is possible obligation or a present obligation where the likelihood of outflow of resources is remote, no provision or disclosure is made.
16. Financial Instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
Financial assets:
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
Classification of financial assets
The financial assets are initially measured at fair value. Transaction costs that are directly attributable to the acquisition of financial assets are added to the fair value of the financial assets on initial recognition.
After initial recognition:
(.i.) Financial assets (other than investments and derivative instruments) are subsequently measured at amortised cost using the effective interest method.
Effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Investments in debt instruments that meet the following conditions are subsequently measured at amortised cost:
- the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
- the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments on principal and interest on the principal amount outstanding.
Income on such debt instruments is recognised in profit or loss and is included in the âOther Incomeâ.
The Company has not designated any debt instruments as fair value through other comprehensive income.
(ii) Financial assets (i.e. derivative instruments and investments in instruments other than equity of subsidiaries, joint ventures and associates) are subsequently measured at fair value.
Such financial assets are measured at fair value at the end of each reporting period, with any gains (e.g. any dividend or interest earned on the financial asset) or losses arising on re-measurement recognised in profit or loss and included in the âOther Incomeâ.
Investments in equity instruments of subsidiaries, joint ventures and associates
The Company measures its investments in equity instruments of subsidiaries, joint ventures and associates at cost in accordance with Ind AS 27. At transition date, the Company has elected to continue with the carrying value of such investments measured as per the previous GAAP and use such carrying value as its deemed cost.
Impairment of financial assets:
A financial asset is regarded as credit impaired when one or more events that may have a detrimental effect on estimated future cash flows of the asset have occurred. The Company applies the expected credit loss model for recognising impairment loss on financial assets (i.e. the shortfall between the contractual cash flows that are due and all the cash flows (discounted) that the Company expects to receive).
De-recognition of financial assets:
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. On de-recognition of a financial asset in its entirety, the difference between the asset''s carrying amount and the sum of the consideration received and receivable is recognised in the Statement of profit and loss.
The Company has applied the de-recognition requirements of financial assets prospectively for transactions occurring on or after April 1, 2015 (the transition date).
Financial liabilities and equity instruments:
Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a group entity are recognised at the proceeds received, net of direct issue costs.
Repurchase of the Company''s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company''s own equity instruments.
Financial liabilities
All financial liabilities (other than derivative instruments) are subsequently measured at amortised cost using the effective interest method. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included in the âFinance Costsâ.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by the Company are initially measured at their fair values and are subsequently measured (if not designated as at Fair value though profit or loss) at the higher of:
- the amount of impairment loss allowance determined in accordance with requirements of Ind AS 109; and
- the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of Ind AS 18.
De-recognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired. An exchange between with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
The Company has applied the de-recognition requirements of financial liabilities prospectively for transactions occurring on or after April 1, 2015 (the transition date).
Derivative financial instruments:
The Company enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign exchange forward contracts and cross currency interest rate swaps. Further details of derivative financial instruments are disclosed in Note 3.6.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedging relationship and the nature of the hedged item.
Embedded derivatives
Derivatives embedded in non-derivative host contracts that are not financial assets within the scope of Ind AS 109 are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at Fair value through profit or loss.
As of the transition date, the Company has assessed whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative on the basis of the conditions that existed on the later of the date of first became a party to the contract and the date when there has been change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract.
Hedge accounting:
The Company designates certain derivatives as hedging instruments in respect of foreign currency risk, as either fair value hedges, cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.
Note 3.6 sets out details of the fair values of the derivative instruments used for hedging purposes.
Fair value hedges
Changes in fair value of the designated portion of derivatives that qualify as fair value hedges are recognised in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The change in the fair value of the designated portion of hedging instrument and the change in the hedged item attributable to the hedged risk are recognised in profit or loss in the line item relating to the hedged item.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. The fair value adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised to profit or loss from that date.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the âOther Incomeâ.
Amounts previously recognised in other comprehensive income and accumulated in equity relating to (effective portion as described above) are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, such gains and losses are transferred from equity (but not as a reclassification adjustment) are included in the initial measurement of the cost of the non-financial asset or non-financial liability.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income and accumulated in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in profit or loss.
17. Recent accounting pronouncements
Appendix B to Ind AS 21, Foreign currency transactions and advance consideration?: On March 28, 2018, the Ministry of Corporate Affairs (''the MCA'') notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency.
The amendment will come into force from April 1, 2018. The Company has evaluated the effect of this on the financial statements and the impact is not material.
Ind AS 115, Revenue from Contract with Customers: On March 28, 2018, the MCA notified the Ind AS 115. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further, the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity''s contracts with customers.The standard permits two possible methods of transition:
Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors.
Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach)
The effective date for adoption of Ind AS 115 is financial period beginning on or after April 1, 2018.
The Company will adopt the standard on April 1, 2018 by using the cumulative catch-up transition method and accordingly, comparatives for the year ending or ended March 31, 2018 will not be retrospectively adjusted. The effect on adoption of Ind AS 115 is not reasonably estimable.
Critical accounting judgments and key sources of estimation uncertainty
The preparation of financial statements in conformity with Ind AS requires the Company''s Management to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities recognised in the Ind AS financial statements that are not readily apparent from other sources. The judgements, estimates and associated assumptions are based on historical experience and other factors including estimation of effects of uncertain future events that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates (accounted on a prospective basis) and recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods of the revision affects both current and future periods.
The following are the critical judgements and estimations that have been made by the Management in the process of applying the Company''s accounting policies and that have the most significant effect on the amounts recognised in the financial statements and/or key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
Inventories
An inventory provision is recognised for cases where the realisable value is estimated to be lower than the inventory carrying value. The inventory provision is estimated taking into account various factors, including prevailing sales prices of inventory item, changes in the related laws / emission norms and losses associated with obsolete / slow-moving / redundant inventory items. The Company has, based on these assessment, made adequate provision in the books.
Taxation
Tax expense is calculated using applicable tax rate and laws that have been enacted or substantially enacted. In arriving at taxable profit and all tax bases of assets and liabilities, the Company determines the taxability based on tax enactments, relevant judicial pronouncements and tax expert opinions, and makes appropriate provisions which includes an estimation of the likely outcome of any open tax assessments / litigations. Any difference is recognised on closure of assessment or in the period in which they are agreed.
Deferred income tax assets are recognized to the extent that it is probable that future taxable income will be available against which the deductible temporary differences, unused tax losses, unabsorbed depreciation and unused tax credits could be utilized.
Provisions
The management makes judgements based on experience regarding the level of provision required to account for potentially uncollectible receivables using information available at the Balance Sheet date. Provisions so created are based on management assessment of the receivable balances after communication with the respective debtors and are created on the receivable balances net off against related brokerage dues outstanding.
Provisions for litigation and contingencies are determined based on evaluations made by the management of the present obligation arising from past events the settlement of which is expected to result in outflow of resources embodying economic benefits, which involves judgements around estimating the ultimate outcome of such past events and measurement of the obligation amount. Due to the judgements involved in such estimations, the provisions are sensitive to the actual outcome in future periods.
Fair value measurements and valuation processes
Some of the Company''s assets and liabilities are measured at fair value for financial reporting purposes. The Management determines the appropriate valuation techniques and inputs for the fair value measurements. In estimating the fair value of an asset or a liability, the Company used market-observable data to the extent it is available. Where Level 1 inputs are not available, the Company engaged third party qualified valuers to perform the valuations in order to determine the fair values based on the appropriate valuation techniques and inputs to fair value measurements. Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed in Note 3.6.
Mar 31, 2017
1. Basis of preparation of standalone financial statements - The standalone financial statements of the Company have been prepared in accordance with the generally accepted accounting principles in India (Indian GAAP) to comply with the Accounting standards specified under section 133 of the Companies Act, 2013 and the relevant provisions of the Companies Act, 2013 (âthe 2013 Actâ)/Companies Act, 1956 (âthe 1956 Actâ), as applicable. The standalone financial statements have been prepared on accrual basis under the historical cost convention except in so far as they relate to revaluation of net assets. The accounting policies adopted in the preparation of the standalone financial statements are consistent with those followed in the previous year.
All assets and liabilities have been classified as current or non-current as per the companyâs normal operating cycle and other criteria set out in the revised schedule II to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the company has determined its operating cycle as twelve months for the purpose of current and non-current classification of assets and liabilities.
2. Use of estimates - The preparation of the standalone financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities on the date of the standalone financial statements, disclosure of contingent liabilities and reported amounts of revenues and expenses for the year. Estimates are based on historical experience, where applicable and other assumptions that management believes are reasonable under the circumstances. Actual results could vary from these estimates and any such differences are dealt with in the period in which the results are known/materialise.
3. Revenue recognition - Revenue from sale of products is recognized on despatch of goods to customers in accordance with the terms of sales. Revenue from services is recognized in accordance with the specific terms of contract on performance. Other operating revenues comprise of income from ancillary activities incidental to the operations of the company and is recognized when the right to receive the income is established as per the terms of the contract.
4. Other Income - Interest and rental income are accounted on accrual basis. Dividend income is accounted when the right to receive is established.
5. Foreign currency transactions - Foreign currency transactions (including booking/cancellation of forward contracts) are recorded at the rates prevailing on the date of the transaction. Monetary assets and liabilities in foreign currency, other than those covered by forward exchange contracts, are translated at year end foreign exchange rates. Exchange differences arising on settlements are recognized in the Statement of Profit and Loss. In case of forward exchange contracts which are entered into hedge the foreign currency risk of a receivable/payable recognized in these standalone financial statements, premium or discount on such contracts are amortised over the life of the contract and exchange differences arising thereon in the reporting period are recognised in the Statement of Profit and loss. Forward exchange contracts which are arranged to hedge the foreign currency risk of a firm commitment is marked to market at the year end and the resulting losses, if any, are charged to the Statement of Profit and loss.
6. Employee benefits - (i) Short term employee benefit obligations are estimated and provided for; (ii) Post employment benefits and other long term employee benefits - (1) Companyâs contribution to provident fund, labour welfare fund, employees state insurance corporation and other funds are determined under the relevant schemes and /or statute and charged to revenue; (2) Companyâs liability towards gratuity and compensated absences are actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognised in revenue.
7. Fixed Assets - Tangible fixed assets - All costs relating to acquisition of fixed assets net of value added tax and terminal excise duty refund under Export Promotion Capital Goods Scheme, subject to the economic life and the cost being in excess of certain limits, are capitalised. Expenditure directly related and incidental to construction are capitalized upto the date of attainment of commercial production. Interest and other related costs, including amortised cost of borrowings attributable only to major projects are capitalized as part of the cost of the respective assets. In the case of Wind energy converters, cost of land on which the converters have been erected is capitalised as cost of the said converters. Cost of structures on leasehold land, where the estimated useful life is more than ten years, is capitalized. Subsequent expenditure relating to fixed assets is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance.
Intangible fixed assets - Intangible assets are carried at cost less accumulated amortisation and impairment losses, if any. The cost of an intangible asset comprises its purchase price, including any duties and other taxes and any directly attributable expenditure on making the asset ready for its intended use and net of any trade discounts and rebate.
8. Depreciation/amortization - Tangible fixed assets - Depreciation on fixed assets is provided on straight line basis. Depreciation is provided based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 except in respect of the following assets, where useful life is different than those prescribed in Schedule II are used:
Intangible fixed assets - (i) Computer software - over a period of 5 years; (ii) Trade name - Over a period of 5 years.
9. Impairment of assets - The carrying amount of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss will be recognised in the Statement of Profit and Loss wherever the carrying amount of an asset exceeds its estimated recoverable amount. The recoverable amount is the greater of the assetâs net selling price and value in use. Provision for impairment will be reviewed periodically and amended depending on changes in circumstances.
10. Investments - Non-current investments are stated at cost. However, provision for diminution is made to recognize a decline, other than temporary, in the value of the investment, if any. Current investments are valued at lower of cost and fair value.
11. Inventories - The governing principle of valuation of Inventories (other than process waste) is the lower of cost and net realisable value. The cost for the said purpose (i) in the case of stores and spare parts, is the weighted average cost (net of Cenvat credit/value added tax, if any), (ii) in the case of cotton in process and manufactured yarn, is the cost adopting the absorption costing method, and (iii) is without deduction of the adjustment made for power generated through Wind energy converters and adjusted against the cost of power purchased from state electricity board. Process waste is valued at net realizable value. Provision is made for obsolete, slow moving and damaged items of inventory, if any.
12. Government grants - Capital grants from government relating to depreciable assets are treated as deferred income and disclosed as a capital reserve and amortised over the useful life of the concerned asset. Cenvat credit relating to capital assets acquired is treated as capital reserve and amortised over the useful life of the concerned assets by transfer profit and loss account and considered under depreciation. Grants/incentives other than those mentioned above are reckoned in the profit and loss account in the year of eligibility.
13. Borrowing costs - Borrowing costs include exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are charged to the Profit and Loss Statement in the period in which they are incurred.
14. Research and development - Revenue expenditure on research and development is charged to the profit and loss account as incurred. Capital expenditure on research and development, where the same represents cost of plant, machinery, equipment and other tangible assets, if any, is given the same accounting treatment as applicable to other capital expenditure.
15. Deferred tax - Deferred income tax charge reflects the impact of the current period timing differences between taxable income and accounting income, other than differences capable of getting reversed during the âtax holidayâ period, subject to consideration of prudence. Where there are unabsorbed depreciation or carry forward losses, deferred tax assets are recognised only to the extent there is virtual certainty of realisation of such assets. Other deferred tax assets are recognised only to the extent there is reasonable certainty of realisation in future. Deferred tax assets/liabilities are reviewed as at each balance sheet date based on developments during the period and available case laws to reassess realisation/liabilities.
16. Provisions and contingencies - To recognise a provision when (i) the company has a present obligation as a result of a past event; (ii) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (iii) a reliable estimate can be made of the amount of the obligation. A disclosure of a contingent liability is made when there is a possible obligation that may, but probably will not, require outflow of resources. Where there is possible obligation or a present obligation where the likelihood of outflow of resources is remote, no provision or disclosure is made.
17. Cash flow statement - Cash flow statements are reported using the indirect method, whereby profit/(loss) before extra-ordinary items/exceptional items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipt or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on available information including taxes paid relating to these activities.
Mar 31, 2016
1. Basis of preparation of financial statements - The financial statements of the Company have been prepared in accordance with the generally accepted accounting principles in India (Indian GAAP) to comply with the Accounting standards prescribed under section 133 of the Companies Act, 2013 and the relevant provisions of the Companies Act, 2013 (âthe 2013 Actâ), as applicable. The financial statements have been prepared on accrual basis under the historical cost convention except in so far as they relate to revaluation of net assets. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.
All assets and liabilities have been classified as current or non-current as per the company''s normal operating cycle and other criteria set out in the revised schedule II to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the company has determined its operating cycle as twelve months for the purpose of current and non-current classification of assets and liabilities.
2. Use of estimates - The preparation of the financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities on the date of the financial statements, disclosure of contingent liabilities and reported amounts of revenues and expenses for the year. Estimates are based on historical experience, where applicable and other assumptions that management believes are reasonable under the circumstances. Actual results could vary from these estimates and any such differences are dealt with in the period in which the results are known/materialize.
3. Revenue recognition - Revenue from sale of products is recognized on dispatch of goods to customers in accordance with the terms of sales. Revenue from services is recognized in accordance with the specific terms of contract on performance. Other operating revenues comprise of income from ancillary activities incidental to the operations of the company and is recognized when the right to receive the income is established as per the terms of the contract.
4. Other Income - Interest and rental income are accounted on accrual basis. Dividend income is accounted when the right to receive is established.
5. Foreign currency transactions - Foreign currency transactions (including booking/cancellation of forward contracts) are recorded at the rates prevailing on the date of the transaction. Monetary assets and liabilities in foreign currency, other than those covered by forward exchange contracts, are translated at year end foreign exchange rates. Exchange differences arising on settlements are recognized in the Statement of Profit and Loss. In case of forward exchange contracts which are entered into hedge the foreign currency risk of a receivable/payable recognized in these financial statements, premium or discount on such contracts are amortized over the life of the contract and exchange differences arising thereon in the reporting period are recognized in the Statement of Profit and loss. Forward exchange contracts which are arranged to hedge the foreign currency risk of a firm commitment is marked to market at the year end and the resulting losses, if any, are charged to the Statement of Profit and loss.
6. Employee benefits - (i) Short term employee benefit obligations are estimated and provided for; (ii) Post employment benefits and other long term employee benefits - (1) Company''s contribution to provident fund, labour welfare fund, employees state insurance corporation and other funds are determined under the relevant schemes and /or statute and charged to revenue; (2) Company''s liability towards gratuity and compensated absences are actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognized in revenue.
7. Fixed Assets - Tangible fixed assets - All costs relating to acquisition of fixed assets net of value added tax and terminal excise duty refund under Export Promotion Capital Goods Scheme, subject to the economic life and the cost being in excess of certain limits, are capitalized. Expenditure directly related and incidental to construction are capitalized upto the date of attainment of commercial production. Interest and other related costs, including amortized cost of borrowings attributable only to major projects are capitalized as part of the cost of the respective assets. In the case of Wind energy converters, cost of land on which the converters have been erected is capitalized as cost of the said converters. Cost of structures on leasehold land, where the estimated useful life is more than ten years, is capitalized. Subsequent expenditure relating to fixed assets is capitalized only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance.
Intangible fixed assets - Intangible assets are carried at cost less accumulated amortization and impairment losses, if any. The cost of an intangible asset comprises its purchase price, including any duties and other taxes and any directly attributable expenditure on making the asset ready for its intended use and net of any trade discounts and rebate.
8. Depreciation/amortization - Tangible fixed assets - Depreciation on fixed assets is provided on straight line basis. Depreciation is provided based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 except in respect of the following assets, where useful life is different than those prescribed in Schedule II are used:
Intangible fixed assets - (i) Computer software - over a period of 5 years; (ii) Trade name - Over a period of 5 years.
9. Impairment of assets - The carrying amount of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss will be recognized in the Statement of Profit and Loss wherever the carrying amount of an asset exceeds its estimated recoverable amount. The recoverable amount is the greater of the asset''s net selling price and value in use. Provision for impairment will be reviewed periodically and amended depending on changes in circumstances.
10. Investments - Non-current investments are stated at cost. However, provision for diminution is made to recognize a decline, other than temporary, in the value of the investment, if any. Current investments are valued at lower of cost and fair value.
11. Inventories - The governing principle of valuation of Inventories (other than process waste) is the lower of cost and net realizable value. The cost for the said purpose (i) in the case of stores and spare parts, is the weighted average cost (net of Cenvat credit/value added tax, if any), (ii) in the case of cotton in process and manufactured yarn, is the cost adopting the absorption costing method, and (iii) is without deduction of the adjustment made for power generated through Wind energy converters and adjusted against the cost of power purchased from state electricity board. Process waste is valued at net realizable value. Provision is made for obsolete, slow moving and damaged items of inventory, if any.
12. Government grants - Capital grants from government relating to depreciable assets are treated as deferred income and disclosed as a capital reserve and amortized over the useful life of the concerned asset. Cenvat credit relating to capital assets acquired is treated as capital reserve and amortized over the useful life of the concerned assets by transfer profit and loss account and considered under depreciation. Grants/incentives other than those mentioned above are reckoned in the profit and loss account in the year of eligibility.
13. Borrowing costs - Borrowing costs include exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are charged to the Profit and Loss Statement in the period in which they are incurred.
14. Research and development - Revenue expenditure on research and development is charged to the profit and loss account as incurred. Capital expenditure on research and development, where the same represents cost of plant, machinery, equipment and other tangible assets, if any, is given the same accounting treatment as applicable to other capital expenditure.
15. Deferred tax - Deferred income tax charge reflects the impact of the current period timing differences between taxable income and accounting income, other than differences capable of getting reversed during the ''tax holiday'' period, subject to consideration of prudence. Where there are unabsorbed depreciation or carry forward losses, deferred tax assets are recognized only to the extent there is virtual certainty of realization of such assets. Other deferred tax assets are recognized only to the extent there is reasonable certainty of realization in future. Deferred tax assets/liabilities are reviewed as at each balance sheet date based on developments during the period and available case laws to reassess realization/liabilities.
16. Provisions and contingencies - To recognize a provision when (i) the company has a present obligation as a result of a past event; (ii) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (iii) a reliable estimate can be made of the amount of the obligation. A disclosure of a contingent liability is made when there is a possible obligation that may, but probably will not, require outflow of resources. Where there is possible obligation or a present obligation where the likelihood of outflow of resources is remote, no provision or disclosure is made.
17. Cash flow statement - Cash flow statements are reported using the indirect method, whereby profit/(loss) before extra-ordinary items/exceptional items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipt or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on available information including taxes paid relating to these activities.
Mar 31, 2015
1. Basis of preparation of financial statements - The financial
statements of the Company have been prepared in accordance with the
generally accepted accounting principles in India (Indian GAAP) to
comply with the Accounting standards specified under section 133 of the
Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules,
2014 and the relevant provisions of the Companies Act, 2013 ("the
2013 Act")/Companies Act, 1956 ("the 1956 Act"), as applicable.
The financial statements have been prepared on accrual basis under the
historical cost convention except in so far as they relate to
revaluation of net assets. The accounting policies adopted in the
preparation of the financial statements are consistent with those
followed in the previous year.
All assets and liabilities have been classified as current or
non-current as per the company's normal operating cycle and other
criteria set out in the revised schedule II to the Companies Act, 2013.
Based on the nature of products and the time between the acquisition of
assets for processing and their realization in cash and cash
equivalents, the company has determined its operating cycle as twelve
months for the purpose of current and non-current classification of
assets and liabilities.
2. Use of estimates - The preparation of the financial statements in
conformity with the generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities on the date of the financial
statements, disclosure of contingent liabilities and reported amounts
of revenues and expenses for the year. Estimates are based on
historical experience, where applicable and other assumptions that
management believes are reasonable under the circumstances. Actual
results could vary from these estimates and any such differences are
dealt with in the period in which the results are known/materialise.
3. Revenue recognition - Revenue from sale of products is recognized on
despatch of goods to customers in accordance with the terms of sales.
Revenue from services is recognized in accordance with the specific
terms of contract on performance. Other operating revenues comprise of
income from ancillary activities incidental to the operations of the
company and is recognized when the right to receive the income is
established as per the terms of the contract.
4. Other Income - Interest and rental income are accounted on accrual
basis. Dividend income is accounted when the right to receive is
established.
5. Foreign currency transactions - Foreign currency transactions
(including booking/cancellation of forward contracts) are recorded at
the rates prevailing on the date of the transaction. Monetary assets
and liabilities in foreign currency, other than those covered by
forward exchange contracts, are translated at year end foreign exchange
rates. Exchange differences arising on settlements are recognized in
the Statement of Profit and Loss. In case of forward exchange contracts
which are entered into hedge the foreign currency risk of a
receivable/payable recognized in these financial statements, premium or
discount on such contracts are amortised over the life of the contract
and exchange differences arising thereon in the reporting period are
recognised in the Statement of Profit and loss. Forward exchange
contracts which are arranged to hedge the foreign currency risk of a
firm commitment is marked to market at the year end and the resulting
losses, if any, are charged to the Statement of Profit and loss.
6. Employee benefits - (i) Short term employee benefit obligations are
estimated and provided for; (ii) Post employment benefits and other
long term employee benefits - (1) Company's contribution to provident
fund, labour welfare fund, employees state insurance corporation and
other funds are determined under the relevant schemes and /or statute
and charged to revenue; (2) Company's liability towards gratuity and
compensated absences are actuarially determined at each balance sheet
date using the projected unit credit method. Actuarial gains and losses
are recognised in revenue.
7. Fixed Assets - Tangible fixed assets - All costs relating to
acquisition of fixed assets net of value added tax and terminal excise
duty refund under Export Promotion Capital Goods Scheme, subject to the
economic life and the cost being in excess of certain limits, are
capitalised. Expenditure directly related and incidental to
construction are capitalized upto the date of attainment of commercial
production. Interest and other related costs, including amortised cost
of borrowings attributable only to major projects are capitalized as
part of the cost of the respective assets. In the case of Wind energy
converters, cost of land on which the converters have been erected is
capitalised as cost of the said converters. Cost of structures on
leasehold land, where the estimated useful life is more than ten years,
is capitalized. Subsequent expenditure relating to fixed assets is
capitalised only if such expenditure results in an increase in the
future benefits from such asset beyond its previously assessed standard
of performance.
Intangible fixed assets - Intangible assets are carried at cost less
accumulated amortisation and impairment losses, if any. The cost of an
intangible asset comprises its purchase price, including any duties and
other taxes and any directly attributable expenditure on making the
asset ready for its intended use and net of any trade discounts and
rebate.
8. Depreciation/amortization - Tangible fixed assets - Depreciation on
fixed assets is provided on straight line basis. Depreciation is
provided based on useful life of the assets as prescribed in Schedule
II to the Companies Act, 2013 except in respect of the following
assets, where useful life is different than those prescribed in
Schedule II are used:
9. Impairment of assets - The carrying amount of assets are reviewed at
each balance sheet date if there is any indication of impairment based
on internal/external factors. An impairment loss will be recognised in
the Statement of Profit and Loss wherever the carrying amount of an
asset exceeds its estimated recoverable amount. The recoverable amount
is the greater of the asset's net selling price and value in use.
Provision for impairment will be reviewed periodically and amended
depending on changes in circumstances.
10. Investments - Non-current investments are stated at cost. However,
provision for diminution is made to recognize a decline, other than
temporary, in the value of the investment, if any. Current investments
are valued at lower of cost and fair value.
11. Inventories - The governing principle of valuation of Inventories
(other than process waste) is the lower of cost and net realisable
value. The cost for the said purpose (i) in the case of stores and
spare parts, is the weighted average cost (net of Cenvat credit/value
added tax, if any), (ii) in the case of cotton in process and
manufactured yarn, is the cost adopting the absorption costing method,
and (iii) is without deduction of the adjustment made for power
generated through Wind energy converters and adjusted against the cost
of power purchased from state electricity board. Process waste is
valued at net realizable value. Provision is made for obsolete, slow
moving and damaged items of inventory, if any.
12. Government grants - Capital grants from government relating to
depreciable assets are treated as deferred income and disclosed as a
capital reserve and amortised over the useful life of the concerned
asset. Cenvat credit relating to capital assets acquired is treated as
capital reserve and amortised over the useful life of the concerned
assets by transfer profit and loss account and considered under
depreciation. Grants/incentives other than those mentioned above are
reckoned in the profit and loss account in the year of eligibility.
13. Borrowing costs - Borrowing costs include exchange differences
arising from foreign currency borrowings to the extent they are
regarded as an adjustment to the interest cost. Borrowing costs that
are attributable to the acquisition or construction of qualifying
assets are capitalised as part of the cost of such assets. A qualifying
asset is one that necessarily takes substantial period of time to get
ready for its intended use. All other borrowing costs are charged to
the Profit and Loss Statement in the period in which they are incurred.
14. Research and development - Revenue expenditure on research and
development is charged to the profit and loss account as incurred.
Capital expenditure on research and development, where the same
represents cost of plant, machinery, equipment and other tangible
assets, if any, is given the same accounting treatment as applicable to
other capital expenditure.
15. Deferred tax - Deferred income tax charge reflects the impact of
the current period timing differences between taxable income and
accounting income, other than differences capable of getting reversed
during the 'tax holiday' period, subject to consideration of
prudence. Where there are unabsorbed depreciation or carry forward
losses, deferred tax assets are recognised only to the extent there is
virtual certainty of realisation of such assets. Other deferred tax
assets are recognised only to the extent there is reasonable certainty
of realisation in future. Deferred tax assets/liabilities are reviewed
as at each balance sheet date based on developments during the period
and available case laws to reassess realisation/liabilities.
16. Provisions and contingencies - To recognise a provision when (i)
the company has a present obligation as a result of a past event; (ii)
it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation; and (iii) a reliable
estimate can be made of the amount of the obligation. A disclosure of a
contingent liability is made when there is a possible obligation that
may, but probably will not, require outflow of resources. Where there
is possible obligation or a present obligation where the likelihood of
outflow of resources is remote, no provision or disclosure is made.
Mar 31, 2014
1. Basis of preparation of financial statements - These financial
statements are prepared in accordance with the generally accepted
accounting standards referred to in Section 211(3C) of the Companies
Act, 1956, read with the General Circular 15/2013 dated September 13,
2013 of the Ministry of Corporate Affairs in respect of Section 133 of
the Companies Act, 2013 under historical cost convention except in so
far as they relate to revaluation of net assets.
All assets and liabilities have been classified as current or
non-current as per the company''s normal operating cycle and other
criteria set out in the revised schedule VI to the Companies Act, 1956.
Based on the nature of products and the time between the acquisition of
assets for processing and their realization in cash and cash
equivalents, the company has determined its operating cycle as twelve
months for the purpose of current and non-current classification of
assets and liabilities.
2. Use of estimates - The preparation of the financial statements in
conformity with the generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities on the date of the financial
statements, disclosure of contingent liabilities and reported amounts
of revenues and expenses for the year. Estimates are based on
historical experience, where applicable and other assumptions that
management believes are reasonable under the circumstances. Actual
results could vary from these estimates and any such differences are
dealt with in the period in which the results are known/materialise.
3. Revenue recognition - Revenue from sale of products is recognized on
despatch of goods to customers in accordance with the terms of sales.
Revenue from services is recognized in accordance with the specific
terms of contract on performance. Other operating revenues comprise of
income from ancillary activities incidental to the operations of the
company and is recognized when the right to receive the income is
established as per the terms of the contract.
4. Foreign currency transactions - Foreign currency transactions
(including booking/cancellation of forward contracts) are recorded at
the rates prevailing on the date of the transaction. Monetary assets
and liabilities in foreign currency, other than those covered by
forward exchange contracts, are translated at year end foreign exchange
rates. Exchange differences arising on settlements are recognized in
the Profit and Loss account. In case of forward exchange contracts
which are entered into hedge the foreign currency risk of a
receivable/payable recognized in these financial statements, premium or
discount on such contracts are amortised over the life of the contract
and exchange differences arising thereon in the reporting period are
recognised in the Profit and loss account. Forward exchange contracts
which are arranged to hedge the foreign currency risk of a firm
commitment is marked to market at the year end and the resulting
losses, if any, are charged to the Profit and loss account.
5. Employee benefits - (i) Short term employee benefit obligations are
estimated and provided for; (ii) Post employment benefits and other
long term employee benefits - (1) Company''s contribution to provident
fund, labour welfare fund, employees state insurance corporation and
other funds are determined under the relevant schemes and /or statute
and charged to revenue; (2) Company''s liability towards gratuity and
compensated absences are actuarially determined at each balance sheet
date using the projected unit credit method. Actuarial gains and losses
are recognised in revenue.
6. Fixed Assets - All costs relating to acquisition of fixed assets net
of value added tax and terminal excise duty refund under Export
Promotion Capital Goods Scheme, subject to the economic life and the
cost being in excess of certain limits, are capitalised. Expenditure
directly related and incidental to construction are capitalized upto
the date of attainment of commercial production. Interest and other
related costs, including amortised cost of borrowings attributable only
to major projects are capitalized as part of the cost of the respective
assets. In the case of Wind energy converters, cost of land on which
the converters have been erected is capitalised as cost of the said
converters. Cost of structures on leasehold land, where the estimated
useful life is more than ten years, is capitalized.
7. Depreciation/amortization - Fixed assets are depreciated/amortised
in the following manner: (i) assets like (a) structures on lease hold
land, over their estimated useful life or ten years, whichever is
lower, (b) computer software and trade name, over their estimated
useful life or five years, whichever is lower; (ii) other assets, over
their estimated useful lives or lives derived from the rates specified
in Schedule XIV to the Companies Act, 1956, whichever is lower; (iii)
depreciation/amortization is provided for the period the asset is put
to use, (iv) Cost of land pertaining to the Wind energy converters is
amortised in the same manner as the cost of the said converters are
depreciated. No depreciation is reckoned in the year of disposal.
8. Impairment of assets - The carrying amount of assets are reviewed at
each balance sheet date if there is any indication of impairment based
on internal/external factors. An impairment loss will be recognised
wherever the carrying amount of an asset exceeds its estimated
recoverable amount. The recoverable amount is the greater of the
asset''s net selling price and value in use. Provision for impairment
will be reviewed periodically and amended depending on changes in
circumstances.
9. Investments - Non-current investments are stated at cost. However,
provision for diminution is made to recognize a decline, other than
temporary, in the value of the investment, if any. Current investments
are valued at lower of cost and fair value.
10. Inventories - The governing principle of valuation of Inventories
(other than process waste) is the lower of cost and net realisable
value. The cost for the said purpose (i) in the case of stores and
spare parts, is the weighted average cost (net of Cenvat credit/value
added tax, if any), (ii) in the case of cotton in process and
manufactured yarn, is the cost adopting the absorption costing method,
and (iii) is without deduction of the adjustment made for power
generated through Wind energy converters and adjusted against the cost
of power purchased from state electricity board. Process waste is
valued at net realizable value. Provision is made for obsolete, slow
moving and damaged items of inventory, if any.
11. Government grants - Capital grants from government relating to
depreciable assets are treated as deferred income and disclosed as a
capital reserve and amortised over the useful life of the concerned
asset. Cenvat credit relating to capital assets acquired is treated as
capital reserve and amortised over the useful life of the concerned
assets by transfer profit and loss account and considered under
depreciation. Grants/incentives other than those mentioned above are
reckoned in the profit and loss account in the year of eligibility.
12. Amortisation of loan raising expenditure - Major revenue
expenditure incurred by way of/in connection with raising of borrowing
is amortised over the period of the borrowings.
13. Research and development - Revenue expenditure on research and
development is charged to the profit and loss account as incurred.
Capital expenditure on research and development, where the same
represents cost of plant, machinery, equipment and other tangible
assets, if any, is given the same accounting treatment as applicable to
other capital expenditure.
14. Deferred tax - Deferred income tax charge reflects the impact of
the current period timing differences between taxable income and
accounting income, other than differences capable of getting reversed
during the ''tax holiday'' period, subject to consideration of
prudence. Where there are unabsorbed depreciation or carry forward
losses, deferred tax assets are recognised only to the extent there is
virtual certainty of realisation of such assets. Other deferred tax
assets are recognised only to the extent there is reasonable certainty
of realisation in future. Deferred tax assets/liabilities are reviewed
as at each balance sheet date based on developments during the period
and available case laws to reassess realisation/liabilities.
15. Provisions and contingencies - To recognise a provision when (i)
the company has a present obligation as a result of a past event; (ii)
it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation; and (iii) a reliable
estimate can be made of the amount of the obligation. A disclosure of a
contingent liability is made when there is a possible obligation that
may, but probably will not, require outflow of resources. Where there
is possible obligation or a present obligation where the likelihood of
outflow of resources is remote, no provision or disclosure is made.
Mar 31, 2013
1. Basis of preparation of financial statements - The financial
statements are prepared in accordance with the generally accepted
accounting standards referred to in Section 211(3C) of the Companies
Act, 1956, under historical cost convention except in so far as they
relate to revaluation of net assets.
All assets and liabilities have been classified as current or
non-current as per the company''s normal operating cycle and other
criteria set out in the revised schedule VI to the Companies Act, 1956.
Based on the nature of products and the time between the acquisition of
assets for processing and their realization in cash and cash
equivalents, the company has determined its operating cycle as twelve
months for the purpose of current and non-current classification of
assets and liabilities.
2. Use of estimates - The preparation of the financial statements in
conformity with the generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities on the date of the financial
statements, disclosure of contingent liabilities and reported amounts
of revenues and expenses for the year. Estimates are based on
historical experience, where applicable and other assumptions that
management believes are reasonable under the circumstances. Actual
results could vary from these estimates and any such differences are
dealt with in the period in which the results are known/materialise.
3. Revenue recognition - Revenue from sale of products is recognized
on despatch of goods to customers in accordance with the terms of
sales. Revenue from services is recognized in accordance with the
specific terms of contract on performance. Other operating revenues
comprise of income from ancillary activities incidental to the
operations of the company and is recognized when the right to receive
the income is established as per the terms of the contract.
4. Foreign currency transactions - Foreign currency transactions
(including booking/cancellation of forward contracts) are recorded at
the rates prevailing on the date of the transaction. Monetary assets
and liabilities in foreign currency, other than those covered by
forward exchange contracts, are translated at year end foreign exchange
rates. Exchange differences arising on settlements are recognized in
the Profit and Loss account. In case of forward exchange contracts
which are entered into hedge the foreign currency risk of a
receivable/payable recognized in these financial statements, premium or
discount on such contracts are amortised over the life of the contract
and exchange differences arising thereon in the reporting period are
recognised in the Profit and loss account. Forward exchange contracts
which are arranged to hedge the foreign currency risk of a firm
commitment is marked to market at the year end and the resulting
losses, if any, are charged to the Profit and loss account.
5. Employee benefits - (i) Short term employee benefit obligations are
estimated and provided for; (ii) Post employment benefits and other
long term employee benefits - (1) Company''s contribution to provident
fund, labour welfare fund, employees state insurance corporation and
other funds are determined under the relevant schemes and /or statute
and charged to revenue; (2) Company''s liability towards gratuity and
compensated absences are actuarially determined at each balance sheet
date using the projected unit credit method. Actuarial gains and losses
are recognised in revenue.
6. Fixed Assets - All costs relating to acquisition of fixed assets
net of value added tax and terminal excise duty refund under Export
Promotion Capital Goods Scheme, subject to the economic life and the
cost being in excess of certain limits, are capitalised. Expenditure
directly related and incidental to construction are capitalized upto
the date of attainment of commercial production. Interest and other
related costs, including amortised cost of borrowings attributable only
to major projects are capitalized as part of the cost of the respective
assets. In the case of Wind energy converters, cost of land on which
the converters have been erected is capitalised as cost of the said
converters. Cost of structures on leasehold land, where the estimated
useful life is more than ten years, is capitalized.
7. Depreciation/amortization - Fixed assets are depreciated/amortised
in the following manner: (i) assets like (a) structures on lease hold
land, over their estimated useful life or ten years, whichever is
lower, (b) computer software and trade name, over their estimated
useful life or five years, whichever is lower; (ii) other assets, over
their estimated useful lives or lives derived from the rates specified
in Schedule XIV to the Companies Act, 1956, whichever is lower; (iii)
depreciation/amortization is provided for the period the asset is put
to use,
(iv) Cost of land pertaining to the Wind energy converters is amortised
in the same manner as the cost of the said converters are depreciated.
No depreciation is reckoned in the year of disposal.
8. Impairment of assets - The carrying amount of assets are reviewed
at each balance sheet date if there is any indication of impairment
based on internal/external factors. An impairment loss will be
recognised wherever the carrying amount of an asset exceeds its
estimated recoverable amount. The recoverable amount is the greater of
the asset''s net selling price and value in use. Provision for
impairment will be reviewed periodically and amended depending on
changes in circumstances.
9. Investments - Non-current investments are stated at cost. However,
provision for diminution is made to recognize a decline, other than
temporary, in the value of the investment, if any. Current investments
are valued at lower of cost and fair value.
10. Inventories - The governing principle of valuation of Inventories
(other than process waste) is the lower of cost and net realisable
value. The cost for the said purpose (i) in the case of stores and
spare parts, is the weighted average cost (net of Cenvat credit/value
added tax, if any), (ii) in the case of cotton in process and
manufactured yarn, is the cost adopting the absorption costing method,
and (iii) is without deduction of the adjustment made for power
generated through Wind energy converters and adjusted against the cost
of power purchased from state electricity board. Process waste is
valued at net realizable value. Provision is made for obsolete, slow
moving and damaged items of inventory, if any.
11. Government grants - Capital grants from government relating to
depreciable assets are treated as deferred income and disclosed as a
capital reserve and amortised over the useful life of the concerned
asset. Cenvat credit relating to capital assets acquired is treated as
capital reserve and amortised over the useful life of the concerned
assets by transfer profit and loss account and considered under
depreciation. Grants/incentives other than those mentioned above are
reckoned in the profit and loss account in the year of eligibility.
12. Amortisation of loan raising expenditure - Major revenue
expenditure incurred by way of/in connection with raising of borrowing
is amortised over the period of the borrowings.
13. Research and development - Revenue expenditure on research and
development is charged to the profit and loss account as incurred.
Capital expenditure on research and development, where the same
represents cost of plant, machinery, equipment and other tangible
assets, if any, is given the same accounting treatment as applicable to
other capital expenditure.
14. Deferred tax - Deferred income tax charge reflects the impact of
the current period timing differences between taxable income and
accounting income, other than differences capable of getting reversed
during the ''tax holiday'' period, subject to consideration of prudence.
Where there are unabsorbed depreciation or carry forward losses,
deferred tax assets are recognised only to the extent there is virtual
certainty of realisation of such assets. Other deferred tax assets are
recognised only to the extent there is reasonable certainty of
realisation in future. Deferred tax assets/liabilities are reviewed as
at each balance sheet date based on developments during the period and
available case laws to reassess realisation/liabilities.
15. Provisions and contingencies - To recognise a provision when (i)
the company has a present obligation as a result of a past event; (ii)
it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation; and (iii) a reliable
estimate can be made of the amount of the obligation. A disclosure of a
contingent liability is made when there is a possible obligation that
may, but probably will not, require outflow of resources. Where there
is possible obligation or a present obligation where the likelihood of
outflow of resources is remote, no provision ordisclosure is made.
Mar 31, 2012
1. Basis of preparation of financial statements - The financial
statements are prepared in accordance with the generally accepted
accounting principles including accounting standards in India under
historical cost convention except in so far as they relate to
revaluation of net assets.
All assets and liabilities have been classified as current or
non-current as per the company's normal operating cycle and other
criteria set out in the revised schedule VI to the Companies Act, 1956.
Based on the nature of products and the time between the acquisition of
assets for processing and their realization in cash and cash
equivalents, the company has determined its operating cycle as twelve
months for the purpose of current and non-current classification of
assets and liabilities.
2. Use of estimates - The preparation of the financial statements in
conformity with the generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities on the date of the financial
statements, disclosure of contingent liabilities and reported amounts
of revenues and expenses for the year. Estimates are based on
historical experience, where applicable, and other assumptions that
management believes are reasonable under the circumstances. Actual
results could vary from these estimates and any such differences are
dealt with in the period in which the results are known/materialise.
3. Revenue recognition - Revenue from sale of products is recognized
on despatch of goods to customers in accordance with the terms of
sales, Revenue from services is recognized in accordance with the
specific terms of contract on performance. Other operating revenues
comprise of income from ancillary. activities incidental to the
operations of the company and is recognized when the right to receive
the income is established as per the terms of the contract.
4. Foreign currency transactions - Foreign currency transactions
(including booking/cancellation of forward contracts) are recorded at
the rates prevailing on the date of the transaction. Monetary assets
and liabilities in foreign currency, other than those covered by
forward exchange contracts, are translated at year end foreign exchange
rates. Exchange differences arising on settlements are recognized in
the Profit and Loss account. In case of forward exchange contracts,
which are entered into hedge the foreign currency risk of a
receivable/payable recognized in these financial statements, premium a
discount on such contracts are amortised over the life of the contract
and exchange differences arising thereon in the reporting period are
recognised in the Profit and loss account. Forward exchange contracts
which are arranged to hedge the foreign currency risk of a firm
commitment is marked to market at the year end and the resulting
losses, if any, are charged to the Profit and loss account.
5. Employee benefits - (i) Short term employee benefit obligations are
estimated and provided for; (ii) Post employment benefits and other
long term employee benefits - (1) Company's contribution to provident
fund, labour welfare fund, employees state insurance corporation and
other funds are determined under the relevant schemes and /or statute
and charged to revenue; (2) Company's liability towards gratuity and
compensated absences are actuarially determined at each balance sheet
date using the projected unit credit method. Actuarial gains and losses
are recognised in revenue.
6. Fixed Assets - All costs relating to acquisition of fixed assets
net of value added tax and terminal excise duty refund under Export
Promotion Capital Goods Scheme, subject to the economic life and the
cost being in excess of certain limits, are capitalised. Expenditure
directly related and incidental to construction are capitalized upto
the date of attainment of commercial production. Interest and other
related costs, including amortised cost of borrowings attributable only
to major projects are capitalized as part of the cost of the respective
assets, in the case of Wind energy converters, cost of land on which
the converters have been erected is capitalised as cost of the said
converters. Cost of structures on leasehold land, where the estimated
useful life is more than ten years, is capitalized.
7. Depreciation/amortization - Fixed assets are depreciated/amortised
in the following manner: (i) assets like (a) structures on lease hold
land, ever their estimated useful life a ten years, whichever is lower,
(b) computer software and trade name, over their estimated useful life
or five years, whichever is lower; (ii) other assets, over their
estimated useful lives or lives derived from the rates specified in
Schedule XIV to the Companies Act, 1956, whichever is lower; (iii)
depreciation/amortization is provided fa the period the asset is put to
use, (iv) Cost of land pertaining to the Wind energy converters is
amortised in the same manner as the cost of the said converters are
depreciated. No depreciation is reckoned in the year of disposal.
8. Impairment of assets - The carrying amount of assets are reviewed
at each balance sheet date if there is any indication of impairment
based on internal/external factors. An impairment loss will be
recognised wherever the carrying amount of an asset exceeds its
estimated ,recoverabie amount. The recoverable amount is the greater of
the asset's net selling price and value in use. Provision to impairment
will be reviewed periodically and amended depending on changes in
circumstances.
9. Investments - Non-current investments are stated at cost. However,
provision for diminution is made to recognize a decline, other than
temporary, in the value of the investment, if any. Current investments
are valued at lower of cost and fair value.
10. Inventories - The governing principle of valuation of Inventories
(other than process waste) is the lower of cost and net realisable
value. The cost to the said purpose (i) in the case of sates and spare
parts, is the weighted average cost (net of Cenvat credit/Value added
tax, if any), (ii) in the case of cotton in process and manufactured
yarn, is the cost adopting the absorption costing method, and (iii) is
without deduction of the adjustment made for power generated through
Wind energy converters and adjusted against the cost of power purchased
from state electricity board. Process waste is valued at net realizable
value. Provision is made for obsolete, slow moving and damaged items of
inventory, if any.
11. Government grants - Capital grants from government relating to
depreciable assets are treated as deferred income and disclosed as a
capital reserve and amortised over the useful life of the concerned
asset. Cenvat credit relating to capital assets acquired is treated as
capital reserve and amortised over the useful life of the concerned
assets by transfer profit and loss account and considered under
depreciation. Grants/incentives other than those mentioned above are
reckoned in the profit and loss account in the year of eligibility.
12. Amortisation of loan raising expenditure - Major revenue
expenditure incurred by way of/in connection with raising of borrowing
is amortised over the period of the barrowings.
13. Research and development - Revenue expenditure on research and
development is charged to the profit and loss account as incurred.
Capital expenditure on research and development, where the same
represents cost of plant, machinery, equipment and other tangible
assets, if any, is given the same accounting treatment as applicable to
other capital expenditure.
14. Deferred tax - Deferred income tax charge reflects the impact of
the current period timing differences between taxable income and
accounting income, other than differences capable of getting reversed
during the lax holiday period, subject to consideration of prudence.
Where there are unabsabed depreciation a carry forward losses, deferred
tax assets are recognised only to the extent there is virtual certainty
of realisation of such assets. Other deferred tax assets are recognised
only to the extent there is reasonable certainly of realisation in
future. Deferred tax assets/liabilities are reviewed as at each balance
sheet date based on developments during the period and available case
laws to reassess realisation/ liabilities.
15. Provisions and contingencies - To recognise a provision when (i)
the company has a present obligation as. a result of a past event; (ii)
it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation; and (iii) a reliable
estimate can be made of the amount of the obligation. A disclosure of a
contingent liability is made when there is a possible obligation that
may, but probably will not, require outflow of resources. Where there
is possible obligation a a present obligation where the likelihood of
outflow of resources is remote, no provision a disclosure is made.
Mar 31, 2011
1. Basis of preparation of financial statements - The financial
statements are prepared in accordance with the generally accepted
accounting principles including accounting standards in India under
historical cost convention except in so far as they relate to
revaluation of net assets.
2. Use of estimates - The preparation of financial statements in
conformity with the generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities on the date of the financial
statements, disclosure of contingent liabilities and reported amounts
of revenues and expenses for the year. Estimates are based on
historical experience, where applicable, and other assumptions that
management believes are reasonable under the circumstances. Actual
results could vary from these estimates and any such differences are
dealt with in the period in which the results are known/materialise.
3. Revenue recognition - Sales are recognized on dispatch to customers
and include recovery towards sales tax, textile committee cess and
export incentives. Revenue by way of, consideration receivable for the
sale of goods and sale of power, the rendering of services or, from the
use by others of enterprise resources, and other benefits are
recognised only when they are measurable and it would not be
unreasonable to expect ultimate collection.
4. Foreign currency transactions - Foreign currency transactions
(including booking/cancellation of forward contracts) are recorded at
the rates prevailing on the date of the transaction. Monetary assets
and liabilities in foreign currency, other than those covered by
forward exchange contracts, are translated at year end foreign exchange
rates. Exchange differences arising on settlements are recognized in
the Profit and Loss account. In case of forward exchange contracts
which are entered into hedge the foreign currency risk of a
receivable/payable recognized in these financial statements, premium or
discount on such contracts are amortised over the life of the contract
and exchange differences arising thereon in the reporting period are
recognised in the Profit and loss account. Forward exchange contracts
which are arranged to hedge the foreign currency risk of a firm
commitment is marked to market at the year end and the resulting
losses, if any, are charged to the Profit and loss account.
5. Employee benefits - (i) Short term employee benefit obligations are
estimated and provided for; (ii) Post employment benefits and other
long term employee benefits - (1) Company's contribution to provident
fund, labour welfare fund, employees state insurance corporation and
other funds are determined under the relevant schemes and /or statute
and charged to revenue; (2) Company's liability towards gratuity and
compensated absences are actuarially determined at each balance sheet
date using the projected unit credit method. Actuarial gains and losses
are recognised in revenue.
6. Fixed Assets - All costs relating to acquisition of fixed assets
net of value added tax and terminal excise duty refund under Export
Promotion Capital Goods Scheme, subject to the economic life and the
cost being in excess of certain limits, are capitalised. Expenditure
directly related and incidental to construction are capitalized upto
the date of attainment of commercial production. Interest and other
related costs, including amortised cost of borrowings attributable only
to major projects are capitalized as part of the cost of the respective
assets. In the case of Wind energy converters, cost of land on which
the converters have been erected is capitalised as cost of the said
converters. Cost of structures on leasehold and, where the estimated
useful life is more than ten years, is capitalized.
7. Depreciation/amortization - Fixed assets are depreciated/amortised
in the following manner: (i) assets like (a) structures on lease hold
land, over their estimated useful life or ten years, whichever is
lower, (b) computer software and trade name, over their estimated
useful life or five years, whichever is lower; (ii) other assets, over
their estimated useful lives or lives derived from the rates specified
in Schedule XIV to the Companies Act, 1956, whichever is lower; (iii)
depreciation/amortization is provided for the period the asset is put
to use, (iv) Cost of land pertaining to the Wind energy converters is
amortised in the same manner as the cost of the said converters are
depreciated. No depreciation is reckoned in the year of disposal.
8. Impairment of assets - The carrying amount of assets are reviewed
at each balance sheet date if there is any indication of impairment
based on internal/external factors. An impairment loss will be
recognised wherever the carrying amount of an asset exceeds its
estimated recoverable amount. The recoverable amount is the greater of
the asset's net selling price and value in use. Provision for
impairment will be reviewed periodically and amended depending on
changes in circumstances.
9. Investments - These are carried at cost of acquisition and related
expenses less provision for diminution other than temporary, if any.
10. Inventories - The governing principle of valuation of Inventories
(other than process waste) is the lower of cost or net realisable
value. The cost for the said purpose (i) in the case of stores and
spare parts, is the weighted average cost (net of Cenvat credit/value
added tax, if any), (ii) in the case of cotton in process and
manufactured yarn, is the cost adopting the absorption costing method,
and (iii) is without deduction of the adjustment made fa power
generated through Wind energy converters and adjusted against the cost
of power purchased from state electricity board. Process waste is
valued at net realizable value. Provision is made for obsolete, slow
moving and damaged items of inventory, if any.
11. Government grants - Capital grants from government relating to
depreciable assets are treated as deferred income and disclosed as a
capital reserve and amortised over the useful life of the concerned
asset. Cenvat credit relating to capital assets acquired is treated as
capital reserve and amortised over the useful life of the concerned
assets by transfer to profit and loss account and considered under
depreciation. Grants/incentives other than those mentioned above are
reckoned in the profit and loss account in the year of eligibility.
12. Deferred revenue expenditure - Major revenue expenditure incurred
by way of/in connection with (i) planned replacement of worn out parts
of plant and equipments and (ii) raising of borrowing, is amortised (i)
over the estimated period the benefit from such expenditure is expected
to enure in the case of (i) above and over the period of the borrowings
in the case of (ii) above.
13. Research and development - Revenue expenditure on research and
development is charged to the profit and loss account as incurred.
Capital expenditure on research and development, where the same
represents cost of plant, machinery, equipment and other tangible
assets, if any, is given the same accounting treatment as applicable to
other capital expenditure.
14. Taxation - Income tax expense comprises of current tax, deferred
tax charge or credit and fringe benefit tax. Provision for current tax
is made with reference to taxable income for the current accounting
year by applying the applicable tax rate. Deferred income tax charge
reflects the impact of the current period timing differences between
taxable income and accounting income, other than differences capable of
getting reversed during the 'tax holiday' period, subject to
consideration of prudence. The deferred tax charge or credit is
recognised using prevailing tax rates. Where there are unabsorbed
depreciation or carry forward losses, deferred tax assets are
recognised only to the extent there is virtual certainly of realisation
of such assets. Other deferred tax assets are recognised only to the
extent there is reasonable certainty of realisation in future.
Deferred tax assets/liabilities are reviewed as at each balance sheet
date based on developments during the period and available case laws to
reassess realisation/liabilities.
15. Provisions and contingencies - To recognise a provision when (i)
the company has a present obligation as a result of a past event; (ii)
it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation; and (iii) reliable estimate
can be made of the amount of the obligation. Disclosure of a contingent
liability is made when there is a possible obligation that may, but
probably will not, require outflow of resources. Where there is a
possible obligation or a present obligation where the likelihood of
outflow of resources is remote, no provision or disclosure is made.
Mar 31, 2010
1 Basis of preparation of financial statements - The financial
statements are prepared in accordance with the generally accepted
accounting principles including accounting standards in India under
historical cost convention except in so far as they relate to
revaluation of net assets.
2 Use of estimates - The preparation of financial statements in
conformity with the generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities on the date of the financial
statements, disclosure of contingent liabilities and reported amounts
of revenues and expenses for the year. Estimates are based on
historical experience, where applicable, and other assumptions that
management believes are reasonable under the circumstances. Actual
results could vary from these estimates and any such differences are
dealt with in the period in which the results are known/materialise.
3 Revenue recognition - Sales are recognized on dispatch to customers
and include recovery towards sales tax, textile committee cess and
export incentives. Revenue by way of, consideration receivable for the
sale of goods, the rendering of services or, from the use by others of
enterprise resources, and other benefits are recognised only when they
are measurable and it would not be unreasonable to expect ultimate
collection.
4 Foreign currency transactions - Foreign currency transactions
(including booking/cancellation of forward contracts) are recorded at
the rates prevailing on the date of the transaction. Monetary assets
and liabilities in foreign currency, other than those covered by
forward exchange contracts, are translated at year end foreign exchange
rates. Exchange differences arising on settlements are recognized in
the Profit and Loss account. In case of forward exchange contracts
which are entered into hedge the foreign currency risk of a
receivable/payable recognized in these financial statements, premium or
discount on such contracts are amortised over the life of the contract
and exchange differences arising thereon in the reporting period are
recognised in the Profit and loss account. Forward exchange contracts
which are arranged to hedge the foreign currency risk of a firm
commitment is marked to market at the year end and the resulting
losses, if any, are charged to the Profit and loss account.
5 Employee benefits - (i) Short term employee benefit obligations are
estimated and provided for; (ii) Post employment benefits and other
long term employee benefits - (1) Companys contribution to Provident
Fund, Labour Welfare Fund, Employees State Insurance Corporation and
other funds are determined under the relevant schemes and /or statute
and charged to revenue; (2) Companys liability towards gratuity and
compensated absences are actuarially determined at each balance sheet
date using the projected unit credit method. Actuarial gains and losses
are recognised in revenue.
6 Fixed Assets - All costs relating to acquisition of fixed assets net
of value added tax and terminal excise duty refund under Export
Promotion Capital Goods Scheme, subject to the economic life and the
cost being in excess of certain limits, are capitalised. Expenditure
directly related and incidental to construction are capitalized upto
the date of attainment of commercial production. Interest and other
related costs, including amortised cost of borrowings attributable only
to major projects are capitalized as part of the cost of the respective
assets. In the case of Wind energy converters, cost of land on which
the converters have been erected is capitalised as cost of the said
converters. Cost of structures on leasehold land, where the estimated
useful life is more than ten years, is capitalized.
7 Depreciation/amortization - Fixed assets are depreciated/amortised in
the following manner: (1) assets like (a) structures on lease hold
land, over their estimated useful life or ten years, whichever is
lower, (b) computer software and trade name, over their estimated
useful life or five years, whichever is lower; (ii) other assets, over
their estimated useful lives or lives derived from the rates specified
in Schedule XIV to the Companies Act, 1956, whichever is lower; (iii)
depreciation/amortization is provided for the period the asset is put
to use, (iv) Cost of land pertaining to the Wind Energy Converters is
amortised in the same manner as the cost of the said converters are
depreciated. No depreciation is reckoned in the year of disposal.
8 Impairment of assets - The carrying amount of assets are reviewed at
each balance sheet date if there is any indication of impairment based
on internal/external factors. An impairment loss wiil be recognised
wherever the carrying amount of an asset exceeds its estimated
recoverable amount, The recoverable amount is the greater of the
assets net selling price and value in use. Provision for impairment
will be reviewed periodically and amended depending on changes in
circumstances.
9 Investments - These are carried at cost of acquisition and related
expenses less provision for diminution other than temporary, if any.
10 Inventories - The governing principle of valuation of Inventories
(other than process waste) is the lower of cost and net realisable
value. The cost for the said purpose (i) in the case of stores and
spare parts, is the weighted average cost (net of Cenvat credit/value
added tax, if any), (ii) in the case of cotton in process and
manufactured yarn, is the cost adopting the absorption costing method,
and (iii) is without deduction of the adjustment made for power
generated through Wind energy converters and adjusted against the cost
of power purchased from state electricity board. Process waste is
valued at net realizable value. Provision is made for obsolete, slow
moving and damaged items of inventory, if any.
11 Government grants - Capital grants from government relating to
depreciable assets are treated as deferred income and disclosed as a
capital reserve and amortised over the useful life of the concerned
asset, Cenvat credit relating to capital assets acquired is treated as
capital reserve and amortised over the useful life of the concerned
assets by transfer to profit and loss account and considered under
depreciation. Grants/incentives other than those mentioned above are
reckoned in the profit and loss account in the year of eligibility.
12 Deferred revenue expenditure - Major revenue expenditure incurred by
way of/in connection with (i) planned replacement of worn out parts of
plant and equipments and (ii) raising of borrowing, is amortised (i)
over the estimated period the benefit from such expenditure is expected
to enure in the case of (i) above and over the period of the borrowings
in the case of (ii) above.
13 Research and development - Revenue expenditure on research and
development is charged to the profit and loss account as incurred.
Capital expenditure on research and development, where the same
represents cost of plant, machinery, equipment and other tangible
assets, if any, is given the same accounting treatment as applicable to
other capital expenditure.
14Taxation - Income tax expense comprises of current tax, deferred tax
charge or credit and fringe benefit tax. Provision for current tax is
made with reference to taxable income for the current accounting year
by applying the applicable tax rate. Deferred income tax charge
reflects the impact of the current period timing differences between
taxable income and accounting income, other than differences capable of
getting reversed during the "tax holiday period, subject to
consideration of prudence. The deferred tax charge or credit is
recognised using prevailing tax rates. Where there are unabsorbed
depreciation or carry forward losses, deferred tax assets are
recognised only to the extent there is virtual certainty of realisation
of such assets. Other deferred tax assets are recognised only to the
extent there is reasonable certainty of realisation in future. Deferred
tax assets/liabilities are reviewed as at each balance sheet date based
on developments during the period and available case laws to reassess
realisation/liabilities.
15 Provisions and contingencies - To recognise a provision when (i) the
Company has a present obligation as a result of a past event; (ii) it
is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation; and (iii) a reliable
estimate can be made of the amount of the obligation. A disclosure of a
contingent liability is made when there is a possible obligation that
may. but probably will not, require outflow of resources. Where there
is possible obligation or a present obligation where the likelihood of
outflow of resources is remote, no provision or disclosure is made.
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