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Accounting Policies of Sportking India Ltd. Company
Mar 31, 2025
Note-2.3 Material Accounting Policies:
2.3.1 Revenue Recognition
2.3.1 (a) Sale of goods or services
Revenue from the sale of goods or services is recognized at the point in time on satisfaction of distinct performance obligations when control is transferred to the
customer and the amount of revenue can be measured reliably and recovery of consideration is probable.
Revenue is measured based on the transaction price (net of variable consideration) which is consideration, adjusted for volume discounts, rebates, scheme
allowances, price concessions, incentives, and returns, if any, as specified in the contracts with the customers. Revenue excludes taxes collected from customers
on behalf of the government. Due to short nature of credit period given to customers, there is no financing component in the contract.
2.3.1(b) Interest Income
Interest Income from financial asset is recognized when it is probable that economic benefits will flow to the company and amount of income can be measured
reliably. Interest income is accrued on time basis, by reference to principal outstanding and at effective interest rate applicable, which is the rate that exactly
discounts estimated future cash receipts through the expected life of financial asset to that asset''s net carrying amount on initial recognition.
(i) Rental income from leases is recognized on straight line basis over lease term.
(ii) Insurance claims and export incentives are accounted for as and when the estimated amounts recoverable can be reasonably determined as being
acceptable to the concerned authorities/parties.
2.3.2 Employee Benefits
2.3.2(a) Short term Employee Benefits:
Employee benefits payable wholly within twelve months of receiving employee services are classified as short-term employee benefits. The amount of short-term
employee benefits are recognized as an expense on an undiscounted basis in the statement of profit and loss of the year in which the related service is rendered.
2.3.2(b) Post-Employment benefit plans
(a) Defined Contribution Plan:
Contribution towards Provident fund and national pension scheme is classified as defined contribution scheme as the Company has no obligation,
other than the contribution made to the fund. The Company recognizes contribution payable to the such schemes as an expense, when an employee
renders the related service.
(b) Defined Benefit Plan:
Gratuity
The Company provides for gratuity, a defined benefit retirement plan covering eligible employees. The gratuity plan provides for lump sum payment
to vested employee at retirement, death, incapacitation or termination of employee, based on the respective employee''s salary and the tenure of
employment.
The liability or asset recognised in the balance sheet in respect of the defined benefit plan is the present value of the defined benefit obligation at the
end of the reporting period less the fair value of plan assets. The liability/asset is determined using projected unit credit method, through actuarial
valuation carried out at the end of each annual reporting period.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets.
Such net interest cost along with the current service cost and, if applicable, the past service cost and settlement gain/loss, is included in employee
benefit expense in the statement of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions, comprising actuarial gains/losses and
return on plan assets (excluding the amount recognised in net interest on the net defined liability), are recognised in the period in which they occur,
directly in other comprehensive income. These are recognized as a part of in retained earnings in the statement of changes in equity and in the
balance sheet.
2.3.2(c) Other long term employee benefits- Compensated absences
Compensated absences, which are not expected to occur within twelve months after the end of the period in which the employee renders the related service,
are recognised at the present value of the obligation based on actuarial valuation as on the reporting date,performed by an independent actuary using
projected unit credit method.
The expense related to other long term employee benefits including re-measurements as a result of past experience adjustments and changes in actuarial
assumptions are recognised in statement of profit and loss.
2.3.3 Property, plant and equipment:
Recognition and measurement
The cost of an item of property, plant and equipment is recognised as an asset when it is probable that future economic benefits associated with the item
will flow to the entity and the cost of the item can be measured reliably.
Freehold land is carried at cost. All other items of Property, plant and equipment are stated at cost less accumulated depreciation and impairment loss, if
any. The cost directly attributable to acquisition are capitalised until the property plant and equipment are ready for use as intended by the management.
The cost of an item of Property, plant and equipment comprises of:
(i) Purchase price including import duties and non-refundable purchase taxes after deducting trade discounts and rebates.
(ii) Any expenditure directly attributable for bringing an asset to the location and the working condition for its intended use and
(iii) The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity
incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce
inventories during that period.
When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific
useful lives.
Subsequent expenditures relating to property, plant and equipment are included in the asset''s carrying value or recognised as separate assets as appropriate,
only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. All
other repairs and maintenance costs are charged to the statement of profit and loss when incurred.
Property, plant and equipment (including directly attributable expenditure) which are not ready for intended use at each balance sheet date are disclosed
as âCapital work-in-progressâ.
De-recognition of Property, Plant and Equipment
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. The cost and the related accumulated depreciation are eliminated from the financial statements upon disposal or retirement of the asset
and any gain or loss arising thereon is determined as the difference between sale proceeds and the carrying amount of the asset and is recognised in the
statement of profit and loss.
2.3.4 Intangible Assets
Intangible assets are recognized when it is probable that the expected future economic benefits that are attributable to the asset will flow and the cost of
the asset can be measured reliably.
Intangible assets are stated at cost less accumulated amortization and accumulated impairment losses, if any. The cost of intangible asset comprises of its
purchase price, net of recoverable taxes and any directly attributable cost of preparing the asset for its intended use.
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other
expenditure is recognised in statement of profit and loss as and when incurred.
De-recognition of intangible assets
An intangible asset is derecognised upon disposal or retirement of the asset. The cost and the related accumulated amortization are eliminated from the
financial statements upon disposal or when no future economic benefits are expected from its use or disposal and resultant gains or losses are recognized
in the statement of Profit and Loss when the asset is derecognized.
2.3.5 Depreciation and amortization
Depreciation
Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life.
Depreciation is provided on Property, plant and equipment on straight line method on the basis of useful lives of such assets specified in Schedule II to the
Act. Assets costing upto ?5,000 are fully depreciated in the year of purchase.
Depreciation method and useful lives are reviewed periodically, including at each financial year end with the effect of any changes in estimate accounted for
on a prospective basis.
Amortization
Intangible assets are amortized on straight line method over the estimated useful life. The amortization method and useful life are reviewed at each financial
year end. The estimated useful life is based on number of factors including effect of obsolescence and other economic factors and is as under:
2.3.6 Inventories
Inventories are valued at cost or net realizable value, whichever is lower except production waste which is valued at net realizable value. The raw materials
and other supplies held for use in the production are valued at net realisable value only if the finished products in which they are to be incorporated are
expected to be sold below cost. The cost in respect of the various items of inventory is computed as under:
(i) In case of raw materials at first-in first-out (FIFO) basis. The cost includes cost of purchase and other costs incurred in bringing the inventories to their
present location and condition.
(ii) In case of stores and spares at weighted average cost plus direct expenses. The cost includes cost of purchase and other costs incurred in bringing
the inventories to their present location and condition.
(iii) In case of work in progress at raw material cost plus conversion costs depending upon the stage of completion.
(iv) In case of finished goods at raw material cost plus conversion costs, and other overheads incurred to bring the goods to their present location and
condition.
Net Realisable Value is the estimated selling price in ordinary course of business less estimated costs of completion and the estimated costs necessary to
make the sales.
2.3.7 Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets i.e. the assets that necessarily takes a substantial
period of time to get ready for its intended use are capitalized as part of the cost of the asset. All other borrowing costs are expensed in the period in which
they occur. Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds. Borrowing cost also
includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
2.3.8 Earnings per Share
Basic earnings per share is computed by dividing the profit for the period attributable to the equity shareholders of the company by the weighted average
number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the profit for the period attributable to the equity shareholders and the weighted average number
of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares, if any.
2.3.9 Income Taxes
Income tax expense comprises current tax and deferred tax.
Income tax expense is recognised in statement of Profit and Loss except to the extent that it relates to items recognised in other comprehensive income or
directly in equity. In such case, the tax is also recognised in other comprehensive income or directly in equity, as the case may be.
Current tax is the tax payable/receivable on the taxable profit/loss for the year using the tax rates and tax laws that have been enacted or substantively
enacted by the end of the reporting period and any adjustment to taxes in respect of previous years. Interest expenses and penalties, if any, related to
income tax are included in finance cost and other expenses respectively. Interest Income, if any, related to income tax is included in other income.
Deferred tax is recognised in respect of temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purpose at the reporting date using tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date and are
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
A deferred tax asset is recognized to the extent, it is probable that future taxable profit will be available against where the deductible temporary differences
and 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.
2.3.10 Government Grants
Government grants are recognized only when there is reasonable assurance that the conditions attached to them shall be complied with, and the grants will
be received.
Government grants relating to the purchase of property, plant and equipment are deducted from its gross value and are recognised in the statement of profit
and loss profit or loss on a systematic over the expected useful lives of the related assets by way of reduced depreciation.
When the grants relates to an expense item, it is recognised in the statement of profit and loss by way of reduction from the related cost, which the grants
are intended to compensate.
Government grants that become receivable as compensation for expenses or losses already incurred or for the purpose of giving financial support to
the Company with no related costs is recognised in the Statement of profit or loss of the period in which it becomes receivable under âOther operating
income''/Other income'' based on the nature of grant.
2.3.11 Foreign Currency translations
Transactions in foreign currency are initially recorded in the functional currency i.e. Indian Rupees using the exchange rate prevailing at the date of
transactions.
Monetary items denominated in foreign currency are reported using the exchange rate prevailing at the end of reporting period.
The exchange difference arising on the settlement or reporting of monetary items at rates different from rates at which these were initially recorded / reported
in previous financial statements, are recognised in the statement of profit and loss in the period in which they arise.
Non-monetary items denominated in foreign currency and measured at historical cost are recorded at the exchange rate prevalent at the date of transaction.
Non-monetary items that are measured in term of historical cost in foreign currency are not retranslated.
2.3.12 Dividends
Final dividends on shares are recorded as a liability after approval by the shareholders and interim dividends are recorded as a liability on the date of
declaration by the company''s Board of Directors.
2.3.13 Leases
(i) Company as a lessee
The Company''s lease asset classes primarily consist of leases for land and buildings. The Company assesses whether a contract contains a lease, at
inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:
(i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the
period of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (âROUâ) 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 leases for which underlying asset is
of low value. For these short-term and leases for which underlying asset is of low value, the Company recognizes the lease payments as an operating
expense on a straight-line basis over the term of the lease.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the
underlying asset.
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 lessee''s incremental borrowing rate.
Lease Liability and Right-of-Use Asset have been separately presented in the Balance Sheet. The interest expense on the lease liability has been
separately presented as a component of finance costs in the statement of profit and loss. The payments of principal portion and interest portion of
lease liability have been classified under financing activities in the statement of cash flows.
The payments for short-term leases and leases of low-value assets have been recognized in the statement of profit and loss have been classified
under operating activities in the statement of cash flows.
Company as a lessor
Leases for which the company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
For operating leases, lease payments received are recognized on systematic basis over the term of the relevant lease as a part of other income.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
2.3.14(a) Initial Recognition and measurement
The company recognises the financial assets and financial liabilities when it becomes party to the contractual provision of the instruments. All financial assets
and liabilities are recognised at fair value on initial recognition except for trade receivables which are initially measured at transaction price. Transaction
costs that are directly attributable to the acquisition of financial assets and or issue of financial liabilities that are not recognized at fair value through profit
or loss, are added to or reduced from the fair value of the financial assets or financial liabilities, as appropriate. Transaction cost directly attributable to the
acquisition of financial assets and financial liabilities recognized at fair value through Profit or Loss are recognised immediately in the Statement of Profit
and Loss.
2.3.14(b) Subsequent measurement
For the purposes of subsequent measurement, financial instruments are classified as follows:
(a) Non-derivative financial instruments
Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect
contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Interest income for such instruments is recognised in profit or loss using the effective interest rate (EIR) method, which is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial asset to that asset''s gross carrying amount.
The carrying amounts of financial assets that are subsequently measured at amortised cost are determined based on the effective interest method
less any impairment losses.
Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is
achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified
dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Interest income for such instruments is recognised in profit or loss using the effective interest rate(EIR) method, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial asset to that asset''s gross carrying amount.
Fair value movements are recognised in the other comprehensive income (OCI) until the financial asset is derecognised. On de-recognition, cumulative
gain or loss previously recognised in OCI is reclassified from the equity to the profit and loss.
Financial assets at fair value through profit or loss
A financial asset is subsequently measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other
comprehensive income. Such financial assets are measured at fair value with all changes in fair value recognised in the statement of profit and
loss.
Dividend and interest income from such instruments is recognized in the statement of profit and loss, when the right to receive the payment is
established.
Fair value changes on such assets are recognised in the statement of profit and loss.
Financial liabilities
Financial liabilities are classified as at fair value through profit or loss when the financial liability is either contingent consideration recognised by the
Company as an acquirer in a business combination to which Ind AS 103 applies or is held for trading or it is designated as at Fair Value Through Profit
& Loss ( FVTPL).
All other financial liabilities are subsequently measured at amortized cost using the effective interest method unless at initial recognition, they are
classified as measured at fair value through profit and loss.
Financial liabilities carried at fair value through profit or loss, are measured at fair value with all changes in fair value recognised in the statement of
profit and loss.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short
maturity of these instruments.
Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity
instruments are recorded at the proceeds received. Incremental costs directly attributable to the issuance of equity instruments and buy back of equity
instruments are recognized as a deduction from equity, net of any tax effects.
(b) Derivative financial instruments
The Company holds derivative financial instruments such as foreign exchange forward contracts to mitigate the risk of changes in exchange rates on
foreign currency exposures. The counterparty for these contracts is generally a bank.
Although the Company believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting
under Ind AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per Ind AS 109,
is categorized as a financial asset or financial liability, at fair value through profit or loss.
Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in the statement of
profit and loss when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting
exchange gains or losses are charged to Statement of Profit and Loss.
(c) Compound financial instruments
The non-convertible non-cumulative preference shares issued by the company that provides for mandatory redemption by the company for a fixed or
determinable amount at a fixed or determinable future date are treated as compound financial instruments as per criteria mentioned in Ind AS 32.
On issuance of the convertible preference shares, the fair value of the liability component is determined using a market interest rate for an equivalent
non-convertible instrument. This amount is classified as a financial liability measured at amortised cost (net of transaction costs). The remainder of
the proceeds is recognised and included in other equity. The change in liability component on account of modification of terms of redemption, if any,
is recognized in statement of profit and loss.
2.3.14(c) De-recognition of financial instrument
a) A financial asset (or, a part of a financial asset) is primarily derecognized when the contractual right to the cash flows from the financial asset expires,
or the company transfers its right to receive cash flow from the financial assets and substantially all the risks and rewards of ownership of the asset
to another party.
On de-recognition of a financial asset, the difference between the asset''s carrying amount and the sum of the consideration received/receivable is
recognised in the profit or loss.
b) A financial liability (or a part of financial liability) is derecognized when obligation specified in the contract is discharged or cancelled or expires.
On de-recognition of a financial liability, the difference between the carrying amount of the financial liability de-recognised and the consideration paid/
payable is recognised in profit or loss.
2.3.14(d) Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet, if there is a currently enforceable legal right to offset
the recognised amounts and there is an intention to settle them on a net basis or to realise the assets and settle the liabilities simultaneously.
2.3.14(e) Impairment of Financial Assets
Financial assets that are carried at amortised cost and fair value through other comprehensive income (FVOCI) are assessed for possible impairments basis
expected credit losses taking into account the past history of recovery, risk of default of the counterparty, existing market conditions etc. The impairment
methodology applied depends on whether there has been a significant increase in credit risk since initial recognition.
Expected Credit Losses are measured through a loss allowance at an amount equal to:
- 12-months expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12
months after the reporting date); or
- Lifetime expected credit losses (expected credit losses that result from all possible default events over the life of financial instruments).
For trade receivables or any contractual right to receive cash or another financial asset that result from transaction that are within the scope of Ind AS 115
and Ind AS 116, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.
For all other financial assets, expected credit losses are measured at an amount equal to the 12- months ECL, unless there has been a significant increase
in credit risk from initial recognition in which case those are measured at lifetime ECL.
2.3.14(f) Write off
The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering the financial asset in its
entirety or a portion thereof.
2.3.15 Impairment of Non-financial assets
Property, plant and equipment and other intangible assets are tested for impairment whenever events or changes in circumstances indicate that their
carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell
and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from
other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
If such assets are considered to be impaired, the impairment to be recognized in the statement of profit and loss is measured by the amount by which the
carrying value of the assets exceeds the estimated recoverable amount of the asset. The recoverable amount is the higher of an asset''s fair value less costs
of disposal and value in use.
The assets that are impaired are reviewed for possible reversal of the impairment at the end of each reporting period. When an impairment loss subsequently
reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, however that the increased carrying amount
does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been
recognised for the asset in prior years. The reversal of an impairment loss is recognised in the statement of profit and loss.
Impairment is reviewed periodically including at the end of each financial year.
2.3.16 Cash and cash equivalents
The Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and short-term deposits with the original maturity period of three
months or less, which are subject to an insignificant risk of changes in value and all highly liquid investments that are readily convertible to known amounts
of cash to be cash equivalents.
2.3.17 Statement of Cash flows
The statement of cash flows is prepared in accordance with the Indian Accounting Standard (Ind AS) - 7 âStatement of Cash flowsâ using the indirect method
for operating activities whereby profit for the period is adjusted for the effects of transaction of a non-cash nature, and item of income or expenses associated
with investing or financing cash flows. The cash flows from operating, investing and financing activities of the company are segregated. The Company
considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
Mar 31, 2024
Note-1 Corporate Information
Sportking India Limited (the Company) is a public limited company domiciled in India and incorporated under the provisions of the Companies Act, 1956 on 15thFebruary 1989 and has its registered office at Village Kanech, Near Sahnewal G.T. Road, Ludhiana, Punjab -141120. The company is engaged in manufacturing of Cotton Yarn, Synthetic Yarn and Blended Yarn.The company''s equity shares are listed at BSE Limited (Bombay Stock Exchange) and NSE (National Stock Exchange).
The financial statements for the year ended 31stMarch,2024 were approved and authorized for issue by the Company''s Board of Directors on 27thApril 2024.
Note-2 Material Accounting Policies, Significant Accounting Estimates, Judgements and Assumptions and Applicability of New and Revised Ind ASNote- 2.1 Statement of Compliance
The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time and other relevant provisions of the Act.
Note- 2.2 Basis of Preparation of financial statements
(i) The financial statements have been prepared on historical cost convention on accrual basis except for certain financial instruments (including derivative instruments) which are measured at fair value at the end of each reporting period as required under Ind AS.
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 the financial statements is determined on such a basis, except for measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2.
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.
(ii) Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
(iii) The functional and presentation currency of the Company is Indian rupees (INR) and all values are rounded to the nearest ? lakhs and two decimals thereof, except otherwise stated.
Note-2.3 Material Accounting Policies:
2.3.1 Revenue Recognition2.3.1 (a)Sale of products
The company derives revenue primarily from sale of Yarn
Revenue from the sale of goods is recognized at the point in time when control is transferred to the customer which is usually on dispatch/ delivery and the amount of revenue can be measured reliably and recovery of consideration is probable.
Revenue is measured based on the transaction price (net of variable consideration) which is consideration, adjusted for volume discounts, rebates, scheme allowances, price concessions, incentives, and returns, if any, as specified in the contracts with the customers. Revenue excludes taxes collected from customers on behalf of the government. Due to short nature of credit period given to customers, there is no financing component in the contract.
Revenue from services related activities is recognised as and when services are rendered and on the basis of contractual terms with parties.
(i) Interest Income from customers is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate.
(ii) Interest Income from financial asset is recognized when it is probable that economic benefits will flow to the company and amount of income can be measured reliably. Interest income is accrued on time basis, by reference to principal outstanding and at effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of financial asset to that asset''s net carrying amount on initial recognition.
(i) Export benefits are accounted for in the year of exports based on eligibility and when there is no uncertainty in receiving the same.
(ii) Other income is recognized when no significant uncertainty exists with regard to the amount to be realized and the ultimate collection thereof.
2.3.2 Employee Benefits2.3.2(a) Short term Employee Benefits:
Employee benefits payable wholly within twelve months of receiving employee services are classified as short-term employee benefits. The amount of short-term employee benefits are recognized as an expense on an undiscounted basis in the statement of profit and loss of the year in which the related service is rendered.
2.3.2(b) Post-Employment benefit plans(a) Defined Contribution Plan:
Provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service.
(b) Defined Benefit Plan:Gratuity
The Company provides for gratuity, a defined benefit retirement plan covering eligible employees. The gratuity plan provides for lump sum payment to vested employee at retirement, death, incapacitation or termination of employee, based on the respective employee''s salary and the tenure of employment.
The liability or asset recognised in the balance sheet in respect of the defined benefit plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The liability/asset is determined using projected unit credit method, through actuarial valuation carried out at the end of each annual reporting period.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. Such net interest cost along with the current service cost and, if applicable, the past service cost and settlement gain/loss, is included in employee benefit expense in the statement of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions, comprising actuarial gains/losses and return on plan assets (excluding the amount recognised in net interest on the net defined liability), are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
2.3.2(c) Other long term employee benefits- Compensated absences
Compensated absences, which are not expected to occur within twelve months after the end of the period in which the employee renders the related service, are recognised at the present value of the obligation based on actuarial valuation as on the reporting date,performed by an independent actuary using projected unit credit method.
The expense related to other long term employee benefits including re-measurements as a result of past experience adjustments and changes in actuarial assumptions are recognised in statement of profit and loss.
2.3.3 Property, plant and equipment:Recognition and measurement
The cost of an item of property, plant and equipment is recognised as an asset when it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably.
Freehold land is carried at cost. All other items of Property, plant and equipment are stated at costless accumulated depreciation and impairment loss, if any. The cost directly attributable to acquisition are capitalised until the property plant and equipment are ready for use as intended by the management.
The cost of an item of Property, plant and equipment comprises of:
(i) Purchase price including import duties and non-refundable purchase taxes after deducting trade discounts and rebates.
(ii) Any expenditure directly attributable for bringing an asset to the location and the working condition for its intended use and
(iii) The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.
When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives.
Subsequent expenditures relating to property, plant and equipment are included in the assets carrying value or recognised as separate assets as appropriate, only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the statement of profit and loss when incurred.
Property, plant and equipment which are not ready for intended use at each balance sheet date are disclosed as âCapital work-in-progressâ and advances paid towards the acquisition of Property, plant and equipment outstanding at each balance sheet date are classified as Capital advances under âOther non-current assetsâ. Directly attributable expenditure (including finance costs relating to borrowed funds for construction or acquisition of property, plant and equipment) incurred on projects under implementation are treated as pre-operative expenses and are included in Capital work-in-progress.
De-recognition of Property, Plant and Equipment
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. The cost and the related accumulated depreciation are eliminated from the financial statements upon disposal or retirement of the asset and any gain or loss arising thereon is determined as the difference between sale proceeds and the carrying amount of the asset and is recognised in the statement of profit and loss.
Fully depreciated assets still in use are retained in financial statements.
Intangible assets are recognized when it is probable that the expected future economic benefits that are attributable to the asset will flow and the cost of the asset can be measured reliably.
Intangible assets are stated at cost less accumulated amortization and accumulated impairment losses, if any. The cost of intangible asset comprises of its purchase price, net of recoverable taxes and any directly attributable cost of preparing the asset for its intended use.
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in statement of profit and loss as and when incurred.
De-recognition of intangible assets
An intangible asset is derecognised upon disposal or retirement of the asset. The cost and the related accumulated amortization are eliminated from the financial statements upon disposal or retirement of the asset and resultant gains or losses are recognized in the statement of Profit and Loss when the asset is derecognized.
2.3.5 Depreciation and amortizationDepreciation
Depreciation is the systematic allocation Depreciation of the depreciable amount of an asset over its useful life.
Depreciation is provided on Property, plant and equipment on straight line method on the basis of useful lives of such assets specified in Schedule II to the Act. Assets costing upto ? 5,000 are fully depreciated in the year of purchase.
Depreciation method and useful lives are reviewed periodically, including at each financial year end with the effect of any changes in estimate accounted for on a prospective basis.
Intangible assets are amortized on straight line method over the estimated useful life. The amortization method and useful life are reviewed at each financial year end. The estimated useful life is based on number of factors including effect of obsolescence and other economic factors and is as under:
|
Assets description |
Useful Life |
|
Computer Software |
5 Years |
|
Right to use power lines |
5 Years |
Inventories are valued at cost or net realizable value, whichever is lower except production waste which is valued at net realizable value. The raw materials and other supplies held for use in the production are valued at net realisable value only if the finished products in which they are to be incorporated are expected to be sold below cost. The cost in respect of the various items of inventory is computed as under:
(i) In case of raw materials at first-in first-out (FIFO) basis. The cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition.
(ii) In case of stores and spares at weighted average cost plus direct expenses. The cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition.
(iii) In case of work in progress at raw material cost plus conversion costs depending upon the stage of completion.
(iv) In case of finished goods at raw material cost plus conversion costs, and other overheads incurred to bring the goods to their present location and condition.
Net Realisable Value is the estimated selling price in ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sales.
Borrowing costs directly attributable to the acquisition or construction of qualifying assets i.e. the assets that necessarily takes a substantial period of time to get ready for its intended use are capitalized as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
Basic earnings per share is computed by dividing the profit for the period attributable to the equity shareholders of the company by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the profit for the period attributable to the equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares, if any.
Income tax expense comprises current tax and deferred tax.
Income tax expense is recognised in statement of Profit and Loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, as the case may be.
Current tax is the tax payable/receivable on the taxable profit/loss for the year using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period and any adjustment to taxes in respect of previous years. Interest expenses and penalties, if any, related to income tax are included in finance cost and other expenses respectively. Interest Income, if any, related to income tax is included in other income.
Deferred tax is recognised in respect of temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purpose at the reporting date using tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date.
A deferred tax asset is recognized to the extent, it is probable that future taxable profit will be available against where the deductible temporary differences and 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. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis.
Deferred tax assets and deferred tax liabilities have been set off as it relates to income taxes levied by the same taxation authority.
The government grants are recognized only when there is reasonable assurance that the conditions attached to them shall be complied with, and the grants will be received.
Government grants relating to the purchase of property, plant and equipment are deducted from its gross value and are recognised in profit or loss on a systematic over the expected useful lives of the related assets by way of reduced depreciation.
When the grants relates to an expense item, it is recognised in the Statement of profit and loss by way of reduction from the related cost, which the grants are intended to compensate.
Government grants that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving financial support to the Company with no related costs is recognised in the Statement of profit or loss of the period in which it becomes receivable under ''Other operating income''/''Other income'' based on the nature of grant.
2.3.11 Foreign Currency translations
Transactions in foreign currency are initially recorded in the functional currency i.e. Indian Rupees using the exchange rate prevailing at the date of transactions.
Monetary items denominated in foreign currency are reported using the exchange rate prevailing at the end of reporting period.
The exchange difference arising on the settlement or reporting of monetary items at rates different from rates at which these were initially recorded / reported in previous financial statements, are recognised in the statement of profit and loss in the period in which they arise.
Non-monetary items denominated in foreign currency and measured at historical cost are recorded at the exchange rate prevalent at the date of transaction. Non-monetary items that are measured in term of historical cost in foreign currency are not retranslated.
Final dividends on shares are recorded as a liability after approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the company''s Board of Directors.
2.3.13 Leases(i) Company as a lessee
The Company''s lease asset classes primarily consist of leases for land and buildings. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (âROUâ) 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 (shortterm leases) and leases for which underlying asset is of low value. For these short-term and leases for which underlying asset is of low value, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
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 and are adjusted for any remeasurement of the lease liability.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use assets is evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
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 lessee''s incremental borrowing rate.
Lease Liability and Right-of-Use Asset have been separately presented in the Balance Sheet. The interest expense on the lease liability has been separately presented as a component of finance costs in the statement of profit and loss. The payments of principal portion and interest portion of lease liability have been classified under financing activities in the statement of cash flows.
The payments for short-term leases and leases of low-value assets have been recognized in the statement of profit and loss have been classified under operating activities in the statement of cash flows.
Leases for which the company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
For operating leases, lease payments received are recognized on systematic basis over the term of the relevant lease as a part of other income.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
2.3.14(a) Initial Recognition and measurement
The company recognises the financial assets and financial liabilities when it becomes party to the contractual provision of the instruments. All financial assets and liabilities are recognised at fair value on initial recognition except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition of financial assets and or issue of financial liabilities that are not recognized at fair value through profit or loss, are added to or reduced from the fair value of the financial assets or financial liabilities, as appropriate. Transaction cost directly attributable to the acquisition of financial assets and financial liabilities recognized at fair value through Profit or Loss are recognised immediately in the Statement of Profit and Loss.
2.3.14(b) Subsequent measurement
For the purposes of subsequent measurement, financial instruments are classified as follows:
(a) Non-derivative financial instruments* Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Interest income for such instruments is recognised in profit or loss using the effective interest rate (EIR) method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset''s gross carrying amount.
The carrying amounts of financial assets that are subsequently measured at amortised cost are determined based on the effective interest method less any impairment losses.
** Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Interest income for such instruments is recognised in profit or loss using the effective interest rate(EIR) method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset''s gross carrying amount.
Fair value movements are recognised in the other comprehensive income (OCI) until the financial asset is derecognised. On de-recognition, cumulative gain or loss previously recognised in OCI is reclassified from the equity to the profit and loss.
*** Financial assets at fair value through profit or loss
A financial asset is subsequently measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income. Such financial assets are measured at fair value with all changes in fair value recognised in the statement of profit and loss.
Dividend and interest income from such instruments is recognized in the statement of profit and loss, when the right to receive the payment is established.
Fair value changes on such assets are recognised in the statement of profit and loss.
Financial liabilities are classified as at fair value through profit or loss when the financial liability is either contingent consideration recognised by the Company as an acquirer in a business combination to which Ind AS 103 applies or is held for trading or it is designated as at Fair Value Through Profit & Loss ( FVTPL).
All other financial liabilities are subsequently measured at amortized cost using the effective interest method unless at initial recognition, they are classified as measured at fair value through profit and loss.
Financial liabilities carried at fair value through profit or loss, are measured at fair value with all changes in fair value recognised in the statement of profit and loss.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments are recorded at the proceeds received. Incremental costs directly attributable to the issuance of equity instruments and buy back of equity instruments are recognized as a deduction from equity, net of any tax effects.
(b) Derivative financial instruments
The Company holds derivative financial instruments such as foreign exchange forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank.
Although the Company believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under Ind AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per Ind AS 109, is categorized as a financial asset or financial liability, at fair value through profit or loss.
Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in the statement of profit and loss when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are charged to Statement of Profit and Loss.
(c) Compound financial instruments
The non-convertible non-cumulative preference shares issued by the company that provides for mandatory redemption by the company for a fixed or determinable amount at a fixed or determinable future date has been treated as compound financial instruments as per criteria mentioned in Ind AS 32.
On issuance of the convertible preference shares, the fair value of the liability component is determined using a market interest rate for an equivalent non-convertible instrument. This amount is classified as a financial liability measured at amortised cost (net of transaction costs). The remainder of the proceeds is recognised and included in other equity.
2.3.14(c) De-recognition of financial instrument
a) A financial asset (or, a part of a financial asset) is primarily derecognized when the contractual right to the cash flows from the financial asset expires, or the company transfers its right to receive cash flow from the financial assets and substantially all the risks and rewards of ownership of the asset to another party.
On de-recognition of a financial asset, the difference between the asset''s carrying amount and the sum of the consideration received/receivable is recognised in the profit or loss.
b) A financial liability (or a part of financial liability) is derecognized when obligation specified in the contract is discharged or cancelled or expires.
On de-recognition of a financial liability, the difference between the carrying amount of the financial liability de-recognised and the consideration paid/payable is recognised in profit or loss.
2.3.14(d) Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet, if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle them on a net basis or to realise the assets and settle the liabilities simultaneously.
Financial assets that are carried at amortised cost and fair value through other comprehensive income (FVOCI) are assessed for possible impairments basis expected credit losses taking into account the past history of recovery, risk of default of the counterparty, existing market conditions etc. The impairment methodology applied depends on whether there has been a significant increase in credit risk since initial recognition.
Expected Credit Losses are measured through a loss allowance at an amount equal to:
- 12-months expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date); or
- Lifetime expected credit losses (expected credit losses that result from all possible default events over the life of financial instruments).
For trade receivables or any contractual right to receive cash or another financial asset that result from transaction that are within the scope of Ind AS 115 and Ind AS 116, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.
For all other financial assets, expected credit losses are measured at an amount equal to the 12- months ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL.
The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering the financial asset in its entirety or a portion thereof.
2.3.15 Impairment of Non-financial assets
Property, plant and equipment and other intangible assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
If such assets are considered to be impaired, the impairment to be recognized in the statement of profit and loss is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use.
The assets that suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period. When an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, however that the increased carrying amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognised for the asset in prior years. The reversal of an impairment loss is recognised in the statement of profit and loss.
Impairment is reviewed periodically including at the end of each financial year.
2.3.16 Cash and cash equivalents
The Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with the original maturity period of three months or less, which are subject to an insignificant risk of changes in value and all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
2.3.17 Statement of Cash flows
The statement of cash flows is prepared in accordance with the Indian Accounting Standard (Ind AS) - 7 âStatement of Cash flowsâ using the indirect method for operating activities whereby profit for the period is adjusted for the effects of transaction of a non-cash nature, and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the company are segregated. The Company considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
2.3.18 Provisions, Contingent Liabilities and Contingent Assets
(i) Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is recognised when, and only when, it is virtually certain that reimbursement will be received if the Company settles the obligation. The reimbursement is treated as a separate asset. The expense relating to a provision is presented in the statement of profit or loss net of any reimbursement.
(ii) A contingent liability is not recognised in the financial statements, however, is disclosed, unless the possibility of an outflow of resources embodying economic benefits is remote. If it becomes probable that an outflow of future economic benefits will be required for an item dealt with as a contingent liability, a provision is recognised in the financial statements of the period (except in the extremely rare circumstances where no reliable estimate can be made).
(iii) A contingent asset is not recognised in the financial statements, however, is disclosed, where an inflow of economic benefits is probable.
(iv) Provisions, contingent liabilities and contingent assets are reviewed at each balance sheet date.
Segments are identified based on the manner in which the Company''s Chief Operating Decision Maker (''CODM'') decides about
resource allocation and reviews performance.
(1) Segment Revenue includes sales and other income directly identifiable with/ allocable to the segment including intersegment revenue.
(2) Income and Expenses that are directly identifiable with/ allocable to the segments are considered for determining the segment result. Income and Expenses not allocable to segments are included under unallocable expenditure.
(3) Segment results includes margin on inter segment sales.
(4) Segment assets and Liabilities include those directly identifiable with the respective segments. Assets and liabilities not allocable to any segment are classified under unallocable category.
Note-2.4 Current - Non-Current Classification
All assets and liabilities have been classified as current and non-current on the basis of the following criteria:
An asset is classified as current when it satisfies any of the following criteria:
a) it is expected to be realised in, or is intended for sale or consumption in, the company''s normal operating cycle;
b) it is held primarily for the purpose of being traded;
c) it is expected to be realised within twelve months after the reporting date;
or
d) it is cash or cash equivalent unless it is restricted from being exchanged or use to settle a liability for at least twelve months after
the reporting date.
Current assets include the current portion of non-current financial assets.
All other assets are classified as non-current.
A liability is classified as current when it satisfies any of the following criteria:
a) it is expected to be settled in the company''s normal operating cycle;
b) it is held primarily for the purpose of being traded;
c) it is due to be settled within twelve months after the reporting date; or
d) there is no unconditional right to defer settlement of the liability for at least twelve months after the reporting date. Terms of a liability that could, at the option of the counterpart, result in its settlement by the issue of equity instruments do not affect its classification.
Current liabilities include current portion of non-current financial liabilities. All other liabilities are classified as non-current.
Operating cycle is the time between the acquisition of assets for processing/servicing and their realisation in cash or cash equivalents. Based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current or non-current classification of assets and liabilities.
Note-2.5 Use of Accounting Estimates, Judgements and Assumptions
The preparation of financial statements in conformity with Indian Accounting Standards (Ind AS) require management to make judgements, estimates and assumptions in the application of accounting policies that affect the reported amount of income, expenses, assets and liabilities and disclosure of contingent liabilities.
The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis and the effect of revision to accounting estimates is recognized prospectively from the period in which the estimate is revised.
Critical accounting estimates, Judgements and assumptionsi. Income taxes
Significant judgement is required in determination of provision for current tax and deferred tax e.g. determination of taxability of certain incomes and deductibility of certain expenses etc. The carrying amount of income tax assets/liabilities is reviewed at each reporting date. The factors used in estimates may differ from actual outcome which could lead to signification adjustment to the amounts reported in financial statements.
ii Defined Benefit Plans and other post-employment benefits
The cost of the defined benefit plan and other post-employment benefits and the present value of such obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future, salary increases, mortality rates and future pension increases. Due to the complexities involved in the valuation and its long-term nature, the obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
Management has estimated the net realizable values of inventories, taking into account the most reliable evidence available at each reporting date. The future realization of these inventories may be affected by market driven changes.
iv. Fair value measurement
When the fair values of financial assets and financial liabilities recorded in the Balance Sheet cannot be measured based on quoted prices in active markets, their fair values are measured using valuation techniques, including the discounted cash flow model, underlying asset model, comparable companies multiple method and comparable transaction method which involve various judgements and assumptions.
Significant judgement is required for estimating the possible outflow of resources, if any, in respect of contingencies/claims/ litigations against the Company which involves judgements around estimating the ultimate outcome of such past events and measurement of the obligation amount etc. The Company assesses such claims and monitors the legal environment on an ongoing basis, with the assistance of external legal counsel, wherever necessary.
vi. Useful lives of property plant and equipment and Intangible assets
The estimated useful lives of property plant and equipment and intangible assets are based on a number of factors including the effects of obsolescence, internal assessment of user experience and other economic factors (such as the known technological advancements, commercial obsolescence of the asset etc.). The useful life of property plant and equipment and intangible assets is reviewed on an ongoing basis.
vii. Recoverable amount of property, plant and equipment
The recoverable amount of property plant and equipment is based on estimates and assumptions regarding the expected market outlook and expected future cash flows. Any changes in these assumptions may have a material impact on the measurement of the recoverable amount and could result in impairment.
Note-2.6 Applicability of new and revised Ind AS
Ministry of Corporate Affairs (âMCAâ) notifies new accounting standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. As at March 31,2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
Mar 31, 2023
NOTE- 2.3 Significant Accounting Policies:
2.3.1 Revenue Recognition
2.3.1 (a) Sale of products
The company derives revenue primarily from sale of Yarn
Revenue from the sale of goods is recognized at the point in time when control is transferred to the customer which is usually on dispatch/ delivery.
Revenue is measured based on the transaction price (net of variable consideration) which is consideration, adjusted for volume discounts, rebates, scheme allowances, price concessions, incentives, and returns, if any, as specified in the contracts with the customers. Revenue excludes taxes collected from customers on behalf of the government. Due to short nature of credit period given to customers, there is no financing component in the contract.
2.3.1 (b) Sale of services
Revenue from services related activities is recognised as and when services are rendered and on the basis of contractual terms with parties.
2.3.1 (c) Interest Income
a) Interest Income from customers is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate.
b) Interest Income from financial asset is recognized when it is probable that economic benefits will flow to the company and amount of income can be measured reliably. Interest income is accrued on time basis, by reference to principal outstanding and at effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of financial asset to that asset''s net carrying amount on initial recognition.
2.3.1 (d) Insurance and other claims
Insurance and other claims are recognized when no significant uncertainty exists with regard to the amount to be realized and the ultimate collection thereof.
2.3.1 (e) Other Income
Other income is recognized when no significant uncertainty exists with regard to the amount to be realized and the ultimate collection thereof.
2.3.2 Employee Benefits
2.3.2 (a) Short term Employee Benefits:
Employee benefits payable wholly within twelve months of receiving employee services are classified as short-term employee benefits. The amount of short term employee benefits are recognized as an expense on an undiscounted basis in the statement of profit and loss of the year in which the related service is rendered.
2.3.2 (b) Post-Employment benefit plans
(a) Defined Contribution Plan:
Provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service.
(b) Defined Benefit Plan:
Gratuity
The Company provides for gratuity, a defined benefit retirement plan (''the Gratuity Plan'') covering eligible employees of the Company. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee''s salary and the tenure of employment with the Company.
Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each balance sheet date using the projected unit credit method.
The company fully contributes all ascertained liabilities to the âSportking India Limited Employee Group Gratuity Trustâ managed by the trustees. The trustees administrate contributions made to the Trust and contributions are invested in the schemes as permitted by the laws of India.
The Company recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability. Re-measurements
comprising of actuarial gains and losses, and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability) are recognised in Other Comprehensive Income which are not reclassified to profit or loss in subsequent periods. All other expenses related to defined benefit plans are recognised in employee benefits expense in the Statement of profit and loss.
2.3.2 (c) Other long term employee benefits- Compensated absences
Compensated absences, which are not expected to occur within twelve months after the end of the period in which the employee renders the related service, are recognised at the present value of the obligation based on actuarial valuation as on the reporting date, performed by an independent actuary using projected unit credit method.
The expense related to other long term employee benefits including re- measurements as a result of past experience adjustments and changes in actuarial assumptions are recognised in statement of profit and loss.
2.3.3 Property, plant and equipment:
Recognition and measurement
The cost of an item of property, plant and equipment is recognised as an asset when it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably.
Freehold land is carried at cost. All other items of Property, plant and equipment are stated at cost or deemed cost applied on transition to Ind AS, less accumulated depreciation and impairment loss, if any. The cost directly attributable to acquisition are capitalised until the property plant and equipment are ready for use as intended by the management.
The cost of an item of Property, plant and equipment comprises of:
(i) Purchase price including import duties and non-refundable purchase taxes after deducting trade discounts and rebates.
(ii) Any expenditure directly attributable for bringing an asset to the location and the working condition for its intended use and
(iii) The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.
Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in net profit in the statement of profit and loss when incurred.
Property, Plant and Equipment which are significant to the total cost of that item of Property, Plant and Equipment and having different useful life are accounted separately.
Property, plant and equipment which are not ready for intended use at each balance sheet date are disclosed as âCapital work-in-progressâ and advances paid towards the acquisition of Property, plant and equipment outstanding at each balance sheet date are classified as Capital advances under âOther non-current assetsâ.
De-recognition of Property, Plant and Equipment
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. The cost and the related accumulated depreciation are eliminated from the financial statements upon disposal or retirement of the asset and any gain or loss arising thereon is determined as the difference between sale proceeds and the carrying amount of the asset and is recognised in the statement of profit and loss.
2.3.4 Intangible Assets
Intangible assets are recognized when it is probable that the expected future economic benefits that are attributable to the asset will flow and the cost of the asset can be measured reliably.
Intangible assets are stated at cost or deemed cost applied on transition to Ind AS, less accumulated amortization and impairment, if any. The cost of intangible asset comprises of its purchase price, net of recoverable taxes and any directly attributable cost of preparing the asset for its intended use.
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in statement of profit and loss as and when incurred.
De-recognition of intangible assets
An intangible asset is derecognised upon disposal or retirement of the asset. The cost and the related accumulated amortization are eliminated from the financial statements upon disposal or retirement of the asset and resultant gains or losses are recognized in the statement of Profit and Loss when the asset is derecognized.
2.3.5 Depreciation and amortization
Depreciation is provided on Property, plant and equipment on straight line method on the basis of useful lives of such assets specified in Schedule II to the Act.
Depreciation method, useful lives and residual values are reviewed periodically, including at each financial year end with the effect of any changes in estimate accounted for on a prospective basis.
Amortization
Intangible assets are amortized on straight line method over the estimated useful life. The amortization method, useful life and residual value are reviewed at each financial year end. The estimated useful life is based on number of factors including effect of obsolescence and other economic factors and is as under:
|
Assets description |
Useful Life |
|
Computer Software |
5 Years |
|
Electric Line Expenses |
5 Years |
2.3.6 Inventories
Inventories are valued at cost or net realizable value, whichever is lower except production waste which is valued at net realizable value. The raw materials and other supplies held for use in the production are valued at net realisable value only if the finished products in which they are to be incorporated are expected to be sold below cost. The cost in respect of the various items of inventory is computed as under:
(i) In case of raw materials at first-in first-out (FIFO) basis. The cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition.
(ii) In case of stores and spares at weighted average cost plus direct expenses. The cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition.
(iii) In case of work in progress at raw material cost plus conversion costs depending upon the stage of completion.
(iv) In case of finished goods at raw material cost plus conversion costs, and other overheads incurred to bring the goods to their present location and condition.
Net Realisable Value is the estimated selling price in ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sales.
2.3.7 Borrowing Costs
Borrowing costs directly attributable to the acquisition or construction of qualifying assets i.e. the assets that necessarily takes a substantial period of time to get ready for its intended use are capitalized as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
2.3.8 Earnings per Share
Basic earnings per share is computed by dividing the profit for the period attributable to the equity shareholders of the company by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the profit for the period attributable to the equity shareholders and
the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares, if any.
2.3.9 Income Taxes
Income tax expense comprises current tax and deferred tax. Income tax expense is recognised in statement of Profit and Loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, as the case may be.
Current tax is the tax payable/receivable on the taxable profit/loss for the year using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period and any adjustment to taxes in respect of previous years. Interest expenses and penalties, if any, related to income tax are included in finance cost and other expenses respectively. Interest Income, if any, related to income tax is included in other income.
Deferred tax is recognised in respect of temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purpose at the reporting date using tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date.
A deferred tax asset is recognized to the extent, it is probable that future taxable profit will be available against where the deductible temporary differences and 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. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis.
Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority.
2.3.10 Government Grants
The government grants are recognized only when there is reasonable assurance that the conditions attached to them shall be complied with, and the grants will be received.
Government grants related to Property, plant and equipment upto financial year 2018-19 were recognised in statement of profit or loss as income on a systematic basis. As per the amendment in Ind-AS 20 âGovernment Grants vide notification dated 20th September, 2018, the Company has opted to present the grant received / receivable related to assets as deduction from the carrying value of such assets w.e.f. 1st April, 2019.
When the grants relates to an expense item, it is recognised in the Statement of profit and loss by way of reduction from the related cost, which the grants are intended to compensate, except where the related expense is not directly identifiable. In such cases, the grant is presented in the ''Other Income''.
Government grants that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving financial support to the Company with no related costs is recognised in the Statement of profit or loss of the period in which it becomes receivable under ''Other operating income''/''Other income'' based on the nature of grant.
2.3.11Foreign Currency translations
Transactions in foreign currency are initially recorded in the functional currency i.e. Indian Rupees using the exchange rate prevailing at the date of transactions.
Monetary items denominated in foreign currency are reported using the exchange rate prevailing at the end of reporting period.
The exchange difference arising on the settlement or reporting of monetary items at rates different from rates at which these were initially recorded / reported in previous financial statements, are recognised in the statement of profit and loss in the period in which they arise.
Non-monetary items denominated in foreign currency and measured at historical cost are recorded at the exchange rate prevalent at the date of transaction, Non-monetary items that are measured in term of historical cost in foreign currency are not retranslated.
2.3.12 Dividends
Final dividends on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the company''s Board of Directors.
2.3.13 Leases
(i) Company as a lessee
The Company''s lease asset classes primarily consist of leases for land and buildings. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (âROUâ) 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 (shortterm leases) and leases for which underlying asset is of low value. For these short-term and leases for which underlying asset is of low value, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
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 lossesand are adjusted for any re-measurement of the lease liability.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use assets is evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
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 lessee''s incremental borrowing rate. 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 Right of Use assets have been separately presented in the financial statements and Lease Payments has been classified as financing cash flows.
(ii) Company as a lessor
Leases for which the company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
For operating leases, rental income is recognized in the statement of profit and loss on a systematic basis over the term of the relevant lease. The respective leased assets are presented in the balance sheet based on their nature.
2.3.14 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
2.3.14 (a) Initial Recognition and measurement
The company recognises the financial assets and financial liabilities when it becomes party to the contractual provision of the instruments. All financial assets and liabilities are recognised at fair value on initial recognition except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition of financial assets and or issue of financial liabilities that are not recognized at fair value through profit or loss, are added to or reduced from the fair value of the financial assets or financial liabilities, as appropriate. Transaction cost directly attributable to the acquisition of financial assets and financial liabilities recognized at fair value through Profit or Loss are recognised immediately in the Statement of Profit and Loss.
2.3.14 (b) Subsequent measurement
For the purposes of subsequent measurement, financial instruments are classified as follows:
(a) Non-derivative financial instruments
* Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Interest income for such instruments is recognised in profit or loss using the effective interest rate (EIR) method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset''s gross carrying amount.
The carrying amounts of financial assets that are subsequently measured at amortised cost are determined based on the effective interest method less any impairment losses.
** Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Interest income for such instruments is recognised in profit or loss using the effective interest rate (EIR) method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset''s gross carrying amount.
Fair value movements are recognised in the other comprehensive income (OCI) until the financial asset is derecognised. On de-recognition, cumulative gain or loss previously recognised in OCI is reclassified from the equity to the profit and loss.
*** Financial assets at fair value through profit or loss
A financial asset is subsequently measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income. Such financial assets are measured at fair value with all changes in fair value recognised in the statement of profit and loss.
Dividend and interest income from such instruments is recognized in the statement of profit and loss, when the right to receive the payment is established.
Fair value changes on such assets are recognised in the statement of profit and loss.
**** Financial liabilities
Financial liabilities are classified as at fair value through profit or loss when the financial liability is either contingent consideration recognised by the Company as an acquirer in a business combination to which Ind AS 103 applies or is held for trading or it is designated as at FVTPL.
All other financial liabilities are subsequently measured at amortized cost using the effective interest method unless at initial recognition, they are classified as measured at fair value through profit and loss.
Financial liabilities carried at fair value through profit or loss, are measured at fair value with all changes in fair value recognised in the statement of profit and loss.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
****Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments are recorded at the proceeds received. Incremental costs directly attributable to the issuance of equity instruments and buy back of equity instruments are recognized as a deduction from equity, net of any tax effects.
(b) Derivative financial instruments
The Company holds derivative financial instruments such as foreign exchange forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank.
Although the Company believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under Ind AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per Ind AS 109, is categorized as a financial asset or financial liability, at fair value through profit or loss.
Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in the statement of profit and loss when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are charged to Statement of Profit and Loss.
(c) Compound financial instruments
The non-convertible non-cumulative preference shares issued by the company that provides for mandatory redemption by the company for a fixed or determinable amount at a fixed or determinable future date has been treated as compound financial instruments as per criteria mentioned in Ind AS 32.
On issuance of the convertible preference shares, the fair value of the liability component is determined using a market interest rate for an equivalent non-convertible instrument. This amount is classified as a financial liability measured at amortised cost (net of transaction costs). The remainder of the proceeds is recognised and included in other equity.
2.3.14 (c) De-recognition of financial instrument
a) A financial asset (or, a part of a financial asset) is primarily derecognized when the contractual right to the cash flows from the financial asset expires, or the company transfers its right to receive cash flow from the financial assets and substantially all the risks and rewards of ownership of the asset to another party.
On de-recognition of a financial asset, the difference between the asset''s carrying amount and the sum of the consideration received/receivable is recognised in the profit or loss.
b) A financial liability (or a part of financial liability) is derecognized when obligation specified in the contract is discharged or cancelled or expires.
On de-recognition of a financial liability, the difference between the carrying amount of the financial liability de-recognised and the consideration paid/payable is recognised in profit or loss.
2.3.14 (d) Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet, if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle them on a net basis or to realise the assets and settle the liabilities simultaneously.
2.3.14 (e) Impairment of Financial Assets
Financial assets that are carried at amortised cost and fair value through other comprehensive income (FVOCI) are assessed for possible impairments basis expected credit losses taking into account the past history of recovery, risk of default of the counterparty, existing market conditions etc. The impairment methodology applied depends on whether there has been a significant increase in credit risk since initial recognition.
Expected Credit Losses are measured through a loss allowance at an amount equal to:
. The 12-months expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date); or
. Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of financial instruments).
For trade receivables or any contractual right to receive cash or another financial asset that result from transaction that are within the scope of Ind AS 115 and Ind AS 116, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.
Further, for the purpose of measuring lifetime expected credit loss allowance for trade receivables, the company has used a practical expedient as permitted under Ind AS 109. The company follows simplified approach does not require the company to track changes in credit risk. Rather it recognizes impairment loss allowance based on lifetime ECL''s at each reporting date, right from its initial recognition.
For other assets, the company uses 12 months ECL to provide for impairment loss where no significant increase in credit risk is. If there is significant increase in credit risk full lifetime ECL is used.
2.3.14 (f) Write off
The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering the financial asset in its entirety or a portion thereof.
2.3.15 Impairment of Non-financial assets
Property, plant and equipment, other intangible assets and other non-financial assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
If such assets are considered to be impaired, the impairment to be recognized in the statement of profit and loss is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use.
The assets that suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period. When an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, however that the increased carrying amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognised for the asset in prior years. The reversal of an impairment loss is recognised in the statement of profit and loss.
Impairment is reviewed periodically including at the end of each financial year.
2.3.16 Cash and cash equivalents
The Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with the original maturity period of three months or less, which are subject to an insignificant risk of changes in value and all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
2.3.17 Statement of Cash flows
The statement of cash flows is prepared in accordance with the Indian Accounting Standard (Ind AS) - 7 âStatement of Cash flowsâ using the indirect method for operating activities whereby profit for the period is adjusted for the effects of transaction of a non-cash nature, and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the company are segregated.
Mar 31, 2018
NOTE 1. A. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of preparation of financial statements
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued thereafter, relevant provisions of the Companies Act 2013 and guidelines issued by the Securities and Exchange Board of India (SEBI).
For all periods up to and including the year ended 31stMarch, 2017, the Company prepared its financial statements in accordance with accounting standards notified under Companies (Accounting Standard) Rule, 2006 (previous GAAP). These financial statements for the year ended 31 March 2018 are the first financial statements of the Company prepared in accordance with Ind AS as the company is required to comply with the Indian Accounting Standards (Ind AS) for the accounting periods beginning on or after 1st April, 2017, (with the comparatives for the periods ended on 31stMarch, 2017).Detail explanation on how the transition from previous GAAP to Ind AS has affected the Company''s financial position, financial performance and cash flow is explained in Note No.31).
The financial statements have been prepared on historical cost convention on accrual basis, except for certain financial instruments which have been measured at fair value.
The accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
The books of accounts and the financial statements for year ended and as at 31st March, 2017 were audited by previous auditors M/s Rawla & Co.
(b) Use of Estimates and Judgements
The preparation of the financial statements in conformity with Ind AS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made. Differences between actual results and estimates are recognised in the period in which the results are known materialised.
(c) Revenue Recognition
Revenue is recognised at the fair value of the consideration received or receivable. Revenue is reduced for sales return, trade discount and other similar allowances. The company recognizes revenue when the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the entity.
(i) Sales of goods
Revenue from sale of goods is recognised when the following conditions are satisfied:
a) The Company has transferred all significant risk and rewards of ownership to the buyer;
b) The company does not retain effective control on the goods usually associated with ownership;
c) The cost incurred in respect of the transaction can be measured reliably;
d) It is probable that economic benefits will flow to the company; and
e) The amount of revenue can be measured reliably.
In accordance with Ind AS 18 on "Revenue" and Schedule III to the Companies Act, 2013, Sales for the previous year ended 31st March 2017 and for the period 1st April to 30 June 2017 are reported gross of Excise Duty and net of VAT/CST. Further, Excise Duty is reported as a separate expense line item. Consequent to the introduction of Goods and Services Tax (GST) with effect from 1st July 2017, VAT/ CST, Excise Duty etc. have been subsumed into GST and accordingly the same is not recognised as part of sales.
(ii) Export Incentives
Revenue in respect of the export incentives is recognized on post export basis.
(iii) Interest
Income from interest is recognized using the effective interest rate (EIR).
(iv) Dividend
Dividend income is recognized when the right to receive the payment is established.
(v) Insurance and Other Claims
Insurance and other claims are recognized when no significant uncertainty exists with regard to the amount to be realized and the ultimate collection thereof.
(d) Employee Benefits
(A) Short term Employee Benefits :
Employee benefits payable wholly within twelve months of receiving employee services are classified as short-term employee benefits. The amount of short term employee benefits are recognized as an expense on an undiscounted basis in the statement of profit and loss of the year in which the related service is rendered.
(B) Defined Contribution :
Provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service
(C) Defined Benefit Plan :
The Company provides for gratuity, a defined benefit retirement plan (''the Gratuity Plan'') covering eligible employees of the Company. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee''s salary and the tenure of employment with the Company.
Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each balance sheet date using the projected unit credit method. The company fully contributes all ascertained liabilities to the Sportking India Limited Employee Group Gratuity Trust managed by the trustees. The trustees administrate contributions made to the Trust and contributions are invested in the schemes as permitted by the laws of India.
The Company recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability. Re-measurements comprising of actuarial gains and losses, the effect of the asset ceiling (excluding amounts included in net interest on the net defined benefit liability) and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability) are recognised in Other Comprehensive Income which are not reclassified to profit or loss in subsequent periods. All other expenses related to defined benefit plans are recognised in employee benefits expense in the Statement of profit and loss
(D) Compensated absences:
The Company has a policy on compensated absences which are both accumulating and non-accumulating in nature. The expected additional cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.
(e) Property, Plant and Equipment :
The Company has applied for the one time transition exemption of considering the carrying cost on the transition date i.e. April 1, 2016 as the deemed cost under Ind AS 101 and hence regarded thereafter as historical cost.
Freehold land is carried at cost. All other items of Property, plant and equipment are stated at cost, less accumulated depreciation and impairment loss, if any. The cost directly attributable to acquisition are capitalised until the property plant and equipment are ready for use as intended by the management. The cost comprises of:
(a) Purchase price including import duties and non-refundable purchase taxes after deducting trade discounts and rebates.
(b) any expenditure directly attributable for bringing an asset to the location and the working condition for its intended use and
(c) the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.
Depreciation is provided on Straight Line Method on the basis of useful lives of such assets specified in Schedule II to the Companies Act, 2013.
Depreciation method, useful lives and residual values are reviewed periodically, including at each financial year end.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under other non-current assets and the cost of assets not put to use before such date are disclosed under ''Capital work-in-progress''.
Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in net profit in the statement of profit and loss when incurred. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in the statement of profit and loss.
(f) Intangible Assets
Intangible assets are stated at cost less accumulated amount of amortization and impairment, if any. Intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, from the date that they are available for use. The estimated useful life of an identifiable intangible asset is based on a number of factors including the effects of obsolescence, etc. Amortisation method and useful life are reviewed periodically, including at each financial year end.
(g) Inventories
Inventories are valued at cost or net realizable value, whichever is lower. The cost in respect of the various items of inventory is computed as under:
- In case of raw materials at first-in, first-out (FIFO) basis. The cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition.
- In case of stores and spares at weighted average cost plus direct expenses. The cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition.
- In case of work in progress at raw material cost plus conversion costs depending upon the stage of completion.
- In case of finished goods at raw material cost plus conversion costs, packing cost and other overheads incurred to bring the goods to their present location and condition.
(h) Borrowing Costs
Borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset are capitalized as part of the cost of the asset. Other borrowing costs are recognized in the statement of Profit and Loss in the period in which they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
(i) Earnings per Share
Basic earnings per share is computed by dividing the net profit for the period attributable to the equity share holders of the company by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the weighted average numbers of shares outstanding during the period are adjusted for the effects of all diluted potential equity shares if any.
(j) Income Taxes
Income tax expense comprises current tax and deferred tax.
Income tax expense is recognized on net profit in the statement of profit and loss except to the extent that it relates to items recognized directly in equity or other comprehensive income, in which case it is recognized in equity or other comprehensive income respectively.
Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
Deferred income tax assets and liabilities are recognized for all temporary differences arising between the tax base of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred income tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized. The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Minimum Alternate Tax credit is recognised when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period. The same is grouped under the head as ''Deferred Tax Asset''.
(k) Government Grants
The government grants are recognized only when there is reasonable assurance that the conditions attached to them shall be complied with, and the grants will be received.
Government grants related to assets are treated as deferred revenue and are recognized in the statement of profit and loss on a systematic and rational basis over the useful life of the related asset.
Government grants related to revenue are recognized on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs which they are intended to compensate.
(l) Foreign Currency Transactions
Transactions in foreign currency are initially recorded in the functional currency i.e. Indian Rupees using the exchange rate at the date of transaction.
Monetary items (i.e. receivables, payables, loans etc.) denominated in foreign currency are reported using the closing exchange rate as on each balance sheet date.
The exchange difference arising on the settlement or reporting of monetary items at rates different from rates at which these were initially recorded / reported in previous financial statements, are recognised in the statement of profit and loss in the period in which they arise.
(m) Dividends
Final dividends on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the company''s Board of Directors.
(n) Leases
Payments under operating leases are recognized as an expense in the statement of profit and loss on a straight line basis over the term of lease.
(o) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
(i) Initial Recognition and measurement
The company recognises the financial assets and financial liabilities when it becomes party to the contractual provision of the instruments. All financial assets and liabilities are recognised at fair value on initial recognition except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities that are not at fair value through profit or loss are added/ reduced to the fair value on initial recognition. Transaction cost directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit and loss are recognised immediately in the statement of profit and loss.
(ii) Subsequent measurement
a. Non-derivative financial instruments
(i) Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(ii) Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(iii) Financial assets at fair value through profit or loss
A financial asset is measured at fair value through profit and loss unless it is measured at amortized cost or at fair value through other comprehensive income.
(iv) Financial liabilities
The financial liabilities are subsequently carried at amortized cost using the effective interest method. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
b. Derivative financial instruments
The Company holds derivative financial instruments such as foreign exchange forward control to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these co tracts is generally a bank.
Although the Company believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under Ind AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per Ind AS 109, is categorized as a financial asset or financial liability, at fair value through profit or loss.
Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in net profit in the statement of profit and loss when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are charged to Statement of Profit and Loss. Assets/ liabilities in this category are pre sented as current assets/current liabilities if they are either held for trading or are expected to be realized within 12 months after the balance sheet date.
c. Equity Share
Equity shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
d. Compound financial instruments
The non-convertible non-cumulative preference shares issued by the company that provides for mandatory redemption by the company for a fixed or determinable amount at a fixed or determinable future date has been treated as a compound financial instruments as per criteria mentioned in Ind AS 32.
On issuance of the convertible preference shares, the fair value of the liability component is determined using a market rate for an equivalent non-convertible instrument. This amount is classified as a financial liability measured at amortised cost (net of transaction costs).The remainder of the proceeds is recognised and included in other equity.
(iii) De-recognition of financial instruments
A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for de-recognition under Ind AS 109. A financial liability (or a part of financial liability) is derecognized when the obligation specified in the contract is discharged or cancelled or expires.
(iv) Fair value measurement of financial instruments
The Company measures certain financial instruments at the fair value at each balance sheet date.
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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
(i) In the principal market for the asset or liability, or
(ii) In the absence of a principal market, in the most advantageous market for the assets or liability.
The fair value of financial instruments is determined using the valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimising the use of unobservable inputs.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
-Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
-Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (i.e. as prices) or (unadjusted) in active markets for identical assets or liabilities
-Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
Based on the three level fair value hierarchy, the methods used to determine the fair value of financial assets and liabilities include quoted market price, discounted cash flow analysis and valuation certified by the external valuer.
In case of financial instruments where the carrying amount approximates fair value due to the short maturity of those instruments, carrying amount is considered as fair value.
(p) Impairment of assets
a. Financial assets
The company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss.
Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognized as an impairment gain or loss in statement of profit or loss.
b. Non-financial assets
Intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the CGU to which the asset belongs.
If such assets are considered to be impaired, the impairment to be recognized in the statement of profit and loss is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in the statement of profit and loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed thecarrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
(q) Cash and cash equivalents
The Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with a maturity period of three months or less from the balance sheet date, which are subject to an insignificant risk of changes in value.
(r) Cash flow statement
The cash flow statement is prepared in accordance with the Indian Accounting Standard (Ind AS) - 7 "Statement of Cash flows" using the indirect method for operating activities. The cash flows from operating, investing and financing activities of the Company are segregated
(s) Provisions
(i) A provision shall be recognised when:
(a) an entity has a present obligation as a result of a past event;
(b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and
(c)a reliable estimate can be made of the amount of the obligation.
(ii) A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources. When there is a possible obligation or a present obligation in respect of which likelihood of outflow of resources is remote, no provision or disclosure is made.
(iii) Contingent assets are not recognised in the financial statements since this may result in the recognition of income that may never be accrued/ realised. A disclosure for contingent assets is made when an inflow of economic benefit is probable.
B. CRITICAL ACCOUNTING ESTIMATES
i. Useful lives of property, plant and equipment
The estimated useful lives of property, plant and equipment are based on a number of factors including the effects of obsolescence, internal assessment of user experience and other economic factors (such as the stability of the industry, and known technological advances) and the level of maintenance expenditure required to obtain the expected future cash flows from the asset.
The Company reviews the useful life of property, plant and equipment periodically and at the end of each reporting date.
ii. Recoverable amount of property, plant and equipment
The recoverable amount of property plant and equipment is based on estimates and assumptions regarding the expected market outlook and expected future cash flows. Any changes in these assumptions may have a material impact on the measurement of the recoverable amount and could result in impairment.
iii. Post-retirement benefit plans
Employee benefit obligations are measured on the basis of actuarial assumption including any changes in these assumptions that may have a material impact on the resulting calculations.
iv. Recognition of deferred tax assets
Recognition of deferred tax assets depends upon the availability of future profits against which tax losses carried forward can be used.
Mar 31, 2014
A) Accounting Convention :
The financial statements are prepared under historical cost convention
using the accrual system of accounting in accordance with the
accounting principles generally accepted in India and the requirements
of the Companies Act, 1956, including the mandatory Accounting
Standards as prescribed by the Companies (Accounting Standards) Rules,
2006. Value Added Tax (VAT), Income Tax, Wealth Tax, and Service Tax,
Cess, Insurance Claims, etc. which are accounted for as and when final
demand/refund/claim is determined on final assessment.
b) Use of Estimates :
The preparation of financial statements requires the management of the
company to make estimates and assumption that effect the reported
balances of assets/liabilities and disclosure relating to the
contingent liabilities and provisions as at the date of the financial
statements and reported amounts of income and expenses during the year.
The difference between the actuals and estimates are recognized in the
year such amounts are known/materialised.
c) Provisions, Contingent Liabilities and Contingents Assets :
Provisions involving substantial degree of estimation in measurement
are recognized where there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contigent Liabilities are not recognized but are disclosed in the
notes. Contigent assets are neither recognized nor disclosed in the
financial statements/notes.
d) Fixed Assets :
i) Fixed Assets are stated at cost of acquisition, net of modvat
/cenvat credit /terminal excise duty, additional custom duty including
net effect on foreign exchange fluctutation/contracts, financial cost
and other incidental expenses till the commencement of commercial
production attributable to acquisition or construction/installation of
fixed assets less depreciation and impairment loss.
ii) Capital works in progress are carried at cost, comprising direct
cost, finance cost, net effect on foreign fluctuation/contracts and
related incidental expenses.
iii) Intangible assets are stated at cost of acquisition less
accumulated amortisation.
e) Depreciation / Amortisation :
i) The company has provided depreciation on Straight Line Method in
accordance with the rates as prescribed in Schedule XIV under the
provisions of The Companies Act, 1956 on the fixed assets when it is
put to use on monthly basis.
ii) Renovation to premises taken on lease by the company have been
amortised over the period of lease and in case of premature termination
would be written off fully.
iii) Electricity Line Expenses / Service connection charges and
Computer Software being intangible are amortised over a period of 5
years.
f) Impairment of Assets :
At each balance sheet date the carrying amounts of fixed assets are
reviewed by the management to determine whether there is any indication
that these assets had suffered an impairment loss. If any such
indication exists recoverable amount of the asset is estimated in order
to determine the extent of impairment loss. Recoverable amount is the
higher of an asset's net selling price and value in use. In assessing,
value in use, the estimated future cash flows expected from the
continuing use of the assets and from its disposal are discounted to
their present value using a pre tax discount rate that reflects the
current market assessments of time value of money and risks specific to
the asset. Reversal of impairment loss is recognized immediately as
income in the profit and loss account.
g) Inventories :
These are valued as under:
i) Raw Material, Work-in-Process At cost or net realisable value
and useable whichever is lower.
ii) Stores & Spares At cost less provision for
obsolescence or net realisable
value whichever is lower.
iii) Finished Goods At cost plus excise duty payable
on sale or net realisable value
whichever is lower.
iv) Unusable waste At net realisable value
v) The raw material, stores & spares and raw-material contents of
work-in-process are valued by using the first-in-first out (FIFO)
method while the finished goods are valued by using weighted average
cost method. Cost relating to finished goods/work-in-process means
direct raw material cost and allocable manufacturing expenses.
vi)The company makes provision for the value of goods in transit at the
year end for imported/indigenous raw material and imported spare parts
only.
vii) The policy of valuation of inventories is in accordance with
Accounting Standard-2 (Revised) 'Valuation of Inventories' issued by
the Institute of Chartered Accountants of India.
h) Sales/Revenue Recognition :
i) Domestic sales are accounted, net of returns & trade discounts, on
dispatch of products to customers from the works/warehouses and export
sales on shipment of goods. Sales within India comprising of sale of
goods and services are inclusive of excise duty, if any. The sale value
of goods on which value added tax has already been charged, are
exclusive of such tax.
ii) The revenue in respect of export benefit is recognized on post
exports basis, at the rate at which the entitlement accrues, to the
extent the company is reasonably certain of the realisable value.
i) Excise Duty :
The excise duty liability has been accounted for in respect of the
finished goods/ useable waste cleared/ lying in the factory/bonded
premises which are liable to excise duty provided the cenvat of excise
duty/ additional custom duty of the inputs have been availed.
j) Employee Benefits :
i) Short-term employee benefits are recognized as an expense at the
undiscounted amount in the profit and loss account of the year in which
the related service is rendered.
ii) Long term employee benefits are recognized as an expense in the
profit and loss account for the year in which the employee has rendered
services. The expense is recognized at the present value of the amount
payable determined using actuarial valuation techniques. Actuarial
gains / losses in respect of long term benefits are adjusted to the
profit and loss account.
k) Modvat (Cenvat) :
Modvat (cenvat) credit/Terminal Excise Duty paid on inputs and capital
assets is accounted for by reducing the purchase cost of related inputs
or the capital assets.
l) Subsidy :
Government's Capital Investment Subsidy in the nature of promoters'
contribution represents Capital Reserve.
m) Direct Taxes :
i) Current Tax
Provision for Income Tax, if any, is based on the assessable profits,
computed in accordance with the provisions of Income Tax Act, 1961.
ii) Defered Tax
Deferred Income tax expense or benefit is recognized on timing
differences being the difference between taxable income and accounting
income that originate in one period and are capable of reversal in one
or more subsequent period. Deferred tax assets or liabilities are
measured using the tax rates and tax laws that have been enacted or
substantially enacted by the balance sheet date.
Deferred tax assets in respect of unabsorbed depreciation and carry
forward of losses are recognized only to the extent that there is
virtual certainty that sufficient taxable income will be available to
realize these assets. All other deferred tax assets are recognized only
to the extent there is reasonable certainty that sufficient future
taxable income will be available to realize these assets.
iii) Wealth Tax
Wealth tax is ascertained in accordance with the provisions of the
Wealth Tax Act 1957
n) Foreign Currency Transactions :
i) Foreign currency transactions are accounted for at equivalent rupee
value converted at the exchange rates prevailing at the time of such
transaction
ii) Monetary Assets & Liabilities in foreign currency are translated at
the year-end rate through exchange fluctuation account to the
respective accounts as per the guidance issued by The Institute of
Chartered Accountants of India
iii) Any income or expense on account of exchange differences either on
settlement or translation is recognized in the revenue account except
in cases where they relate to acquisition of fixed assets and before
put to use in which case they are adjusted to the carrying cost of such
assets.
iv) Financial derivatives and hedging contracts are accounted on the
date of settlement. The accrued/ realised gain/loss in respect of the
settled contracts/ renewed/ cancelled is only recognized in the books
of accounts.
o) Prior Period Items :
Income and expenditure which relate to significant items of prior
accounting period other than those occasioned during the close of
accounting year to which it is relatable, is considered in current
year.
p) Borrowing Costs :
Borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset are capitalised as
part of the cost of the asset till the asset is ready for use. Other
borrowing costs are recognised as an expense in the year in which they
are incurred.
q) Lease :
Leases of assets under which the lessor effectively retains all the
risks and benefits of ownership are classified as operating lease.
Payments made under operating lease are charged to profit and loss
account over the period of lease.
Mar 31, 2013
A| Accounting Convention :
The financial statements are prepared under historical cost convention
using (he accrual system of accounting ir accordance with the
accounting principles generally accepted in India and the requirements
ot the companies Act 1956. including the mandatory Accounting Standards
as prescribed by the Companies (Accounting Standards) Rules, 2006.
valueAdded Tax (VAT), income rax, Wealth Tax, and Service Tax. Cess,
Insurance Claims etc which are accounted for as and when final
demand/refund/claim is determined on final assessment,
b) Use of Estimates :
The preparation of financial statement requires the management of the
company 10 make estimates gnd assumption (hal effect the reported
balances of assetsfhatulilias and disclosure relating to the cent ngent
uL hi us and provisions as at the date of the financial statements and
reported amounts of income and expenses during the year The difference
between the actuals and estimates are recognized in the year such
amounts are known materilised.
c} Provisions, Contingent Liabilities and Contingents Assets :
Provisions involving substantial degree of estimation in nneasui ament
are recognized where there is a presanl obligation as a result of pest
events and it is probable that there will be an c jUIqw of resources.
Contigent Liabilities are not recognized but are disclosed In the
notes. Cent gam assets ere neither recognized 'lor disclosed in the
financial statEmantsfnptes
d) Fixed Assets:
j) Fixed Assefa are slated at cost of acquisition, net of modvat
feenvat credit /terminal excise duty additional custom duty >ncludng
net effect on foreign exchange fluctufationfcontracts. (inane at cost
and other incidental expenses till the commencement of commercial
production attributable to acquisition or construction''natal lahon of
fixed, assets less degree ahon ann impairment loss, ii) Capital works
in progress are earned al cost, comprising direct cost, finance cost,
net effect on foreign fluctuation contracts and related incidental
expenses iii) Intangible assets are stated at cost of acquisition less
accumulated amortisation
e) Depreciation / Amortisation :
i) The company has provided depreciation on Straight Line Method in
accordance with the rates as presenbed in Schedule XIV under (he
provisions of The Companies Act, 1956 on the fixed assete when it is
put to use on monthly basis.
ii] Renovation to premises taken on lease by the company have been
amortised aver the pentad of lease and In case of premature tm mi
nation would be written off fully iii) Electricity Line Expenses i
Service connection changes and Computer Software being mtengihte ere
amortised over a period of 5 years.
f) Impairment of Assets :
At each balance sheet date the carrying amounts of fixed assets are
reviewed by the management to determine wnether there is any indication
thal these assets had suffered an impairment loss If any such indication
exisls recoverable emounl of the asset is estimated in order to
determine the extent o! impairment loss Recoverable amount is the higher
of an asset's net selling pace and value in use. In assessing, value in
use. the estimaled tulure cash flows expected from the continuing use of
the assets and from its disposal are discounted to their present value
using a pre tax discount rate mat reflects the cunenl market assessments
of time value of money and nsks specific to ttie asset. Reversal of
mpaimmenl loss is recognizer! immediately as income in the profit and
loss account
g) Inventories :
These are valued as under
1) Raw Material Work-in-Process and useable At cost or net realisable
value whichever is lower
ii) Stores & Spares At cost less provision for
obsolescence or net
realisable value whichever
lower
iii) Finished Goods At cosl plus excise duty
payable on salecr net
realisable value whichever
is lower
iv) Unusable waste At net realisable value
v) The raw malenal. stores 4 Spares and raw-materiel contenls of work
-in -process are valued by using me first-in-firsi out (FIFO) method
while the finished goods are valued by using weighted average cost
method Co3t relating to finished goodsfwork-in -process means direct
raw material cost and allocable manufacluring expenses
vi) The company makes provision for the value of goods in transit ait
me year end for imported/indigenous raw maierial and imported spare
parts only
vii) The policy ol valuation of inventories is in accordance with
Accounting Stendard-2 (Revised) h/alualion of inventories' issued by
ihe tnslilute of Chartered Accountants of India
h) Sale/Revenue Recognition :
1) Domestic sales are accounted, net of returns trade discounts, on
dispatch of products to customers from the works anehouses and export
sales on shipment of goods Sales within India comprising of sale of
goods and services are inclusive of excise duty, if arty. The sale
value of goods on which value added tax has already been charged, are
exclusive of such tax. ii) The revenue m respect of export benefit is
recognised on post exports basis, at 1he rate at which the enlivement
accrues, to the extenlthe company Is reasonably certain of the
realisable value
i) Excise Duty:
T no excise duty liability has been accounted for ir respect of the
finished goodsV useable waste cleared,1f lying in (he factoryfbgnded
premises which are liable to exc se duly provided the cenvat of excise
dutyf additional cl atom duty of the inputs have been availed
j) Employes Benefits:
1) Shod-term employee benefits ere recognized as an expense at (he
undiscounted amount in ihe profit and loss acoourf gl the year in which
the related service is rendered. n> Long term employee benefits are
recognized as an expense in the profil and loss account (or 1he year m
which (he employee has rendered services The expense is recognized at
ihe present value of the amount payable determined using actuarial
va.ualkm techniques. Actuarial ga ns / lasses in respect of long term
benefits are adjusted to Ihe profit and loss account
k| Nodvat fCenval):
Modval fcenval} ciBuit/TerrninalExCise Duly paid on nocls anc capital
assets if; accounted "or hy reducing lUe purchase cos?f related inputs
or the capita!assets
l) Subsidy ;
Governments Capital Investment Subsidy in the nature ofpnomoters1
contribution represents Copcai Peseme
m) Direct Taxes:
Provision (or Income Tax, it any, is based on the assessable profits,
computed m accordance with th e provisions of I ncome Tax Act, 1961
ii) Detered Tax
Deferred Income tax expense or benetil is recognized an timing
differences being the d fferenoe between taxable income and accounting
income that originate in one period and ate capable at reverse m cme or
more Subsequent pB'itid Deferred tax assets or liabilities are measured
using the tax rates and lax laws teat have been enacted or
substantially enacted by me balance sheet date. Deterred tax assets in
resped &f unabsnrued depreciation and carry forward of losses are
recognized only to the extent mat mere is virtual certainty thal
sufficient taxable income will be available to rea ize these assels All
other deferred tax assets are recognized only to the extent there is
reasonable certainty thal sufficient future taxable moome will be
available to realize these assets,
ii) Wealth Tax
Wealth tax is ascertained m accordance with the provisions of the Weann
Tax Ad 1967
n) Foreign Currency Transactions :
ij Foreign currency transactions are accounted ford equivalent rupee
value converted al ihe Exchange rates prevailing at the time of such
transaction
ii] Monetary Assets £ Liabilities, in foreign currency are translated
al Ihe year-end rate Ihrough exchange fluctuation account to the
respective accounts as per Ihe guidance issued by The Institute of
Chartered Accountants of India
iii) Any income or expense on account of exohange differences eilher on
settlement or translation is recognized in the revenue account except
in cases where (hey relate to acquisition of fixed assets and before
put to use in which case they are adjusted 1o 1he carrying cost of such
assets.
iy) Financial derivatives and hedging conhaclsare accounted on Lhe date
of settlement. The accrued/ realised gain/loss in respect of the
settled contracts/ renewed^ cancelled is only recognized rn the books
of accounts,
o) Prior Period Items :
Income and expenditure which relate to significant items of prior
accounting period ether then those occasioned during the dose of
accounting year to which it is relalable, is considered in current
year,
p) Borrowing Costs:
Borrowing costs thal are direotly attributable to fhe acquisition
construction or production of sq'.n ifying asset are capitalised as
part of lhe owl of the asset till Lite asset is ready for use. Other
borrowing costs are recognised as an expense in the year in whicil ihey
are incurred
q) LeasE :
Leases of assets under which the lessor effectively relates all the
risks and benefits of ownership are classified as operating tease.
Payments made under operating lease are charged to profiL and loss
account over me penod of lease.
Mar 31, 2012
A) Accounting Convention:
The financial statements are prepared under historical cost convention
using the accrual system of accounting in accordance with the
accounting principles generally accepted in India and the requirements
of the Companies Act, 1956, including the mandatory Accounting
Standards as prescribed by the Companies (Accounting Standards) Rules,
2006
b) Use of Estimates:
The preparation of financial statements requires the management of the
company to make estimates and assumption that effect the reported
balances of assets/liabilities and disclosure relating to the
contingent liabilities and provisions as at the date of the financial
statements and reported amounts of income and expenses during the year.
The difference between the actuals and estimates are recognized in the
year such amounts are known/materialised.
c) Provisions, Contingent Liabilities and Contingents Assets :
Provisions involving substantial degree of estimation in measurement
are recognized where there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contigent Liabilities are not recognized but are disclosed in the
notes. Contigent assets are neither recognized nor disclosed in the
financial statements/notes.
d) Fixed Assets:
i) Fixed Assets are stated at cost of acquisition, net of modvat/cenvat
credit/terminal excise duty, additional custom duty, or of
construction, including pre-operative, financial and other incidental
expenses attributable to acquisition or construction of fixed assets
less depreciation.
ii) Capital works in progress are carried at cost, comprising direct
costs, related incidental expenses & attributable interest.
iii) Intangible assets are stated at cost of acquisition less
accumulated amortisation.
e) Depreciation / Amortisation:
i) The company has provided depreciation on Straight Line Method in
accordance with the rates as prescribed in Schedule XIV under the
provisions of The Companies Act, 1956 on the fixed assets when it is
put to use.
ii) Renovation to premises taken on lease by the company have been
amortised over the period of lease and in case of premature termination
would be written off fully.
iii) Electricity Line Expenses / Service connection charges and
Computer Software being intangible are amortised over a period of 5
years.
f) Impairment of Assets:
At each balance sheet date the carrying amounts of fixed assets are
reviewed by the management to determine whether there is any indication
that these assets had suffered an impairment loss. If any such
indication exists recoverable amount of the asset is estimated in order
to determine the extent of impairment loss. Recoverable amount is the
higher of an asset's net selling price and value in use. In assessing,
value in use, the estimated future cash flows expected from the
continuing use of the assets and from its disposal are discounted to
their present value using a pre tax discount rate that reflects the
current market assessments of time value of money and risks specific to
the asset. Reversal of impairment loss is recognized immediately as
income in the profit and loss account.
g) Inventories:
These are valued as under:
i) Raw Material, Work-in-Process and useable
At cost or estimated realisable value whichever is lower.
ii) Stores & Spares
At cost less provision for obsolescence or estimated realisable value
whichever is lower.
iii) Finished Goods
At cost plus excise duty payable on sale or estimated realisable value
whichever is lower.
iv) Unusable waste
At net realisable value
v) The raw material, stores & spares and raw-material contents of
work-in-process are valued by using the first-in-first out (FIFO)
method while the finished goods are valued by using weighted average
cost method. Cost relating to finished goods/work-in-process means
direct raw material cost and allocable manufacturing expenses.
vi) The company makes provision for the value of goods in transit at
the year end for imported/indigenous raw material and imported spare
parts only and does not make any provision in respect of other
materials.
vii) The policy of valuation of inventories is in accordance with
Accounting Standard-2 (Revised) 'Valuation of Inventories' issued by
the Institute of Chartered Accountants of India.
h) Sales/Revenue Recognition:
i) Domestic sales are accounted, net of returns & trade discounts, on
dispatch of products to customers from the works/warehouses and export
sales on shipment of goods. Sales within India comprising of sale of
goods and services are inclusive of excise duty cleared in the domestic
market. The sale value of goods oh which value added tax has been
charged, are exclusive of value added tax.
ii) The revenue in respect of export benefit is recognized on post
exports basis, at the rate at which the entitlement accrued, to the
extent the company is reasonably certain of the realisable value.
i) Excise Duty:
The excise duty liability has been accounted for in respect of the
finished goods/ useable waste cleared/ lying in the factory/bonded
premises which are liable to excise duty provided the cenvat of excise
duty/ additional custom duty of the inputs have been availed.
j) Employee Benefits:
i) Short-term employee benefits are recognized as an expense at the
undiscounted amount in the profit and loss account of the year in which
the related service is rendered.
ii) Long term employee benefits are recognized as an expense in the
profit and loss account for the year in which the employee has rendered
services. The expense is recognized at the present value of the amount
payable determined using actuarial valuation techniques. Actuarial
gains / losses in respect of long term benefits are adjusted to the
profit and loss account.
k) Modvat (Cenvat):
Modvat (cenvat) credit/Terminal Excise Duty paid on inputs and capital
assets is accounted for by reducing the purchase cost of related inputs
or the capital assets.
l) Subsidy:
Government Capital Investment Subsidy in the nature of promoters'
contribution represents Capital Reserve.
m) Direct Taxes:
i) Current Tax
Provision for Income Tax, if any, is based on the assessable profits,
computed in accordance with the provisions of Income Tax Act, 1961
ii) Defferred Tax
Deferred Income tax expense or benefit is recognized on timing
differences being the difference between taxable income and accounting
income that originate in one period and are capable of reversal in one
or more subsequent period. Deferred tax assets or liabilities are
measured using the tax rates and tax laws that have been enacted or
substantially enacted by the balance sheet date.
Deferred tax assets in respect of unabsorbed depreciation and carry
forward of losses are recognized only to the extent that there is
virtual certainty that sufficient taxable income will be available to
realize these assets. All other deferred tax assets are recognized only
to the extent there is reasonable certainty that sufficient future
taxable income will be available to realize these assets.
iii) Wealth Tax
Wealth tax is ascertained in accordance with the provisions of the
Wealth Tax Act 1957
n) Foreign Currency Transactions:
i) Foreign currency transactions are accounted for at equivalent rupee
value converted at the exchange rates prevailing at the time of such
transaction
ii) Monetary Assets & Liabilities in foreign currency are translated at
the year-end rate through exchange fluctuation account to the
respective accounts as per the guidance issued by The Institute of
Chartered Accountants of India
iii) Any income or expense on account of exchange differences either on
settlement or translation is recognized in the revenue account except
in cases where they relate to acquisition of fixed assets and before
put to use in which case they are adjusted to the carrying cost of such
assets.
iv) Financial derivatives and hedging contracts are accounted on the
date of settlement. The accrued/ realised gain/loss in respect of the
settled contracts/ renewed/ cancelled is only recognized in the books
accounts.
o) Prior Period Items:
Income and expenditure which relate to significant items of prior
accounting period other than those occasioned during the close of
accounting year to which it is relatable, is considered in current
year.
p) Borrowing Costs:
Borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset are capitalised as
part of the cost of the asset till the asset is ready for use. Other
borrowing costs are recognised as an expense in the year in which they
are incurred.
q) Lease:
Leases of assets under which the lessor effectively retains all the
risks and benefits of ownership are classified as operating lease.
Payments made under operating lease are charged to profit and loss
account over the period of lease.
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