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Accounting Policies of Sri Nachammai Cotton Mills Ltd. Company
Mar 31, 2024
1. Corporate Information
Sri Nachammai Cotton Mills Limited (SNCM) was incorporated in March 1980 as a wholly owned subsidiary of " Jawahar Mills Limited". It ceased to be a subsidiary of The Jawahar Mills Limited with the allotment of the said 46,000 shares on 9.8.1982.The Company has been expanding and modernizing its plant over the years. All expansions and modernisation schemes completed so far has been funded from internal accruals and Long-term borrowings. It has expanded its spindlage from 16,120 spindles in 1980 to the present level of 53,664 spindles and 504 Rotors
The Company has attained a sound financial footing with its good performance over the years and is surging ahead towards better prospects every year.
2. Basis of preparation of financial statements Statement of Compliance
These financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act, 2013 (''the Act'') (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
Basis of preparation and presentation
For all periods up to and including the year ended March 31, 2017, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).
The financial statements for the year ended March 31, 2018 are the first financial statements the Company has prepared in accordance with Ind AS with the date of transition as April 1, 2016. Refer to note 45 for information on how the Company adopted Ind AS.
Estimation uncertainly in Accounting Policy relateing to COVID 19 Outbreak:
The Company has considered ubterbak abd certain external sources of information including credit reports, economic forecasts and industry reports up to the date of approval of the financial statements in determing the impact on various elements of its financial statements. The Company has used thge principles of prudence in applying judgements, estimates and assumptionmns including sensitivity analysis and based on current estimates, the Company expectes to fully recover the carrying amount of trade receivables, intangible assets and investiments. The eventual outcome of impact of the global health pandemic may be different from those estimated as on the date of approval of these financial statements.
The preparation of financial statements in conformity with Ind AS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses and the disclosure of contingent liabilities on the date of the financial statements. Actual results could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Any revision to accounting estimates is recognised prospectively in current and future periods.
Functional and presentation currency
These financial statements are presented in Indian Rupees (INR), which is the Company''s functional currency. All financial information presented in INR has been rounded to the nearest Lakhs (up to two decimals).
The financial statements are approved for issue by the Company''s Board of Directors on 24.05.2024
2A. Critical accounting estimates and management judgments
In application of the accounting policies, which are described in note 2, the management of the Company is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and assumptions are based on historical experience and other factors that are considered to be relevant.
Information about significant areas of estimation, uncertainty and critical judgements used in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes:
Property, Plant and Equipment (PPE)
The residual values and estimated useful life of PPEs are assessed by the technical team at each reporting date by taking into account the nature of asset, the estimated usage of the asset, the operating condition of the asset, past history of replacement and maintenance support. Upon review, the management accepts the assigned useful life and residual value for computation of depreciation/ amortisation.
Calculations of income taxes for the current period are done based on applicable tax laws and management''s judgement by evaluating positions taken in tax returns and interpretations of relevant provisions of law.
Deferred Tax Assets (including MAT Credit Entitlement)
Significant management judgement is exercised by reviewing the deferred tax assets at each reporting date to determine the amount of deferred tax assets that can be retained/ recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
Management uses valuation techniques in measuring the fair value of financial instruments where active market quotes are not available. In applying the valuation techniques, management makes maximum use of market inputs and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm''s length transaction at the reporting date.
Impairment of Trade Receivables
The impairment for trade receivables are done based on assumptions about risk of default and expected loss rates. The assumptions, selection of inputs for calculation of impairment are based on management judgement considering the past history, market conditions and forward looking estimates at the end of each reporting date.
Impairment of Non-financial assets - PPE
The impairment of non-financial assets is determined based on estimation of recoverable amount of such assets. The assumptions used in computing the recoverable amount are based on management judgement considering the timing of future cash flows, discount rates and the risks specific to the asset.
Defined Benefit Plans and Other long term employee benefits
The cost of the defined benefit plan and other long term employee benefits, and the present value of such obligation are determined by the independent actuarial valuer. An actuarial valuation involves making various assumptions that may differ from actual developments in future. Management believes that the assumptions used by the actuary in determination of the discount rate, future salary increases, mortality rates and attrition rates are reasonable. Due to the complexities involved in the valuation and its long term nature, this obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities could not be measured based on quoted prices in active markets, management uses valuation techniques including the Discounted Cash Flow (DCF) model, to determine its fair value The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is exercised in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility.
The recognition and measurement of other provisions are based on the assessment of the probability of an outflow of resources, and on past experience and circumstances known at the reporting date. The actual outflow of resources at a future date may therefore vary from the figure estimated at end of each reporting period.
2B. Recent accounting pronouncements Ind AS 116 Leases
On March 30, 2019, Ministry of Corporate Affairs has notified Ind AS 116, Leases. Ind AS 116 will replace the existing leases Standard, Ind AS 17 Leases, and related Interpretations. The Standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract i.e., the lessee and the lessor. Ind AS 116 introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than twelve months, unless the underlying asset is of low value. Currently, operating lease expenses are charged to the statement of Profit & Loss. The Standard also contains enhanced disclosure requirements for lessees. Ind AS 116 substantially carries forward the lessor accounting requirements in Ind AS 17. The effective date for adoption of Ind AS 116 is annual periods beginning on or after April 1, 2019.
Ind AS 12 Appendix C, Uncertainty over Income Tax Treatments
On March 30, 2019, Ministry of Corporate Affairs has notified Ind AS 12 Appendix C, Uncertainty over Income Tax Treatments which is to be applied while performing the determination of taxable profit (or loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under Ind AS 12. According to the appendix, companies need to determine the probability of the relevant tax authority accepting each tax treatment, or group of tax treatments, that the companies have used or plan to use in their income tax filing which has to be considered to compute the most likely amount or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates.
The standard permits two possible methods of transition -
i) Full retrospective approach - Under this approach, Appendix C will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors, without using hindsight and
ii) Retrospectively with cumulative effect of initially applying Appendix C recognized by adjusting equity on initial application, without adjusting comparatives.
The effective date for adoption of Ind AS 12 Appendix C is annual periods beginning on or after April 1, 2019. The Company will adopt the standard on April 1, 2019 and has decided to adjust the cumulative effect in equity on the date of initial application i.e. April 1, 2019 without adjusting comparatives.
Amendment to Ind AS 12 - Income taxes
On March 30, 2019, Ministry of Corporate Affairs issued amendments to the guidance in Ind AS 12, ''Income Taxes'', in connection with accounting for dividend distribution taxes.
The amendment clarifies that an entity shall recognise the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events.
Effective date for application of this amendment is annual period beginning on or after April 1, 2019.
Amendment to Ind AS 19 - plan amendment, curtailment or settlement:
On March 30, 2019, Ministry of Corporate Affairs issued amendments to Ind AS 19, ''Employee Benefits'', in connection with accounting for plan amendments, curtailments and settlements.
The amendments require an entity:
⢠to use updated assumptions to determine current service cost and net interest for the remainder of the period after a plan amendment, curtailment or settlement; and
⢠to recognise in profit or loss as part of past service cost, or a gain or loss on settlement, any reduction in a surplus, even if that surplus was not previously recognised because of the impact of the asset ceiling.
Effective date for application of this amendment is annual period beginning on or after April 1, 2019.
3. Significant Accounting Policies
a) Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification.
An asset is treated as current when it is:
i. Expected to be realised or intended to be sold or consumed in normal operating cycle
ii. Held primarily for the purpose of trading
iii. Expected to be realised within twelve months after the reporting period, or
iv. Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
i. It is expected to be settled in normal operating cycle
ii. It is held primarily for the purpose of trading
iii. It is due to be settled within twelve months after the reporting period, or
iv. There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified 12 months as its operating cycle.
The Company has applied the fair value measurement wherever necessitated at each reporting period.
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;
ii. In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non - financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and the best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses 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.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1: Quoted (unadjusted) market prices in active market for identical assets or liabilities;
Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and
Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Company has designated the respective team leads to determine the policies and procedures for both recurring and non - recurring fair value measurement. External valuers are involved, wherever necessary with the approval of Company''s board of directors. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained.
For the purpose of fair value disclosure, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risk of the asset or liability and the level of the fair value hierarchy as explained above. The component wise fair value measurement is disclosed in the relevant notes.
c) Revenue Recognition Sale of goods
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for rebates, and similar allowances.
Sale of goods and services: Revenue from the sale of goods and services is recognised when the company transfers control of goods or services to its customer at the amount to which the company expects to be entitled.
Interest income is recorded using the effective interest rate (EIR) method. EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a financial liability. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
d) Property, plant and equipment and capital work in progress Deemed cost option for first time adopter of Ind AS
Under the previous GAAP (Indian GAAP), the property, plant and equipment were carried in the balance sheet at cost less accumulated depreciation. The company has elected to fair value its land as the deemed cost as at the date of transition, viz.,1 April 2016 and applied Ind AS 16 retrospectively for all other classes of Property, Plant and Equipment.
Property, plant and equipment and capital work in progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs of a qualifying asset, if the recognition criteria are met. 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. All other repair and maintenance costs are recognised in profit or loss as incurred.
Advances paid towards the acquisition of tangible assets outstanding at each balance sheet date, are disclosed as capital advances under long term loans and advances and the cost of the tangible assets not ready for their intended use before such date, are disclosed as capital work in progress.
All material/ significant components have been identified and have been accounted separately. The useful life of such component are analysed independently and wherever components are having different useful life other than plant they are part of, useful life of components are considered for calculation of depreciation.
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The costs of repairs and maintenance are recognised in the statement of profit and loss as incurred.
Machinery spares/ insurance spares that can be issued only in connection with an item of fixed assets and their issue is expected to be irregular are capitalised. Replacement of such spares is charged to revenue. Other spares are charged as revenue expenditure as and when consumed.
Gains or losses arising from derecognition of property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
e) Depreciation on property, plant and equipment
Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less 5% being its residual value.
Depreciation is provided on written down value method, over the useful lives specified in Schedule II to the Companies Act, 2013, except in respect of certain assets, where useful life estimated based on internal assessment and/or independent technical evaluation carried out by external valuer, past trends and differs from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013.
Depreciation for PPE on additions is calculated on pro-rata basis from the date of such additions. For deletion/ disposals, the depreciation is calculated on pro-rata basis up to the date on which such assets have been discarded/ sold. Additions to fixed assets, costing 5000 each or less are fully depreciated retaining its residual value.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Inventories are carried at the lower of cost and net realisable value. Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition.
(i) Raw materials: At specific identification method including other cost incurred in bringing materials/consumables to their present location and condition.
(ii) Stock of stores, Spares and Packing Material: Determined based on Weighted Average method.
(iii) Finished goods and Work in progress: Determined under FIFO method where cost involves conversion and other costs incurred in bringing the inventories to their present location and condition.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
Notes to Financial Statements for the year ended March 31, 2024
g) Financial Instruments
Financial assets and financial liabilities are recognised when an entity becomes a party to the contractual provisions of the instruments.
Initial recognition and measurement
All financial assets are recognised initially at fair value. However, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset are also added to the cost of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
For purposes of subsequent measurement, financial assets are classified on the basis of their contractual cash flow characteristics and the entity''s business model of managing them.
Financial assets are classified into the following categories:
⢠Debt instruments at amortised cost
⢠Debt instruments at fair value through other comprehensive income (FVTOCI)
⢠Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL)
⢠Equity instruments measured at fair value through other comprehensive income (FVTOCI)
Debt instruments at amortised cost
The Company classifies a debt instrument as at amortised cost, if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows; and
b) Contractual terms of the asset give rise on specified dates to cash flows that are Solely Payments of Principal and Interest (SPPI) on the principal amount outstanding.
Such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss.
The Company classifies a debt instrument at FVTOCI, if both of the following criteria are met:
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
b) The asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category are measured as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). However, the Company recognizes finance income, impairment losses and reversals and foreign exchange gain or loss in the profit and loss statement. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to profit and loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
The Company classifies all debt instruments, which do not meet the criteria for categorization as at amortized cost or as FVTOCI, as at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the profit and loss.
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. Where the Company makes an irrevocable election of classifying the equity instruments at FVTOCI, it recognises all subsequent changes in the fair value in OCI, without any recycling of the amounts from OCI to profit and loss, even on sale of such investments.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the profit and loss.
Financial assets are measured at FVTPL except for those financial assets whose contractual terms give rise to cash flows on specified dates that represents SPPI, are measured as detailed below depending on the business model:
|
Classification |
Name of the financial asset |
|
Amortised cost |
Trade receivables, Loans given to employees and others, deposits, interest receivable, unbilled revenue and other advances recoverable in cash. |
|
FVTOCI |
Equity investments in companies other than subsidiaries and associates if an option exercised at the time of initial recognition. |
|
FVTPL |
Other investments in equity instruments, mutual funds, forward exchange contracts (to the extent not designated as a hedging instrument). |
A financial asset is primarily derecognised when:
⢠The rights to receive cash flows from the asset have expired, or
⢠The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Notes to Financial Statements for the year ended March 31, 2024
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
a) Financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities, deposits, receivables and bank balance.
b) Financial assets that are debt instruments and are measured at FVTOCI
c) Trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 11 and Ind AS 18.
The Company follows ''simplified approach'' for recognition of impairment loss allowance on:
⢠Trade receivables or contract revenue receivables; and
⢠All lease receivables resulting from transactions within the scope of Ind AS 17
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime Expected Credit Loss (ECL) at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12 months ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on 12-month ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12 months ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR. When estimating the cash flows, the Company considers all contractual terms of the financial instrument (including prepayment, extension, call and similar options) over the expected life of the financial instrument and Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECL allowance (or reversal) recognized during the period is recognized as income/ expense in the statement of profit and loss. This amount is reflected under the head ''other expenses'' in the profit and loss. The balance sheet presentation of ECL for various financial instruments is described below:
Notes to Financial Statements for the year ended March 31, 2024
⢠Financial assets measured as at amortised cost, contractual revenue receivables and lease receivables: ECL is
presented as an allowance, which reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
⢠Debt instruments measured at FVTOCI: Since financial assets are already reflected at fair value, impairment allowance is not further reduced from its value. Rather, ECL amount is presented as ''accumulated impairment amount'' in the OCI.
For assessing increase in credit risk and impairment loss, the company combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis.
For impairment purposes, significant financial assets are tested on individual basis at each reporting date. Other financial assets are assessed collectively in groups that share similar credit risk characteristics. Accordingly, the impairment testing is done on the following basis:
|
Name of the financial asset |
Impairment Testing Methodology |
|
Trade Receivables |
Expected Credit Loss model (ECL) is applied. The ECL over lifetime of the assets are estimated by using a provision matrix which is based on historical loss rates reflecting current conditions and forecasts of future economic conditions which are grouped on the basis of similar credit characteristics such as nature of industry, customer segment, past due status and other factors that are relevant to estimate the expected cash loss from these assets. |
|
Name of the financial asset |
Impairment Testing Methodology |
|
Other financial assets |
When the credit risk has not increased significantly, 12 month ECL is used to provide for impairment loss. When there is significant change in credit risk since initial recognition, the impairment is measured based on probability of default over the life time. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognizing impairment loss allowance based on 12 month ECL. |
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at FVTPL and as at amortised cost.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company''s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments.
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at FVTPL
Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading, if they are incurred for the purpose of repurchasing in the near term.
Gains or losses on liabilities held for trading are recognised in the profit or loss.
Notes to Financial Statements for the year ended March 31, 2024
For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ loss are not subsequently transferred to profit and loss. However, the company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of profit or loss. The company has not designated any financial liability as at fair value through profit and loss.
|
Classification |
Name of the financial liability |
|
Amortised cost |
Borrowings, Trade payables, Interest accrued, Unclaimed / Disputed dividends, Security deposits and other financial liabilities not for trading. |
|
FVTPL |
Foreign exchange Forward contracts being derivative contracts do not qualify for hedge accounting under Ind AS 109 and other financial liabilities held for trading. |
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by the Company are initially measured at their fair values and, if not designated as at fair value through profit or loss, are subsequently measured at higher of (i) The amount of loss allowance determined in accordance with impairment requirements of Ind AS 109 - Financial Instruments and (ii) The amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of Ind AS 18 - Revenue.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
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The following table shows various reclassifications and how they are accounted for: |
|||
|
Sl.No |
Original classification |
Revised classification |
Accounting treatment |
|
1 |
Amortised cost |
FVTPL |
Fair value is measured at reclassification date. Difference between previous amortized cost and fair value is recognised in P&L. |
|
2 |
FVTPL |
Amortised Cost |
Fair value at reclassification date becomes its new gross carrying amount. EIR is calculated based on the new gross carrying amount. |
|
3 |
Amortised cost |
FVTOCI |
Fair value is measured at reclassification date. Difference between previous amortised cost and fair value is recognised in OCI. No change in EIR due to reclassification. |
|
4 |
FVTOCI |
Amortised cost |
Fair value at reclassification date becomes its new amortised cost carrying amount. However, cumulative gain or loss in OCI is adjusted against fair value. Consequently, the asset is measured as if it had always been measured at amortised cost. |
|
5 |
FVTPL |
FVTOCI |
Fair value at reclassification date becomes its new carrying amount. No other adjustment is required. |
|
6 |
FVTOCI |
FVTPL |
Assets continue to be measured at fair value. Cumulative gain or loss previously recognized in OCI is reclassified to P&L at the reclassification date. |
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 on a net basis, to realise the assets and settle the liabilities simultaneously.
h) Foreign currency transactions and translations Transactions and balances
Transactions in currencies other than the entity''s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. However, for practical reasons, the Company uses an average rate, if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss, respectively).
The Company enters into forward exchange contract to hedge its risk associated with Foreign currency fluctuations. The premium or discount arising at the inception of a forward exchange contract is amortized as expense or income over the life of the contract. In case of monetary items which are covered by forward exchange contract, the difference between the yearend rate and rate on the date of the contract is recognized as exchange difference. Any profit or loss arising on cancellation of a forward exchange contract is recognized as income or expense for that year.
Borrowing cost include interest computed using Effective Interest Rate method and amortisation of ancillary costs incurred
Borrowing costs that are directly attributable to the acquisition, construction, production of a qualifying asset are capitalised as part of the cost of that asset which takes substantial period of time to get ready for its intended use. The Company determines the amount of borrowing cost eligible for capitalisation by applying capitalisation rate to the expenditure incurred on such cost. The capitalisation rate is determined based on the weighted average rate of borrowing cost applicable to the borrowings of the Company which are outstanding during the period, other than borrowings made specifically towards purchase of the qualifying asset. The amount of borrowing cost that the Company capitalises during the period does not exceed the amount of borrowing cost incurred during that period. All other borrowings costs are expensed in the period in which they occur.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in the statement of profit and loss in the period in which they are incurred.
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Company operates and generates taxable income.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future tax liability, is recognised as an asset viz. MAT Credit Entitlement, to the extent there is convincing evidence that the Company will pay normal Income tax and it is highly probable that future economic benefits associated with it will flow to the Company during the specified period. The Company reviews the "MAT Credit Entitlementâ at each Balance Sheet date and writes down the carrying amount of the same to the extent there is no longer convincing evidence to the effect that the Company will pay normal Income tax during the specified period.
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised. Where there is deferred tax assets arising from carry forward of unused tax losses and unused tax created, they are recognised to the extent of deferred tax liability
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 utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
k) Retirement and other employee benefits Short-term employee benefits
A liability is recognised for short-term employee benefit in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Retirement benefit in the form of 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. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
The Company operates a defined benefit gratuity plan in India, which requires contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.
Remeasurements, 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 immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
The Company has a policy on compensated absences which are both accumulating and non-accumulating in nature. The expected 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 on the additional amount expected to be paid / availed as a result of the unused entitlement that has accumulated at the balance sheet date. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.
Other long term employee benefits
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by the employees up to the reporting date.
Arangements in the nature of lease
The Company enters into agreements, comprising a transaction or series of related transactions that does not take the legal form of a lease but conveys the right to use the asset in return for a payment or series of payments. In case of such arrangements, the Company applies the requirements of Ind AS 116- Leases to the lease element of the arrangement. For the purpose of applying the requirements under Ind AS 116- Leases, payments and other consideration required by the arrangement are seperated at the inception of the arrangement into those for lease and those for other elements.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Rental expenses from operating leases is generally recognised on a straight-line basis over the term of the relevant lease. However, where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases, such increases are recognised in the year in which such benefits accrue. Contingent rentals, if any, arising under operating leases are recognised as an expense in the period in which they are incurred.
m) Impairment of non financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
n) Provisions, contingent liabilities and contingent asset Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are discounted, if the effect of the time value of money is material, using pre-tax rates that reflects the risks specific to the liability. When discounting is used, an increase in the provisions due to the passage of time is recognised as finance cost. These provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
Necessary provision for doubtful debts, claims, etc., are made, if realisation of money is doubtful in the judgement of the management.
A contingent liability is a possible obligation that arises from past e
Jun 30, 2014
(In the order of applicability of Accounting Standards)
AS - 1 Disclosure and Basis of Accounting
(i) The Financial Statements have been prepared under the Historical
cost convention in accordance with the provisions of the Companies Act,
1956. The Company has complied with the Accounting Standards prescribed
in the Companies (Accounting Standards) Rules, 2006 issued by the
Central Government, in consultation with the National Advisory
Committee on Accounting Standards, to the extent applicable.
(ii) The Company has been consistently following the accrual basis of
accounting in respect of its Income and Expenditure.
(iii) The Accounts are prepared on the basis of going concern concept
only.
AS - 2 Valuation of Inventories
Inventories are valued at lower of cost and net realisable value, where
a) Cost of Raw materials is determined on specific identification
method.
b) Stock of stores, spares and packing materials is determined on
weighted average method.
c) Finished goods and work in progress is determined under FIFO method
where cost includes conversion and other costs incurred in bringing the
inventories to their present location and condition.
AS - 3 Cash Flow Statement
Cash flows are reported using the indirect method, where by the profit
before tax is adjusted for the effect of transactions of a non cash
nature, any deferrals or accruals of past or future operating cash
receipts or payments and items of income or expense associated with
investing or financing cash flows. Cash and cash equivalent include
cash on hand and balances with banks in current and deposit accounts
with necessary disclosure of cash and cash equivalent balances that are
not available for use by the company.
AS - 6 Depreciation Accounting
Depreciation on Fixed Assets has been provided as per Schedule XIV of
the Companies Act, 1956 adopting the methods as under:
i) On Assets acquired before 01.04.1990 - Written Down Value Method.
ii) On Assets acquired from 01.04.1990 - Straight Line Method
iii) In respect of all assets purchased or sold during the year,
depreciation has been provided at the above rates on pro-rata basis
from the date of purchase / to the date of sale including assets whose
cost is below Rs.5,000/-.
AS - 9 Revenue Recognition
i) Revenue from sale transactions is recognized as and when the
property in the goods sold is transferred to the buyer for a definite
consideration. Revenue from service transactions are recognised on the
completion of the contract at the contracted rate and when there is no
uncertainty regarding the amount of consideration or collectability.
ii) Other Income except dividend is accounted on accrual basis.
iii) Sales as reported are exclusive of Sales Tax (VAT), Insurance and
Transport charges.
AS - 10 Fixed Assets
The cost of fixed assets is shown at historical cost of acquisition
including installation, commissioning less accumulated depreciation.
AS - 11 Foreign Currency Transactions
Foreign currency transactions are recorded at the prevailing exchange
rates at the time of initial recognition. Exchange differences are
recognized as income or expense in the Profit and Loss account.
Outstanding balances of monetary items denominated in foreign currency
are restated at closing exchange rates and recognised as income or
expenses in the Profit and Loss account in other cases. The premium on
discount arising at the inception of forward exchange contracts is
accounted as income or expense over the life of the contract. Any
profit or loss arising on cancellation or renewal exchange contract is
recognized as income or as expense in the period in which they arise.
AS - 13 Accounting for Investments
Long term investments are stated at cost. A provision for diminution,
if any, is made to recognise a decline, other than temporary, in the
value of long term investments.
AS - 15 Employee Benefits
Short term employee benefits (other than termination benefits) which
are payable within 12 months after the end of the period in which the
employees render service are accounted on accrual basis.
Defined Contribution Plans
Company''s contributions paid / payable during the year to Provident
Fund is recognized in the Profit and Loss account.
Defined Benefit Plans
Company''s Liabilities towards gratuity is determined using the
projected unit credit method which considers each period of service as
giving rise to an additional unit of benefit entitlement and measures
each unit separately to build up the final obligation. Past services
are recognized on a straight line basis over the average period until
the amended benefits becomes vested. Actuarial gains or losses are
recognized immediately in the statement of profit and loss account as
income or expense. Obligation is measured at the present value of
estimated future cash flows using a discounted rate.
AS - 16 Borrowing Costs
Borrowing costs that are attributable to the acquisition, construction
or production of qualifying assets are capitalized as part of cost of
such assets. Aqualifying asset is an asset that necessarily requires a
substantial period of time to get ready for its intended use or sale.
All other borrowing costs are recognized as expenses in the period in
which they are incurred.
AS -19 Lease
Lease, where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating lease. Operating lease payments are recognized as an expense
in the profit and loss account on a straight line basis over the lease
term.
AS - 20 Earnings per Share
The Earnings considered in ascertaining the Company''s earnings per
share comprise of Net Profit after tax.
AS - 22 Accounting for taxes on Income
Deferred Tax resulting from timing differences between book and tax
profits is accounted under liability method at enacted as substantively
enacted rate as on the balance sheet date. Deferred tax asset, other
than those arising on account of unabsorbed depreciation or carried
forward of losses under tax loss, are recognised and carried forward
subject to consideration of prudence only to the extent that there is
reasonable certainty that sufficient future taxable income will be
available against which such deferred tax asset can be realized.
Deferred tax asset, arising on account of unabsorbed depreciation or
carried forward of losses under tax loss, are recognised and carried
forward subject to consideration of prudence only to the extent that
there is virtual certainty that sufficient future taxable income will
be available against which such deferred tax asset can be realised.
Current tax is determined at the amount of tax payable in respect of
estimated taxable income for the year.
AS - 28 Impairment of Assets
An asset is impaired when the carrying amount of the assets exceeds its
recoverable amount. An impairment loss is charged to the Profit and
Loss account in the year in which an asset is identified as impaired.
An impairment loss recognized in prior accounting period is reversed if
there has been a change in the estimate of the recoverable amount.
AS - 29 Provisions, Contingent liability and Contingent Assets
a) Provisions involving degree of estimation in measurement are
recognized when there is a present obligation as a result of past event
and it is probable that there will be an outflow of resources.
b) Contingent liabilities are disclosed by way of notes to accounts.
Provision is made if it becomes probable that an outflow of future
economic benefits will be required for an item previously dealt with as
a contingent liability.
c) Contingent liability under various fiscal laws includes those in
respect of which the Company / Department is in appeal.
Others : Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and the disclosures of contingent liabilities as at the
date of the financial statements and reported amount of revenues and
expenses during the reporting period. Actual results could differ from
these estimates. Any revision to the estimates is recognized
prospectively.
VAT
a) The value of VAT benefits is being reduced from the value of
purchase of materials
b) The value of benefits eligible in respect of Capital items is
reduced from the cost and depreciation is calculated accordingly.
Jun 30, 2013
In the order of applicability of Accounting Standards) AS -1
Disclosure and Oasis of Accounting (i) The Financial Statements have
been prepared under the Historical cost convention in accordance with,
(he provisions of the Companies Act, 1956. The Company has complied
with the Accounting Standards- prescribed in the Companies (Accounting
Standards) Rules. 2006 issued by 13iq Conlral Govommonl, in
consirllafiDn wllh Iho National Advisory Commutes on Accounting
SttmdardB. to Ihocaiont appl jwblu. (il) The Company has been
consistently following the accrual basis of accounting in respect nf
its Income and Expenditure. (iii) Trie Account are prepared an the
basis of going concern concept only, AS - 2 Valuation of Inventories
Inventon''os are valued at lower of cost and net realisable value, whore
a) Cost of Raw materials is dete-nniiied on specific IdentJlBcaGon
method.
b) Stock of stores, spares and packing materials is determined on
weighted average melhcd.
c) Finished goods and wmk In progress In dole*mined under FIFO method
where cost includes conversion and oliier oasis incurrod In Bringing
ihu inventories to their present location and condition,
AS - 3. Cash Flow Statement
Cash tows are reported using the indirect method, where by the prof it
before tax is adjusted for (he effect of transactions of a rum cash
nature, any deferrals or accruals of past or liilura operating nnsti
rcoaipls or ptfyftenta and Horns ol income or espouse associated uaUi
investing or linancing cash flows. Cash ur>d cash equivalent include
cash on hand and balances wild banks in current and deposit
accounlsvrith necessary discfosureof cash and cash equi valenlbalances
lhat are not available for use by the company.
AS - G Depredation Accounting
provided asper Schauuta XIV of the Companies Act, 1956 adapting the met
hoda asunder:
I) On Assets aoquifod before 01.04.1990 - Wriltori Dawn Value Mnlhod.
ii} On Assels acqu! red from 01,04,1990 - Slrajght Lins Method
iii) In respect of nil niseis purchased or sofd du ring the year.
depreciation has been provided at the above rates en pro-rata basis
from ¦ Uie dale of pgrtl i ase i to the data of sale Including assets
whose cost is Wow R&,5,0QOA,
A3 - 9 Revenue Recognition
i) Revenue from sale liansaclwns is recognized as and when Ihu property
in the goods sold is transferred to trie buyer for a definite
consideration. Revenue from service transactions arc recognised an ihe
completion cf Hie contract at the contracted rate and when Ihoiolsnb
uncertainly regarding lliearriountolcpnslderauon orcollectability.
11} Other income excepl dividend is accounted on accrual basis,
iii) Sales as reported are exctusive of Sates Tax (VAT), Insurance and
Transport charges,
AS -10 Fixed Assets i The cost of fixed assets Is shown al historical
cost of acquisition Including installation, commissioning loss
accumulated doprtitialiQA
AS - H Foreign Currency Transections
Foreign currency transactions are recorded at ihe prevailing exchange
rates at ihetimo of initial recognition, Exchange differences are
ropngnized as income w ex pensa in the Profit and Loss account.
Outstanding bai snees of monetary Items denominated in foreign cunoiicy
are restated at ctosi rtQ oxch ango rates and roocgni&ot! as Income or
oxponsos in tho Profit and Loss account in ChUhOC cases, The prtsnlum
on discount arising; at toe Inception of forward exchange oonlracts is
accounted as income or expense over the I ile of the contract. Any
profit orloss arising en cancelation or rone v/al exchange contract is
recognteed as income of as expense i n theperiod in which UiQyjrise.
AS -13 Accounting for Invo&lmcnts
Lang term investments are stated at cost. Aorovlslon for diminution, if
any, is mado to recognise a decline, other than tern poraiy, in the
value of long term investments.
AS -15 Employee- Benefits
Short tonn emptayeo benefits (other than termination bontfils) which
ate payable wilhl n 2 months niter llirj end of Uio period in willed
Uw employees icndor series aro accounted on accrual basis.
Jun 30, 2012
(i) The Financial Statements have been prepared under the Historical
cost convention in accordance with the provisions of the Companies Act,
1956. The Company has complied with the Accounting Standards prescribed
in the Companies (Accounting Standards) Rules, 2006 issued by the
Central Government, in consultation with the National Advisory
Committee on Accounting Standards, to the extent applicable.
(ii) The Company has been consistently following the accrual basis of
accounting in respect of its Income and Expenditure.
(iii) The Accounts are prepared on the basis of going concern concept
only. AS-2: VALUATION OF INVENTORIES:
Inventories are valued at lower of cost and net realisable value, where
a) Cost of Raw materials is determined on specific identification
method.
b) Stock of stores, spares and packing materials is determined on
weighted average method.
c) Finished goods and work in progress is determined under FIFO method
where cost includes conversion and other costs incurred in bringing the
inventories to their present location and condition.
AS - 3: CASH FLOW STATEMENT:
Cash flows are reported using the indirect method, where by the profit
before tax is adjusted for the effect of transactions of a non cash
nature, any deferrals or accruals of past or future operating cash
receipts or payments and items of income or expense associated with
investing or financing cash flows. Cash and cash equivalentindude cash
on hand and balances with banks in current and deposit accounts with
necessary disclosure of cash and cash equivalent balances that are not
available for use by the company.
AS - 5: NET PROFIT / LOSS FORTHE PERIOD AND PRIOR PERIOD ITEMS:
All items of income and expenses pertaining to the year are included in
arriving at the net profit for the year, unless specifically mentioned
elsewhere in the financial statement or as required by Accounting
Standards.
AS-6: DEPRECIATION ACCOUNTING:
Depreciation on Fixed Assets has been provided as per Schedule XIV of
the Companies Act, 1956 adopting the methods as under: i) On Assets
acquired before 01.04.1990-Written Down Value Method. ii) On Assets
acquired from 01.04.1990 - Straight Line Method.
iii) In respect of all assets purchased or sold during the year,
depreciation has been provided at the above rates on pro-rata basis
from the date of purchase/to the dateof sale including assets whose
cost is below Rs.5,000/-.
AS-9: REVENUE RECOGNITION:
a) Revenue from sale transactions is recognized as and when the
property in the goods sold is transferred to the buyer for a definite
consideration. Revenue from service transactions are recognised on the
completion of the contract at the contracted rate and when there is no
uncertainty regarding the amount of consideration or collectability.
b) Other Income except dividend is accounted on accrual basis.
c) Sales as reported are exclusive of Sales Tax (VAT), Insurance and
Transport charges. AS-10: FIXED ASSETS:
The cost of Fixed Assets is shown at historical cost of acquisition
including installation, commissioning less accumulated depreciation.
AS-11:FOREIGNCURRENCYTRANSACTIONS: Foreign currency transactions are
recorded at the prevailing exchange rates at the time of initial
recognition. Exchange differences are recognized as income or expense
in the profit and loss account. Outstanding balances of monetary items
denominated in foreign currency are restated at closing exchange rates
and recognised as income or expenses in the profit and loss account in
othercases. The premium on discount arising at the inception of
forward exchange contracts is accounted as income or expense over the
life of the contract. Any profit or loss arising on cancellation or
renewal exchange contract is recognized as income or as expense in the
period in which they arise. AS -13: ACCOUNTING FOR INVESTMENTS:
Long term investments are stated at cost. A provision for diminution,
if any, is made to recognise a decline, other than temporary, in the
value of long term investments.
AS -15: EMPLOYEE BENEFITS:
Short term employee benefits (other than termination benefits) which
are payable within 12 months after the end of the period in which the
employees render service are accounted on accrual basis. Defined
Contribution Plans
Company'scontributionspaid/payableduringtheyeartoProvidentFund
isrecognized inthe profit and loss account. Defined Benefit Plans
Company's Liabilities towards gratuity is determined using the
projected unit credit method which considers each period of service as
giving rise to an additional unit of benefit entitlement and measures
each unit separately to build up the final obligation. Past services
are recognized on a straight line basis over the average period until
the amended benefits becomes vested. Actuarial gains or losses are
recognized immediately in the statement of profit and loss account as
income or expense. Obligation is measured at the present value of
estimated future cash flows using a discounted rate,
AS -16: BORROWING COSTS:
Borrowing costs that are attributable to the acquisition, construction
or production of qualifying assets are capitalized as part of cost of
such assets. A qualifying asset is an asset that necessarily requires a
substantial period of time to get ready for its intended use or sale.
All other borrowing costs are recognized as expenses in the period in
which they are incurred.
AS-19: LEASE:
Lease, where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating lease. Operating lease payments are recognized as an expense
in the profit and loss account on a straight-line basis over the lease
term.
AS-20: EARNINGS PER SHARE:
The Earnings considered in ascertaining the Company's earning per share
comprise of Net Profit after tax and include post tax adjustments of
prior period and extra-ordinary items.
AS-22: ACCOUNTING FOR TAXES ON INCOME:
Deferred Tax resulting from timing differences between book and tax
profits is accounted under liability method at enacted as substantively
enacted rate as on the balance sheet date. Deferred tax asset, other
than those arising on account of unabsorbed depreciation or carried
forward of losses undertax loss, are recognised and carried forward
subject to consideration of prudence only to the extent that there is
reasonable certainty that sufficient future taxable income will be'
available against which such deferred tax asset can be realized.
Deferred tax asset, arising on account of unabsorbed depreciation or
carried forward of losses under tax loss, are recognised and carried
forward subject to consideration of prudence only to the extent that
there is virtual certainty that sufficient future taxable income will
be available against which such deferred tax asset can be realised.
Current tax is determined at the amount of tax payable in respect of
estimated taxable income for the year.
AS - 28: IMPAIRMENT OF ASSETS:
An asset is impaired when the carrying amount of the assets exceeds its
recoverable amount. An impairment loss is charged to the Profit and
Loss account in the year in which an asset is identified as impaired.
An impairment loss recognized in prior accounting period is reversed if
there has been a change in the estimate of the recoverable amount.
AS-29: PROVISIONS, CONTINGENT LIABILITY AND CONTINGENT ASSETS:
a) Provisions involving degree of estimation in measurement are
recognized when there is a present obligation as a result of past event
and it is probable that there will be an outflow of resources.
b) Contingent liabilities are disclosed by way of notes to accounts.
Provision is made if it becomes probable that an outflow of future
economic benefits will be required for an item previously dealt with as
a contingent liability.
c) Contingent liability under various fiscal laws includes those in
respect of which the Company / Department is in appeal.
Jun 30, 2010
AS 1: DISCLOSURE AND BASIS OF ACCOUNTING:
(i) The Financial Statements have been prepared under the Historical
cost convention in accordance with the provisions i of the Companies
Act, 1956. The Company has complied with the Accounting Standards
prescribed in {he, Companies (Accounting Standards) Rules, 2006 issued
by the Central Government, in consultation with the National à Advisory
Committee on Accounting Standards, to the extent applicable.
(ii) The Company has been consistently following the accrual basis of
accounting in respect of its Income and; Expenditure.
(iii) The Accounts are prepared on the basis of going concern concept
only.
AS 2: VALUATION OF INVENTORIES:
Inventories are valued at lower of cost and net realisable value, where
a) Cost of Raw materials is d etermined on specific identification
method.
b) Stock of stores, spares and packing materials is determined on
weighted average method.
c) Finished goods and work in progress is determined under FIFO method
where cost includes conversion and other; costs incurred in bringing
the inventories to their present location and condition.
AS 3: CASH FLOW STATEMENT:
Cash flows are reported using the indirect method, where by the profit
before tax is adjusted for the effect of transactions of a non cash
nature, any deferrals or accruals of past or future operating cash
receipts or payments and items of income or expense associated with
investing or financing cash flows. Cash and cash equivalent include
cash on hand and balances with banks in current and deposit accounts
with necessary disclosure of cash and cash equivalent balances that are
not available for use by the company.
AS 5: NET PROFIT /LOSS FOR THE PERIOD AND PRIOR PERIOD ITEMS:
a) All items of income and expenses pertaining to the year are included
in arriving at the net profit for the year, unless specifically
mentioned elsewhere in the financial statement or as required by
Accounting Standards.
b) Prior year items are disclosed separately in the Profit & Loss
Account below the line.
AS 6: DEPRECIATION ACCOUNTING:
Depreciation on Fixed Assets has been provided as per Schedule XIV of
the Companies Act,1956 adopting the methods as under:
i) On Assets acquired before 01.04.1990-Written Down Value Method.
ii) On Assets acquired from 01.04.1990 - Straight Line Method
iii) In respect of all assets purchased or sold during the year,
depreciation has been provided at the above rates on pro- rata basis
from the date of purchase/to the date of sale including assets whose
cost is below Rs.5,000/-.
AS 9: REVENUE RECOGNITION:
a) Revenue from sale transactions is recognized as and when the
property in the goods sold is transferred to the buyer for a definite
consideration. Revenue from service transactions are recognised on the
completion of the contract at the contracted rate and when there is no
uncertainty regarding the amount of consideration or collectability.
b) Other Income except dividend is accounted on accrual basis,
c) Sales as reported are exclusive of Sales Tax (VAT), Insurance and
Transport charges.
AS 10: FIXED ASSETS:
The cost of Fixed Assets is shown at historicaI cost of acquisition
including installation, commissioning less accumulated depreciation
AS 11: FOREIGN CURRENCY TRANSACTIONS:
Foreign currency transactions are recorded at the prevailing exchange
rates at the time of initial recognition. Exchange differences are
recognized as income or expense in the profit and loss account.
Outstanding balances of monetary items denominated in foreign currency
are restated at closing exchange rates and recognised as income or
expenses in the profit and loss account in other cases.
The premium on discount arising at the inception of forward exchange
contracts is accounted as income or expense over the life of the
contract. Any profit or loss arising on cancellation or renewal
exchange contract is recognized as income or as expense in the period
in which they arise.
AS 13: ACCOUNTING FOR INVESTMENTS:
Long term investments are stated at cost. A provision for diminution,
if any, is made to recognise a decline, other than temporary, in the
value of long term investments.
AS 15: EMPLOYEE BENEFITS:
Short term employee benefits (other than termination benefits) which
are payable within 12 months after the end of the period in which the
employees render service are accounted on accrual basis.
Defined Contribution Plans
Companys contributions paid / payable during the year to Provident
Fund is recognized in the profit and loss account.
Defined Benefit Plans
Companys Liabilities towards gratuity is determined using the
projected unit credit method which considers each period of service as
giving rise to an additional unit of benefit entitlement and measures
each unit separately to build up the final obligation. Past services
are recognized on a straight line basis over the average period until
the amended benefits becomes vested. Actuarial gains or losses are
recognized immediately in the statement of profit and loss account as
income or expense. Obligation is measured at the present value of
estimated future cash flows using a discounted rate.
AS 16: BORROWING COSTS:
Borrowing costs that are attributable to the acquisition, construction
or production of qualifying assets are capitalized as part of cost of
such assets. A qualifying asset is an asset that necessarily requires a
substantial period of time to get ready for its intended use or sale.
All other borrowing costs are recognized as expenses in the period in
which they are incurred.
AS 19: LEASE:
Lease, where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating lease. Operating lease payments are recognized as an expanse
in the profit and loss account on a straight-line basis over the lease
term.
AS 20: EARNINGS PER SHARE:
The Earnings considered in ascertaining the Companys earning per share
comprise of Net Profit aftertax and include post tax adjustments of
prior period and extra-ordinary items.
AS 22: ACCOUNTING FOR TAXES ON INCOME:
Deferred Tax resulting from timing differences between book and tax
profits is accounted under liability method at enacted as substantially
enacted rate as on the balance sheet date. Deferred tax asset, other
than those arising on account of unabsorbed depreciation or carried
forward of losses under tax loss, are recognised and carried forward
subject to consideration of prudence only to the extent that there is
reasonable certainty that sufficient future taxable income will be
available against which such deferred tax asset can be realized,
Deferred tax asset, arising on account of unabsorbed depreciation or
carried forward of losses under tax loss, are recognised and carried
forward subject to consideration of prudence only to the extent that
there is virtual certainty that sufficient future taxable income will
be available against which such deferred tax asset can be realised.
Current tax is determined atthe amount of tax payable in respect of
estimated taxable income fortheyear.
AS 28: IMPAIRMENT OF ASSETS:
An asset is impaired when the carrying amount of the assets exceeds its
recoverable amount. An impairment loss is charged to the Profit and
Loss account in the year in which an asset is identified as impaired,
An impairment loss recognized in prior accounting period is reversed if
there has been a change in the estimate of the recoverable amount.
AS 29: PROVISIONS. CONTINGENT LIABILITY AND CONTINGENT ASSETS:
a) Provisions involving degree of estimation in measurement are
recognized when there is a present obligation as a result of past event
and it is probable that there will bean outflow of resources.
b) Contingent liabilities are disclosed by way of notes to accounts.
Provision is made if it becomes probable that an outflow of future
economic benefits will be required for an item previously dealt with as
a contingent liability.
c) Contingent liability under various fiscal laws includes those in
respect of which the Company/ Department is in appeal,
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and
liabilities and the disclosures of contingent liabilities as at the
date of the financial statements and reported amount of revenues and
expenses during the reporting period. Actual results could differ from
these estimates. Any revision to the estimates is recognized
prospectively.
Jun 30, 2009
AS 1: DISCLOSURE AND BASIS OF ACCOUNTING:
(i) The Financial Statements have been prepared under the Historical
cost convention in accordance with the generally accepted accounting
principles and the provisions of the Companies Act, 1956. The Company
has complied with the Accounting Standards Prescribed by the Companies
(Accounting Standards) Rules, 2006 issued by the Central Government, in
consultation with the National Advisory Committee on Accounting
Standards, to the extent applicable.
(ii) The Company has been consistently following the accrual basis of
accounting in respect of its Income and Expenditure.
(iii) The Accounts are prepared on the basis of going concern concept
only. AS 2: VALUATION OF INVENTORIES.
Inventories are valued at lower of cost and net realisable value, where
a) Cost of Raw materials is determined on specific identification
method.
b) Stock of stores, spares and packing materials is determined on
weighted average method.
c) Finished goods and work in progress is determined under FIFO method
where cost includes conversion and other costs incurred in bringing the
inventories to their present location and condition.
AS 3: CASH FLOW STATEMENT:
Cash flows are reported using the indirect method, where by the profit
before tax is adjusted for the effect of transactions of a non cash
nature, any deferrals or accruals of past or future operating cash
receipts or payments and items of income or expense associated with
investing or financing cash flows. Cash and cash equivalent include
cash on hand and balances with banks in current and deposit accounts
with necessary disclosure of cash equivalent balances that are not
available for use by the company.
AS 5: NET (LOSS) / PROFIT FOR THE PERIOD AND PRIOR PERIOD ITEMS:
a) All items of income and expenses in the period are included in
arriving at the net loss for the year, unless specifically mentioned
elsewhere in the financial statement or is required by an Accounting
Standard.
b) Prior year items are disclosed separately in the Profit 6 Loss
Account below the line.
AS 6: DEPRECIATION ACCOUNTING:
Depreciation on Fixed Assets has been provided as per Schedule XIV of
the Companies Act,1956 adopting the methods as under:
i) On Assets acquired before 01.04.1990 - Written Down Value Method.
ii) On Assets acquired from 01.04.1990 - Straight Line Method
iii) In respect of all assets purchased or sold during the year,
depreciation has been provided at the above rates on pro- rata
basisfrom the date of purchase/to the date of sale including assets
whose cost is below Rs. 5,000/-.
AS 9: REVENUE RECOGNITION:
a) Revenue from sale transactions is recognized as and when the goods
sold is transferred to the buyer for a definite consideration.
b) Other Income except dividend is accounted on accrual basis.
c) Sales as reported are exclusive of Sales Tax (VAT), Insurance and
Transport charges. AS 10: FIXED ASSETS:
Fixed Assets are shown at historical cost of acquisition including
installation, commissioning less accumulated depreciation AS 11:
FOREIGN CURRENCY TRANSACTIONS:
Foreign currency transactions are recorded at the prevailing exchange
rates at the time of initial recognition. Exchange differences are
recognized as income or expense in the profit and loss account.
Outstanding balances of monetary items denominated in foreign currency
are restated at closing exchange rates and recognised as income or
expenses in the profit and loss account in other cases.
The premium on discount arising at the inception of forward exchange
contracts is accounted as income or expense over the life of the
contract. Any profit or loss arising on cancellation or renewal
exchange contract is recognized as income or as expense in the period
in which they arise.
AS 13: ACCOUNTING FOR INVESTMENTS:
Long term investments are stated at cost. A provision for diminution,
if any, is made to recognise a decline, other than temporary, in the
value of long term investments.
AS 15: EMPLOYEE BENEFITS:
Short term employee benefits (other than termination benefits) which
are payable within 12 months after the end of the period in which the
employees render service are accounted on accrual basis. Defined
Contribution Plans
Companys contributions paid / payable during the year to Provident
Fund is recognized in the profit and loss account. Defined Benefit
Plans Companys Liabilities towards gratuity are determined using the
projected unit credit method which considers each period of service as
giving rise to an additional unit of benefit entitlement and measures
each unit separately to build up the final obligation. Past services
are recognized on a straight line basis over the average period until
the amended benefits becomes vested. Actuarial gains or losses are
recognized immediately in the statement of profit and loss account as
income or expense. Obligation is measured at the present value of
estimated future cash flows using a discounted rate that is determined
by reference to market yields at the balance sheet date on government
bonds where the currency and terms of the government bonds consistent
with the currency and estimated terms of the defined benefit
obligations.
AS 16:BORROWINGCOSTS:
Borrowing costs that are attributable to the acquisition, construction
or production of qualifying assets are capitalized as part of cost of
such assets. A qualifying asset is an asset that necessarily requires a
substantial period of time to get ready for its intended use or sale.
All other borrowing costs are recognized as expenses in the period in
which they are incurred.
AS 19: LEASE:
Lease, where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating lease. Operating lease payments are recognized as an expense
in the profit and loss account on a straight-line basis over the lease
term.
AS 20: EARNINGS PER SHARE:
The Earnings considered in ascertaining the Companys earning per share
comprise of Net Profit after tax and include post tax adjustments of
prior period and extra-ordinary items.
AS 22: ACCOUNTING FORTAXES ON INCOME:
Deferred Tax resulting from timing differences between book and tax
profits is accounted under liability method at enacted as substantially
enacted rate as on the balance sheet date. Deferred tax asset, other
than those arising on account of unabsorbed depreciation or carried
forward of losses under tax loss, are recognised and carried forward
subject to consideration of prudence only to the extent that there is
reasonable certainty that sufficient future taxable income will be
available against which such deferred tax asset can be realized.
Deferred tax asset, arising on account of unabsorbed depreciation or
carried forward of losses under tax loss, are recognised and carried
forward subject to consideration of prudence only to the extent that
there is virtual certainty that sufficient future taxable income will
be available against which such deferred tax asset can be realised.
Current tax is determined at the amount of tax payable in respect of
estimated taxable income for the year.
AS 28: IMPAIRMENT OF ASSETS:
An asset is impaired when the carrying amount of the assets exceeds its
recoverable amount. An impairment loss is charged to the Profit and
Loss account in the year in which an asset is identified as impaired.
An impairment loss recognized in prior accounting period is reversed if
there has been a change in the estimate of the recoverable amount.
AS 29: PROVISIONS, CONTINGENT LIABILITY AND CONTINGENT ASSETS:
a) Provisions involving degree of estimation in measurement are
recognized when there is a present obligation as a result of past event
and it is probable that there will be an outflow of resources.
b) Contingent liabilities are disclosed by way of notes to accounts.
Provision is made if it becomes probable that an outflow of future
economic benefits will be required for an item previously dealt with as
a contingent liability.
c) Contingent liability under various fiscal laws includes those in
respect of which the Company/Department is in appeal.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and
liabilities and the disclosures of contingent liabilities as at the
date of the financial statements and reported amount of revenues and
expenses during the reporting period. Actual results could differ from
these estimates. Any revision to the estimates is recognized
prospectively.
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