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Accounting Policies of Zodiac Clothing Company Ltd. Company
Mar 31, 2025
1 Background and Operations
Zodiac Clothing Company Limited (âthe Companyâ)
incorporated in India having registered office at
Mumbai and manufacturing facilities at Bengaluru,
Umbergaon and Mumbai. The Company deals
in clothing and clothing accessories.
2 Basis of preparation and material accounting policies
(a) Material accounting policies of Standalone
Financial Statements
(i) Compliance with Ind AS
The standalone financial statements have
been prepared in accordance with the Indian
Accounting Standards (hereinafter referred to as
the âInd ASâ) notified under section 133 of the
Companies Act, 2013 (the âActâ) [Companies
(Indian Accounting Standards) Rules, 2015 (as
amended)], and other relevant provisions of the
Act.
(ii) Going Concern assessment
The Directors of the Company have assessed
its liquidity position. the Board of Directors
are confident of the Companyâs ability to meet
its obligation atleast for the next twelve months
from the balance sheet date. Accordingly, these
standalone financial statements have been
prepared on going concern basis.
(iii) Historical cost convention
The standalone financial statements have
been prepared on a historical cost basis,
except for the following:
1) certain financial assets and liabilities
(including derivative instruments) that are
measured at fair value;
2) defined benefit plans - plan assets
measured at fair value;
(iv) Current and non-current classification
All assets and liabilities have been classified
as current or non-current as per the Companyâs
normal operating cycle (twelve months) and
other criteria set out in the Schedule III to the
Act.
(v) Rounding off amounts
All amounts disclosed in the standalone
financial statements and notes have been
rounded off to the nearest lakhs, unless
otherwise stated.
(b) use of estimates and judgments
the estimates and judgments used in the
preparation of the standalone financial statements
are continuously evaluated by the Company and
are based on historical experience and various other
assumptions and factors (including expectations
of future events) that the company believes to
be reasonable under the existing circumstances.
Differences between actual results and estimates
are recognised in the period in which the results
are known/materialised. The said estimates are
based on the facts and events, that existed as at
the reporting date, or that occurred after that date
but provide additional evidence about conditions
existing as at the reporting date.
(c) property, plant and equipment
Freehold land is carried at historical cost. All other
items of property, plant and equipment are stated
at cost less depreciation and impairment, if any.
Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
Subsequent costs are included in the assetâs
carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future
economic benefits associated with the item will
flow to the Company and the cost of the item can
be measured reliably. the carrying amount of any
component accounted for as a separate asset is
derecognised when replaced. All other repairs and
maintenance are charged to the Statement of Profit
and Loss during the reporting period in which they
are incurred.
Depreciation methods, estimated useful lives
and residual value
the Company depreciates its property, plant and
equipment on a straight line method net of residual
values over the useful life in the manner prescribed
in Schedule II of the Act, and management believe
that useful lives of assets are same as those
prescribed in Schedule II of the Act, except for
the following class of assets, useful life for which
is based on a technical evaluation and taking into
consideration nature of Companyâs business and
past experience of usage of such assets:
Leasehold improvements are depreciated over the
shorter of their useful life or the lease term, unless
the entity expects to use the assets beyond the lease
term. Period of lease is either the primary lease
period or where the Company as a lessee has the right
of renewal of lease, and it is intended to renew for
further periods, then such extended period.
The residual values are generally not more than 5%
of the original cost of the asset.
An assetâs carrying amount is written down
immediately to its recoverable amount if the assetâs
carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposals are determined by
comparing proceeds with carrying amount. These are
included in the Statement of Profit and Loss.
(d) Investment properties
Property that is held for long-term rental yields
or for capital appreciation or both, and that is not
occupied by the Company, is classified as investment
property. Investment property is initially recognized
at cost, including related transaction costs and where
applicable borrowing costs. Subsequent expenditure
is capitalised to the assetâs carrying amount only
when it is probable that future economic benefits
associated with the expenditure will flow to the
Company and the cost of the item can be measured
reliably. All other repairs and maintenance costs are
expensed when incurred. When part of an investment
property is replaced, the carrying amount of the
replaced part is derecognised.
Investment properties, net of residual value are
depreciated using the straight-line method over their
useful life in the manner prescribed in Schedule II of
the Act, and management believe that useful lives of
assets are same as those prescribed in Schedule II of
the Act.
(e) Intangible assets
Computer software
Computer software are stated at cost, less accumulated
amortisation and impairments, if any.
Amortisation method
The Company amortizes intangible assets using the
straight-line method over following period:
Nature of intangible asset useful life
- Computer Software 6 Years
Gains and losses on disposals are determined by
comparing proceeds with carrying amount. These are
included in the Statement of Profit and Loss.
(f) Lease
As lessee
The Companyâs lease asset classes primarily consist
of leases for Land and Buildings. The Company
assesses whether a contract is or 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.
At the date of commencement of the lease, the
Company recognises 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 of low value assets. For
these short term and leases of low value assets,
the Company recognises the lease payments as
an operating expense on a straight line basis over
the term of the lease. Variable lease payments that
depend on sales are recognised in profit or loss
in the period in which the condition that triggers
those payments occurs.
The lease liability is initially measured at the present
value of the future lease payments and payments to
be made under reasonably certain extension option
are also included in measurement of liability. The
lease payments are discounted using the interest rate
implicit in the lease or, if not readily determinable,
using the incremental borrowing rates. The lease
liability is subsequently remeasured by increasing
the carrying amount to reflect interest on the lease
liability, reducing the carrying amount to reflect the
lease payments made.
The right-of-use assets are initially recognised 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. They
are subsequently measured at cost less accumulated
depreciation and impairment losses, if any. 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.
A lease liability is remeasured upon the occurrence
of certain events such as a change in the lease term.
The amount on remeasurement of lease liability is
adjusted to the right of use asset and any remaining
amount is recognised in statement of profit and loss.
Variable Lease payments
Certain property leases contain variable payment
terms that are linked to sales generated from a store.
For individual stores, up to 100% of lease payments
are on the basis of variable payment terms with
percentages ranging from 10% to 30% of sales.
Variable payment terms are used for a variety of
reasons, including minimising the fixed costs base
for newly established stores, etc.. Variable lease
payments that depend on sales are recognised in
statement of profit or loss in the period in which the
condition that triggers those payments occurs.
Lease liability and ROU asset have been presented
separately on the face of the Balance Sheet and lease
payments have been classified as financing cash
flows.
As lessor
Lease income from operating leases where the
Company is a lessor is recognised as income on
a straight-line basis over the lease term unless
the receipts are structured to increase in line with
expected general inflation to compensate for the
excepted inflationary cost increases.
(g) Cash and Cash Equivalents
For the purpose of presentation in the statement
of cash flows, cash and cash equivalents includes
cash on hand, Bank overdrafts, deposits and other
short-term highly liquid investments with original
maturities of three months or less that are readily
convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
(h) Inventories
Inventories of Raw Materials, Work-in-Progress,
Stock-in-trade, Stores and spares and Finished Goods
are stated âat cost or net realisable value, whichever
is lowerâ. Cost comprise all cost of purchase, cost of
conversion and other costs incurred in bringing the
inventories to their present location and condition.
Cost formula used is âFirst-in-First-Outâ, âWeighted
Average costâ or âSpecific Identificationâ, as
applicable.
Materials and other items held for use in the
production of inventories are not written down below
cost if the finished products in which they will be
utilised are expected to be sold at or above cost.
Net realisable value is the estimated selling price in
the ordinary course of business, less the estimated
cost of completion and the estimated cost necessary
to make the sale.
Slow-moving, non-moving and defective inventories
are identified and wherever necessary, provision is
made for such inventories considering various factors
such as likely usage, obsolescence etc.
(i) Investment in subsidiary
Investment in subsidiary is recognised at cost (less,
impairment, if any), as per Ind AS - 27 âSeparate
Financial Statementsâ.
(j) Investments and other financial assets
(i) Classification
The Company classifies its financial assets in the
following measurement categories:
* those to be measured subsequently at fair value
(either through other comprehensive income, or
through the Statement of Profit and Loss), and
* those measured at amortised cost.
The classification depends on the companyâs
business model for managing the financial assets
and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses
will either be recorded in the Statement of Profit
and Loss or other comprehensive income. For
investments in debt instruments, this will depend
on the business model in which the investment
is held. For investments in equity instruments,
this will depend on whether the Company has
made an irrevocable election at the time of initial
recognition to account for the equity investment at
fair value through other comprehensive income.
(ii) Recognition
Purchases and sales of financial assets are
recognised on trade - date, being the date on
which the Company commits to purchase or sale
the financial asset.
(iii) Measurement
At initial recognition, the Company measures a
financial asset at its fair value plus, in the case
of a financial asset not at fair value through
profit or loss, transaction costs that are directly
attributable to the acquisition of the financial
asset. Transaction costs of financial assets
carried at fair value through the Statement of
Profit and Loss are expensed in the Statement
of Profit and Loss.
Debt instruments:
Subsequent measurement of debt instruments
depends on the Companyâs business model
for managing the asset and the cash flow
characteristics of the asset. There are three
measurement categories into which the
Company classifies its debt instruments:
* Amortised cost: Assets that are held for
collection of contractual cash flows where
those cash flows represent solely payments of
principal and interest are measured at amortised
cost. Interest income from these financial assets
is included in other income using the effective
interest rate method.
* Fair value through other comprehensive
income (FVOCI): Assets that are held for
collection of contractual cash flows and for
selling the financial assets, where the assetsâ cash
flows represent solely payments of principal and
interest are measured at fair value through other
comprehensive income (FVOCI). Movements
in the carrying amount are taken through OCI,
except for the recognition of impairment losses,
interest revenue which are recognised in the
Statement of Profit and Loss. When the financial
asset is derecognised, the cumulative gain or
loss previously recognised in OCI is reclassified
from equity to the Statement of Profit and Loss
and recognised in other income/expense. Interest
income from these financial assets is included
in other income using the effective interest rate
method.
* Fair value through profit and loss: Assets
that do not meet the criteria for amortised cost
or FVOCI are measured at fair value through
Statement of Profit and Loss. Interest income
from these financial assets is included in other
income.
Equity instruments:
The Company subsequently measures all equity
investments at fair value. Where the Company
has elected to present fair value gains and losses
on equity investments in other comprehensive
income, there is no subsequent reclassification of
fair value gains and losses to the Statement of
Profit and Loss. Dividends from such investments
are recognised in the Statement of Profit and
Loss as other income when the Companyâs right
to receive payments is established.
Changes in the fair value of financial assets at
fair value through profit or loss are recognised as
other income in the Statement of profit or loss.
Impairment losses (and reversal of impairment
losses) on equity investments measured at
FVOCI are not reported separately from other
changes in fair value.
(iv) 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 measured at amortised
cost e.g., loans, deposits and bank balance.
(b) Trade receivables - 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 ECLs at each reporting date, right
from its initial recognition. Trade receivables are
tested for impairment on a specific basis after
considering the sanctioned credit limits, security
like letters of credit, security deposit collected
etc. and expectations about future cash flows.
(v) Derecognition
A financial asset is derecognised only when
- the Company has transferred the rights to
receive the cash flows from the financial asset or
- retains the contractual rights to receive the
cash flows of the financial asset, but assumes a
contractual obligation to pay the cash flows to
one or more recipients.
Where the entity has transferred an asset, the
Company evaluates whether it has transferred
substantially all risks and rewards of ownership
of the financial asset. In such cases, the financial
asset is derecognised. Where the entity has not
transferred substantially all risks and rewards
of ownership of the financial asset, the financial
asset is not derecognised.
(vi) Income recognition
Interest income
Interest income from debt instruments is
recognised using the effective interest rate
method.
Dividends
Dividends are recognised in the Statement of
Profit and Loss only when the right to receive
payment is established.
(k) Borrowings
Borrowings are initially recognised at net of
transaction costs incurred. Borrowings are
subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction
costs) and the redemption amount is recognised in
the Statement of Profit and Loss over the period of
the borrowings using the effective interest method.
Mar 31, 2024
1 Background and Operations
Zodiac Clothing Company Limited (âthe Companyâ) incorporated in India having registered office at Mumbai and manufacturing facilities at Bengaluru, Umbergaon and Mumbai. The Company deals in clothing and clothing accessories.
2 Basis of preparation and material accounting policies(a) basis of preparation of Standalone Financial Statements(i) Compliance with Ind AS
The standalone financial statements have been prepared in accordance with the Indian Accounting Standards (hereinafter referred to as the âInd ASâ) notified under section 133 of the Companies Act, 2013 (the âActâ) [Companies (Indian Accounting Standards) Rules, 2015 (as amended)], and other relevant provisions of the Act.
The Directors of the Company have assessed its liquidity position. the Board of Directors are confident of the Companyâs ability to meet its obligation atleast for the next twelve months from the balance sheet date. Accordingly, these financial statements have been prepared on going concern basis.
(iii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
1) certain financial assets and liabilities (including derivative instruments) that are measured at fair value;
2) defined benefit plans - plan assets measured at fair value;
(iv) Current and non-current classification
All assets and liabilities have been classified as current or non-current as per the Companyâs normal operating cycle (twelve months) and other criteria set out in the Schedule III to the Act.
All amounts disclosed in the standalone financial statements and notes have been rounded off to the nearest lakhs, unless otherwise stated.
(b) use of estimates and judgments
the estimates and judgments used in the preparation of the standalone financial statements are continuously evaluated by the Company and are based on historical experience and various other assumptions and factors (including expectations of future events) that the company believes to
be reasonable under the existing circumstances. Differences between actual results and estimates are recognised in the period in which the results are known/materialised. The said estimates are based on the facts and events, that existed as at the reporting date, or that occurred after that date but provide additional evidence about conditions existing as at the reporting date.
(c) property, plant and equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at cost less depreciation and impairment, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. the carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to the Statement of Profit and Loss during the reporting period in which they are incurred.
Depreciation methods, estimated useful lives and residual value
the Company depreciates its property, plant and equipment on a straight line method net of residual values over the useful life in the manner prescribed in Schedule II of the Act, and management believe that useful lives of assets are same as those prescribed in Schedule II of the Act, except for the following class of assets, useful life for which is based on a technical evaluation and taking into consideration nature of Companyâs business and past experience of usage of such assets:
|
description of assets |
useful life followed by the Company |
useful life as prescribed under Schedule ii |
|
Buildings |
31 Years |
30 / 60 Years |
|
Plant and equipment |
21 Years * |
15 Years * |
|
Furniture and fixtures |
16 Years |
10 Years |
|
Office equipments |
21 Years |
5 Years |
|
Computer (including servers) |
6 Years |
3 - 6 Years |
|
Electrical Installation |
21 Years |
10 Years |
|
* Based on single shift |
||
Leasehold improvements are depreciated over the shorter of their useful life or the lease term, unless the entity expects to use the assets beyond the lease term. Period of lease is either the primary lease period or where the Company as a lessee has the right of renewal of lease, and it is intended to renew for further periods, then such extended period.
The residual values are generally not more than 5% of the original cost of the asset.
An assetâs carrying amount is written down immediately to its recoverable amount if the assetâs carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the Statement of Profit and Loss.
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Company, is classified as investment property. Investment property is initially recognized at cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalised to the assetâs carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.
Investment properties, net of residual value are depreciated using the straight-line method over their useful life in the manner prescribed in Schedule II of the Act, and management believe that useful lives of assets are same as those prescribed in Schedule II of the Act.
(e) Intangible assets Computer software
Computer software are stated at cost, less accumulated amortisation and impairments, if any.
The Company amortizes intangible assets using the straight-line method over following period:
Nature of intangible asset useful life
- Computer Software 6 Years
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the Statement of Profit and Loss.
The Companyâs lease asset classes primarily consist of leases for Land and Buildings. The Company assesses whether a contract is or 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.
At the date of commencement of the lease, the Company recognises 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 of low value assets. For these short term and leases of low value assets, the Company recognises the lease payments as an operating expense on a straight line basis over the term of the lease. Variable lease payments that depend on sales are recognised in profit or loss in the period in which the condition that triggers those payments occurs.
The lease liability is initially measured at the present value of the future lease payments and payments to be made under reasonably certain extension option are also included in measurement of liability. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made.
The right-of-use assets are initially recognised 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. They are subsequently measured at cost less accumulated depreciation and impairment losses, if any. 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.
A lease liability is remeasured upon the occurrence of certain events such as a change in the lease term. The amount on remeasurement of lease liability is adjusted to the right of use asset and any remaining amount is recognised in statement of profit and loss.
Lease liability and ROU asset have been presented separately on the face of the Balance Sheet and lease payments have been classified as financing cash flows.
Lease income from operating leases where the Company is a lessor is recognised as income on a straight-line basis over the lease term unless the receipts are structured to increase in line with expected general inflation to compensate for the excepted inflationary cost increases.
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, Bank overdrafts, deposits and other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Inventories of Raw Materials, Work-in-Progress, Stock-in-trade, Stores and spares and Finished Goods are stated âat cost or net realisable value, whichever is lowerâ. Cost comprise all cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost formula used is âFirst-in-First-Outâ, âWeighted Average costâ or âSpecific Identificationâ, as applicable.
Materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be utilised are expected to be sold at or above cost.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and the estimated cost necessary to make the sale.
Slow-moving, non-moving and defective inventories are identified and wherever necessary, provision is made for such inventories considering various factors such as likely usage, obsolescence etc.
Investment in subsidiary is recognised at cost (less, impairment, if any), as per Ind AS - 27 âSeparate Financial Statementsâ.
(j) Investments and other financial assets
(i) Classification
The Company classifies its financial assets in the following measurement categories:
* those to be measured subsequently at fair value (either through other comprehensive income, or through the Statement of Profit and Loss), and
* those measured at amortised cost.
The classification depends on the companyâs business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in the Statement of Profit and Loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
Purchases and sales of financial assets are recognised on trade - date, being the date on which the Company commits to purchase or sale the financial asset.
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through
profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through the Statement of Profit and Loss are expensed in the Statement of Profit and Loss.
Subsequent measurement of debt instruments depends on the Companyâs business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:
* Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in other income using the effective interest rate method.
* Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assetsâ cash flows represent solely payments of principal and interest are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment losses, interest revenue which are recognised in the Statement of Profit and Loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to the Statement of Profit and Loss and recognised in other income/expense. Interest income from these financial assets is included in other income using the effective interest rate method.
* Fair value through profit and loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through Statement of Profit and Loss. Interest income from these financial assets is included in other income.
Equity instruments:
The Company subsequently measures all equity investments at fair value. Where the Company has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to the Statement of Profit and Loss. Dividends from such investments are recognised in the Statement of Profit and Loss as other income when the Companyâs right to receive payments is established.
Changes in the fair value of financial assets at fair value through profit or loss are recognised as other income in the Statement of profit or loss.
Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
(iv) 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 measured at amortised cost e.g., loans, deposits and bank balance.
(b) Trade receivables - 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 ECLs at each reporting date, right from its initial recognition. Trade receivables are tested for impairment on a specific basis after considering the sanctioned credit limits, security like letters of credit, security deposit collected etc. and expectations about future cash flows.
A financial asset is derecognised only when
- the Company has transferred the rights to receive the cash flows from the financial asset or
- retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
(vi) Income recognition Interest income
Interest income from debt instruments is recognised using the effective interest rate method.
Dividends are recognised in the Statement of Profit and Loss only when the right to receive payment is established.
Borrowings are initially recognised at net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the Statement of Profit and Loss over the period of the borrowings using the effective interest method.
(l) Provisions, contingent liabilities and contingent assets
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of managementâs best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense in Statement of Profit and loss.
Contingent Liabilities are disclosed in respect of possible obligations that arise from past events but their existence will be confirmed by the occurrence or non occurrence of one or more uncertain future events.
Contingent assets disclosed in respect of possible asset that may arise from past event and whose existence will be confirmed only by the occurrence or non occurrence of one or more uncertain future events.
(m) Revenue recognition Sale of goods - Wholesale
Sales are recognised when the control of the goods has been transferred to customer which is generally on delivery of goods and there is no unfulfilled obligation that could affect the customerâs acceptance of the product. Delivery occurs when the products have been shipped to the specific location, risk of obsolescence and loss have been transfer to customer and the Company has objective evidence that all criteria for the acceptance have been satisfied.
A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.
Sale of goods - Retail
The Company operates a chain of retail stores. Revenue from the sale of goods is recognised when the Company sells a product to the customer. Payment of transaction price is generally due immediately when the customer purchases the goods and takes delivery in store.
Aeccumulated experience is used to estimate and provide for the sales return, using the expected value method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. A refund liability (included in other current liabilities) is recognised for expected sales
return in relation to sales made until the end of the reporting period.
Sale of services - Revenue is recognised based on actual service provided at the end of the reporting period as proportion of total service to be provided.
Other operating revenue - Export incentives
Export incentives under various schemes of Government of India are accounted on accrual basis on the basis of exports made and when there is reasonable assurance that the Company will comply with the conditions and incentive will be received.
(n) Employee benefits(i) Short-term obligations
Liabilities for wages and salaries, including nonmonetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employeesâ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled.
(ii) post-employment obligations Defined Benefits Plan Gratuity obligations
The liability or asset recognised in the balance sheet in respect of defined gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The net interest cost is calculated by actuary applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost 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 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.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments as calculated by actuary are recognised immediately in the Statement of Profit and Loss as past service cost.
The Company pays Provident Fund (PF) contributions, Employees State Insurance Scheme (ESIC) etc., to publicly administered funds as per
local regulations. The Company has no further payment obligations once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognised as employee benefits expense when they are due.
(iii) Other long-term employee benefit obligations
The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. An actuarial valuation is obtained at the end of reporting period. The present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method.
The obligations are presented as current liabilities in the balance sheet, if the Company does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
Termination benefits are payable when employment is terminated by the company before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The company recognises termination benefits at the earlier of the following dates: (a) when the company can no longer withdraw the offer of those benefits; and (b)when the company recognises costs for structuring that is within the scope of Ind AS-37 and involves the payment of terminations benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.
(o) Foreign currency transactions(i) functional and presentation currency
The financial statements are presented in Indian rupee (INR), which is Companyâs functional and presentation currency.
(ii) Transactions and balances
Transactions in foreign currencies are recognised at the prevailing exchange rates on the transaction dates. Realised gains and losses on settlement of foreign currency transactions are recognised in the Statement of Profit and Loss.
Monetary foreign currency assets and liabilities at the year-end are translated at the year-end exchange rates and the resultant exchange differences are recognised in the Statement of Profit and Loss.
(p) Derivative and hedging activities
Derivatives are only used for economic hedging purposes and not as speculative investments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged and the type of hedge relationship designated.
The Company designates their derivatives as hedges of foreign exchange risk associated with the cash flows of firm commitment transactions (sales orders/ purchase orders) (cash flow hedges).
The Company documents at the inception of the hedging transaction the economic relationship between hedging instruments and hedged items including whether the hedging instrument is expected to offset changes in cash flows of hedged items. the Company documents its risk management objectives and strategy for undertaking various hedge transactions at the inception of each hedge relationship.
the full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than or equal to 12 months.
Cash flow hedges that qualify for hedge accounting -
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the other comprehensive income in cash flow hedging reserve within equity, limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge.
When forward contracts are used to hedge forecast transactions, the Company designates them in entirety as the hedging instrument. Gains or losses relating to effective portion of fair value of forward contracts are recognised in the other comprehensive income in the cash flow hedging reserve within other equity.
When the option contracts are used to hedge forecast transactions, the Company designates only the intrinsic value of the option contract as the hedging instrument.
Amounts accumulated in equity are reclassified to statement of profit and loss in the periods when the hedged item affects profit or loss i.e. when the underlying sale or purchase transaction occurs.
The gain or loss relating to the ineffective portion is recognised immediately in the Statement of Profit and Loss.
Derivative Contracts other than cash flow hedges:
Derivative contracts which are not designated as cash flow hedges, are accounted for at fair value through profit or loss and are included in Statement of Profit and Loss.
the income tax expense for the period is the tax payable on the current periodâs taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
the current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. the group measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.
Deferred income tax is provided in full, using the liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amount in the standalone financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax assets is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are off set where the company has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Current and deferred tax is recognised in the 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, respectively.
(r) Earnings Per Share Basic earnings per share
Basic earnings per share is calculated by dividing:
- the profit attributable to owners of the company
- by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year and excluding treasury shares.
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
- the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
- the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
The calculation of diluted earnings per share does not assume conversion, exercise, or other issue of potential ordinary shares that would have an antidilutive effect on earnings per share.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker(CODM). The CODM, being the Managing Director assesses the financial performance and position of the Company and makes strategic decisions.
(t) Impairment of non-financial assets:
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assetâs carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assetâs fair value less costs of disposal and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating units). Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
(v) Non-current assets held for sale
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their
carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and contractual rights under insurance contracts, which are specifically exempt from this requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset, but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the noncurrent asset is recognised at the date of derecognition.
Non-current assets are not depreciated or amortised while they are classified as held for sale.
Non-current assets classified as held for sale are presented separately from the other assets in the balance sheet.
(w) recent Accounting pronouncements:
Standards issued but not yet effective:
Ministry of Corporate Affairs (âMCAâ) notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On March 31, 2024, MCA has not notified any new Standard or amended any existing standard which are applicable from April 1, 2024.
3 Critical estimates and judgements
The preparation of standalone financial statements requires the use of accounting estimates which by definition will seldom equal the actual results.
This note provides an overview of the areas that involved a higher degree of judgement or complexity, and items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the standalone financial statements. .
The areas involving critical estimates or judgement are:
- Estimation of Defined benefit obligation (Refer Note 42).
- Recoverability of deferred tax assets (Refer Note 38).
- Allowance for doubtful debts (Refer Note 14 and 46).
- Fair value of Investment properties (Refer Note 5)
- Direct tax litigations (Refer Note 40)
- Determination of lease term (Refer Note 4(c))
- Impairment of non-financial assets (Refer Note 2(u))
- Provision for Inventory Obsolescence (Refer Note 2(h) and 12)
Mar 31, 2023
1 Background and Operations
Zodiac Clothing Company Limited (âthe Companyâ) incorporated in India having registered office at Mumbai and manufacturing facilities at Bengaluru, Umbergaon and Mumbai. The Company deals in clothing and clothing accessories.
2 Significant accounting policies
(a) Basis of preparation of Standalone Financial Statements
(i) Compliance with Ind AS
The standalone financial statements have been prepared in accordance with the Indian Accounting Standards (hereinafter referred to as the âInd ASâ) notified under section 133 of the Companies Act, 2013 (the âActâ) [Companies (Indian Accounting Standards) Rules, 2015 (as amended)], and other relevant provisions of the Act.
(ii) Going Concern Assessment
The Directors of the Company have assessed its liquidity position. The Board of Directors are confident of the Companyâs ability to meet its obligation atleast for the next twelve months from the balance sheet date. Accordingly, these financial statements have been prepared on going concern basis.
(iii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
1) certain financial assets and liabilities (including derivative instruments) that are measured at fair value;
2) defined benefit plans - plan assets measured at fair value;
(iv) Current and non-current classification
All assets and liabilities have been classified as current or non-current as per the Companyâs normal operating cycle (twelve months) and other criteria set out in the Schedule III to the Act.
(v) Rounding off amounts
All amounts disclosed in the standalone financial statements and notes have been rounded off to the nearest lakhs, unless otherwise stated.
(b) Use of estimates and judgments
The estimates and judgments used in the preparation of the standalone financial statements are continuously evaluated by the Company and are based on historical experience and various other assumptions and factors (including expectations of future events) that the company believes to be reasonable under the existing circumstances. Differences between actual results and estimates are recognised in the period in which the results are known/materialised. The said estimates are
based on the facts and events, that existed as at the reporting date, or that occurred after that date but provide additional evidence about conditions existing as at the reporting date.
(c) Property, plant and equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at cost less depreciation and impairment, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to the Statement of Profit and Loss during the reporting period in which they are incurred.
Depreciation methods, estimated useful lives and residual value
The Company depreciates its property, plant and equipment on a straight line method net of residual values over the useful life in the manner prescribed in Schedule II of the Act, and management believe that useful lives of assets are same as those prescribed in Schedule II of the Act, except for the following class of assets, useful life for which is based on a technical evaluation and taking into consideration nature of Companyâs business and past experience of usage of such assets:
|
Description of assets |
Useful life followed by the Company |
Useful life as prescribed under Schedule II |
|
Plant and equipment |
21 Years * |
15 Years |
|
Furniture and fixtures |
16 Years |
10 Years |
|
Office equipments |
21 Years |
5 Years |
|
Computer (including servers) |
6 Years |
3-6 Years |
|
Electrical Installation |
21 Years |
10 Years |
|
* Based on single shift |
||
Leasehold improvements are depreciated over the shorter of their useful life or the lease term, unless the entity expects to use the assets beyond the lease term. Period of lease is either the primary lease period or where the Company as a lessee has the right of renewal of lease, and it is intended to renew for further periods, then such extended period.
The residual values are generally not more than 5% of the original cost of the asset.
An assetâs carrying amount is written down immediately to its recoverable amount if the assetâs
carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the Statement of Profit and Loss.
(d) Investment properties
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Company, is classified as investment property. Investment property is initially recognized at cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalised to the assetâs carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.
Investment properties, net of residual value are depreciated using the straight-line method over their useful life in the manner prescribed in Schedule II of the Act, and management believe that useful lives of assets are same as those prescribed in Schedule II of the Act.
(e) Intangible assets Computer software
Computer software are stated at cost, less accumulated amortisation and impairments, if any.
Amortisation method
The Company amortizes intangible assets using the straight-line method over following period:
Nature of intangible asset Useful life
- Computer Software 6 Years
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the Statement of Profit and Loss.
(f) Lease As lessee
The Companyâs lease asset classes primarily consist of leases for Land and Buildings. The Company assesses whether a contract is or 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.
At the date of commencement of the lease, the Company recognises 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 of low value assets. For these short term and leases of low value assets, the Company recognises the lease payments as an operating expense on a straight line basis over
the term of the lease. Variable lease payments that depend on sales are recognised in profit or loss in the period in which the condition that triggers those payments occurs.
The lease liability is initially measured at the present value of the future lease payments and payments to be made under reasonably certain extension option are also included in measurement of liability. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made.
The right-of-use assets are initially recognised 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. They are subsequently measured at cost less accumulated depreciation and impairment losses, if any. 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.
A lease liability is remeasured upon the occurrence of certain events such as a change in the lease term. The amount on remeasurement of lease liability is adjusted to the right of use asset and any remaining amount is recognised in statement of profit and loss.
Lease liability and ROU asset have been presented separately on the face of the Balance Sheet and lease payments have been classified as financing cash flows.
Covid-19-Related Rent Concessions:
The Ministry of Corporate Affairs vide notification dated July 24, 2020, issued an amendment to Ind AS 116- Leases, by inserting a practical expedient on âCovid19-Related Rent Concessionsâ and vide notification dated June 18, 2021, extended such practical expedient upto June 30, 2022. Pursuant to the above amendment, the Company has applied the practical expedient by accounting the unconditional rent concessions in the Statement of Profit and Loss, in respect of leases, which has satisfied following conditions:
i) the change in lease payments results in revised consideration for the lease that is less than, the consideration for the lease immediately preceding the change
ii) any reduction in lease payments affects only payments originally due on or before the June 30, 2022
iii) there is no substantive change to other terms and conditions of the lease.
The Company has recognised such Covid-19 related rent concessions as other income in the period in which such concessions are agreed with lessor, with corresponding impact to lease liabilities.
As lessor
Lease income from operating leases where the Company is a lessor is recognised as income on a straight-line basis over the lease term unless the receipts are structured to increase in line with expected general inflation to compensate for the excepted inflationary cost increases.
(g) Cash and Cash Equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, Bank overdrafts, deposits and other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
(h) Inventories
Inventories of Raw Materials, Work-in-Progress, Stock-in-trade, Stores and spares and Finished Goods are stated âat cost or net realisable value, whichever is lowerâ. Cost comprise all cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost formula used is âFirst-in-First-Outâ, âWeighted Average costâ or âSpecific Identificationâ, as applicable.
Materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be utilised are expected to be sold at or above cost.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and the estimated cost necessary to make the sale.
Slow-moving, non-moving and defective inventories are identified and wherever necessary, provision is made for such inventories considering various factors such as likely usage, obsolescence etc.
(i) Investment in subsidiary
Investment in subsidiary is recognised at cost (less, impairment, if any), as per Ind AS - 27 âSeparate Financial Statementsâ.
(j) Investments and other financial assets
(i) Classification
The Company classifies its financial assets in the following measurement categories:
* those to be measured subsequently at fair value (either through other comprehensive income, or through the Statement of Profit and Loss), and
* those measured at amortised cost.
The classification depends on the companyâs business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses
will either be recorded in the Statement of Profit and Loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
(ii) Recognition
Purchases and sales of financial assets are recognised on trade - date, being the date on which the Company commits to purchase or sale the financial asset.
(iii) Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through the Statement of Profit and Loss are expensed in the Statement of Profit and Loss.
Debt instruments:
Subsequent measurement of debt instruments depends on the Companyâs business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:
* Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in other income using the effective interest rate method.
* Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assetsâ cash flows represent solely payments of principal and interest are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment losses, interest revenue which are recognised in the Statement of Profit and Loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to the Statement of Profit and Loss and recognised in other income/expense. Interest income from these financial assets is included in other income using the effective interest rate method.
* Fair value through profit and loss: Assets
that do not meet the criteria for amortised cost or FVOCI are measured at fair value through Statement of Profit and Loss. Interest income from these financial assets is included in other income.
Equity instruments:
The Company subsequently measures all equity investments at fair value. Where the Company has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to the Statement of Profit and Loss. Dividends from such investments are recognised in the Statement of Profit and Loss as other income when the Companyâs right to receive payments is established.
Changes in the fair value of financial assets at fair value through profit or loss are recognised as other income in the Statement of profit or loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
(iv) 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 measured at amortised cost e.g., loans, deposits and bank balance.
(b) Trade receivables - 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 ECLs at each reporting date, right from its initial recognition. Trade receivables are tested for impairment on a specific basis after considering the sanctioned credit limits, security like letters of credit, security deposit collected etc. and expectations about future cash flows.
(v) Derecognition
A financial asset is derecognised only when
- the Company has transferred the rights to receive the cash flows from the financial asset or
- retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
(vi) Income recognition Interest income
Interest income from debt instruments is recognised using the effective interest rate method.
Dividends
Dividends are recognised in the Statement of Profit and Loss only when the right to receive payment is established.
Rental Income
Rentals basically consists of rental revenue earned from letting of space at the entityâs own premises. Revenue is recognised in the period in which services are being rendered.
(k) Borrowings
Borrowings are initially recognised at net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the Statement of Profit and Loss over the period of the borrowings using the effective interest method.
(l) Borrowing costs
General and specific borrowing costs that are attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale.
Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.
Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the statement of profit and loss, within finance costs.
Other interest and borrowing costs are charged to Statement of Profit and Loss in the period in which they are incurred.
(m) Provisions, contingent liabilities and contingent assets
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of managementâs best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense in Statement of Profit and loss.
Contingent Liabilities are disclosed in respect of possible obligations that arise from past events but their existence will be confirmed by the occurrence or non occurrence of one or more uncertain future events.
Contingent assets disclosed in respect of possible asset that may arise from past event and whose existence will be confirmed only by the occurrence or non occurrence of one or more uncertain future events.
(n) Revenue recognition Sale of goods - Wholesale
Sales are recognised when the control of the goods has been transferred to customer which is generally on delivery of goods and there is no unfulfilled obligation that could affect the customerâs acceptance of the product. Delivery occurs when the products have been shipped to the specific location, risk of obsolescence and loss have been transferred to customer and the Company has objective evidence that all criteria for the acceptance have been satisfied.
A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.
Sale of goods - Retail
The Company operates a chain of retail stores. Revenue from the sale of goods is recognised when the Company sells a product to the customer. Payment of transaction price is generally due immediately when the customer purchases the goods and takes delivery in store.
Variable Lease Payments
Certain property leases contain variable payment terms that are linked to sales generated from a store. For individual stores, up to 100% of lease payments are on the basis of variable payment terms with percentages ranging from 10% to 30% of sales. Variable payment terms are used for a variety of reasons, including minimising the fixed costs base for newly established stores, re-evaluation done post Covid-19 etc.. Variable lease payments that depend on sales are recognised in statement of profit or loss in the period in which the condition that triggers those payments occurs.
Sales return
Accumulated experience is used to estimate and provide for the sales return, using the expected value method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. A refund liability (included in other current liabilities) is recognised for expected sales return in relation to sales made until the end of the reporting period.
Service income
Sale of services - Revenue is recognised based on actual service provided at the end of the reporting period as proportion of total service to be provided.
Other operating revenue - Export incentives
Export incentives under various schemes of Government of India are accounted on accrual basis on the basis of exports made and when there is reasonable assurance that the Company will comply with the conditions and incentive will be received.
(o) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including nonmonetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employeesâ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled.
(ii) Post-employment obligations Defined Benefits Plan Gratuity obligations
The liability or asset recognised in the balance sheet in respect of defined gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated at the year-end by actuary using the projected unit credit method.
The net interest cost is calculated by actuary applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost 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 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.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments as calculated by actuary are recognised immediately in the Statement of Profit and Loss as past service cost.
Defined Contribution Plans
The Company pays Provident Fund (PF) contributions, Employees State Insurance Scheme (ESIC) etc., to publicly administered funds as per local regulations. The Company has no further payment obligations once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognised as employee benefits expense when they are due.
(iii) Other long-term employee benefit obligations
The liabilities for earned leave are not expected to be settled wholly within 12 months after the end
of the period in which the employees render the related service. An actuarial valuation is obtained at the end of reporting period. The present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method.
The obligations are presented as current liabilities in the balance sheet, if the Company does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
(iv) Termination benefits
Termination benefits are payable when employment is terminated by the company before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The company recognises termination benefits at the earlier of the following dates: (a) when the company can no longer withdraw the offer of those benefits; and (b)when the company recognises costs for structuring that is within the scope of Ind AS-37 and involves the payment of terminations benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.
(p) Foreign currency transactions
(i) Functional and presentation currency
The financial statements are presented in Indian rupee (INR), which is Companyâs functional and presentation currency.
(ii) Transactions and balances
Transactions in foreign currencies are recognised at the prevailing exchange rates on the transaction dates. Realised gains and losses on settlement of foreign currency transactions are recognised in the Statement of Profit and Loss.
Monetary foreign currency assets and liabilities at the year-end are translated at the year-end exchange rates and the resultant exchange differences are recognised in the Statement of Profit and Loss.
(q) Derivative and hedging activities
Derivatives are only used for economic hedging purposes and not as speculative investments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item
being hedged and the type of hedge relationship designated.
The Company designates their derivatives as hedges of foreign exchange risk associated with the cash flows of firm commitment transactions (sales orders/purchase orders) (cash flow hedges).
The Company documents at the inception of the hedging transaction the economic relationship between hedging instruments and hedged items including whether the hedging instrument is expected to offset changes in cash flows of hedged items. The Company documents its risk management objectives and strategy for undertaking various hedge transactions at the inception of each hedge relationship.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than or equal to 12 months.
Cash flow hedges that qualify for hedge accounting -
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the other comprehensive income in cash flow hedging reserve within equity, limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge.
When forward contracts are used to hedge forecast transactions, the Company designates them in entirety as the hedging instrument. Gains or losses relating to effective portion of fair value of forward contracts are recognised in the other comprehensive income in the cash flow hedging reserve within other equity.
When the option contracts are used to hedge forecast transactions, the Company designates only the intrinsic value of the option contract as the hedging instrument.
Amounts accumulated in equity are reclassified to statement of profit and loss in the periods when the hedged item affects profit or loss i,e when the underlying sales or purchase transaction occurs.
The gain or loss relating to the ineffective portion is recognised immediately in the Statement of Profit and Loss.
Derivative Contracts other than cash flow hedges:
Derivative contracts which are not designated as cash flow hedges, are accounted for at fair value through profit or loss and are included in Statement of Profit and Loss.
(r) Income tax
The income tax expense for the period is the tax payable on the current periodâs taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The group measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.
Deferred income tax is provided in full, using the liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amount in the standalone financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax assets is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are off set where the company has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Current and deferred tax is recognised in the 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, respectively.
(s) Earnings Per Share Basic earnings per share
Basic earnings per share is calculated by dividing:
- the profit attributable to owners of the company
- by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year and excluding treasury shares.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
- the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
- the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
The calculation of diluted earnings per share does not assume conversion, exercise, or other issue of potential ordinary shares that would have an antidilutive effect on earnings per share.
(t) Segment Reporting:
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker(CODM). The CODM, being the Managing Director assesses the financial performance and position of the Company and makes strategic decisions.
(u) Impairment of non-financial assets:
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assetâs carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assetâs fair value less costs of disposal and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating units). Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
(v) Government Grants
Grants from the government are recognised at their fair value where there is reasonable assurance that the grant will be received and the Company will comply with all the attached conditions.
(w) Dividend
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
(x) Non-current assets held for sale
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and contractual rights under insurance contracts, which are specifically exempt from this requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset, but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset is recognised at the date of de-recognition.
Non-current assets are not depreciated or amortised while they are classified as held for sale.
Non-current assets classified as held for sale are presented separately from the other assets in the balance sheet.
(y) Recent Accounting Pronouncements:
Standards issued but not yet effective:
Ministry of Corporate Affairs (âMCAâ) and notifies new standard or amendments to the existing standards. MCA vide notiication dated 31st March, 2023 has made the following amendments to the Ind AS which are effective 1st April 2023:
a) Amendments to the Ind AS 1, Presentation of Financial Statements where the company are now required to disclose material accounting policies rather than thier significant accounting policy.
b) Amendments to the Ind As 8, Accounting policies changes in Accounting Estimates and Errors where the definition of âChange in account estimateâ has
been replaced by revised definition of âaccounting estimateâ.
c) Amendments to Ind AS 12, Income taxes where the scope of Initial Recognition Exemption (IRE) has been narrowed down.
Based on the Preliminary assessment, the company does not expect these amendments to have any significant impact on its standalone financial statements.
3 Critical estimates and judgements
The preparation of standalone financial statements requires the use of accounting estimates which by definition will seldom equal the actual results.
This note provides an overview of the areas that involved a higher degree of judgement or complexity, and items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the standalone financial statements. .
The areas involving critical estimates or judgement are:
- Estimation of Defined benefit obligation (Refer Note 42).
- Recoverability of deferred tax assets (Refer Note 38).
- Allowance for doubtful debts (Refer Note 14 and 46).
- Fair value of Investment properties (Refer Note 5)
- Direct tax litigations (Refer Note 40)
- Determination of lease term (Refer Note 4(c))
- Impairment of non-financial assets (Refer Note 2(u))
- Provision for Inventory Obsolescence (Refer Note 2(h) and 12)
Mar 31, 2018
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES:
1 Background and Operations
Zodiac Clothing Company Limited (âthe Companyâ) incorporated in India having registered office at Mumbai and Manufacturing facilities at Bengaluru, Umbergaon and Mumbai. The Company is a leading garment manufacturing Company and having retail stores spread across India.
2 Significant accounting policies
(a) Basis of preparation of Standalone Ind AS Financial Statements
(i) Compliance with Ind AS
These standalone Ind AS financial statements have been prepared in accordance with the Indian Accounting Standards (hereinafter referred to as the âInd ASâ) as notified by Ministry of Corporate Affairs pursuant to section 133 of the Companies Act, 2013 (the âActâ) [Companies (Indian Accounting standards) Rules, 2015], as amended and other relevant provisions of the Act.
The standalone financial statements up to year ended 31st March 2017 were prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act.
These standalone Ind AS financial statements are the first financial statements of the group under Ind AS. Refer note 50 for an explanation of how the transition from previous GAAP to Ind AS has effected the Companyâs financial position, financial performance and cash flows.
The accounting policies are applied consistently to all the periods presented in the standalone Ind AS financial statements, including the preparation of the opening Ind AS Balance Sheet as at 1st April, 2016 being the date of transition to Ind AS.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
1) certain financial assets and liabilities (including derivative instruments) that are measured at fair value;
2) defined benefit plans - plan assets measured at fair value;
(iii) Current non-current classification
All assets and liabilities have been classified as current or non-current as per the Companyâs normal operating cycle (twelve months) and other criteria set out in the Schedule III to the Act.
(iv) Rounding of amounts
All amounts disclosed in the standalone
Ind AS financial statements and notes have been rounded off to the nearest lakhs unless otherwise stated.
(b) Use of estimates and judgments
The estimates and judgments used in the preparation of the standalone Ind AS financial statements are continuously evaluated by the company and are based on historical experience and various other assumptions and factors (including expectations of future events) that the company believes to be reasonable under the existing circumstances. Differences between actual results and estimates are recognized in the period in which the results are known/materialized.
The said estimates are based on the facts and events, that existed as at the reporting date, or that occurred after that date but provide additional evidence about conditions existing as at the reporting date.
(c) Property, plant and equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at cost less depreciation and impairment, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the assetâs carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to the Statement of Profit and Loss during the reporting period in which they are incurred.
Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all its property, plant and equipment recognized as at 1st April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment.
Depreciation methods, estimated useful lives and residual value
Depreciation on Property, Plant and Equipment is provided on a Straight Line Method, net of their residual values, over the estimated useful lives of assets. Leasehold land is amortized over the period of lease. Leasehold improvements are amortized over the period of lease or estimated useful lives of such assets, whichever is lower. Period of lease is either the primary lease period or where the Company as a lessee has the right of renewal of lease, and it is intended to renew for further periods, then such extended period.
The company depreciates its property, plant and equipment over the useful life in the manner prescribed in Schedule II of the Act, and management believe that useful lives of assets are same as those prescribed in schedule II of the Act, except for the following class of assets, useful life for which is based on a technical evaluation and taking into consideration nature of Companyâs business and past experience of usage of such assets and which are different from those prescribed in Schedule II of the Act:
Accounting Standards) Amendment Rules, 2018. These amendments are mandatory for the accounting period beginning on or after April 1, 2018. The Company is currently evaluating the impact of the change on its financial statements.
(e) Intangible assets Computer software
Computer software are stated at cost, less accumulated amortisation and impairments, if any.
Amortisation method
The Company amortizes intangible assets with a future useful life using the straight-line method over following period:
Nature of intangible asset Useful life
- Computer Software 6 years
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the Statement of Profit and Loss.
Transition to Ind AS
On transition to Ind AS the company has elected to continue with the carrying value of all of intangible assets recognized as at 1st April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of intangible assets.
(f) Lease As lessee
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Payments made under operating leases are charged to the Statement of Profit and Loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the less orâs expected inflationary cost increases.
As less or
Lease income from operating leases where the Company is a less or is recognized as income on a straight-line basis over the lease term unless the receipts are structured to increase in line with expected general inflation to compensate for the excepted inflationary cost increases.
The respective leased assets are included in the balance sheet based on their nature.
(g) Cash and Cash Equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, Bank overdrafts, deposits and other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
The residual values are generally not more than 5% of the original cost of the asset.
An assetâs carrying amount is written down immediately to its recoverable amount if the assetâs carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the Statement of Profit and Loss.
(d) Investment properties
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Company, is classified as investment property. Investment property is initially recognized at cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalized to the assetâs carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognized.
Investment properties, net of residual value are depreciated using the straight-line method over their useful life in the manner prescribed in Schedule II of the Act, and management believe that useful lives of assets are same as those prescribed in schedule II of the Act.
The Ministry of Corporate Affairs (MCA), on 28 March 2018, notified Appendix B to Ind AS 40, Investment property - Transfers of investment property as part of the Companies (Indian
(h) Inventories
Inventories of Raw Materials, Work-in-Progress, Stock-in-trade, Stores and spares and Finished Goods are stated âat cost or net realizable value, whichever is lowerâ. Cost comprise all cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost formula used is âFirst-in-First-Outâ, âWeighted Average costâ or âSpecific Identificationâ, as applicable. Due allowance is estimated and made for defective and obsolete items, wherever necessary.
(i) Investment in subsidiary
Investment in subsidiary is recognized at cost (less impairment, if any) as per Ind AS-27 âSeparate Financial Statementâ.
(j) Investments and other financial assets (i) Classification
The company classifies its financial assets in the following measurement categories:
* those to be measured subsequently at fair value (either through other comprehensive income, or through the Statement of Profit and Loss), and
* those measured at amortized cost.
The classification depends on the companyâs business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in the Statement of Profit and Loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
(ii) Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through the Statement of Profit and Loss are expensed in the Statement of Profit and Loss.
Debt instruments:
Subsequent measurement of debt instruments depends on the companyâs business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:
* Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Interest income from these financial assets is included in other income using the effective interest rate method.
* Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assetsâ cash flows represent solely payments of principal and interest are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment losses, interest revenue which are recognized in the Statement of Profit and Loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to the Statement of Profit and Loss and recognized in other income/expense. Interest income from these financial assets is included in other income using the effective interest rate method.
* Fair value through profit and loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through Statement of Profit and Loss. Interest income from these financial assets is included in other income.
Equity instruments:
The Company subsequently measures all equity investments at fair value. Where the Companyâs management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to the Statement of Profit and Loss. Dividends from such investments are recognized in the Statement of Profit and Loss as other income when the Companyâs right to receive payments is established.
Changes in the fair value of financial assets at fair value through profit or loss are recognized in other gain/(losses) in the Statement of profit or loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
(iii) Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated
with its assets carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
(iv) Income recognition Interest income
Interest income from debt instruments is recognized using the effective interest rate method.
Dividends
Dividends are recognized in the Statement of Profit and Loss only when the right to receive payment is established.
(k) Borrowings
Borrowings are initially recognized at net of transaction costs incurred. Borrowings are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in the Statement of Profit and Loss over the period of the borrowings using the effective interest method.
(l) Borrowing costs
Interest and other borrowing costs attributable to qualifying assets are capitalized. Other interest and borrowing costs are charged to Statement of Profit and Loss.
(m)Provisions, contingent liabilities and contingent assets
Provisions are recognized when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognized for future operating losses.
Provisions are measured at the present value of managementâs best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognized as interest expense in Statement of Profit and loss.
Contingent Liabilities are disclosed in respect of possible obligations that arise from past events but their existence will be confirmed by the occurrence or non occurrence of one or more uncertain future events.
A contingent asset is disclosed in respect of possible asset that may arise from past event and whose existence will be confirmed only by the occurrence or non occurrence of one or more uncertain future events.
(n) Revenue recognition
Revenue is measured at the value of the consideration received or receivable. Amounts disclosed as revenue are inclusive of excise duty and net of returns, trade allowances, rebates, discounts, value added taxes, goods and services tax and amounts collected on behalf of third parties.
The company recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the company and specific criteria have been met for each of the companyâs activities as described below.
Sale of goods - Wholesale
Sales are recognized when substantial risk and rewards of ownership are transferred to customer. In case of domestic sales, sales are recognized when goods are dispatched or delivery in handed over to transporter. In case of export sales, sales are recognized when goods are cleared by customs.
Sale of goods - Retail
Sales are recognized when substantial risk and rewards of ownership are transferred to retail customers, when goods are handed over to the customer against moneys received.
Sales return
The Company recognizes provision for sales return, based on the historical trends.
Other operating revenue - Export incentives -
Export benefits under various schemes of Government of India are accounted on accrual basis on the basis of exports made.
The Ministry of Corporate Affairs (MCA), on 28 March 2018, notified Ind AS 115, Revenue from Contracts with Customers as part of the Companies (Indian Accounting Standards) Amendment Rules, 2018. These amendments are mandatory for the accounting period beginning on or after April 1, 2018. The Company is currently evaluating the impact of the change on its financial statements.
(o) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognized in
respect of employeesâ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled.
(ii) Other long-term employee benefit obligations
The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. An actuarial valuation is obtained at the end of reporting period. The present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method.
The obligations are presented as current liabilities in the balance sheet, if the Company does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
(iii) Post-employment obligations
Defined Benefits Plan Gratuity obligations
The liability or asset recognized in the balance sheet in respect of defined gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The net interest cost is calculated by actuary applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost 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 are recognized 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.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments as calculated by actuary are recognized immediately in the Statement of Profit and Loss as past service cost.
Defined Contribution Plans
The Company pays Provident Fund (PF) contributions, Employees State Insurance
Scheme (ESIC) etc., to publicly administered funds as per local regulations. The Company has no further payment obligations once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognized as employee benefits expense when they are due.
Termination benefits
Termination benefits are payable when employment is terminated by the company before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The company recognizes termination benefits at the earlier of the following dates: (a) when the company can no longer withdraw the offer of those benefits; and (b)when the company recognizes costs for are structuring that is within the scope of Ind AS-37 and involves the payment of terminations benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.
(p) Foreign currency transactions (i) Functional and presentation currency
The financial statements are presented in Indian rupee (INR), which is Companyâs functional and presentation currency.
(ii) Transactions and balances
Transactions in foreign currencies are recognized at the prevailing exchange rates on the transaction dates. Realized gains and losses on settlement of foreign currency transactions are recognized in the Statement of Profit and Loss.
Monetary foreign currency assets and liabilities at the year-end are translated at the year-end exchange rates and the resultant exchange differences are recognized in the Statement of Profit and Loss.
The Ministry of Corporate Affairs (MCA), on 28 March 2018, notified Appendix B to Ind AS 21, Foreign currency transactions and advance consideration as part of the Companies (Indian Accounting Standards) Amendment Rules, 2018. These amendments are mandatory for the accounting period beginning on or after April 1, 2018. The Company is currently evaluating the impact of the change on its financial statements.
(q) Derivative and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged and the type of hedge relationship designated.
The Company designates their derivatives as hedges of foreign exchange risk associated with the cash flows of highly probable forecast transactions (cash flow hedges).
The Company documents at the inception of the hedging transaction the economic relationship between hedging instruments and hedged items including whether the hedging instrument is expected to offset changes in cash flows of hedged items. The Company documents its risk management objectives and strategy for undertaking various hedge transactions at the inception of each hedge relationship.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than or equal to 12 months.
Cash flow hedges that qualify for hedge accounting -
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in the other comprehensive income in cash flow hedging reserve within equity, limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is recognized immediately in the Statement of Profit and Loss.
When forward contracts and non-derivative financial liabilities in the form of Pre-shipment export credit in Foreign Currency (PCFC) are used to hedge forecast transactions, the Company designates them in entirety as the hedging instrument. Gains or losses relating to effective portion of fair value of forward contracts and PCFC are recognized in the cash flow hedging reserve within other equity.
When the option contracts are used to hedge forecast transactions, the Company designates only the intrinsic value of the option contract as the hedging instrument.
Derivative Contracts other than cash flow hedges: Derivative contracts which are not designated as cash flow hedges, are accounted for at fair value through profit or loss and are included in Statement of Profit and Loss.
(r) Income tax
The income tax expense or credit for the period is the tax payable on the current periodâs taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
Deferred income tax is provided in full, using the liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amount in the standalone Ind AS financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are excepted to apply when the related defer income tax assets is realized or the deferred income tax liability is settled.
Deferred tax assets are recognized for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the company has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Current and deferred tax is recognized in the Statement of Profit and Loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
Minimum Alternate Tax credit is recognized as deferred tax asset only 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 Ministry of Corporate Affairs (MCA), on 28 March 2018, notified amendments to Ind AS 12, Income taxes regarding recognition of deferred tax assets on unrealised losses as part of the Companies (Indian Accounting Standards) Amendment Rules, 2018. These amendments are mandatory for the accounting period beginning on or after April 1,
2018. The Company is currently evaluating the impact of the change on its financial statements.
(s) Earnings Per Share Basic earnings per share
Basic earnings per share is calculated by dividing:
- the profit attributable to owners of the company
- by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year and excluding treasury shares.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
- Ihe after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
- the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
(t) Segment Reporting:
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
(u) Impairment of non-financial assets:
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the assetâs carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assetâs fair value less costs of disposal and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating units). Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
(v) Government Grants
Grants from the government are recognized at their fair value where there is reasonable assurance that the grant will be received and the Company will comply with all the attached conditions.
(w) Business Combinations
Amalgamation under common control are accounted using âPooling of Interest Methodâ.
(x) Dividend
Provision is made for the amount of any dividend declared, being appropriately authorized and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
Mar 31, 2017
1) SIGNIFICANT ACCOUNTING POLICIES:
a) BASIS OF ACCOUNTING
The financial statements of the company have been prepared in accordance with Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the accounting standards specified under section 133 of the Companies Act 2013 and the relevant provisions of the Companies Act, 2013 ("the 2013 Act"). The financial statements have been prepared on accrual basis under the historical cost convention. The accounting policies adopted in the preparation of financial statements are consistent with those followed in the previous year.
The preparation of financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates and the differences between the actual results and the estimates are recognized in the periods in which the results are known/ materialize.
b) REVENUE RECOGNITION
Sales are recognized when goods are supplied to customers and are recorded net of sales tax/ value added tax, trade Discounts, Rebate and Returns but include excise duty. Dividend income on investments is accounted when the right to receive the dividend is established. Interest Income is accounted on accrual basis.
Revenue in respect of Insurance/other claims, interest etc. is recognized only when it is reasonably certain that the ultimate collection will be made.
c) EXPORT BENEFITS
Export benefits under various schemes of Government of India are accounted on accrual basis on the basis of exports made and the value of imports made/ to be made there against.
d) FIXED ASSETS
i) Property, plant and equipment:
Fixed Assets are recorded at Cost of acquisition. They are stated at historical costs including incidental expenses.
ii) Intangible Assets:
Intangible assets are stated at cost less amortization.
e) DEPRECIATION / AMORTISATION
i) On Property, plant and equipment :
Depreciation has been calculated on straight-line basis in accordance with the provisions of Schedule II to the Companies Act, 2013. The estimated useful lives have been assessed based on a technical evaluation, taking into account the nature of the Company''s business and past experience of usage of assets. The useful lives that are different from those prescribed under Schedule II are mentioned below:
|
Description |
Useful Life |
|
Plant and Equipments |
21 years |
|
Furniture and Fixtures |
16 years |
|
Office Equipments |
21 years |
|
Computer |
6 years |
|
Electrical Installation |
21 years |
Assets costing Rs. 5000/- or less individually are fully depreciated over a period of one year.
Cost of Leasehold Land is amortized over the period of lease.
Cost of Leasehold improvements is amortized over the primary period of lease. However, in cases where the company as a lessee has the right of renewal of lease and it is intended to renew for further periods, then the cost of such leasehold improvements is amortized over such extended period.
ii) On Intangible Assets:
a) Goodwill
At the time of acquisition of the business, the difference between the cost of investments and the fair value of assets as at the date of acquisition is accounted for as goodwill. Goodwill is amortized over a period of 10 years. Goodwill on amalgamation in the nature of merger is amortized over a period of 5 years.
b) Computer software is amortized on straight line basis over a period of 6 years.
f) IMPAIRMENT OF ASSETS
An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. Recoverable amount is the higher of an asset''s net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Net selling price is the amount obtainable from sale of the asset in an arm''s length transaction between knowledgeable, willing parties, less the costs of disposal. An impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. The impaired loss recognized in prior accounting periods is reversed if there is a change in the estimate of the recoverable value.
g) INVESTMENTS
Investments are classified into non-current investments and current investments. Investments, which are intended to be held for more than one year, are classified as non-current investments and investments, which are intended to be held for less than one year, are classified as current investments. Non-current investments are accounted at cost and a provision for diminution is made to recognize a decline other than temporary in the value of long term investments. Current investments are valued at cost or fair value whichever is lower. Investments include investments in shares of a company registered outside India. They are stated at cost by converting at the rate of exchange prevalent at the time of acquisition thereof.
Any profit or loss on sale of investments is determined on the basis of the average cost of acquisition.
h) TRANSACTIONS IN FOREIGN CURRENCY
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. Monetary items denominated in foreign currencies are restated at the exchange rate prevailing on the balance sheet date. Exchange differences arising on settlement of the transaction and on account of restatement of monetary items are dealt with in the Statement of Profit and Loss. Forward exchange contracts entered into to hedge the foreign currency risk and outstanding as on balance sheet date are translated at year end exchange rates. The premium or discount arising at the inception of such forward exchange contracts are amortized as income or expense over the life of the contract.
Gains / Losses on settlement of transactions arising on cancellation / renewal of forward exchange contracts are recognized as income or expense.
i) HEDGE ACCOUNTING
The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. Further, non-derivative financial liabilities in the form of
Pre-shipment Export Credit in Foreign Currency (PCFC) borrowings have also been designated as hedging instruments to hedge the highly probable forecast sales in foreign currency. The Company designates these hedging instruments as cash flow hedges applying the recognition and measurement principles set out in the "Guidance Note on Accounting for Derivative Contracts".
The use of hedging instruments is governed by the Company''s policies approved by the board of directors, which provide written principles on the use of such financial derivatives consistent with the Company''s risk management strategy.
Hedging instruments are initially measured at fair value, and are premeasured at subsequent reporting dates.
Changes in the fair value of these derivatives that are designated and effective as hedges of future cash flows are recognized directly in shareholders'' funds and the ineffective portion is recognized immediately in the Statement of Profit and Loss. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognized in the Statement of Profit and Loss as they arise.
If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in shareholders'' funds is transferred to the Statement of Profit and Loss for the period.
j) INVENTORIES
a) Raw materials are valued at cost or net realizable value whichever is lower. The cost includes purchase price as well as incidental expenses. The cost formulae used are First In First Out, Weighted average cost or Specific identification method, as applicable and found appropriate.
b) Work -in - progress is valued at cost calculated on the basis of absorption costing or net realizable value whichever is lower.
c) Finished goods are valued at cost or net realizable value whichever is lower. Cost is determined on the basis of absorption costing.
d) Packing materials and accessories are valued at First in First out cost or net realizable value whichever is lower.
e) Stores and spare parts are valued at First in First out cost or net realizable value whichever is lower.
k) EMPLOYEE BENEFITS
a) The contribution to Provident Fund as required under the statute is made to the Government Provident Fund and is debited to Statement of Profit and Loss.
b) Gratuity liability is a defined benefit obligation. The Company has taken Group gratuity- cum-life assurance (cash accumulation) Scheme offered by Life Insurance Corporation of India (LIC). Annual contributions are made on the basis of intimation received from LIC. The company accounts for liability for future gratuity benefits based on actuarial valuation carried out as at the end of each financial year. Actuarial gains and losses are recognized in full in Statement of Profit and Loss for the period in which they occur.
c) Benefits in the form of vesting and non-vesting compensated absences are accounted as per actuarial valuation carried out as at the year end.
l) EMPLOYEE SHARE BASED PAYMENTS
The Company has formulated Employee Stock Option Schemes (ESOS) in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (now known as SEBI (Share Based Employee Benefits) Regulations, 2014). The Schemes provides for grant of options to employees of the company to acquire equity shares of the company that vest in a graded manner and that are to be exercised within a specified period. In accordance with the SEBI Guidelines; the excess, if any, of the closing market price on the day prior to the grant of the options under ESOS over the exercise price is amortized on a straight- line basis over the vesting period.
m) TAXES ON INCOME
Income Taxes are accounted for in accordance with Accounting Standard (AS 22) - Accounting for Taxes on Income. Income Tax comprises both current and deferred tax.
Current tax is measured at the amount expected to be paid to the revenue authorities, using applicable tax rates and laws and the provisions of the Income Tax Act, 1961 and other applicable tax laws. Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognized as an asset in the Balance Sheet when it is highly probable that future economic benefit associated with it will flow to the Company.
The tax effect of the timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. They are measured using the
Compiled by: Dion Global Solution
substantively enacted tax rates and tax regulations as of the Balance Sheet date.
Deferred tax assets arising mainly on account of brought forward losses and unabsorbed depreciation under tax laws are recognized only if there is virtual certainty of its realization, supported by convincing evidence. Deferred tax assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization.
n) BORROWING COST
Interest and other costs in connection with the borrowing of the funds to the extent related / attributed to the acquisition / construction of qualifying fixed assets are capitalized up to the date when such assets are ready for its intended use and all other borrowing costs are recognized as an expense in the period in which they are incurred.
o) LEASES
Assets taken / given on lease by which all significant risks and rewards of ownership are retained by the lessor are classified as operating leases. Lease payment / receipts under operating leases are recognized as expense / income on straight line basis over the lease term.
p) PROVISIONS AND CONTINGENCIES
Provisions are recognized when the Company has a legal and constructive obligation as a result of a past event, for which it is probable that cash outflow will be required and a reliable estimate can be made of the amount of the obligation. Contingent liabilities are disclosed when the Company has a possible or present obligation where it is not probable that an outflow of resources will be required to settle it. Contingent assets are neither recognized nor disclosed.
q) EARNINGS PER SHARE
Basic Earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
Mar 31, 2014
A) BASIS OF ACCOUNTING
The Accounts are prepared on accrual basis under the historical cost
convention and to comply in all material aspects with the applicable
accounting principles in India, the accounting standards issued by the
Institute of Chartered Accountants of India and the relevant provisions
of the Companies Act, 1956 ("the 1956 Act") (which continue to be
applicable in respect of Section 133 of the Companies Act, 2013 ("the
2013 Act") in terms of general circular 15 / 2013 dated 13 September
2013 of the Ministry of Corporate Affairs).
The preparation of financial statements in conformity with generally
accepted accounting principles in India requires the Management to make
estimates and assumptions considered in the reported amounts of assets
and liabilities (including contingent liabilities) as of the date of
the financial statements and the reported income and expenses during the
reported period. Management believes that the estimates used in
preparation of the financial statements are prudent and reasonable.
Future results could differ from these estimates.
b) REVENUE RECOGNITION
Sales are recognised when goods are supplied to customers and are
recorded net of sales tax / value added tax, trade Discounts, Rebate
and Returns but includes excise duty. Dividend income on investments is
accounted when the right to receive the dividend is established.
Revenue in respect of Insurance / other claims, interest etc. is
recognised only when it is reasonably certain that the ultimate
collection will be made.
c) EXPORT BENEFITS
Export benefits under various schemes of Government of India are
accounted on accrual basis on the basis of exports made and the value
of imports made / to be made there against.
d) FIXED ASSETS
Fixed Assets are recorded at Cost of acquisition. They are stated at
historical costs including incidental expenses.
e) DEPRECIATION / AMORTISATION
i) On Tangible Assets:
Depreciation has been calculated on straight-line basis in accordance
with the provisions of section 205(2)(b) of the Companies Act, 1956 at
the rates and in the manner specified in schedule XIV of the said act.
Cost of Leasehold Land is amortised over the period of lease. Cost of
Leasehold improvements is amortised over the primary period of lease.
However, in cases where the company as a lessee has the right of
renewal of lease and it is intended to renew for further periods, then
the cost of such leasehold improvements is amortised over such extended
period.
ii) On Intangible Assets:
a) Goodwill
At the time of acquisition of the business, the difference between the
cost of investments and the fair value of assets as at the date of
acquisition is accounted for as goodwill. Goodwill is amortised over a
period of 10 years. Goodwill on amalgamation in the nature of merger
is amortised over a period of 5 years.
b) Computer software is amortised on straight line basis over a period
of 6 years.
f) IMPAIRMENT OF ASSETS
An asset is treated as impaired when the carrying cost of the asset
exceeds its recoverable value. Recoverable amount is the higher of an
asset''s net selling price and its value in use. Value in use is the
present value of estimated future cash flows expected to arise from the
continuing use of the asset and from its disposal at the end of its
useful life. Net selling price is the amount obtainable from sale of
the asset in an arm''s length transaction between knowledgeable, willing
parties, less the costs of disposal. An impairment loss is charged to
the Statement of Profit and Loss in the year in which an asset is
identified as impaired. The impairment loss recognised in prior
accounting periods is reversed if there is a change in the estimate of
the recoverable value.
g) INVESTMENTS
Investments are classified into non-current investments and current
investments. Investments, which are intended to be held for more than
one year, are classified as non- current investments and investments,
which are intended to be held for less than one year, are classified as
current investments. Non- current investments are accounted at cost and
a provision for diminution is made to recognize a decline other than
temporary in the value of long term investments. Current investments
are valued at cost or fair value whichever is lower.
Investments include investments in shares of a company registered
outside India. They are stated at cost by converting at the rate of
exchange prevalent at the time of acquisition thereof.
Any profit or loss on sale of investments is determined on the basis of
the average cost of acquisition.
h) TRANSACTIONS IN FOREIGN
CURRENCY
Transactions in foreign currencies are recorded at the exchange rate
prevailing on the date of the transaction. Monetary items denominated
in foreign currencies are restated at the exchange rate prevailing on
the balance sheet date. Exchange differences arising on settlement of
the transaction and on account of restatement of monetary items are
dealt with in the Statement of Profit and Loss. Forward exchange
contracts entered into to hedge the foreign currency risk and
outstanding as on balance sheet date are translated at year end
exchange rates. The premium or discount arising at the inception of
such forward exchange contracts are amortised as income or expense over
the life of the contract.
Gains / Losses on settlement of transactions arising on cancellation /
renewal of forward exchange contracts are recognized as income or
expense.
i) HEDGE ACCOUNTING
The Company uses foreign currency forward contracts to hedge its risks
associated with foreign currency fluctuations relating to certain firm
commitments and forecasted transactions. Further, non-derivative
financial liabilities in the form of Pre-shipment Export Credit in
Foreign Currency (PCFC) borrowings have also been designated as hedging
instruments to hedge the highly probable forecast sales in foreign
currency. The Company designates these hedging instruments as cash flow
hedges applying the recognition and measurement principles set out in
the Accounting Standard 30 "Financial Instruments: Recognition and
Measurement" (ASÂ30).
The use of hedging instruments is governed by the Company''s policies
approved by the board of directors, which provide written principles on
the use of such financial derivatives consistent with the Company''s risk
management strategy. Hedging instruments are initially measured at
fair value, and are remeasured at subsequent reporting dates.
Changes in the fair value of these derivatives that are designated and
effective as hedges of future cash flows are recognised directly in
shareholders'' funds and the ineffective portion is recognised
immediately in the Statement of Profit and Loss. Changes in the fair
value of derivative financial instruments that do not qualify for hedge
accounting are recognised in the Statement of Profit and Loss as they
arise. If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognised in shareholders'' funds is
transferred to the Statement of Profit and Loss for the period.
j) INVENTORIES
a) Raw materials are valued at cost or net realisable value whichever
is lower. The cost includes purchase price as well as incidental
expenses. The cost formulae used are First In First Out, Weighted
average cost or Specific identification method, as applicable and found
appropriate.
b) Work-in-progress is valued at cost calculated on the basis of
absorption costing or net realisable value whichever is lower.
c) Finished goods are valued at cost or net realisable value whichever
is lower. Cost is determined on the basis of absorption costing.
d) Packing materials and accessories are valued at First in First out
cost or net realisable value whichever is lower.
e) Stores and spare parts are valued at First in First out cost or net
realisable value whichever is lower.
k) EMPLOYEE BENEFITS
a) The contribution to Provident Fund as required under the statute is
made to the Government Provident Fund and is debited to Statement of
Profit and Loss.
b) Gratuity liability is a defined benefit obligation. The Company has
taken Group gratuity- cum-life assurance (cash accumulation) Scheme
offered by Life Insurance Corporation of India (LIC). Annual
contributions are made on the basis of intimation received from LIC.
The company accounts for liability for future gratuity benefits based on
actuarial valuation carried out as at the end of each financial year.
Actuarial gains and losses are recognized in full in Statement of Profit
and Loss for the period in which they occur.
c) Benefits in the form of vesting and non-vesting compensated absences
are accounted as per actuarial valuation carried out as at the year
end.
l) EMPLOYEE SHARE BASED PAYMENTS
The Company has formulated Employee Stock Option Schemes (ESOS) in
accordance with the SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999. The Schemes provide for grant
of options to employees of the Company to acquire equity shares of the
Company that vest in a graded manner and that are to be exercised
within a specified period. In accordance with the SEBI Guidelines; the
excess, if any, of the closing market price on the day prior to the
grant of the options under ESOS over the exercise price is amortised on
a straight-line basis over the vesting period.
m) TAXES ON INCOME
Income Taxes are accounted for in accordance with Accounting Standard
(AS 22) Â Accounting for Taxes on Income, notified under the Companies
(Accounting Standard) Rules, 2006. Income Tax comprises both current
and deferred tax. Current tax is measured at the amount expected to be
paid to the revenue authorities, using applicable tax rates and laws.
The tax effect of the timing differences that result between taxable
income and accounting income and are capable of reversal in one or more
subsequent periods are recorded as a deferred tax asset or deferred tax
liability. They are measured using the substantively enacted tax rates
and tax regulations as of the Balance Sheet date.
Deferred tax assets arising mainly on account of brought forward losses
and unabsorbed depreciation under tax laws are recognised only if there
is virtual certainty of its realization, supported by convincing
evidence. Deferred tax assets on account of other timing differences
are recognized only to the extent there is a reasonable certainty of
its realisation.
n) BORROWING COST
Interest and other costs in connection with the borrowing of the funds
to the extent related / attributed to the acquisition / construction of
qualifying fixed assets are capitalised up to the date when such assets
are ready for its intended use and all other borrowing costs are
recognised as an expense in the period in which they are incurred.
o) LEASES
Assets taken / given on lease by which all Significant risks and rewards
of ownership are retained by the lessor are classified as operating
leases. Lease payment / receipts under operating leases are recognized
as expense / income on straight line basis over the lease term.
p) PROVISIONS AND CONTINGENCIES
Provisions are recognized when the Company has a legal and constructive
obligation as a result of a past event, for which it is probable that
cash outflow will be required and a reliable estimate can be made of the
amount of the obligation. Contingent liabilities are disclosed when the
Company has a possible or present obligation where it is not probable
that an outflow of resources will be required to settle it. Contingent
assets are neither recognized nor disclosed.
q) EARNING PER SHARE
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. For the
purpose of calculating diluted earnings per share, the net profit or
loss for the period attributable to equity shareholders and the
weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
(i) Rights, Preferences and Restrictions attached to equity shares:
i) Right to receive dividend as may be approved by the Board of
Directors / Annual General Meeting.
ii) The equity shares are not repayable except in the case of a buy
back, reduction of capital or winding up in terms of the provisions of
the Companies Act, 1956.
iii) Every member of the Company holding equity shares has a right to
attend the General Meeting of the Company and has a right to speak and
on a show of hands, has one vote if he is present and on a poll shall
have the right to vote in proportion to his share of the paid-up
capital of the Company.
(ii) Reconciliation of the number of shares and amount outstanding at
the beginning and at the end of the reporting period:
(iv) As at 31st March, 2014, 349,575 shares (As at 31 March, 2013,
369,075 shares) were reserved for issuance towards outstanding employee
stock options granted (Refer Note 41)
(v) Aggregate number of equity shares allotted as fully paid up
pursuant to contract(s) without payment being received in cash, bonus
shares and shares bought back for the period of 5 years immediately
preceding the Balance Sheet date:
Mar 31, 2013
(a) BASIS OF ACCOUNTING
The Accounts are prepared on accrual basis under the historical cost
convention and to comply in all material aspects with the applicable
accounting principles in India, the accounting standards issued by the
Institute of Chartered Accountants of India and the relevant provisions
of the Companies Act, 1956.
The preparation of financial statements in conformity with generally
accepted accounting principles in India requires the Management to make
estimates and assumptions considered in the reported amounts of assets
and liabilities (including contingent liabilities) as of the date of
the financial statements and the reported income and expenses during
the reported period. Management believes that the estimates used in
preparation of the financial statements are prudent and reasonable.
Future results could differ from these estimates.
(b) REVENUE RECOGNITION
Sales are recognised when goods are supplied to customers and are
recorded net of sales tax/ value added tax, trade Discounts, Rebate and
Returns but includes excise duty. Dividend income on investments is
accounted when the right to receive the dividend is established.
Revenue in respect of Insurance/other claims, interest etc. is
recognised only when it is reasonably certain that the ultimate
collection will be made.
(c) EXPORT BENEFITS
Export benefits under various schemes of Government of India are
accounted on accrual basis on the basis of exports made and the value
of imports made/ to be made there against.
(d) FIXED ASSETS
Fixed Assets are recorded at Cost of acquisition. They are stated at
historical costs including incidental expenses.
(e) DEPRECIATION/AMORTISATION
(i) On Tangible Assets:
Depreciation has been calculated on straight-line basis in accordance
with the provisions of section 205 (2) (b) of the Companies Act, 1956
at the rates and in the manner specified in schedule XIV of the said
act.
Cost of Leasehold Land is amortised over the period of lease.
Cost of Leasehold improvements is amortised over the primary period of
lease. However, in cases where the company as a lessee has the right of
renewal of lease and it is intended to renew for further periods, then
the cost of such leasehold improvements is amortised over such extended
period.
ii) On Intangible Assets:
(a) Goodwill
At the time of acquisition of the business, the difference between the
cost of investments and the fair value of assets as at the date of
acquisition is accounted for as goodwill. Goodwill is amortised over a
period of 10 years.
Goodwill on amalgamation in the nature of merger is amortised over a
period of 5 years.
(b) Computer software is amortised on straight line basis over a period
of 6 years.
(f) IMPAIRMENT OF ASSETS
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. Recoverable amount is the higher of an asset''s
net selling price and its value in use. Value in use is the present
value of estimated future cash flows expected to arise from the
continuing use of the asset and from its disposal at the end of its
useful life. Net selling price is the amount obtainable from sale of
the asset in an arm''s length transaction between knowledgeable, willing
parties, less the costs of disposal. An impairment loss is charged to
the Statement of Profit and Loss in the year in which an asset is
identified as impaired. The impaired loss recognised in prior
accounting periods is reversed if there has been a change in the
estimate of the recoverable value.
(g) INVESTMENTS
Investments are classified into non-current investments and current
investments. Investments, which are intended to be held for more than
one year, are classified as non- current investments and investments,
which are intended to be held for less than one year, are classified as
current investments. Non- current investments are accounted at cost and
a provision for diminution is made to recognize a decline other than
temporary in the value of long term investments. Current investments
are valued at cost or fair value whichever is lower.
Investments include investments in shares of a company registered
outside India. They are stated at cost by converting at the rate of
exchange prevalent at the time of acquisition thereof.
Any profit or loss on sale of investments is determined on the basis of
the average cost of acquisition.
(h) TRANSACTIONS IN FOREIGN CURRENCY
Transactions in foreign currencies are recorded at the exchange rate
prevailing on the date of the transaction. Monetary items denominated
in foreign currencies are restated at the exchange rate prevailing on
the balance sheet date. Exchange differences arising on settlement of
the transaction and on account of restatement of monetary items are
dealt with in the Statement of Profit and Loss .
Forward exchange contracts entered into to hedge the foreign currency
risk and outstanding as on balance sheet date are translated at year
end exchange rates. The premium or discount arising at the inception of
such forward exchange contracts are amortised as income or expense over
the life of the contract.
Gains/Losses on settlement of transactions arising on
cancellation/renewal of forward exchange contracts are recognized as
income or expense.
(i) HEDGE ACCOUNTING
The Company uses foreign currency forward contracts to hedge its risks
associated with foreign currency fluctuations relating to certain firm
commitments and forecasted transactions. The Company designates these
hedging instruments as cash flow hedges applying the recognition and
measurement principles set out in the Accounting Standard 30 "Financial
Instruments: Recognition and Measurement" (AS-30).
The use of hedging instruments is governed by the Company''s policies
approved by the board of directors, which provide written principles on
the use of such financial derivatives consistent with the Company''s
risk management strategy.
Hedging instruments are initially measured at fair value, and are
remeasured at subsequent reporting dates.
Changes in the fair value of these derivatives that are designated and
effective as hedges of future cash flows are recognised directly in
shareholders'' funds and the ineffective portion is recognised
immediately in the Statement of Profit and Loss.
Changes in the fair value of derivative financial instruments that do
not qualify for hedge accounting are recognised in the Statement of
Profit and Loss as they arise.
If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognised in shareholders'' funds is
transferred to the Statement of Profit and Loss for the period.
(j) INVENTORIES
(a) Raw materials are valued at cost or net realisable value whichever
is lower. The cost includes purchase price as well as incidental
expenses. The cost formulae used are First In First Out, Weighted
average cost or Specific identification method, as applicable and found
appropriate.
(b) Work -in - progress is valued at cost calculated on the basis of
absorption costing or net realisable value whichever is lower.
(c) Finished goods are valued at cost or net realisable value whichever
is lower. Cost is determined on the basis of absorption costing.
(d) Packing materials and accessories are valued at First in First out
cost or net realisable value whichever is lower.
(e) Stores and spare parts are valued at First in First out cost or net
realisable value whichever is lower.
(k) EMPLOYEE BENEFITS
(a) The contribution to Provident Fund as required under the statute is
made to the Government Provident Fund and is debited to Statement of
Profit and Loss.
(b) Gratuity liability is a defined benefit obligation. The Company has
taken Group gratuity- cum-life assurance (cash accumulation) Scheme
offered by Life Insurance Corporation of India (LIC) . Annual
contributions are made on the basis of intimation received from LIC.
The company accounts for liability for future gratuity benefits based
on actuarial valuation carried out as at the end of each financial
year. Actuarial gains and losses are recognized in full in Statement of
Profit and Loss for the period in which they occur.
(c) Benefits in the form of vesting and non-vesting compensated
absences are accounted as per actuarial valuation carried out as at the
year end.
l) TAXES ON INCOME
Income Taxes are accounted for in accordance with Accounting Standard
(AS 22) - Accounting for Taxes on Income, notified under the Companies
(Accounting Standard) Rules, 2006. Income Tax comprises both current
and deferred tax.
Current tax is measured at the amount expected to be paid to/recovered
from the revenue authorities, using applicable tax rates and laws.
The tax effect of the timing differences that result between taxable
income and accounting income and are capable of reversal in one or more
subsequent periods are recorded as a deferred tax asset or deferred tax
liability. They are measured using the substantively enacted tax rates
and tax regulations as of the Balance Sheet date.
Deferred tax assets arising mainly on account of brought forward losses
and unabsorbed depreciation under tax laws are recognised only if there
is virtual certainty of its realisation, supported by convincing
evidence. Deferred tax assets on account of other timing differences
are recognized only to the extent there is a reasonable certainty of
its realisation.
m) BORROWING COST
Interest and other costs in connection with the borrowing of the funds
to the extent related/ attributed to the acquisition/construction of
qualifying fixed assets are capitalised up to the date when such assets
are ready for its intended use and all other borrowing costs are
recognised as an expense in the period in which they are incurred.
n) LEASES
Assets taken / given on lease by which all significant risks and
rewards of ownership are retained by the lessor are classified as
operating leases. Lease payment/receipts under operating leases are
recognized as expense/ income on straight line basis over the lease
term.
o) PROVISIONS AND CONTINGENCIES
Provisions are recognized when the Company has a legal and constructive
obligation as a result of a past event, for which it is probable that
cash outflow will be required and a reliable estimate can be made of
the amount of the obligation. Contingent liabilities are disclosed when
the Company has a possible or present obligation where it is not
probable that an outflow of resources will be required to settle it.
Contingent assets are neither recognized nor disclosed.
Mar 31, 2012
A) BASIS OF ACCOUNTING
The Accounts are prepared on accrual basis under the historical cost
convention and to comply in all material aspects with the applicable
accounting principles in India, the accounting standards issued by the
Institute of Chartered Accountants of India and the relevant provisions
of the Companies Act, 1956.
The preparation of financial statements in conformity with generally
accepted accounting principles in India requires the Management to make
estimates and assumptions considered in the reported amounts of assets
and liabilities (including contingent liabilities) as of the date of
the financial statements and the reported income and expenses during
the reported period. Management believes that the estimates used in
preparation of the financial statements are prudent and reasonable.
Future results could differ from these estimates.
b) REVENUE RECOGNITION
Sales are recognised when goods are supplied to customers and are
recorded net of sales tax/ value added tax, trade Discounts, Rebate and
Returns but includes excise duty. Dividend income on investments is
accounted when the right to receive the dividend is established.
Revenue in respect of Insurance/other claims, interest etc. is
recognised only when it is reasonably certain that the ultimate
collection will be made.
c) EXPORT BENEFITS
Export benefits under various schemes of Government of hidia are
accounted on accrual basis on the basis of exports made and the value
of imports made/ to be made there against.
d) FIXED ASSETS
Fixed Assets are recorded at Cost of acquisition. They are stated at
historical costs including incidental expenses.
e) DEPRECIATION/AMORTISATION
i) On Tangible Assets:
Depreciation has been calculated on straight-line basis in accordance
with the provisions of section 205(2)(b) of the
Companies Act, 1956 at the rates and in the manner specified in
schedule XIV of the said act.
Cost of Leasehold Land is amortised over the period of lease.
Cost of Leasehold improvements is amortised over the primary period of
lease. However, in cases where the company as a lessee has the right of
renewal of lease and it is intended to renew for further periods, then
the cost of such leasehold improvements is amortised over such extended
period, not exceeding 10 years.
ii) On Intangible Assets:
a) Goodwill
At the time of acquisition of the business, the difference between the
cost of investments and the fair value of assets as at the date of
acquisition is accounted for as goodwill. Goodwill is amortised over a
period of 10 years.
Goodwill on amalgamation in the nature of merger is amortised over a
period of 5 years.
b) Computer software is amortised on straight line basis over a period
of 6 years.
f) IMPAIRMENT OF ASSETS
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. Recoverable amount is the higher of an asset's
net selling price and its value in use. Value in use is the present
value of estimated future cash flows expected to arise from the
continuing use of the asset and from its disposal at the end of its
useful life. Net selling price is the amount obtainable from sale of
the asset in an arm's length transaction between knowledgeable, willing
parties, less the costs of disposal. An impairment loss is charged to
Statement of Profit and Loss in the year in which an asset is
identified as impaired. The impaired loss recognised in prior
accounting periods is reversed if there has been a change in the
estimate of the recoverable value.
g) INVESTMENTS
Investments are classified into non-current investments and current
investments. Investments, which are intended to be held for more than
one year, are classified as non- current investments and investments,
which are intended to be held for less than one year, are classified as
current investments. Non- current investments are accounted at cost and
a provision for diminution is made to recognize a decline other than
temporary in the value of long term investments. Current investments
are valued at cost or fair value whichever is lower.
Investments include investments in shares of a company registered
outside India. They are stated at cost by converting at the rate of
exchange prevalent at the time of acquisition thereof.
Any profit or loss on sale of investments is determined on the basis of
the average cost of acquisition.
h) TRANSACTIONS IN FOREIGN CURRENCY
Transactions in foreign currencies are recorded at the exchange rate
prevailing on the date of the transaction. Monetary items denominated
in foreign currencies are restated at the exchange rate prevailing on
the balance sheet date. Exchange differences arising on settlement of
the transaction and on account of restatement of monetary items are
dealt with in the Statement of Profit and Loss.
Forward exchange contracts entered into to hedge the foreign currency
risk and outstanding as on balance sheet date are translated at year
end exchange rates. The premium or discount arising at the inception of
such forward exchange contracts are amortised as income or expense over
the life of the contract.
Gains/Losses on settlement of transactions arising on
cancellation/renewal of forward exchange contracts are recognized as
income or expense.
i) HEDGE ACCOUNTING
The Company uses foreign currency forward contracts to hedge its risks
associated with foreign currency fluctuations relating to certain firm
commitments and forecasted transactions. The Company designates these
hedging instruments as cash flow hedges applying the recognition and
measurement principles set out in the Accounting Standard 30 "Financial
Instruments: Recognition and Measurement" (AS-30).
The use of hedging instruments is governed by the Company's policies
approved by the board of directors, which provide written principles on
the use of such financial derivatives consistent with the Company's
risk management strategy.
Hedging instruments are initially measured at fair value, and are
remeasured at subsequent reporting dates.
Changes in the fair value of these derivatives that are designated and
effective as hedges of future cash flows are recognised directly in
shareholders' funds and the ineffective portion is recognised
immediately in the Statement of Profit and Loss.
Changes in the fair value of derivative financial instruments that do
not qualify for hedge accounting are recognised in the Statement of
Profit and Loss as they arise.
If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognised in shareholders' funds is
transferred to the Statement of Profit and Loss for the period.
j) INVENTORIES
a) Raw materials are valued at cost or net realisable value whichever
is lower. The cost includes purchase price as well as incidental
expenses. The cost formulae used are First In First Out, Weighted
average cost or Specific identification method, as applicable and found
appropriate.
b) Work -in - progress is valued at cost calculated on the basis of
absorption costing or net realisable value whichever is lower.
c) Finished goods are valued at cost or net realisable value whichever
is lower. Cost is determined on the basis of absorption costing.
d) Packing materials and accessories are valued at First in First out
cost or net realisable value whichever is lower.
e) Stores and spare parts are valued at First in First out cost or net
realisable value whichever is lower.
k) EMPLOYEE BENEFITS
a) The contribution to Provident Fund as required under the statute is
made to the Government Provident Fund and is debited to Statement of
Profit and Loss.
b) Gratuity liability is a defined benefit obligation. The Company has
taken Group gratuity- cum-life assurance (cash accumulation) Scheme
offered by Life Insurance Corporation of India (LIC) . Annual
contributions are made on the basis of intimation received from LIC.
The company accounts for liability for future gratuity benefits based
on actuarial valuation carried out as at the end of each financial
year. Actuarial gains and losses are recognized in full in Statement of
Profit and Loss for the period in which they occur.
c) Benefits in the form of vesting and non-vesting compensated absences
are accounted as per actuarial valuation carried out as at the year
end.
1) TAXES ON INCOME
Income Taxes are accounted for in accordance with Accounting Standard
(AS 22) - Accounting for Taxes on Income, notified under the Companies
(Accounting Standard) Rules, 2006. Income Tax comprises both current
and deferred tax.
Current tax is measured at the amount expected to be paid to/recovered
from the revenue authorities, using applicable tax rates and laws.
The tax effect of the timing differences that result between taxable
income and accounting income and are capable of reversal in one or more
subsequent periods are recorded as a deferred tax asset or deferred tax
liability. They are measured using the substantively enacted tax rates
and tax regulations as of the Balance Sheet date.
Deferred tax assets arising mainly on account of brought forward losses
and unabsorbed depreciation under tax laws are recognised only if there
is virtual certainty of its realization, supported by convincing
evidence. Deferred tax assets on account of other timing differences
are recognized only to the extent there is a reasonable certainty of
its realisation.
m) BORROWING COST
Interest and other costs in connection with the borrowing of the funds
to the extent related/ attributed to the acquisition/construction of
qualifying fixed assets are capitalised up to the date when such assets
are ready for its intended use and all other borrowing costs are
recognised as an expense in the period in which they are incurred.
n) LEASES
Assets taken / given on lease by which all significant risks and
rewards of ownership are retained by the lessor are classified as
operating leases. Lease payment/receipts under operating leases are
recognized as expense/income on straight line basis over the lease
term.
o) PROVISIONS AND CONTINGENCIES
Provisions are recognized when the Company has a legal and constructive
obligation as a result of a past event, for which it is probable that
cash outflow will be required and a reliable estimate can be made of
the amount of the obligation. Contingent liabilities are disclosed when
the Company has a possible or present obligation where it is not
probable that an outflow of resources will be required to settle it.
Contingent assets are neither recognized nor disclosed.
Mar 31, 2011
A) BASIS OF ACCOUNTING
The Accounts are prepared on accrual basis under the historical cost
convention and to comply in all material aspects with the applicable
accounting principles in India, the accounting standards issued by the
Institute of Chartered Accountants of India and the relevant provisions
of the Companies Act, 1956.
The preparation of financial statements in conformity with generally
accepted accounting principles in India requires the Management to make
estimates and assumptions considered in the reported amounts of assets
and liabilities (including contingent liabilities) as of the date of
the financial statements and the reported income and expenses during
the reported period. Management believes that the estimates used in
preparation of the financial statements are prudent and reasonable.
Future results could differ from these estimates.
b) REVENUE RECOGNITION
Sales are recognised when goods are supplied to customers and are
recorded net of sales tax/ value added tax, trade discounts, Rebate and
Returns but includes excise duty. Dividend income on investments is
accounted when the right to receive the dividend is established.
Revenue in respect of Insurance/other claims, interest etc. is
recognised only when it is reasonably certain that the ultimate
collection will be made.
c) EXPORT BENEFITS
Export benefits under various schemes of Government of India are
accounted on accrual basis on the basis of exports made and the value
of imports made/ to be made there against.
d) FIXED ASSETS
Fixed Assets are recorded at Cost of acquisition. They are stated at
historical costs including incidental expenses.
e) DEPRECIATION/AMORTISATION
i) On Tangible Assets:
Depreciation has been calculated on straight-line basis in accordance
with the provisions of section 205(2)(b) of the Companies Act, 1956 at
the rates and in the manner specified in schedule XIV of the said act.
Cost of Leasehold Land is amortised over the period of lease.
Cost of Leasehold improvements is amortised over the primary period of
lease. However, in cases where the company as a lessee has the right of
renewal of lease and it is intended to renew for further periods, then
the cost of such leasehold improvements is amortised over such extended
period, not exceeding 10 years.
ii) On Intangible Assets:
a) Goodwill
At the time of acquisition of the business, the difference between the
cost of investments and the fair value of assets as at the date of
acquisition is accounted for as goodwill. Goodwill is amortised over a
period of 10 years.
Goodwill on amalgamation in the nature of merger is amortised over a
period of 5 years.
b) Computer software is amortised on straight line basis over a period
of 6 years.
f) IMPAIRMENT OF ASSETS
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. Recoverable amount is the higher of an asset's
net selling price and its value in use. Value in use is the present
value of estimated future cash flows expected to arise from the
continuing use of the asset and from its disposal at the end of its
useful life. Net selling price is the amount obtainable from sale of
the asset in an arm's length transaction between knowledgeable, willing
parties, less the costs of disposal. An impairment loss is charged to
the Profit & Loss in the year in which an asset is identified as
impaired. The impaired loss recognised in prior accounting periods is
reversed if there has been a change in the estimate of the recoverable
value.
g) INVESTMENTS
Investments are classified into long-term investments and current
investments. Investments, which are intended to be held for more than
one year, are classified as long- term investments and investments,
which are intended to be held for less than one year, are classified as
current investments. Long- term investments are accounted at cost and a
provision for diminution is made to recognize a decline other than
temporary in the value of long term investments. Current investments
are valued at cost or fair value whichever is lower.
Investments include investments in shares of a company registered
outside India. They are stated at cost by converting at the rate of
exchange prevalent at the time of acquisition thereof.
Any profit or loss on sale of investments is determined on the basis of
the average cost of acquisition.
h) TRANSACTIONS IN FOREIGN CURRENCY
Transactions in foreign currencies are recorded at the exchange rate
prevailing on the date of the transaction. Monetary items denominated
in foreign currencies are restated at the exchange rate prevailing on
the balance sheet date. Exchange differences arising on settlement of
the transaction and on account of restatement of monetary items are
dealt with in the Profit and Loss Account.
Forward exchange contracts entered into to hedge the foreign currency
risk and outstanding as on balance sheet date are translated at year
end exchange rates. The premium or discount arising at the inception of
such forward exchange contracts are amortised as income or expense over
the life of the contract.
Gains/Losses on settlement of transactions arising on
cancellation/renewal of forward exchange contracts are recognized as
income or expense.
i) HEDGE ACCOUNTING
The Company uses foreign currency forward contracts to hedge its risks
associated with foreign currency fluctuations relating to certain firm
commitments and forecasted transactions. The Company designates these
hedging instruments as cash flow hedges applying the recognition and
measurement principles set out in the Accounting Standard 30 "Financial
Instruments: Recognition and Measurement" (ASÃ30).
The use of hedging instruments is governed by the Company's policies
approved by the board of directors, which provide written principles on
the use of such financial derivatives consistent with the Company's
risk management strategy.
Hedging instruments are initially measured at fair value, and are
remeasured at subsequent reporting dates.
Changes in the fair value of these derivatives that are designated and
effective as hedges of future cash flows are recognised directly in
shareholders' funds and the ineffective portion is recognised
immediately in the profit and loss account.
Changes in the fair value of derivative financial instruments that do
not qualify for hedge accounting are recognised in the profit and loss
account as they arise.
If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognised in shareholders' funds is
transferred to the profit and loss account for the period.
j) INVENTORIES
a) Raw materials are valued at cost or net realisable value whichever
is lower. The cost includes purchase price as well as incidental
expenses. The cost formulae used are First In First Out, Weighted
average cost or Specific identification method, as applicable and found
appropriate.
b) Work -in - progress is valued at cost calculated on the basis of
absorption costing or net realisable value whichever is lower.
c) Finished goods are valued at cost or net realisable value whichever
is lower. Cost is determined on the basis of absorption costing.
d) Packing materials and accessories are valued at First in First Out
cost or net realisable value whichever is lower.
e) Stores and spare parts are valued at First in First Out cost or net
realisable value whichever is lower.
k) EMPLOYEE BENEFITS
a) The contribution to Provident Fund as required under the statute is
made to the Government Provident Fund and is debited to profit and loss
account.
b) Gratuity liability is a defined benefit obligation. The Company has
taken Group gratuity- cum-life assurance (cash accumulation) Scheme
offered by Life Insurance Corporation of India (LIC) . Annual
contributions are made on the basis of intimation received from LIC.
The company accounts for liability for future gratuity benefits based
on actuarial valuation carried out as at the end of each financial
year. Actuarial gains and losses are recognized in full in profit and
loss account for the period in which they occur.
c) Benefits in the form of vesting and non-vesting compensated absences
are accounted as per actuarial valuation carried out as at the year
end.
l) TAXES ON INCOME
Income Taxes are accounted for in accordance with Accounting Standard
(AS 22) Ã Accounting for Taxes on Income, notified under the Companies
(Accounting Standard) Rules, 2006. Income Tax comprises both current
and deferred tax.
Current tax is measured at the amount expected to be paid to/recovered
from the revenue authorities, using applicable tax rates and laws.
The tax effect of the timing differences that result between taxable
income and accounting income and are capable of reversal in one or more
subsequent periods are recorded as a deferred tax asset or deferred tax
liability. They are measured using the substantively enacted tax rates
and tax regulations as of the Balance Sheet date.
Deferred tax assets arising mainly on account of brought forward losses
and unabsorbed depreciation under tax laws are recognised only if there
is virtual certainty of its realization, supported by convincing
evidence. Deferred tax assets on account of other timing differences
are recognized only to the extent there is a reasonable certainty of
its realisation.
m) BORROWING COST
Interest and other costs in connection with the borrowing of the funds
to the extent related/ attributed to the acquisition/construction of
qualifying fixed assets are capitalised up to the date when such assets
are ready for its intended use and all other borrowing costs are
recognised as an expense in the period in which they are incurred.
n) LEASES
Assets taken / given on lease by which all significant risks and
rewards of ownership are retained by the lessor are classified as
operating leases. Lease payment/receipts under operating leases are
recognized as expense/income on straight line basis over the lease
term.
o) PROVISIONS AND CONTINGENCIES
Provisions are recognized when the Company has a legal and constructive
obligation as a result of a past event, for which it is probable that
cash outflow will be required and a reliable estimate can be made of
the amount of the obligation. Contingent liabilities are disclosed when
the Company has a possible or present obligation where it is not
probable that an outflow of resources will be required to settle it.
Contingent assets are neither recognized nor disclosed.
B) NOTES FORMING PART OF THE ACCOUNTS:
1) Contingent Liabilities:
a) Guarantee issued by the Bank and counter guaranteed by the Company:
Rs.4,632,913/- (Previous year: Rs.6,621,567/).
b) Foreign letters of Credits opened by Bank and counter guaranteed by
the Company: Rs.29,269,060/- (Previous year: Rs.13,073,806/-).
c) Foreign bills/Letters of Credit discounted with Bank: Rs.4,980,791/-
(Previous year Rs.26,689,108/-)
d) Disputed demand not provided for in respect of: -
Mar 31, 2010
A) BASIS OF ACCOUNTING
The Accounts are prepared on accrual basis under the historical cost
convention and to comply in all material aspects with the applicable
accounting principles in India, the accounting standards issued by the
Institute of Chartered Accountants of India and the relevant provisions
of the Companies Act, 1956.
The preparation of financial statements in conformity with generally
accepted accounting principles in India requires the Management to make
estimates and assumptions considered in the reported amounts of assets
and liabilities (including contingent liabilities) as of the date of
the financial statements and the reported income and expenses during
the reported period. Management believes that the estimates used in
preparation of the financial statements are prudent and reasonable.
Future results could differ from these estimates.
b) REVENUE RECOGNITION
Sales are recognised when goods are supplied to customers and are
recorded net of sales tax/value added tax . Dividend income on
investments is accounted when the right to receive the dividend is
established.
Revenue in respect of Insurance/other claims, interest etc. is
recognised only when it is reasonably certain that the ultimate
collection will be made.
c) EXPORT BENEFITS
Export benefits under various schemes of Government of India are
accounted on accrual basis on the basis of exports made and the value
of imports made/to be made there against.
d) FIXED ASSETS
Fixed Assets are recorded at Cost of acquisition. They are stated at
historical costs including incidental expenses.
e) DEPRECIATION/AMORTISATION
i) On Tangible Assets:
Depreciation has been calculated on straight-line basis in accordance
with the
provisions of section 205(2)(b) of th
Companies Act, 1956 at the rates and ii
the manner specified in schedule XIV o
the said act.
Cost of Leasehold Land is amortised ove the period of lease.
Cost of Leasehold improvements i amortised over the primary period o
lease. However, in cases where th company as a lessee has the right o
renewal of lease and it is intended t< renew for further periods, then
the cost o such leasehold improvements is amortisei over such extended
period, not exceedinj 10 years.
ii) On Intangible Assets:
a) Goodwill
At the time of acquisition of thi business, the difference betweei the
cost of investments and tin fair value of assets as at the dati of
acquisition is accounted for a goodwill. Goodwill is amortised ove a
period of 10 years.
Goodwill on amalgamation in thi nature of merger is amortised over ;
period of 5 years.
b) Computer software is amortised oi straight line basis over a period
of ( years.
f) INVESTMENTS
Investments are classified into long-tern investments and current
investments Investments, which are intended to be hel< for more than
one year, are classified as long term investments and investments,
which an intended to be held for less than one yeai are classified as
current investments. Long term investments are accounted at cost and ;
provision for diminution is made to recognizi a decline other than
temporary in the value o long term investments. Current investments an
valued at cost or fair value whichever is lower Investments include
investments in share: of a company registered outside India. The are
stated at cost by converting at the rate exchange prevalent at the
time of acquisitioi thereof.
Any profit or loss on sale of investments is determined on the basis of
the average cost of acquisition.
g) TRANSACTIONS IN FOREIGN CURRENCY
Transactions in foreign currencies are recorded at the exchange rate
prevailing on the date of the transaction. Monetary items denominated
in foreign currencies are restated at the exchange rate prevailing on
the balance sheet date. Exchange differences arising on settlement of
the transaction and on account of restatement of monetary items are
dealt with in the Profit and Loss Account.
Forward exchange contracts entered into to hedge the foreign currency
risk and outstanding as on balance sheet date are translated at year
end exchange rates. The premium or discount arising at the inception of
such forward exchange contracts are amortised as income or expense over
the life of the contract.
Gains/Losses on settlement of transactions arising on
cancellation/renewal of forward exchange contracts are recognized as
income or expense.
h) HEDGE ACCOUNTING
The Company uses foreign currency forward contracts to hedge its risks
associated with foreign currency fluctuations relating to certain firm
commitments and forecasted transactions. The Company designates these
hedging instruments as cash flow hedges applying the recognition and
measurement principles set out in the Accounting Standard 30 "Financial
Instruments: Recognition and Measurement" (AS-30).
The use of hedging instruments is governed by the Companys policies
approved by the board of directors, which provide written principles on
the use of such financial derivatives consistent with the Companys
risk management strategy.
Hedging instruments are initially measured at fair value, and are
remeasured at subsequent reporting dates.
Changes in the fair value of these derivatives that are designated and
effective as hedges of future cash flows are recognised directly in
shareholders funds and the ineffective portion is recognised
immediately in the profit and loss account.
Changes in the fair value of derivative financial instruments that do
not qualify for hedge accounting are recognised in the profit and loss
account as they arise.
If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognised in shareholders funds is
transferred to the profit and loss account for the period
i) INVENTORIES
a) Raw materials are valued at cost or net realisable value whichever
is lower. The cost includes purchase price as well as incidental
expenses. The cost formulae used are First In First Out, Weighted
average cost or Specific identification method, as applicable and found
appropriate.
b) Work -in - progress is valued at cost calculated on the basis of
absorption costing or net realisable value whichever is lower.
c) Finished goods are valued at cost or net realisable value whichever
is lower. Cost is determined on the basis of absorption costing.
d) Packing materials and accessories are valued at First in First out
cost or net realisable value whichever is lower.
e) Stores and spare parts are valued at First in First out cost or net
realisable value whichever is lower.
j) EMPLOYEE BENEFITS
fa) The contribution to Provident Fund as required under the statute is
made to the Government Provident Fund and is debited to profit and loss
account.
b) Gratuity liability is a defined benefit obligation. The Company has
taken Group gratuity- cum-life assurance (cash accumulation) Scheme
offered by Life Insurance Corporation of India (LIC) . Annual
contributions are made on the basis of intimation received from LIC.
The company accounts for liability for future gratuity benefits based
on actuarial valuation carried out as at the end of each financial
year. Actuarial gains and losses are recognized in full in profit and
loss account for the period inûwhich they occur.
c) Benefits in the form of vesting and non-vesting compensated absences
are accounted as per actuarial valuation carried out as at the year
end.
k) TAXES ON INCOME
Income Taxes are accounted for in accordance with Accounting Standard
(AS 22) -
Accounting for Taxes on Income, notified under the Companies
(Accounting Standard) Rules, 2006. Income Tax comprises both current
and deferred tax.
Current tax is measured at the amount expected to be paid to/recovered
from the revenue authorities, using applicable tax rates and laws.
The tax effect of the timing differences that result between taxable
income and accounting income and are capable of reversal in one or more
subsequent periods are recorded as a deferred tax asset or deferred tax
liability. They are measured using the substantively enacted tax rates
and tax regulations as of the Balance Sheet date.
Deferred tax assets arising mainly on account of brought forward losses
and unabsorbed depreciation under tax laws are recognised only if there
is virtual certainty of its realization, supported by convincing
evidence. Deferred tax assets on account of other timing differences
are recognized only to the extent there is a reasonable certainty of
its realisation.
l) BORROWING COST
Interest and other costs in connection with the borrowing of the funds
to the extent related/ attributed to the acquisition/construction of
qualifying fixed assets are capitalised up to the date when such assets
are ready for its intended use and all other borrowing costs are
recognised as an expense in the period in which they are incurred.
m) LEASES
Assets acquired on leases where significant portions of the risks and
rewards incidental to ownership are retained by the lessors are
classified as operating leases. Lease rentals are charged to the Profit
& Loss Account on straight line basis.
n) PROVISIONS AND CONTINGENCIES
Provisions are recognized when the Company has a legal and constructive
obligation as a result of a past event, for which it is probable that
cash outflow will be required and a reliable estimate can be made of
the amount of the obligation. Contingent liabilities are disclosed when
the Company has a possible or present obligation where it is not
probable that an outflow of resources will be required to settle it.
Contingent assets are neither recognized nor disclosed.
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Stocks To Buy Today, Dec 12: Top 2 Picks By Riyank Arora of Mehta Equities For Profitable Trading On Friday -
Market Outlook 2026: Kotak Securities Sees Nifty 50 at 30,000; THESE 4 Sectors Lead Rally, Gold To Stay Strong -
Stocks To Buy Today, Dec 10: Top 2 Picks By Riyank Arora of Mehta Equities For Profitable Trading On Wednesday -
D-Street Bleeds For 2nd Day! Sensex Slumps 678 Pts; Nifty Cracks 25,800; Why Stock Market Is Falling Today? -
Stocks To Buy Today, Dec 9: Top 2 Picks By Riyank Arora of Mehta Equities For Profitable Trading On Tuesday -
Stocks To Buy Today, Dec 8: Top 4 Picks By Riyank Arora of Mehta Equities For Profitable Trading On Monday -
Stock Market Alert! Major Pre-Open Session Change From Dec 8: Full Timings, Rules & All You Need To Know -
Bank Nifty Surges: RBI’s 25 bps Rate Cut Triggers Strong Upside in Major Banking Stocks -
Closing Bell: Sensex Ends 158 pts Higher, Nifty Climbs Above 26,000; Hero MotoCorp, HAL Up 2% Each -
Stocks To Buy Today, Dec 4: Top 2 Picks By Riyank Arora of Mehta Equities For Profitable Trading On Thursday
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