(a) SYSTEM OF ACCOUNTING
The Company follows the accrual system of accounting.
(b) OVERALL VALUATION POLICY
The accounts have been prepared under the historical cost convention.
(c) REVENUE RECOGNITION
Revenue on sale of goods is recognized on transfer of significant risks
& rewards of ownership to the buyer and on reasonable certainty of the
ultimate collection. Sales are net off sales tax, trade discounts and
Interest Income is recognized on time proportion basis taking into
account the amount outstanding and the rate applicable.
(d) VALUATION OF INVENTORY
Inventories are valued at lower of cost and net realisable value.
The cost in respect of raw materials, store and spares and packing
material is determined under the Specific Identification of cost
method. Cost are net of credit under CENVAT scheme, wherever
The cost in respect of work-in-progress and finished goods is
determined using the weighted average cost method and includes direct
materials and labour and a proportion of manufacturing overheads based
on normal operating capacity.
Waste is valued at estimated net realisable value.
(e) FIXED ASSETS
All fixed assets are stated at original cost less depreciation. Cost
includes freight, duties (net of CENVAT), taxes and other incidental
expenses relating to acquisition and installation.
Depreciation has been provided on straight-line method in accordance
with the rates prescribed under Schedule XIV to the Companies Act,
1956. On the basis of technical advice, the Company has treated its
spinning Process Plant as a Continuous Process Plant and has provided
(g) FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currency are accounted for at the exchange
rates prevailing on the date of transaction. All monetary items
denominated in foreign currency are translated at year end rates.
Exchange differences arising on such transactions and also exchange
differences arising on the settlement of such transactions are adjusted
in the profit and loss account.
In case of forward contracts the premium or discount on all such
contracts arising at the inception of each contract is recognized /
amortised as income or expense over the life of the contract. Any
profit or loss arising on the cancellation or renewal of such contract
is recognized as income or expense for the period.
(h) EMPLOYEE BENEFITS
i. Defined Contribution Plan
The company''s contributions to recognized Provident Fund and Labour
Welfare Fund are charged to profit and loss account on accrual basis.
ii. Defined Benefit Plan
Gratuity - The Gratuity plan, a defined benefit plan, provides a lump
sum payment to vested employees, at the retirement or termination of
employment, an amount based on the respective employees'' last drawn
salary and the years of employment with the Company. The liability with
regard to Gratuity plan is accrued based on the actuarial valuation at
the balance sheet date, carried out by an independent actuary.
Actuarial gain or loss is recognised immediately in the statement of
profit and loss as income or expense. The Company has employees''
Gratuity fund managed by Life Insurance Corporation of India (LIC).
Compensated Absences - The Company provides for the encashment of
absence or absences with pay based on policy of the Company in this
regard. The employees are entitled to accumulate such absences subject
to certain limits, for the future encashment or absence. The Company
records an obligation for compensated absences in the period in which
the employee renders the services that increases this entitlement. The
Company measured the expected cost of compensated absences as the
additional amount that the Company expects to pay as a result of the
unused entitlement that has accumulated at the Balance Sheet date on
the basis of an independent actuarial valuation.
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognize a
decline other than temporary in the value of investments.
(j) BORROWING COST
Borrowing costs that are directly attributable to acquisition,
construction or production of a qualifying asset are capitalised as a
part of the cost of that asset. Other borrowing costs are recognised as
expense in the period in which they are incurred.
The company has taken premises on lease. Lease rental in respect of
operating lease arrangement are charged to Profit and Loss Account.
(l) TAXES ON INCOME
Tax expense for the year, comprising current tax and deferred tax is
included in determining the net profit/(loss) for the year.
A provision is made for the current tax based on tax liability computed
in accordance with the relevant tax rates and tax laws. Deferred tax
assets are recognized for all deductible timing differences and carried
forward to the extent it is reasonably certain that future taxable
profit will be available against which such deferred tax assets can be
Deferred tax assets and liabilities are measured at the tax rates that
have been enacted or substantively enacted by the Balance Sheet date.
(m) IMPAIRMENT OF ASSETS
At each Balance Sheet date, the carrying amount of assets is tested for
impairment so as to determine:
a) the provision for impairment, if any, required; or
b) the reversal, if any, required of impairment loss recognised in
Impairment loss is recognised when the carrying amount of an asset
exceeds its recoverable amount.
Recoverable amount is determined
a) In the case of an individual asset, on the higher of the net selling
price and the value in use.
b) In the case of a cash-generating unit, on the higher of the cash
generating units net selling price and value in use.
(Value in use is determined on the present value of estimated future
cash flows from the continuing use of an asset and from its disposal at
the end of its useful life)
(n) GOVERNMENT GRANT
Government grants of the nature of promoter''s contribution are credited
to capital reserve and treated as part of shareholder''s funds.
(o) PROVISIONS AND CONTINGENCIES
The company creates a provision when there is present obligation as a
result of past event that probably requires an outflow of resources and
a reliable estimate can be made of the amount of obligation. A
disclosure for a contingent liability is made when there is possible
obligation or a present obligation that probably will not require an
outflow of resources or where a reliable estimate of the obligation
cannot be made.