1. Basis of preparation of f inanciai Statements
The company follows the mercantile system of accounting and recognizes
income and expenditure on accrual basis. The accounts are prepared on
historical cost basis as a going concern and are consistent with
generally accepted accounting principles.
2. Revenue Recognition
a. Domestic sales are accounted for on dispatch of goods to customers.
Gross Sales are net of sales returns.
b. Export sales are accounted for on the basis of dates of Bill of
Lading. Gross Sales are inclusive of incentives/benefits, exchange rate
difference realized during the year and net of sales returns.
c. Revenue from Job work is recognized when services are rendered.
3. Fixed Assets
Fixed assets are stated at cost of acquisition less depreciation. Cost
includes taxes, duties, freight, installation and other direct or
allocated expenses up to the date of commercial production and net of
CENVAT credit and Subsidy received, if any.
4. Depreciation on Fixed Assets
Depreciation on Fixed Assets is provided on ''Straight Line Method'' at
rates prescribed in Schedule - XIV to the Companies Act, 1956.
Depreciation on fixed assets added /disposed off during the year is
provided on prorata basis.
5. Impairment of Assets
An asset is treated as impaired when the carrying cost of assets
exceeds its recoverable value. An impairment loss is charged to the
profit & loss account as and when an asset is identified as impaired.
The impairment loss recognized in prior accounting period is reversed
if there has been a change in the estimate of recoverable amount.
6. Expenditure during construction period
The expenditure incurred and attributable interest & financing costs
incurred prior to commencement of commercial production including Trial
Run Expenses in respect of new project & substantial expansion of
existing facilities are capitalized to the respective assets.
Current investments are carried at the lower of cost and quoted / fair
value, computed category wise. Long Term Investments are stated at
cost. Provision for diminution in the value of long-term investments is
made only if such a decline is other than temporary in the opinion of
8. Foreign Currency
a. Transactions in foreign currencies are recorded at the exchange
rate prevailing on the date of the transactions or that approximates
the actual rate. The realized exchange gains/ losses are recognized in
the Profit & Loss account. All foreign currency current assets and
liabilities are translated in rupees at the rates prevailing on the
date of balance sheet.
b. In respect of branches, which are integral foreign operations, all
transactions are translated at average rates. Branch monetary assets
and liabilities are restated at the rates prevailing on the date of
9. Employee Benefits
i. Short Term Employee Benefits are recognized as an expense at the
undiscounted amount in the profit and loss account of the year in which
the related service is rendered.
ii. Post employment benefits are recognized as an expense in the Profit
and Loss account for the year in which the employee has rendered
services. The expense is recognized based upon the premium amount
determined by Life insurance Corporation (LIC) and State Bank Of India
Group Gratuity Scheme in case of covered employees. The employees that
are not yet covered in the above Group Gratuity Scheme, provision for
the same has been made on estimated basis by the management.
iii. Long Term employee benefits are recognized as an expense in the
Profit and Loss account for the year in which the employee has rendered
services. The liabilities on account of leave encashment have been
provided on estimated basis by management.
a. Provision for current tax is made with reference to taxable income
computed for the accounting period, for which the financial statements
are prepared by applying the tax rates as applicable.
b. Deferred tax is recognised subject to the consideration of
prudence, on timing differences being the difference between taxable
income and accounting income that originate in one period and are
capable of reversal in one or more subsequent periods. Such deferred
tax is quantified using the tax rates and laws enacted or substantively
enacted as on the Balance Sheet date. Deferred tax assets are
recognized and carried forward to extent that there is a reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised.
11. Borrowing Cost;
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to revenue.
12. Government Grants:
Grants and subsidies from the government are recognized when there is
reasonable assurance that the grant/subsidy will be received and all
attaching conditions will be complied with. When the grant or subsidy
relates to an expense item, it is netted off with the relevant expense.
Where the grant or subsidy relates to an asset, its value is deducted
in arriving at the carrying amount of the related asset.
13. Provisions, Contingent Liabilities and Contingent Assets:
Provisions involving substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognised but are disclosed in the
notes to the accounts. Contingent Assets are neither recognised nor
disclosed in the financial statements.
14. Segmental Reporting:
The Company is mainly engaged in the business of manufacturing of
textiles consisting of yarn, fabrics and garments. Considering the
nature of business and financial reporting of the Company, the Company
has only one segment viz; textile as reportable segment. The Company
operates in Local & Export segments geographically. The sale for both
is separately given, but due to the nature of business the
assets/liabilities and expenses for these activities cannot be
The Company is also engaged in power generation through windmills &
manufacturing of buttons, however the same are not considered as
reportable segment in accordance with AS-17.