1 Accounting Convention:
The Financial Statements are prepared on accrual basis and in
accordance with the requirements of the Companies Act, 1956 and the
applicable Accounting Standards.
2 Fixed Assets, Intangible Assets & Depreciation:
a Fixed Assets are stated at cost less accumulated depreciation. b
Depreciation on Fixed Assets acquired up to 31st March 2005 is
calculated on Written Down Value Method at the rates specified in
Schedule XIV to the Companies Act, 1956 c Depreciation on addition to
Fixed Assets on or after 1st April 2005 has been provided on Straight
Line Method at the rates specified in Schedule XIV to the Companies
Act, 1956. d Additional Depreciation is being provided to the extent
required during the year of Sale of Assets. e Borrowing Costs, (if
any) attributable to acquisition and construction of qualifying assets
are capitalized as a part of the cost of such asset. Other Borrowing
Costs are charged to Profit and Loss Account.
a Raw Materials and Components are valued at lower of Cost or Net
Realizable Value. Cost of the said is computed by applying Specific
Identification Method. b Work in Progress and Finished Goods are
valued at lower of Cost or Net Realizable Value. Cost of these
inventories includes Costs of Conversion and Other costs incurred in
bringing them to the present location and condition.
4 Income Recognition:
Sales net of trade discounts and rebates are recorded when the
significant risks and rewards of ownership are transferred.
Export Sales are accounted on the basis of the dates of Bill of Lading,
other delivery documents as per the contract.
Domestic Sales includes Excise Duty but excludes Sales Tax and Value
Export Incentives are accounted for on export of goods if the
entitlements can be estimated with reasonable accuracy and conditions
precedent to claim are fulfilled.
Other Operating Income represents conversion charges received by the
Company towards contract manufacturing activities and the same is
accounted when the significant risks and rewards of ownership are
Rental Income on properties given on lease are accounted on accrual
Interest Income is recognized on Time-Proportion basis taking into
account the amount outstanding and the rate applicable.
5 Measurement of foreign currency monetary items at the Balance Sheet
date and Treatment of Exchange Differences:
The Company uses derivative financial instruments such as forward
exchange contracts to hedge its risks associated with foreign exchange
fluctuations. The Company does not use the foreign exchange forward
contracts or options for trading or speculating pupose.
Foreign Currency transactions are initially recorded at the exchange
rates prevailing on the date of transactions. Current Assets and
Current Liabilities are restated at the yearend closing rates. The
differences arising on such restatement are reflected in the Profit and
Loss Account and Exchange Gain / Loss.
Premium / Discount on Forward Foreign Exchange Contracts are recognized
over the life of the Contracts. The value of unperformed contracts is
shown under Loans & Advances.
The Company has the policy of accounting the profits and losses from
Derivative Contracts on Cash basis.
Investments are either classified as current or long term based on
Management''s intention at the time of purchase.
Long term investments are stated at cost. Provision where necessary is
made to recognize a decline other than temporary in the carrying value
of each investments. Current investments are carried at lower of cost
and quoted /fair value.
7 Accounting of Government Grants:
Government grants are recognized accounted on Cash Basis.
The Company was in receipt of Interest Subsidy under Technology
Up gradation Fund (TUF) Scheme during the year for an amount of Rs.2.52
crs. Refer Note 26.
Capital grants were neither received nor accrued.
8 Employees'' Benefits:
Provident Fund is defined contribution plan and charged to Profit &
Loss Account on accrual basis with corresponding contribution to
Leave Entitlement is short term employees benefit and determined
arithmetically and charged to Profit & Loss Account on accrual basis.
Gratuity Liability under Payment of Gratuity Act is determined on the
basis of an actuarial valuation made at the end of the financial year
and in accordance with the Revised Accounting Standard 15.
The computation of tax liability is made in accordance with the
provisions of Income Tax Act,1961 and tax liability so computed is
Nil and hence no provision has been made.
The Company has got a net deferred tax asset on account of accumulated
losses and unabsorbed depreciation. In Compliance with the provisions
of the Accounting Standard - 22, Accounting for Taxes on Income
and based on General Prudence, the Company has not recognized Deferred
10 Impairment of Assets:
The Company assesses at each Balance Sheet date whether there is any
indication due to internal or external factors that an asset may be
impaired. If any such indication exists, the Company estimates the
recoverable amount of the asset. If such recoverable amount of the
asset or the recoverable amount of the cash generating unit to which
the asset belongs is less than its carrying amount, the carrying amount
is reduced to its recoverable amount and the reduction is treated as an
impairment loss and is recognized in the profit and loss account. If at
any subsequent balance sheet date there is an indication that a
previously assessed impairment loss no longer exists, the recoverable
amount is reassessed and the asset is reflected at recoverable amount
subject to maximum of depreciated historical cost and is accordingly
reversed in the profit and loss account.
In the opinion of the Management , Current Assets, Loans and Advances
have a value of at least equal to the amounts shown in the Balance
Sheet, if realized in the due course of the business. The provision for
all liabilities is adequate and not in excess of the amount reasonably
11 Provisions and Contingent Liabilities:
Provisions are recognized when the Company has a present obligation, as
a result of past events, for which it is probable that an outflow of
economic benefits will be required to settle the obligation and a
reliable estimate can be made for the amount of obligation. Contingent
liabilities are not recognized but are disclosed in the Notes.
12 Segment reporting:
The Company has considered business segment as the primary segment for
disclosure. The Company is primarily engaged in a single segment
business of manufacturing garments and is managed as one entity and is
governed by a similar set of risks and return.