a) The financial statements are prepared in accordance with Indian
Generally Accepted Accounting Principles (GAAP) under the
historical cost convention (except for certain revalued fixed assets)
on the accounting principles of a going concern and the Company follows
mercantile system of accounting and recognises income and expenditure
on accrual basis except those with significant uncertainties.
b) The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amount of assets, liabilities, revenues and expenses and
disclosure of contingent liabilities on the date of financial
statements. The recognition, measurement, classification or disclosure
of an item or information in the financial statements are made relying
on these estimates. Any revision to accounting estimates is recognised
2) FIXED ASSETS
a) All fixed assets are stated at cost net of CENVAT / Value Added Tax
adjusted by revaluation in case of certain Land, Building, Plant &
Machinery and Electrical Installations, less accumulated depreciation
and impairment loss, if any. Expenditure during construction period in
respect of new project/ expansion is allocated to the respective fixed
assets on their being ready for intended use.
b) In accordance with AS 28 on ''Impairment of Assets'', where there is
an indication of impairment of the Company''s assets related to cash
generating units, the carrying amounts of such assets are reviewed at
each Balance Sheet date to determine whether there is any impairment.
The recoverable amount of such assets is estimated as the higher of its
net selling price and its value in use. An impairment loss is
recognised in the Statement of Profit and Loss whenever the carrying
amount of such assets exceeds its recoverable amount.
Long term Investments are stated at cost and provision is made to
recognise any decline, other than temporary, in the value of such
Inventories are valued at lower of cost and net realisable value. Cost
of raw material is computed by using Specific Identification
method and for other inventories Weighted Average method.
The cost in case of finished goods includes cost of purchase, cost of
conversion and other costs (on the basis of normal operating capacity)
incurred in bringing the inventories to their present location and
Revenue is recognised when the property and all the significant risks
and rewards of ownership are transferred to the buyer and no
significant uncertainty exists regarding the amount of consideration.
Export Sales are inclusive of deemed exports. Local sales are
inclusive of excise duty, wherever applicable and net of sales tax.
6) BORROWING COST
Borrowing Costs directly attributable to acquisition and construction
of qualifying assets are capitalised as a part of the cost of such
asset upto the date when such asset is ready for its intended use.
Other borrowing costs are charged to statement of Profit & Loss.
Depreciation is provided at the rates and in the manner prescribed in
Schedule XIV to the Companies Act, 1956. Plant & Machinery and
Electrical Installations have been, on technical assessment, considered
as continuous process plants as defined in the said Schedule and
depreciation has been provided accordingly.
Depreciation in respect of various units is provided as below:
a) MEDAK SPINNING UNIT: Depreciation on Plant & Machinery and
Electrical Installations (including revalued assets) installed upto
31st March, 1992 has been charged under Written Down Value Method and
on additions thereafter under Straight Line Method. In respect of other
assets (including revalued assets) depreciation has been charged under
Written Down Value Method.
b) MEDAK DOUBLING UNIT: Depreciation is provided on Written Down Value
c) Other Units (Nagpur Spinning Unit, Shadnagar Yarn Processing Unit
and Knitting Unit): Depreciation is prbvided o''n Straight Line Method.
8) EMPLOYEE BENEFITS
a) Provident Fund
Provident Fund is a defined contribution scheme and the contributions
are charged to Statement of Profit and Loss as incurred.
Superannuation is a defined contribution plan and contribution is made
to Life Insurance Corporation of India for eligible employees who have
opted for the same as a percentage of salaries. The Company has no
further obligations to the scheme beyond its monthly / annual
Gratuity is a defined retirement benefit plan. The Company contributes
to the Scheme with Life Insurance Corporation of India based on
actuarial valuation done by them as at the close of the financial year.
d) The employees are entitled to accumulate leave as per the rules of
the Company for future encashment / availment. Liability for leave
encashment is provided for on the basis of the such eligible leaves at
the close of the year.
9) FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currency are recorded at the rate of exchange
in force at the date of transactions. Gains and losses resulting from
settlement of such transactions and from the transaction of monetary
assets and liabilities denominated jn foreign currencies are recognised
in Statement of Profit and Loss. Premium in respect of forward foreign
exchange contract is recognised over the life of the contracts. In
respect of Derivative Contracts, premium paid, provision for losses on
restatement and gains/ losses on settlement are recognised alongwith
the underlying transactions and charged to Statement of Profit and
Loss. , s
Income tax expenses comprise current tax (i.e., amount of tax for the
year determined in accordance with the income tax law) and deferred tax
charges or credit (reflecting the tax effects of timing differences
between accounting income and taxable income of the year). The deferred
tax charge or credit and the corresponding deferred tax liabilities or
assets are recognised using the tax rates that have been enacted or
substantively enacted by the Balance Sheet date. Deterred tax on assets
are recognised and carried forward only if there is a virtual /
reasonable certainty of realisation of such assets in near future and
are reviewed for their appropriateness of their respective carrying
value at each Balance Sheet date. Tax credit is recognised in respect
of Minimum Alternate Tax (MAT) paid in terms of Section 115JAA of the
Income Tax Act, 1961 based on convincing evidence that the Company will
pay normal tax within the statutory time frame and the same is reviewed
at each Balance Sheet date.
11) PROVISIONS, CONTINGENT LIABILITIES AND CONTINQENT.ASSET, ira s,
A provision is made based on a reliable estimate when if is probale
that an! out low of resources embodying economic benefits will be
required to settle an obligation. Contingent liabilities are disclosed
in the notes to accounts and are determined based on the management
perception that these liabilities are not likely to materialise.
Contingent assets are not recognised or disclosed in the financial