1.1 Method of Accounting
The financial statements have been prepared under the historical cost
convention on an accrual basis and in accordance with the Accounting
Principles generally accepted in India (Indian GAAP) and comply with
mandatory Accounting Standards notified by the Central Government of
India under the Companies (Accounting Standards) Rules, 2006 and the
relevant provisions of the Companies Act, 1956, to the extent
1.2 Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires estimates and assumptions to be
made that affect the reported amounts of assets and liabilities on the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Differences between actual
results and estimates are recognized in the period in which the results
are known / materialised.
1.3 Fixed Assets
Fixed assets are stated at historical cost net of .ivat credit /Value
added Tax, including appropriate direct and allocated expenses and
interest on specific borrowings related to qualifying assets up to the
commencement of production less accumulated depreciation and impairment
losses, if any.
Long Term Investments are carried at cost inclusive of all expenses
incidental to acquisition. Provision for diminution in value of long
term investments is made only if such a decline is other than temporary
in nature in the opinion of the management. Diminution with respect to
market value, if temporary, is not recognized.
1.5 Valuation of Inventories
Inventories are valued as under
a) Finished goods: Yarn and cloth at lower of weighted average cost and
net realizable value (Including excise duty) wherever applicable.
b) Waste at contracted prices.
c) Raw materials and stock-in-process at lower of weighted average cost
and net realisable value.
d) Stores and spare parts, components at weighted average cost.
e) Stock in trade of land under development comprises of Free hold land
and buildings at net book value, converted from fixed assets into Stock
in trade and expenses related / attributable to the development of the
said property. The same is valued at Lower of such net book value or
Net realisable value.
1.6 Translation of Foreign Currency Transactions
Foreign currency transactions are recorded at the prevailing exchange
rates at the time of initial recognition. Exchange differences arising
on final settlement are adjusted and recognized as income or expense in
the Statement of Profit and Loss. Outstanding balances of monetary
items denominated in foreign currency are restated at closing exchange
rates and the difference adjusted as income or expense in the profit
and loss statement.
The premium or discount arising at the inception of forward exchange
contracts is accounted as income or expense over the life of the
contract. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognized as income or as expense in
period in which they arise,
Depreciation is provided on plant and machinery and factory buildings
on straight line basis and on the other assets on WDV basis at the
rates specified in Schedule XIV of the Companies Act, 1956. For
additions and deletions depreciation is provided on pro-rata basis.
1.8 Recognition of Revenue
Income and Expenditure are recognized and accounted on accrual basis as
and when they are earned or incurred. Revenue from sale trans- action
is recognized as and when significant risks and rewards attached to
ownership in the goods is transferred to the buyer. Revenue from
service transactions is recognized when invoiced / upon completion of
work based on confirmed contracts. Dividend from investments and Export
incentives under Duty Entitlement Pass Book [DEPB] Scheme and Duty
drawback scheme are recognized when the right to receive payment /
credit is established and no significant uncertainty as to
measurability or collectability exists.
1.9 Borrowing costs
Borrowing costs, if any, attributable to acquisition / construction of
qualifying assets are capitalized and included in the cost of the
asset, as appropriate.
1.10 Earnings per Share
Basic Earning per share is calculated by dividing the Net Profit after
tax attributable to the equity shareholders by the weighted average
number of Equity Shares outstanding during the year.
1.11 Employee Benefits
Short term employee benefits (other than termination benefits) which
are payable within 12 months after the end of the period in which the
employees rendered service are accounted on accrual basis.
Defined Contribution Plans
Company''s contributions paid/payable during the year to Provident
Fund and Superannuation Fund and ESIC are recognized in the profit and
loss state- ment.
Defined Benefit Plans
Company''s liabilities towards gratuity is determined using the
projected unit credit method which considers each period of service as
giving rise to an additional unit of benefit entitlement and measures
each unit separately to build up the final obligation. Past services
are recognized on a straight line basis over the average period until
the amended benefits becomes vested. Actuaries gains or losses are
recognized immediately in the Statement of Profit and Loss as income or
expenses. Obligation is measured at the present value of estimated
future cash flows using a discounted rate that is determined by
reference to market yields at the balance sheet date on government
bonds where the currency and terms of the government bonds are
consistent with the currency and estimated terms of the defined benefit
obligations. The expected return on plan assets is based on market
expectations at the beginning of the period for returns over the entire
life of the related obligations.
There is no scheme for encashment of unavailed leave on retirement
since unavailed earned leave is settled annually and accounted on
payment. The cost of termination benefits, namely voluntary retirement
payments are expensed in the year of payment.
1.12 Taxes on Income
Current Tax is determined as per the provisions of the Income-tax Act,
1961 in respect of taxable income for the year and based on the
expected outcome of assessment /appeals.
Deferred Tax assets and liabilities are recognized on timing
differences between accounting income and taxable income that originate
in one period and are capable of reversal in one or more subsequent
period and quantified using the tax rates and laws enacted or
substantively enacted as on the balance sheet date.
Deferred Tax assets arising on account of unabsorbed depreciation or
carried forward business losses are recognized only when there is
virtual certainty with convincing evidence that sufficient future
taxable income will be available against which such deferred tax assets
can be realised.
The carrying amount of deferred tax assets and liabilities are reviewed
at each balance sheet date.
1.13 Provisions, contingent liabilities and contingent assets
Provisions involving substantial degree of estimation in measurement
are recognized 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 recognized but are disclosed in the
notes to financial statements. Contingent assets are neither recognized
nor disclosed in the financial statements. Provisions, contingent
liabilities and contingent assets are reviewed at each balance sheet
date and adjusted to reflect the best current estimate.
1.14 Cash Flow Statements
Cash Flows are reported using the Indirect method, whereby profit
before tax is adjusted for the effects of transactions of a non-cash
nature, any deferrals or accruals of past or future operating cash
receipts or payments and items of income or expense associated with
investing or financing cash flows. Cash and cash equivalents include
cash on hand and balances with banks in current and deposit accounts
with necessary disclosure of cash and cash equivalent balances that are
not available for use by the company.
1.15 Impairment of assets
An asset is treated as impaired when the carrying amount of the asset
exceeds its estimated recoverable value. Carrying amounts of fixed
assets are reviewed at each balance sheet date to determine indications
of impairment, if any, of those assets. If any such indication exists,
the recoverable amount of the asset is estimated and an impairment loss
equal to the excess of the carrying amount over its recoverable value
is recognized as an impairment loss. The impairment loss, if any,
recognized in prior accounting period is reversed if there is a change
in estimate of recoverable amount.