A.  BASIS OF PREPARATION OF FINANCIAL STATEMENTS
 
 a) The financial statements are prepared in accordance with Indian
 Generally Accepted Accounting Principals (GAAP) under the historical
 cost convention on accrual basis. GAAP comprises mandatory accounting
 standards as specified in the Companies (Accounting Standards) Rules,
 2006, the provisions of the Companies Act, 1956 and guidelines issued
 by the Securities and Exchange Board of India. Accounting policies have
 been consistently applied except where a newly issued accounting
 standard is initially adopted or a revision to an existing accounting
 standard requires a change in the accounting policy hitherto in use.
 
 The Management evaluates all recently issued or revised accounting
 standards on an ongoing concern basis.
 
 b) The Company follows mercantile system of accounting and recognizes
 significant items of income and expenditure on accrual basis.
 
 B.  USE OF ESTIMATES
 
 The preparation of financial statements in conformity with GAAP
 requires management to make estimates and Assumptions that affect the
 reported amounts of assets and liabilities, disclosure of contingent
 liabilities at the date of financial statements and the reported
 amounts of revenues and expenses during the reporting period. Example
 of such estimates includes estimate of carrying value of work in
 progress, provision for doubtful debts and useful life of fixed assets.
 Actual results could differ from estimates.
 
 C.  FIXED ASSETS AND DEPRECIATION
 
 a) Expenditure of capital nature are capitalized at cost comprising of
 purchase price (net of rebates and discounts) and any other cost which
 is directly attributable to bringing the asset to its working condition
 for the intended use.
 
 b) Depreciation on fixed assets is provided on Straight-line method at
 the rates and in the manner prescribed in schedule XIV to the Companies
 Act, 1956.
 
 c) Fixed Assets Acquired at New York Trading Office is capitalized at
 historical cost. Depreciation on these Fixed Assets is accounted for as
 charged in the branch Profit & Loss Account. The same is converted in
 INR based on the rate prevailing at the time of acquisition of relevant
 fixed assets.
 
 D.  INVESTMENTS
 
 Investments are in the nature of long term investments and are valued
 at cost to the Company in accordance with AS - 13 accounting for
 Investments.
 
 E.  FOREIGN EXCHANGE TRANSACTIONS
 
 In view of the Accounting Standard (AS)-11 “ Accounting for the
 effects of Changes in Foreign Exchange rates (AS-11) issued by the
 Institute of Chartered Accountants of India, being mandatory with
 effect from the 1st April, 1995 foreign currency transactions are
 translated as under :
 
 a) Transactions denominated in foreign currencies are recorded at the
 exchange rate prevailing at the time of the transaction as far as
 possible.
 
 b) Monetary items denominated in foreign currency other than the
 foreign currency loans outstanding as at the year end are recorded at
 the closing rate and the difference is adjusted in profit & loss
 account.
 
 c) Exchange differences arising on foreign currency transactions are
 recognized as income or expenditure in the year in which they arise.
 
 d) Financial Statement of M/S Samtex Fashions Ltd. (New York) branch is
 translated and incorporated in the books of Head Office M/S Samtex
 Fashions Ltd. (India) in accordance to with the AS - 11.
 
 F.  INVENTORY VALUATION
 
 a) Stock of Raw Materials are valued according to FIFO method as
 prescribed for the valuation of Inventory, at purchase cost or net
 realisable value whichever is low. The quantity and valuation of stocks
 of Raw Material is taken as physically verified, valued and certified
 by the Management at the end of the year. The inventory of Raw Material
 includes raw material supplied by foreign parties for the execution of
 their export orders by the company and the same is valued at the end of
 the year.
 
 b) Finished goods are valued at lower of cost or net realizable value.
 Cost for the purpose is determined on the basis of absorption costing
 method the quantity and valuation of finished goods is taken as
 physically verified valued and certified by the management at the end
 of the year. Cost for the purpose of valuation is inclusive of all the
 expenses except selling expenses. Excise duty levied on domestic tariff
 area sales does not form part of the cost since the quantum of these
 sales out of the finished goods stock cannot be ascertained.
 
 c) The stock of Work In Process, is valued at the estimated cost or net
 realizable value whichever is lower to the company based on absorption
 costing method. Packing material and accessories like thread, buttons,
 etc is valued at Cost or Net realizable value whichever is low. The
 quantity and valuation of Inventory of WIP is taken as physically
 verified, valued and certified by the management at the end of the
 year.
 
 G.  REVENUE RECOGNITION
 
 a) EXPORT SALES
 
 Sales of M/s Samtex Fashions Ltd. (India) is recognized on the basis of
 Bill Of Lading. Sales of M/S Samtex Fashions Ltd. (New York) is
 recognized as and when they are executed at New York Office. In respect
 of sales where material are supplied by the foreign buyers, purchases
 are booked at the amount debited by them for supply of materials and
 sales invoices includes the value of material so debited.
 
 b) DOMESTIC SALES
 
 Domestic Sales is recognized in the books of accounts at the time of
 dispatch from the custom gate at NSEZ, and sales executed at the Delhi
 office is recognized at the date of dispatch from Delhi Office.
 
 H.  PROVISION FOR CURRENT AND DEFERRED TAX
 
 Provision for current tax is made on the basis of assessable income
 under the Income Tax Act, 1961.
 
 Current Tax is the amount of tax payable on the taxable income for the
 year determined in accordance with the provisions of the Income Tax
 Act, 1961. Deferred tax is recognized on timing differences being the
 differences between the taxable income and accounting income that
 originate in one period and are capable of reversal in one or more
 subsequent periods.
 
 Deferred tax assets subject to the consideration of prudence are
 recognized and carried forward only to the extent that there is a
 reasonable certainty that sufficient future taxable income will be
 available against which such deferred tax assets can be realized. The
 tax effect is calculated and accounted for using the tax rates and laws
 that have been enacted or substantially enacted as on the balance sheet
 date.
 
 I.  PROVISIONS & CONTINGENT LIABILITIES
 
 In terms of the requirement of the Accounting Standard 29 (AS-29) on
 “Provisions, Contingent Liabilities and Contingent Assets''''.
 
 (a) Where, as a result of past events, there is a present obligation
 that probably requires an outflow of resources and reliable estimates''
 can be made of the amount of obligation- an appropriate provision is
 created and disclosed.
 
 (b) Where as a result of past events, there is a possible obligation
 that may, but probably will not require an outflow of resources no
 provision is recognized but appropriate disclosure made as contingent
 liability unless the possibility of out flow is remote.
 
 J. BORROWING COST
 
 Borrowing cost specifically identified to the acquisition or
 construction of qualifying assets are capitalized as part 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 Profit & Loss Account.
 
 K. IMPAIRMENT OF ASSETS
 
 An asset is treated as impaired when the carrying cost of assets
 exceeds its recoverable value. An impairment loss is charged for 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.
 
 L. EMPLOYEE BENEFITS
 
 a) PROVIDENT FUND
 
 Employees receive benefits from a provident fund, which is a defined
 contribution plan. Both the employee and the company make monthly
 contributions to the Regional Provident Fund equal to a specified
 percentage of the covered employees'' salary. The company has no further
 obligations under the plan beyond its monthly contributions.
 
 b) GRATUITY
 
 In accordance with the Payment of Gratuity Act, 1972, the Company
 provides for gratuity, a non - funded, defined benefit retirement plan
 (the gratuity plan) covering all employees. The plan, subject to the
 provisions of the Act, provides a lump sum payment to vested employees
 at retirement or termination of employment with the company. The
 Company estimates its liability on adhoc basis in the interim financial
 reports and on an actuarial valuation basis as of year end balance
 sheet date carried out by an independent actuary, and is charged to
 Profit & Loss Account in accordance with AS-15 (revised).
 
 c) LEAVE ENCASHMENT
 
 Leave encashment cost is a defined benefit, and is accrued on adhoc
 basis in the interim financial reports and on An actuarial valuation
 basis as of year end balance sheet date carried out by an independent
 actuary, and is charged to Profit & Loss Account in accordance with
 AS-15 (revised).