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
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
Investments are in the nature of long term investments and are valued
at cost to the Company in accordance with AS - 13 accounting for
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
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
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
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
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
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
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.
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