1. METHOD OF ACCOUNTING
The accounts are prepared under the historical cost convention applying
accrual method of accounting and as a going concern, complying with the
applicable Accounting Standards and the generally accepted accounting
principles prevailing in the country
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 revenues and expenses during
the reporting period. Differences between actual results and estimates
are recognized in the period in which the results are known /
3. FIXED ASSETS
i) Fixed assets have been maintained in the books at historical cost.
Fixed assets acquired on amalgamation of Shiva Texyarn Limited have
been accounted for based on the gross purchase consideration adopted
for acquisition as per the Scheme of Amalgamation which was effective
ii) Cenvat credit eligible against capital equipments purchased during
the year for central excise duty paid, service tax paid and for State
Value Added Tax paid have been adjusted and reduced from the cost of
the relevant asset.
iii) Land and Buildings which are not occupied for use by or in the
operations of the Company, have been treated as Investment Property.
Investments are treated as non-current investments and are maintained
at cost; provision for diminution in value, other than temporary, has
been made wherever required.
Inventories are valued at the lower of cost and net realizable value.
Cost of inventories comprises all cost of purchase, cost of conversion
and other costs incurred in bringing the inventories to their present
location and condition. The methods of determining cost of various
categories of inventories are as follows:
i) Raw materials - cotton - weighted average methods
ii) Packing materials, stores and spares- at weighted average method
iii) Process - at weighted average method including appropriate
iv) Finished goods - at weighted average method including appropriate
v) Waste - at since realised/realisable value
vi) Scrapped machines - at depreciated value or net realisable value,
whichever is lower
vii) Stationery, stamps etc., - at actual item wise cost
6. REVENUE RECOGNITION
i) Sales are accounted on transfer of property in goods to the buyers
for a definite consideration; Sales include exchange fluctuation
gain/loss realized or incurred during the year in respect of export
ii) Sales include receipts incidental to export such as income from
import entitlement and premium on sale of such entitlement etc.
iii) Income from windmills denotes income earned by sale of electricity
to Tamilnadu Electricity Board and the income accrued for which billing
iv) Revenue from others:
a) Income from investments in shares is accounted for in the year in
which the right to receive the yield are definite.
b) Income from erstwhile financing business against overdue hire
purchase instalments, lease rentals, bills discounted and loans written
off are accounted for to the extent collected upon final settlement of
account with the parties.
7. FOREIGN CURRENCY TRANSACTIONS
i) Receivables on account of exports, backed by irrevocable letter of
credit of customer''s bankers are accounted for at the exchange rate as
negotiated by the bankers at the time of discounting of export bills.
ii) All other foreign currency transactions have been accounted for at
the rates negotiated by the bankers or at the forward contract rates
wherever applicable; exchange fluctuation on revenue account has been
charged to revenue.
8. EXCISE DUTY
Excise duty if any is consistently accounted on clearance basis.
Provision for depreciation has been made on cost of fixed assets, as
reduced by the cenvat credit, adopting the following methods/rates:
i) On straight line method and at the rates prescribed in schedule XIV
to the Companies Act 1956; for plant and machinery in the spinning
units of textile division, the rates applicable to continuous process
plant have been applied.
ii) For assets costing Rs 5000/- or less, full depreciation has been
charged in the year of purchase of such assets; for other assets
acquired during the year pro-rata charge has been made from the date of
first use; no depreciation is charged in the year of disposal of
assets, as per consistent practice followed by the company, which has
no revenue impact.
10. ACCOUNTING FOR TAXES ON INCOME
Income tax expense is accounted for in accordance with AS 22 -
Accounting for taxes on income prescribed under the Companies
(Accounting Standards) Rules, 2006 which includes current taxes and
Current taxes reflect the impact of tax on income of the previous year
as defined under the Income Tax Act, 1961 as per applicable rates.
Deferred taxes reflect the impact of Current Year timing differences
between taxable income and accounting income for the year and reversal
of timing differences of earlier years. Deferred tax assets are
recognized only to the extent that there is reasonable certainty that
sufficient future taxable income will be available.
11. IMPAIRMENT OF ASSETS
Impairment loss from fixed assets is assessed as at the close of each
financial year and appropriate provision, if required, is considered in
12. BORROWING COSTS
Interest on borrowings, if any attributed to acquisition of qualifying
assets are capitalized and included in the cost of the assets, as
13. EARNINGS PER SHARE
Basic Earnings per share is calculated by dividing the Net Profit after
tax attributable to the shareholders by the weighted average number of
Equity Shares outstanding during the year.
14. DEFINED RETIREMENT BENEFITS
Gratuity, which is a defined benefit, has been accounted for an
actuarial valuation by contribution to an approved gratuity fund
established under Life Insurance Corporation of India (LIC) group
gratuity scheme; difference in payment of gratuity to employees is
being accounted for in the year of settlement of such liability.
Contributions payable to Recognized Provident Funds, which is a defined
contribution are determined based on the statutory rates in force and
remitted to the competent authority, and is charged to the profit and
Contributions payable to Employees State Insurance Scheme, which is a
defined contribution are determined based on the statutory rates in
force and remitted to the competent authority, and is charged to the
profit and loss account.
15. RELATED PARTY TRANSACTIONS
Irrespective of the materiality, all the transactions between related
parties during the existence of related party relationship has been
disclosed as required by the Accounting Standard 18 prescribed under
(Accounting Standards) Rules, 2006. Items of the similar nature has
been disclosed in aggregate by type of related party except when
separate disclosure is necessary for an understanding of the effects of
related party transactions on the financial statements of the reporting
16. 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
event and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognized but are disclosed in the
notes. Contingent Assets are neither recognized nor disclosed in the
17. 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 balance 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.
18. CENVAT AND STATE VAT FOR INPUTS
i) The value of eligible CENVAT Credit against Central Excise duty paid
on purchase of capital goods and service tax on capital expenditure
have been deducted from the cost of relevant plant and machinery
ii) The value of eligible CENVAT Credit against Central Excise duty
paid has been adjusted against the relevant materials purchased and
inventory of materials has been valued at rates net of CENVAT Credit;
Service Tax paid against input services has been reduced from the
relevant expenses for input credit taken.
iii) CENVAT Credit availed has been adjusted against Central Excise
duty incurred on finished goods dispatched and unutilised deferred
CENVAT Credit are carried over as advance.
iv) STATE VAT - Input Credit against Capital goods are adjusted against
relevant asset and net amount capitalized; Input credit against
remaining goods are accounted for by adjustments against cost of
relevant goods; Unadjusted State VAT is carried over as advance.
19. OPERATING LEASES
Leases, where significant portion of risk and reward of ownership are
retained by the Lessor, are classified as Operating Leases and lease
rentals thereon charged to the Profit and Loss Account.
20. RESEARCH AND DEVELOPMENT
Revenue expenditure incurred on research and development is expensed as
incurred. Capital expenditure incurred on research and development is
depreciated over the estimated useful lives of the related assets.