(a) Basis of Preparation
The financial statements of the Company have been prepared in
accordance with the generally accepted accounting principles in India
(Indian GAAP). The company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under section 133 of the Companies Act 2013 (''the Act), read together
with paragraph 7 of the Companies (Accounts) Rules 2014 and provisions
of the Act, to the extent notified. The financial statements have been
prepared on an accrual basis and under the historical cost convention
except for certain Fixed Assets which are carried at revalued amounts
and on going concern basis.
(b) Use of Estimates
The preparation of the Financial Statements in conformity with
generally accepted accounting principles requires the management to
make estimates and assumptions that affect the reporting balances of
assets and liabilities and disclosures relating to contingent
liabilities as at the date of the financial statements and reporting
amounts of income and expenditure during the year. Contingencies are
recorded when it is probable that a liability will be incurred, and the
amount can be reasonably estimated. Actual results could differ from
such estimates. Any revision to accounting estimates is recognized in
the period the same is determined.
(c) Fixed Assets (Tangible & Intangible)
Tangible Fixed Assets are stated at cost (or revalued amount as the
case may be), less accumulated depreciation and impairment losses, if
any. Cost comprises the purchase price / cost of acquisition including
taxes, duties, freight and other incidental expenses related to
acquisition, construction and installation to bring the asset to its
working condition for its intended use. In case of revaluation of fixed
assets, the original cost as written up by the valuer, is considered in
the accounts and the differential amount is transferred to revaluation
reserve. Borrowing costs that are directly attributable to
acquisition, construction or production of a qualifying asset are
Intangible fixed assets are stated at cost less accumulated
amortization and net of impairments, if any. An intangible asset is
recognized if it is probable that the expected future economic benefits
that are attributable to the asset will flow to the Company and its
cost can be measured reliably. Intangible assets having finite useful
lives are amortized on straight line basis over their estimated useful
(d) Impairment of Assets
Regular review is done to determine whether there is any indication for
impairment in carrying amount of the Company''s fixed assets. If any
indication exists, an assets recoverable amount is estimated based on
internal / external factors. An impairment loss is recognized if the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the asset''s net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value at the weighted average
cost of capital.
Long term investments are stated at cost. Provision for diminution in
value, other than temporary, is made in the accounts. Earnings on
investments are accounted for when the right to receive payment is
Raw materials are valued at Lower of cost and net realizable value.
However, materials and other items held for use in the production of
inventories are not written down below cost if the finished products in
which they will be incorporated are expected to be sold at or above
cost. Cost is determined on a First in First out basis.
Work-in-progress and finished goods are valued at Lower of cost and net
realizable value. Cost includes direct materials and labour and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty. Cost is
determined on a First in First Out basis.
Traded goods are valued at Lower of cost and net realizable value. Cost
includes cost of purchase and other costs incurred in bringing the
inventories to their present location and condition. Cost is determined
on a First in First out basis.
Goods in transit are valued at cost
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion to make the
Product warranty costs are determined using reasonable estimates based
on costs incurred in the past and are provided for in the year sale is
made. Contractual obligations in respect of warranties includes
estimates made for the products sold by the Company which are covered
under free replacement warranty on manufacturing defects / breakages
etc. in respect of sewing machines and domestic appliances are accrued
at 1% of sales to cover future costs.
(h) Excise Duty
Excise duty is accounted for at the point of manufacture of goods and
accordingly, is considered for valuation of finished goods stock lying
in the factory and branches and as on the Balance Sheet date.
(i) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company and the revenue can be
reliably measured. Revenue from sale of goods including traded and
manufactured products is recognized upon passage of title to the
customers, in accordance with the Sale of Goods Act, 1930. The Company
collects Sales taxes / Value added Taxes (VAT) on behalf of the
Government and, therefore, these are not economic benefits flowing to
the Company. Hence they are excluded from Revenue. Interest income is
recognized on time proportionate basis taking into account the amount
outstanding and the rate applicable and is stated at gross. Export
incentives are accounted on accrual basis.
(j) Depreciation / Amortization
i) Tangible Assets
a) Depreciation on the tangible fixed assets is provided on straight
line method based on the useful life of the assets as estimated by the
management. The estimate of the useful life of the assets has been
assessed based on internal evaluation/ technical advice which
considered the nature of the asset, expected physical wear and tear,
the operating conditions of the asset etc., The useful lives of
following assets; furniture & fittings, plant and machinery and office
equipment, are depreciated over estimated useful lives of 5 years, 4 -
15 years & 2- 5 years respectively which are lower than those indicated
in Schedule II. The Company has used the following lives to provide
depreciation on its fixed assets (except building as mentioned in para
b) The buildings are depreciated equally over the balance useful life
ascertained by independent technical expert, which ranges between 41
years and 52 years after considering the structural condition etc. The
management believes that the balance useful lives so assessed best
represent the periods over which the buildings are expected to be in
c) Leasehold land is amortized over the lease period.
d) In case of leasehold land and building which were revalued in the
past, the additional depreciation on the increased value of the assets
due to revaluation is debited to Statement of Profit & Loss and
equivalent amount is transferred from Revaluation Reserve to General
e) Depreciation on fixed assets added/disposed off during the year is
provided on pro-rata basis with reference to the month of addition/
f) In case of impairment, if any, depreciation is provided on the
revised carrying amount of the assets over its remaining useful life.
ii) Intangible Assets
Computer software is amortized over a period of thirty six months on
the straight line method.
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased assets are classified as
operating leases. Operating lease payments are recognized as an expense
in the Statement of Profit & Loss on a straight-line basis over the
(l) Foreign currency transactions
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
Foreign currency monetary items are reported using the closing rate.
Non-monetary items, which are carried in terms of historical cost
denominated in a foreign currency, are reported using the exchange rate
at the date of the transaction.
Exchange differences arising on the settlement of monetary items or on
reporting company''s monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or as expenses
in the year in which they arise.
(m) Employees Benefits
Short Term Employee Benefit is recognized as an expense in the
Statement of Profit and Loss of the year in which related service is
rendered. Post employment and other Long Term Employee Benefits are
provided in the Accounts in the following manner:
i) Gratuity: Maintained as a defined benefit retirement plan and
contribution is made to the Life Insurance Corporation of India, as per
the Company''s Scheme. Provision / write back, if any is made on the
basis of the present value of the liability as at the Balance Sheet
date determined by actuarial valuation following projected Unit Credit
Method and is treated as liability.
ii) Leave Encashment: As per independent actuarial valuation as at the
Balance Sheet date following projected Unit Credit Method in accordance
with the requirements of Accounting Standard AS-15 on Employee Benefit''
is included in provisions.
iii) Provident Fund: Liability on account of Provident Fund (Pension)
for employees is a defined contribution wherever contributions are made
to a fund administered by Government Provident Fund Authority.
For employees, Provident Fund administered by a Recognized Trust, is a
Defined Benefit Plan (DBP) wherein the employee and the Company make
monthly contributions. Pending the issuance of Guidance Note from the
Actuarial Society of India, actuarial valuation is not carried out and
the Company provides for required liability at year end, in respect of
the shortfall, if any, upon confirmation from the Trustees of such
(n) Research and development
Research and development expenses of revenue nature are charged to the
Statement of Profit & Loss in the year in which they are incurred.
(o) Taxes on Income
Tax expense comprises of current and deferred tax. Current income tax
is measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act,1961.Deferred income taxes
reflects 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 is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. In situations
where the company has unabsorbed depreciation or carry forward tax
losses, all deferred tax assets are recognized only if there is virtual
certainty supported by convincing evidence that they can be realized
against future taxable profits.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The company writes down the carrying amount of the deferred
tax assets to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonable certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Minimum Alternate Tax (MAT) is accounted for in accordance with tax
laws which give rise to future economic benefits in the form of tax
credits against which future income tax liability is adjusted and is
recognized as an asset in the Balance Sheet.
(p) Provisions, Contingent Liabilities & Contingent Assets
A provision is recognized when the Company has a present obligation as
a result of past event and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions made in terms of Accounting
Standard-29, are not discounted to its present value and are determined
based on the management estimate required to settle the obligation at
the balance sheet date. These are reviewed at each balance sheet date
and adjusted to reflect the current management estimates.
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. The company does not recognize a
contingent liability but discloses its existence in the financial
Contingent assets are not recognized in the financial statements.
(q) Earnings per share
Earning per share is calculated by dividing the net profit or loss for
the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year.
(r) Events after the Balance Sheet date
Events occurring after the date of the Balance Sheet which affect the
financial position to a material extent are taken into cognizance.
(s) Cash and cash equivalents
Cash and cash equivalents for the purpose of cash flow statement
comprise cash at bank and in hand and fixed deposits with maturity of
three months or less.