(a) Change in accounting policy
Presentation & disclosure of Financial Statements
During the year ended 30th June, 2012, the revised Schedule VI notified
underthe Companies Act, 1956 has become applicable to the Company for
preparation and presentation of its Financial Statements. The adoption
of revised Schedule does not impact recognition and measurement
principles followed for preparation of Financial Statements. However,
it has significant impact on the presentation and disclosures made in
the Financial Statements. The Company has also reclassified the
previous year figures in accordance with the requirements applicable in
the current year.
(b) Currentand Non currentclassification
Any asset / liability is classified as current if it satisfies any of
the following conditions:
(i) it is expected to be realized / seltled.in the Company''s normal
operating cycle; or
(ii) it is expected to be realized / settled within 12 months after the
reporting date; or
(iii) inthecaseof an asset,
a) it is held primarily for the purpose of being traded;or
b) it is cash or cash equivalent unless it is restricted from being
exchanged or utilized to settle a liability for atleast 12 months after
the reporting date.
(iv) in case of a liability, the Company does not have an unconditional
right to defer settlement of liability for atleast 12 months after the
All other assets / liabilities are classified as non- current.
(c) 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 resulls could differ from
such estimates. Any revision to accounting estimates is recognised
prospectively in the current and future periods.
(d) Tangible Fixed Assets
FixedAssets are stated at cost of acquisition including taxes, duties,
freight and other incidental expenses related to acquisition,
construction and installation less depreciation/amortisation. Borrowing
costs that are directly attributable to acquisition, construclion or
production of a qualifying asset are capitalized.
Intangible assets are stated at cost of acquisition less accumulated
depreciation/ amortisation. Computer Software is amortised over a
period'' of thirty six months. Amortisation is done on the straight line
(f) 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 discounled 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
Inventories are valued at lower of cost or nel realisable value, on the
basis of physical verification carried out by trie management. Cost is
arrived at on a FIFO basis and includes appropriate portion of
allocable overheads. Net realizable value is the estimated selling
price in ordinary course of business, less estimated cost necessary to
make the sale. Raw Materials are valued at cost (FIFO basis). Goods in
transit are valued at cost. Cost of inventories have been computed to
include all costs of purchases, cost of conversion and other costs
incurred in bringing the inventories to their present location and
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 of sewing
machines and breakages of cast iron, plastic & wooden accessories and
are accrued at 1 % of sales to cover future costs.
(j) Revenue recognition
i) 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 is recognized when all
significant risk and rewards of the ownership are transferred to the
buyer as per the terms of sales which coincides with the despatch of
the goods. Revenue is recorded net of value added tax / sales taxi
returns and gross of excise duty, if any.
ii) Interest income is recognized on time proportionate basis taking
into account the amount outstanding and the rate applicable and is
staled at gross.
Depreciation is provided on a straight-line basis at the per annum
rates (with the corresponding useful life) specified below:
Assets Percentage Estimated useful
life in years
Building 3.34% 30years
machinery 4.75%to25% 4 years to21 years
Vehicles 25% 4 years Office
equipment 20% 5 years Furniture
and fixtures 20% 5 years
Computers 33.33% 3 years
Assets costing less than Rs. 5,000/- per unit are depreciated at the
rate of 100%. Depreciation on additions is being provided on prorata
basis from the date of such additions. Similarly, depreciation on
assets sold/disposed off during the year is being provided up to the
dates on which such assets are sold/disposed off. Renovation
expenditure incurred on shops, warehouses, offices etc. are written off
in the year it is incurred.
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
(m) 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 Ihe year, or reported in
previous financial statements, are recognised as income or as expenses
in the year in which they arise.
(n) Employees Benefits
Defined Contribution Plans
Company''s contribution paid /payable during the year to Employees State
Insurance Corporation (ESIC) and Provident Fund are recognized in the
Statement of Profit & Loss. The Provident Fund Contributions are made
to employer established Provident Fund. ESIC contributions are made to
Government administered ESIC fund. The Company also makes contribution
towards superannuation and is required to contribute a specified
percentage of payroll cost to fund the benefits. /
Defined Benefit Plans
Company provides retirement benefits in the form of gratuity (funded),
and leave encashment (unfunded) which are measured using the Projected
unit credit method with actuarial valuation being carried out at each
valuation dale. Contribution for Gratuity is made to Life Insurance
Corporation of India as per Company''s Scheme. Provision / write back,
if any is made on the basis of the present value of liability as at the
Balance Sheet date determined by an actuarial valuation and is treated
as liability under OtherCurrent Liabilities.
Termination benefits are recognized as an expense as and when incurred.
Short term compensated absences are provided based on past experience
of leave availed. Actuarial gains / losses are immediately taken to
Statement of Profit & Loss and are not deferred.
(o) 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.
(p) Taxes on Income
Income Tax is accounted for in accordance with Accounting Standard on
Accounting for Taxes on Income notified pursuant to the Companies
(Accounting Standards) Rules. 2006.
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 asan asset in the Balance Sheet.
Deferred Tax is provided and recognized on timing differences between
taxable income arid accounting income subject to prudential
consideration. Deferred Tax Asset on unabsorbed depreciation and carry
forward of losses are not recognized unless there is a virtual
certainty about availability of future taxable income to realize such
(q) Provisions, Contingent Liabilities & Contingent Assets
Provisions are recognized when there is a present legal or statutory
obligation as a result of past events and where it is probable that
there will be outflow of resources lo settle the obligation and when a
reliable estimate of the amount of the obligation can be made.
Contingent Liabilities are recognized only when there is a possible
obligation arising from past events due to occurrence or non-occurrence
of one or more uncertain future events not wholly within the control of
the Company or where any present obligation cannot be measured in terms
of future outflow of resources or where a reliable estimate of the
obligation cannot be made. Obligations are assessed on an ongoing basis
and only those having a largely probable outflow or resources are
Contingent Assets are not recognized in the Financial Statements.
(r) 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.
(s) Events afterthe 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.