(i) These accounts are prepared on the historical cost basis and on the
accounting principles of a going concern.
(ii) Accounting policies not specifically referred to otherwise are
consistent and in consonance with generally accepted accounting
principles and mandatory Accounting Standards as per Company
(Accounting Standard) Rules, 2006.
1.2 REVENUE RECOGNITION
(i) Revenue represents the net invoice value of goods and services
provided to third parties after deducting discounts, volume rebates,
outgoing sales taxes and duties, and are recognized usually when all
significant risks and rewards of ownership of the asset sold are
transferred to the customer and the commodity has been delivered to the
(ii) Revenues from sale of material by-products are included in
(iii) Interest income is recognized on an accrual basis in the income
1.3 VALUATION OF INVENTORIES
(i) Inventories are valued at lower of Cost and Net Realizable Value
except for scrap and by-products which are valued at net realizable
(ii) Cost of inventories of finished goods and work-in-process includes
material cost, cost of conversion and other related overhead costs.
(iii) Cost of inventories of raw material, work-in-process and stores &
spares is determined on weighted average cost method.
Long Term Investments are stated at cost. Provision for diminution in
long term investments is made only if such decline is other than
temporary. Current investments are carried at lower of cost or market
1.5 FIXED ASSETS
Fixed assets are stated at cost of acquisition (net of canvas credit) &
are inclusive of freight, duties, taxes and installation expenses less
accumulated depreciation and impairment loss, if any.
1.5 DEPRECIATION/ AMORTISATION/ IMPAIREMENT LOSS
(a) Depreciation on fixed assets is provided on Straight Line Method by
applying rates given in Schedule XIV of the Companies Act, 1956.
(except leasehold land which is amortization over the period of lease).
(b) Depreciation on certain plant & machinery is provided as per the
rates applicable to the continuous process plant on the basis of
(c) Depreciation on addition/sale is provided Pro-rata with reference
to the month of addition/sale.
(d) In case, the recoverable amount of the fixed assets is lower than
its carrying amount a provision for the impairment loss, depreciation
on impaired assets is provided based on the reassessed life of the
(e) Capital Expenditure on assets not owned are written off over the
duration of contract or ten years, whichever is lower.
(f) Fixed assets costing Rs.5000 or less has been depreciated fully in
the year of purchase.
1.6 BORROWING COST
Interest and other costs in connection with the borrowing of the funds
to the extent related/attributed for acquisition/ construction of
qualifying fixed assets are capitalized till the date of intended
commercial use of the assets and other borrowing costs are charged to
the Profit & Loss Account.
1.7 GOVERNMENT GRANTS
(i) Grants other than capital subsidy under TUFS relating to fixed
assets are shown as deduction from the gross value of fixed assets and
those of the nature of project subsidy are credited to Capital
(ii) Other Government Grants including incentive are credited to Profit
& Loss Account or deducted from the related expenses.
(iii) Capital Subsidy under TUFS from the Ministry of Textiles on
specified processing machinery has been treated as deferred income
which is recognized on systematic and rational basis in proportion of
the applicable depreciation over the useful life of the respective
assets and is adjusted against the depreciation / credited to the
Profit and Loss account.
1.8 FOREIGN CURRENCY TRANSACTIONS
Foreign Currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate prevailing
at the time of transaction. Monetary items denominated in foreign
currencies and outstanding at the year-end are translated at year-end
rates. Exchange difference arising on settlement of monetary items at
rates different from those at which they were initially recorded are
recognized as income or as expenses in the year in which they arise. In
case of forward contracts, the exchange difference are dealt within the
Profit & Loss account over the period of the contracts.
1.9 EXPENDITURE DURING CONSTRUCTION PERIOD
All pre-operative project expenditure (net of income accrued) incurred
upto the date of commercial production is capitalized and the same are
allocated to the respective fixed assets on the completion of the
1.10 EMPLOYEE BENEFITS:-
(I) Defined Contribution Plan
Employee benefits in the form of Provident Fund are considered as
defined contribution plan and the contributions are charged to the
Profit and Loss Account of the year when the contributions to the
respective funds are due.
(II) Defined Benefit Plan
A retirement benefit in the form of Gratuity is funded every year under
group policy of Life Insurance Corporation of India. Long Term
compensated leaves are considered as defined benefit obligations and
are provided for on the basis of an actuarial valuation, using the
projected unit credit method, as at the date of the Balance Sheet.
(III) Other short term absences are provided based on past experience
of leave availed.
Actuarial gain/losses, if any, are immediately recognised in the Profit
and Loss Account.
1.11 TAXES ON INCOME
Provision for In come Tax for the period comprises of Current Tax and
Deferred Tax. Provision for current tax has been made on the basis of
estimated taxable income in accordance with the provisions of Income
tax Act, 1961. Deferred Tax is recognized, subject to consideration of
prudence, at the prevailing tax rates on timing differences between
taxable and accounting income/ expenditure that originate in one period
and are capable of reversal in one or more subsequent periods.
1.12 CONTINGENT LIABILITIES, CONTINGENT ASSETS & PROVISIONS
Contingent liabilities if material, are disclosed by way of notes,
contingent assets are not recognized or disclosed in the financial
statements. Provision is recognized when an enterprise has a present
obligation as a result of past event(s) and it is probable that an
outflow of resources embodying economic benefits will be required to
settle the obligation(s), in respect of which a reliable estimate can
be made for the amount of obligation.