1. Material Accounting Policies
1.1 Company Information
Gujarat Craft Industries Limited (Company) is a Public Limited Company domiciled in India and
incorporated under the provisions of the Companies Act, 2013. Its shares are listed on Bombay Stock
Exchange in India. The Company is engaged in the manufacturing of HDPE / PP woven fabrics, sacks,
PE tarpaulin. The company caters to both domestic and international markets.
The Board of directors approved the financials statements for the year ended March 31, 2025 and
authorized for issue on May 27, 2025.
1.2 Basis of Preparation of Financial Statements:
(i) Compliance with Ind-AS
The financial statements of the Company have been prepared in accordance with Indian Accounting
Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as
amended).
The financial statements have been prepared on a historical cost basis, except for certain financial
instruments which are measured at fair values.
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.
(ii) Current versus non-current classification
The Company presents assets and liabilities in the Balance Sheet based on current/non-current
classification.
An asset is treated as current when it is:
• Expected to be realised or intended to be sold or consumed in the normal operating cycle;
• Held primarily for the purpose of trading;
• Expected to be realised within twelve months after the reporting period; or
• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for
at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
• It is expected to be settled in the normal operating cycle;
• It is held primarily for the purpose of trading;
• It is due to be settled within twelve months after the reporting period; or
• There is no unconditional right to defer the settlement of the liability for at least twelve months
after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
The operating cycle is the time between acquisition of assets for processing and their realisation
in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
(iii) Rounding of amounts
The financial statements are presented in INR and all values are rounded to the nearest Lakh as
per the requirement of Schedule III, unless otherwise stated.
1.3 Use of Estimates:
The preparation of the financial statements in conformity with Ind AS requires the Management to
make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the
application of accounting policies and the reported amounts of assets and liabilities, the disclosures of
contingent assets and liabilities at the date of the financial statements and reported amounts of revenues
and expenses during the period. The application of accounting policies that require critical accounting
estimates involving complex and subjective judgments and the use of assumptions in these financial
statements have been disclosed in Note 1.4. Accounting estimates could change from period to period.
Actual results could differ from those estimates. Appropriate changes in estimates are made as the
management becomes aware of the changes in circumstances surrounding the estimates.
The said estimates are based on the facts and events, that existed as at the reporting date, or that
occurred after that date but provide additional evidence about conditions existing as at the reporting
date.
1.4 Critical estimates and judgments
The preparation of financial statements requires the use of accounting estimates which by definition
will seldom equal the actual results. Management also need to exercise judgment in applying the
Company’s accounting policies.
This note provides an overview of the areas that involved a higher degree of judgment or complexity,
and items which are more likely to be materially adjusted due to estimates and assumptions turning
out to be different than those originally assessed. Detailed information about each of these estimates
and judgments is included in relevant notes together with information about the basis of calculation for
each affected line item in the financial statements.
The areas involving critical estimates or judgment are:
Estimation of current tax expenses - refer note 1.7
The Group’s tax jurisdiction is India. Significant judgments are involved in estimating budgeted profits
for the purpose of paying advance tax, determining the provision for income taxes, including amount
expected to be paid/recovered for uncertain tax positions (Refer note 18).
Estimation of Defined benefit obligation - refer note 1.14
The costs of providing pensions and other post-employment benefits are charged to the Statement of
Profit and Loss in accordance with IND AS 19 ‘Employee benefits’ over the period during which benefit
is derived from the employees’ services. The costs are assessed on the basis of assumptions selected
by the management. These assumptions include salary escalation rate, discount rates, expected rate
of return on assets and mortality rates. The same is disclosed in Note 39, ‘Post Retirement Benefit
Plans’.
1.5 Fair value measurement
The Company measures financial instruments, such as, derivatives at fair value as per Ind AS 113 at
each balance sheet date. All assets and liabilities for which fair value is measured or disclosed in the
financial statements are categorized within the fair value hierarchy, described as follows, based on the
lowest level input that is significant to the fair value measurement as a whole:
- Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
- Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable
- Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities
on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value
hierarchy as explained above.
1.6 Revenue recognition
Revenue is recognized upon transfer of control of promised products or services to customers in an
amount that reflects the consideration which the company expects to receive in exchange for those
products or services GST is not received by the Company on its own account. Rather, it is tax collected
on value added to the commodity by the seller on behalf of the government. Accordingly, it is excluded
from revenue.
The specific recognition criteria described below must also be met before revenue is recognized.
“Revenue towards satisfaction of a performance obligation is measured at the amount of transaction
price (net of variable consideration) allocated to that performance obligation. The transaction price of
goods sold is net of variable consideration on account of various discounts offered by the company as
the part of contract. Revenue (net of variable consideration) is recognized only to the extent that is
highly probable that amount will not be subject to significant reversal when uncertainty relating to its
recognition is resolved.”
Sale of goods
Revenue from the sale of goods is recognized when control of the goods have passed to the buyer,
usually on delivery of the goods. In determining the transaction price for the sale of goods, the company
considers the effects of variable consideration, the existence of significant financing components, non
cash consideration, and consideration payable to the customer (if any).
Interest income
Interest income on financial asset is recognized using the effective interest rate (EIR) method.
Dividends
Dividend income from investment is accounted for when the right to receive is established, which is
generally when shareholders approve the dividend.
Other Income:
Other income is recognized when no significant uncertainty as to its determination or realization exists.
Contract Balances:
Trade Receivables:
A receivable represents the company’s right to an amount of consideration that is unconditional (i.e.,
only the passage of time is required before payment of the consideration is due). Refer note 1.16
Financial instruments - initial recognition and subsequent measurement.
Contract Liabilities:
A contract liability is the obligation to transfer goods or services to a customer for which the company
has received consideration (or an amount of consideration is due) from the customer. If a customer
pays consideration before the company transfers goods or services to the customer, a contract liability
is recognised when the payment is made or the payment is due (whichever is earlier). Revenue for the
same is recognised when the company performs under the contract.
1.7 Taxes
Tax expenses comprise of current and deferred tax.
Current income tax
a Current tax is measured at the amount expected to be paid on the basis of reliefs and deductions
available in accordance with the provisions of the Income Tax Act, 1961. The tax rates and tax
laws used to compute the amount are those that are enacted or substantively enacted, at the
reporting date.
b Current tax items are recognized in correlation to the underlying transaction either in Profit &
Loss, Other Comprehensive Income or directly in equity.
Deferred tax
a Deferred tax is provided using the balance sheet approach on temporary differences between the
tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at
the reporting date.
b Deferred tax liabilities are recognized for all taxable temporary differences.
c Deferred tax assets are recognized for all deductible temporary differences, the carry forward of
any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that
taxable profit will be available against which the deductible temporary differences, the carry
forward of unused tax losses can be utilized.
d The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or part
of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each
reporting date and are recognized to the extent that it has become probable that future taxable
profits will allow the deferred tax asset to be recovered.
e Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
year when the asset is realized or the liability is settled, based on tax rates that have been enacted
or substantively enacted at the reporting date.
f Deferred tax items are recognized in correlation to the underlying transaction either in OCI or
directly in equity.
g Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set
off current tax assets against current tax liabilities.
1.8 Property, Plant and Equipment (PPE)
Property, Plant and Equipment (PPE) (including Capital work in progress) are stated at cost net of
accumulated depreciation and accumulated impairment losses, if any. The cost comprises the purchase
price, borrowing costs, if capitalization criteria are met, directly attributable cost of bringing the asset to
its working condition for the intended use.
Capital Work in progress included in PPE is stated at cost, net accumulated depreciation and
accumulated impairment losses, if any. Such cost includes the cost of replacing part of the plant and
equipment and borrowing costs for long-term constructions projects if the recognition criteria is met.
When significant parts of plant and equipment are required to be replaced at intervals, the Company
depreciates them separately based on their specific useful lives. Likewise, when a major inspection is
performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement
if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit
or loss as incurred.
Borrowing cost relating to acquisition/construction of fixed assets which take substantial period of time
to get ready for its intended use are also included to the extent they relate to the period till such assets
are ready to be put to use.
Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as
prescribed under Part C of Schedule II of the Companies Act, 2013 except for the assets mentioned
below for which useful lives estimated by the management. The identified component of fixed assets
are depreciated over the useful lives and the remaining components are depreciated over the life of
the principal assets.
Further, the Company evaluated the useful life of certain components of Plant and Machinery, the
impact of which is not material. Assets costing Rs. 5,000 or less are fully depreciated in the year of
purchase.
An item of property, plant and equipment and any significant part initially recognised is derecognised
upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or
loss arising on derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the
asset is derecognised.
1.9 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as
part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur.
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing
of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment
to the borrowing costs.
General borrowing costs are capitalized at the weighted average of such borrowings outstanding
during the year.
1.10 Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the
arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the
arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a
right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Company as a lessee:
(i) Right-of-use assets
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the
date the underlying asset is available for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease
liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial
direct cost incurred and Lease payment made at or before the commencement date less any
lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the
the lease term and the estimated useful lives of the assets is over the balance period of lease
agreement.
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost
reflects the exercise of a purchase option, depreciation is calculated using the estimated useful
life of the asset. The right-of-use assets are also subject to impairment. Refer to the accounting
policies in relating to Impairment of non-financial assets.
(ii) Lease Liabilities
At the commencement date of the lease, company recognizes lease liabilities measured at the
present value of lease payments to be made over the lease term. The lease payments include
fixed payments (including in substance fixed payments) less any lease incentives receivable,
variable lease payments that depend on an index or a rate, and amounts expected to be paid
under residual value guarantees. The lease payments also include the exercise price of a purchase
option reasonably certain to be exercised by the company and payments of penalties for terminating
the lease, if the lease term reflects the company exercising the option to terminate. Variable lease
payments that do not depend on an index or a rate are recognized as expenses (unless they are
incurred to produce inventories) in the period in which the event or condition that triggers the
payment occurs.
In calculating the present value of lease payments, company uses its incremental borrowing rate
at the lease commencement date because the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease liabilities is increased to reflect
the accretion of interest and reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a
change in the lease payments (e.g., changes to future payments resulting from a change in an
index or rate used to determine such lease payments) or a change in the assessment of an option
to purchase the underlying asset.
(iii) Short-term leases and leases of low-value assets
Company applies the short-term lease recognition exemption to its short-term leases. (i.e., those
leases that have a lease term of 12 months or less from the commencement date and do not
contain a purchase option). It also applies the lease of low-value assets recognition exemption
that are considered to be low value. Lease payments on short-term leases and leases of low-
value assets are recognized as expense on a straight-line basis over the lease term.
1.11 Inventories
Inventories are valued as under:
a RAW MATERIALS, PACKING MATERIALS AND STORES & SPARES :
Raw materials and stores and spares 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 of raw materials and stores and spares is determined on First-in-First-out basis.
b FINISHED GOODS & WORK IN PROGRESS :
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.
c WASTAGE :
Wastages are valued at net realizable value.
d STOCK-IN-TRADE :
Valued at lower of cost or net realizable value and for this purpose cost is determined on weighted
average basis.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated
costs of completion and the estimated costs necessary to make the sale.
1.12 Impairment of Non-financial Assets
Intangible assets and Property, Plant and Equipment are evaluated for recoverability whenever events
or changes in circumstances indicate that their carrying amounts may not be recoverable. For the
purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell
and the value-in-use) is determined on an individual asset basis unless the asset does not generate
cash flows that are largely independent of those from other assets. In such cases, the recoverable
amount is determined for the CGU to which the asset belongs.
If such assets are considered to be impaired, the impairment to be recognized in the Statement of Profit
and Loss is measured by the amount by which the carrying value of the assets exceeds the estimated
recoverable amount of the asset. An impairment loss is reversed in the Statement of Profit and Loss if
there has been a change in the estimates used to determine the recoverable amount. The carrying
amount of the asset is increased to its revised recoverable amount, provided that this amount does not
exceed the carrying amount that would have been determined (net of any accumulated amortization or
depreciation) had no impairment loss been recognized for the asset in prior year.
Impairment is determined for goodwill by assessing the recoverable amount of each Cash Generating
Unit (i.e. CGU) (or group of CGUs) to which the goodwill relates. When the recoverable amount of the
CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating to
goodwill cannot be reversed in future periods.
Intangible assets with indefinite useful lives are tested for impairment annually as at year end at the
CGU level, as appropriate, and when circumstances indicate that the carrying value may be impaired.
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