Note No. 2 Significant Accounting Policies
2.1 Basis of accounting and preparation of financial statements
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The financial statements of the Company have been prepared in accordance with the Generally
Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards
specified under section 133 the Act read with the Companies (Accounting Standards) Rules,
2021 and the relevant provisions of the Companies Act, 2013. The financial statements have
been prepared on accrual basis under the historical cost convention. All assets and liabilities
are classified as current or non current as per the operating cycle criterion as per schedule III
of the companies act 2013.The accounting policies adopted in the preparation of the financial
statements are consistent with those followed in the previous year. All the values are rounded
off to nearest Hundreds.
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Previous year figures have been regrouped and rearranged whenever found necessary to make
it comparable
2.2 Use of Estimates
The preparation of the financial statements in the conformity with Indian GAAP requires the
management to make estimates and assumptions considered in the reported amounts of
assets and liabilities (including Contingent liabilities) and reported income and expenses during
they year. The management believes that the estimates used in preparation of the financial
statements are prudent and reasonable.
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2.3 Inventories
Inventories are valued at lower of cost on FIFO basis and net realisablevalue after providing
for obsolesence and other losses. The cost includes all the charges incurred till bringing the
goods to the point of sales. Other stock is valued at estimated realisable value
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2.4 Property, Plant and Equipment:
2.4.1Property Plant and Equipment are stated at cost less accumulated depreciation. Cost
includes all expenses incurred to bring the asset to its present location and condition
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2.4.2 Depreciation and amortization
Depreciation has been provided on the Written Down Value Method over the useful
life of the asset as per the provisions of schedule II of the Companies Act 2013.
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2.4.3 Capital work-in-progress:
Projects under which assets are not ready for their intended use and other capital
work-in-progress are carried at cost, comprising direct cost, related incidental
expenses and attributable interest.
2.4.4 Intangible assets
Intangible assets are carried at cost less accumulated amortisation and impairment
losses, if any. The cost of an intangible asset comprises its purchase price, including
any import duties and other taxes and any directly attributable expenditure on
making the asset ready for its intended use and net of any trade discounts and
rebates.
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2.5 Cash and cash equivalents
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Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short¬
term balances (with an original maturity of three months or less from the date of acquisition),
highly liquid investments that are readily convertible into known amounts of cash and which
are subject to insignificant risk of changes in value.
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2.6 Cash flow statement
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary
items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals
or accruals of past or future cash receipts or payments. The cash flows from operating,
investing and financing activities of the Company are segregated based on the available
information.
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2.7 Revenue recognition
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2.7.1 Sale of goods
Sales are recognised, net of returns and trade discounts, on transfer of significant risks and
rewards of ownership to the buyer, which generally coincides with the delivery of goods to
customers. Sales excludes the value of Goods and Service taxes as applicable on such goods
sold by the company
2.7.2 Income from services
Revenues from contracts priced on a time and material basis are recognised when services are
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rendered and related costs are incurred.
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2.7.3 Other income
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Interest income is accounted on accrual basis. Dividend income is accounted for when the right
to receive it is established.
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2.8 Segment Reporting
The Company identifies primary segments based on the dominant source, nature of risks and
returns and the internal organisation and management structure. The operating segments are
the segments for which separate financial information is available and for which operating
profit/loss amounts are evaluated regularly by the executive Management in deciding how to
allocate resources and in assessing performance Accordingly company has only one Segment
namely TEXTILES.
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2.9 Taxes on income
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Current tax is the amount of tax payable on the taxable income for the year as determined in
accordance with the provisions of the Income Tax Act, 1961.
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Deferred tax is recognised on timing differences, being the differences between the taxable
income and the accounting income that originate in one period and are capable of reversal in
one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantially enacted as at the reporting date. Deferred tax liabilities are recognised
for all timing differences. Deferred tax assets in respect of unabsorbed depreciation and carry
forward of losses are recognised only if there is virtual certainty that there will be sufficient
future taxable income available to realise such assets.
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2.10 Foreign currency transactions and translations
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2.10.1 Initial recognition
Transactions in foreign currencies entered into by the Company and its integral foreign
operations are accounted at the exchange rates prevailing on the date of the transaction or at
rates that closely approximate the rate at the date of the transaction.
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2.10.2 Accounting of forward contracts
Premium / discount on forward exchange contracts, which are not intended for trading or
speculation purposes, are amortised over the period of the contracts if such contracts relate to
monetary items as at the Balance Sheet date.
2.11 Government Grants
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Government grants and subsidies arerecognised when there is reasonable assurance that the
Company will comply with the conditions attached to them and the grants / subsidy will be
received. Government grants whose primary condition is that the Company should purchase,
construct or otherwise acquire capital assets are presented by deducting them from the
carrying value of the assets. The grant is recognised as income over the life of a depreciable
asset by way of a reduced depreciation charge.
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Government grants in the nature of promoters' contribution like investment subsidy, where no
repayment is ordinarily expected in respect thereof, are treated as capital reserve. Government
grants in the form of non-monetary assets, given at a concessional rate, are recorded on the
basis of their acquisition cost. In case the non-monetary asset is given free of cost, the grant is
recorded at a nominal value.
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2.12 Investments
Long-term investments (excluding investment properties), are carried individually at cost less
provision for diminution, other than temporary, in the value of such investments. Current
investments are carried individually, at the lower of cost and fair value. Cost of investments
include acquisition charges such as brokerage, fees and duties.
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2.13 Borrowing costs
Borrowing costs include interest, amortisation of ancillary costs incurred and exchange
differences arising from foreign currency borrowings to the extent they are regarded as an
adjustment to the interest cost. Costs to the extent not directly related to the acquisition of
qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan.
Borrowing costs, allocated to and utilised for qualifying assets, pertaining to the period from
commencement of activities relating to construction / development of the qualifying asset
upto the date of capitalisation of such asset is added to the cost of the assets.
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2.14 Leases
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The company has not taken any asset on lease and has also not given its any of asset on lease
to other parties.
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2.15 Earnings per share
Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post
tax effect of extraordinary items, if any) by the weighted average number of equity shares
outstanding during the year.
2.16 Impairment of assets
The carrying values of assets / cash generating units at each Balance Sheet date are reviewed
for impairment. If any indication of impairment exists, the recoverable amount of such assets
is estimated and impairment is recognised.
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