A) INVENTORIES
Inventories are valued at lower of cost and net realizable value.
The cost of raw materials, components, stock-in-trade,
consumable stores packing material and spare parts are
determined using first-in first-out / specific identification method
and includes freight, taxes and duties, (net of credits) wherever
applicable, and any other expenditure incurred in bringing them
to their present location and condition. In the case of finished
goods and work-in-progress, cost includes an appropriate
share of manufacturing overheads based on normal operating
capacity.
Net realisable value is the estimated selling price in the ordinary
course of business, less the estimated cost of completion and
the estimated costs necessary to make the sale. The net
realisable value of work-in-progress is determined with
reference to the selling prices of related finished products. Raw
materials, stores and spares, packing and others held for use in
the production of finished goods are not written down below
except in cases where material prices have declined and it is
estimated that the cost of the finished goods will exceed their
net realizable value.
The comparison of cost and net realisable value is made on an
item by item basis.
B) CASH AND CASH EQUIVALENTS (FOR PURPOSES OF
CASH FLOW STATEMENT)
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.
C) CASH FLOW STATEMENT
Cash flows are reported using the indirect method, whereby
profit / (loss) 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. In cash flow statement, cash and
cash equivalents include cash in hand, balances with banks in
current accounts and other short-term highly liquid investments
with original maturities of three months or less.
D) PROPERTY, PLANT AND EQUIPMENT
Recognition and measurement
The cost of an item of property, plant and equipment shall be
recognised as an asset if, and only if it is probable that future
economic benefits associated with the item will flow to the
Company and the cost of the item can be measured reliably.
Freehold land is stated at historical cost less any accumulated
impairment losses. Items of property, plant and equipment are
measured at cost, which includes capitalised borrowing costs,
less accumulated depreciation and accumulated impairment
losses, if any. Cost of an item of property, plant and equipment
comprises:
a. purchase price, including import duties and non¬
refundable taxes on purchase (goods and service tax),
after deducting trade discounts and rebates.
b. any directly attributable cost of bringing the item to its
working condition for its intended use, estimated costs of
dismantling and removing the item and restoring the site
on which it is located.
c. The cost of a self-constructed item of property, plant and
equipment comprises the cost of materials and direct
labour, any other costs directly attributable to bringing
the item to working condition for its intended use, and
estimated costs of dismantling and removing the item
and restoring the site on which it is located.
Any gain/ loss on disposal of an item of property, plant and
equipment is recognised in the statement of profit and loss.
Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that
future economic benefits associated with the item will flow to the
Company and the cost of the item can be measured reliably.
Component accounting
If significant parts of an item of property, plant and equipment
have different useful lives, then they are accounted for as
separate items (major components) of property, plant and
equipment.
Depreciation
Depreciation is calculated on the cost of items of property, plant
and equipment less their estimated residual values using the
straight-line method over the estimated useful lives and is
generally recognised in the Statement of profit and loss.
Freehold land is not depreciated.
Depreciation on property, plant and equipment is charged over
the estimated useful life of the asset or part of the asset (after
considering double/triple shifts) as evaluated on technical
assessment on straight-line method, in accordance with Part A
of Schedule II to the Companies Act, 2013.
The estimated useful life of the property, plant and equipment
followed by the Company for the current and the comparative
period are as follows :
Depreciation method, useful lives and residual values are
reviewed at each financial year-end and adjusted if necessary,
for each reporting period. Based on technical evaluation, the
management believes that its estimate of useful life as given
above best represent the period over which management
expects to use the asset.
On property, plant and equipment added/ disposed off during
the year, depreciation is charged on pro-rata basis for the period
from/upto which the asset is ready for use/disposed off.
INTANGIBLE ASSETS
Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated amortisation
and accumulated impairment losses. Amortisation is
calculated on a straight-line basis over their estimated useful
lives and it is included in the statement of profit and loss. The
estimated useful life and amortisation method are reviewed at
the end of each reporting period, with the effect of any changes
in estimate being accounted for on a prospective basis.
Intangible assets with indefinite useful lives that are acquired
separately are carried at cost less accumulated impairment
losses.
The estimated useful life of intangible assets consisting
computer software is 3 years.
i. Subsequent expenditure
Subsequent expenditure is capitalised only when it increases
the future economic benefits embodied in the specific asset to
which it relates and the cost of the asset can be measured
reliably. All other expenditure, including expenditure on
internally generated goodwill and brands, is recognised in profit
or loss as incurred."
INVESTMENT PROPERTY
(i) Recognition and measurement
Investment property is property held either to earn rental
income or for capital appreciation or for both, but not for sale in
the ordinary course of business, use in the production or supply
of goods or services or for administrative purposes. Upon initial
recognition, an investment property is measured at cost,
including related transaction costs. Subsequent to initial
recognition, investment property is measured at cost less
accumulated depreciation and accumulated impairment losses,
if any.
ii. Reclassification from / to investment property
Transfers to (or from) investment property are made only when
there is a change in use. Transfers between investment
property, owner-occupied property and inventories do not
change the carrying amount of the property transferred and
they do not change the cost of that property for measurement or
disclosure purposes.
E) REVENUE FROM CONTRACTS WITH CUSTOMERS
The Company generates revenue primarily from sale of Yarn,
Knitted Fabric, cotton waste, Readymade Garments and scrap.
The Company also earns revenue from rendering of services.
Revenue is measured based on the consideration specified in a
contract with a customer. The Company recognises revenue
when it transfers control over a good or service to a customer.
1.1 Sale of products:
Revenue is recognised when a promise in a customer contract
(performance obligation) has been satisfied by transferring
control over the promised goods to the customer. Control over
the promised good refers to the ability to direct the use of, and
obtain substantially all of the remaining benefits from, those
goods. Control is usually transferred upon shipment, delivery to,
upon receipt of goods by the customer, in accordance with the
individual delivery and acceptance terms agreed with the
customers.
The amount of revenue to be recognized (transaction price) is
based on the consideration expected to be received in
exchange for goods, excluding amounts collected on behalf of
third parties such as sales tax or other taxes directly linked to
sales. If a contract contains more than one performance
obligation, the transaction price is allocated to each
performance obligation based on their relative stand-alone
selling prices. Revenue from product sales are recorded net of
allowances for estimated rebates, cash discounts and
estimates of product returns, all of which are established at the
time of sale.
1.2 Revenue from services:
Revenue from sale of services is recognised when related
services are rendered as per the terms agreed with customers.
1.3 Export incentives
Export incentives are accounted in the year of exports based on
eligibility and expected amount on realisation.
F) OTHER INCOME
Dividend income from investments is recognized when the right
to receive the payment is established and when no significant
uncertainty as to measurability or collectability exists.
Rental income under operating leases is recognized in the
statement of profit and loss on a straight-line basis over the term
of the lease except where another systematic basis is more
representative of the pattern in which benefit from the use of the
underlying asset is diminished.
Interest income is recognised using effective interest rate
method. Interest income on overdue receivables is recognized
only when there is a certainty of receipt. The ’effective interest
rate’ is the rate that exactly discounts estimated future cash
payments or receipts through the expected life of financial
instrument to: the gross carrying amount of the financial asset;
or the amortised cost of the financial liability.
G) FOREIGN CURRENCY TRANSACTIONS AND
TRANSLATIONS
Transactions in foreign currencies are translated into the
functional currency at the exchange rates at the dates of the
transactions or an average rate if the average rate
approximates the actual rate at the date of the transaction.
Foreign exchange gains and losses from settlement of these
transactions are recognised in the statement of profit and loss.
Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at the
exchange rate at the reporting date. Non-monetary assets and
liabilities that are measured at fair value in a foreign currency
are translated into the functional currency at the exchange rate
when the fair value was determined. Non-monetary assets and
liabilities that are measured at historical cost in a foreign
currency are translated at the exchange rate at the date of the
transaction. Exchange differences arising on translation are
recognised in the statement of profit and loss.
H) FINANCIAL INSTRUMENTS
(i) Recognition and initial measurement
Trade receivables and debt securities are initially recognised
when they are originated.
All other financial assets and financial liabilities are initially
recognized when the Company becomes a party to the
contractual provisions of the instrument. A financial asset
(unless it is a trade receivable without a significant financing
component) or financial liability is initially measured at fair value
plus or minus, for an item not at FVTPL, transaction costs that
are directly attributable to its acquisition or issue. A trade
receivable without a significant financing component is initially
measured at the transaction price.
However, if the Company has an unconditional right to an
amount that differs from the transaction price (e.g. due to the
Company’s refund policy), the trade receivable will be initially
measured at the amount of that unconditional right.
(ii) Classification and subsequent measurement
Financial assets
On initial recognition, a financial asset is classified as measured
at
- amortised cost;
- Fair value through other comprehensive income
(FVTOCI) - debt investment
- Fair value through other comprehensive income
(FVTOCI) - equity investment; or
- Fair value through profit and loss (FVTPL)
For the purpose of subsequent measurement, financial
instruments of the Company are classified in the following
categories: non-derivative financial assets comprising
amortised cost, debt instruments at fair value through other
comprehensive income (FVTOCI), equity instruments at
FVTOCI or fair value through profit and loss account (FVTPL),
non derivative financial liabilities at amortised cost or FVTPL
and derivative financial instruments (under the category of
financial assets or financial liabilities) at FVTPL.
The classification of financial instruments depends on the
objective of the business model for which it is held.
Management determines the classification of its financial
instruments at initial recognition.
(ii) Classification and subsequent measurement
a) Non-derivative financial assets
Financial assets at amortised cost
A financial asset is measured at amortised cost if it meets both
of the following conditions and is not designated as at FVTPL :
(a) it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
(b) its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest
(SPPI) on the principal amount outstanding.
Debt investment at FVTOCI
A debt Investment will be measured at FVTOCI if it meets both
of the following conditions and is not designated as at FVTPL:
(a) it is held within a business model whose objective is
achieved by both collecting contractual cash flows and
selling financial assets; and
(b) its contractual terms give rise on specified dates to cash
flows that are SPPI on the principal amount outstanding.
Equity instruments at FVTOCI
On initial recognition of an equity investment that is not held for
trading, the Company may irrevocably elect to present
subsequent changes in the investment’s fair value in Other
comprehensive income (’OCI’). This election is made on an
investment-by-investment basis.
If the Company decides to classify an equity instrument as
FVTOCI, then all fair value changes on the instrument,
excluding dividend are recognised in OCI which is not
subsequently recycled to statement of profit and loss.
Financial assets at FVTPL
All financial assets not classified as measured at amortised cost
or FVTOCI as described above are measured at FVTPL. .
On initial recognition, the Company may irrevocably designate
a financial asset that otherwise meets the requirements to be
measured at amortised cost or at FVTOCI as at FVTPL if doing
so eliminates or significantly reduces an accounting mismatch
that would otherwise arise.
Financial assets: Business model assessment
The Company makes an assessment of the objective of the
business model in which a financial asset is held at a portfolio
level because this best reflects the way the business is
managed and information is provided to management. The
information considered includes:
- the stated policies and objectives for the portfolio and the
operation of those policies in practice. These include
whether management’s strategy focuses on earning
contractual interest income, maintaining a particular
interest rate profile, matching the duration of the financial
assets to the duration of any related liabilities or expected
cash outflows or realising cash flows through the sale of the
assets;
- how the performance of the portfolio is evaluated and
reported to the Company’s management;
- the risks that affect the performance of the business model
(and the financial assets held within that business model)
and how those risks are managed;
- how managers of the business are compensated - e.g.
whether compensation is based on the fair value of the
assets managed or the contractual cash flows collected;
and
- the frequency, volume and timing of sales of financial
assets in prior periods, the reasons for such sales and
expectations about future sales activity.
Transfers of financial assets to third parties in transactions that
do not qualify for derecognition are not considered sales for this
purpose, consistent with the Company’s continuing recognition
of the assets.
Financial assets: Assessment whether contractual cash
flows are solely payments of principal and interest
For the purposes of this assessment, ’principal’ is defined as the
fair value of the financial asset on initial recognition. ’Interest’ is
defined as consideration for the time value of money and for the
credit risk associated with the principal amount outstanding
during a particular period of time and for other basic lending
risks and costs (e.g. liquidity risk and administrative costs), as
well as a profit margin.
In assessing whether the contractual cash flows are solely
payments of principal and interest, the Company considers the
contractual terms of the instrument. This includes assessing
whether the financial asset contains a contractual term that
could change the timing or amount of contractual cash flows
such that it would not meet this condition. In making this
assessment, the Company considers:
- contingent events that would change the amount or timing
of cash flows;
- terms that may adjust the contractual coupon rate,
including variable interest rate features;
- prepayment and extension features; and
- terms that limit the Company’s claim to cash flows from
specified assets (e.g. non- recourse features).
A prepayment feature is consistent with the solely payments of
principal and interest criterion if the prepayment amount
substantially represents unpaid amounts of principal and
interest on the principal amount outstanding, which may include
reasonable additional compensation for early termination of the
contract. Additionally, for a financial asset acquired at a
significant discount or premium to its contractual par amount, a
feature that permits or requires prepayment at an amount that
substantially represents the contractual par amount plus
accrued (but unpaid) contractual interest (which may also
include reasonable additional compensation for early
termination) is treated as consistent with this criterion if the fair
value of the prepayment feature is insignificant at initial
recognition.
Financial assets - Subsequent measurement and gains
and losses
Financial assets are not reclassified subsequent to their initial
recognition unless the Company changes its business model
for managing financial assets, in which case all affected
financial assets are reclassified on the first day of the first
reporting period following the change in the business model.
Financial assets at FVTPL:
These assets are subsequently measured at fair value. Net
gains and losses, including any interest or dividend income, are
recognised in standalone statement of profit and loss.
Financial assets at amortised cost:
These assets are subsequently measured at amortised cost
using the effective interest method. The amortised cost is
reduced by impairment losses. Interest income, foreign
exchange gains and losses and impairment are recognised in
standalone statement of profit and loss. Any gain or loss on
derecognition is recognised in standalone statement of profit
and loss.
Debt investments at FVOCI:
These assets are subsequently measured at fair value. Interest
income calculated using the effective interest method, foreign
exchange gains and losses and impairment are recognised in
stndalone statement of profit and loss. Other net gains and
losses are recognised in OCI. On derecognition, gains and
losses accumulated in OCI are reclassified to standalone
statement of profit and loss.
Equity investments at FVOCI:
These assets are subsequently measured at fair value.
Impairment losses (and reversal of impairment losses) on
equity investments measured at FVOCI are not reported
separately from other changes in fair value. Dividends are
recognised as income in profit and loss unless the dividend
clearly represents a recovery of part of the cost of the
investment. Other net gains and losses are recognised in OCI
and are not reclassified to standalone statement of profit and
loss.
Financial liabilities - Classification, subsequent
measurement and gains and losses
Financial liabilities are classified as measured at amortised cost
or FVTPL. A financial liability is classified as at FVTPL if it is
classified as held for trading, it is a derivative or it is designated
as such on initial recognition. Financial liabilities at FVTPL are
measured at fair value and net gains and losses, including any
interest expense, are recognised in profit and loss. Other
financial liabilities are subsequently measured at amortised
cost using the effective interest method. Interest expense and
foreign exchange gains and losses are recognised in
standalone statement of profit and loss. Any gain or loss on
derecognition is also recognised in standalone statement of
profit and loss.
(iii) Derecognition
Financial assets
The Company derecognises a financial asset when the
contractual rights to the cash flows from the financial asset
expire, or it transfers the rights to receive the contractual cash
flows in a transaction in which either substantially all of the risks
and rewards of ownership of the financial asset are transferred
or the Company neither transfers nor retains substantially all of
the risks and rewards of ownership and does not retain control
of the financial asset.
If the Company enters into transactions whereby it transfers
assets recognised on its balance sheet, but retains either all or
substantially all of the risks and rewards of the transferred
assets. In these cases the transferred assets are not
derecognised.
Financial liabilities
The Company derecognises a financial liability when its
contractual obligations are discharged or cancelled, or expire.
The Company also derecognises a financial liability when its
terms are modified and the cash flows of the modified liability
are substantially different. In this case, a new financial liability
based on the modified terms is recognised at fair value.
On derecognition of a financial liability, the difference between
the carrying extinguished and the consideration paid (including
any non-cash assets transferred or liabilities assumed) is
recognised in standalone statement of profit and loss.
(iv) Offsetting
Financial assets and financial liabilities are offset and the net
amount presented in the balance sheet when, and only when,
the Company currently has a legally enforceable right to set off
the amounts and it intends either to settle them on a net basis or
to realise the asset and settle the liability simultaneously.
(v) Derivative financial instruments
The Company holds derivative financial instruments such as
foreign exchange forward contracts to mitigate the risk of
changes in foreign exchange rates on foreign currency assets
or liabilities and forecasted cash flows denominated in foreign
currencies. The counterparty for these contracts is generally a
bank.
Derivatives are recognized and measured at fair value.
Attributable transaction costs are recognized in statement of
profit and loss. Subsequent to initial recognition, derivatives are
measured at fair value, and changes therein are generally
recognised in profit and loss. Derivatives are carried as financial
assets when the fair value is positive and as financial liabilities
when the fair value is negative.
I) GOVERNMENT GRANTS, SUBSIDIES AND EXPORT
INCENTIVES
Government grants and subsidies related to assets, including
non-monetary grants, are initially recognised as deferred
income at fair value if there is reasonable assurance that they
will be received and the Company will comply with the
conditions associated with the grant; they are then recognised
in statement of profit and loss as other operating revenue / other
income on a systematic basis.
Government grants received in relation to assets are presented
as a reduction to the carrying amount of the related asset and
the same is recognised in statement of profit and loss over the
life of a depreciable asset as a reduced depreciation expense.
Repayment of a grant related to an asset is recognised by
increasing the carrying amount of the asset and the cumulative
additional depreciation that would have been recognised in the
statement of profit and loss in the absence of the grant is
recognised immediately in the statement of profit and loss.
Government grants relating to income are deferred and
recognised in the statement of profit and loss over the period
necessary to match them with the costs that they intended to
compensate and presented in other operating revenue.
Grants that compensate the Company for expenses incurred
are recognised in profit and loss as other income on a
systematic basis in the periods in which the expenses are
recognised, unless the conditions for receiving the grant are
met after the related expenses have been recognised. In this
case, the grant is recognised when it becomes receivable.
Export benefits are accounted for in the year of exports based
on eligibility and when there is no uncertainty in receiving the
same.
J) INVESTMENTS
Investment in subsidiaries
Investments in subsidiaries are carried at cost less
accumulated impairment losses, if any. Where an indication of
impairment exists, the carrying amount of investment is
assessed and written down immediately to its recoverable
amount.
K) EMPLOYEE BENEFITS
(a) Short term employee benefits:
Short-term employee benefits are measured on an
undiscounted basis and expensed as the related service is
provided. A liability is recognised for the amount expected to be
paid under short-term cash bonus, if the Company has a
present legal or constructive obligation to pay this amount as a
result of past service provided by the employee and the
obligation can be estimated reliably.
(b) Defined contribution plan
Provident Fund and Employee State Insurance
A defined contribution plan is a post-employment benefit plan
where the Company’s legal or constructive obligation is limited
to the amount that it contributes to a separate legal entity. The
Company makes specified contributions towards Government
administered provident fund and employee state insurance
schemes. Obligations for contributions to defined contribution
plan are expensed as an employee benefits expense in the
statement of profit and loss in period in which the related service
is provided by the employee. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a
reduction in future payments is available.
(c) Defined benefit plan
A defined benefit plan is a post-employment benefit plan other
than a defined contribution plan. Post employment benefit
comprises of Gratuity which is accounted for as follows:
Gratuity Fund
The Company’s net obligation in respect of defined benefit
plans is calculated separately for each plan by estimating the
amount of future benefit that employees have earned in the
current and prior periods, discounting that amount and
deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed
annually by a qualified actuary using the projected unit credit
method. When the calculation results in a potential asset for the
Company, the recognised asset is limited to the present value of
economic benefits available in the form of any future refunds
from the plan or reductions in future contributions to the plan
(’the asset ceiling’). To calculate the present value of economic
benefits, consideration is given to any applicable minimum
funding requirements.
Remeasurements of the net defined benefit liability, which
comprise actuarial gains and losses, the return on plan assets
(excluding interest) and the effect of the asset ceiling (if any,
excluding interest), are recognised immediately in OCI. The
Company determines the net interest expense (income) on the
net defined benefit liability (asset) for the period by applying the
discount rate determined by reference to market yields at the
end of the reporting period on government bonds. This rate is
applied on the net defined benefit liability (asset), both as
determined at the start of the annual reporting period, taking into
account any changes in the net defined benefit liability (asset)
during the period as a result of contributions and benefit
payments. Net interest expense and other expenses related to
defined benefit plans are recognised in the statement of profit
and loss.
When the benefits of a plan are changed or when a plan is
curtailed, the resulting change in benefit that relates to past
service (’past service cost’ or ’past service gain’) or the gain or
loss on curtailment is recognised immediately in standalone
statement of profit and loss. The Company recognises gains
and losses on the settlement of a defined benefit plan when the
settlement occurs.
L) LEASES
At inception of a contract, the Company assesses whether a
contract is, or contains, a lease. A contract is, or contains, a
lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration.
i) As a lessee:
At commencement or on modification of a contract that contains
a lease component, the Company allocates the consideration in
the contract to each lease component on the basis of its relative
stand-alone prices. However, for the leases of property the
Company has elected not to separate non-lease components
and account for the lease and non-lease components as a
single lease component.
The Company recognises a right-of-use asset and a lease
liability at the lease commencement date. The right-of-use
asset is initially measured at cost, which comprises the initial
amount of the lease liability adjusted for any lease payments
made at or before the commencement date, plus any initial
direct costs incurred and an estimate of costs to dismantle and
remove the underlying asset or to restore the underlying asset
or the site on which it is located, less any lease incentives
received.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the end of
the lease term, unless the lease transfers ownership of the
underlying asset to the Company by the end of the lease term or
the cost of the right-of-use asset reflects that the Company will
exercise a purchase option. In that case the right-of-use asset
will be depreciated over the useful life of the underlying asset,
which is determined on the same basis as those of property,
plant and equipment. In addition, the right-of-use asset is
periodically reduced by impairment losses, if any, and adjusted
for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the
lease payments that are not paid at the commencement date,
discounted using interest rate implicit in the lease or, if that rate
cannot be readily determined, the Company’s incremental
borrowing rate. Generally, the Company uses its incremental
borrowing rate as the discount rate. The Company determines
its incremental borrowing rate by obtaining interest rates from
various external financing sources and makes certain
adjustments to reflects the terms of the lease and type of the
asset leased.
Lease payments included in the measurement of the lease
liability comprise the following:
- fixed payments, including in-substance fixed payments
- variable lease payments that depend on an index or rate,
initially measured using the index or rate as at the
commencement date;
- amounts expected to be payable under a residual value
guarantee; and
- the exercise price under a purchase option that the
Company is reasonably certain to exercise, lease
payments in an optional renewal period if the Company is
reasonably certain to exercise an extension option, and
penalties for early termination of a lease unless the
Company is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the
effective interest method. It is remeasured when there is a
change in future lease payments arising from a change in an
index or rate, if there is a change in the Company’s estimate of
the amount expected to be payable under a residual value
guarantee, if the Company changes its assessment of whether
it will exercise a purchase, extension or termination option or if
there is a revision in-substance fixed lease payment.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount of the
right-of-use asset or is recorded in profit and loss if the carrying
amount of the right-of-use asset has been reduced to zero. The
Company presents right-of-use assets that do not meet the
definition of investment property in “property, plant and
equipment” and lease liabilities separately in balance sheet
within “Financial liabilities”.
Short term leases and low value assets:
The Company has elected not to recognise right-of-use assets
and lease liabilities for leases of low-value assets and short¬
term leases, including IT equipment. The Company recognises
the lease payments associated with these leases are
recognized as an expense in standalone statement of profit and
loss on a straight-line basis over the lease term.
ii) As a lessor
At inception or on modification of a contract that contains a
lease component, the Company allocates the consideration in
the contract to each lease component on the basis of their
relative stand-alone prices.
When the Company acts as a lessor, it determines at lease
inception whether each lease is a finance lease or an operating
lease.
To classify each lease, the Company makes an overall
assessment of whether the lease transfers substantially all of
the risks and rewards incidental to ownership of the underlying
asset. If this is the case, then the lease is a finance lease; if not,
then it is an operating lease. As a part of this assessment, the
company considers certain indicators such as whether the
lease is for the major part of the economic life of the asset.
The Company recognises lease payments received under
operating leases as income on a straight-line basis over the
lease term as part of other income. In case of a finance lease,
finance income is recognised over the lease term based on a
pattern reflecting a constant periodic rate of return on the
lessor’s net investment in the lease.
If an arrangement contains lease and non-lease components,
then the Company applies Ind AS 115 Revenue from contracts
with customers to allocate the consideration in the contract.
M) BORROWING COSTS
Borrowing cost are interest and other costs (including exchange
differences relating to foreign currency borrowings to the extent
that they are considered as adjustment to interest costs)
incurred in connection with the borrowings of funds. Borrowing
costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for
their intended use, are added to the cost of those assets.
Interest income earned on the temporary investment of specific
borrowings pending their expenditure on qualifying assets is
deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in the statement of
profit and loss in the year in which they are incurred.
N) SEGMENT REPORTING
The Company is engaged in manufacture and sale of Yarn,
Knitted Fabric and Readymade Garments and thus the
Company has only one reportable segment (i.e.) Textile
business.
O) EARNINGS PER SHARE
(i) Basic Earnings Per Share
Basic earnings per share is calculated by dividing the profit (or
loss) attributable to the owners of the Company by the weighted
average number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding
during the year is adjusted for bonus issue, bonus element in a
rights issue to existing shareholders, share split and reverse
share split ’(consolidation of shares).
(ii) Diluted Earnings Per Share
Diluted earnings per share is computed by dividing the profit
(considered in determination of basic earnings per share) after
considering the effect of interest and other financing costs or
income ’(net of attributable taxes) associated with dilutive
potential equity shares by the weighted average number of
equity shares considered for deriving basic earnings per share
adjusted for the weighted average number of equity shares that
would have been issued upon conversion of all dilutive potential
equity shares"
P) INCOME TAXES
Income tax expense comprises current and deferred tax. It is
recognised in standalone statement of profit and loss except to
the extent that it relates to a business combination or to an item
recognised directly in equity or in other comprehensive income.
The Company has determined that interest and penalties
related to income taxes, including uncertain tax treatments, do
not meet the definition of income taxes, and therefore
accounted for them under Ind AS 37 Provisions, Contingent
Liabilities and Contingent Assets
i) Current tax
Current tax comprises the expected tax payable or receivable
on the taxable income or loss for the year and any adjustment to
the tax payable or receivable in respect of previous years. The
amount of current tax payable or receivable is the the best
estimate of the tax amount expected to be paid or received that
reflects the uncertainty related to income taxes, if any. It is
measured using tax rates (and tax laws) enacted or
substantively enacted by the reporting date.
Current tax liabilities and current tax assets are offset only if
there is a legally enforceable right to set off the recognised
amounts, and it is intended to realise the asset and settle the
liability on a net basis or simultaneously.
ii) Deferred tax
"Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the corresponding amounts
used for taxation purposes. Deferred tax is also recognised in
respect of carried forward tax losses and tax credits.
Deferred tax is not recognised for:
- temporary differences on the initial recognition of assets or
liabilities in a transaction that:
- is not a business combination; and
- at the time of the transaction (i) affects neither accounting
nor taxable profit or loss and
(ii) does not give rise to equal taxable and deductible
temporary differences;
• temporary differences related to investments in
subsidiaries, associates and joint arrangements to the
extent that the Group is able to control the timing of the
reversal of the temporary differences and it is probable that
they will not reverse in the foreseeable future; and
- taxable temporary differences arising on the initial
recognition of goodwill.
Deferred tax assets are recognised for unused tax losses,
unused tax credits and deductible temporary differences to the
extent that it is probable that future taxable profits will be
available against which they can be used. Future taxable
profits are determined based on the reversal of relevant taxable
temporary differences. If the amount of taxable temporary
differences is insufficient to recognise a deferred tax asset in
full, then future taxable profits, adjusted for reversals of existing
temporary differences, are considered, based on the business
plans for individual subsidiaries in the Group.
The carrying amount of deferred tax assets is reviewed at the
end of each reporting period and reduced to the extent that it is
no longer probable that sufficient taxable profits will be available
to allow all or part of the asset to be recovered. Such reductions
are reversed when the probability of future taxable profit
improves.
Deferred tax liabilities and assets are measured at the tax rates
that are expected to apply in the period in which the liability is
settled or the asset realised, based on tax rates (and tax laws)
that have been enacted or substantively enacted by the end of
the reporting period.
The measurement of deferred tax liabilities and assets reflects
the tax consequences that would follow from the manner in
which the Company expects, at the end of the reporting period,
to recover or settle the carrying amount of its assets and
liabilities. For this purpose, the carrying amount of investment
property is presumed to be recovered through sale.
Deferred tax assets and liabilities are offset if there is a legally
enforceable right to offset current tax liabilities and assets, and
they relate to income taxes levied by same tax authority on
same taxable entity, or on different tax entities, but they intend to
settle current tax liabilities and assets on a net basis or its tax
assets and liabilities will be realised simultaneously.
iii) Recognition
Current and deferred tax are recognised in the statement of
profit and loss, except when they relate to items that are
recognised in other comprehensive income or directly in equity,
in which case, the current and deferred tax are also recognised
in other comprehensive income or directly in equity respectively.
Where current tax or deferred tax arises from the initial
accounting for a business combination, the tax effect is included
in the accounting for the business combination.
Q) IMPAIRMENT
Impairment of Financial instruments and contract assets
The Company recognises loss allowance for expected credit
loss on financial assets measured at amortised cost.
At each reporting date, the Company assesses whether
financial assets carried at amortised cost are credit impaired. A
financial asset is ’credit impaired’ when one or more events that
have a detrimental impact on the estimated future cash flows of
the financial asset have occurred.
Evidence that a financial asset is credit - impaired includes the
following observable data:
- significant financial difficulty;
- a breach of contract such as a default or being past due;
- the restructuring of a loan or advance by the Company on
terms that the Company would not consider otherwise;
- it is probable that the borrower will enter bankruptcy or
other financial reorganisation; or
- the disappearance of an active market for a security
because of financial difficulties.
Loss allowances for trade receivables are measured at an
amount equal to lifetime expected credit losses. Lifetime
expected credit losses are credit losses that result from all
possible default events over expected life of financial
instrument. The maximum period considered when estimating
expected credit losses is the maximum contractual period over
which the Company is exposed to credit risk.
When determining whether the credit risk of a financial asset
has increased significantly since initial recognition and when
estimating expected credit losses, the Company considers
reasonable and supportable information that is relevant and
available without undue cost or effort. This includes both
quantitative and qualitative information and analysis, based on
the Company’s historical experience and informed credit
assessment and including forward looking information. The
Company assumes that credit risk on a financial asset has
increased significantly if it is past due.
The Company considers a financial asset to be in default when:
- the recipient is unlikely to pay its credit obligations to the
Company in full, without recourse by the Company to
actions such as realising security (if any is held); or
- the financial asset is past due.
Measurement of expected credit losses
Expected credit losses are a probability - weighted estimate of
credit losses. Credit losses are measured as the present value
of all cash shortfalls (i.e. the difference between the cash flows
due to the Company in accordance with the contract and the
cash flows that the Company expects to receive).
Presentation of allowance for expected credit losses in the
balance sheet
Loss allowances for financial assets measured at amortised
cost are deducted from the gross carrying amount of the assets.
Write-off
The gross carrying amount of a financial asset is written off
(either partially or in full) to the extent that there is no realistic
prospect of recovery. This is generally the case when the
Company determines that the debtor does not have assets or
sources of income that could generate sufficient cash flows to
repay the amounts subject to the write off. However, financial
assets that are written off could still be subject to enforcement
activities in order to comply with the Company’s procedures for
recovery of amounts due.
Impairment of Non-Financial Assets
The Company’s non-financial assets, other than inventories
and deferred tax assets, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any
such indication exists, then the asset’s recoverable amount is
estimated. Goodwill is tested annually for impairment.
For impairment testing, assets that do not generate
independent cash inflows are grouped together into cash¬
generating units (CGUs). Each CGU represents the smallest
group of assets that generates cash inflows that are largely
independent of the cash inflows of other assets or CGUs.
The recoverable amount of a CGU (or an individual asset) is the
higher of its value in use and its fair value less costs to sell.
Value in use is based on the estimated future cash flows,
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of
money and the risks specific to the CGU (or the asset).
An impairment loss is recognised if the carrying amount of an
asset or CGU exceeds its estimated recoverable amount.
Impairment losses are recognised in the statement of profit and
loss. Impairment loss recognised in respect of a CGU is
allocated first to reduce the carrying amount of any goodwill
allocated to the CGU, and then to reduce the carrying amounts
of the other assets of the CGU (or group of CGUs) on a pro rata
basis.
An impairment loss in respect of assets for which impairment
loss has been recognised in prior periods, the Company
reviews at each reporting date whether there is any indication
that loss has decreased or no longer exists. An impairment loss
is reversed if there has been a change in estimates used to
determine recoverable amount. Such a reversal is made only to
an extent that asset’s carrying amount does not exceed carrying
amount that would have been determined, net of depreciation/
amortisation, if no impairment loss was recognised.
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