1) MATERIAL ACCOUNTING POLICIES
Basis of Preparation
i. Statement of Compliance
The financial statements of the Company have been
prepared in accordance with Indian Accounting
Standard ("Ind AS") notified under the Companies
(Indian Accounting standards) Rules, 2015 and
Companies (Indian Accounting Standards) Amendment
Rules, 2016 read with section 133 of the Companies
Act, 2013.
ii. Basis of preparation and presentation
The financial statements have been prepared on
accrual basis under the historical cost convention
except for the following that are measured at fair value
as required by relevant Ind AS:
a. Defined Employee benefit Plans - Plan assets are
measured at fair value.
b. Certain financial assets and liabilities
iii. Use of Estimates and judgement
The preparation of financial statements in conformity
with Ind AS requires management to make judgements,
estimates and assumptions that affect the application
of accounting policies and the reported amount of
assets and liabilities, revenues and expenses and
disclosure of contingent liabilities. Such estimates and
assumptions are based on management's evaluation
of relevant facts and circumstances as on the date of
financial statements. The actual outcome may diverge
from these estimates.
Estimates and assumptions are reviewed on a periodic
basis. Revisions to accounting estimates are recognized
in the period in which the estimates are revised and in
any future periods affected.
iv. Revenue Recognition
Sales are recognized when goods are supplied and are
recorded at net realizable value excluding GST and
other statutory levies.
Interest income is recognized on a time proportion
basis taking into account the amount outstanding and
the rate applicable.
v. Inventories
Inventories including company's stock held with
goldsmiths are valued at lower of cost or net realizable
value. The cost of raw material inventories is computed
on a FIFO basis. The cost of finished goods and work
in progress includes cost of conversion and other cost
incurred in bringing the Inventories to their present
location and condition.
Cost is generally determined on FIFO basis and
wherever required, appropriate direct on cost are taken
into account. Net Realizable Value is the estimated
selling price in the ordinary course of business less the
estimated cost necessary to make the sale.
Packing materials and Gift items are valued at cost on
FIFO basis.
vi. Property, Plant and Equipment
Buildings held'rom such asset beyond its previously
assessed standard of performance.
vii. Depreciation on Fixed Assets is provided at rates as
prescribed under the Companies Act, 2013 on the
following basis:
viii. Capital work in progress
Capital work in progress includes, cost of assets not
yet commissioned, and incidental expenses during
the construction period. Certain directly attributable
pre-operative expenses during construction period
are included under Capital Work in Progress. These
expenses are allocated to the cost of Fixed Assets
when the same are ready for intended use.
ix. Borrowing cost
Borrowing costs that are attributable to the acquisition,
construction or production of qualifying assets are
capitalized as part of the cost of such assets till such
time the assets is ready for its intended use or sale. A
qualifying asset is an asset that necessarily requires a
substantial period of time to get ready for its intended
use or sale. All other borrowing costs are recognized as
an expense in the year in which they are incurred.
x. Foreign Exchange Transactions
Transactions in foreign currency are recorded at the
rate prevailing on the date of transactions. Foreign
currency Assets and Liabilities are stated at the rate
of exchange prevailing at the balance sheet date and
the resultant gains/losses are charged to the profit and
loss account.
Premium/Discount in respect of foreign exchange
contract is amortized as Income/Expense over the life
of the contract .Any profit or loss arising on cancellation
or renewal of such forward contracts is recognized as
Income/Expense for the period. Exchange difference
arising on settlement or restatement of foreign
currency denominated liability is recognized in the
profit & loss a/c.
xi. Retirement Benefits
a. Defined Contribution Plan
Company's contribution paid/payable during the
year to Provident Fund etc are recognized in the
Profit and Loss Account. These are approved/
recognized scheme of the Company.
b. Defined Benefit Plan
Annual Company's liability towards Gratuity is
funded on the basis of actuarial valuation furnished
by the Life Insurance Corporation of India under
Group Gratuity Scheme.
c. The company does not provide leave encashment
and carry forward of accumulated leave to next
year to its employees.
xii. Leases
The Company's lease asset classes primarily consist of
leases for land and buildings. The Company assesses
whether a contract contains a lease, at inception of
a contract. 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. To assess whether a contract conveys
the right to control the use of an identified asset, the
Company assesses whether: (i)the contract involves
the use of an identified asset (ii) the Company has
substantially all of the economic benefits from use of
the asset through the period of the lease and (iii) the
Company has the right to direct the use of the asset.
At the date of commencement of the lease, the
Company recognizes a right-of-use asset("ROU")and a
corresponding lease liability for all lease arrangements
in which it is a lessee, except for leases with a term
of twelve months or less (short-term-leases) and
low value leases. For these short-term and low value
leases, the Company recognizes the lease payments as
an operating expense on a straight-line basis over the
term of the lease.
Certain lease arrangements include the option to
extend or terminate the lease before the end of the
lease term. ROU assets and lease liabilities include
these options when it is reasonably certain that they
will be exercised.
The right-of-use assets are initially recognized at cost,
which comprises the initial amount of the lease liability
adjusted for any lease payments made at or prior to the
commencement date of the lease plus any initial direct
costs less any lease incentives. They are subsequently
measured at cost less accumulated depreciation and
impairment losses.
Right-of-use assets are depreciated from the
commencement date on a straight-line basis over
the shorter of the lease term and useful life of the
underlying asset. Right of use assets 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 Cash
Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized
cost at the present value of the future lease payments.
The lease payments are discounted using the interest
rate implicit in the lease or, if not readily determinable,
using the incremental borrowing rates in the country
of domicile of these leases. Lease liabilities are
remeasured with a corresponding adjustment to the
related right-of-use asset if the Company changes its
assessment if whether it will exercise an extension or a
termination option.
Lease liability and ROU asset have been separately
presented in the Balance Sheet and lease payments
have been classified as financing cash flows.
The Company as a lessor Leases for which the Company
is a lessor is classified as a finance or operating lease.
Whenever the terms of the lease transfer substantially
all the risks and rewards of ownership to the lessee,
the contract is classified as a finance lease. All other
leases are classified as operating leases
When the Company is an intermediate lessor, it
accounts for its interests in the head lease and the
sublease separately. The sublease is classified as a
finance or operating lease by reference to the right-of-
use asset arising from the head lease. For operating
leases, rental income is recognized on a straight-line
basis over the term of the relevant lease.
Intangible Fixed Assets
Intangible Assets are stated at cost less accumulated
amortization and impairment loss, if any. Cost includes
any directly attributable expenditure on making the
asset ready for its intended use. Intangible assets are
amortized over their respective estimated useful lives'
on a Written down value basis, from the date that they
are available for use.
xiii. Expenses
a. All expenses including interest and finance charges
are accounted for on accrual basis.
b. Prior period items, if material, are disclosed
separately.
xiv. Research and Development
Expenditure incurred during research and
development phase is charged to revenue when no
intangible asset arises from such research. Assets
procured for research and development activities are
generally capitalized.
xv. Redemption of Referral Points
The Company pays referral fees to customers, wherein
the reward points can be used by the customers at the
time of subsequent purchases made by them within
stipulated period on giving the referral points. The
Company treats it as promotional expenses but the
payment will fructify on the subsequent purchases
within the stipulated time of such referral customer.
xvi. Advance from Customers
Amounts collected as advances from customers have
been recognized as a liability in the year of collection.
The accumulated amount along with applicable bonus
amount is redeemed in the form of Jewellery. The
bonus or obligations arising out of these transactions
are accounted for in books on accrual basis on a
consistent basis.
The Company is collecting money from its customers
on advance basis by extending easy payment scheme,
and offers in return gold ornaments at the rate
prevailing on the date of redemption (which is less than
twelve months from the date of original entry date)
with discounts on any charges towards making and
wastage cost. The concession if any will be accounted
in the year in which it is redeemed as discount to sales
realization.
The company is accepting old gold from its customers
to be exchanged for new gold ornaments with a period
of eleven months At the time of redemption up to 75%
value addition will be given as discount to the customer.
The Company is operating a scheme by which customer
fixes the gold price to the extent of amount paid on
the date of remittance. The liability that would arise to
the company due to adverse price fluctuations if any or
the benefits that would arise due to favourable price
marked to market as on the last date of financial year
will be dealt with accordingly in the books on the year
in which such transactions were put through.
The Company is operating gold savings in the name
of "DigiGold" scheme wherein the customers can pay
any amount for 330 days at any time and convert the
payment made to gold weight. An additional benefit
of gold weight is provided to the customers on a time
proportionate basis not exceeding 5%. These weights
can be redeemed at the time of purchase by paying
making charges and taxes. The actual additional
benefits that could occurred to such customers could
vary based on certain conditions to be fulfilled at the
time of redemption of advances in the sales bill that
may be raised at the time of closure of such advances.
xvii. Gold Metal Loan
The company has an arrangement with its banker for
lifting gold under metal loan terms against a limit under
"price unfixed basis" and opts to fix the price for gold
taken under loan within 180 days at delivery. However,
based on business expediencies the company fixes the
price within 180 days, whenever the price is favorable
and carried the transaction under the forward cover to
be settled for payment of money on the specified date.
The price difference arising out of such transactions
accounted in the head of cost of sales and adjusted
accordingly. The interest if any payable to bankers on
such outstanding is treated as expenses on accrual
basis.
The outstanding metal loan position if any as on
reporting date is marked to market and the resulting
difference if any is adjusted to the notional purchase
account and the value as on that date is adjusted as
cost for inventory valuation consideration.
xviii. Derivative financial instruments
a. Derivative instruments not designated as Fair
value hedges: The Company enters into a variety
of derivative financial instruments to manage its
exposure to foreign exchange rate risks, including
foreign exchange forward contracts, future
contracts and Options. Derivatives are initially
recognised at fair value at the date the derivative
contracts are entered into and are subsequently
remeasured to their fair value at the end of each
reporting period. The resulting gain or loss is
recognised in the statement of profit and loss
immediately unless the derivative is designated
and effective as a hedging instrument, in which
event the timing of the recognition in profit or loss
depends on the nature of the hedging relationship
and the nature of the hedged item.
b. Fair Value Hedge: The Company has adopted
fair value hedge for the derivative contracts
entered into and designated derivative contracts
or nonderivative financial liabilities as hedging
instruments to mitigate the risk of change in
fair value of hedged item due to movement
in interest rates, foreign exchange rates and
commodity prices. Changes in the fair value of
hedging instruments and hedged items that are
designated and qualify as fair value hedges are
recorded in the Statement of Profit and Loss with
an adjustment to the carrying value of the hedged
item. Hedge accounting is discontinued when the
Company revokes the hedge relationship, the
hedging instrument or hedged item expires or is
sold, terminated, or exercised or no longer meets
the criteria for hedge accounting.
The Company designates derivative contracts as
hedging instruments to mitigate the risk of change
in fair value of hedged item i.e. fixed gold inventory
due to movement in gold prices. The Company also
designated the trade payables pertaining to gold taken
on loan from banks ('unfixed gold') as a fair value hedge
to the corresponding gold inventory purchased on loan
xix. Taxes on Income
Tax expense comprises current income and deferred
income tax. Current income tax is measured at the
amount expected to be paid to the tax authorities in
accordance with the Income Tax Act 1961.
Deferred tax: Deferred tax is recognized using the
balance sheet approach. Deferred tax assets and
liabilities are recognized on temporary differences
between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax
bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognized for all
taxable temporary differences. Deferred tax assets
are generally recognized for all deductible temporary
differences to the extent that it is probable that taxable
profits will be available against which those deductible
temporary differences can be utilized.
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 utilized.
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 realized, based
on tax rates (and tax laws) that have been enacted
or substantively enacted by the end of the reporting
period.
xx. Impairment of assets
At the end of each reporting period, the Company
reviews the carrying amounts of its tangible and
intangible assets to determine whether there is
any indication that those assets have suffered an
impairment loss. If any such indication exists, the
recoverable amount of the assets is estimated in order
to determine the extent of the impairment loss (if any).
When it is not possible to estimate the recoverable
amount of an individual asset, the Company estimates
the recoverable amount of the cash-generating unit to
which the assets are also allocated to individual cash¬
generating units, or otherwise they are allocated to
the smallest group of cash-generating units for which
a reasonable and consistent allocation basis can be
identified.
Recoverable amount is the higher of fair value less
costs of disposal and value in use. In assessing value in
use, the estimated future cash flows are 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 asset for which
estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash
generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash
generating unit) is reduced to its recoverable amount.
An impairment loss is recognised immediately in the
statement of profit and loss.
When an impairment loss subsequently reverses, the
carrying amount of the asset (or cash generating unit)
is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount
does not exceed the carrying amount that would
have been determined had no impairment loss been
recognised for the asset (or cash generating unit) in
prior years. A reversal of impairment loss is recognised
immediately in the statement of profit and loss.
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