III. Significant accounting policies
A. Revenue recognition
Revenue from contract with customers is
recognized upon transfer of control of promised
goods/ products to customers at an amount that
reflects the consideration to which the Company
expect to be entitled for those goods/ products.
To recognize revenues, the Company applies the
following five-step approach:
• Identify the contract with a customer,
• I dentify the performance obligations in the
contract,
• Determine the transaction price,
• Allocate the transaction price to the
performance obligations in the contract, and
• Recognize revenues when a performance
obligation is satisfied.
1. Sale of goods
Revenue from the sale of goods is recognized
when the significant risks and rewards of
ownership of the goods have passed to the
buyer and no significant uncertainty exists
regarding the amount of the consideration
that will be derived from the sale of goods.
Revenue from the sale of goods is measured
at the fair value of the consideration received
or receivable, net of returns and allowances,
related discounts & incentives and volume
rebates. It includes excise duty and excludes
value added tax/ sales tax/goods and service
tax.
The Company has adopted Ind AS 115
Revenue from contracts with customers, with
effect from April 1, 2018. Ind AS 115 establishes
principles for reporting information about
the nature, amount, timing and uncertainty
of revenues and cash flows arising from the
contracts with customers and replaces Ind
AS 18 Revenue and Ind AS 11 Construction
Contracts.
2. Interest income
For all financial instruments measured either
at amortized cost or at fair value through
other comprehensive income, interest
income is recorded using the effective
interest rate (EIR), which is the rate that
exactly discounts the estimated future cash
payments or receipts over the expected
life of the financial instrument or a shorter
period, where appropriate, to the gross
carrying amount of the financial asset or
to the amortized cost of a financial liability.
Interest income is included in other income in
the statement of profit and loss.
3. Dividends
Dividend income is accounted for when the
right to receive the same is established, which
is generally when shareholders approve the
dividend.
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.
Qualifying assets are assets that necessarily take
a substantial period of time to get ready for their
intended use or sale. All other borrowing costs
are expensed in the period in which they occur.
Borrowing costs consist of interest and other
costs that a company incurs in connection with the
borrowing of funds.
Investment income earned on the temporary
investment of specific borrowings pending their
expenditure on qualifying asset is deducted from
the borrowing costs eligible for capitalization.
C. Government Grants
Government grants are only recognized where
there is reasonable assurance that the grant will
be received and all attached conditions will be
complied with.
• When the grant relates to an expense item,
it is recognized as income on a systematic
basis over the periods that the related costs,
for which it is intended to compensate, are
expensed.
• Where the grant relates to an asset, it is
recognized as income in equal amounts over
the expected useful life of the related asset.
When loans or similar assistance are provided by
governments or related institutions, at a below
market rate of interest, the effect of this favorable
interest is treated as a government grant. The loan
or assistance is initially recognized and measured at
fair value, and the government grant is measured
as the difference between the proceeds received
and the initial carrying value of the loan. The loan
is subsequently measured as per the accounting
policies applicable to financial liabilities.
D. Export Benefits
Duty free imports of raw materials under advance
license for imports, as per the Foreign Trade
Policy, are matched with the exports made against
the said licenses and the net benefits / obligations
are accounted by making suitable adjustments in
raw material consumption.
E. Taxes
1. Current income tax
Current income tax assets and liabilities
are measured at the amount expected to
be recovered from or paid to the taxation
authorities, based on the rates and tax laws
enacted or substantively enacted, at the
reporting date in the country where the entity
operates and generates taxable income.
Current tax items are recognized in correlation
to the underlying transaction either in OCI or
directly in equity.
Management periodically evaluates positions
taken in the tax returns with respect to
situations in which applicable tax regulations
are subject to interpretation and establishes
provisions where appropriate.
2. Deferred tax
Deferred tax is provided using the balance
sheet approach on temporary differences at
the reporting date between the tax bases of
assets and liabilities and their corresponding
carrying amounts for the financial reporting
purposes.
Deferred tax assets are the amounts of
income taxes recoverable in future periods in
respect of:
i. deductible temporary differences;
ii. the carry forward of unused tax losses;
and
iii. the carry forward of unused tax credits.
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.
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
(and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax relating to items recognized
outside profit or loss is (either in other
comprehensive income or in equity).
Deferred tax items are recognized in
correlation to the underlying transaction
either in OCI or directly in equity.
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 and the deferred taxes relate
to the same taxable entity and the same
taxation authority.
F. Leases
Company as a lessee
The Company applies a single recognition and
measurement approach for all leases, except
for short term leases and leases of low-value
assets. The Company recognises lease liabilities
to make lease payments and right-of-use assets
representing the right to use the underlying assets.
1) Right-of-use assets
• The Company recognises 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 costs incurred,
and lease payments 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 shorter of the lease term and
the estimated useful lives of the assets,
as follows:
• Leasehold Land 99 years
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 section (p)
Impairment of non-financial assets.
2) Lease Liabilities
At the commencement date of the lease,
the Company recognises lease liabilities
measured at the present value of lease
payments to be made over the lease term.
The lease payments include 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, the 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.
3) Short-term leases and leases of low-value
assets
The Company applies the short-term lease
recognition exemption to its short-term
leases of machinery and equipment (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 to leases of
office equipment 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.
G. Employee Benefits
The Company provides for gratuity, a defined
benefit retirement plan ('the Gratuity Plan')
covering eligible Indian employees of Vishal
Fabrics. The Gratuity Plan provides a lump-sum
payment to vested employees at retirement,
death, in capacitation or termination of
employment, of an amount based on the
respective employee's salary and the tenure of
employment with the Company. The Company
contributes Gratuity liabilities to the Vishal Fabrics
Limited Employees' Gratuity Fund Trust (the
Trust). Trustees administer contributions made
to the Trusts and contributions are invested in a
scheme with the Life Insurance Corporation of
India as permitted by Indian law.
All employee benefits payable wholly within
twelve months of rendering services are classified
as short term employee benefits. Benefits such
as salaries, wages, short-term compensated
absences, performance incentives etc., and the
expected cost of bonus, ex-gratia are recognized
during the period in which the employee renders
related service.
Payments to defined contribution retirement
benefit plans are recognized as an expense when
employees have rendered the service entitling
them to the contribution.
The company operates a defined benefit gratuity
plan in India, which requires contributions to be
made to a LIC.
The cost of providing benefits under the defined
benefit plan is determined using the projected unit
credit method. Re-measurements, comprising of
actuarial gains and losses, the effect of the asset
ceiling, excluding amounts included in net interest
on the net defined benefit liability and the return
on plan assets (excluding amounts included in
net interest on the net defined benefit liability),
are recognized immediately in the balance sheet
with a corresponding debit or credit to retained
earnings through OCI in the period in which they
occur. Re-measurements are not reclassified to
profit or loss in subsequent periods.
Past service costs are recognized in profit or loss
on the earlier of:
i. The date of the plan amendment or
curtailment, and
ii. The date that the company recognizes
related restructuring costs
Net interest is calculated by applying the discount
rate to the net defined benefit liability or asset.
The company recognizes the following changes in
the net defined benefit obligation as an expense in
the statement of profit and loss:
i. Service costs comprising current service
costs, past-service costs, gains and losses on
curtailments and non-routine settlements;
and
ii. Net interest expense or income
1. Long-term employee benefits
Post-employment and other employee
benefits are recognized as an expense in the
statement of profit and loss for the period in
which the employee has rendered services.
The expenses are recognized at the present
value of the amount payable determined
using actuarial valuation techniques. Actuarial
gains and loss in respect of post-employment
and other long term benefits are charged
to the statement of other comprehensive
income.
2. Defined contribution plans
The company pays provident fund
contributions to publicly administered
provident funds as per local regulations. The
company has no further payment obligations
once the contributions have been paid.
H. Property, plant and equipment
Freehold land is carried at historical cost. All other
items of property, plant and equipment are stated
at acquisition cost of the items. Acquisition cost
includes expenditure that is directly attributable
to getting the asset ready for intended use.
Subsequent costs are included in the asset's
carrying amount or recognized as a separate asset,
as appropriate, only when 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. The carrying amount of any
component accounted for as a separate asset is
derecognized when replaced. All other repairs and
maintenance are charged to profit or loss during
the reporting period in which they are incurred.
An item of spare parts that meets the definition of
'property, plant and equipment' is recognized as
property, plant and equipment. The depreciation
on such an item of spare part will begin when
the asset is available for use i.e. when it is in the
location and condition necessary for it to be
capable of operating in the manner intended by
management. In case of a spare part, as it may
be readily available for use, it may be depreciated
from the date of purchase of the spare part.
Capital work in progress is stated at cost and net
of accumulated impairment losses, if any. All the
direct expenditure related to implementation
including incidental expenditure incurred during
the period of implementation of a project, till it
is commissioned, is accounted as Capital work
in progress (CWIP) and after commissioning the
same is transferred / allocated to the respective
item of property, plant and equipment.
Pre-operating costs, being indirect in nature, are
expensed to the statement of profit and loss as
and when incurred.
The present value of the expected cost for the
decommissioning of an asset after its use is
included in the cost of the respective asset if the
recognition criteria for a provision are met.
Property, plant and equipment are eliminated from
financial statement, either on disposal or when
retired from active use. Losses arising in the case
of retirement of property, plant and equipment
are recognized in the statement of profit and loss
in the year of occurrence.
Depreciation methods, estimated useful lives and
residual value
Depreciation is calculated to allocate the cost
of assets, net of their residual values, over their
estimated useful lives. Components having
value significant to the total cost of the asset
and life different from that of the main asset are
depreciated over its useful life. However, land is
not depreciated. The useful lives so determined
are as follows'
Depreciation on property, plant and equipment
has been provided in the accounts based on
useful life of the assets prescribed in Schedule II
to the Companies Act, 2013. Certain assets are
depreciated over the useful life decided by the
management based on estimate by the domain
experts. The said useful life is less then prescribed
by the schedule II of the Companies Act, 2013.
Written down method is used for Depreciation
calculation except Plant and Machinery. Plant and
Machinery has been depreciated on Straight Line
Basis.
Depreciation on additions is calculated on pro rata
basis with reference to the date of addition.
Depreciation on assets sold/ discarded, during the
period, has been provided up to the preceding
month of sale / discarded.
The residual values, useful lives and methods of
depreciation of property, plant and equipment are
reviewed at each financial year end and adjusted
prospectively, if appropriate.
Gains and losses on disposals are determined by
comparing proceeds with carrying amount. These
are included in profit or loss within other gains /
(losses).
Investment properties
Property that is held for long-term rental yields
or for capital appreciation or both, is classified
as investment property. Investment property is
measured initially at its cost, including related
transaction costs and where applicable borrowing
costs. Subsequent expenditure is capitalized to the
asset's carrying amount only when it is probable
that future economic benefits associated with
the expenditure will flow to the company and the
cost of the item can be measure reliably. All other
repairs and maintenance costs are expensed when
incurred. When part of an investment property is
replaced, the carrying amount of the replaced part
is derecognized.
J. Intangibles
Intangible assets are recognized when it is probable
that the future economic benefits that are
attributable to the assets will flow to the company
and the cost of the asset can be measured reliably.
Intangible assets acquired separately are
measured on initial recognition at cost. The
cost of intangible assets acquired in a business
combination is their fair value at the date of
acquisition. Following initial recognition, intangible
assets are carried at cost less any accumulated
amortization and accumulated impairment
losses. Internally generated intangibles, excluding
capitalized development costs, are not capitalized
and the related expenditure is reflected in profit
or loss in the period in which the expenditure is
incurred.
K. Inventories
Inventories are valued at the lower of cost and net
realizable value.
1. Raw materials: cost includes cost of purchase
and other costs incurred in bringing the
inventories to their present location and
condition. Cost is determined on first in, first
out basis.
2. Finished goods and work in progress:
cost includes cost of direct materials and
labor and a proportion of manufacturing
overheads based on the normal operating
capacity, but excluding borrowing costs.
Cost is determined on lower of cost or net
realizable value.
3. Stores and spares: cost includes cost of
purchase and other costs incurred in bringing
the inventories to their present location and
condition. Cost is determined on weighted
average basis. An item of spare parts that
does not meet the definition of 'property,
plant and equipment' has to be recognized
as a part of inventories.
4. Fuel: cost includes cost of purchase and
other cost incurred in bringing the inventories
to their present location and condition. Cost
is determined on first in, first out 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.
L. I nvestment in subsidiaries, joint ventures and
associates
Investments in subsidiaries, joint ventures and
associates are recognized at cost as per Ind AS
27. Except where investments accounted for at
cost shall be accounted for in accordance with
Ind AS 105, Non-current Assets Held for Sale and
Discontinued Operations, when they are classified
as held for sale.
M. Financial Instruments
1. Financial assets
i. Initial recognition and measurement
All financial assets are recognized
initially at fair value plus, in the case of
financial assets not recorded at fair value
through profit or loss, transaction costs
that are attributable to the acquisition
of the financial asset. Transaction costs
of financial assets carried at fair value
through profit or loss are expensed in
profit or loss.
Financial assets are classified, at
initial recognition, as financial assets
measured at fair value or as financial
assets measured at amortized cost.
ii. Subsequent measurement
For purposes of subsequent
measurement, financial assets are
classified in four categories:
a. Debt instruments at amortized
cost
b. Debt instruments at fair value
through other comprehensive
income (FVTOCI)
c. Financial assets at fair value
through profit or loss (FVTPL)
d. Equity instruments measured
at fair value through other
comprehensive income (FVTOCI)
iii. Debt instruments at amortized cost
A 'debt instrument' is measured at the
amortized cost if both the following
conditions are met:
a. The asset is held within a business
model whose objective is to hold
assets for collecting contractual
cash flows, and
b. Contractual terms of the asset
give rise on specified dates to cash
flows that are solely payments of
principal and interest (SPPI) on the
principal amount outstanding.
After initial measurement, such
financial assets are subsequently
measured at amortized cost
using the effective interest rate
(EIR) method. Amortized cost is
calculated by taking into account
any discount or premium on
acquisition and fees or costs that
are an integral part of the EIR.
The EIR amortization is included in
finance income in the profit or loss.
The losses arising from impairment
are recognized in the profit or loss.
This category generally applies to
trade and other receivables.
iv. Debt instrument at FVTOCI
A 'debt instrument' is classified as at the
FVTOCI if both of the following criteria
are met:
a. The objective of the business
model is achieved both by
collecting contractual cash flows
and selling the financial assets, and
b. The asset's contractual cash flows
represent SPPI.
Debt instruments included
within the FVTOCI category are
measured initially as well as at each
reporting date at fair value. Fair
value movements are recognized
in the other comprehensive
income (OCI).
v. Financial instrument at FVTPL
FVTPL is a residual category for debt
instruments. Any debt instrument,
which does not meet the criteria for
categorization as at amortized cost or
as FVTOCI, is classified as at FVTPL.
In addition, the company may elect
to designate a debt instrument, which
otherwise meets amortized cost or
FVTOCI criteria, as at FVTPL. However,
such election is allowed only if doing so
reduces or eliminates a measurement
or recognition inconsistency (referred
to as 'accounting mismatch'). The
company has not designated any debt
instrument as at FVTPL.
Debt instruments included within the
FVTPL category are measured at fair
value with all changes recognized in the
P&L.
vi. Equity investments
All equity investments in scope of Ind
AS 109 are measured at fair value.
Equity instruments which are held for
trading and contingent consideration
recognized by an acquirer in a business
combination to which Ind AS103 applies
are classified as at FVTPL. For all other
equity instruments, the company
may make an irrevocable election to
present in other comprehensive income
subsequent changes in the fair value.
The company makes such election on
an instrument by-instrument basis.
The classification is made on initial
recognition and is irrevocable.
I f the company decides to classify an
equity instrument as at FVTOCI, then
all fair value changes on the instrument,
excluding dividends, are recognized in
the OCI. There is no recycling of the
amounts from OCI to P&L, even on sale
of investment. However, the company
may transfer the cumulative gain or loss
within equity.
Equity instruments included within the
FVTPL category are measured at fair
value with all changes recognized in the
P&L.
vii. Derecognition
A financial asset (or, where applicable,
a part of a financial asset or part of a
company of similar financial assets) is
primarily derecognized (i.e. removed
from the company's balance sheet)
when:
a. The rights to receive cash flows
from the asset have expired, or
b. The company has transferred
its rights to receive cash flows
from the asset or has assumed an
obligation to pay the received cash
flows in full without material delay
to a third party under a 'pass¬
through' arrangement; and either
a) the company has transferred
substantially all the risks and
rewards of the asset, or
b) the company has neither
transferred nor retained
substantially all the risks and
rewards of the asset, but has
transferred control of the asset.
When the company has transferred
its rights to receive cash flows from
an asset or has entered into a pass¬
through arrangement, it evaluates if
and to what extent it has retained the
risks and rewards of ownership. When
it has neither transferred nor retained
substantially all of the risks and rewards
of the asset, nor transferred control of
the asset, the company continues to
recognize the transferred asset to the
extent of the company's continuing
involvement. In that case, the company
also recognizes an associated liability.
The transferred asset and the associated
liability are measured on a basis that
reflects the rights and obligations that
the company has retained.
viii. Impairment of financial assets
The company assesses impairment
based on expected credit loss (ECL)
model to the following:
a. Financial assets measured at
amortized cost;
b. Financial assets measured
at fair value through other
comprehensive income (FVTOCI);
Expected credit losses are
measured through a loss allowance
at an amount equal to:
a. The 12-months expected credit
losses (expected credit losses that
result from those default events
on the financial instrument that are
possible within 12 months after the
reporting date); or
b. Full time expected credit losses
(expected credit losses that
result from all possible default
events over the life of the financial
instrument).
The company follows 'simplified
approach' for recognition of impairment
loss allowance on:
a. Trade receivables or contract
revenue receivables; and
Under the simplified approach, the
company does not track changes
in credit risk. Rather, it recognizes
impairment loss allowance
based on lifetime ECLs at each
reporting date, right from its initial
recognition.
The company uses a provision
matrix to determine impairment
loss allowance on the portfolio of
trade receivables. The provision
matrix is based on its historically
observed default rates over the
expected life of the trade receivable
and is adjusted for forward looking
estimates. At every reporting date,
the historical observed default
rates are updated and changes in
the forward-looking estimates are
analyzed.
For recognition of impairment
loss on other financial assets
and risk exposure, the company
determines that whether there has
been a significant increase in the
credit risk since initial recognition.
If credit risk has not increased
significantly, 12-month ECL is used
to provide for impairment loss.
However, if credit risk has increased
significantly, lifetime ECL is used.
If, in a subsequent period, credit
quality of the instrument improves
such that there is no longer a
significant increase in credit risk
since initial recognition, then
the entity reverts to recognizing
impairment loss allowance based
on 12-month ECL.
Lifetime ECL are the expected
credit losses resulting from all
possible default events over
the expected life of a financial
instrument. The 12-month ECL is
a portion of the lifetime ECL which
results from default events that are
possible within 12 months after the
reporting date.
ECL impairment loss allowance (or
reversal) recognized during the
period is recognized as income/
expense in the statement of profit
and loss (P&L). This amount is
reflected under the head 'other
expenses' in the P&L.
ix. Financial assets measured as at
amortized cost, contractual revenue
receivables and lease receivables
ECL is presented as an allowance, i.e.,
as an integral part of the measurement
of those assets in the balance sheet.
The allowance reduces the net carrying
amount. Until the asset meets write-off
criteria, the company does not reduce
impairment allowance from the gross
carrying amount.
For assessing increase in credit risk and
impairment loss, the company combines
financial instruments on the basis of
shared credit risk characteristics with
the objective of facilitating an analysis
that is designed to enable significant
increases in credit risk to be identified
on a timely basis.
The company does not have any
purchased or originated credit-impaired
(POCI) financial assets, i.e., financial
assets which are credit impaired on
purchase/ origination.
2. Financial liabilities
i. Initial recognition and measurement
All financial liabilities are recognized initially at fair
value and, in the case of loans and borrowings and
payables, net of directly attributable transaction
costs.
The company's financial liabilities include trade
and other payables, loans and borrowings including
bank overdrafts.
i. Subsequent measurement
The measurement of financial liabilities
depends on their classification, as described
below:
a. Financial liabilities at fair value through
profit or loss
b. Loans and borrowings
c. Financial guarantee contracts
ii. Financial liabilities at FVTPL
Financial liabilities at fair value through profit
or loss include financial liabilities held for
trading and financial liabilities designated
upon initial recognition as at fair value through
profit or loss. Financial liabilities are classified
as held for trading if they are incurred for the
purpose of repurchasing in the near term.
Gains or losses on liabilities held for trading
are recognized in the profit or loss.
Financial liabilities designated upon initial
recognition at fair value through profit or loss
are designated as such at the initial date of
recognition, and only if the criteria in Ind AS
109 are satisfied. For liabilities designated as
FVTPL, fair value gains/ losses attributable
to changes in own credit risk is recognized
in OCI. These gains/ losses are not
subsequently transferred to P&L. However,
the company may transfer the cumulative
gain or loss within equity. All other changes in
fair value of such liability are recognized in the
statement of profit and loss. The company
has not designated any financial liability as at
fair value through profit and loss.
iii. Loans and borrowings
After initial recognition, interest-bearing loans
and borrowings are subsequently measured
at amortized cost using the EIR method.
Gains and losses are recognized in profit or
loss when the liabilities are derecognized
as well as through the EIR amortization
process. Amortized cost is calculated by
taking into account any discount or premium
on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortization
is included as finance costs in the statement
of profit and loss.
iv. Financial guarantee contracts
Financial guarantee contracts issued by the
company are those contracts that require a
payment to be made to reimburse the holder
for a loss it incurs because the specified
debtor fails to make a payment when due
in accordance with the terms of a debt
instrument. Financial guarantee contracts
are recognized initially as a liability at fair
value, adjusted for transaction costs that
are directly attributable to the issuance of
the guarantee. Subsequently, the liability
is measured at the higher of the amount of
loss allowance determined as per impairment
requirements of Ind AS 109 and the amount
recognized less cumulative amortization.
The fair value of financial guarantees is
determined as the present value of the
difference in net cash flows between the
contractual payments under the debt
instrument and the payments that would
be required without the guarantee, or the
estimated amount that would be payable to
a third party for assuming the obligations.
When guarantees in relation to loans or other
payables of associates are provided for no
compensation the fair values are accounted
for as contributions and recognized as part of
the cost of the investment.
v. Preference shares
Preference shares, which are mandatorily
redeemable on a specific date, are classified
as liabilities. The dividends on these
preference shares are recognized in profit or
loss as finance costs.
vi. Derecognition
A financial liability is derecognized when the
obligation under the liability is discharged
or cancelled or expires. When an existing
financial liability is replaced by another from
the same lender on substantially different
terms, or the terms of an existing liability are
substantially modified, such an exchange or
modification is treated as the derecognition
of the original liability and the recognition of a
new liability. The difference in the respective
carrying amounts is recognized in the
statement of profit and loss.
3. Off-setting of financial instruments
Financial assets and financial liabilities are offset
and the net amount is reported in the standalone
balance sheet if there is a currently enforceable
legal right to offset the recognized amounts
and there is an intention to settle on a net basis,
to realize the assets and settle the liabilities
simultaneously.
N. Impairment of non-financial assets
The company assesses, at each reporting date,
whether there is an indication that an asset may
be impaired. If any indication exists, or when
annual impairment testing for an asset is required,
the company estimates the asset's recoverable
amount. An asset's recoverable amount is the
higher of an assets or cash-generating unit's
(CGU) fair value less costs of disposal and its
value in use. Recoverable amount is determined
for an individual asset, unless the asset does not
generate cash inflows that are largely independent
of those from other assets or company's assets.
When the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is
considered impaired and is written down to its
recoverable amount.
Recoverable amount is determined:
i. In case of individual asset, at higher of the fair
value less cost to sell and value in use; and
ii. In case of cash-generating unit (accompany
of assets that generates identified,
independent cash flows), at the higher of the
cash-generating unit's fair value less cost to
sell and the 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. In determining fair value less costs
of disposal, recent market transactions are
taken into account. If no such transactions
can be identified, an appropriate valuation
model is used. These calculations are
corroborated by valuation multiples, quoted
share prices for publicly traded companies or
other available fair value indicators.
The company bases its impairment
calculation on detailed budgets and forecast
calculations, which are prepared separately
for each of the company's CGUs to which
the individual assets are allocated. These
budgets and forecast calculations generally
cover a period of five years. For longer
periods, a long-term growth rate is calculated
and applied to project future cash flows after
the fifth year.
I mpairment losses of continuing operations,
including impairment on inventories, are
recognized in the statement of profit
and loss, except for properties previously
revalued with the revaluation surplus taken
to OCI. For such properties, the impairment
is recognized in OCI up to the amount of any
previous revaluation surplus.
O. Cash and cash equivalents
Cash and cash equivalent in the balance sheet
comprise cash at banks and on hand and short¬
term deposits with an original maturity of
three months or less, which are subject to an
insignificant risk of changes in value. For the
purpose of the statement of cash flows, cash and
cash equivalents consist of cash and short-term
deposits, as defined above, net of outstanding
bank overdrafts as they are considered an integral
part of the company's cash management.
P. Segment accounting
The Chief Operational Decision Maker monitors
the operating results of its business Segments
separately for the purpose of making decisions
about resource allocation and performance
assessment. Segment performance is evaluated
based on profit or loss and is measured consistently
with profit or loss in the financial statements.
The Operating segments have been identified on
the basis of the nature of products/services.
The accounting policies adopted for segment
reporting are in line with the accounting policies
of the company. Segment revenue, segment
expenses, segment assets and segment liabilities
have been identified to segments on the basis of
their relationship to the operating activities of the
segment. Inter Segment revenue is accounted
on the basis of transactions which are primarily
determined based on market/fair value factors.
Revenue, expenses, assets and liabilities which
relate to the company as a whole and are not
allocated to segments on a reasonable basis
have been included under “unallocated revenue /
expenses / assets / liabilities".
The Company is primarily engaged in the business
of manufacturing, distribution and marketing of
textile product. These, in the context of Ind AS 108
on Operating Segments Reporting are considered
to constitute single business segment.
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