NOTE 1: MATERIAL ACCOUNTING POLICIES
a) Basis of preparation:
The financial statements of the Company have been
prepared in accordance with Indian Accounting
Standards (Ind AS) notified pursuant to section 133
of the Companies Act 2013 read with Rule 3 of the
Companies (Indian Accounting Standards) Rules,
2015 and Companies (Indian Accounting Standards)
Amendment Rules, 2023 (as amended from time to
time) and presentation requirements of Division II
of Schedule III to the Companies Act, 2013, (Ind AS
compliant Schedule III), as applicable to the Financial
statements ('Standalone IND AS Financial Statements').
The Company has prepared the financial statements
on the basis that it will continue to operate as a going
concern and further, the financial statements have been
prepared on the historical cost basis except for certain
financial instruments that are measured at fair values
at the end of each reporting period, as explained in the
accounting policies below:
a. Derivative financial instruments,
b. Certain financial assets and liabilities measured at
fair value, and
c. Defined benefit plans - plan assets measured at
fair value;
Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date,
regardless of whether that price is directly observable
or estimated using another valuation technique. In
estimating the fair value of an asset or a liability, the
Company takes into account the characteristics of the
asset or liability if market participants would take those
characteristics into account when pricing the asset or
liability at the measurement date.
In addition, for financial reporting purposes, fair value
measurements are categorised into Level 1 , 2, or 3
based on the degree to which the inputs to the fair value
measurements are observable and the significance of
the inputs to the fair value measurement in its entirety,
which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities that
the entity can access at the measurement date
• Level 2 inputs are inputs, other than quoted prices
included within Level 1, that are observable for the
asset or liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the
asset or liability.
The financial statements are presented in ', which is
the functional currency and all values are rounded to
the nearest crore (' 00,00,000), except when otherwise
indicated.
b) Current versus non-current classification
The Company presents assets and liabilities in
the balance sheet based on current/non-current
classification. An asset is treated as current when it is:
• Expected to be realised or intended to be sold or
consumed in normal operating cycle
• Held primarily for the purpose of trading
• Expected to be realised within twelve months after
the reporting period, or
• Cash or cash equivalent unless restricted from
being exchanged or used to settle a liability for at
least twelve months after the reporting period.
All other assets are classified as non-current
A liability is current when:
• It is expected to be settled in the normal operating
cycle
• It is held primarily for the purpose of trading
• It is due to be settled within twelve months after
the reporting period, or
• There is no unconditional right to defer the
settlement of the liability for at least twelve months
after the reporting period.
The terms of the liability that could, at the option of the
counterparty, result in its settlement by the issue of
equity instruments do not affect its classification.
The Company classifies all other liabilities as non¬
current.
Deferred tax assets and liabilities are classified as non¬
current assets and liabilities.
Based on the nature of services and the normal time
between the acquisition of assets and their realisation
into cash and cash equivalents, the Company has
ascertained its operating cycle as 12 months for the
purpose of current and non-current classification of
assets and liabilities.
c) Foreign Currency Transactions and Translation
The management of the Company has determined
Indian rupee ("'") as the functional currency of the
Company. In preparing the financial statements of the
Company, transactions in currencies other than the
Company's functional currency ("foreign currencies")
are recognised at the rates of exchange prevailing at the
dates of the transactions. At the end of each reporting
period, monetary items denominated in foreign
currencies are retranslated at the rates prevailing at
that date.
Exchange differences on monetary items are recognised
in statement of profit and loss in the period in which
they arise except for:
• exchange differences on foreign currency
borrowings relating to assets under construction
for future productive use, which are included in
the cost of those assets when they are regarded
as an adjustment to interest costs on those foreign
currency borrowings
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using
the exchange rates at the dates of the initial transactions.
Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the
date when the fair value is determined. The gain or loss
arising on translation of non-monetary items measured
at fair value is treated in line with the recognition of the
gain or loss on the change in fair value of the item (i.e.,
translation differences on items whose fair value gain
or loss is recognised in OCI or profit or loss are also
recognised in OCI or profit or loss, respectively).
In determining the spot exchange rate to use on
initial recognition of the related asset, expense or
income (or part of it) on the derecognition of a non¬
monetary asset or non-monetary liability relating to
advance consideration, the date of the transaction is
the date on which the Company initially recognises
the non-monetary asset or non-monetary liability
arising from the advance consideration. If there are
multiple payments or receipts in advance, the Company
determines the transaction date for each payment or
receipt of advance consideration.
d) Revenue from contract with customers:
The Company recognises revenue from the following
major sources, acting in the capacity of principal:
• Sale of consumer product
• Sale of services
• Other operating revenue
Sale of consumer product
The Company sells textile Products. The Company
recognizes revenue on the sale of goods, net of
discounts, sales incentives, estimated customer returns
and rebates granted, if any, when control of the goods is
transferred to the customer.
Discounts given include rebates, price reductions
and other incentives given to customer The Company
bases its estimates on historical results, taking
into consideration the type of customer, the type of
transaction and the specifics of each arrangement.
Nature, timing of satisfaction of performance obligation
and transaction price (Fixed and variable)
The control of goods is transferred to the customer
depending upon the terms or as agreed with customer
or delivery basis (i.e. at the point in time when goods
are delivered to the customer or when the customer
purchases the goods from the Company warehouse).
Control is considered to be transferred to customer
when customer has ability to direct the use of such
goods and obtain substantially all the benefits from
it such as following delivery, the customer has full
discretion over the manner of distribution and price to
sell the goods, has the primary responsibility when on
selling the goods and bears the risks of obsolescence
and loss in relation to the goods.
Based on the terms of the contract and as per business
practice, the Company determines the transaction
price considering the amount it expects to be entitled in
exchange of transferring promised goods or services to
the customer. It excludes amount collected on behalf of
third parties such as taxes.
The Company provides volume discount and rebate
schemes, to its customers on certain goods purchased
by the customer once the quantity of goods purchased
during the period exceeds a threshold specified in the
contract. Volume discount and rebate schemes give
rise to variable consideration. To estimate the variable
consideration to which it will be entitled, the Company
considers that either the expected value method or the
most likely amount method, depending on which of them
better predicts the amount of variable consideration for
the particular type of contract.
Sale of services
Revenue from services mainly consists of job work
income and is recognised when performance obligation
is satisfied. The transaction price of these services
is recognised as a contract liability upon receipt of
advance from the customer, if any.
Export Incentives
Export benefits arising from Duty Drawback scheme,
Remission of Duties and Taxes on Export Products
(RoDTEP) and other eligible export incentives are
recognised on post export basis at the rate at which
the entitlements accrue and is included in the 'Other
Operating Income' (Revenue from operation).
Contract assets, contract liabilities and trade
receivables
Revenues in excess of invoicing are classified as
contract assets (which we refer as unbilled revenue)
while invoicing in excess of revenues (which we refer
to as unearned revenues) and advance from customers
are classified as contract liabilities. A receivable is
recognised by the Company when the control over the
g oods is transferred to the customer such as when
goods are delivered as this represents the point in
time at which the right to consideration becomes
unconditional, as only the passage of time is required
before payment is due. The average credit period on
sale of goods is upto 90 days.
e) Income taxes:
Current tax
Current tax payable is based on taxable profit for the
year. Taxable profit differs from 'profit before tax' as
reported in the statement of profit and loss because
of items of income or expense that are taxable or
deductible in other years and items that are never
taxable or deductible. The Company's current tax is
calculated using tax rates that have been enacted by the
end of the reporting period.
Deferred tax
Deferred tax is recognised 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. While
preparing standalone financial statements, temporary
differences are calculated using the carrying amount
as per standalone financial statements and tax bases
as determined by reference to the method of tax
computation.
Deferred tax liabilities are recognised for all taxable
temporary differences, except:
• When the deferred tax liability arises from the
initial recognition of goodwill or an asset or liability
in a transaction that is not a business combination
and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss
• In respect of taxable temporary differences
associated with investments in subsidiaries,
associates and interests in joint ventures, when
the timing of the reversal of the temporary
differences can be controlled and it is probable that
the temporary differences will not reverse in the
foreseeable future
Deferred tax liabilities are generally recognised for
all taxable temporary differences. Deferred tax assets
are generally recognised for all deductible temporary
differences, the carry forward of unused tax credits and
unused tax losses to the extent that it is probable that
taxable profits will be available against which deductible
temporary differences and the carry forward of unused
tax credits and unused tax losses can be utilised. Such
deferred tax assets and liabilities are not recognised
if the temporary difference arises from the initial
recognition (other than in a business combination)
of assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit. In
addition, deferred tax liabilities are not recognised if the
temporary difference arises from the initial recognition
of goodwill.
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.
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.
Current and deferred tax are recognised in 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.
f) Property, Plant and Equipment
Assets held for use in the production or supply of goods
or services, or for administrative purposes, are stated in
the standalone balance sheet at cost less accumulated
depreciation and accumulated impairment losses.
Freehold land is not depreciated, however, it is subject
to impairment.
Properties in the course of construction for production,
supply or administrative purposes are carried at cost,
less any recognised impairment loss. Cost includes
professional fees and, for qualifying assets, borrowing
costs capitalised in accordance with the Company's
accounting policy. Such properties are classified to the
appropriate categories of property, plant and equipment
when completed and ready for intended use.
Likewise, subsequent cost incurred to overhaul the
plant and machineries and major inspection costs are
recognised in the carrying amount of the plant and
equipment as a replacement if the recognition criteria
are satisfied. The carrying amount of any component
accounted for as a separate asset is derecognised
when replaced. All other repairs and maintenance
are charged to statement of profit and loss during the
reporting period in which they are incurred.
Capital work in progress is stated at cost, net of
accumulated impairment loss, if any.
Non-current assets held for sale
The Company classifies non-current assets as held for
sale if their carrying amounts will be recovered principally
through a sale rather than through continuing use.
Non-current assets classified as held for sale are
measured at the lower of their carrying amount and fair
value less costs to sell. Costs to sell are the incremental
costs directly attributable to the disposal of an asset,
excluding finance costs and income tax expense.
For these purposes, sale transactions include
exchanges of non-current assets for other non-current
assets when the exchange has commercial substance.
The criteria for held for sale classification is regarded
met only when the assets is available for immediate
sale in its present condition, subject only to terms that
are usual and customary for sales of such assets, its
sale is highly probable; and it will genuinely be sold, not
abandoned. The Company treats sale of the asset to be
highly probable when:
• The appropriate level of management is committed
to a plan to sell the asset,
• An active programme to locate a buyer and
complete the plan has been initiated (if applicable),
• The asset is being actively marketed for sale at a
price that is reasonable in relation to its current
fair value,
• The sale is expected to qualify for recognition as
a completed sale within one year from the date of
classification, and
Actions required to complete the plan indicate that it
is unlikely that significant changes to the plan will be
made or that the plan will be withdrawn.
Depreciation of these assets, on the same basis as
other property assets, commences when the assets are
ready for their intended use.
Stand-by equipment and servicing equipment are
recognised as property, plant and equipment if they
are held for use in the production or supply of goods
or services, for rental to others, or for administrative
purposes and are expected to be used during more than
one period. Property, plant and equipment which are
not ready for intended use as on the date of Balance
Sheet are disclosed as 'Capital work-in-progress'.
An item of property, plant and equipment is derecognised
upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset.
Any gain or loss arising on the disposal or retirement of
an item of property, plant and equipment is determined
as the difference between the sales proceeds and
the carrying amount of the asset and is recognised in
statement of profit and loss.
Depreciation methods, estimated useful lives and
residual value:
Depreciation is recognised so as to write off the cost
of assets (other than freehold land) less their residual
values over their useful lives, using the straight-line
method. The estimated useful lives, residual values
and depreciation method are reviewed at the end of
each reporting period, with the effect of any changes
in estimate accounted for on a prospective basis.
Depreciation on property, plant and equipment has been
provided on straight line method as per the useful life
prescribed in Schedule II of the Company's Act, 2013,
except in case of following assets, where useful life
used is different than those prescribed in part C of
Schedule II:
Based on technical evaluation performed, the
management believes that the useful lives as
given above, best represent, the period over which
management expects to use these assets. Hence, the
useful lives for these assets is different from the useful
lives as prescribed under Part C of Schedule II of the
Companies Act, 2013.
The residual values are not more than 5% of the original
cost of the asset.
The residual values, useful lives and method of
depreciation of property, plant and equipment are
reviewed at each financial year end and any changes
there in are considered as change in estimate and
accounted prospectively.
Goods and Services Tax (GST) paid on acquisition of
assets or on incurring expenses
Expenses and assets are recognised net of the amount
of GST/ value added taxes paid, except:
• When the tax incurred on a purchase of assets
or services is not recoverable from the taxation
authority, in which case, the tax paid is recognised
as part of the cost of acquisition of the asset or as
part of the expense item, as applicable
• When receivables and payables are stated with the
amount of tax included
The net amount of tax recoverable from, or payable
to, the taxation authority is included as part of other
current/non-current assets/ liabilities in the balance
sheet.
g) Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are
acquired separately are carried at cost less accumulated
amortisation and accumulated impairment losses.
Amortisation is recognised on a straight-line basis over
their estimated useful lives. 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, if any. The assessment of indefinite
life is reviewed annually to determine whether the
indefinite life continues to be supportable. If not, the
change in useful life from indefinite to finite is made on
a prospective basis.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination
and recognised separately from goodwill are initially
recognised at their fair value at the acquisition date
(which is regarded as their cost).
Subsequent to initial recognition, intangible assets
acquired in a business combination are reported on
the same basis as intangible assets that are acquired
separately.
Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when
no future economic benefits are expected from use or
disposal. Gains or losses arising from derecognition of
an intangible asset, measured as the difference between
the net disposal proceeds and the carrying amount of
the asset are recognised in statement of profit and loss
when the asset is derecognised.
Useful lives of intangible assets
Estimated useful lives of the intangible assets are as
follows;
h) Borrowing costs
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 or sale, are
added to the cost of those assets, until such time as
the assets are substantially ready for their intended
use or sale. 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 period in which they
are incurred.
The Company may incur borrowing costs during an
extended period in which it suspends the activities
necessary to prepare an asset for its intended use or
sale. Such costs are costs of holding partially completed
assets and do not qualify for capitalisation. However, an
entity does not normally suspend capitalising borrowing
costs during a period when it carries out substantial
technical and administrative work. The Company also
does not suspend capitalising borrowing costs when a
temporary delay is a necessary part of the process of
getting an asset ready for its intended use or sale.
The Company shall cease capitalising borrowing
costs when substantially all the activities necessary to
prepare the qualifying asset for its intended use or sale
are complete.
Transfers are made to (or from) investment property
only when there is a change in use.
i) Financial instruments
A financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability or
equity instrument of another entity.
I. Financial Assets
A) Initial recognition and measurement
All financial assets are recognised 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.
B) Subsequent measurement
For purposes of subsequent measurement,
financial assets are classified in four
categories:
• Debt instruments at amortised cost
A 'debt instrument' is measured at the
amortised cost if both the following
conditions are met:
• The asset is held within a business model
whose objective is to hold assets for
collecting contractual cash flows, and
• 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.
This category is the most relevant to the
Company. After initial measurement, such
financial assets are subsequently measured at
amortised cost using the effective interest rate
(EIR) method. Amortised 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 amortisation
is included in other income in the statement
of profit and loss. The losses arising from
impairment are recognised in the profit or
loss. This category generally applies to trade
and other receivables.
• Debt instruments at fair value through
other comprehensive income (FVTOCI)
A 'debt instrument' is classified as at the
FVTOCI if both of the following criteria are
met:
• The objective of the business model is
achieved both by collecting contractual
cash flows and selling the financial
assets, and
• 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 recognised in the other
comprehensive income (OCI). On derecognition
of the asset, cumulative gain or loss previously
recognised in OCI is reclassified from the
equity to statement of profit and loss. Interest
earned whilst holding FVTOCI debt instrument
is reported as interest income using the EIR
method.
• Debt instruments at fair value through
profit or loss (FVTPL)
FVTPL is a residual category for debt
instruments. Any debt instrument, which does
not meet the criteria for categorisation as at
amortised cost or as FVTOCI, is classified as at
FVTPL.
In addition, the Company may elect to
designate a debt instrument, which otherwise
meets amortised 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'). Debt
instruments included within the FVTPL
category are measured at fair value with all
changes recognised in the statement of profit
and loss.
• Equity instruments measured at fair value
through other comprehensive income
(FVTOCI)
All equity investments in scope of Ind AS 109
are measured at fair value. Equity instruments
which are held for trading and contingent
consideration recognised 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.
If the Company decides to classify an equity
instrument as at FVTOCI, then all fair value
changes on the instrument, excluding
dividends, are recognised in the OCI. There
is no recycling of the amounts from OCI to
statement of profit & loss, 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 recognised in the statement of profit
and loss.
C) Derecognition
A financial asset (or, where applicable, a part
of a financial asset or part of a group of similar
financial assets) is primarily derecognised (i.e.
removed from the Company's balance sheet)
when:
The rights to receive cash flows from the asset
have expired, or
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
recognise the transferred asset to the extent
of the Company's continuing involvement. In
that case, the Company also recognises 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.
Continuing involvement that takes the form
of a guarantee over the transferred asset is
measured at the lower of the original carrying
amount of the asset and the maximum amount
of consideration that the Company could be
required to repay.
D) Impairment of financial assets
The Company assesses on a forward looking
basis the expected credit losses associated
with its assets carried at amortised cost and
FVOCI debt instruments. The impairment
methodology applied depends on whether
there has been a significant increase in credit
risk. For trade receivables only, the Company
applies the simplified approach permitted
by Ind AS 109 Financial Instruments, which
requires expected lifetime losses to be
recognised from initial recognition of the
receivables.
E) Investments in subsidiaries, associates and
joint ventures
The Company has elected to account for its
equity investments in subsidiaries, associates
and joint ventures under IND AS 27 on Separate
Financials Statements, at cost. At the end of
each reporting period the Company assesses
whether there are indicators of diminution in
the value of its investments and provides for
impairment loss, where necessary.
II. Financial Liabilities
A) Initial recognition and measurement
Financial liabilities are classified, at initial
recognition, as financial liabilities at fair value
through profit or loss, loans and borrowings,
payables, or as derivatives designated as
hedging instruments in an effective hedge, as
appropriate.
All financial liabilities are recognised initially
at fair value and, in the case of loans and
borrowings and payables, net of directly
attributable transaction costs.
B) Subsequent measurement
The measurement of financial liabilities
depends on their classification, as described
below:
• Financial liabilities at fair value through
profit or loss
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.
This category also includes derivative
financial instruments entered into by
the Company that are not designated
as hedging instruments in hedge
relationships as defined by Ind AS 109.
Separated embedded derivatives are
also classified as held for trading unless
they are designated as effective hedging
instruments. Gains or losses on liabilities
held for trading are recognised 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 are recognised in OCI.
These gains/ loss are not subsequently
transferred to statement of profit and
loss. However, the Company may transfer
the cumulative gain or loss within equity.
All other changes in fair value of such
liability are recognised in the statement
of profit or loss.
• Loans and Borrowings
This is the category most relevant to
the Company. After initial recognition,
interest-bearing loans and borrowings
are subsequently measured at amortised
cost using the EIR method. Gains and
losses are recognised in profit or loss
when the liabilities are derecognised
as well as through the EIR amortisation
process.
Amortised 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
amortisation is included as finance costs
in the statement of profit and loss.
• 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
recognised 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 recognised less
cumulative amortisation.
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 contractual
payments that would be required without
the guarantee, or the estimated amount
that would be payable to a third party for
assuming the obligations.
C) De-recognition
A financial liability is derecognised 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 recognised in the statement of
profit or loss.
D) Compound instruments
The component parts of compound
instruments (optionally convertible preference
share) issued by the Company are classified
separately as financial liabilities and equity
in accordance with the substance of the
contractual arrangements and the definitions
of a financial liability and an equity instrument.
A conversion option that will be settled by
the exchange of a fixed amount of cash or
another financial asset for a fixed number of
the Company's own equity instruments is an
equity instrument.
At the date of issue, the fair value of the
liability component is estimated using the
prevailing market interest rate for similar
non-convertible instruments. This amount is
recorded as a liability on an amortised cost
basis using the effective interest method
until extinguished upon conversion or at the
instrument's maturity date.
The conversion option classified as equity
is determined by deducting the amount of
the liability component from the fair value of
the compound instrument as a whole. This
is recognised and included in equity, net of
income tax effects, and is not subsequently
remeasured. In addition, the conversion option
classified as equity will remain in equity until
the conversion option is exercised, in which
case, the balance recognised in equity will be
transferred to other component of equity. When
the conversion option remains unexercised
at the maturity date of the convertible
instrument, the balance recognised in equity
will be transferred to retained earnings. No
gain or loss is recognised in statement of profit
and loss upon conversion or expiration of the
conversion option.
Transaction costs that relate to the issue of the
convertible instruments are allocated to the
liability and equity components in proportion
to the allocation of the gross proceeds.
Transaction costs relating to the equity
component are recognised directly in equity.
Transaction costs relating to the liability
component are included in the carrying amount
of the liability component and are amortised
over the lives of the convertible instrument
using the effective interest method.
III. Reclassification of financial assets / liabilities
After initial recognition, no reclassification is made
for financial assets which are equity instruments
and financial liabilities. For financial assets
which are debt instruments, a reclassification
is made only if there is a change in the business
model for managing those assets. Changes to the
business model are expected to be infrequent.
The Company's senior management determines
change in the business model as a result of
external or internal changes which are significant
to the Company's operations.
IV. Offsetting of financial instruments
Financial assets and liabilities are offset and the
net amount is reported in the balance sheet where
there is a legally enforceable right to offset the
recognised amounts and there is an intention to
settle on a net basis or realise the asset and settle
the liability simultaneously. The legally enforceable
right must not be contingent on future events
and must be enforceable in the normal course of
business and in the event of default, insolvency or
bankruptcy of Company or the counterparty.
V. Derivatives and hedging activities
The Company enters derivatives like forwards
contracts to hedge its foreign currency risks.
Derivatives are initially recognised at fair value on
the date a derivative contract is entered into and are
subsequently marked to market at the end of each
reporting period with profit/loss being recognised
in statement of profit and loss. Derivative assets/
liabilities are classified under "other financial
assets/other financial liabilities”. Profits and
losses arising from cancellation of contracts are
recognised in the statement of profit and loss.
j) Inventories:
Finished goods are stated at the lower of cost
and net realisable value. Raw material, packing
materials and stores & spares are stated at costs
unless the finished goods in which they will be
incorporated are expected to be sold below cost.
Net realisable value represents the estimated
selling price for inventories less all estimated
costs of completion and costs necessary to make
the sale.
Costs incurred in bringing each product to its
present location and condition are accounted for as
follows:
• Raw materials, Packing Materials and stores
& spares: cost includes cost of purchase and
other costs incurred in bringing the inventories
to their present location and condition.
• Finished goods and work in progress: cost
includes cost of direct materials and labour
and a proportion of manufacturing overheads
based on the normal operating capacity, but
excluding borrowing costs.
Due allowances are made for slow moving and
obsolete inventories based on estimates made by
the Company.
k) Impairment of non-financial 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 asset 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 asset
belongs. When a reasonable and consistent basis
of allocation can be identified, corporate 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.
Intangible assets with indefinite useful lives
and intangible assets not yet available for use
are tested for impairment at least annually, and
whenever there is an indication that the asset may
be impaired.
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 the 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 statement of profit and
loss.
When an impairment loss subsequently reverses,
the carrying amount of the asset (or a 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 year A reversal of
an impairment loss is recognised immediately in
statement of profit and loss.
|