SIGNIFICANT ACCOUNTING POLICIES
A. CORPORATE INFORMATION
Blue Chip Tex Industries Limited (the ‘Company’) is a public limited company domiciled and incorporated in India under the Indian Companies Act, 1956. The registered office of the company is situated at 63-B, Danudyog Sahakari Sangh Ltd., Village Piparia, Silvassa 396230, (U.T.) Dadra & Nagar Haveli and Corporate Office where the books of Accounts are maintained is situated at Office no. 15 - 17, 1st floor, Maker Chambers III, Jamnalal Bajaj Road, Nariman Point, Mumbai - 400021.
The Company is engaged mainly in manufacturing of polyester texturising yarn. The Company has manufacturing plants in Union Territory of Dadra and Nagar Haveli, India and entire sales in domestic market. The Company is listed on the Bombay Stock Exchange (BSE).
B. MATERIAL ACCOUNTING POLICIES B.1 Basis for preparation of accounts:
The financial statements are prepared in accordance with Indian Accounting Standards (‘Ind AS’) notified under Section 133 of the Companies Act, 2013, read together with the Companies (Indian Accounting Standards) Rules, 2015.
The financial statements have been prepared and presented under the historical cost convention, on the accrual basis of accounting except for certain financial assets and financial liabilities that are measured at fair values at the end of each reporting period, as stated in the accounting policies set out below.
The financial statements of the Company have been prepared to comply with the Indian Accounting standards (“Ind As”) including the rules notified under the relevant provisions of the Companies Act, 2013 and presentation ond disclosure requirements of Division II of Schedule III to the Companies Act 2013 (the Act).
The accounting policies have been applied consistently over all the periods presented in these financial statements.
All assets and liabilities have been classified as current or non-current based on the Company’s normal operating cycle for yarn business, as per the criteria set out in the Schedule III to the Act.
The Company’s Financial Statements are presented in Indian Rupees, which is also its functional currency, and all values are rounded off to the nearest Lakh unless otherwise stated.
B.2 Summary of Material Accounting Policies
a) (i) Property, Plant and Equipment
• Property, Plant and Equipment are stated at cost of acquisition or construction less accumulated depreciation and accumulated impairment losses, if any. All costs, net of recoverable taxes, including cost of financing till commencement of commercial production are capitalised.
• Gains or losses arising from de-recognition of property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
• Capital work in progress and Capital advances: Cost of assets not ready for intended use, as on the Balance Sheet date, is shown as capital work in progress. Advances given towards acquisition of property, plant and equipment outstanding at each Balance Sheet date are disclosed as Other NonCurrent Assets.
• Depreciation on Property, Plant and Equipment is provided using straight line method except furniture and fixtures which are depreciated using written down value method. Depreciation is provided based on the useful life of the Assets as prescribed in Schedule II to the Companies Act 2013, except in respect of Texturizing Machines and Compressors where, based on the certification obtained from the Chartered Engineer, the useful life is taken as 25 years instead of 15 years as prescribed in Schedule
II. Useful life taken as 3 years for replaced part of air-compressor instead of 15 years as prescribed in schedule II. Also, Leasehold Land is amortized over the remaining period of lease. Freehold land is not depreciated.
• 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.
(ii) Other Intangible Assets
• Other intangible assets are stated at cost of acquisition less accumulated amortisation.
• Computer Software are amortised at over a period of five years.
b) Investments:
The Company has elected to recognize its non-current investments in group entities at cost. The details of such investments are given in Note 3.
c) Inventories:
Items of inventories are measured at lower of cost and net realisable value after providing for obsolescence, if any. Cost of inventories comprises of all cost of purchase, cost of conversion and other costs, including manufacturing overheads net of recoverable taxes, incurred in bringing them to their respective present location and condition. Items of Inventories are valued as under:
I. Packing Material and Oil :
At cost, on First-in-first-out (FIFO) basis.
II. Raw Materials:
At cost, on FIFO basis or net realisable value, whichever is lower . Raw Materials held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost.
III. Finished Goods (manufactured):
At cost which includes cost of raw materials determined on FIFO basis plus appropriate share of overhead expenses or net realisable value, whichever is lower.
IV. The stock of stores and spares is charged to revenue in the year of purchase and no adjustment is made for such stocks, if any, at the year end.
d) Employee Benefits :
(i) Short term
Short term Employee Benefits are recognised as an expense on accrual basis at the undiscounted amount in the statement of profit and loss of the year in which related service is rendered.
(ii) Defined contribution plans
The eligible employees of the Company are entitled to receive post employment benefits in respect of provident and family pension fund, in which both the employees and the Company make monthly contributions at a specified percentage of the employees’ eligible salary (currently 12% of employees’ eligible salary). The contributions are made to the Regional Provident Fund Commissioner (RPFC) which are charged to the Statement of Profit and Loss as incurred.
(iii) Defined benefit plans
Post employment and other long term employee benefits are recognised as expense in the statement of profit and loss for the year in which the Employees have rendered services. The expense is recognised at the present value of the amount payable determined using actuarial valuation techniques. Re-measurement of Defined Benefit Plans in respect of post-employment are charged to the Other Comprehensive Income.
e) Tax Expense:
The tax expense for the period comprises current tax and deferred income tax. Tax is recognised in statement of profit and loss, except to the extent that it relates to items recognised in the Other Comprehensive Income or in equity. In this case, the tax is also recognised in Other Comprehensive Income and Equity.
• Current Tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or to be paid to the Income Tax authorities, based on tax rates and laws that are enacted at the Balance sheet date.
• 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. 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 carrying amount of Deferred tax liabilities and assets are reviewed at the end of each reporting period.
f) Revenue Recognition:
Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation. The transaction price of goods sold and services rendered is net of variable consideration on account of various discounts and schemes offered by the Company as part of the contract
• Revenue from sale of goods is recognised when the goods are despatched to the customers, all significant contractual obligations have been satisfied and the collection of the resulting receivable is reasonably expected. The sales are stated net of returns and related taxes.
• Revenue in respect of insurance or other claims, quantity discount on purchase etc. is recognised only when it is reasonably certain that the ultimate collection will be made.
• Interest Income is recognised on time proportion basis taking into account the amount outstanding and the interest rate applicable.
• Dividend Income is recognised when the Company’s right to receive the amount has been established.
• Job work Income is recognised when related services are rendered.
g) Provisions, Contingent liabilities and Contingent assets:
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liabilities are not recognised, but are disclosed in the Notes. Contingent assets are neither recognised nor disclosed in the financial statements.
h) Impairment of Non-Financial Assets - Property, Plant and Equipment and Intangible Assets:
The Company assesses at each reporting date as to whether there is any indication that any Property, Plant and Equipment and intangible assets or group of assets, called Cash Generating Units (CGU) may be impaired. If any such indication exists the recoverable amount of an asset or CGU is estimated to determine the extent of impairment, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the CGU to which the asset belongs.
An impairment loss is recognised in the Statement of Profit and Loss to the extent asset’s carrying amount exceeds its recoverable amount. The recoverable amount is higher of an asset’s fair value less cost of disposal and value in use. Value in use is based on the estimated future cash flows, discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and risk specific to the assets.
The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised.
i) Finance costs:
Borrowing costs consists of interest cost and other borrowing costs that an entity incurs in connection with the borrowing of funds including exchange differences to the extent regarded an adjustment to the borrowing costs.
Borrowing costs directly attributable to the acquisition and construction of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of the respective assets up to the date when such assets are ready for their intended use. The borrowing cost eligible for capitalization is being netted off against any income arising on temporary investment.
All other borrowing costs are charged to the statement of profit and loss for the period for which they are incurred.
J) Government grants:
Grants and subsidies from the government are recognised at their fair value where there is reasonable assurance that the grant will be received and the Company will comply with all attached conditions.
Grants and subsidies, except which relates to Property Plant & Equipment, received from Government is credited to statement of profit and loss in the period for which it relates.
K) Foreign currency transactions and Translation:
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in Statement of Profit and Loss except to the extent of exchange differences which are regarded as an adjustment to interest costs on foreign currency borrowings that are directly attributable to the acquisition or construction of qualifying assets which are capitalised as cost of assets.
Non-monetary items that are measured in terms of historical cost in a foreign currency are recorded using the exchange rates at the date of the transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. 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 Other Comprehensive Income or Statement of Profit and Loss are also recognised in Other Comprehensive Income or Statement of Profit and Loss, respectively).
l) Lease:
As a Lessee: The Company has elected to account for short term leases and leases of low-value assets using the exemption given under Ind AS 116, Leases. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in statement of profit and loss on a straight-line basis over the lease term or on another systematic basis if that basis is more representative of the pattern of the Company’s benefit.
m) Research and Development Expenditure:
Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss. Development costs of products are charged to the statement of profit and loss unless a product’s technological and commercial feasibility has been established, in which case such expenditure is capitalised.
n) Financial Instruments I) Financial Assets
1. Initial Recognition and Measurement
All Financial Assets are initially recognized at fair value. Transaction costs that are directly attributable to the acquisition or issue of Financial Assets, which are not at Fair Value through Profit and Loss, are added to the fair value on initial recognition. Purchase and sale of Financial Assets are recognised using trade date accounting. However, trade receivables that do not contain a significant financing component are measured at transaction price.
2. Subsequent Measurement
i. Financial assets measured at amortised cost (AC)
Financial asset is measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
ii. Financial Assets Measured at Fair Value Through Other Comprehensive Income (FVTOCI)
Financial Asset is measured at FVTOCI if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
iii. Financial assets measured at fair value through Profit or Loss (FVTPL)
Financial Asset which is not classified in any of the above categories are measured at FVTPL.
3. Investment In Subsidiaries, Associates and Joint Ventures
The Company has accounted for its investments in group entity at amortised cost less impairment loss (if any).
4. Other Equity Investments
All other equity investments are measured at fair value, with value changes recognised in Statement of Profit and Loss, except for those equity investments for which the Company has elected to present the value changes in ‘Other Comprehensive Income’.
5. Impairment of Financial Assets
The Company recognises loss allowances for expected credit losses on:
- financial assets measured at amortised cost;
At each reporting date, the Company assesses whether financial assets carried at amortised cost has impaired and provisions are made for impairment accordingly. A financial asset is ‘credit impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
The Company measures loss allowances at an amount equal to lifetime expected credit losses, except for the following, which are measured as 12 month expected credit losses:
- other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.
Loss allowances for trade receivables are always measured at an amount equal to lifetime expected credit losses.
12-month expected credit losses are the portion of expected credit losses that result from default events that are possible within 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical experience and informed credit assessment and including forward looking information.
II) Financial Liabilities
1. Initial recognition and measurement
All financial liabilities are recognized at fair value and in case borrowings, net of directly attributable cost. Fees of recurring nature are directly recognised in the Statement of Profit and Loss as finance cost.
2. Subsequent measurement
Financial liabilities are carried at amortized cost using the effective interest method. For trade and other payables maturing within one year from the balance sheet date, the carrying value approximate fair value due to the short maturity of these instruments.
III) Derecognition of Financial Instruments
The company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the Financial Asset and the transfer qualifies for derecognition under Ind AS 109. A Financial Liability (or a part of a Financial Liability) is derecognized from the Company’s Balance Sheet when the obligation specified in the contract is discharged or cancelled or expired.
IV) Offsetting Instruments
Financial Assets and Financial Liabilities are offset and the net amount is presented in the balance sheet when, and only when, the Company has a legally enforceable right to set off the amount and it intends, either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
V) Cash and Cash Equivalents
Cash and cash equivalents for the purpose of presentation in the statement of cash flows comprises of cash on hand, cheque on hand, bank balances in current account, fixed deposits with banks with original maturity of less than 3 months and short term highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.
For the purpose of Cash Flow Statement, cash and cash equivalent includes bank overdraft repayable on demand.
C) CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of the Company’s Financial Statements requires management to make judgement, estimates and assumptions that affect the reported amount of revenue, expenses, assets and liabilities and the accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in next financial year.
1) Depreciation / Amortisation And Useful Lives of Property Plant and Equipment / Intangible Assets
Property, plant and equipment / intangible assets are depreciated / amortised over their estimated useful lives, after taking into account estimated residual value. Management reviews the estimated useful lives and residual values of the assets annually in order to determine the amount of depreciation / amortisation to be recorded during any reporting period. The useful lives and residual values are based on the company’s historical experience with similar assets and take into account anticipated technological changes. The depreciation / amortisation for future periods are revised if there are significant changes from previous estimates.
2) Recoverability of Trade Receivable
Judgements are required in assessing the recoverability of overdue trade receivables and determining whether a provision against those receivables is required. Factors considered include assessing the credit rating of the counterparty, the amount and timing of anticipated future payments and any possible actions that can be taken to mitigate the risk of non-payment.
3) Provisions
Provisions and liabilities are recognized in the period when it becomes probable that there will be a future outflow of funds resulting from past operations or events and the amount of cash outflow can be reliably estimated. The timing of recognition and quantification of the liability require the application of judgement to existing facts and circumstances, which can be subject to change. The carrying amounts of provisions and liabilities are reviewed regularly and revised to take account of changing facts and circumstances.
4) 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, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or Cash Generating Units (CGU’s) fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where 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.
In assessing value in use, the estimated future cash flows are discounted to their present value using 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 transaction are taken into account, if no such transactions can be identified, an appropriate valuation model is used.
5) Impairment of Financial Assets
The impairment provisions for Financial Assets are based on assumptions about risk of default and expected cash loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Company’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
D) Recent pronouncements
Ý Ministry of Corporate Affairs (“MCA”) notifies new standards or amenments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. For the year ended March 31,2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
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