2 (b) MATERIAL ACCOUNTING POLICIES
The accounting policies set out below have been
applied consistently to the periods presented in these
financial statements.
(i) Foreign currency transactions:
Transactions in foreign currencies are translated
into the functional currency of the Company at the
exchange rates at the dates of the transactions or
an average rate if the average rate approximates the
actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency
at the exchange rate at the reporting date. Non¬
monetary assets and liabilities that are measured at
fair value in a foreign currency are translated into the
functional currency at the exchange rate when the
fair value was determined. Non-monetary assets and
liabilities that are measured based on historical cost
in a foreign currency are translated at the exchange
rate at the date of the transaction. Foreign currency
exchange differences are recognised in statement of
profit and loss.
(ii) 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.
Recognition and initial measurement
Trade receivables are initially recognized when they
are originated. All other financial assets and financial
liabilities are recognized when the Company
becomes a party to the contractual provisions of the
instrument.
A financial asset (unless it is a trade receivable without a
significant financing component) or financial liability
is initially measured at fair value plus or minus, for an
item not at fair value through profit and loss (FVTPL),
transaction costs that are directly attributable to
its acquisition or issue. A trade receivable without a
significant financing component is initially measured
at the transaction price.
Classification and subsequent measurement
Financial assets
On initial recognition, a financial asset is classified as
measured at:
- Amortised cost;
- FVOCI - debt investment;
- FVOCI - equity investment; or
- FVTPL.
Financial assets are not reclassified subsequent to
their initial recognition, unless the Company changes
its business model for managing financial assets, in
which case all affected financial assets are reclassified
on the first day of the first reporting period following
the change in the business model.
A financial asset is measured at amortised cost if it
meets both of the following conditions and is not
designated as at FVTPL:
- the asset is held within a business model whose
objective is to hold assets 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.
A debt investment is measured at FVOCI if it meets
both of the following conditions and is not designated
as at FVTPL:
- the asset 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.
On initial recognition of an equity investment that is
not held for trading, the Company may irrevocably
elect to present subsequent changes in the
investment’s fair value in OCI. This election is made
on an investment-by-investment basis.
Financial assets that are held for trading or are
managed and whose performance is evaluated on a
fair value basis are measured at FVTPL.
All financial assets not classified as measured at
amortised cost or FVOCI as described above are
measured at FVTPL. On initial recognition, the
Company may irrevocably designate a financial
asset that otherwise meets the requirements to be
measured at amortised cost or at FVOCI as at FVTPL
if doing so eliminates or significantly reduces an
accounting mismatch that would otherwise arise.
Subsequent measurement
Financial assets at amortised cost are subsequently
measured at amortised cost using the effective
interest method. The amortised cost is reduced by
impairment losses. Interest income, foreign exchange
gains and losses and impairment are recognised
in statement of profit and loss. Any gain or loss on
derecognition is also recognised in statement of
profit and loss.
Financial assets at FVTPL are subsequently measured
at fair value. Net gains and losses, including any
interest or dividend income, are recognised in the
statement of profit and loss.
Impairment of financial assets:
The Company applies expected credit loss (ECL)
model for measurement and recognition of loss
allowance on the following:
i Financial assets measured at amortized cost;
ii. Financial assets i.e. debt investments measured
at fair value through other comprehensive
income (FVTOCI).
In case of trade receivables, the Company follows a
simplified approach wherein an amount equal to
lifetime ECL is measured and recognized as loss
allowance.
In case of other assets (listed as i and ii above), the
Company determines if there has been a significant
increase in credit risk of the financial asset since
initial recognition. If the credit risk of such assets
has not increased significantly, an amount equal
to 12-month ECL is measured and recognized as
loss allowance. However, if credit risk has increased
significantly, an amount equal to lifetime ECL is
measured and recognized as loss allowance.
Subsequently, if the credit quality of the financial asset
improves such that there is no longer a significant
increase in credit risk since initial recognition, the
Company reverts to recognizing impairment loss
allowance based on 12-month ECL.
ECL is the difference between all contractual cash
flows that are due to the Company in accordance with
the contract and all the cash flows that the Company
expects to receive (i.e. all cash shortfalls), discounted
at the original effective interest rate.
Lifetime ECL are the expected credit losses resulting
from all possible default events over the expected life
of a financial asset. 12-month ECL are a portion of the
lifetime ECL which result from default events that are
possible within 12 months from the reporting date.
ECL are measured in a manner that they reflect
unbiased and probability weighted amounts
determined by a range of outcomes, taking into
account the time value of money and other
reasonable information available as a result of past
events, current conditions and forecasts of future
economic conditions.
As a practical expedient, the Company uses a provision
matrix to measure lifetime ECL on its portfolio of
trade receivables. The provision matrix is prepared
based on historically observed default rates over the
expected life of trade receivables and is adjusted for
forward-looking estimates. At each reporting date,
the historically observed default rates and changes in
the forward-looking estimates are updated.
Financial liabilities: Classification, subsequent
measurement and gains and losses
Financial liabilities are classified as measured at
amortised cost or FVTPL. A financial liability is classified
as at FVTPL if it is classified as held-for-trading,
or it is a derivative or it is designated as such on
initial recognition. Financial liabilities at FVTPL are
measured at fair value and net gains and losses,
including any interest expense, are recognised in
statement of profit and loss. Other financial liabilities
are subsequently measured at amortised cost using
the effective interest method. Interest expense and
foreign exchange gains and losses are recognised
in statement of profit and loss. Any gain or loss on
derecognition is also recognised in statement of
profit and loss.
Derecognition
Financial assets
The Company derecognises a financial asset when
- the contractual rights to the cash flows from the
financial asset expire; or
- it transfers the rights to receive the contractual
cash flows in a transaction in which either:
• substantially all of the risks and rewards
of ownership of the financial asset are
transferred; or
• the Company neither transfers nor retains
substantially all of the risks and rewards of
ownership and does not retain control of the
financial asset.
If the Company enters into transactions whereby it
transfers assets recognised on its balance sheet but
retains either all or substantially all of the risks and
rewards of the transferred assets. In these cases, the
transferred assets are not derecognised.
Financial liabilities
The Company derecognises a financial liability
when its contractual obligations are discharged or
cancelled, or expire.
The Company also derecognises a financial liability
when its terms are modified and the cash flows of the
modified liability are substantially different, in which
case a new financial liability based on the modified
terms is recognised at fair value.
On derecognition of a financial liability, the difference
between the carrying amount extinguished and the
consideration paid (including any non-cash assets
transferred or liabilities assumed) is recognized in
statement of profit and loss.
Offsetting
Financial assets and financial liabilities are offset and
the net amount is presented in the balance sheet
when, and only when, the Company currently has a
legally enforceable right to set off the amounts and
it intends either to settle them on a net basis or to
realise the asset and settle the liability simultaneously.
(iii) Property, plant and equipment
Recognition and measurement
The cost of an item of property, plant and equipment
shall be recognised as an asset if, and only if it is
probable that future economic benefits associated
with the item will flow to the Company and the cost
of the item can be measured reliably.
Items of property, plant and equipment (including
capital-work-in progress) are measured at cost,
which includes capitalised borrowing costs, less
accumulated depreciation and any accumulated
impairment losses. Freehold land is carried at
historical cost less any accumulated impairment
losses.
The cost of an item of property, plant and equipment
comprises the cost of materials and direct labour,
any other costs directly attributable to bringing the
item to working condition for its intended use, and
estimated costs of dismantling and removing the
item and restoring the site on which it is located.
If significant parts of an item of property, plant and
equipment have different useful lives, then they are
accounted for as separate items (major components)
of property, plant and equipment.
Subsequent costs are included in the assets
carrying amount or recognised as a separate asset,
as appropriate, only when it is probable of future
economic benefits.
Property, plant and equipment which are not ready
for intended use as on date of reporting period, are
disclosed as Capital work in progress.
Any gain or loss on disposal of an item of property,
plant and equipment is recognised in statement of
profit and loss.
Depreciation
Depreciation is calculated on cost of items of
property, plant and equipment less their estimated
residual values over their estimated useful lives using
the written down value method and is generally
recognised in the statement of profit and loss.
Freehold land is not depreciated.
Depreciation method, useful lives and residual values
are reviewed at each financial year-end and adjusted
if appropriate. In case of a revision, the unamortized
depreciable amount is charged over the revised
remaining useful life.
Depreciation on additions/(disposals) is provided on a
pro-rata basis i.e. from/(upto) the date on which asset
is ready for use/(disposed off).
Leasehold improvements are amortised over the
lower of lease period or estimated useful life, on
straight line basis from the date that they are available
for use.
The useful lives have been determined based
on internal and technical evaluation done by
management and are in line with the estimated
useful lives, to the extent prescribed by the
Schedule II to the Companies Act, 2013, in order to
reflect the technological obsolescence and actual
usage of the asset.
(iv) Intangible assets
Intangible assets that are acquired by the Company
are measured initially at cost. After initial recognition,
an intangible asset is carried at its cost less any
accumulated amortization and any accumulated
impairment loss.
Subsequent expenditure is capitalised only when
it increases the future economic benefits from the
specific asset to which it relates.
Intangible assets are amortised in the Statement
of Profit and Loss over their estimated useful lives,
from the date that they are available for use based on
the expected pattern of consumption of economic
benefits of the asset. Accordingly, at present, these
are being amortised on straight line basis. Intangible
assets are amortised over the best estimate of the
respective useful lives as under:
(a) Trademarks: Amortised over the period of 10
years.
(b) Software: Amortised over the period of 5 years.
Amortisation method, useful lives and residual values
are reviewed at the end of each financial year and
adjusted if appropriate.
An intangible asset is derecognized on disposal or
when no future economic benefits are expected
from its use and disposal.
Gains or losses arising from retirement and gains or
losses arising from disposal of an intangible asset 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.
Internally generated intangibles, excluding
capitalised development costs, are not capitalised and
the related expenditure is reflected in statement of
profit and loss in the period in which the expenditure
is incurred.
Intangible assets under development
Expenditure incurred on intangible assets under
development stage eligible for capitalization carried
as intangible assets under development.
(v) Impairment
Impairment of non-financial assets
The Company’s non-financial assets, other than
inventories, are reviewed at each reporting date
to determine whether there is any indication of
impairment. If any such indication exists, then the
asset’s recoverable amount is estimated.
For impairment testing, assets that do not generate
independent cash inflows are grouped together into
cash-generating units (CGUs). Each CGU represents
the smallest group of assets that generates cash
inflows that are largely independent of the cash
inflows of other assets or CGUs.
The recoverable amount of a CGU (or an individual
asset) is the higher of its value in use and its fair
value less costs of disposal. Value in use is based on
the estimated future cash flows, discounted to their
present value using a pre-tax discount rate that
reflects current market assessments of the time
value of money and the risks specific to the CGU (or
the asset).
An impairment loss is recognised if the carrying
amount of an asset or CGU exceeds its estimated
recoverable amount. Impairment losses are
recognised in the statement of profit and loss. They
are allocated first to reduce the carrying amount of
any goodwill allocated to the CGU, and then to reduce
the carrying amounts of the other assets in the CGU
on a pro rata basis.
In respect of other assets for which impairment loss
has been recognised in prior periods, the Company
reviews at each reporting date whether there is any
indication that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been
a change in the estimates used to determine the
recoverable amount. Such a reversal is made only to
the extent that the asset’s carrying amount does not
exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
(vi) Borrowing costs
Borrowing costs are interest and other costs
(including exchange differences relating to foreign
currency borrowings to the extent that they are
regarded as an adjustment to interest costs, if any)
incurred in connection with the borrowing of funds.
Borrowing costs directly attributable to acquisition
or construction of an asset which necessarily take
a substantial period of time to get ready for their
intended use are capitalised as part of the cost of that
asset. Other borrowing costs are recognised as an
expense in the period in which they are incurred.
(vii) Leases
Company ‘as a’ lessee
The Company’s lease asset classes primarily consist of
leases for land and buildings taken for warehouses,
retail stores and factories. The Company assesses
whether a contract contains a lease, at inception of
a contract. A contract is, or contains, a lease if the
contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys
the right to control the use of an identified asset, the
Company assesses whether:
(i) the contract involves the use of an identified
asset,
(ii) the Company has substantially all of the
economic benefits from use of the asset through
the period of the lease; and
(iii) the Company has the right to direct the use of
the asset.
At the date of commencement of the lease, the
Company recognizes a right-of-use asset (“ROU”)
and a corresponding lease liability for all lease
arrangements in which it is a lessee, except for leases
with a term of twelve months or less (short-term
leases) and low value leases.
For these short-term and low value leases, the
Company recognizes the lease payments as an
operating expense on a straight-line basis over the
term of the lease.
Certain lease arrangements include the options to
extend or terminate the lease before the end of the
lease term. ROU assets and lease liabilities include
these options when it is reasonably certain that they
will be exercised. The right-of-use assets are initially
recognized at cost, which comprises the initial
amount of the lease liability adjusted for any lease
payments made at or prior to the commencement
date of the lease plus any initial direct costs and
an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or
the site on which it is located, less any lease incentives
received.
They are subsequently measured at cost less
accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the
commencement date on a straight-line basis over
the shorter of the lease term and useful life of the
underlying asset. Right of use assets are evaluated
for recoverability whenever events or changes in
circumstances indicate that their carrying amounts
may not be recoverable. In addition, the right-of-use
asset is periodically reduced by impairment losses, if
any, and adjusted for certain remeasurements of the
lease liability.
The lease liability is initially measured at amortized
cost at the present value of the future lease payments.
The lease payments are discounted using the interest
rate implicit in the lease or, if not readily determinable,
using the incremental borrowing rates in the country
of domicile of these leases.
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.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying
amount of the right-of-use asset, or is recorded in
statement of profit and loss if the carrying amount of
the right-of-use asset has been reduced to zero.
Company ‘as a’ lessor
Leases for which the Company is a lessor is classified
as a finance or operating lease. Whenever the terms
of the lease transfer substantially all the risks and
rewards of ownership to the lessee, the contract
is classified as a finance lease. All other leases are
classified as operating leases. When the Company
is an intermediate lessor, it accounts for its interests
in the head lease and the sublease separately. The
sublease is classified as a finance or operating lease
by reference to the right-of-use asset arising from
the head lease. For operating leases, rental income is
recognized on a straight -line basis over the term of
the relevant lease.
(viii) Inventories
Inventories are valued at the lower of cost and net
realisable value. The cost of inventories is based on
First in First out ("FIFO”) formula.
Raw materials: Cost includes cost of purchase and
other costs incurred in bringing the inventories to
their present location and condition.
Finished goods (manufactured) and work in
progress: Cost includes cost of direct materials
and labour and an appropriate share of production
overheads based on normal operating capacity.
Stock in trade: Cost includes cost of purchase and
other costs incurred in bringing the inventories
to their present location and condition. Cost is
determined on FIFO basis.
Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs
of completion and the estimated costs necessary to
make the sale.
Inventories in transit are valued at the lower of cos
and net realisable value.
The comparison of cost and net realisable value i:
made on an item-by-item basis.
The net realisable value of work-in-progress i:
determined with reference to the selling prices o
related finished goods. Raw materials and packing
material held for use in the production of finishe
products are not written down below cost excep
in cases when a decline in the price of material
indicates that the cost of the finished products sha
exceed the net realisable value.
Appropriate adjustments are made to the carrying
value of damaged, slow moving and obsolet
inventories based on management’s current bes
estimate.
(ix) Revenue recognition
Ind AS 115 establishes a comprehensive frameworl
for determining whether, how much and whe
revenue is to be recognised.
Revenue is recognised upon transfer of contrc
of promised goods or services to customers in a
amount that reflects the consideration which thf
Company expects to receive in exchange for thoss
products or services.
The Company is primarily engaged in the busines:
of manufacturing and trading of footwear anc
accessories through its own retail stores, wholesalf
and e-commerce.
Sale of goods - retail
The Company operates a network of own retail store:
across India. Revenue from the sale of goods sole
through own retail stores is recognized when thf
Company delivers goods to the customer. Paymen
of the transaction price is due immediately when thf
customer purchases the goods and takes delivery ir
store.
Sale of goods - other than retail
i. Wholesale
The Company sells products to its distributors
Revenue from sale of goods in such arrangement:
is recognized when control of the products ha:
transferred, being when the products are delivere
to the customer, the customer has full discretior
over the channel and price to sell the products, an
there is no unfulfilled obligation that could affec
the customer’s acceptance of the products. Deliver
occurs when the products have been delivered to thf
customer.
ii. E-commerce
The Company through its own website and
marketplace sells its products to customers.
Revenue from sale of goods through online channel
is recognized when control of the products has
transferred, being when the products are delivered
to the customer. For e-commerce sales, it is the
Company’s policy to sell its products to the end
consumer with a right of return depending on the
terms of arrangement. Therefore, a refund liability in
relation to expected returns (included in other current
liabilities) and a right to recover the returned goods
(included in other current assets) are recognized for
the products expected to be returned. Accumulated
experience is used to estimate such returns at the time
of sale at a portfolio level (expected value method).
Because the number of products returned has been
steady for years, it is highly probable that a significant
reversal in the cumulative revenue recognized will
not occur. The validity of this assumption and the
estimated amount of returns are reassessed at each
reporting date.
Revenue from the sale of goods is recognised at
the point in time when control is transferred to the
customer which coincides with the performance
obligation under the contract with the customer.
Revenue is measured based on the transaction price,
which is the consideration, adjusted for discounts,
price concessions and incentives, if any, as specified
in the contract with the customer. Revenue also
excludes taxes collected from customers. Invoices
are usually payable based on the credit terms agreed
with customers which vary up to 90 days.
Use of significant judgments in revenue
recognition:
Judgment is also required to determine the transaction
price for the contract. The transaction price could be
either a fixed amount of customer consideration or
variable consideration with elements such as volume
discounts, price concessions and incentives. Any
consideration payable to the customer (or to other
parties that purchase the entity’s goods or services
from the customer) is adjusted to the transaction
price, unless it is a payment for a distinct product or
service from the customer. The estimated amount of
variable consideration is adjusted in the transaction
price only to the extent that it is highly probable that
a significant reversal in the amount of cumulative
revenue recognized will not occur and is reassessed
at the end of each reporting period. The Company
allocates the elements of variable considerations to
all the performance obligations of the contract unless
there is observable evidence that it pertains to one or
more distinct performance obligations.
Assets and liabilities arising form right to return
For contracts that permit the customer to return
an item, revenue is recognised to the extent that it
is highly probable that a significant reversal in the
amount of cumulative revenue recognised will not
occur.
Therefore, the amount of revenue recognised is
adjusted for expected returns, which are estimated
based on the historical data. In these circumstances,
a refund liability and a right to recover returned goods
asset are recognised.
Right to return assets
A right of return gives an entity a contractual right to
recover the goods from a customer (return asset), if
the customer exercises its option to return the goods
and obtain a refund. The asset is measured at the
carrying amount of the inventory, less any expected
costs to recover the goods, including any potential
decreases in the value of the returned goods. The
right to recover returned goods is included in Other
current assets.
Refund liabilities
A refund liability is the obligation to refund part or all
of the consideration received (or receivable) from the
customer. The Company has therefore recognised
refund liabilities in respect of customer's right to
return. The liability is measured at the amount the
Company ultimately expects it will have to return to
the customer. The Company updates its estimate of
refund liabilities (and the corresponding change in
the transaction price) at the end of each reporting
period. The refund liability is included in other current
liabilities.
The Company reviews its estimate of expected returns
at each reporting date and updates the amounts of
the asset and liability accordingly.
Other Operating Revenue
Other operating revenue include revenue arising
from a Company’s operating activities, i.e., either its
principal or ancillary revenue-generating activities,
but which is not revenue arising from sale of products
or rendering of services. The other operating revenue
of the Company includes revenue from scrap sales,
Protection fund, franchisee fees, export incentives,
etc.
Export incentives are recognized as income on
accrual basis to the extent its realization is certain.
Other income
Interest income from a financial asset is recognized
when it is probable that the economic benefits will
flow to the Company and the amount of income can
be measured reliably. Interest income is accrued on a
time basis, by reference to the principal outstanding
and at the effective interest rate applicable.
Other income is recognized on accrual basis in
the financial statements, except when there is
uncertainty of collection.
(x) Government grants and incentives
Export benefits in the form of duty drawback, duty
entitlement pass book (DEPB) and other schemes
are recognised in the Statement of profit and loss
when the right to receive credit as per the terms of
the scheme is established in respect of exports made
and when there is reasonable assurance that the
grant will be received and the Company will comply
with all the attached conditions.
Government grants are recognised in the statement
of profit and loss, either on a systematic basis when
the Company recognises, as expenses, the related
costs that the grants are intended to compensate or,
immediately if the costs have already been incurred.
Government grants related to assets are deferred and
amortised over the useful life of the asset.
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