Note:-35: STATEMENT OF MATERIAL ACCOUNTING POLICIES
K G Denim Limited incorporated In India and listed on the BSE is a leading manufacturer of denim fabrics, apparel fabrics,
home textiles and apparel (garments).
II. Material Accounting Policies followed by the Company
Basis of preparation
1. Compliance with Ind AS
These financial statements have been prepared in accordance with the Indian Accounting Standards (hereinafter referred to
as the Ind AS) as notified by Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act. 2013 ('Act') read with
of the Companies (Indian Accounting Standards) Rules,2015 as amended and other relevant provisions of the Act.
The accounting policies are applied consistently to all the periods presented in the financial statements.
2. Historical cost conventions
The financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities that
are measured at fair value in terms of Ind AS.
3. Going Concern
The accounts are prepared on the basis of going concern concept
4. Current non-current classification
All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and
othercnteria set out in the Schedule III to the Act.
5. Presentation and Functional Currency
The standalone financial statements and Notes are presented in the Company's functional and presentation currency, Indian
rupee (Rs.), rounded off to the nearest rupees in lakhs, unless otherwise stated.
Use of estimates and judgments
The estimates and judgments used in the preparation of the financial statements are continuously evaluated by the Company
and are based on historical experience and various other assumptions and factors (including expectations of future events)
that the Company believes to be reasonable under the existing circumstances. Differences between actual results and
estimates are recognised in the period In which the results are known / materialised. The said estimates are based on the
facts and events, that existed as at the reporting date, or that occurred after that date but provide additional evidence about
conditions existing as at the reporting date
Property, Plant and equipment
The Company has applied for the one-time transition exemption of considering the carrying cost on the transition date i.e.
April 1.2016 as the deemed cost under IND AS. Hence regarded thereafter as historical cost. Freehold land is carried at cost
All other items of property, plant and equipment are stated at cost less depreciation and impairment, if any. Historical cost
includes expenditure that is directly attnbutable to the acquisition of the items. Subsequent costs are included In the asset's
carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits
associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of
any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are
charged to the Statement of Profit and Loss during the reporting period in which they are incurred. Depreciation methods,
estimated useful lives and residual value Depreciation on Property. Plant and Equipment and other fixed assets is provided
on a Straight-Line Method, over the estimated useful lives of assets.
The Company depreciates its property, plant and equipment over the useful life in the manner prescnbed in Schedule II to the
Act. and management believe that useful life of assets are same as those prescnbed in Schedule II to the Act. except for
power plant machinery which based on an independent technical evaluation, life has been estimated as 20
years, which is different from that prescribed in Schedule II to the Act.
The residual values are not more than 5% of the onginal cost of the asset. The assets residual values and useful lives are
reviewed, and adjusted if appropnate. at the end of each reporting period.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the
Statement of Profit and Loss.
Capital Work-in-Progress comprises cost of fixed assets that are not yet installed and ready for their intended use at the
balance sheet date.
Intangible Assets
Intangible assets are stated at cost of acquisition net of recoverable taxes less accumulated amortisation/ depletion and
impairment loss. If any. The cost compnses of purchase pnce. borrowing costs and any cost directly attributable to bringing
the asset to its working condition for the intended use. Gains and losses on disposals are determined by
comparing proceeds with carrying amount. These are recognized as income or expense in the statement of profit and loss.
Cost of items of intangible assets not ready for intended use as on the balance sheet date are disclosed as intangible assets
under development. Amortisation method and periods. Amortisation is charged on a straight-line basis over the estimated
useful lives. The estimated useful life and amortisation method are reviewed at the end of each annual
reporting period, with the effect of any changes in the estimate being accounted for on a prospective basis.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is
derecognised.
Non-Current Assets held for Sale
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale
transaction rather than continuing use and a sale is considered highly probable They are measured at the lower of their
carrying amount and fair value less cost to sell.
Non-current assets are not depreciated or amortised while they are classified as held for sale. Non-current assets classified
as held for sale are presented separately from the other assets in the balance sheet.
Cash and Cash Equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand and bank,
current account balances.
Inventories
Inventones of Raw Materials, Work-in-Progress, Stores and spares, Finished Goods and Stock-in-trade are stated' at cost or
net realisable value, whichever is lower Cost comprise all cost of purchase, cost of conversion and other costs incurred in
bringing the inventones to their present location and condition. Cost formula used are 'Weighted Average cost’ average cost
or'Specific identification' as applicable. Due allowance is estimated and made for defective and obsolete items, wherever
necessary
Cash flow statement
Cash flows are reported using the indirect method, whereby profit / (loss) before tax is adjusted for the effects of tax expenses
. transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows
from operating, investing and financing activities of the Company are segregated based on the available information.
Lease
Operating Lease
The Company has adopted the accounting standard Ind AS 116 ‘Leases". Ind AS 116 is a single lessee accounting model and
sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors.
As a lessee: The Company s lease assets primanly consist of office premises which are of short-term lease with the term of
twelve months or less and low value leases. For these short term and low value leases, the Company has recognized the
lease payments as an expense in the Statement of Profit and Loss on a straight-line basis over the term of lease. At the date of
commencement of the lease, the Company recognizes a right-of-use (ROU) asset and a corresponding lease liability for all
lease arrangements in which it is a lessee, except for leases with a term of 12 months or less (short-term leases) and low
value leases. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The ROU assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or pnor to the commencement date of the lease plus any initial direct costs less any lease Incentives. They
are subsequently measured at cost less accumulated depreciation and impairment losses.
ROU 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. ROU assets are evaluated for recoverability whenever events or changes in circumstances
indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount
(i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the
asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable
amount is determined for the Cash Generating Unit (CGU) to which the asset belongs. The lease liability is initially measured
at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest
rate implicit in the lease or. if not readily determinable, using the incremental borrowing rates In the country of domicile of
these leases. Lease liabilities are remeasured with a corresponding adjustment to the related ROU asset if the Company
changes its assessment of whether it will exercise an extension or a termination option. Lease liability and ROU assets have
been separately presented In the Balance Sheet and lease payments have been classified as financing cash flows
As a lessor: Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset
are classified as operating leases. Rental Income from operating lease is recognised on a straight-line basis over the term of
the relevant lease unless the receipts are structured to increase in line with expected general inflation to compensate for the
lessor's expected inflationary cost increases. Initial direct costs Incurred in negotiating and arranging an operating lease are
added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income
Contingent rents are recognised as revenue in the period in which they are earned.
Leases are classified as finance leases when substantially all the risks and rewards of ownership transfer from the Company
to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Company's net investment
in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant penodic rate of return on the
net investment outstanding in respect of the lease.
(g) Investments in subsidiaries
Investments in subsidiaries are recognised at cost as per Ind AS 27. And subject to impairment losses reviewed at the end of
each year.
(h) Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entityand a financial liability or equity instrument
of another entity. Financial assets and financial liabilities are recognised when an entity becomes a party to the contractual
provisions of the instrument. All financial instruments are recognised initially at fair value. Transaction costs that are
attributable to the acquisition of the financial asset (other than financial assets recorded at fair value through profit or loss) are
included in the transaction value of the financial assets. Purchase or sales of financial assets that require delivery of assets
within a time frame established by regulation or convention in the market place (regular way trade) are recognised on trade
date. While, financial liabilities like loans and borrowings and payables are recognised net of directly attributable transaction
costs.
(a) Non-derivative Financial Assets
(I) Classification
The Company classifies its financial assets in the following measurement categories:
(1) those to be measured subsequently at fair value (either through other comprehensive income, or through the
Statement of Profit and Loss), and
(2) those measured at amortised cost.
The classification depends on the Company's business model for managing the financial assets and the contractual
terms of the cash flows.
Measurement
Equity instruments at FVTOCI
All equity Instruments except Investments in subsidiaries are measured at fair value. Equity instruments held for trading is
classified as FVTPL. For all other equity instruments, the Company may make an irrevocable election to present subsequent
changes in the fair value in OCI. The Company makes such election on an mstrumentby-instrument basis. If the Company
decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividend are
recognised in OCI which is not subsequently reclassified to statement ol profit and loss.
At initial recognition, the Company measures a financial asset at its fair value. Transaction costs of financial assets carried at
fair value through the Profitand Loss are expensed in the Statement of Profit and Loss.
Financial assets at FVTPL
FVTPL is a residual category for financial assets. Any financial asset which does not meet the criteria for categonzalion as at
amortised cost or as FVTOCI. is classified as FVTPL In addition, the Company may elect to designate the financial asset.
which otherwise meets amortised cost or FVOCI critena. as FVTPL if doing so eliminates or significantly reduces a
measurement or recognition inconsistency. Financial assets at FVTPL are measured at fair value at the end of each reporting
period, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss
recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the tOther
income' line item. Dividend on financial assets at FVTPL is recognised when the Company's right to receive the dividends is
established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not
represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably
Derecognition of financial assets
The Company derecognises a financial asset when the contractual nghts 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 substantially all of the risks and rewards of
ownership of the financial asset are transferred or in which 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, the transferred assets are not derecognised. On derecognition of a financial asset, the difference
between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the
sum of (0 the consideration received (including any new asset obtained less any new liability assumed) and (li) any cumulative
gain or loss that had been recognised in OCI is recognised In Statement of Profit and Loss.
Impairment of financial assets
The Company measures the expected credit loss associated with its assets based on historical trend, industry practices
and the business environment in which the entity operates or any other appropriate basis. The impairment methodology
applied depends on whether there has been a significant increase in credit risk.
Impairment of non-Financial assets
Impairment of non-fmancial assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are
tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purpose
of assessing Impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which
are largely independent of the cash inflows from other assets or group of assets (cashgenerating units). Non- financial assets
that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
(b) Derivative financial instruments
The Company uses denvalive financial instruments, e.g. foreign currency foreign exchange forward contracts to hedge its
foreign currency nsks. Derivative financial instruments are initially recognised at fair value on the date a derivative contract
is entered into and are subsequently remeasured at their fair value at the end of each period. Any gains or losses arising
from changes In the fair value of derivatives are taken directly to profit or loss.
Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL.
Financial liabilities measured at amortised cost
After initial recognition, interest-beanng loans and borrowings are subsequently measured at amortised cost using the EIR
method Gains and losses are recognised in the Statement of Profit and 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.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash
payments through the expected life of the financial liability, or (where appropnate) a shorter period, to the net carrying amount
on initial recognition.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities designated upon initial recognition as at fair
value through profit or loss.
Financial liabilities at FVTPL are measured at fair value and net gains and losses. Including any interest expense, are
recognised in profit or loss.
Derecognition of financial liabilities
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expired.
Segment Reporting:
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker.
Borrowings
Borrowings are initially recognised at net of transaction costs incurred and measured at amortised cost. Any difference between
the proceeds (net of transaction costs) and the redemption amount is recognised in the Statement of Profit and Loss over the
period of the borrowings using the effective interest method
Borrowing costs
Interest and other borrowing costs attnbutable to qualifying assets are capitalised. Other Interest and borrowing costs are
charged to Statement of Profit and Loss.
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