2c material accounting policies
1 Revenue Recognition
Revenue is measured at the amount of
consideration which the Company expects to be
entitled to in exchange for transferring distinct
goods or services to a customer as specified in
the contract, excluding amounts collected on
behalf of third parties (for example taxes and
duties collected on behalf of the government).
Consideration is generally due upon satisfaction
of performance obligations and a receivable is
recognised when it becomes unconditional
Sale of goods and services
Revenue is recognised when a promise in a
customer contract (performance obligation) has
been satisfied by transferring control over the
promised goods to the customer. Control over
a promised good refers to the ability to direct
the use of, and obtain substantially all of the
remaining benefits from, those goods. Control
is usually transferred upon shipment, delivery
to, upon receipt of goods by the customer, in
accordance with the individual delivery and
acceptance terms agreed with the customers.
The amount of revenue to be recognised
(transaction price) is based on the consideration
expected to be received in exchange for goods,
excluding amounts collected on behalf of third
parties such as GST or other taxes directly linked
to sales.
Revenue from rendering of services is recognised
over time as and when the customer receives
the benefit of the Company’s performance
and the Company has an enforceable right to
payment for services transferred. Unbilled
revenue represents value of services performed
in accordance with the contract terms but not
billed.
Interest income
Interest income from a financial asset is
recognised 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, which is
the rate that exactly discounts estimated future
cash receipts through the expected life of the
financial asset to that asset’s carrying amount on
inital recognition.
Government grants
Government grants (including export incentives)
are recognised only when there is reasonable
assurance that the Company will comply with
the conditions attaching to them and the grants
will be received.
Government grants are recognised in profit or
loss on a systematic basis over the periods in
which the Company recognises as expenses the
related costs for which the grants are intended
to compensate.
The benefit of a government loan at a below
market rate of interest is treated as a government
grant, measured at the difference between
proceeds received and the fair value of the loan
based on prevailing market rates.
The Company has applied Ind AS 109 ‘Financial
Instruments’ and Ind AS 20 ‘Accounting for
Government Grants and Disclosure of Government
Assistance’ prospectively to government loans
existing at the date of transition and the Company
has not recognised the corresponding benefit of
the government loans at the below-market rate
of interest as a government grant. Consequently,
the Company has used the previous GAAP carrying
amounts of the government loans at the date of
transition as the carrying amount of these loans
in the opening Ind AS Balance Sheet.
2 Property, plant and equipment
Land and buildings held for use in the production or
supply of goods or services, or for administrative
purposes, are stated at cost less accumulated
depreciation and accumulated impairment
losses. Freehold land is not depreciated.
Property, plant and equipment are carried at cost
less accumulated depreciation and impairment
losses, if any. The cost of property, plant and
equipment comprises its purchase price/
acquisition cost, net of any trade discounts
and rebates, any import duties and other taxes
(other than those subsequently recoverable from
the tax authorities), any directly attributable
expenditure on making the asset ready for its
intended use, other incidental expenses and
interest on borrowings attributable to acquisition
of qualifying property, plant and equipment up
to the date the asset is ready for its intended
use. Machinery spares which can be used only
in connection with an item of Property, plant
and equipment and whose use is expected to
be irregular are capitalised and depreciated
over the useful life of the principal item of
the relevant assets. Subsequent expenditure
on property, plant and equipment after its
purchase / completion is capitalised only if such
expenditure results in an increase in the future
benefits from such asset beyond its previously
assessed standard of performance.
Depreciation on Property, plant and equipment
(other than freehold land) has been provided on
written down value method as per the useful life
prescribed in Schedule II to the Companies Act, 2013
The estimated useful life of the tangible assets
and the useful life are reviewed at the end of
the each financial year and the depreciation
period is revised to reflect the changed pattern,
if any.
An item of property, plant and equipment is
derecognised upon disposal or when no future
economic benefits are expected to arise from
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 the statement of profit and loss.
3 Investment property
Investment properties are properties held to
earn rentals and/or for capital appreciation
(including property under construction for such
purposes). Investment properties are measured
initially at cost, including transaction costs.
Subsequent to initial recognition, investment
properties are measured in accordance with
Ind AS 16’s requirements for cost model. The
cost of Investment property includes the cost
of replacing parts and borrowing costs if the
recognition criteria are met. When significant
parts of the investment property are required
to be replaced at intervals, the Company
depreciates them separately based on their
specific useful lives. All other repair and
maintenance costs are recognised in Statement
of Profit and Loss as incurred.
An investment property is derecognised upon
disposal or when the investment property is
permanently withdrawn from use and no future
economic benefits are expected from the
disposal. Any gain or loss arising on derecognition
of the property (calculated as the difference
between the net disposal proceeds and the
carrying amount of the asset) is included in
profit or loss in the period in which the property
is derecognised. The fair value of investment
property is disclosed in the notes. Fair values are
determined based on evaluation performed by
accredited external independent valuers.
Depreciation on Buildings and other equipment
has been provided on written down value method
as per the useful life prescribed in Schedule II to
the Companies Act, 2013.
4 Leases
Arrangements in the nature of Lessor
Leases are classified as finance leases whenever
the terms of the lease transfer substantially
all the risks and rewards of ownership to the
lessee. Leases in which the Company does not
transfer substantially all the risks and rewards
incidental to ownership of an asset are classified
as operating leases. Rental income arising
therefrom is accounted for on a straight-line
basis over the lease terms.
In respect of finance leases,the company
recognizes a financial asset (net investment in
lease) measured at the present value of the
lease rental receivables that are not paid at
the commencement date, discounted using the
Company’s incremental borrowing rate. The
Company subsequently measures finance income
over the lease term based on a pattern reflecting
a constant periodic rate of return on the net
investment in the lease.
Rental income and expense from operating
leases is generally recognised on a straight¬
line basis over the term of the relevant lease.
However, where the rentals are structured
solely to increase in line with expected general
inflation to compensate for the lessor’s expected
inflationary cost increases, such increases are
recognised in the year in which such benefits
accrue.
5 Inventories
Inventories are stated at the lower of cost and net
realisable value after providing for obsolescence
and other losses, where considered necessary.
Cost is determined using weighted average basis.
Cost comprises all costs of purchase including
duties and taxes (other than those subsequently
recoverable by the Company), freight inwards
and other expenditure directly attributable to
acquisition. Work-in-progress and finished goods
include appropriate proportion of overheads.
Raw Materials and other items 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. Work in progress and finished
goods are valued at cost or Net Realisable Value
whichever is lower. Saleable scrap is valued at
the net realisable value. Net realisable value
represents the estimated selling price for
inventories less all estimated costs of completion
and costs necessary to make the sale.
6 Impairment of tangible and intangible 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).
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 is
estimated to be less than its carrying amount,
the carrying amount of the asset is reduced to
its recoverable amount. An impairment loss is
recognised immediately in profit or loss. When
an impairment loss subsequently reverses, the
carrying amount of the asset 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 in prior years. A reversal
of an impairment loss is recognised immediately
in profit or loss.
The assets under Capital Work-in-Progress did
not have any impairment during the year
7 Financial instruments
Financial assets and financial liabilities are
recognised when the Company becomes a party
to the contractual provisions of the instruments.
Financial assets and liabilities are initially
recognised at fair value. Transaction costs that
are directly attributable to financial assets
and liabilities [other than financial assets and
liabilities measured at fair value through profit
and loss (FVTPL)] are added to or deducted from
the fair value of the financial assets or liabilities,
as appropriate on initial recognition. Transaction
costs directly attributable to acquisition of
financial assets or liabilities measured at FVTPL
are recognised immediately in the statement
of profit and loss. Subsequently, financial
instruments are measured according to the
category in which they are classified.
a) Non-derivative Financial assets:
All regular way purchases or sales of financial
assets are recognised and derecognised on a
trade date basis. Regular way purchases or sales
are purchases or sales of financial assets that
require delivery of assets within the time frame
established by regulation or convention in the
marketplace.
All recognised financial assets are subsequently
measured in their entirety at either amortised
cost or fair value, depending on the classification
of the financial assets.
Financial assets at amortised cost
A financial asset is measured at amortised cost if
both of the following conditions are met:
a) the financial asset is held within a business
model whose objective is to hold financial assets
in order to collect contractual cash flows; and
b) the contractual terms of the financial asset
give rise on specified dates to cash flows that are
Solely Payments of Principal and Interest (SPPI)
on the principal amount outstanding.
Financial assets measured at Fair Value through
Other Comprehensive Income (FVTOCI)
A financial asset is measured at amortised cost if
both of the following conditions are met:
a) the financial asset is held within a business
model whose objective is achieved by both
collecting cash flows and selling financial assets.;
and
b) the contractual terms of the financial asset
give rise on specified dates to cash flows that are
solely payments of principal and interest (SPPI)
on the principal amount outstanding.
All other financial assets are measured at fair
value through profit or loss.
Effective interest method:
The effective interest method is a method
of calculating the amortised cost of a debt
instrument and of allocating interest income
over the relevant period. The effective interest
rate that exactly discounts estimated future
cash receipts through the expected life of
the debt instrument, or, where appropriate, a
shorter period, to the net carrying amount on
initial recognition.
Income is recognised on an effective interest
basis for debt instruments other than those
financial assets classified as FVTPL/FVTOCI
Interest income is recognised in profit or loss and
is included in the “Other income” line item.
b) Derecognition of financial assets:
A financial asset is derecognised only when the:
- Company has transferred the rights to receive
cash flows from the financial asset; or
- retains the contractual rights to receive the
cash flows of the financial asset, but assumes a
contractual obligation to pay the cash flows to
one or more recipients.
When the entity has transferred an asset, the
Company evaluates whether it has transferred
substantially all risks and rewards of ownership
of the financial asset. In such cases, the financial
asset is derecognised. Whether the entity has not
transferred substantially all risks and rewards of
ownership of the financial asset, the financial
asset is not derecognised.
Where the entity has neither transferred a
financial asset nor retains substantially all risks
and rewards of ownership of the financial asset,
the financial asset is derecognised if the Company
has not retained control of the financial asset.
When the Company retains control of the financial
asset, the asset is continued to be recognised
to the extent of continuing involvement in the
financial asset.
c) Foreign exchange gains and losses:
The fair value of financial assets denominated in
a foreign currency is determined in that foreign
currency and translated at the spot rate at the
end of each reporting period.
For foreign currency denominated financial
assets measured at amortised cost and FVTPL,
the exchange differences are recognised in
statement of profit and loss.
d) Investments
The Company measures investments in quoted
equity investments (other than the investment
in subsidiaries, joint ventures and associates
which are measured at cost) at fair value.
Where the Company has elected to present fair
value gains and losses on equity investments in
Other Comprehensive Income (“FVOCI”), there
is no subsequent reclassification of fair value
gains and losses to profit or loss. Dividends
from such investments are recognised in the
Statement of Profit and Loss as other income
when the Company’s right to receive payment is
established.
At the date of transition to Ind AS, the
Company has made an irrevocable election
to present in Other Comprehensive Income
subsequent changes in the fair value of equity
investments that are not held for trading.
When the equity investment is derecognised, the
cumulative gain or loss previously recognised in
Other Comprehensive Income is reclassified from
Other Comprehensive Income to the Retained
Earnings directly.
Fair value of unquoted instrument has been
valued at the book values of that Company based
on Level 2 input. In respect of investment in
equity share capital of captive power companies
which are made to comply with the provisions
of Electricity Rules 2003, these investments are
carried at cost as these investments can be sold
back only at par.
The Company assesses impairment based on
Expected Credit Losses (ECL) model to the
following:
• financial assets measured at amortised cost
• financial assets measured at fair value through
other comprehensive income
Expected credit loss are measured through a loss
allowance at an amount equal to :
• the twelve month expected credit losses
(expected credit losses that result from those
default events on the financial instruments that
are possible within twelve months after the
reporting date); or
• full life time expected credit losses (expected
credit losses that result from all possible default
events over the life of the financial instrument).
For trade receivables or any contractual right to
receive cash or another financial asset that result
from transactions that are within the scope of
Ind AS 115, the Company always measures the
loss allowance at an amount equal to life time
expected credit losses.
f) Financial liabilities:
All financial liabilities are subsequently measured
at amortised cost using the effective interest
method or at FVTPL.
However, financial liabilities that arise when
a transfer of a financial asset does not qualify
for derecognition or when the continuing
involvement approach applies, financial
guarantee contracts issued by the Company,
and commitments issued by the Company to
provide a loan at below-market interest rate
are measured in accordance with the specific
accounting policies set out below.
Financial liabilities at FVTPL
Financial liabilities at FVTPL are stated at
fair value, with any gains or losses arising on
remeasurment recognised in statement of
profit and loss. The net gain or loss recognised
in statement of profit and loss incorporates any
interest paid on the financial liability and is
included in the ‘Other income/Other expenses’
line item.
Financial liabilities subsequently measured at
amortised cost
Financial liabilities that are not held-for-trading
and are not designated as at FVTPL are measured
at amortised cost at the end of subsequent
accounting periods. The carrying amounts
of financial liabilities that are subsequently
measured at amortised cost are determined
based on the effective interest method.
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 appropriate)
a shorter period, to the net carrying amount on
initial recognition.
Foreign exchange gains and losses
For financial liabilities that are denominated in a
foreign currency and are measured at amortised
cost at the end of each reporting period, the
foreign exchange gains and losses are determined
based on the amortised cost of the instruments
and are recognised in the statement of profit
and loss.
The fair value of financial liabilities denominated
in a foreign currency is determined in that
foreign currency and translated at the spot rate
at the end of the reporting period. For financial
liabilities that are measured as at FVTPL, the
foreign exchange component forms part of the
fair value gains or losses and is recognised in the
statement of profit and loss.
Derecognition of financial liabilities
The Company derecognises financial liabilities
when, and only when, the Company’s obligations
are discharged, cancelled or have expired.
An exchange between with a lender of debt
instruments with substantially different terms
is accounted for as an extinguishment of the
original financial liability and the recognition of
a new financial liability.
Similarly, a substantial modification of the terms
of an existing financial liability (whether or not
attributable to the financial difficulty of the
debtor) is accounted for as an extinguishment of
the original financial liability and the recognition
of a new financial liability. The difference
between the carrying amount of the financial
liability, derecognized and the consideration
paid and payable is recognized in profit or loss.
8 Segment reporting
An operating segment is a component of the
Company that engages in business activities from
which it may earn revenues and incur expenses,
including revenues and expenses that relate to
transactions with any of the Company’s other
components and for which discrete financial
information is available. Operating segments
are reported in the manner consistent with
the internal reporting to the chief operating
decision maker (CODM) as per Ind AS 108. The
Company is structured into two reportable
business segments - “Textiles”and “Rental
Services”. Textiles consists of manufacturing and
sale of yarn and trading in fabrics. Rental service
consist of letting out of properties. The Company
has restructured its verticals and accordingly, as
required by accounting standards, comparatives
have been restated and presented in line with
the current segments. The reportable business
segments are in line with the segment wise
information which is being presented to the
CODM. Geographic information is based on
business sources from that geographic region.
Accordingly the geographical segments are
determined as Domestic ie., within India and
External ie., Outside India. The accounting
policies adopted for segment reporting are in
conformity with the accounting policies adopted
for the Company. Revenue and expenses have
been identified to segments on the basis of
their relationship to the operating activities of
the segment. Income / costs which relate to
the Company as a whole and are not allocable
to segments on a reasonable basis have been
included under unallocated income / costs.
9 Employee Benefits
The Company participates in various employee
benefit plans. Post-employment benefits are
classified as either defined contribution plans
or defined benefit plans. Under a defined
contribution plan, the Company’s only obligation
is to pay a fixed amount with no obligation to pay
further contributions if the fund does not hold
sufficient assets to pay all employee benefits.
The related actuarial and investment risks fall
on the employee. The expenditure for defined
contribution plans is recognized as expense
during the period when the employee provides
service. Under a defined benefit plan, it is the
Company’s obligation to provide agreed benefits
to the employees. The related actuarial risks
fall on the Company. The present value of the
defined benefit obligations is calculated using
the projected unit credit method.
Short-term employee benefits
All short-term employee benefits such as
salaries, wages, bonus, and other benefits
which fall within 12 months of the period in
which the employee renders related services
which entitles them to avail such benefits and
non-accumulating compensated absences are
recognised on an undiscounted basis and charged
to the statement of profit and loss.
A liability is recognised for benefits accruing to
employees in respect of wages and salaries in
the period the related service is rendered at the
undiscounted amount of the benefits expected
to be paid in exchange for that service.
Defined contribution plan
The Company’s contribution to provident fund
and employee state insurance scheme are
considered as defined contribution plans and
are charged as an expense based on the amount
of contribution required to be made and when
services are rendered by the employees.
Defined benefit plan
In accordance with the Payment of Gratuity Act,
1972, the Company provides for a lump sum
payment to eligible employees, at retirement
or termination of employment based on the last
drawn salary and years of employment with the
Company. The gratuity liability is partly funded.
The Company’s obligation in respect of the
gratuity plan, which is a defined benefit plan, is
provided for based on actuarial valuation using
the projected unit credit method. Actuarial gains
or losses are recognized in other comprehensive
income. Further, the profit or loss does not
include an expected return on plan assets.
Instead net interest recognized in profit or loss
is calculated by applying the discount rate used
to measure the defined benefit obligation to
the net defined benefit liability or asset. The
actual return on the plan assets above or below
the discount rate is recognized as part of re¬
measurement of net defined liability or asset
through other comprehensive income.
Remeasurement, comprising actuarial gains and
losses is reflected immediately in the balance
sheet with charge or credit recognised in other
comprehensive income in the period in which
they occur. Remeasurement recognised in other
comprehensive income is reflected in retained
earnings and is not reclassified to the statement
of profit and loss.
2D other accounting policies
1 Foreign Currencies
In preparing the financial statements of the
Company, transactions in currencies other
than the entity’s functional currency (foreign
currencies) are recognized at the rates of
exchange prevailing at the date of the transaction.
At the end of each reporting period, monetary
items denominated in foreign currencies are
retranslated at the rates prevailing at that date.
Non-monetary items that are measured in terms
of historical cost in a foreign currency are not
retranslated.
Exchange differences on monetary items are
recognised in the statement of profit and loss
in the period in which they arise except for
exchange differences on transactions designated
as fair value hedge.
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)
2 Borrowing costs
General and specific borrowing costs that
are directly attributable to the acquisition,
construction or production of a qualifying asset
are capitalised during the period of time that
is required to complete and prepare the asset
for its intended use or sale. Qualifying assets
are assets that necessarily take a substantial
period of time to get ready for their intended
use or sale. Investment 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 profit
or loss in the period in which they are incurred.
3 Taxation
Income tax expense represents the sum of the
tax currently payable and deferred tax.
a) Current tax: Current tax is the amount of tax
payable on the taxable income for the year as
determined in accordance with the applicable
tax rates and the provisions of the Income Tax
Act, 1961 and other applicable tax laws.
b) Minimum Alternate Tax (MAT): MAT paid in
accordance with the tax laws, which gives future
economic benefits in the form of adjustment
to future income tax liability, is considered as
an asset if there is convincing evidence that
the Company will pay normal income tax.
Accordingly, Deferred tax is provided on MAT and
created as an asset when it is highly probable
that future economic benefit associated with it
will flow to the Company.
c) Deferred tax: Deferred tax is recognized using
the balance sheet approach. Deferred tax assets
and liabilities are 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 are generally recognised for all taxable
temporary differences.
Deferred tax assets are generally recognised
for all deductible temporary differences to the
extent that it is probable that taxable profits
will be available against which those deductible
temporary differences can be utilised.
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
utilised.
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.
4 intangible assets
An intangible asset is an identifiable non¬
monetary asset without physical substance
Internally generated intangible assets
Expenditure on research activities is recognised
as an expense in the period in which it is
incurred. An internally generated intangible
asset arising from development (or from the
development phase of an internal project) is
recognised if, and only if, all of the following
have been demonstrated:
- the technical feasibility of completing the
intangible asset so that it will be available for
use or sale,
- the intention to complete the intangible asset
and use or sell it, the ability to use or sell the
intangible asset,
- how the intangible asset will generate probable
future economic benefits
- the availability of adequate technical,
financial and other resources to complete the
development and to use or sell the intangible
asset, and
-the ability to measure reliably the expenditure
attributable to the intangible asset during its
development.
The amount initially recognised for internally
generated intangible assets is the sum of the
expenditure incurred from the date when the
intangible asset first meets the recognition
criteria listed above. Where no internally
generated intangible asset can be recognised,
development expenditure is recognised in profit
and loss in the period in which it is incurred.
Subsequent to initial recognition, internally
generated intangible assets are reported at cost
less accumulated amortization and accumulated
impairment losses, on the same basis as
intangible assets that are acquired separately.
Amortization of Intangible assets
An intangible asset with finite useful life that are
acquired separately and where the useful life is
2 years or more is capitalised and carried at cost
less accumulated amortization. Amortization is
recognised on written down value basis over the
useful life of the asset.
Internally generated intangible assets are
amortized over the period for which the company
expects to derive the economic benefits from
such assets.
Estimated useful life of intangible assets which
is based on technical evaluation of the useful
lives of the assets is 6 years.
De-recognition
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.
Intangible assets are stated at cost of acquisition
or construction less accumulated depreciation
less accumulated impairment, if any.
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