III. Material accounting policies
A. Revenue recognition
Revenue from contract with customers is recognized
upon transfer of control of promised goods/
products to customers at an amount that reflects
the consideration to which the Company expect to
be entitled for those goods/ products. To recognize
revenues, the Company applies the following
five-step approach:
• Identify the contract with a customer,
• Identify the performance obligations
in the contract,
• Determine the transaction price,
• Allocate the transaction price to the performance
obligations in the contract, and
• Recognize revenues when a performance
obligation is satisfied.
1. Sale of goods
Revenue from the sale of goods is recognized
when the significant risks and rewards of
ownership of the goods have passed to the buyer
and no significant uncertainty exists regarding
the amount of the consideration that will be
derived from the sale of goods. Revenue from
the sale of goods is measured at the fair value
of the consideration received or receivable, net
of returns and allowances, related discounts &
incentives and volume rebates. It includes excise
duty and excludes value added tax/ sales tax/
goods and service tax.
The Company has adopted Ind AS 115 Revenue
from contracts with customers, with effect from
April 1, 2018. Ind AS 115 establishes principles for
reporting information about the nature, amount,
timing and uncertainty of revenues and cash
flows arising from the contracts with customers
and replaces Ind AS 18 Revenue and Ind AS 11
Construction Contracts.
2. Interest income
For all financial instruments measured either at
amortized cost or at fair value through other
comprehensive income, interest income is
recorded using the effective interest rate (EIR),
which is the rate that exactly discounts the
estimated future cash payments or receipts over
the expected life of the financial instrument
or a shorter period, where appropriate, to the
gross carrying amount of the financial asset
or to the amortized cost of a financial liability.
Interest income is included in other income in
the statement of profit and loss.
3. Dividends
Dividend income is accounted for when
the right to receive the same is established,
which is generally when shareholders
approve the dividend.
B. Borrowing costs
Borrowing costs directly attributable to the
acquisition, construction or production of an asset
that necessarily takes a substantial period of time to
get ready for its intended use or sale are capitalized
as part of the cost of the asset. Qualifying assets are
assets that necessarily take a substantial period of
time to get ready for their intended use or sale. All
other borrowing costs are expensed in the period in
which they occur. Borrowing costs consist of interest
and other costs that a company incurs in connection
with the borrowing of funds.
Investment income earned on the temporary
investment of specific borrowings pending their
expenditure on qualifying asset is deducted from the
borrowing costs eligible for capitalization.
C. Government Grants
Government grants are only recognized where there
is reasonable assurance that the grant will be received
and all attached conditions will be complied with.
• When the grant relates to an expense item, it
is recognized as income on a systematic basis
over the periods that the related costs, for which
it is intended to compensate, are expensed.
• Where the grant relates to an asset, it is
recognized as income in equal amounts over
the expected useful life of the related asset.
When loans or similar assistance are provided by
governments or related institutions, at a below market
rate of interest, the effect of this favorable interest is
treated as a government grant. The loan or assistance
is initially recognized and measured at fair value, and the
government grant is measured as the difference between
the proceeds received and the initial carrying value of
the loan. The loan is subsequently measured as per the
accounting policies applicable to financial liabilities.
D. Export Benefits
Duty free imports of raw materials under advance license
for imports, as per the Foreign Trade Policy, are matched
with the exports made against the said licenses and the
net benefits / obligations are accounted by making
suitable adjustments in raw material consumption.
E. Taxes
1. Current income tax
Current income tax assets and liabilities
are measured at the amount expected to
be recovered from or paid to the taxation
authorities, based on the rates and tax laws
enacted or substantively enacted, at the
reporting date in the country where the entity
operates and generates taxable income.
Current tax items are recognized in correlation
to the underlying transaction either in OCI or
directly in equity.
Management periodically evaluates positions taken
in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation
and establishes provisions where appropriate.
2. Deferred tax
Deferred tax is provided using the balance
sheet approach on temporary differences at the
reporting date between the tax bases of assets
and liabilities and their corresponding carrying
amounts for the financial reporting purposes.
Deferred tax assets are the amounts of income
taxes recoverable in future periods in respect of:
i. deductible temporary differences;
ii. the carry forward of unused tax losses; and
iii. the carry forward of unused tax credits.
The carrying amount of deferred tax assets is
reviewed at each reporting date and reduced
to the extent that it is no longer probable that
sufficient taxable profit will be available to
allow all or part of the deferred tax asset to
be utilized. Unrecognized deferred tax assets
are re-assessed at each reporting date and are
recognized to the extent that it has become
probable that future taxable profits will allow the
deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured
at the tax rates that are expected to apply in the
year when the asset is realized or the liability is
settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted at
the reporting date.
Deferred tax relating to items recognized outside
profit or loss is (either in other comprehensive
income or in equity). Deferred tax items are
recognized in correlation to the underlying
transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are
offset if a legally enforceable right exists to set
off current tax assets against current tax liabilities
and the deferred taxes relate to the same taxable
entity and the same taxation authority.
F. Leases
Company as a lessee
The Company applies a single recognition and
measurement approach for all leases, except for
short term leases and leases of low-value assets. The
Company recognises lease liabilities to make lease
payments and right-of-use assets representing the
right to use the underlying assets.
1) Right-of-use assets
• The Company recognises right-of-use
assets at the commencement date of the
lease (i.e., the date the underlying asset is
available for use).
Right-of-use assets are measured at cost,
less any accumulated depreciation and
impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost
of right-of-use assets includes the amount
of lease liabilities recognized, initial direct
costs incurred, and lease payments made
at or before the commencement date less
any lease incentives received. Right of-
use assets are depreciated on a straight¬
line basis over the shorter of the lease
term and the estimated useful lives of the
assets, as follows:
• Leasehold Land 99 years
If ownership of the leased asset transfers
to the Company at the end of the lease
term or the cost reflects the exercise of a
purchase option, depreciation is calculated
using the estimated useful life of the asset.
The right-of-use assets are also subject
to impairment. Refer to the accounting
policies in section (p) Impairment of non¬
financial assets.
2) Lease Liabilities
At the commencement date of the lease, the
Company recognises lease liabilities measured
at the present value of lease payments to be
made over the lease term. The lease payments
include fixed payments less any lease incentives
receivable, variable lease payments that depend
on an index or a rate, and amounts expected to
be paid under residual value guarantees. The
lease payments also include the exercise price
of a purchase option reasonably certain to be
exercised by the Company and payments of
penalties for terminating the lease, if the lease
term reflects the Company exercising the option
to terminate. Variable lease payments that do
not depend on an index or a rate are recognized
as expenses (unless they are incurred to produce
inventories) in the period in which the event or
condition that triggers the payment occurs. In
calculating the present value of lease payments,
the Company uses its incremental borrowing
rate atthe lease commencement date because
the interest rate implicit in the lease is not readily
determinable. After the commencement date,
the amount of lease liabilities is increased to
reflect the accretion of interest and reduced
for the lease payments made. 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.
3) Short-term leases and leases of low-value assets
The Company applies the short-term lease
recognition exemption to its short-term leases of
machinery and equipment (i.e., those leases that
have a lease term of 12 months or less from the
commencement date and do not contain a purchase
option). It also applies the lease of low-value
assets recognition exemption to leases of office
equipment that are considered to be low value.
Lease payments on short-term leases and leases
of low-value assets are recognized as expense
on a straight-line basis over the lease term.
G. Employee Benefits
The Company provides for gratuity, a defined benefit
retirement plan ('the Gratuity Plan') covering eligible
Indian employees of Vishal Fabrics. The Gratuity Plan
provides a lump-sum payment to vested employees
at retirement, death, in capacitation or termination of
employment, of an amount based on the respective
employee's salary and the tenure of employment with
the Company. The Company contributes Gratuity
liabilities to the__Limited Employees'
Gratuity Fund Trust (the Trust). Trustees administer
contributions made to the Trusts and contributions
are invested in a scheme with the Life Insurance
Corporation of India as permitted by Indian law.
All employee benefits payable wholly within twelve
months of rendering services are classified as
short term employee benefits. Benefits such as
salaries, wages, short-term compensated absences,
performance incentives etc., and the expected cost
of bonus, ex-gratia are recognized during the period
in which the employee renders related service.
Payments to defined contribution retirement
benefit plans are recognized as an expense when
employees have rendered the service entitling them
to the contribution.
The company operates a defined benefit gratuity
plan in India, which requires contributions to
be made to a LIC.
The cost of providing benefits under the defined
benefit plan is determined using the projected unit
credit method. Re-measurements, comprising of
actuarial gains and losses, the effect of the asset
ceiling, excluding amounts included in net interest
on the net defined benefit liability and the return
on plan assets (excluding amounts included in net
interest on the net defined benefit liability), are
recognized immediately in the balance sheet with
a corresponding debit or credit to retained earnings
through OCI in the period in which they occur. Re¬
measurements are not reclassified to profit or loss in
subsequent periods.
Past service costs are recognized in profit or loss on
the earlier of:
i. The date of the plan amendment or
curtailment, and
ii. The date that the company recognizes related
restructuring costs
Net interest is calculated by applying the discount
rate to the net defined benefit liability or asset.
The company recognizes the following changes in
the net defined benefit obligation as an expense in
the statement of profit and loss:
i. Service costs comprising current service
costs, past-service costs, gains and losses on
curtailments and non-routine settlements; and
ii. Net interest expense or income
1. Long-term employee benefits
Post-employment and other employee benefits
are recognized as an expense in the statement
of profit and loss for the period in which the
employee has rendered services. The expenses
are recognized at the present value of the
amount payable determined using actuarial
valuation techniques. Actuarial gains and loss
in respect of post-employment and other long
term benefits are charged to the statement of
other comprehensive income.
2. Defined contribution plans
The company pays provident fund contributions
to publicly administered provident funds as per
local regulations. The company has no further
payment obligations once the contributions
have been paid.
H. Property, plant and equipment
Freehold land is carried at historical cost. All other
items of property, plant and equipment are stated
at acquisition cost of the items. Acquisition cost
includes expenditure that is directly attributable to
getting the asset ready for intended use. Subsequent
costs are included in the asset's carrying amount or
recognized 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
profit or loss during the reporting period in which
they are incurred.
An item of spare parts that meets the definition of
'property, plant and equipment' is recognized as
property, plant and equipment. The depreciation on
such an item of spare part will begin when the asset
is available for use i.e. when it is in the location and
condition necessary for it to be capable of operating
in the manner intended by management. In case of
a spare part, as it may be readily available for use, it
may be depreciated from the date of purchase of
the spare part.
Capital work in progress is stated at cost and net of
accumulated impairment losses, if any. All the direct
expenditure related to implementation including
incidental expenditure incurred during the period of
implementation of a project, till it is commissioned, is
accounted as Capital work in progress (CWIP) and after
commissioning the same is transferred / allocated to
the respective item of property, plant and equipment.
Pre-operating costs, being indirect in nature, are
expensed to the statement of profit and loss as
and when incurred.
The present value of the expected cost for the
decommissioning of an asset after its use is included
in the cost of the respective asset if the recognition
criteria for a provision are met.
Property, plant and equipment are eliminated from
financial statement, either on disposal or when
retired from active use. Losses arising in the case
of retirement of property, plant and equipment are
recognized in the statement of profit and loss in the
year of occurrence.
Depreciation methods, estimated useful lives and
residual value
Depreciation is calculated to allocate the cost of
assets, net of their residual values, over their estimated
useful lives. Components having value significant to
the total cost of the asset and life different from that
Depreciation on property, plant and equipment has
been provided in the accounts based on useful life of
the assets prescribed in Schedule II to the Companies
Act, 2013. Certain assets are depreciated over the useful
life decided by the management based on estimate by
the domain experts. The said useful life are less then
prescribed by the schedule II of the Companies Act, 2013.
Depreciation on additions is calculated on pro rata
basis with reference to the date of addition.
Depreciation on assets sold/ discarded, during the
period, has been provided up to the preceding month
of sale / discarded.
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.
Gains and losses on disposals are determined by
comparing proceeds with carrying amount. These are
included in profit or loss within other gains / (losses).
I. Investment properties
Property that is held for long-term rental yields or for
capital appreciation or both, and that is not occupied
by the company, is classified as investment property.
Investment property is measured initially at its cost,
including related transaction costs and where applicable
borrowing costs. Subsequent expenditure is capitalized
to the asset's carrying amount only when it is probable
that future economic benefits associated with the
expenditure will flow to the company and the cost of
the item can be measure reliably. All other repairs and
maintenance costs are expensed when incurred. When
part of an investment property is replaced, the carrying
amount of the replaced part is derecognized.
J. Intangibles
Intangible assets are recognized when it is probable
that the future economic benefits that are attributable
to the assets will flow to the company and the cost of
the asset can be measured reliably.
Intangible assets acquired separately are measured
on initial recognition at cost. The cost of intangible
assets acquired in a business combination is their
fair value at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less
any accumulated amortization and accumulated
impairment losses. Internally generated intangibles,
excluding capitalized development costs, are
not capitalized and the related expenditure is
reflected in profit or loss in the period in which the
expenditure is incurred.
K. Inventories
Inventories are valued at the lower of cost and net
realizable value.
1. Raw materials: cost includes cost of purchase
and other costs incurred in bringing the
inventories to their present location and
condition. Cost is determined on first in,
first out basis.
2. Finished goods and work in progress: cost
includes cost of direct materials and labor and
a proportion of manufacturing overheads based
on the normal operating capacity, but excluding
borrowing costs. Cost is determined on lower of
cost or net realizable value.
3. Stores and spares: cost includes cost of
purchase and other costs incurred in bringing
the inventories to their present location and
condition. Cost is determined on weighted
average basis. An item of spare parts that does
not meet the definition of 'property, plant and
equipment' has to be recognized as a part
of inventories.
4. Fuel: cost includes cost of purchase and other
cost incurred in bringing the inventories to
their present location and condition. Cost is
determined on first in, first out basis.
Net realizable value is the estimated selling price in
the ordinary course of business, less estimated costs
of completion and the estimated costs necessary
to make the sale.
L. Investment in subsidiaries, joint ventures and
associates
Investments in subsidiaries, joint ventures and
associates are recognized at cost as per Ind AS 27.
Except where investments accounted for at cost shall
be accounted for in accordance with Ind AS 105,
Non-current Assets Held for Sale and Discontinued
Operations, when they are classified as held for sale.
M. Financial Instruments
1. Financial assets
i. Initial recognition and measurement
All financial assets are recognized initially
at fair value plus, in the case of financial
assets not recorded at fair value through
profit or loss, transaction costs that are
attributable to the acquisition of the
financial asset. Transaction costs of
financial assets carried at fair value through
profit or loss are expensed in profit or loss.
Financial assets are classified, at initial
recognition, as financial assets measured
at fair value or as financial assets measured
at amortized cost.
ii. Subsequent measurement
For purposes of subsequent measurement,
financial assets are classified in
four categories:
a. Debt instruments at amortized cost
b. Debt instruments at fair value
through other comprehensive
income (FVTOCI)
c. Financial assets at fair value through
profit or loss (FVTPL)
d. Equity instruments measured at fair
value through other comprehensive
income (FVTOCI)
iii. Debt instruments at amortized cost
A 'debt instrument' is measured at the
amortized cost if both the following
conditions are met:
a. The asset is held within a business
model whose objective is to hold
assets for collecting contractual
cash flows, and
b. Contractual terms of the asset give
rise on specified dates to cash flows
that are solely payments of principal
and interest (SPPI) on the principal
amount outstanding.
After initial measurement, such financial
assets are subsequently measured at
amortized cost using the effective interest
rate (EIR) method. Amortized 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 amortization is included
in finance income in the profit or loss.
The losses arising from impairment are
recognized in the profit or loss. This
category generally applies to trade and
other receivables.
iv. Debt instrument at FVTOCI
A 'debt instrument' is classified as at
the FVTOCI if both of the following
criteria are met:
a. The objective of the business model
is achieved both by collecting
contractual cash flows and selling the
financial assets, and
b. The asset's contractual cash flows
represent SPPI.
Debt instruments included within the
FVTOCI category are measured initially as
well as at each reporting date at fair value.
Fair value movements are recognized in
the other comprehensive income (OCI).
v. Financial instrument at FVTPL
FVTPL is a residual category for debt
instruments. Any debt instrument,
which does not meet the criteria for
categorization as at amortized cost or as
FVTOCI, is classified as at FVTPL.
In addition, the company may elect
to designate a debt instrument, which
otherwise meets amortized cost or
FVTOCI criteria, as at FVTPL. However,
such election is allowed only if doing so
reduces or eliminates a measurement
or recognition inconsistency (referred
to as 'accounting mismatch'). The
company has not designated any debt
instrument as at FVTPL.
Debt instruments included within the
FVTPL category are measured at fair value
with all changes recognized in the P&L.
vi. Equity investments
All equity investments in scope of Ind
AS 109 are measured at fair value. Equity
instruments which are held for trading and
contingent consideration recognized by
an acquirer in a business combination to
which Ind AS103 applies are classified as
at FVTPL. For all other equity instruments,
the company may make an irrevocable
election to present in other comprehensive
income subsequent changes in the fair
value. The company makes such election
on an instrument by-instrument basis. The
classification is made on initial recognition
and is irrevocable.
If the company decides to classify an equity
instrument as at FVTOCI, then all fair value
changes on the instrument, excluding
dividends, are recognized in the OCI. There
is no recycling of the amounts from OCI to
P&L, even on sale of investment. However,
the company may transfer the cumulative
gain or loss within equity.
Equity instruments included within the
FVTPL category are measured at fair value
with all changes recognized in the P&L.
vii. Derecognition
A financial asset (or, where applicable,
a part of a financial asset or part of a
company of similar financial assets) is
primarily derecognized (i.e. removed from
the company's balance sheet) when:
a. The rights to receive cash flows from
the asset have expired, or
b. The company has transferred its
rights to receive cash flows from the
asset or has assumed an obligation
to pay the received cash flows in
full without material delay to a
third party under a 'pass-through'
arrangement; and either
a) the company has transferred
substantially all the risks and rewards
of the asset, or
b) the company has neither transferred
nor retained substantially all the risks
and rewards of the asset, but has
transferred control of the asset.
When the company has transferred its
rights to receive cash flows from an
asset or has entered into a pass-through
arrangement, it evaluates if and to
what extent it has retained the risks and
rewards of ownership. When it has neither
transferred nor retained substantially
all of the risks and rewards of the asset,
nor transferred control of the asset, the
company continues to recognize the
transferred asset to the extent of the
company's continuing involvement. In
that case, the company also recognizes an
associated liability. The transferred asset
and the associated liability are measured
on a basis that reflects the rights and
obligations that the company has retained.
viii. Impairment of financial assets
The company assesses impairment based
on expected credit loss (ECL) model
to the following:
a. Financial assets measured at
amortized cost;
b. Financial assets measured at fair
value through other comprehensive
income (FVTOCI);
Expected credit losses are measured
through a loss allowance at an
amount equal to:
a. The 12-months expected credit
losses (expected credit losses that
result from those default events on
the financial instrument that are
possible within 12 months after the
reporting date); or
b. Full time expected credit losses
(expected credit losses that result
from all possible default events over
the life of the financial instrument).
The company follows 'simplified
approach' for recognition of impairment
loss allowance on:
a. Trade receivables or contract revenue
receivables; and
Under the simplified approach, the
company does not track changes in credit
risk. Rather, it recognizes impairment
loss allowance based on lifetime ECLs
at each reporting date, right from its
initial recognition.
The company uses a provision matrix to
determine impairment loss allowance
on the portfolio of trade receivables. The
provision matrix is based on its historically
observed default rates over the expected
life of the trade receivable and is adjusted
for forward looking estimates. At every
reporting date, the historical observed
default rates are updated and changes in the
forward-looking estimates are analyzed.
For recognition of impairment loss on
other financial assets and risk exposure,
the company determines that whether
there has been a significant increase in
the credit risk since initial recognition. If
credit risk has not increased significantly,
12-month ECL is used to provide for
impairment loss. However, if credit risk has
increased significantly, lifetime ECL is used.
If, in a subsequent period, credit quality of
the instrument improves such that there
is no longer a significant increase in credit
risk since initial recognition, then the entity
reverts to recognizing impairment loss
allowance based on 12-month ECL.
Lifetime ECL are the expected credit
losses resulting from all possible default
events over the expected life of a financial
instrument. The 12-month ECL is a portion
of the lifetime ECL which results from
default events that are possible within 12
months after the reporting date.
ECL impairment loss allowance (or reversal)
recognized during the period is recognized
as income/ expense in the statement of
profit and loss (P&L). This amount is reflected
under the head 'other expenses' in the P&L.
ix. Financial assets measured as at amortized
cost, contractual revenue receivables and
lease receivables
ECL is presented as an allowance, i.e., as an
integral part of the measurement of those
assets in the balance sheet. The allowance
reduces the net carrying amount. Until the
asset meets write-off criteria, the company
does not reduce impairment allowance
from the gross carrying amount.
For assessing increase in credit risk and
impairment loss, the company combines
financial instruments on the basis of shared
credit risk characteristics with the objective
of facilitating an analysis that is designed to
enable significant increases in credit risk to
be identified on a timely basis.
The company does not have any purchased
or originated credit-impaired (POCI)
financial assets, i.e., financial assets which
are credit impaired on purchase/ origination.
2. Financial liabilities
i. Initial recognition and measurement
All financial liabilities are recognized
initially at fair value and, in the case of
loans and borrowings and payables, net of
directly attributable transaction costs.
The company's financial liabilities include
trade and other payables, loans and
borrowings including bank overdrafts.
ii. Subsequent measurement
The measurement of financial liabilities
depends on their classification, as
described below:
a. Financial liabilities at fair value
through profit or loss
b. Loans and borrowings
c. Financial guarantee contracts
iii. Financial liabilities at FVTPL
Financial liabilities at fair value through
profit or loss include financial liabilities
held for trading and financial liabilities
designated upon initial recognition as at
fair value through profit or loss. Financial
liabilities are classified as held for trading
if they are incurred for the purpose of
repurchasing in the near term.
Gains or losses on liabilities held for trading
are recognized in the profit or loss.
Financial liabilities designated upon initial
recognition at fair value through profit or
loss are designated as such at the initial date
of recognition, and only if the criteria in Ind
AS 109 are satisfied. For liabilities designated
as FVTPL, fair value gains/ losses attributable
to changes in own credit risk is recognized
in OCI. These gains/ losses are not
subsequently transferred to P&L. However,
the company may transfer the cumulative
gain or loss within equity. All other changes
in fair value of such liability are recognized
in the statement of profit and loss. The
company has not designated any financial
liability as at fair value through profit and loss.
iv. Loans and borrowings
After initial recognition, interest-bearing
loans and borrowings are subsequently
measured at amortized cost using the EIR
method. Gains and losses are recognized
in profit or loss when the liabilities are
derecognized as well as through the EIR
amortization process. Amortized 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 amortization is included
as finance costs in the statement of
profit and loss.
v. Financial guarantee contracts
Financial guarantee contracts issued by the
company are those contracts that require
a payment to be made to reimburse the
holder for a loss it incurs because the
specified debtor fails to make a payment
when due in accordance with the terms
of a debt instrument. Financial guarantee
contracts are recognized initially as a
liability at fair value, adjusted for transaction
costs that are directly attributable to the
issuance of the guarantee. Subsequently,
the liability is measured at the higher of
the amount of loss allowance determined
as per impairment requirements of Ind
AS 109 and the amount recognized less
cumulative amortization.
The fair value of financial guarantees is
determined as the present value of the
difference in net cash flows between the
contractual payments under the debt
instrument and the payments that would
be required without the guarantee, or the
estimated amount that would be payable
to a third party for assuming the obligations.
When guarantees in relation to loans
or other payables of associates are
provided for no compensation the fair
values are accounted for as contributions
and recognized as part of the cost of
the investment.
vi. Preference shares
Preference shares, which are mandatorily
redeemable on a specific date, are
classified as liabilities. The dividends on
these preference shares are recognized in
profit or loss as finance costs.
vii. Derecognition
A financial liability is derecognized when the
obligation under the liability is discharged
or cancelled or expires. When an existing
financial liability is replaced by another
from the same lender on substantially
different terms, or the terms of an existing
liability are substantially modified, such
an exchange or modification is treated as
the derecognition of the original liability
and the recognition of a new liability.
The difference in the respective carrying
amounts is recognized in the statement of
profit and loss.
3. Off-setting of financial instruments
Financial assets and financial liabilities are
offset and the net amount is reported in the
standalone balance sheet if there is a currently
enforceable legal right to offset the recognized
amounts and there is an intention to settle on
a net basis, to realize the assets and settle the
liabilities simultaneously.
N. 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, or when annual
impairment testing for an asset is required, the
company estimates the asset's recoverable amount.
An asset's recoverable amount is the higher of an
assets or cash-generating unit's (CGU) fair value less
costs of disposal and its value in use. Recoverable
amount is determined for an individual asset, unless
the asset does not generate cash inflows that are
largely independent of those from other assets or
company's assets. When 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.
Recoverable amount is determined:
i. In case of individual asset, at higher of the fair
value less cost to sell and value in use; and
ii. In case of cash-generating unit (accompany of
assets that generates identified, independent
cash flows), at the higher of the cash¬
generating unit's fair value less cost to sell and
the 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. In determining fair value
less costs of disposal, recent market transactions
are taken into account. If no such transactions can
be identified, an appropriate valuation model is used.
These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded
companies or other available fair value indicators.
The company bases its impairment calculation on
detailed budgets and forecast calculations, which are
prepared separately for each of the company's CGUs
to which the individual assets are allocated. These
budgets and forecast calculations generally cover a
period of five years. For longer periods, a long-term
growth rate is calculated and applied to project future
cash flows after the fifth year.
Impairment losses of continuing operations, including
impairment on inventories, are recognized in the
statement of profit and loss, except for properties
previously revalued with the revaluation surplus
taken to OCI. For such properties, the impairment is
recognized in OCI up to the amount of any previous
revaluation surplus.
O. Cash and cash equivalents
Cash and cash equivalent in the balance sheet
comprise cash at banks and on hand and short-term
deposits with an original maturity of three months
or less, which are subject to an insignificant risk of
changes in value. For the purpose of the statement
of cash flows, cash and cash equivalents consist of
cash and short-term deposits, as defined above, net
of outstanding bank overdrafts as they are considered
an integral part of the company's cash management.
P. Segment accounting
The Chief Operational Decision Maker monitors the
operating results of its business Segments separately
for the purpose of making decisions about resource
allocation and performance assessment. Segment
performance is evaluated based on profit or loss and
is measured consistently with profit or loss in the
financial statements.
The Operating segments have been identified on the
basis of the nature of products/services.
The accounting policies adopted for segment
reporting are in line with the accounting policies
of the company. Segment revenue, segment
expenses, segment assets and segment liabilities
have been identified to segments on the basis of their
relationship to the operating activities of the segment.
Inter Segment revenue is accounted on the basis of
transactions which are primarily determined based on
market/fair value factors. Revenue, expenses, assets
and liabilities which relate to the company as a whole
and are not allocated to segments on a reasonable
basis have been included under "unallocated revenue
/ expenses / assets / liabilities”
The Company is primarily engaged in the business
of manufacturing, distribution and marketing of
textile product. These, in the context of Ind AS 108
on Operating Segments Reporting are considered to
constitute single business segment.
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