PROVISION, CONTINGENT LIABILITIES ANDCONTINGENT ASSETS
Provisions: Provisions are recognized when there is a present obligation as result of a past
event, it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the expenditure required to settle
the present obligation at the Balance Sheet date and are not discounted to its present value.
Contingent Liabilities : Contingent liabilities are not provided for in the books but are
disclosed by way of notes in the financial statements when there is a possible obligation
arising from past events, the existence of which will be confirmed only by the occurrence or
nonoccurrence of one or more uncertain future events not wholly within the control of the
company or a present obligation that arises from past events where it is either not probable
that an outflow of resources will be required to settle or a reliable estimate of the amount
cannot be made.
Contingent Assets: Contingent Assets are neither recognized nor disclosed in the financial
statements.
EARNINGS PER SHARE (EPS)
The earnings considered in ascertaining the Company’s earnings per share comprise the net
profit after tax (and include post tax effect of any extraordinary items.) The number of shares
used in computing basic earnings per share is the weighted average number of shares
outstanding during the period. The number of shares used in computing diluted earnings per
share comprises of the weighted average number of shares outstanding during the period. The
number of shares used in computing diluted earnings per share comprises of the weighted
average shares considered for deriving basic earning per share, and also the weighted average
number of equity shares which could have been issued on conversion of all dilutive potential
equity shares.
RELATED PARTY TRANSACTIONS
Related party transactions are transfer of resources or obligations between related parties,
regardless of whether a price is charged. Parties are considered to be related, if one party has
the ability, directly or indirectly, to control the other party of exercise significant influence over
the other party in making financial or operating decisions. Parties are considered to be related
if they are subject to common control or common significant influence.
SEGMENT REPORTING
Operating segments are reported in a manner consistent with the internal reporting
provided by Chief Financial Officer and Director of the Company jointly and responsible for
allocating resources, assess the financial performance of the Company and make strategic
decisions.
The Company has identified one reportable segment “trading of textile products” based on
information reviewed by them.
DIVIDEND:
Dividend declared is provided in books of account when the same is approved by shareholders’.
EMPLOYEE BENEFITS
• Short-term Obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected
to be settled wholly within 12 months after the end of the period in which the
employees render the related service are recognised in respect of employees’ services
up to the end of the reporting period and are measured at the amounts expected to
be paid when the liabilities are settled. The liabilities are presented as current
employee benefit obligations in the balance sheet.
• Post Employee Obligations
The Company operates the following post-employment schemes:
• defined contribution plans such as provident fund.
• Gratuity obligations
The Company had an obligation towards gratuity - a defined benefit retirement plan
covering eligible employees. The plan provides a lump sum payment to vested
employees at retirement, death while in employment or on termination of an
employment of an amount equivalent to 15 days salary payable for each completed
years of service or part thereof in excess of six months. Vesting occurs upon
completion of five years of service and is payable thereafter on occurrence of any of
above events.
As per information provided by the Company, there are no employees who have
served more than 5 years.
• Defined contribution plans
Retirement benefit in the form of provident fund is a defined contribution scheme. The
company has no obligation, other than the contribution payable to the provident fund.
The company recognizes contribution payable to the provident fund scheme as an
expense, when an employee renders the related service. If the contribution payable to
the scheme for service received before the balance sheet date exceeds the contribution
already paid, the deficit payable to the scheme is recognized as a liability after
deducting the contribution already paid.
FOREIGN CURRENCY TRANSACTIONS
Initial Recognition:
On initial recognition, all foreign currency transactions arerecorded by applying to the foreign
currency amount the exchange rate between the functional currency and the foreign currency
at the date of the transaction.
Subsequent Recognition:
As at the reporting date, non-monetary items which arecarried in terms of historical cost
denominated in a foreigncurrency are reported using the exchange rate at the date ofthe
transaction. All non-monetary items which are carried atfair value or other similar valuation
denominated in a foreigncurrency are reported using the exchange rates that existedwhen the
values were determined. All monetary assets and liabilities in foreign currency arereinstated at
the end of accounting period.Exchange differences on reinstatement of all monetary itemsare
recognised in the Statement of Profit and Loss.
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.
FINANCIAL ASSETS
Initial recognition and measurement
All financial assets are initially recognised when the Company becomes a party to the
contractual provisions of the instrument. All financial assets are initially measured 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.
Subsequent measurement
? Classification
For the purpose of subsequent measurement, the Company classifies financial assets in
following categories:
• Financial assets at amortised cost
Financial assets at amortized cost are subsequently measured at amortized cost
using the effective interest method. The amortized cost is reduced by impairment
losses, if any. Interest income and impairment are recognized in the Statement of
Profit and Loss.
• Financial assets at fair value through other comprehensive income (FVTOCI)
These assets are subsequently measured at fair value through other comprehensive
income (OCI). Changes in fair values are recognized in OCI and on derecognition,
cumulative gain or loss previously recognized in OCI is reclassified to the Statement
of Profit and Loss. Interest income calculated using EIR and impairment loss, if any,
are recognized in the Statement of Profit and Loss.
• Financial assets at fair value through profit or loss (FVTPL)
These assets are subsequently measured at fair value. Net gains and losses,
including any interest income, are recognized in the Statement of Profit and Loss.
Financial assets are not reclassified subsequent to their recognition except if and in the
period the Company changes its business model for managing for financial assets.
De-recognition
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 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 it 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.
Any gain or loss on derecognition is recognised in the Statement of Profit and Loss.
Impairment of financial assets
The Company applies the expected credit loss model for recognizing impairment loss on
financial assets measured at amortized cost, lease receivable, trade receivable other
contractual rights to receive cash or other financial assets. For trade receivable, the
Company measures the loss allowance at an amount equal to life time expected credit
losses. Further, for the measuring life time expected credit losses allowance for trade
receivable the Company has used a practical expedient as permitted under Indian AS 109.
This expected credit loss allowance is computed based on provisions, matrix which takes
into account historical credit loss experience and adjusted for forward looking information.
FINANCIAL LIABILITIES
Initial recognition and measurement
All financial liabilities are initially recognised when the Company becomes a party to the
contractual provisions of the instrument. All financial liabilities are initially measured at
amortized cost unless at initial recognition, they are classified as fair value through profit or
loss. In case of trade payables they are initially recognize at fair value and subsequently,
these liabilities are held at amortized cost, using the Effective interest method.
Classification and subsequent measurement
Financial liabilities are classified as measured at amortised cost or FVTPL.
A financial liability is classified as 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 the Statement of Profit and Loss.
Financial liabilities other than classified as FVTPL, are subsequently measured at amortized
cost using the effective interest method. Interest expense is recognised in Statement of Profit
and Loss. Any gain or loss on derecognition is also recognised in the Statement of Profit and
Loss.
De-recognition
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 subsequently different terms, or the terms of an existing liability are
subsequently modified, such an exchange or modification is treated as the derecognition of
the original liability and the recognition of the new liability. The difference in the respective
carrying amount is recognize in the Statement of Profit & Loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount 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
assets and settle the liabilities simultaneously.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount presented in the
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing:
? the profit attributable to owners of the Company
? by the weighted average number of equity shares outstanding during the financial year,
adjusted for bonus elements in equity shares issued during the year and excluding treasury
shares.
Diluted earnings per share
Diluted earnings per share adjust the figures used in the determination of basic earnings
per share to take into account:
? after income tax effect of interest and other financing costs associated with dilutive
potential equity shares, and
the weighted average number of additional equity shares that would have been outstanding
assuming the conversion of all dilutive potential equity shares
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