SIGNIFICANT ACCOUNTING POLICIES Corporate Information AARVEE DENIMS AND EXPORTS LIMITED ("the company") is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on two stock exchanges in India. The company is engaged in the manufacturing and selling of denim and non denim Fabrics, Garments. The company caters to both domestic and international markets. Basis of Preparation of Financial Statements The financial statements of the Company have been brpared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 of the Companies Act, 2013 ("the 2013 Act"), as applicable. The financial statements have been brpared on accrual basis under the historical cost convention. 1 SIGNIFICANT ACCOUNTING POLICIES a. Use of Estimates The brparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise. b. Fixed Assets Tangible and Intangible Assets are carried at cost less accumulated debrciation and impairment losses, if any. the Cost of Fixed Assets comprises of all expenses incurred on making the asset ready for its intended use. Borrowing costs directly attributable to the acquisition of qualifying fixed assets / construction are included in the cost of fixed assets. The Company has adopted the provisions of para 46 / 46A of AS 11 The Effects of Changes in Foreign Exchange Rates, accordingly, exchange differences arising on restatement / settlement of long-term foreign currency borrowings relating to acquisition of debrciable fixed assets are adjusted to the cost of the respective assets and debrciated over the remaining useful life of such assets. In case of new projects / expansion of existing projects, expenditure incurred on making the asset ready for its intended use during construction / broperative period including interest and finance charges on specific / general purpose loans, prior to commencement of commercial production are capitalized. The same has been allocated to the respective fixed assets on completion of construction / erection of the capital project / fixed assets. Capital assets (including expenditure incurred during the construction period) under erection / installation are stated in the Balance Sheet as "Capital Work in Progress." c. Lease Assets acquired under leases where a significant portion of the risk and rewards of ownership are retained by the lessor are classified as operating leases. Lease rentals under operating leases are recognised in the Statement of Profit and Loss on a straight-line basis. d. Impairment of Assets Impairment is recognised if carrying amount exceeds their recoverable amount. At each balance sheet date, the Company reviews the carrying amounts of its fixed assets to determine whether there is any indication that those assets suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of impairment loss. Recoverable amount is the higher of an asset's net selling price and value in use. In assessing value in use, the estimated future cash flows expected from the continuing use of the asset and from its disposal are discounted to their brsent value using a br-tax discount rate that reflects the current market assessments of time value of money and the risks specific to the asset. e. Debrciation /Amortization All Tangible assets, except freehold land, leasehold land and capital work in progress, are debrciated on a straight line method as per the useful life brscribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.: Particulars Debrciation Plant & Machineries Over the period of 30 to 40 years as technically assessed Debrciation on additions to / deletions from fixed assets made during the period is provided on pro-rata basis from / up to the month of such addition / deletion as the case may be. Amortization in respect of Intangible assets is provided on Straight Line basis over the period of under lying contract or estimated period of its economic life. Leasehold land is amortized over the period of lease. f. Investments Long term investments are stated at cost. Current investments are carried individually, at lower of cost and market value. Provision for diminution in the value of long term investments is made only if such a decline is other than temporary. g. Inventories Inventories are measured at lower of cost and net realizable value. Cost of raw materials, stores & spares parts are ascertained on FIFO basis. Cost for finished goods and process stock is ascertained on full absorption cost basis. Cost of inventories comprises of cost of purchase, cost of conversion and other costs incurred in bringing them to their brsent location & condition. h. Government Grants: Government grants are recognised when there is reasonable assurance that the Company will comply with the conditions attached to them and the grants will be received. Revenue grants are recognized in the statement of profit and loss. Capital grants relating to specific fixed assets are reduced from the gross value of the respective fixed assets. Export benefits are accounted for in the year of exports based on eligibility and when there is no uncertainty in receiving the same. i. Revenue Recognition Sales are recognized net of trade discounts, rebates and sales tax, on transfer of significant risks and rewards of ownership. It does not include interdivisional sales. Revenue in respect of other item is recognized when no significant uncertainty as to its determination or realization exists. j. Borrowing Cost Borrowing costs include interest, amortisation of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Borrowing costs that are attributable to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use. All other borrowing costs are charged to revenue. k. Foreign Currency Transactions and Translations Transactions in foreign currencies entered into by the Company are accounted at the exchange rates brvailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction. Foreign currency monetary items (other than derivative contracts) of the Company, outstanding at the balance sheet date are restated at the year-end rates. Non-monetary items of the Company are carried at historical cost.Exchange differences arising on settlement / restatement of short-term foreign currency monetary assets and liabilities of the Company are recognised as income or expense in the Statement of Profit and Loss. Exchange difference on long-term foreign currency monetary items: The exchange differences arising on settlement / restatement of long-term foreign currency monetary items are capitalised as part of the debrciable fixed assets to which the monetary item relates and debrciated over the remaining useful life of such assets. If such monetary items do not relate to acquisition of debrciable fixed assets, the exchange difference is amortised over the maturity period / upto the date of settlement of such monetary items, whichever is earlier, and charged to the Statement of Profit and Loss. The unamortised exchange difference is carried under Reserves and surplus as "Foreign currency monetary item translation difference account" net of the tax effect thereon, where applicable. l. Accounting for Forward Contracts Premium / discount on forward exchange contracts, which are not intended for trading or speculation purposes, are amortised over the period of the contracts if such contracts relate to monetary items as at the balance sheet date. Any profit or loss arising on cancellation or renewal of such a forward exchange contract is recognised as income or as expense in the period in which such cancellation or renewal is made. m. Financial Derivatives and Commodity Hedging Transactions In respect of financial derivatives and commodity hedging contracts, brmium paid, losses on restatement and gains/losses on settlement are charged to the statement of profit and loss. n. Employee Benefits Short term employee benefits are recognized as an expense at the undiscounted amount in the statement of profit and loss of the year in which the related service is rendered. Post employment and other long term employee benefits are recognized as an expense in the statement of profit and loss for the year in which the employee has rendered services. The cost of providing benefits is determined using the Projected Unit Credit method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses in respect of post employment and other long term benefits are charged to statement of profit and loss. o. Taxes on Income Income tax expenses for the year comprises of current tax and deferred tax. Current tax provision is determined on the basis of taxable income computed as per the provisions of the Income Tax Act. Deferred tax is recognized for all timing differences that are capable of reversal in one or more subsequent periods subject to conditions of prudence and by applying tax rates that have been substantively enacted by the balance sheet date. Deferred tax assets are recognised only if there is virtual certainty supported by covincing evidence that there will be sufficient future taxable income available to realise the assets. Minimum alternative tax (MAT) paid in accordance to the tax laws, which gives rise to future economic benefits in the form of adjustment of future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax in future. Accordingly, MAT is recognized as an asset in the balance sheet when it is probable that the future economic benefit associated with it will flow to the Company and the asset can be measured reliably. p. Provision, Contingent Liabilities and Contingent Assets Provisions involving substantial degree of estimation in measurement are recognized when there is a brsent obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are disclosed in the notes. Contingent assets are neither recognized nor disclosed in the financial statements. S. Insurance Claim Insurance claims are accounted for on the basis of claims submitted/ admitted / expected to be admitted and to the extent that the amount recoverable can be measured reliably and it is reasonable to expect ultimate collection. 2. Capital Commitments The estimated amount of contracts remaining to be executed on capital accounts and not provided for Rs. 1059.53 lacs (Previous Year NIL). 3. There are no dues to Micro and Small enterprises as at 31st March, 2015. Micro, Small and Medium enterprises has been determined to the extent such parties have been identified on the basis of information available with the company. 4. There is no amount due and outstanding as on 31st March, 2015 to be credited to Investor Education and Protection Fund. During the year the Company has credited Rs.1.86 Lacs, lying in the unpaid / unclaimed dividend account, to the Investor Education and Protection Fund pursuant to Section 205C of the Companies Act,1956 read with the Investor Education and Protection Fund(Awareness and Protection of Investors) Rules, 2001. 5. Claim on Fire On March 1, 2015, there was a fire in the packing department of Vijay Farm Unit of the Company resulting into a loss of finished goods, Work in Progress, Plant & Machinery, Factory Building, Furniture & Fixtures and other Miscelleneous items. The Company has the insurance policies of all the effected assets, so the company has lodged claims with the insurance companies which claims include claim towards loss of theabove stated assets. The carrying value of the assets destroyed in fire is estimated by the management at Rs.1732.21 lacs. The loss has been accounted for in the books of the Company and the amount of the insurance claims of Rs. 1477.64 lacs has been recognised as revenue in the Statement of Profit & Loss. 6. Previous Year figures have been regrouped/ rearranged wherever considered necessary. In terms of our report attached For N.C.Shah & Associates Chartered Accountants Nitin C. Shah Proprietor For Deloitte Haskins & Sells Chartered Accountants Gaurav J. Shah Partner For and on behalf of the Board of Directors Vinod P. Arora Chairman & Managing Director(DIN:00007065) Ashish V. Shah Managing Director (DIN:00007201) Hardik Modi Company Secretary Utsav Pandwar C.F.O. Place : Ahmedabad Date : 29th May 2015 |