NOTES TO FINANCIAL STATEMENT FOR THE YEAR ENDED MARCH 31, 2015 1. Nature of Operation Filatex India Limited (hereinafter referred to as "the Company") is a manufacturer of Polyester Chips, Polyester/ Nylon/Polypropylene Multi & Mono Filament Yarn and Narrow fabrics. 2. Statement of Significant Accounting Policies a) Basis of brparation The financial statements of the company have been brpared in accordance with generally accepted accounting principles in India (Indian GAAP). The company has brpared these financial statements to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended), and the relevant provisions of the Companies Act, 2013. The financial statements have been brpared underthe historical cost convention on an accrual basis, except where stated otherwise. The accounting policies adopted in brparation of financial statements are consistent with those of brvious year. b) Use of estimates The brparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although, these estimates are based on the management's best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. c) Fixed Assets & Debrciation: i) Fixed Assets are stated at cost less accumulated debrciation and impairment loss, if any. Cost comprises the purchase price and any directly attributable cost of bringing the assets to its working condition for its intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. Borrowing costs relating to acquisition of fixed assets which take substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use. Subsequent expenditure relating to an item of fixed asset is added back for its book value only if it increases the future benefits from the existing asset beyond its brviously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts are charged to the statement of profit and loss account for the period during which such expenses are incurred. ii) Debrciation has been provided on straight-line method on pro-rata basis at the rates & manner brscribed in Schedule II of the Companies Act, 2013. iii) Effective from April 01, 2014 the company has charged debrciation based on the revised remaining useful life of the assets as per the requirement of Schedule II of the Companies Act, 2013. Due to above, debrciation charge for the year ended March 31, 2015, is lower by Rs. 568 lacs. Further based on transitional provision provided in Note 7(b) of Schedule II of the Companies Act, 2013, an amount of Rs.74 lacs (Net of Deferred Tax) has been adjusted with retained earnings. iv) Debrciation on the amount of additions made to fixed assets due to upgradation / improvements is provided over the remaining useful life of the asset to which it relates. v) Debrciation on fixed assets added / disposed off during the year is provided on pro-rata basis. vi) Lease hold improvements are amortized over the primary period of lease or useful life, whichever is lower. vii) Lease hold Land is amortized on straight line basis over the period of lease. d) Expenditure incurred during the construction period. i) Expenditure directly relating to construction activity is capitalized (net of income, if any), Indirect expenditure incurred during construction period is capitalized as part of the indirect construction cost to the extent, to which the expenditure is indirectly related to construction or is incidental thereto. Other indirect expenditure incurred during the construction period which is not related to construction activity nor is incidental thereto is charged to Profit & Loss Account. ii) Capital Work in Progress is stated at cost (including borrowing cost, where applicable) incurred during construction, installation/ br-operative period relating to items or projects in progress. e) Intangibles Intangible assets, softwares etc. are accounted at their cost of acquisition and amortized over their estimated economic life not exceeding 5 years. Leasehold improvements are charged to the Profit & Loss Account over the primary period of lease. f) Impairment of Assets Consideration is given at each balance sheet date to determine whether there is any indication of impairment of the carrying amount of the Company's fixed assets. If any indication exists, an asset's recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is defined as value in use. In assessing value in use, the estimated future cash flows are discounted to their brsent value based on an appropriate discounting factor. g) Investments Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of such investments. h) Leases Finance leases, which effectively transfer to the Company, substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the lower of the fair value and brsent value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalized. If there is no reasonable certainty that the company will obtain the ownership by the end of the lease term, capitalized leased assets are debrciated over the shorter of the estimated useful life of the asset or the lease term. Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item are classified as operating leases. Operating lease payments are recognized as expenses in the statement of Profit & Loss Account on a straight-line basis over the lease term. i) Foreign Currency Transactions i) Initial Recognition: Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of transaction. ii) Conversion Foreign currency monetary items are reported using the closing rate. Non monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. iii) Exchange Differences: Exchange differences arising on the settlement of monetary items or on reporting company's monetary items at rates different from those at which they were initially recorded during the year, or reported in brvious financial statements, are recognized as income or as expenses in the year in which they arise. In terms of the Notification No.G.S.R. 225(E) dated 31.03.2009 as amended till date issued by the Ministry of Corporate Affairs on Accounting Standard (AS-11) read with Clause 4(e) of AS-16 and Para 46A read with clarification issued by the Ministry of Corporate Affairs vide Circular No.25/2012 dated August 09, 2012 on AS-11 relating to "the effects of changes in Foreign Exchange Rates", the Company has exercised option to adjust the foreign exchange difference on long term foreign currency loans to the cost of qualifying capital assets. iv) Forward Exchange Contracts not intended for trading or speculation purposes The Company obtains forward exchange contracts to hedge its risk associated with foreign currency fluctuations. The brmium or discount arising at the inception of forward exchange contract is amortized as expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as an income or as an expense for the year. j) Inventories Inventories are valued as follows: Raw material, consumables and stores & spares: Lower of cost or net realisable value. However, materials and other items held for use in the production of inventories are not written down below cost if finished products, in which they will be incorporated, are expected to be sold at or above cost. Cost is determined on Moving Weighted Average Method. Work in Progress and Finished Goods: Lower of cost or net realisable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty. Waste At net realizable value which is the estimated selling price in the ordinary course of business, less selling expenses. k) Employees Benefits The employees' gratuity fund and leave encashment schemes are the company's defined benefit plan. The brsent value of the obligation under such defined benefit plan is determined based on the actuarial valuation using the Projected Unit credit Method. l) Revenue Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be measured. Sale of Goods Revenue is recognized when the significant risks and rewards of ownership of the goods have been passed to the buyers. Sales are net of return, volume discount, trade discounts & sales tax /VAT including excise duty. Export Benefits Export benefits constituting duty drawback, incentives under FPS/FMS and Duty Free Advance License are accounted for on accrual basis. Interest Income Interest is recognized on a time proportion basis taking into account the amount outstanding and rate applicable. Dividend Income Dividend income is recognized when the company's right to receive dividend is established by the reporting date. Insurance claims Insurance claims are recognized to the extent the company is reasonably certain of their ultimate receipt. m) Borrowing cost Borrowing cost attributable to acquisitions and construction of assets are capitalized as a part of cost of such assets upto the date when such assets are ready for its intended use and other borrowing cost are charged to Profit & Loss Account. n) Accounting for Taxes on Income Provision for tax on income is made after taking into consideration benefits admissible underthe provisions of the Income-tax Act, 1961. Deferred tax resulting from "timing difference" between book and taxable profit is accounted for using the tax rates and laws that have been enacted as on the balance sheet date. The deferred tax asset is recognized and carried forward only to the extent that there is a reasonable certainty that the assets will be realized in future. Minimum Alternate Tax (MAT) credit is recognized as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the specified period. In the year in which the MAT credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in guidance note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the statement of profit and loss account and shown as MAT Credit Entitlement. The company reviews the same at each balance sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that Company will pay normal Income Tax during the specified period. o) Provisions A provision is recognized when an enterprise has a brsent obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its brsent value and are determined based on best management estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to refect the current management estimates. p) Cash and Cash Equivalents Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term investments with an original maturity of three months or less. q) Contingent Liabilities. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the company or a brsent obligation that is not recognized because it is not probable that an outflow or resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The company does not recognize a contingent liability but discloses its existence in the financial statements. r) Earnings Per Share (EPS) Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting brference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the year. For the purpose of calculating Diluted Earnings per Share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year and adjusted for the effects of all dilutive potential Equity Shares. 2. In respect of fire at companies POY manufacturing unit at Dadra in Financial Year 2012-13, the company has received claim under fire policy during FY 2013-14 and claim under loss of profit policy amounting to Rs. 536.59 lacs is under consideration of insurer. 3. In terms of the Notification No.G.S.R. 225(E) dated March 31, 2009 as amended till date by the Ministry of Corporate Affairs (MCA) on Accounting Standard (AS-11), the Company had exercised option to adjust the foreign exchange difference on long term foreign currency loans including Foreign Currency Loan obtained under buyers credit with maturity of less than one year and considered as long term liabilities, as the same are to be rolled over for a period of three years from the date of origination) to the cost of qualifying capital assets. Accordingly during the year, the company has added Rs. 17.82 lacs on account of foreign exchange difference to the cost of qualifying assets which are being amortized over the remaining life of such assets upon capitalization. The company has received letter dated 26th December, 2014 from National Stock Exchange (NSE) advising the company to restate its Financial Statements for the financial year 2012-13 subsequent to the auditors qualification relating to treatment of foreign exchange difference during FY 2012-13. The company has taken up the matter with NSE/SEBI to explain and substantiate the accounting treatment by the company is justifed. Considering the companies request the Securities & exchange board of India (SEBI) has informed the company for providing an opportunity of being heard and make submissions/rebrsentations before Qualified Audit Review Committee (QARC). As the matter is under consideration of SEBI/QARC, any effect with respect to restated of financial statement for FY 2012-13 will be accounted for on receipt of final decision in the matter. 4. The company has incurred an expenditure of Rs. 4.68 lacs on Education, toilets and providing medical facilities under Corporate Social responsibility during FY 2014-15 & the same has been shown in Other Expenses Schedule No. 28. 5. Segment reporting as defined in Accounting Standard 17 is not applicable as the Company is primarily engaged in manufacture of Synthetic Yarn & Textiles. 6. The company has taken various residential, office and warehouse brmises under operating lease agreements. These are generally cancelable and are renewable by mutual agreed terms. There are no restrictions imposed under the lease agreement and there are no subleases. The company has paid Rs. 119.01 lacs (brvious year Rs. 123.84 lacs) towards operating lease rentals. 7. Figures have been rounded off to rupees in lacs and brvious year figures have been regrouped / rearranged to the extent necessary to correspond with the figures for the current year. As per our report of even date for and on behalf of the Board of Directors of Firm Registration No. 005780N Chartered Accountants AMOD AGRAWAL Partner Membership No. 84175 for AMOD AGRAWAL & ASSOCIATES FILATEX INDIA LIMITED MADHU SUDHAN Vice Chairman & Managing Director BHAGERIA S.C. PARIJA Independent Director R.P. GUPTA Chief Financial Officer RAMAN KUMAR JHA Company Secretary Place : New Delhi Date : May 04, 2015 |