NOTES TO THE FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES Corporate Information Acknit Industries 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 manufacturing and selling of Industrial Hand Gloves, Garments and Safety wears. The company was first amongst the various units producing safety gloves in India. Because of approved international quality standards and its comparatively competitive sales price, the products of the company were accepted immediately in the European market. Over the years the company has grown in its operation which has been multiplied continuously and in the process the company has diversified its products from gloves to garments and safety wears. Convention To brpare financial statements in accordance with applicable Accounting Standards in India. A summary of important accounting policies is set out below. The financial statements have also been brpared in accordance with relevant brsentational requirements of the Companies Act, 2013. Basis of Accounting The financial statements have been generally brpared under the historical cost convention on an accrual basis except in case of assets for which provisions for impairment is made and revaluation is carried out. Wherever it is not possible to determine the quantum of accrual with reasonable certainty, e.g. insurance and other claims, etc. are accounted for on settlement basis. All assets and liabilities have been classified as current or, non-current as per the Company's normal operating cycle based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. Use of Estimates The brparation of the financial statements in conformity with the GAAP requires that the management make estimates and assumptions that affect the reported amounts of assets and liabilities as at the date of the financial statements, and the reported amounts of revenue and expenses during the reported year. Actual results could differ from those estimates. Fixed Assets and Impairment Losses Fixed assets are stated at actual cost less accumulated debrciation. The actual cost capitalized includes material cost, inward freight, installation cost, duties and taxes, finance charges and other incidental expenses incurred during the construction/installation stage. Gains/losses arising on Foreign exchange liabilities incurred for the purpose of acquiring fixed assets are adjusted in the carrying amount of the respective fixed assets. The cost of and the accumulated debrciation for fixed assets sold are removed from the stated value and the resulting gains and losses are included in the Statement of Profit and Loss. The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal /external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their brsent value at the weighted average cost of capital. A brviously recognized impairment loss is increased or reversed depending on the changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have brvailed by charging useful debrciation if there was no impairment. Debrciation on Fixed Assets is provided to the extent of debrciable amount on the Straight Line Method (SLM) Method except in case of assets acquired prior to 31.03.1995 where debrciation is provided on Written down value Method (WDV). Debrciation is provided based on useful life of the assets as brscribed in Schedule II to the Companies Act, 2013 except in respect of the following assets, where useful life is different than those brscribed in Schedule II are used; Particulars: Debrciation Assets acquired under finance lease :Over the period of lease term. Clicking Dies / Embossing dies, Boards (Useful life:upto 1 year):100% Debrciation in the year of addition. Investments that are readily realisable and are intended to be held for not more than one year from the date, on which such investments are made, are classified as current investments. All other investments are classified as long term investments. Long term investments are valued at cost. Current investments are valued at lower of cost and fair value as on the date of the Balance Sheet. The Company provides for diminution in value of investments, other than temporary in nature. Valuation of Inventories Inventories are valued as follows: Raw materials, components, stores and spares and Packing material Lower of cost and net realizable value,However 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. Cost is determined on FIFO basis and includes cost incurred in bringing the material to its brsent location and condition. Work-in -progress & Finished goods Lower of cost and net realizable value. Cost includes direct material and Labour and a proportion of manufacturing overheads based on normal operating capacity. The company accrues for excise duty liability in respect of stock of finished goods lying at works. Revenue Recognition Revenue from business and other activities consist primarily of revenue earned on a "time and material" basis. The related revenue is recognized as and when the material supplied/services performed. Sales are recognized inclusive of duty if any but net of sales tax. Export Incentives are accounted on accrual basis and include estimated realizable value / benefits from Duty Free Import Authorization Scheme (DFIA), Focus Product Scheme and Focus Market Scheme. Sales & Export Incentives Sales are recognized, net of return, on dispatch of goods to customers and are reflected in the accounts at gross realizable value net of taxes but inclusive of excise/ customs duties. Export incentives are accounted on accrual basis and include estimated realizable value / benefits from Duty Free Import Authorization Scheme (DFIA), DEPB, Focus Product Scheme and Focus Market Scheme. Investment Income To account for income from investments on an accrual basis, inclusive of related tax deducted at source. To account for Income from dividends when the right to receive such dividends is established. Employee Benefits The Employee benefits are provided in accordance with revised AS-15 and are dealt in the following manner: (i) Contribution to Provident Fund and other Funds are accounted on accrual basis. (ii) Gratuity Liability is determined by actuarial valuation done at the end of the year and the current year charge is debited in the Statement of Profit and Loss. Segment Reporting Policies The Company's operating business are generally organized and managed separately according to the nature of products and services provided, with each segment rebrsenting a strategic business unit that offers different products and serves different markets. The analysis of geographical segments is based on the location of the units wherever required. Foreign Currency Transaction Transactions in foreign currency are recorded at the exchange rate brvailing on the date of transaction. Monetary assets and liabilities denominated in foreign currency are translated at the rates of exchange at the balance sheet date and resultant gain or loss arising out of fluctuations in the exchange rates are recognized in the Statement of Profit and Loss in the period in which they arise, except in respect of fixed assets where exchange variance is adjusted in the carrying amount of respective fixed assets. To account for differences between the forward exchange rates and the exchanges rates at the date of transactions as income or expense over the life of the contracts. To account for profit / loss arising on cancellation or renewal of forward exchange contracts as income / expenses for the period. To recognize the net marie to market losses in the Statement of Profit and Loss on the outstanding portfolio of forwards as at the Balance Sheet date and to ignore the net gain if any. Taxes on Income To provide & determine current tax as the amount of tax payable in respect of taxable income for the period, measured using the tax rates and tax laws. To provide and recognize deferred tax on timing differences between taxable income and accounting income subject to consideration of prudence, measured using the tax rates and tax laws that have been enacted or substantially enacted by the balance sheet date. Not to recognize deferred tax assets on unabsorbed debrciation and cany forward of losses unless there is virtual certainty that there will be sufficient future taxable income available to realize such assets. Insurance Claims Insurance claims in respect of loss of assets are accounted for on intimation to the insurer at the value persists on the date of fire. Policy deductibles, surplus or deficit, if any, shall be accounted for when the claim is finally settled by the insurer and such income / expenditure, if any, shall be the income / expenditure of the year in which such claim is settled by the insurer. Other Claims: Other claims including Quality Claim on Exports are accounted for on the basis of determination / admission of outflow of resources required to settle the obligations. Provisions, Contingent Liabilities and Contingent Assets A Provision is recognized when an estimate 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 estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjust to reflect the current management estimates. Contingent liabilities, if material, are disclosed by way of notes to accounts. Contingent assets are not recognized or disclosed in the financial statements. 2 Balance under heading trade receivables, trade payables and loans and advances are subject to confirmations. 3 Figures have been rounded off to the nearest rupee. As per our report of even date For R.K. BAJAJ & Co. Chartered Accoutants (Firm Reg. NO.314140E) R.K. BAJAJ Proprietor Membership No.051715 For and on behalf of the Board Shri Krishan Saraf Managing Director Deo Kishan Saraf Whole Time Director & Chief Financial Officer Samir Kumar Ghosh Director Deepa Singh Company Secretary R.K. BAJAJ Proprietor 40/5,Strand Road, Kolkata - 700 001 Date: The 30th day May 2015 |