Significant Accounting Policies & Notes on Financial Statements 1 General Information The company was incorporated on December 6, 1991 in India. The company is a garment manufacturing company and majorly deals in exports however during the year, value of exports are INR 124,392,737 and further company has domestic sales and processing income during the year. 2 Summary of Significant Accounting Policies 2.1 Basis Of Preparation Of Financial Statements The financial statements of the company have been brpared in accordance with generally accepted accounting principles in India (Indian GAAP). The financial statements have been brpared to comply in all material respects with the notified accounting standard by Companies(Accounting Standards)Rules, 2006, (as amended) and the relevant provisions of Companies Act, 2013.the financial Statements have been brpared under the historical cost convention on an accrual basis Accounting policies not specifically referred to otherwise are consistent and are in consonance with generally accepted accounting principles. All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current - non current classification of assets and liabilities. 2.2 Use Of Estimates The brparation of the financial statements in conformity with generally accepted accounting principles in India requires the management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and disclosures relating to contingent liabilities, at the end of the reporting period. Although these estimates are based on the management's best knowledge of current events and action, 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 2.3 Tangible Assets Tangible Assets are stated at cost net of recoverable taxes and includes amounts added on revaluation, less accumulated debrciation and impairment loss, if any.Revaluation effect is taken by restating the net book value by adding therein the net increase on account of revaluation. All costs, including finance costs till commencement of commercial production, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the fixed asset are capitalised. 2.4 Intangible Assets In accordance with the Accounting Standards (AS) 26 relating to intangible assets, all costs incurred on technical know-how / license fee relating to production process are charged to revenue in the year of incurrence. Costs incurred on technical know-how / license fee relating to process design / plants / facilities are capitalized at the time of capitalization of the said plant / facility and amortized on pro-rata basis over a period of five years. Computer software is capitalized on the date of installation and is amortized over a period of three years. 2.5 Debrciation Debrciation on all plant and machinery is provided on Written Down Value Method and on other fixed assets is provided on the basis of Straight Line Method. Debrciation has been provided on the basis of useful life of the assets and the manner as brscribed in Schedule II of The Companies Act 2013. Following useful life were used for calculating debrciation amount as per Schedule II of The Companies Act 2013: Particulars Useful Life (in Years) Factory Building 30 Years Plant & Machinery 15 Years Electric Installation & Equipment 10 Years General Laboratory Equipment 10 Years Office Equipments 5 Years Servers & Networks 6 Years End User Devices (Computer) 3 Years Furniture & Fixtures 10 Years Motor Cycles 10 Years Motor Buses 10 Years 2.6 Impairment Of Assets Assessment is done at each Balance Sheet date as to whether there is any indication that an asset (tangible and intangible) may be impaired. For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets, is considered as a cash generating unit. If any such indication exists, an estimate of the recoverable amount of the asset/cash generating unit is made. Assets whose carrying value exceeds their recoverable amount are written down to the recoverable amount. Recoverable amount is higher of an asset's or cash generating unit's net selling price and its value in use. Value in use is the brsent value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Assessment is also done at each Balance Sheet date as to whether there is any indication that an impairment loss recognised for an asset in prior accounting periods may no longer exist or may have decreased. 2.7 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 or fair value. Long-term investments are carried at cost. Provision for diminution in value is made to recognise a decline other than temporary in the value of the investments. 2.8 Inventory Inventories are valued at lower of cost or net realizable value after providing for obsolescence, if any. Cost of inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overhead incurred in bringing them to their respective brsent location and condition. Cost of raw materials, process chemicals, stores and spares, packing material, trading and other products are detrermined on First in First out (FIFO) method. Scrap is valued at net realizable value. 2.9 Revenue Recognition i) Sales are recognised when the substantial risks and rewards of ownership in the goods are transferred to the buyer as per the terms of the contract and are net of trade discounts, rebates and sales taxes, etc. ii) Processing Charges are recognised at the time of dispatch of goods to the customers and are net of trade discounts, rebates and sales taxes, etc. iii) Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. iv) Income from duty drawback and Import licences under focus product scheme are recognised on accrual basis on acceptance of claim by the Government Authority. v) Dividend Income is recognised when right to receive is established. vi) Claim receivables are accounted for depending on the certainty of receipt and claims payable are accounted for at the time of acceptance. 2.10 Borrowing Cost: Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to Statement of Profit and Loss. 2.11 Foreign Currency Transactions Transactions denominated in foreign currencies are normally recorded at the exchange rate brvailing at the time of transaction. Monetary items denominated in foreign currencies outstanding at the year-end are translated at exchange rate applicable as of that date. Non-Monetary items denominated in foreign currency are valued at the exchange rate brvailing on the date of transaction. Any income or expense on account of exchange difference either on settlement or on translation is recognized in the Statement of Profit and Loss. 2.12 Current And Deferred Tax Tax expense comprises of current tax and deferred tax. Current tax is determined in accordance with relevant tax rates and tax laws. Provision for current income tax is made after taking credit for allowances and exemptions. In case of matters under appeal, due to disallowance or otherwise, provision is made when the company accepts the said liabilities. Deferred tax is recognised for all timing differences arising between taxable income and accounting income based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are carried forward to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets on carry forward of unabsorbed debrciation and tax losses are recognised only if there is virtual certainty that such deferred tax assets can be realised against future taxable profits. As the company has substantial losses and value of the business has reduced substantially . There is huge fixed cost relating to debrciation. In view of facts stated above and keeping in view the financial position of the company, the Deferred Tax Assets in respect of carry forward losses has been recognized only to the extent of Deferred Tax Liability. 2.13 Employee's Benefits i. 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 related service is rendered. ii. Eligible employees of the company are entitled to receive benefits under the Provident Fund scheme administered through providend fund commissioner and the company's contribution are charged to Statement of Profit and Loss. iii. Company's contribution to state plans namely Employees State Insurance Fund is charged to Statement of Profit and Loss every year. iv. Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation made by an independent actuary at the Balance Sheet date using projected unit credit method. The Gratuity Scheme is administered through LIC under its Group Gratuity Scheme. Contributions are paid to LIC in accordance with the demands received. v. Termination benefits are recognized as an expense immediately. vi. Gain or Loss arising out of actuarial evaluation is recognized immediately in the Statement of Profit and Loss as income or expense. 2.14 Value Added Tax (VAT) VAT claimed on capital assets is credited to assets/capital work in progress account. VAT on purchase of raw materials and other materials are deducted from the cost of such materials. 2.15 Provision And Contingent Liabilities Show cause notices issued by various government authorities are not considered as obligation. When the demand notice are raised against such show cause notice and are disputed by the company then these are classified as possible obligations. Provisions: Provisions are recognised when there is a brsent obligation as a 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 brsent obligation at the Balance sheet date and are not discounted to its brsent value. Contingent Liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the company or a brsent 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. 2.16 Financial Derivative And Hedging Transaction In respect of the Financial derivative contracts the brmium / interest paid and profit / loss on settlement is charged to Statement of Profit & Loss . The contracts entered into are marked to market at year end and the resultant profit / loss is charged to Statement of Profit & Loss. 2.17 Cash and Cash Equivalents In the cash flow statement, cash and cash equivalents includes cash in hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less. 2.18 Earnings Per Share Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Earnings considered in ascertaining the Company's earnings per share is the net profit for the period after deducting brference dividends and any attributable tax thereto for the period. The weighted average number of equity shares outstanding during the period and for all periods brsented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares, that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares. for SINGHI CHUGH & KUMAR For and on behalf of the Board of Directors of Chartered Accountants SPL Industries Limited Firm Registration No. 013613N Harsh Kumar (Partner) M. No.088123 Chief Financial Officer Company Secretary Managing Director Director Date : 29.05.2015 Place : New Delhi |