Accounting Policies of Hytone Texstyles Ltd. Company

Mar 31, 2014

A. The Accounts are drawn up in accordance with the historical cost convention method on "Going Concern" basis and are in accordance with Generally Accepted Accounting Principles and under relevant provisions of the Companies Act, 1956. The Company follows the mercantile system of accounting and recognises Income and Expenditure on accrual basis except medical reimbursements, leave travel allowances, insurance claims and scrap sale which are recognised on cash basis. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.

b. Use of Estimates:

The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the report amounts of revenues and expenses during the reporting period. Differences between actual results and estimates are recognized in the accounting period in which the results are known / materialized.

c. Fixed Assets:

i Fixed assets are stated at historical cost less accumulated depreciation, which includes effect of impairment. Historical cost comprises of the acquisition price and all direct and indirect costs that are attributable in bringing the assets to their working condition for intended use.

ii All expenses during construction are allocated to the respective asset proportionately.

iii Adjustments arising from exchange rate variations relating to borrowings/ liabilities for the fixed assets are capitalised.

iv The carrying amounts of assets are reviewed at each balance sheet date on value in use basis to assess whether they are recorded in excess of their estimated recoverable amount. If the carrying value exceeds the estimated recoverable amount, assets are written down to their estimated recoverable amount. If at the balance sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost, (Also referto policy on Leases and Borrowing Costs (refer point no. k & I of this note).

d. Depreciation:

i Depreciation for the period has been provided at rates prescribed under Schedule XIV to the Companies Act, 1956 as amended from time to time on all assets as per Straight Line Method.

ii No amortisation is made in respect of leasehold land.

iii Assets acquired under finance leases are depreciated as stated in (i) above.

e. Employment Retirement Benefits:

i Provision for encashable leave salary is made on the assumption that such benefits are payable to all employees at the end of the accounting period.

ii Contributions to defined contribution schemes such as Employees Provident Fund and Family Pension Fund are charged to the profit & loss account as and when incurred.

f. Inventories:

i Raw Materials, Stores, Spares and Consumables are valued at cost or net realisable value whichever is lower.

ii Stock-in-process is valued at cost including related production overheads or net realisable value whichever is lower

iii Finished goods are valued at cost or net realisable value whichever is lower

Cost includes cost of production and expenses incurred, as allocated by the Management, in putting the inventories in their present condition. Net realisable value in case of goods meant for exports includes the export incentives receivable as estimated by the Management.

g. Accounting of CENVAT Benefits:

CENVAT Credit availed under the relevant scheme in respect of Raw material, Packing Material, Fuel, Stores and spares, capital goods etc. is reduced from the cost of purchase.

h. Export Incentives:

i Export incentives in the form of advance licenses to the extent utilised in the period of exports are not accounted separately.

ii Export incentives receivable at the period-end are accounted at value subsequently realised or in absence thereof as estimated by the Management.

I. Foreign Currency Transactions:

i Transactions denominated in Foreign Currencies are recorded at the exchange rate prevailing on the date of the transaction.

ii Monetary items denominated in Foreign Currencies at the end of the period are translated at the period-end rates.

iii Any income or expense on account of exchange difference either on settlement or translation is recognised in the Profit and Loss Account except in cases where they relate to acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.

j. Research and Development:

Recurring expenditure on research and development are charged to the profit and loss account under the respective head of expenditure.

Capital expenditure is stated as depreciable fixed asset.

k. Leases:

Assets acquired under leases where substantially all the risks and reward of ownership are transferred to the company are classified as finance leases. Such assets are capitalised at the inception of the lease at the lower of the fair value or the present value of minimum lease payments and a liability is created for an equivalent amount. The Lease rental paid is allocated between the liability and the finance cost.

l. Borrowing Costs:

Borrowing costs that are attributable to the acquisition, construction or production of qualifying assets are capitalised as part of cost of such assets till such time as the assets are ready for its intended use or sale.

A qualifying asset is an asset that necessarily requires a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognised as an expense in the period in which they are incurred.

m. Investments:

Long Term Investments are stated at cost. Permanent diminution in value thereof is provided for.

n. Taxation:

i Provision for current tax is made on the basis of estimated taxable income computed in accordance with the provisions of Income Tax Act 1961.

ii Deferred tax is recognised on timing differences between the accounting income and the taxable income for the period and quantified using the tax rates and laws enacted or substantively enacted as at the Balance Sheet date.

iii Deferred tax assets are recognised and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

o. As per Accounting Standard 29, ‘Provisions, Contingent Liabilities and Contingent Assets'', the Company recognizes provisions only when it has a present 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 when a reliable estimate of the amount of the obligation can be made.

No Provision is recognized for: -

Any possible obligation that arises from past events and 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

Any present obligation that arises from past events but is not recognized because

(1) It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

(2) A reliable estimate of the amount of obligation cannot be made. Such obligations are recorded as Contingent Liabilities. These are assessed periodically and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made. Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

III Cumulative redeemable preference shares (Series I) & (Series II) having par value of Rs 100 per share is entitled to one vote per share only on resolution placed before the Company, which directly affects the right attached to it. In the event of liquidation of the Company, the holders of cumulative redeemable preference shares (Series I) & (Series II) will have priority over equity shares in the payment of dividend and repayment of capital.

IV Each equity share is entitled to one voting right only.

V Preference Shares (Series I) & Preference Shares (Series II) can be redeemed any time during the year subject to availability of reserves but within 20 years from the date of allotment (i.e. 31st October, 2000 in case of series I and 26th June, 2010 in case of series II).

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Sep 30, 2012

A) The Accounts are drawn up in accordance with the historical cost convention method on "Going Concern" basis and are in accordance with Generally Accepted Accounting Principles and under relevant provisions of the Companies Act, 1956. The Company follows the mercantile system of accounting and recognises Income and Expenditure on accrual basis except medical reimbursements, leave travel allowances, insurance claims and scrap sale which are recognised on cash basis. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.

b) Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the report amounts of revenues and expenses during the reporting period. Diffeences between actual results and estimates are recognized in the accounting period in which the results are known / materialized.

c) Fixed Assets

i) Fixed assets are stated at historical cost less accumulated depreciation, which includes effect of impairment. Historical cost comprises of the acquisition price and all direct and indirect costs that are attributable in bringing the assets to their working condition for intended use.

ii) All expenses during construction are allocated to the respective asset proportionately.

iii) Adjustments arising from exchange rate variation relating to borrowings/ liabilities for the fixed assets are capitalised.

iv)The carrying amounts of assets are reviewed at each balance sheet date on value in use basis to assess whether they are recorded in excess of their estimated recoverable amount. If the carrying value exceeds the estimated recoverable amount, assets are written down to their estimated recoverable amount. If at the balance sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.

(Also refer to policy on Leases and Borrowing Costs (refer point no. k & I of this note).

d) Depreciation

i) Depreciation for the period has been provided at rates prescribed under Schedule XIV to the Companies Act, 1956 as amended from time to time on all assets as per Straight Line Method.

ii) No amortisation is made in respect of leasehold land.

iii) Assets acquired under finance leases are depreciated as stated in (i) above.

e)Employment Retirement Benefits

i) Provision for encashable leave salary is made on the assumption that such benefits are payable to all employees at the end of the accounting period.

ii) Contributions to defined contribution schemes such as Employees Provident Fund and Family Pension Fund are charged to the profit & loss account as and when incurred.

f) Inventories:-

i) Raw Materials, Stores, Spares and Consumables are valued at cost or net realisable value whichever is lower.

ii) Stock-in-process is valued at cost including related production overheads or net realisable value whichever is lower.

iii) Finished goods are valued at cost or net realisable value whichever is lower

iv)Gost includes cost of production and expenses incurred, as allocated by the Management, in putting the inventories in their present condition. Net realisable value in case of goods meant for exports includes the export incentives receivable as estimated by the Management.

g) Accounting of CENVAT Benefits:

CENVAT Credit availed under the relevant scheme in respect of Raw material, Packing Material, Fuel, stores and spares, capital goods etc. is reduced from the cost of purchase.

h) Export Incentives:

i) Export incentives in the form of advance licenses to the extent utilised in the period of exports are not accounted separately.

ii) Export incentives receivable at the period -end are accounted at value subsequently realised or in absence thereof as estimated by the Management.

i) Foreign Currency Transactions:

i) Transactions denominated in Foreign Currencies are recorded at the exchange rate prevailing on the date of the transaction. ii) Monetary items denominated in Foreign Currencies the end of the period are translated at the period-end rates.

ii) Any income or expense on account of exchange difference either on settlement or translation is recognised in the Profit and Loss Account except in cases where they relate to acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.

j) Research and Development:

Recurring expenditure on research and development are charged to the profit and loss account under the re- spective head of expenditure.

Capital expenditure is stated as depreciable fixed asset.

k) Leases:

Assets acquired under leases where substantially all the risks and reward of ownership are transferred to the company are classified as finance leases. Such assets are capitalised at the inception of the lease at the lower of the fair value or the present value of minimum lease payments and a liability is created for an equiva- lent amount. The Lease rental paid is allocated between the liability and the finance cost. I) Borrowing Costs:

Borrowing costs that are attriii Jtable to the acquisition, construction or production cf qualifying assets are capitalised as part of cost of such assets till such time as the assets are ready for its intended use or sale.

A qualifying asset is an asset that necessarily requires

a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognised as an expense in the period in which they are. incurred.

m) Investments:

Long Term Investments are stated at cost. Permanent diminution in value thereof is provided for.

n) Taxation:

i) Provision for current tax is made on the basis of estimated taxable income computed in accordance with the provisions of Income Tax Act 1961.

ii) Deferred tax is recognised on timing differences between the accounting income and the taxable income for the period and quantified using the tax rates and laws enacted or substantively enacted as at the Balance Sheet date.

ii) Deferred tax assets are recognised and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

0) As per Accounting Standard 29, ''Provisions, Contingent Liabilities and Contingent Assets'', the Company recognizes provisions only when it has a present 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 when a reliable estimate of the amount of the obligation can be made.

No Provision is recognized for: -

Any possible obligation that arises from past events and 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

Any present obligation that arises from past events but is not recognized because

1) It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

2) A reliable estimate of the amount of obligation cannot be made. Such obligations are recorded as Contingent Liabilities. These are assessed periodically and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can b<- made. Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.