Accounting Policies of Kajal Synthetics & Silk Mills Ltd. Company

Mar 31, 2024

SIGNIFICANT ACCOUNTING POLICIES
i. Cash and Cash Equivalents:

Cash and cash equivalents for the purpose of Cash Flow Statement comprise cash and cheques in hand,
bank balances and short-term (three months or less from the date of acquisition), highly liquid
investments that are readily convertible into cash and which are subject to an insignificant risk of
changes in value.

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.

Financial Assets

Initial recognition and measurement:

The Company recognizes a financial asset in its Balance Sheet when it becomes party to the contractual
provisions of the instrument. All financial assets are recognized initially at fair value. Transaction costs
that are directly attributable to the acquisition or issue of financial assets, which are not at fair value
through profit or loss, are added to the fair value measured on initial recognition of financial asset.
Where the fair value of a financial asset at initial recognition is different from its transaction price, the
difference between the fair value and the transaction price is recognized as a gain or loss in the
Statement of Profit and Loss if the fair value is determined through a quoted market price in an active
market for an identical asset (i.e. level 1 input) or through a valuation technique that uses data from
observable markets (i.e. level 2 input). In case the fair value is not determined using a level 1 or level 2
input as mentioned above, the difference between the fair value and transaction price is deferred
appropriately and recognized as a gain or loss in the Statement of Profit and Loss only to the extent that
such gain or loss arises due to a change in factor that market participants take into account when
pricing the financial asset.

Subsequent measurement:

Financial assets are subsequently measured at amortised cost, fair value through other comprehensive
income (FVTOCI) or fair value through profit or loss (FVTPL) on the basis of both:

- the entity''s business model for managing the financial assets, and

- the contractual cash flow characteristics of the financial assets.

(a) Measured at amortised cost:

Financial assets that are held within a business model whose objective is to hold financial assets in
order to collect contractual cash flows that are solely payments of principal and interest, are
subsequently measured at amortised cost using the effective interest rate (''ElR'') method less
impairment, if any. The amortisation of ElR and loss arising from impairment, if any, is recognised in
the Statement of Profit and Loss. This category applies to cash and bank balances, loans and other
financial assets of the Company. The EIR is the rate that discounts estimated future cash income
through the expected life of financial instrument.

(b) Measured at fair value through other comprehensive income:

Financial assets that are held within a business model whose objective is achieved by both, selling
financial assets and collecting contractual cash flows that are solely payments of principal and
interest, are subsequently measured at fair value through other comprehensive income. Fair value
movements are recognized in the other comprehensive income (OCI). Interest income measured
using the EIR method and impairment losses, if any, are recognised in the Statement of Profit and
Loss. On derecognition, cumulative gain or loss previously recognised in OCI is reclassified from the
equity to ''other income'' in the Statement of Profit and Loss.

Further, the Company, through an irrevocable election at initial recognition, has measured
investments in equity instruments other than investment in subsidiary at FVTOCI. The Company has

made such election on an instrument by instrument basis. These equity instruments are neither
held for trading nor are contingent consideration recognized under a business combination.
Pursuant to such irrevocable election, subsequent changes in the fair value of such equity
instruments are recognized in OCI. However, the Company recognizes dividend income from such
instruments in the Statement of Profit and Loss. On derecognition of such financial assets,
cumulative gain or loss previously recognized in OCI is not reclassified from the equity to Statement
of Profit and Loss. However, the Company may transfer such cumulative gain or loss into retained
earnings within equity.

(c) Measured at fair value through profit or loss:

A financial asset is measured at FVTPL unless it is measured at amortized cost or at FVTOCI. This is a
residual category applied to all other investments of the Company excluding investments in
subsidiary. Such financial assets are subsequently measured at fair value at each reporting date.
Fair value changes are recognized in the Statement of Profit and Loss.

Derecognition

The Company derecognises a financial asset when the contractual rights to the cash flows from the
financial asset expire, or it transfers the contractual rights to receive the cash flows from the asset.

Impairment of Financial Assets

The measurement of impairment losses across all categories of financial assets requires judgement,
in particular, the estimation of the amount and timing of future cash flows and collateral values
when determining impairment losses and the assessment of a significant increase in credit
risk.These estimates are driven by a number of factors, changes in which can result in different
levels of allowances. The Company''s ECL calculations are outputs of complex models with a number
of underlying assumptions regarding the choice of variable inputs and their interdependencies.
Elements of the ECL models that are considered accounting estimates include:

• The Company''s criteria for assessing if there has been a significant increase in credit risk and so
allowances for financial assets should be measured on a lifetime ECL basis and the qualitative
assessment.

• The segmentation of financial assets when their ECL is assessed on a collective basis.

• Development of ECL models, including the various formulas and the choice of inputs.

• Determination of temporary adjustments as qualitative adjustment or overlays based on broad
range of forward looking information as economic inputs.

The impairment losses and reversals are recognised in Statement of Profit and Loss.

Financial Liabilities:

Initial recognition and measurement

Financial liabilities are recognised when the Company becomes a party to the contractual
provisions of the instrument. Financial liabilities are initially measured at the fair value. Transaction
costs that are directly attributable to the financial liabilities (other than financial liability at fair
value through profit or loss) are deducted from the fair value measured on initial recognition of
financial liability.

Subsequent measurement

Financial liabilities are subsequently measured at amortised cost using the ElR method. Financial
liabilities carried at fair value through profit or loss are measured at fair value with all changes in
fair value recognised in the Statement of Profit and Loss.

Derecognition

A financial liability is derecognised when the obligation specified in the contract is discharged,
cancelled or expires.

FAIR VALUE MEASUREMENT:

The Company measures financial instruments at fair value in accordance with the accounting
policies mentioned above. Fair value is the price that would be received on sell of an asset or paid
to transfer a liability in an orderly transaction between market participants at the measurement
date. The fair value measurement is based on the presumption that the transaction to sell the asset
or transfer the liability takes place either:

- in the principal market for the asset or liability, or

- in the absence of a principal market, in the most advantageous market for the asset or liability.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorized within the fair value hierarchy that categorizes into three levels, described as follows,
the inputs to valuation techniques used to measure value. The fair value hierarchy gives the highest
priority to quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the
lowest priority to unobservable inputs (Level 3 inputs).

Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities

Level 2 — inputs other than quoted prices included within Level 1 that are observable for the asset
or liability, either directly or indirectly

Level 3 — inputs that are unobservable for the asset or liability

For assets and liabilities that are recognized in the financial statements at fair value on a recurring
basis, the Company determines whether transfers have occurred between levels in the hierarchy by
re-assessing categorization at the end of each reporting period and discloses the same.

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Mar 31, 2014

1.1 Basis of preparation of Accounts

The Financial Statements have been prepared on accrual basis, with due compliance of the relevant Directions of the Reserve Bank Of india relating to income recognition, accounting standards, asset classification and provisioning Section 211 (3C) of the Companies Act, 1956 read with the General Circular 15 / 2013 dated September, 13 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013,which have been prescribed by the Companies (Accounting Standards) Rules, 2006.

1.2 Recognition of Income & Expenditure

All Income and Expenditure are generally accounted for on accrual and prudent basis with due compliance of the guidelines of the Reserve Bank of India on Prudential Norms for Income recognition and Provisioning for Non-Performing Assets.

1.3 Investments:

Investments have been classified into long term investments and current investments in accordance with Accounting Standard 13 issued by the Institute of Chartered Accountants of India. Long term Investments are stated at cost. Current Investments are valued at lower of cost or market / fair valued determined by the category of Investment. Provisions in respect of diminution other than temporary, in the value of long term quoted investments are recognized on a prudent basis. Gains / Losses on disposal of Investments are recognized as income / expenditure.

1.4 Taxes on Income:

a. Current Tax is determined as an amount of tax payable in respect of taxable income for the year.

b. In accordance with the accounting standard 22 - Accounting for Taxes on Income - issued by The Institute of Chartered Accountants of India, the Deferred Tax for timing difference is accounted for using tax rates and laws that have been enacted or substantially enacted by the Balance Sheet Date.

c. Deferred Tax Assets arising for timing differences are recognized only on consideration of prudence.

1.5 Retirement and other employee benefits :

a. Gratuity

Gratuity liability is accounted for on payment basis.

b. Leave Encashment

Leave encashment is accounted at the year end on actual basis and is charged to the Statement of Profit and Loss.

1.6 General

Accounting Policies not specifically referred to otherwise are consistent and in a generally accepted accounting principle.