1) RECENT ACCOUNTING DEVELOPMENTS
Standards issued but not yet effective:
In March 2018, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendment) Rules, 2018, issuing Ind AS 115, Revenue from Contracts with Customers. The standard j is applicable from April 01, 2018. The Corresponding Ind AS 18, ‘Revenue’ and Ind AS 11, ‘Construction | Contract’ have been omitted. Relevant amendments have been made to Ind AS 101, 103, 104, 107, 109, i 112, 1, 2, 8, 12, 16, 17, 21, 23, 28, 32, 34, 36, 37, 38 and 40.
The Company has not applied these amendments since they are effective for periods beginning on or after April 01, 2018.
2) FIRST TIME ADOPTION OF IND AS
These are the Company’s first financial statements prepared in accordance with Ind AS.
The Company has adopted Indian Accounting Standards (Ind AS) as notified by the Ministry of Corporate
Affairs with effect from April 01, 2017 with a transition date of April 1, 2016. These financial statements for the year ended March 31, 2018 are the first the Company has prepared under Ind AS. For all period’s up to and including the year ended 31st March, 2017, the Company prepared its financial statements in accordance with the previously applicable Indian GAAP (previous GAAP).
The adoption of Ind AS has been carried out in accordance with Ind AS 101, First-time Adoption of Indian
Accounting Standards. Ind AS 101 requires that all Ind AS standards and interpretations that are issued and effective for the first Ind AS financial statements be applied retrospectively and consistently for all financial years presented. Accordingly, the Company has prepared financial statements which comply with Ind As for year ended 31st March 2018, together with the comparative information as at and for the | year ended 31st March 2017. The Company’s opening Ind AS Balance Sheet has been prepared as at 1st April, 2016, the date of transition to Ind AS.
In preparing its opening Ind AS balance sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act. ;
An explanation of how the transition from previous GAAP to Ind AS has affected the Company financial position, financial performance and cash flows is set out in the following tables and notes
I. Optional Exemptions from retrospective application
Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions.
(a) Deemed cost of property, plant and equipment.
Ind AS 101 permits a first time adopter to elect to continue with the carrying values for all of its Property, plant and equipment as recognized in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for decommissioning liabilities. Accordingly, the Company has opted to consider the carrying value for all of its Property, plant and equipment’s as recognized in its previous GAAP financials as its deemed cost at the transition date
(b) Fair value of financial assets and financial liabilities.
Ind AS 101 permits a first time adopter to apply requirement of Ind AS 109 prospectively to | transactions entered into on or after the date of transition. Accordingly the company has opted to consider the measurement of financial assets and liabilities arisen before the date of transition of Ind AS as per previous GAAP.
II. Mandatory Exceptions to retrospective application
(a) Estimates
An entity’s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies).
The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at April 01, 2016, the date of transition to Ind AS and as of March 31, 2018.
(b) Classification and measurement of financial assets
The classification of financial assets to be measured at cost or fair value made on the basis of the facts and circumstances that existed on the date of transition to Ind AS.
III. Transition to Ind AS - Reconciliations
The following reconciliations provide the explanations and quantification of the differences ; arising from the transition from Previous GAAP to Ind AS in accordance with Ind AS 101: ;
i. Reconciliation of Statement of Profit and Loss for the year ended 31st March, 2018.
ii. Adjustments to Statement of Cash Flows for the year ended 31st March, 2018.
Previous GAAP figures have been reclassified/regrouped wherever necessary to conform to ; Standalone financial statements prepared under Ind AS.
Notes to reconciliation
1) Remeasurement of defined benefit obligations :
Under the Previous GAAP, actuarial gains and losses on defined benefit obligations were recognized in the statement of profit and loss. Under Ind AS, these are recognized in other comprehensive income. This difference has resulted in an increase in net income for the year ended March 31, 2016. However, the same does not result in difference in equity or total comprehensive income.
2) Difference in current tax expense :
Tax adjustments include deferred tax impact on account of differences between Previous GAAP and Ind AS.
(ii) Terms and rights attached to equity shares.
The company has only one class of equity shares having face value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share. The final dividend if proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
In the event of liquidation of the company, the holders of equity shares will be entitled to receive | remaining assets of the Company. The distribution will be in proportion to the number of equity shares held by the shareholder.
During the immediate preceding five years, no shares were bought back. However, 250,000 shares held by Vishvas Infrastructure Ltd. were cancelled during the financial year 2013-14 as per the order of High Court.
Nature of security
Hypothication of 1st charge on all fixed assets of the company and 2nd pari passue charge on all current assets of the company.
Mortgage of Fixed Assets of M/S. Sitaram Prints Pvt. Ltd. And Residence Bunglow of Shri Shankar Lal Somani and Smt.Ganga devi Somani. Hypothication of Exclusive Charges of Machinery Financed by them only.
Vehicle Loans are secured by hypothecation of vehicles itself.
LIC has Key Man Insurance policy hypothecated against Premium Amt. Paid.
Note # 3
Other Notes to Accounts:
1) There was no employee in receipt of remuneration aggregating to Rs. 102,00,000/- or more per year or | Rs 8,50,000/- or more per month for the part or whole of the year. Previous year also there was no such i employee.
2) Balances of loans, advances, Cash & Bank and Creditors & Debtors are subject to confirmation and have been taken as appeared in the books of account of the company.
3) The quantity and value of closing stock is certified by the management as true and correct.
4) In the absence of information regarding outstanding dues of MICRO or Small Scale Industrial Enterprise(s) as per The Micro, Small & Medium Enterprise Development Act, the Company has not disclosed the same | as required by Schedule III to the Companies Act, 2013.
5) Advances include Rs. 1357 Lacs (Pre.Year Rs. 1255 Lacs) to companies in which directors are interested.
6) Defined Benefit Plan - Gratuity
The Company has a defined benefit gratuity plan in India (unfunded). The company’s defined benefit gratuity plan is a final salary plan for employees.
Gratuity is paid from company as and when it becomes due and is paid as per company scheme for Gratuity.
During the year, the company has changed the benefit scheme in line with Payment of Gratuity Act, 1972 j by increasing monetary ceiling from 10 lakhs to 20 lakhs. Change in liability (if any) due to this scheme | change is recognized as past service cost.
The Company’s obligation in respect of the gratuity plan is provided for based on actuarial valuation using the projected unit credit method. The Company recognizes actuarial gains and losses immediately in other comprehensive income, net of taxes. Amount recognized in the statement of profit and loss in respect of gratuity cost (defined benefit plan) is as follows:
The sensitivity analysis have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.
The sensitivity analysis presented above may not be representative of the actual change in the projected benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the projected benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same method as applied in calculating the projected benefit obligation as recognized in the balance sheet.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.
Risks associated with defined benefit plan
Gratuity is a defined benefit plan and company is exposed to the Following Risks:
Interest rate risk: A fall in the discount rate which is linked to the G.Sec. Rate will increase the present value of the liability requiring higher provision.
Asset Liability Matching Risk: The plan faces the ALM risk as to the matching cash flow. Company has to | manage pay- out based on pay as you go basis from own funds.
Mortality risk: Since the benefits under the plan is not payable for life time and payable till retirement age only, plan does not have any longevity risk.
4) The fair value of cash and cash equivalents, trade receivables, borrowings, trade payables, other current j financial assets and liabilities approximate their carrying amount largely due to the short-term nature of ; these instruments. The Company’s long-term debt and investment in fixed deposit have been contracted at market rates of interest. Accordingly, the carrying value of such instruments approximates their fair value.
5) Contingent Liabilities:
(a) Letter of credit outstanding is 2,18,280 US$ as on 31.03.2018 (Pre. Year 380000 US$ and JPY 14269760 respectively).
(b) SEBI had imposed penalty of Rs.2.00 crore U/S 15-of Securities and Exchange Board of India Act, 1992 read with rule 5 of SEBI (procedure for holding enquiry and imposing penalties by educating officer) Rules 1995 vide Adjudication order no. IVD/SIL/AO/DrK-CS/EAD-3/473-486/16-29-14. The j Company has filed petition before SAT against the said order. The same has been remanded back to SEBI for fresh order on merits.
(c) The Company has given corporate guarantee to State Bank of India for term loan given to Sumicot Ltd (Formally known as Sumeet Poly Power Limited) and the present outstanding was Rs. 27.93 Crores.
(d) Income Tax Assessment for A.Y. 2012-13, 2014-15 and 2015-16 is pending with CIT (Appeals) and A.Y. 2009-10 is pending with Dy. Commissioner of Income Tax, Surat. Total amount of demand involved in all these cases is amounting to Rs. 8.06 crores which is subject to final order and rectification.
6) Operating Segment:
The operations of the company are limited to one segment viz. Polyester Yarn manufacturing (textile).
Operating segments are defined as components of a company for which discrete financial information is available that is evaluated regularly by Chief Operating Decision Maker (“CODM”), in deciding how to allocate resources and assessing performance.
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