2.7. Provisions and Contingent Liabilities
Provisions are recognized when there is 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 there is a reliable estimate of the amount of the
obligation.
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 present obligation that arises from past events where it is either not
probable that an outflow of resources will be required to settle the obligation or a
reliable estimate of the amount cannot be made.
2.8. Revenue Recognition
Sale of goods: Sales are recognized when the significant risks and rewards of
ownership in the goods are transferred to the buyer as per the terms of the contract and
are recognized net of trade discounts, rebates, sales taxes and excise duties.
Sale of services: In contracts involving the rendering of services, revenue is measured
using the proportionate completion method and is recognized net of taxes.
Revenue in respect of other types of income is recognized when no significant
uncertainty exists regarding realization of such income.
Government grants in the nature of revenue receipts are recognized in the Statement
of Profit and Loss when there is reasonable certainty of its receipt from the Government
in the period to which they relate.
Government grants in the nature of capital receipts are deducted from the cost of assets
against which such grants have been recognized. Such grants are recognized when
there is reasonable certainty of its receipt from the Government.
2.9. Taxes on Income
Tax expense for the period, comprising current tax and deferred tax, are included in
the determination of the net profit or loss for the period. Current tax is measured at the
amount expected to be paid to the tax authorities in accordance with the taxation laws
prevailing in the respective jurisdictions.
Deferred tax is recognized on timing differences, being the differences between the
taxable income and the accounting income that originate in one period and are capable
of reversal in one or more subsequent periods. Deferred tax is measured using the tax
rates and the tax laws enacted or substantively enacted as at the reporting date.
Deferred tax liabilities are recognized for all timing differences. Deferred tax assets
are recognized for timing differences of items other than unabsorbed depreciation and
carry forward losses only to the extent that reasonable certainty exists that sufficient
future taxable income will be available against which these can be realized. However,
if there is unabsorbed depreciation and carry forward of losses, deferred tax assets are
recognized only if there is virtual certainty that there will be sufficient future taxable
income available to realize the assets. Deferred tax assets are reviewed at each balance
sheet date for their realisability.
Current tax assets and current tax liabilities are offset when there is a legally
enforceable right to set off the recognized amounts and there is an intention to settle the
asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are
offset when there is a legally enforceable right to set off assets against liabilities
representing current tax and where the deferred tax assets and the deferred tax
liabilities relate to taxes on income levied by the same governing taxation laws.
Minimum Alternate Tax credit is recognized as an asset only when and to the extent
that there is convincing evidence that the company will pay normal income tax during
the specified period. Such asset is reviewed at each Balance Sheet date and the
carrying amount of the MAT credit is written down to the extent that there is no longer
a convincing evidence to the effect that the Company will pay normal income tax during
the specified period.
2.10. Cash and Cash Equivalents
In the cash flow statement, cash and cash equivalents include cash in hand, demand
deposits with banks and other short-term highly liquid investments with original
maturities of three months or less.
2.11. Borrowing Costs
Borrowing costs, if any, directly attributable to acquisition or construction of
qualifying assets (i.e. those fixed assets which necessarily take a substantial period of
time to get ready for their intended use) are capitalized. Other borrowing costs are
recognized as an expense in the period in which they are incurred.
2.12. Deferred Revenue and Unbilled Revenue
Amounts received from customers or billed to customers, in advance of services
performed are recorded as deferred revenue under Other Current Liabilities. Unbilled
revenue included in Other Current Assets, represents amounts recognized in respect
of services performed in accordance with contract terms, not yet billed to customers
as at the year end.
2.13. Segment Reporting
The Company operates under a single operating segment in accordance with
Accounting Standard 17 - 'Segment Reporting' and hence, segment reporting is not
applicable to the Company.
2.14. Prior Period Items, Exceptional and Extraordinary Items
The Company follows the practice of making adjustments through 'prior year
adjustments' in respect of all material transactions pertaining to the period prior to the
current accounting year. The prior period adjustments, if any, are shown by way of
notes to financial statements.
Exceptional and Extra Ordinary Items, if any, are shown separately as per applicable
accounting standards.
2.15. Earnings per Share
The Company reports basic and diluted Earnings per Share (EPS) in accordance with
Accounting Standard 20.
33 Segment repporting
The company operates under a single reporing segment" Spinning of cotton Yarns" and hence, segment reporting is not applicable to the company as per AS 17-Segment reporting
34. Employee Benefits
1.In Case of funded scheme, the fund are recognized by the income tax authorities and administered through trustees. The company's defind contribution plans are provident fund(in
case of certain employees),(under the provident funds and miscellaneous provision act 1952).The company has no further obligation beyond making the contributions to such plan
the company's defined benefit plans includes Gratuity only.
2. The company provides for leave encashment on actual payment basis only._
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