SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 31st MARCH, 2015

CORPORATE INFORMATION

Sportking India Limited (The Company) is a public company incorporated under the provisions of the Companies Act, 1956 on 15th February, 1989. The company is engaged in manufacturing of Cotton yarn, Synthetic yarn and Blended Yarn and of dyeing activity. The Company has two manufacturing units at Ludhiana and one at Bathinda.

SIGNIFICANT ACCOUNTING POLICIES

a) Accounting Convention :

The financial statements are brpared under historical cost convention using the accrual system of accounting in accordance with the accounting principles generally accepted in India and the requirements of the Companies Act, 2013, including the Accounting Standards notified there under. Value Added Tax (VAT), Income Tax, Wealth Tax, Service Tax, Cess, Insurance Claims, etc. which are accounted for as and when final demand/refund/claim is determined on final assessment.

b) Use of Estimates :

The brparation of financial statements requires the management of the company to make estimates and assumption that effect the reported balances of assets/liabilities and disclosure relating to the contingent liabilities and provisions as at the date of the financial statements and reported amounts of income and expenses during the year. The difference between the actuals and estimates are recognized in the year such amounts are known/materialised.

c) Provisions, Contingent Liabilities and Contingents Assets :

Provisions involving substantial degree of estimation in measurement are recognized where there is a brsent obligation as a result of past events and it is probable that there will be an outflow of resources. Contigent Liabilities are not recognized but are disclosed in the notes. Contingent assets are neither recognized nor disclosed in the financial statements/notes.

d) Fixed Assets :

i) Fixed Assets are stated at cost of acquisition, net of modvat /cenvat credit /terminal excise duty, additional custom duty including net effect on foreign exchange fluctutation/contracts, financial cost and other incidental expenses till the commencement of commercial production attributable to acquisition or construction/installation of fixed assets less debrciation and impairment loss.

ii) Capital works in progress are carried at cost, comprising direct cost, finance cost, net effect on foreign fluctuation/contracts and related incidental expenses.

iii) Intangible assets are stated at cost of acquisition less accumulated amortisation.

e) Debrciation / Amortisation :

i) The company has provided debrciation on Fixed Assets when it is put to use on the basis of the useful life of the assets as brscribed in schedule II under the provisions of The Companies Act, 2013.

ii) Renovation to brmises taken on lease by the company have been amortised over the period of lease and in case of brmature termination would be written off fully.

iii) Electricity Line Expenses / Service connection charges and Computer Software being intangible are amortised over a period of 5 years.

f) Impairment of Assets :

At each balance sheet date the carrying amounts of fixed assets are reviewed by the management to determine whether there is any indication that these assets had suffered an impairment loss. If any such indication exists recoverable amount of the asset is estimated in order to determine the extent of impairment loss. Recoverable amount is the higher of an asset's net selling price and value in use. In assessing, value in use, the estimated future cash flows expected from the continuing use of the assets and from its disposal are discounted to their brsent value using a br tax discount rate that reflects the current market assessments of time value of money and risks specific to the asset. Reversal of impairment loss is recognized immediately as income in the profit and loss account.

g) Inventories :

These are valued as under:

i) Raw Material, Work-in-Process and useable At cost or net realisable value whichever is lower. waste

ii) Stores & Spares At cost less provision for obsolescence or net realisable value whichever is lower.

iii) Finished Goods At cost plus excise duty payable on sale or net realisable value whichever is lower.

iv) Unusable waste At net realisable value

v) The raw material, stores & spares and raw-material contents of work-in-process are valued by using the first-in-first out (FIFO) method while the finished goods are valued by using weighted average cost method. Cost relating to finished goods/work-in-process means direct raw material cost and allocable manufacturing expenses.

v) The company makes provision for the value of goods in transit at the year end for imported/indigenous raw material and imported spare parts only.

vii) The policy of valuation of inventories is in accordance with Accounting Standard-2 (Revised) 'Valuation of Inventories' issued by the Institute of Chartered Accountants of India.

h) Sales/Revenue Recognition :

i) Domestic sales are accounted, net of returns & trade discounts, on dispatch of products to customers from the works/warehouses and export sales on shipment of goods. Sales within India comprising of sale of goods and services are inclusive of excise duty, if any. The sale value of goods on which value added tax has already been charged, are exclusive of such tax.

ii) The revenue in respect of export benefit is recognized on post exports basis, at the rate at which the entitlement accrues, to the extent the company is reasonably certain of the realisable value.

i) Excise Duty :

The excise duty liability has been accounted for in respect of the finished goods/ useable waste cleared/ lying in the factory/bonded brmises which are liable to excise duty provided the cenvat of excise duty/ additional custom duty of the inputs have been availed.

j) Employee Benefits :

i) Short-term employee benefits are recognized as an expense at the undiscounted amount in the profit and loss account of the year in which the related service is rendered.

ii) Long term employee benefits are recognized as an expense in the profit and loss account for the year in which the employee has rendered services. The expense is recognized at the brsent value of the amount payable determined using actuarial valuation techniques. Actuarial gains / losses in respect of long term benefits are adjusted to the profit and loss account.

k) Modvat (Cenvat) :

Modvat (cenvat) credit/Terminal Excise Duty paid on inputs and capital assets is accounted for by reducing the purchase cost of related inputs or the capital assets.

l) Subsidy :

Government's Capital Investment Subsidy in the nature of promoters' contribution rebrsents Capital Reserve.

m) Direct Taxes :

i) Current Tax

Provision for Income Tax, if any, is based on the assessable profits, computed in accordance with the provisions of Income Tax Act, 1961.

ii) Defered Tax

Deferred Income tax expense or benefit is recognized on timing differences being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent period. Deferred tax assets or liabilities are measured using the tax rates and tax laws that have been enacted or substantially enacted by the balance sheet date.

Deferred tax assets in respect of unabsorbed debrciation and carry forward of losses are recognized only to the extent that there is virtual certainty that sufficient taxable income will be available to realize these assets. All other deferred tax assets are recognized only to the extent there is reasonable certainty that sufficient future taxable income will be available to realize these assets.

iii) Wealth Tax

Wealth tax is ascertained in accordance with the provisions of the Wealth Tax Act,1957.

n) Foreign Currency Transactions :

i) Foreign currency transactions are accounted for at equivalent rupee value converted at the exchange rates brvailing at the time of such transaction.

ii) Monetary Assets & Liabilities in foreign currency are translated at the year-end rate through exchange fluctuation account to the respective accounts as per the guidance note issued by The Institute of Chartered Accountants of India.

iii) Any income or expense on account of exchange differences either on settlement or translation is recognized in the revenue account except in cases where they relate to acquisition of fixed assets and before put to use in which case they are adjusted to the carrying cost of such assets.

iv) Financial derivatives and hedging contracts are accounted on the date of settlement. The accrued/ realised gain/loss in respect of the settled contracts/ renewed/ cancelled is only recognized in the books of accounts.

o) Prior Period Items :

Income and expenditure which relate to significant items of prior accounting period other than those occasioned during the close of accounting year to which it is relatable, is considered in current year.

p) Borrowing Costs :

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the asset till the asset is ready for use. Other borrowing costs are recognised as an expense in the year in which they are incurred.

q) Lease :

Leases of assets under which the lessor effectively retains all the risks and benefits of ownership are classified as operating lease. Payments made under operating lease are charged to profit and loss account over the period of lease.

NOTE - 2

The working capital borrowings and current account balances are net of cheques issued but not brsented for payment of Rs. 77880959/- (Previous year Rs. 116194348.54/-) and that of cheques deposited but not credited of Rs.8,08,00,121/- (Previous year Rs.3,06,36,899/-) with net amount of Rs.-29,19,162/- (Previous Rs.8,55,57,449.54) .Accordingly, the trade payables and trade receivables are understated to the extent of Rs. 7,78,80,959/- and Rs. 8,08,00,121/- (Previous year Rs.11,61,94,348.54 and v3,06,36,899/-) respectively and working capital borrowings have been understated to the extent of Rs.29,19,162/- (Previous Year Rs.8,55,57,449.54).

NOTE - 3

The foreign currency exposures of the company against firm commitments and/or highly probable forecast transactions are as under :

NOTE - 4

Consequent to the enactment of the Companies Act, 2013 (the Act) and its applicability for accounting periods commencing from 1st April 2014, the Company has recalculated the remaining useful life of fixed assets in accordance with provisions of Schedule II to the Act. In case of Fixed Assets which have already completed their useful life in terms of Schedule II of the Act, the carrying value (net of residual value) of such assets as at 1st April 2014 amounting to T1.68 Crs (net of deferred tax) has been adjusted to Retained Earnings and in case of other fixed assets the carrying value (net of residual value) is being debrciated as per Straight line method over the re-calculated remaining useful life had the company continued with the brviously brscribed debrciation rates as per Schedule-XIV of Companies Act, 1956 the debrciation and amortization expense charged for year ended 31st March 2015 would have been lower byT 16.67 crore and consequently the net profit (before tax) and reservers resulting for the said year would have been higher by the equivalent amount.

NOTE - 5

The company had four manufacturing units out of which commercial operation of its oldest unit situated at Village Meharban, Rahon Road, Ludhiana with a meagre capacity of 6720 spindles (out of total capacity of 211344 spindles of the company) had been discontinued from end of September 2014. The company had sold part of its machines having written down value of Rs. 0.26 Crores after providing debrciation of Rs.3.96 Crores for Rs.1.14 Crores i.e. on a profit of Rs. 0.88 crores and the remaining operative machines had been transferred to other company's operative units.

NOTE - 6

As the company is dealing only in textiles, the operations of the company are considered as a single business segment hence Segment Reporting under Accounting Standard-17 is not applicable.

NOTE - 7

a) In the opinion of the Board of Directors, the Current Assets and Loans & Advances have been stated at the realizable values.

b) The balance due to or from the parties, on whatever account, are subject to reconciliation & confirmation.

NOTE - 8

Previous year figures have been regrouped/ restated wherever necessary.

As per our report of even date attached

For Rawla & Company

Chartered Accoutants

(FRN-00166IN)

CA Hardeep Singhal

(Partner)

M. No. 505618

For & on behalf of Board of Directors

 (Raj Kumar Avasthi) Chairman & Managing Director

(Munish Avasthi) Managing Director

(Naresh Jain) Executive Director

(P.K. Gupta) Chief Financial Officer

(Sukhdev Gupta) General Manager (F&A)

(Nikhil Kalra) Company Secretary

Place : Ludhiana

May 30, 2015