NOTES TO THE NOTES TO THE

FINANCIAL STATEMENTS FINANCIAL STATEMENTS

For the year ended June 30, 2023 For the year ended June 30, 2023

1. LEGAL STATUS AND OPERATIONS directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an
item of property, plant and equipment used in fulfilling the contract). The adoption of amendment
Interloop Limited (the Company) was incorporated in Pakistan on April 25, 1992 and publicly listed on Pakistan Stock
did not have any impact on the Company’s financial statements.
Exchange on April 5, 2019. The registered office of the Company is situated at Al-Sadiq Plaza, P-157, Railway Road,
Faisalabad. The manufacturing facilities are located at 1-km, 6-km, 7-km Jaranwala Road, Khurrianwala, Faisalabad
– Amendments to IFRS 3, ‘Business Combinations’ - Reference to the Conceptual Framework
and 8-km Manga Mandi, Raiwand Road, Lahore. The Company is a vertically integrated multi-category Full Family
(effective for the Company’s annual period beginning on January 01, 2022):
Clothing, manufacturing Hosiery, Denim, Knitted Apparel and Seamless Active wear, for top international brands and
retailers, besides producing yarns for a range of textile customers. The Company’s commitment to environmental, The amendments are intended to replace a reference to the Framework for the Preparation and
social responsibility & governance (ESG) is deeply rooted in its mission and has gained it global recognition as a Presentation of Financial Statements, issued in 1989 with a reference to the Conceptual Framework
pioneer in responsible manufacturing. The Company’s diverse & engaged workforce and operational excellence for Financial Reporting, that was issued in March 2018, without significantly changing its requirements.
has established it as a Partner of Choice for its customers. In addition, the Board added an exception to the recognition principle of IFRS 3 to avoid the issue of
potential ‘day 2’ gains or losses arising for liabilities and contingent liabilities and it clarified existing
2. BASIS OF PREPARATION guidance in IFRS 3 for contingent assets. The adoption of amendment did not have any impact on
the Company’s financial statements.
2.1 Statement of compliance
These financial statements have been prepared in accordance with the accounting and reporting standards – Annual Improvements to IFRS Standards 2018–2020 Cycle. The new cycle of improvements
as applicable in Pakistan. The accounting and reporting standards applicable in Pakistan comprise of: addresses improvements to following approved accounting standards (effective for annual
period beginning on or after January 01, 2022):
– International Financial Reporting Standards (IFRS Standards) issued by the International Accounting
– IFRS 1 First-time Adoption of International Financial Reporting Standards. This amendment simplifies
Standards Board (IASB) as notified under the Companies Act, 2017,
the application of IFRS 1 for a subsidiary that becomes a first-time adopter of IFRS Standards later
than its parent – i.e. if a subsidiary adopts IFRS Standards later than its parent and applies IFRS
– Provisions of and directives issued under the Companies Act, 2017.
1.D16(a), then a subsidiary may elect to measure cumulative translation differences for all foreign
operations at amounts included in the consolidated financial statements of the parent, based on
Where the provisions of and directives issued under the Companies Act, 2017 differ from the IFRS Standards,
the parent’s date of transition to IFRS Standards. The adoption of the improvement did not have any
the provisions of and directives issued under the Companies Act, 2017 have been followed.
impact on the Company’s financial statements.
2.2 Basis of measurement
– IFRS 9 Financial Instruments. The amendment clarifies which fees an entity includes when it applies
These financial statements have been prepared under the historical cost convention except as otherwise the ‘10 percent’ test in assessing whether to derecognize a financial liability. An entity includes
stated in respective policy notes. In these financial statements, all the transactions are recorded on actual only fees paid or received between the entity (the borrower) and the lender, including fees paid or
basis except for the statement of cash flows. received by either the entity or the lender on the other’s behalf. The adoption of the improvement
did not have any impact on the Company’s financial statements.
2.3 Functional and presentation currency
These financial statements are presented in Pakistani Rupee which is also the Company’s functional – IAS 41 Agriculture. The amendment removes the requirement for entities to exclude taxation cash
currency. flows when measuring the fair value of a biological asset using a present value technique. This will
ensure consistency with the requirements in IFRS 13 - Fair Value Measurement. The adoption of the
3. NEW AND REVISED STANDARDS, INTERPRETATIONS AND PRONOUNCEMENTS improvement did not have any impact on the Company’s financial statements.

3.1 Standards, interpretations and amendments to approved accounting standards which became 3.2 Standards, interpretations and amendments to approved accounting standards that are issued but
effective during the year not yet effective and have not been early adopted by the Company
There were certain amendments to accounting and reporting standards which became effective during The following standards, amendments and interpretations with respect to the approved accounting
the year. The Company has adopted the following accounting standards and the amendments and standards as applicable in Pakistan would be effective from the dates mentioned below and have not
interpretation of IFRSs which became effective for the current year: been adopted early by the Company.

– Amendment to IAS 16 ‘Property, Plant and Equipment’ - Proceeds before Intended Use – Amendments to IAS 1, ‘Presentation of financial statements’ and IFRS Practice Statement
(effective for annual period beginning on or after January 01, 2022): 2- Disclosure of Accounting Policies (effective for the Company’s annual period beginning on
The amendment prohibit deducting from the cost of an item of property, plant and equipment January 01, 2023):
any proceeds from selling items produced while bringing that asset to the location and condition The amendments require that an entity discloses its material accounting policies, instead of its
necessary for it to be capable of operating in the manner intended by management. Instead, an significant accounting policies. Further amendments explain how an entity can identify a material
entity recognizes the proceeds from selling such items, and the cost of producing those items, in accounting policy. Examples of when an accounting policy is likely to be material are added.
profit or loss. The adoption of amendment did not have any impact on the Company’s financial To support the amendment, the Board has also developed guidance and examples to explain
statements. and demonstrate the application of the ‘four-step materiality process’ described in IFRS Practice
Statement 2.
– Amendment to IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ - Onerous
Contracts - Cost of Fulfilling a Contract (effective for annual period beginning on or after
January 01, 2022):
The amendment specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly
to the contract’. Costs that relate directly to a contract can either be incremental costs of fulfilling
that contract (examples would be direct labour, materials) or an allocation of other costs that relate

96 97
FINANCIAL STATEMENTS
 NOTES TO THE NOTES TO THE
FINANCIAL STATEMENTS FINANCIAL STATEMENTS
For the year ended June 30, 2023 For the year ended June 30, 2023

– Amendments to IAS 1, ‘Presentation of financial statements’ - Classification of Liabilities as of the revision and future periods. Judgments made by management in application of the approved accounting
Current or Non-current (effective for the Company’s annual period beginning on January 01, standards that have significant effect on the financial statements and estimates with a significant risk of material
2023): adjustments in the next year are discussed in respective policy notes. The areas where various assumptions and
estimates are significant to the Company’s financial statements or where judgment was exercised in application of
The amendments specify that the conditions which exist at the end of the reporting period are
accounting policies are as follows:
those which will be used to determine if a right to defer settlement of a liability exists. Management
expectations about events after the reporting date, for example on whether a covenant will be
– Estimate of useful life of operating fixed assets - note 5.1
breached, or whether early settlement will take place, are not relevant. The amendments clarify the
– Estimated useful life of intangible assets - note 5.3
situations that are considered settlement of a liability.
– Impairment of non-financial assets - note 5.4
– Stores and spares - note 5.5
– Amendments to IAS 8, ‘Accounting policies, changes in accounting estimates and errors’ - – Stock-in-trade - note 5.6
Definition of Accounting Estimates (effective for the Company’s annual period beginning on – Estimates for expected credit loss (ECL) of financial assets i.e. trade debts and other receivables- note
January 01, 2023): 5.7
The amendments replace the definition of a change in accounting estimates with a definition of – Estimation used in right of use asset and corresponding lease liability - note 5.9
accounting estimates. Under the new definition, accounting estimates are “monetary amounts in – Staff retirement benefits - note 5.11
financial statements that are subject to measurement uncertainty”. Entities develop accounting – Provisions - note 5.16
estimates if accounting policies require items in financial statements to be measured in a way that – Contingencies - note 5.17
involves measurement uncertainty. The amendments clarify that a change in accounting estimate – Estimates as to expected value or most likely amount method for determination of variable consideration
that results from new information or new developments is not the correction of an error. of transaction price - note 5.19
– Taxation - note 5.21
– Derivative financial instruments - note 5.26
– IAS 12 Income Taxes - Amendments regarding deferred tax on leases and decommissioning – Impairment of Financial Assets - note 5.26
obligations (Effective for annual periods beginning on or after 1 January 2023):
The main change in Deferred Tax related to Assets and Liabilities arising from a Single Transaction 5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Amendments to IAS 12) is an exemption from the initial recognition exemption provided in IAS 5.1 Operating fixed assets and depreciation
12. Accordingly, the initial recognition exemption does not apply to transactions in which equal
amounts of deductible and taxable temporary differences arise on initial recognition. Operating fixed assets, except freehold land which is stated at cost, are stated at cost less accumulated
depreciation and identified accumulated impairment loss, if any. Cost comprises acquisition and other
– Amendments to IFRS 16, ‘Leases’ - Sale and leaseback transactions (Effective for annual directly attributable costs.
periods beginning on or after 1 January 2024):
Depreciation is calculated at the rates stated in note - 6.1 applying reducing balance method. The useful
Amendments impact how a seller-lessee accounts for variable lease payments that arise life and residual value of major components of operating fixed assets are reviewed annually to determine
in a sale-and-leaseback transaction. On initial recognition, the seller-lessee includes that expectations are not significantly different from the previous estimates. Adjustment in depreciation
variable lease payments when it measures a lease liability arising from a sale-and-leaseback rate for current and future periods is made if expectations are significantly different from the previous
transaction. After initial recognition, the seller-lessee applies the general requirements for estimates. Depreciation is charged from the month when an asset becomes available for use, whereas no
subsequent accounting of the lease liability such that it recognizes no gain or loss relating depreciation is charged in the month of its disposal.
to the right of use it retains. The amendments introduce a new accounting model for variable
payments and will require seller-lessees to reassess and potentially restate sale-and-leaseback Expenditure, which enhances or extends the performance of operating fixed assets beyond its original
transactions entered. specification and its useful life, is recognized as a capital expenditure and is added to the cost of the
operating fixed assets. These are depreciated on reducing balance method at the rate mentioned in note
The Company expects that the adoption of the above amendments to the standards will have no - 6.1.
material effect on the Company’s financial statements, in the period of their initial application.
An item of operating fixed asset and any significant part initially recognized is derecognized upon disposal
Further, the following new standards have been issued by the International Accounting Standards or when no future economic benefits are expected from its use or disposal. The gain or loss arising on
Board (IASB), which are yet to be notified by the Securities and Exchange Commission of Pakistan derecognition of an item of operating fixed asset is determined as the difference between the sales
(SECP), for the purposes of their applicability in Pakistan: proceeds and the carrying amounts of the asset and is recognized in the statement of profit or loss.

IFRS - 1 ‘First time adoption of International Financial Reporting Standards’. 5.2 Capital work in progress
IFRS - 17 ‘Insurance Contracts’. Capital work in progress is stated at cost less identified impairment loss, if any, and represents direct cost
of material, labour, applicable overheads and borrowing costs on qualifying assets. Transfers are made to
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS relevant property, plant and equipment category as and when assets are available for its intended use.
The preparation of financial statements in conformity with the approved accounting standards require management
to make judgments, estimates and assumptions that affect the application of accounting policies and the reported 5.3 Intangible assets - Computer software
amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on Intangible assets are stated at cost less accumulated amortization and identified accumulated impairment
historical experience and various other factors that are believed to be reasonable under the circumstances, the loss, if any. These are amortized using the reducing balance method at the rates given in note - 7.1.
results of which form the basis of making the judgments about carrying values of assets and liabilities that are not Amortization on additions is charged from the month in which an intangible asset is acquired, while no
readily apparent from other sources. Actual results may differ from these estimates. amortization is charged for the month in which intangible asset is disposed off.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are Costs associated with maintaining computer software program are recognized as an expense as and
recognized in the period in which the estimates are revised if the revision affects only that period, or in the period when incurred. Costs that are directly attributable to identifiable software and have probable economic

98 99
FINANCIAL STATEMENTS
 NOTES TO THE NOTES TO THE
FINANCIAL STATEMENTS FINANCIAL STATEMENTS
For the year ended June 30, 2023 For the year ended June 30, 2023

benefits exceeding one year, are recognized as an intangible asset at the time of initial recognition. Direct 5.7 Trade debts and other receivables
costs include the purchase cost of software and related overhead costs. Trade debts are recognized and carried at the original invoice amounts, being the fair value, less loss
allowance, if any. For measurement of loss allowance for trade debts, the Company applies IFRS 9
Expenditure, which enhances or extends the performance of computer software beyond its original simplified approach to measure the expected credit losses.
specification and useful life, is recognized as a capital expenditure and added to the cost of the software.
These are amortized on reducing balance method at the rate mentioned in the relevant note. Other receivables are recognized at amortized cost, less any allowance for expected credit losses.
5.3.1 Development costs 5.8 Cash and cash equivalents
Development costs that are directly attributable to the design and testing of identifiable and unique Cash and cash equivalents comprise of cash in hand, cheques in hand/cheques overdrawn, balances
software products controlled by the Company are recognized as development cost in intangible assets. with banks and include short term highly liquid investments with original maturities of three months or
Directly attributable costs that are capitalized as part of the software include advance payments for the less. The cash and cash equivalents are readily convertible to known amount of cash and are subject to
software. Capitalized development costs are recorded as intangible assets and amortized from the point insignificant risk of change in value.
at which the asset is ready for use.
5.9 Leases
5.4 Impairment of non-financial assets
Right of use assets
The carrying amounts of the Company’s non-financial assets, other than stock in trade and stores &
spares, are reviewed at each reporting date to determine whether there is any indication of impairment. At inception, the Company assesses whether a contract is or contains a lease. This assessment involves the
If any such indication exists then the asset’s recoverable amount is estimated. For goodwill and intangible exercise of judgement about whether the Company obtains substantially all the economic benefits from
assets that have indefinite lives or that are not yet available for use, recoverable amount is estimated at the use of the asset and whether the Company has a right to direct the use of the asset. The Company
each reporting date. recognizes right of use assets (RoU) at the commencement date of the lease (i.e. the date the underlying
asset is available for use). Right of use assets are measured at cost, less any accumulated depreciation and
An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of RoU includes the
recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before
flows that largely are independent from other assets and groups. the commencement date less any lease incentives received.

Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of cash- Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease
generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units term, the recognized right of use assets are depreciated on a straight-line basis over the shorter of its
and then to reduce the carrying amount of the other assets of the unit on a pro-rata basis. Impairment estimated useful life and the lease term. Depreciation of RoU is charged to statement of profit or loss.
losses on goodwill shall not be reversed. Residual value and the useful life of an RoU are reviewed at least at each financial year-end and the impact
on depreciation is adjusted in the statement of profit or loss. Depreciation on additions to RoU is charged
An impairment loss is reversed if there has been a change in the estimates used to determine the from the month in which an asset is acquired, while no depreciation is charged for the month in which the
recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount asset is disposed off.
does not exceed the carrying amount that would have been determined, net of depreciation or
amortization, if no impairment loss had been recognized. Prior impairments of non-financial assets are Lease liabilities
reviewed for possible reversal at each reporting date. At the commencement date of the lease, the Company recognizes lease liabilities measured at the present
value of lease payments to be made over the lease term. The lease payments include fixed payments
5.5 Stores and spares (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that
Stores and spares are carried at moving average cost. Provision is made for slow moving and obsolete depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
store items when so identified. Stores and spares held for capital expenditure are included in capital work
in progress. The related payment obligations, net of finance costs are classified as current and long term liability
depending upon the timing of the payment.
5.6 Stock-in-trade
In calculating the present value of lease payments, the Company uses the incremental borrowing rate
These are stated at the lower of cost and net realizable value (NRV). The methods used for the calculation at the lease commencement date if the interest rate implicit in the lease is not readily determinable.
of cost are as follows: After the commencement date, the amount of lease liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is
Raw material - At factory Moving average cost remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease
- In transit Invoice value plus direct charges in respect thereof. payments or a change in the assessment to purchase the underlying asset.
Work in process and finished goods Prime cost including a proportion of production overheads.
Each lease payment is allocated between the liability and finance cost so as to achieve a constant rate on
the balance outstanding. The interest element of the rental is charged to statement of profit or loss over
Wastes are valued at net realizable value.
the lease term.
Stock-in-trade is regularly reviewed by the management and any obsolete items are brought down to
Payments associated with short-term leases and leases of low-value assets are recognized on a straight-
their net realizable value. Net realizable value signifies the selling price in the ordinary course of business
line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or
less costs necessary to be incurred to affect such sale.
less and leases of low value items.

100 101
FINANCIAL STATEMENTS
 NOTES TO THE NOTES TO THE
FINANCIAL STATEMENTS FINANCIAL STATEMENTS
For the year ended June 30, 2023 For the year ended June 30, 2023

5.10 Share capital The Company recognizes government grants when there is reasonable assurance that grants will be
received and the Company will be able to comply with conditions associated with grants. Government
Ordinary shares are classified as equity and recognized at their face value. Incremental costs directly
grants are recognized at fair value, as deferred income, when there is reasonable assurance that the
attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the
grants will be received and the Company will be able to comply with the conditions associated with the
proceeds. grants.
5.11 Staff retirement benefits Grants that compensate the Company for expenses incurred, are recognized on a systematic basis in the
The Company operates an unfunded gratuity scheme for all its employees (executives and non executives) income for the year in which the related expenses are recognized. Grants that compensate for the cost of
and also a contributory provident fund for only executive employees of the Company. Executive employees an asset are recognized in income on a systematic basis over the expected useful life of the related asset.
of the Company can avail contributory provident fund along with 50% of their entitlement for gratuity.
Government grant includes any benefit earned on account of a government loan obtained at below-
(a) Defined Benefit Plan market rate of interest. The loan is initially recognized and subsequently measured in accordance with
IFRS 9. IFRS 9 requires loans at below-market rates to be initially measured at their fair value - e.g. the
The Company operates an unfunded gratuity scheme for all its employees according to the terms of present value of the expected future cash flows discounted at a market-related interest rate. The benefit
employment, subject to a minimum qualifying period of service. Annual provision is made on the basis of that is the government grant is measured as the difference between the fair value of the loan on initial
actuarial valuation to cover obligations under the scheme for all employees eligible to gratuity benefits. recognition and the amount received, which is accounted for according to the nature of the grant.

The cost of providing benefits is determined using the projected unit credit method, with actuarial 5.14 Trade and other payables
valuation being carried out at each reporting date. Remeasurement of net defined benefit liability, which Liabilities for trade and other payables are carried at their amortized cost, which approximate fair value
comprise of actuarial gains and losses i.e. experience adjustments and the effects of changes in actuarial of the consideration to be paid in future for goods and services received, whether or not billed to the
assumptions, are recognized immediately in other comprehensive income. The Company determines net Company. Exchange gains and losses arising on translation in respect of liabilities in foreign currency are
interest expense/(income) on the defined benefit obligation for the period by applying the discount rate added to the carrying amount of the respective liabilities.
used to measure the defined benefit obligation at the beginning of the annual period to then-net defined
benefit, taking into account any change in the net defined benefit obligation during the period as a result 5.15 Contract liabilities
of contributions and benefit payments. Net interest expense and other expenses e.g. current service cost,
Contract liability is the obligation of the Company to transfer goods to a customer for which the Company
related to defined benefit plans are recognized in statement of profit or loss.
has received consideration from the customer. If a customer pays consideration before the Company
transfers goods, a contract liability is recognized when the payment is made. Contract liabilities are
(b) Defined Contribution Plan recognized as revenue when the Company performs its performance obligations under the contract.
There is also a contributory provident fund for only executive staff of the Company for which contributions
are charged to profit or loss as and when incurred. 5.16 Provisions
Provisions are recognized when the Company has a present legal or constructive obligation as a result of
The Company makes monthly contribution to the fund at the rate of 7.5% whereas employees of the past events and it is probable that an outflow of resources will be required to settle the obligation and a
Company have the option to contribute more than 7.5% but not exceeding 12.5% of his/her monthly basic reliable estimate of the amount can be made.
pay with the written approval of the Board. The assets of the fund are held separately under the control of
trustees. Provisions are reviewed at each reporting date and are adjusted to reflect the current best estimate. If it is
no longer probable that an outflow of resources embodying economic benefits will be required to settle
5.12 Employees’ Share Option Scheme (ESOS) the obligation, the provisions are reversed.
Equity settled share based payments to the employees are measured at fair value at grant date. The fair
5.17 Contingencies
value determined at grant date of equity settled share based payments is recognized as an employee
compensation expense on a straight line basis over the vesting period. The Company reviews the status of all pending litigations and claims against the Company. Based on the
judgment and the advice of the legal advisors for the estimated financial outcome, appropriate disclosure
Fair value is measured using the Black-Scholes Pricing model. The expected life used in the model has or provision is made. The actual outcome of these litigations and claims can have an effect on the carrying
been adjusted, based on the management’s best estimate for the effects of exercise restrictions. amounts of the liabilities recognized at the statement of financial position date.

When a vested option lapses on expiry of exercise period. employee compensation expense already 5.18 Foreign currency translation
recognized in statement of profit and loss is transferred to unappropriated profit from employee share Transactions in foreign currency during the period are initially recorded in the functional currency at
option compensation reserve in the statement of changes in equity. the rate prevailing at the date of transaction. Monetary assets and liabilities denominated in foreign
currencies are translated at functional currency at the rate of exchange prevailing at the reporting date.
When options are exercised, employee share option compensation reserve relating to these options All non-monetary assets and liabilities are translated into rupees at exchange rates prevailing on the date
is transferred to share capital and share premium. An amount equivalent to the face value of related of transaction or on date when fair values are determined. Exchange differences are charged to statement
shares is transferred to share capital. Any amount over and above the share capital is transferred to share of profit or loss.
premium.
5.19 Revenue recognition
5.13 Government grants Revenue is recognized at an amount that reflects the consideration to which the Company is expected
to be entitled in exchange for transferring goods or services to a customer. For each contract with a
Government grants are transfers of resources to an entity by a government entity in return for compliance
customer, the Company: identifies the contract with a customer; identifies the performance obligations in
with certain past or future conditions related to the entity’s operating activities - e.g. a government
the contract; determines the transaction price which takes into account estimates of variable consideration
subsidy. The definition of “government” refers to governments, government agencies and similar bodies,
and the time value of money; allocates the transaction price to the separate performance obligations on
whether local, national or international.

102 103
FINANCIAL STATEMENTS
 NOTES TO THE NOTES TO THE
FINANCIAL STATEMENTS FINANCIAL STATEMENTS
For the year ended June 30, 2023 For the year ended June 30, 2023

the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and Deferred
recognizes revenue when or as each performance obligation is satisfied in a manner that depicts the Deferred tax is accounted for using the statement of financial position method in respect of temporary
transfer to the customer of the goods or services promised. differences arising from differences between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax basis used in the computation of taxable income. Deferred tax
Variable consideration within the transaction price, if any, reflects concessions provided to the customer is calculated by using the tax rates enacted at the reporting date. In this regard, the effect on deferred
such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any taxation of the portion of income subjected to Final Tax Regime is adjusted in accordance with the
other contingent events. Such estimates are determined using either the ‘expected value’ or ‘most requirements of Accounting Technical Release – 27 of the Institute of Chartered Accountants of Pakistan,
likely amount’ method. The measurement of variable consideration is subject to a constraining principle if considered material. However, no provision of deferred tax is made/required where the whole income
whereby revenue will only be recognized to the extent that it is highly probable that a significant reversal in of the Company arises and comes under the ambit of Final Tax Regime (FTR).
the amount of cumulative revenue recognized will not occur. The measurement constraint continues until
the uncertainty associated with the variable consideration is subsequently resolved. Amounts received Deferred tax liability is recognized for all taxable temporary differences and deferred tax asset is
that are subject to the constraining principle are initially recognized as deferred revenue in the form of a recognized for all deductible temporary differences and carry forward of unused tax losses and unused
separate refund liability. tax credits, if any, to the extent that it is probable that future taxable profit will be available against which
these can be utilized.
a) Sale of goods
Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit
Revenue from the sale of goods is recognized at the point in time when the customer obtains control will be realized. Significant management judgment is required to determine the amount of deferred tax
of the goods, which is generally at the time of delivery. Otherwise, control is transferred over time and assets that can be recognized, based upon the likely timing and level of future taxable profits together
revenue is recognized over time by reference to the progress towards complete satisfaction of the relevant with future tax planning strategies.
performance obligation if one of the following criteria is met:
5.22 Earnings per share
– the customer simultaneously receives and consumes the benefits provided by the Company’s The Company presents basic and diluted earnings per share (EPS) for its ordinary shares. Basic EPS is
performance as the Company performs; calculated by dividing the profit by weighted average number of shares outstanding during the period.
Diluted EPS is calculated by adjusting for the effects of all dilutive potential ordinary shares.
– the Company’s performance creates and enhances an asset that the customer controls as the
Company performs; or 5.23 Dividend
Dividend is recognized as a liability in the period in which it is declared. Movement in reserves is recognized
– the Company’s performance does not create an asset with an alternative use to the Company and the in the year in which it is approved.
Company has an enforceable right to payment for performance completed to date.
Final dividend distributions to the Company’s shareholders are recognised as a liability in the financial
b) Rendering of services statements in the period in which the dividends are approved by the Company’s shareholders at the
Revenue from a contract to provide services is recognized over time as the services are rendered. Annual General Meeting, while interim dividend distributions are recognised in the period in which the
dividends are declared by the Board of Directors.
c) Interest income
5.24 Segment reporting
Interest income is recognized as interest accrues using the effective interest method. This is a method
Segment reporting is based on the operating (business) segments of the Company. An operating
of calculating the amortized cost of a financial asset and allocating the interest income over the relevant
segment is a component of the Company that engages in business activities from which it may earn
period using the effective interest rate, which is the rate that exactly discounts estimated future cash
revenues and incur expenses, including revenues and expenses that relate to the transactions with any of
receipts through the expected life of the financial asset to the net carrying amount of the financial asset.
the Company’s other components. An operating segment’s operating results are reviewed regularly by
the chief operating decision maker (‘CODM’) to make decisions about resources to be allocated to the
d) Other revenue segment and assess its performance, and for which discrete financial information is available. The CODM,
Other revenue is recognized when it is received or when the right to receive payment is established. who is responsible for allocating resources and assessing performance of the operating segments, has
been identified as the Board of Directors of the Company that makes the strategic decisions.
5.20 Borrowing costs
Segment results that are reported to the CODM include items directly attributable to a segment as well
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, as those that can be allocated on a reasonable basis. Those incomes, expenses, assets, liabilities and
which are assets that necessarily take a substantial period of time to get ready for their intended use or other balances which cannot be allocated to a particular segment on a reasonable basis are reported as
sale, are added to the cost of those assets, until such time when the assets are substantially ready for their unallocated.
intended use or sale. All other borrowing costs are charged to statement of profit or loss in the period of
as and when incurred. Transactions among the business segments are recorded at cost. Inter segment sales and purchases are
eliminated from the total.
5.21 Taxation
5.25 Related party transactions
Current
All transactions with related parties are carried out at arm’s length prices. Each transaction is evaluated to
The charge for current taxation is based on taxable income at current rates of taxation after taking into
be characterized as an “”arm’s length transaction”” and approximated to the arm’s length criteria using
account tax credits, rebates and exemptions available, if any. However, for income covered under Final
one of the following methodologies:
Taxation Regime (FTR), taxation is based on the applicable tax rates under such Regime. The charge for
current tax also includes adjustments, where considered necessary, and the tax assessed from assessments • Market-based pricing
framed during the year for such years is over/under the provision of tax then made. • Negotiated pricing
• Cost-based pricing
104 105
FINANCIAL STATEMENTS
 NOTES TO THE NOTES TO THE
FINANCIAL STATEMENTS FINANCIAL STATEMENTS
For the year ended June 30, 2023 For the year ended June 30, 2023

5.26 Financial Instruments: Fair value through other comprehensive income (FVTOCI)
5.26.1 Financial assets Financial assets that are held for collection of contractual cash flows and for selling the financial assets,
A financial asset is measured at amortized cost if it is held in order to collect contractual cash flows which where the assets’ cash flows represent solely payments of principal and interest, are measured at
arise on specified dates and that are ‘solely payment of principal and interest (SPPI)’ on the principal FVTOCI. Movements in the carrying amount are taken through other comprehensive income, except for
amount outstanding. A debt investment is measured at fair value through other comprehensive income if the recognition of impairment losses (and reversal of impairment losses), interest income and foreign
it is held in order to collect contractual cash flows which arise on specified dates that are solely principal exchange gains and losses which are recognized in statement of profit or loss. When the financial asset
and interest and as well as selling the asset on the basis of its fair value. All other financial assets are is derecognized, the cumulative gain or loss previously recognized in other comprehensive income is
classified and measured at fair value through profit or loss unless the Company makes an irrevocable reclassified from equity to profit or loss and recognized in other income / (other operating expenses).
election on initial recognition to present gains and losses on equity instruments in other comprehensive Interest income from these financial assets is included in other income using the effective interest rate
income. Despite these requirements, a financial asset may be irrevocably designated as measured at fair method. Foreign exchange gains and losses are presented in other income/ (other operating expenses)
value through profit or loss to reduce the effect of, or eliminate, an accounting mismatch. and impairment losses are presented as separate line item in the statement of profit or loss.

A. Classification and measurement of financial assets Fair value through profit or loss
Investments and other financial assets Financial assets at fair value through profit or loss include financial assets held for trading, financial assets
designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily
Classification:
required to be measured at fair value. Financial assets are classified as held for trading if they are acquired
The Company classifies its financial assets in the following measurement categories: for the purpose of selling or repurchasing in the near term. Financial assets with cash flows that are not
solely payments of principal and interest are classified and measured at fair value through profit or loss,
– those to be measured subsequently at fair value (either through other comprehensive income, or irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at
through profit or loss), and amortized cost or at fair value through OCI, as described above, debt instruments may be designated
at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an
– those to be measured at amortized cost. accounting mismatch.

The classification depends on the Company’s business model for managing the financial assets and the Financial assets at fair value through profit or loss are carried in the statement of financial position at fair
contractual terms of the cash flows. In order for a financial asset to be classified and measured at amortized value with net changes in fair value recognized in the statement of profit or loss.
cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and
interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is B. Derecognition
performed at an instrument level. The Company’s business model for managing financial assets refers to
how it manages its financial assets in order to generate cash flows. A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial
assets) is primarily derecognized when:
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other
comprehensive income. For investments in debt instruments, this will depend on the business model The rights to receive cash flows from the asset have expired, or
in which the investment is held. For investments in equity instruments, this will depend on whether the
Company has made an irrevocable election at the time of initial recognition to account for the equity The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation
investment at fair value through other comprehensive income. The Company reclassifies debt investments to pay the received cash flows in full without material delay to a third party under a ‘pass-through’
when and only when its business model for managing those assets changes. arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the
asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the
Measurement: asset, but has transferred control of the asset.
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial
asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition When the Company has transferred its rights to receive cash flows from an asset or has entered into a
of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of
expensed in statement of profit or loss. ownership.

Financial assets with embedded derivatives are considered in their entirety when determining whether When it has neither transferred nor retained substantially all of the risks and rewards of the asset,
their cash flows are solely payment of principal and interest. nor transferred control of the asset, the Company continues to recognize the transferred asset to the
extent of its continuing involvement. In that case, the Company also recognizes an associated liability.
Debt instruments The transferred asset and the associated liability are measured on a basis that reflects the rights and
obligations that the Company has retained.
Subsequent measurement of debt instruments depends on the Company’s business model for managing
the asset and the cash flow characteristics of the asset. There are three measurement categories into
which the Company classifies its debt instruments:
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the
lower of the original carrying amount of the asset and the maximum amount of consideration that the
Amortized cost
Company could be required to repay.
Financial assets that are held for collection of contractual cash flows where those cash flows represent
solely payments of principal and interest are measured at amortized cost. Interest income from these C. Impairment
financial assets is included in other income using the effective interest rate method. Any gain or loss
The Company record an allowance for a forward-looking expected credit loss (ECL) approach for all loans
arising on derecognition is recognized directly in statement of profit or loss and presented in other
income / (other operating expenses) together with foreign exchange gains and losses. Impairment losses and other debt financial assets not held at FVPL.
are presented as separate line item in the statement of profit or loss.
106 107
FINANCIAL STATEMENTS
 NOTES TO THE NOTES TO THE
FINANCIAL STATEMENTS FINANCIAL STATEMENTS
For the year ended June 30, 2023 For the year ended June 30, 2023

ECLs are based on the difference between the contractual cash flows due in accordance with the contract 2023 2022
and all the cash flows that the Company expects to receive. The shortfall is then discounted at an Note (Rupees ‘000) (Rupees ‘000)
approximation to the asset’s original effective interest rate.
6. PROPERTY, PLANT AND EQUIPMENT
For trade and other receivables, the Company has applied the standard’s simplified approach and has Operating fixed assets 6.1 33,588,068 29,632,448
calculated ECLs based on lifetime expected credit losses. The Company has established a provision Capital work in progress 6.2 24,959,464 4,964,375
matrix that is based on the Company’s historical credit loss experience, adjusted for forward-looking Right of use assets 6.3 103,321 133,559
factors specific to the debtors and the economic environment. However, in certain cases, the Company
may also consider a financial asset to be in default when internal or external information indicates that the 58,650,853 34,730,382
Company is unlikely to receive the outstanding contractual amounts in full before taking into account any
credit enhancements held by the Company. 6.1 Operating fixed assets

2023
D. Derivative financial instruments
Cost Depreciation W.D.V
Derivatives are initially recognized at fair value. Any directly attributable transaction costs are recognized
in the statement of profit or loss as incurred. They are subsequently remeasured at fair value, with all gains Description As On As on As on As on As on
Rate
For the %
or losses, realized and unrealized, recognized in the statement of profit or loss. July 1, Additions Deletions June 30, July 1,
year
Adjustments June 30, June 30,
2022 2023 2022 2023 2023

5.26.2 Financial liabilities

(Rupees ‘000)
A. Classification and measurement
Owned
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or
loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective Freehold land 2,564,800 86,915 – 2,651,715 – – – – 2,651,715 –
hedge, as appropriate. Buildings on freehold land 9,438,090 1,952,364 (36,181) 11,354,273 3,643,244 659,902 (4,744) 4,298,402 7,055,871 10
Plant and machinery 27,110,144 3,164,586 (9,774) 30,264,956 10,954,965 1,785,087 (6,941) 12,733,111 17,531,845 10
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and Tools and equipment 1,905,021 455,287 (2,685) 2,357,623 675,176 138,997 (644) 813,529 1,544,094 10
payables, net of directly attributable transaction costs. Office equipment 929,337 208,830 (10,474) 1,127,693 413,284 126,378 (6,566) 533,096 594,597 20
Electric installations 3,162,597 615,064 (9,866) 3,767,795 983,638 238,654 (6,933) 1,215,359 2,552,436 10
i) Financial liabilities at fair value through profit or loss Furniture and fixtures 840,674 200,348 (2,934) 1,038,088 270,308 67,113 (1,223) 336,198 701,890 10
Vehicles 983,965 617,677 (193,262) 1,408,380 361,565 197,613 (106,418) 452,760 955,620 20
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and
financial liabilities designated upon initial recognition as at fair value through profit or loss. Gains or Total 46,934,628 7,301,071 (265,176) 53,970,523 17,302,180 3,213,744 (133,469) 20,382,455 33,588,068
losses on liabilities held for trading are recognized in the statement of profit or loss. Financial liabilities
designated upon initial recognition at fair value through profit or loss are designated at the initial date of 2022
recognition, and only if the criteria in IFRS 9 are satisfied. The Company has not designated any financial
Cost Depreciation W.D.V
liability as at fair value through profit or loss.
Rate
Description As On As on As on As on As on
For the %
ii) Loans and borrowings
July 1, Additions Deletions June 30, July 1, Adjustments June 30, June 30,
year
2021 2022 2021 2022 2022

This is the category most relevant to the Company. After initial recognition, interest-bearing loans and (Rupees ‘000)
borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are
Owned
recognized in the statement of profit or loss when the liabilities are derecognized as well as through the
EIR amortization process. Freehold land 2,132,389 432,411 – 2,564,800 – – – – 2,564,800 –
Buildings on freehold land 7,994,854 1,443,236 – 9,438,090 3,061,490 581,754 – 3,643,244 5,794,846 10
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or Plant and machinery 22,112,767 5,069,606 (72,229) 27,110,144 9,426,295 1,588,318 (59,648) 10,954,965 16,155,179 10
costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement Tools and equipment 1,456,513 451,611 (3,103) 1,905,021 559,954 117,324 (2,102) 675,176 1,229,845 10
of profit or loss. Office equipment 718,432 228,401 (17,496) 929,337 320,424 108,694 (15,834) 413,284 516,053 20
Electric installations 2,333,598 831,002 (2,003) 3,162,597 791,479 193,575 (1,416) 983,638 2,178,959 10
This category generally applies to interest-bearing loans and borrowings. Furniture and fixtures 590,782 249,932 (40) 840,674 220,572 49,769 (33) 270,308 570,366 10
Vehicles 800,652 296,661 (113,348) 983,965 292,612 134,839 (65,886) 361,565 622,400 20
B. Derecognition
Total 38,139,987 9,002,860 (208,219) 46,934,628 14,672,826 2,774,273 (144,919) 17,302,180 29,632,448
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or
expires. When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original liability and the recognition of a new liability.
The difference in the respective carrying amounts is recognized in the statement of profit or loss.

5.26.3 Offsetting of financial assets and liabilities

Financial assets and financial liabilities are set off and the net amount is reported in the financial statements
when there is a legally enforceable right to set off and the Company intends either to settle on a net basis,
or to realize the assets and to settle the liabilities simultaneously.

108 109
FINANCIAL STATEMENTS