Comsats University, Islamabad

Management sciences department

Financial Statement Analysis and Valuation

Submitted to: Ma’am Shanza Tabassum

Submitted by: Ayyat Ali

Class: BAF 6-A
Reg #: SP20-BAF-018

Date: 1/10/2022
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR 2021

LEGAL STATUS AND OPERATIONS (NOTE 1)

The first note of Sapphire Textile Mills Limited explains to us that it is a public limited company, and it is
registered under the Companies 2017. It is a listed company on Pakistan Stock Exchange. This note
further explains the core activities of the company and where its registered offices and production plants
are located.

BASIS OF PREPARATION (NOTE 2.1)

This note comes under IAS 1, which deals with financial statement presentation. IAS 1 requires an entity
whose financial statements adhere to IFRSs to make a clear and unqualified statement in the notes of such
compliance. This note states that the financial statements have been made in accordance with
International Financial Reporting Standards (IFRS) established by the International Accounting Standards
Board (IASB). Provisions and directives were enacted under the 2017 Companies Act. It also states that
where provisions and directives made by the Companies Act, 2017 clashed with the IFRS Standards, the
Companies Act, 2017 provisions and directives were observed.

BASIS OF PREPARATION (NOTE 2.3)

This note states the functional currency of the company, which is PKR, this comes under IAS 21 which
says that the functional currency is the currency in which the entity operates. This further explains that all
figures have been rounded rupees.

INVESTMENT PROPERTY (NOTE 6.4)

This states that investment property was held for capital gain and rental income which was not being used
by the Group. This property consists of land. The investment property comes under the IAS 40. The
Group has implemented a cost model for its investment property, using the same criteria as disclosed for
measuring the Group's owned assets.

IMPAIRMENT (NOTE 6.21)

This note indicates that the Group's carrying value of non-financial assets is analyzed at each reporting
date to check whether there is any sign of impairment and if such indicators exist, the recoverable amount
of the asset is evaluated to assess the amount of the impairment loss. This is related to the IAS 36. This
further explains that an impairment loss is shown as an item in the profit and loss statement.

CONTRACT LIABILITIES (NOTE 29.1)

The entity has invoiced or received money from a related party Creadore A/S Denmark amounting to
Rs.51,709,003 (which was Rs. 24,179,553 in 2020) thus the contract liability comes under IFRS 15.