1 Reporting entity
Britannia Industries Limited (the ‘Company’) is a Company domiciled in India, with its registered office situated at 5/1A, Hungerford Street, Kolkata, West Bengal - 700017. The Company has been incorporated under the provisions of Indian Companies Act and its equity shares are listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in India. The Company is primarily involved in manufacturing and sale of various food products.
2 Basis of preparation
A. Statement of compliance
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under Section 133 of Companies Act, 2013, (the ‘Act’) and other relevant provisions of the Act.
The financial statements up to and for the year ended 31 March 2016 were prepared in accordance with the Companies (Accounting Standards) Rules, 2006, notified under Section 133 of the Act and other relevant provisions of the Act.
As these are the Company’s first standalone financial statements prepared in accordance with Indian Accounting Standards (Ind AS), Ind AS 101, First-time Adoption of Indian Accounting Standards has been applied. An explanation of how the transition to Ind AS has affected the previously reported financial position, financial performance is provided in Note 55.
The standalone financial statements were authorised for issue by the Company’s Board of Directors on 25 May 2017.
Details of the Company’s accounting policies are included in Note 3.
B. Functional and presentation currency
These standalone financial statements are presented in Indian Rupees (''''), which is also the Company’s functional currency. All amounts have been rounded-off to two decimal places to the nearest crores, unless otherwise indicated.
C. Basis of measurement
The standalone financial statements have been prepared on the historical cost basis except for the following items:
D. use of estimates and judgements
In preparing these standalone financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.
Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the standalone financial statements is included in the following notes:
- Note 36 - leases: whether an arrangement contains a lease and ;
- Note 36 - lease classification.
Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 31 March 2017 is included in the following notes:
- Note 34 - recognition of deferred tax assets: availability of future taxable profit against which tax losses carried forward can be used;
- Note 45 - measurement of defined benefit obligations: key actuarial assumptions;
- Note 40 - recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources;
- Note 4 - useful life of property, plant and equipment
- Note 5 - useful life of investment property.
- Note 6 - useful life of intangible assets.
- Notes 7 to 10 and Notes 12, 13, 15 and16 - impairment of financial assets.
E. Measurement of fair values
Certain accounting policies and disclosures of the Company require the measurement of fair values, for both financial and non financial assets and liabilities.
The Company has an established control framework with respect to the measurement of fair values.
The valuation team regularly reviews significant unobservable inputs and valuation adjustments.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into a different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
Further information about the assumptions made in the measuring fair values is included in the following notes:
- Note 5 - investment property
- Note 18 (d) - share-based payments
- Note 54 - financial instruments.
Note 3 Contingent liabilities and commitments: (to the extent not provided for) :
(i) Contingent liabilities:
(a) Claims / demands against the Company not acknowledged as debts including excise duty, income tax, sales tax and trade and other demands of Rs.60.08 (31 March 2016: Rs.146.82, 1 April 2015: Rs.44.49)
(b) Bank guarantees and letters of credit for Rs.43.75 (31 March 2016: Rs.25.12, 1 April 2015: Rs.22.46)
(c) Discounted cheques Rs.Nil (31 March 2016: Rs.Nil, 1 April 2015: Rs.0.30) notes:
(i) Contingent liabilities disclosed above represent possible obligations where possibility of cash outflow to settle the obligations is not remote.
(ii) The above does not include non-quantifiable industrial disputes and other legal disputes pending before various judicial authorities [Also refer note 40,41 and 49].
(a) Estimated amount of contracts remaining to be executed on capital account and not provided for Rs.167.44 (31 March 2016: Rs.131.78, 1 April 2015: Rs.106.82).
(b) The Company has furnished the following corporate guarantees:
Note 4 (a) Operating leases
(i) The Company has certain operating leases for office facilities and residential premises (cancellable leases). Such leases are generally with the option of renewal against increased rent and premature termination of agreement. Rental expenses of Rs.8.89 (31 March 2016: Rs.6.76) in respect of obligation under operating leases have been recognised in the statement of profit and loss.
(ii) The Company has certain cancellable arrangements with contract packers (which conveys a right to use an asset in return for a payment or a series of payment) identified to be in the nature of lease and have been classified as operating lease arrangements. Rental expenses of Rs.47.48 (31 March 2016: Rs.43.95) in respect of obligation under operating leases have been recognised in the statement of profit and loss.
(b) Finance leases
The Company has taken motor vehicles on finance lease. The total minimum lease payments and present value of minimum lease payments are as follows:
The difference between minimum lease payments and the present value of minimum lease payments of Rs.0.08 (31 March 2016: Rs.0.12, 1 April 2015: Rs.0.25) represents interest not due. The lease liability is secured by the relevant vehicles acquired under lease.
* The movement in corporate guarantee is on account of change in exchange rates.
Purpose: The loan availed by Britannia and Associates (Mauritius) Private Limited from Mizuho Bank -USD 1.3 was repaid on 13 October 2016 and fresh loan was availed from The Bank of Tokyo - Mitsubishi UFJ, Ltd. outstanding USD 1.3 for which Britannia Industries Limited has given Corporate Guarantee of USD 1.3. This loan is towards working capital facilities for Al Sallan Food Industries Co. SAOC/ Strategic Food International Co. LLC, Dubai.
Note 5 In accordance with Ind AS 37 - “Provisions, Contingent Liabilities and Contingent Assets", notified under Section 133 of the Act, certain classes of liabilities have been identified as provisions which have been disclosed as under:
Note 6 With respect to the matter related to the refund of excess contribution by the Britannia Industries Covenanted Staff Pension Fund (“CSPF”) to the Company, the Honourable Supreme Court at its hearing on 12 May 2008 set aside the order of the Division Bench of the Honourable High Court, Kolkata and remanded the writ pending for disposal. Based on the directions of the courts, the Company was required to deposit Rs.12.12 with a Nationalised Bank, which the Company has done under protest.
In the suit filed by the Britannia Industries Limited Pensioners Welfare Association (PWA), the Company received a judgement on 21 September 2015 from Honourable City Civil Court, Bangalore, in the matter of pension payable to its eligible beneficiaries. The Board of Directors of the Company reviewed the judgement and after obtaining legal opinion from eminent lawyers resolved to file an appeal in the higher court against the said judgement. Accordingly, the Company as well as CSPF appealed against the Honourable City Civil Court’s judgement in the Honourable High Court of Karnataka. In response to the appeals filed, the Honourable High Court of Karnataka, in its order dated 18 December 2015, referred the matter to Bangalore Mediation Centre for exploring the possibilities of a settlement. The PWA through their legal counsel had submitted that they will not precipitate execution before the trial court during mediation.
As a result of the mediation process, a Memorandum of Settlement (‘MoS’) dated 29 August 2016 was entered into between the PWA, the Company and Trust funds. As per the terms of the MoS and the Decree passed by the Honourable High Court of Karnataka dated 18 October 2016, the Company, inter alia, filed an application with the Honourable High Court at Calcutta for obtaining approval to use the fixed deposit held in the name of the Trust and interest thereon. In response to the petition filed by the CSPF, the Honourable High Court of Calcutta passed an order wherein it directed the CIT, calcutta to consider the representations made by the PWA and the Company. On 9 January 2017, the CIT passed an order wherein, in continuation to the show cause notice dated 11 April 2007, the approval accorded to the CSPF was withdrawn w.e.f. AY 2003-04 in view of Rule 91(2) of the Income Tax Rules, 1962. The CSPF filed a Writ petition with the Honourable High Court at Calcutta against the said order of CIT, Kolkata. On 3rd February 2017, while admitting the writ, the Honourable High Court of Calcutta did not pass any interim order or grant stay against the order of the CIT. Aggrieved by the same, the CSPF filed an appeal in the Division Bench of Calcutta High Court which was heard on 10 March 2017 and the Calcutta High Court granted the stay. However it restrained the Company from encashing the fixed deposit of Rs.12.12 It also directed the single bench of the Calcutta High Court to dispose of the writ petition as expeditiously as possible. The matter before the single bench is yet to be listed for hearing.
In the meanwhile, the Company continues to pay pension as per the interim order passed by the Bangalore City Civil Court on 1 January 2009 (i.e. on Defined Contribution basis).
The Company believes, based on current knowledge and after consultation with eminent legal counsel that the resolution of the matter will not have any material adverse effect on the financial statements of the Company. Accordingly, no adjustment in this respect has been made in the financial results of the Company.
Note 7 Segmental information
The Chief Operating Decision Maker (CODM) evaluates the Company’s performance and allocates resources based on an analysis of various performance indicators by industry classes. Accordingly, segment information has been presented for industry classes.
The operating segment of the Company is identified to be “Foods” as the CODM reviews business performance at an overall Company level as one segment.
Note 8 Related parties Relationships
1. Ultimate holding Company The Bombay Burmah Trading Corporation Limited Holding Company Associated Biscuits International Limited (ABIL), UK
2. Subsidiary companies Al Sallan Food Industries Co. SAOC
Boribunder Finance and Investments Private Limited Britannia and Associates (Dubai) Private Company Limited, Dubai Britannia and Associates (Mauritius) Private Limited, Mauritius Britannia Dairy Holdings Private Limited, Mauritius Britannia Dairy Private Limited Britchip Foods Limited
Daily Bread Gourmet Foods (India) Private Limited
Flora Investments Company Private Limited
Ganges Vally Foods Private Limited
Gilt Edge Finance and Investments Private Limited
International Bakery Products Limited
J B Mangharam Foods Private Limited
Manna Foods Private Limited
Strategic Brands Holding Company Limited, Dubai Strategic Food International Co. LLC, Dubai Sunrise Biscuit Company Private Limited
3. Fellow subsidiary companies Bannatyne Enterprises Pte Limited, Singapore
Dowbiggin Enterprises Pte Limited, Singapore Nacupa Enterprises Pte Limited, Singapore Spargo Enterprises Pte Limited, Singapore Valletort Enterprises Pte Limited, Singapore
4. Associates Klassik Foods Private Limited
Nalanda Biscuits Company Limited Sunandaram Foods Private Limited*
5. Other related party Bombay Dyeing & Manufacturing Co. Ltd. (w.e.f 20 March 2017)
6. Post employment-benefit plan entities Britannia Industries Limited Management Staff Provident Fund
Britannia Industries Limited Covenated Staff Gratuity Fund Britannia Industries Limited Non Covenated Staff Gratuity Fund Britannia Industries Limited Covenated Staff Pension Fund Britannia Industries Limited Officers Pension Fund
Note 9 employee benefits
(a) Post retirement benefit - Defined contribution plans
The Company has recognised an amount of Rs.7.43 (31 March 2016: Rs.6.54) as expenses under the defined contribution plans in the statement of profit and loss for the year:
(b) Post retirement benefit - Defined benefit plans
The Company has two funds: Britannia Industries Limited Covenanted Staff Gratuity Fund and Britannia Industries Limited Non Covenanted Staff Gratuity Fund, which are funded defined benefit plans for qualifying employees.
(i) The Scheme in relation to Britannia Industries Limited Non Covenanted Staff Gratuity Fund provides for lumpsum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months subject to the higher of maximum amount payable as per the Payment of Gratuity Act, 1972 and twenty months salary.
(ii) The Scheme in relation to Britannia Industries Limited Covenanted Staff Gratuity Fund provides for lumpsum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months subject to the higher of maximum amount payable as per the Payment of Gratuity Act, 1972 and twenty months salary.
Vesting (for both the funds mentioned above) occurs only upon completion of five years of service, except in case of death or permanent disability. The present value of the defined benefit obligation and the related current service cost are measured using the projected unit credit method with actuarial valuation being carried out at balance sheet date.
(i) The discount rate is based on the prevailing market yield on Government Securities as at the balance sheet date for the estimated term of obligations.
(ii) The expected return on plan assets is determined considering several applicable factors mainly the composition of the plan assets held, assessed risks of asset management, historical results of the return on plan assets and the Company’s policy for plan asset management.
(iii) The estimate of future salary increases considered in actuarial valuation takes into account inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.
(iv) The disclosure above includes amounts for both Britannia Industries Limited Covenanted Staff Gratuity Fund and Britannia Industries Limited Non Covenanted Staff Gratuity Fund.
Note 10 disclosure as per Regulation 34 (3) and 53 (f) read with Part A of Schedule v of the SEBI (Listing Obligations and disclosure Requirements) Regulations, 2015 in respect of loans and advances, the amount in the nature of loans outstanding at year end:
Note 11 Government grant
During the year ended 31 March 2013, an amount of Rs.5 was received towards capital subsidy for the Hajipur Factory, Bihar in accordance with the State Industrial Policy of Bihar. Out of this, an amount of Rs.0.71 (31 March 2016: Rs.0.71) has been credited to the statement of profit and loss (by reducing the depreciation charge for the year) and the outstanding amount of Rs.2.15 (31 March 2016: Rs.2.86, 1 April 2015: Rs.3.57) has been classified as government grant in the balance sheet [Refer note 3 (k)].
Note 12 Corporate Social Responsibility
During the year, the amount required to be spent on corporate social responsibility activities amounted to Rs.15.80 (31 March 2016: Rs.10.46) in accordance with Section 135 of the Companies Act, 2013.The following amounts were spent during the current & previous years:
Note 13 During the previous year ended 31 March 2016, based on queries received from Securities Exchange Board of India (‘SEBI’), the Company conducted a preliminary internal investigation and discovered certain irregularities by M/s Sharepro Services (India) Private Limited (‘Sharepro’), the Company’s erstwhile Registrar and Share Transfer Agent. Subsequently, the Company filed a criminal complaint against Sharepro and its employees. Pursuant to the directions issued by SEBI in its interim order dated 22 March 2016, the Company appointed an independent external agency to conduct an audit of the records and systems of Sharepro with respect to past transactions.The report of the external agency was submitted with SEBI by the Comapny vide its letter dated 12 July 2016. The Company will evaluate additional steps, if any, based on the directions of SEBI or any other regulatory authorities.
Based on consultations with its legal counsel, the Company has been advised that the liability will not devolve on the Company and thus no provision is considered necessary. Further, the Company has a right to claim losses, if any, from Sharepro and accordingly the Company does not plan to make good the losses on its own account.
Note 14 During the year ended 31 March 2016, the Board of Directors in its meeting dated 9 February 2016 had approved the scheme of arrangement between the Company and a wholly owned subsidiary of the Company i.e. Daily Bread Gourmet Foods (India) Private Limited (“Daily Bread"), its shareholders, creditors and other stakeholders of both the Companies under section 391 to 394 of the Companies Act, 1956 by way of merger of the manufacturing and Retail sales businesses consisting of the manufacturing facility, retail outlets/ stores and the brand/ trademark of Daily Bread into the Company as a going concern with appointed date as 1 April 2015. The relevant petition has been filed before the respective jurisdictional High courts has been sanctioned on dated 7 October 2016. Upon necessary filings with the respective Registrars of Companies, the scheme has become effective from 1 April 2015 (Appointed date") and effect thereof have been given in these financial statements. Consequently, all assets and liabilities of manufacturing and Retail sales businesses consisting of the manufacturing facility, retail outlets/ stores and the brand/ trademark of Daily Bread, as a going concern transferred to and vested in the Company in accordance with the provisions of the scheme with effect from the appointed date.
The Company has given effect to the Scheme in the accounts with effect from 1 April 2015, being the appointed date. As stipulated in the Scheme:
- Assets and liabilities comprised in the manufacturing and Retail sales businesses consisting of the manufacturing facility, retail outlets/ stores and the brand/ trademark of Daily Bread has been recorded at the same value as appearing in the books of the Daily Bread at the close of the business of day immediately preceding the appointed date.
- Difference between the value of net assets of Daily Bread transferred to the Company after reduction in value of investment held by the Company in Daily Bread has been debited to accumulated balance of Profit and loss in the balance sheet of the Company.
The aforementioned has resulted in decrease in other equity by Rs.1.25 as at 1 April 2015, and decrease in net profit for the year ended 31 March 2016 by Rs.1.67.
Note 15 Disclosure on Specified bank notes (SBNs)
During the year, the Company had specified bank notes or other denomination note as defined in the MCA notification G.S.R. 308(E) dated 31 March, 2017 on the details of Specified Bank Notes (SBN) held and transacted during the period from 8 November 2016 to 30 December 2016, the denomination wise SBNs and other notes as per the notification is given below:
Note 16 Capital management
The Company’s policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investors, creditors and market confidence and to sustain future development and growth of its business. In order to maintain the capital structure the Company monitors the return on capital, as well as the level of dividends to equity shareholders.The Company aims to manage its capital efficiently so as to safeguard its ability to continue as a going concern and to optimise returns to all its shareholders. For the purpose of the Company’s capital management, capital includes issued capital and all other equity reserves and debt includes maturities of finance lease obligations.
Note 17 Financial instruments - fair values and risk management Accounting classification and fair values
The following table shows the carrying amounts and fair values of financial assets and financial liabilities as at 31 March 2017, including their levels in the fair value hierarchy.
The fair value of cash and cash equivalents, bank balances, trade receivables, loans, investments in tax-free bonds, investments in debentures/ bonds, borrowings, trade payables and other financial assets and liabilities approximate their carrying amount largely due to the short-term nature of these instruments. The Company’s loans have been contracted at market rates of interest. Accordingly, the carrying value of such loans approximate fair value.
Investments in liquid and short- term mutual funds, which are classified as FVTPL are measured using net assets value at the reporting date multiplied by the quantity held.
The Company’s financial risk management is an integral part of how to plan and execute its business strategies. The Company’s management risk policy is set by the Managing Board. The Company’s activities expose it to a variety of financial risks: credit risk, liquidity and risk market risk. The Company’s primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. A summary of the risks have been given below.
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and loans given. Credit risk arises from cash held with banks and financial institutions, as well as credit exposure to clients, including outstanding accounts receivables. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The objective of managing counterparty credit risk is to prevent losses in financial assets. The Company assesses the credit quality of the counterparties, taking into account their financial position, past experience and other factors.
Trade and other receivables
The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment. The Company limits its exposure to credit risk from trade receivables by establishing a maximum payment period of three months for customer respectively. In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are wholesale, retail or institutional customers, their geographic location, industry, trading history with the Company and existence of previous financial difficulties. The default in collection as a percentage to total receivable is low.
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, that it will always have sufficient liquidity to meet its liabilities when due. The Company’s corporate treasury department is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risks are overseen by the senior management.
The Company aims to maintain the level of its cash and cash equivalents and other highly marketable debt investments at an amount in excess of expected cash outflows on financial liabilities (other than trade payables) over the next six months. The Company also monitors the level of expected cash inflows on trade receivables and loans together with expected cash outflows on trade payables and other financial liabilities. At 31 March 2017, the expected cash flows from trade receivables is Rs.126.41 (31 March 2016: Rs.106.88 , 1 April 2015: Rs.71.14). This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
In addition, the Company maintains the following lines of credit, Rs.227 (31 March 2016: 252, 1 April 2015: 307) overdraft facility with various banks that is unsecured. Interest would be payable basis prevailing MCLR (31 March 2016: prevailing base rate , 1 April 2015: prevailing base rate)
The table below provides details regarding the contractual maturities of significant financial liabilities as at 31 March, 2017, 31 March, 2016 and 1 April, 2015:
Market risk is the risk that changes in market prices - such as foreign exchange rates and interest rates - will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
The Company is exposed to currency risk to the extent that there is mismatch between the currencies in which sales, purchase are denominated and the respective functional currencies of Company. The Company has export sales (2% of total sales) primarily denominated in US dollars and Euro. At any point in time, the Company hedges 95% to 100% of its estimated foreign currency exposure in respect of sales and purchases over the following 12 months. The Company uses forward exchange contracts to hedge its currency risk, most with a maturity of less than one year from the reporting date.
Exposure to currency risk
The summary quantitative data about the Company’s exposure to currency risk as reported to the management is as follows:
The impact of strengthening/weakening of currency on the Company is not material as Company hedges 95% to 100% of the foreign currency exposure.
Note 18 Explanation of transition to Ind AS
As stated in Note 2A, the Company has prepared its first financial statements in accordance with Ind AS. For the year ended 31 March 2016, the Company had prepared its financial statements in accordance with Companies (Accounting Standards) Rules, 2006, notified under Section 133 of the Act and other relevant provisions of the Act.
The accounting policies set out in Note 3 have been applied in preparing the financial statements for the year ended 31 March 2017 including the comparative information for the year ended 31 March 2016 and the opening Ind AS balance sheet on the date of transition i.e. 1 April 2015.
In preparing its Ind AS balance sheet as at 1 April 2015 and in presenting the comparative information for the year ended 31 March 2016, the Company has adjusted amounts reported previously in financial statements prepared in accordance with previous GAAP. This note explains the principal adjustments made by the Company in restating its financial statements prepared in accordance with previous GAAP, and how the transition from previous GAAP to Ind AS has affected the Company’s financial position, financial performance and cashflows.
There were no significant reconciliation items between cash flows prepared under Indian GAAP and those prepared under Ind AS.
Optional exemptions availed and mandatory exceptions
In preparing the financial statements, the Company has applied the below mentioned optional exemptions and mandatory exceptions.
A. Optional exemptions availed
1 Property, plant and equipment and intangible assets
As per Ind AS 101 an entity may elect to:
(i) measure an item of property, plant and equipment at the date of transition at its fair value and use that fair value as its deemed cost at that date
(ii) use a previous GAAP revaluation of an item of property, plant and equipment at or before the date of transition as deemed cost at the date of revaluation, provided the revaluation was, at the date of revaluation, broadly comparable to:
- fair value
- or cost or depreciated cost under Ind AS adjusted to reflect.
The elections under (i) and (ii) above are also available for intangible assets that meets the recognition criteria in Ind AS 38, Intangible Assets, (including reliable measurement of original cost); and criteria in Ind AS 38 for revaluation (including the existence of an active market).
(iii) use carrying values of property, plant and equipment and intangible assets as on the date of transition to Ind AS (which are measured in accordance with previous GAAP and after making adjustments relating to decommissioning liabilities prescribed under Ind AS 101) if there has been no change in its functional currency on the date of transition.
As permitted by Ind AS 101, the Company has elected to continue with the carrying values under previous GAAP for all the items of property, plant and equipment. The same election has been made in respect of intangible assets also.
2 determining whether an arrangement contains a lease
Ind AS 101 includes an optional exemption that permits an entity to apply the relevant requirements in Appendix C of Ind AS 17 for determining whether an arrangement exisiting at the date of transition contains a lease by considering the facts and circumstances exisiting at the date of transition (rather than at the inception of the arrangement).
The Company has elected to avail of the above exemption.
3 Investment in subsidiaries, joint venture and associates
As permitted by Ind AS 101, the Company has elected to carry all investments in subsidiaries and associates at cost as determined in accordance with Ind AS 27.
4 Business combinations
Ind AS 101 provides the option to apply Ind AS 103 prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date.
The Company elected to apply Ind AS 103 prospectively to business combinations occurring after its transition date. Business combinations occurring prior to the transition date have not been restated. The Company has applied same exemption for investment in subsidiaries and associates.
B. Mandatory exceptions
As per Ind AS 101, an entity’s estimates in accordance with Ind AS at the date of transition to Ind AS at the end of the comparative period presented in the entity’s first Ind AS financial statements , as the case may be, should be consistent with estimates made for the same date in accordance with the previous GAAP unless there is objective evidence that those estimates were in error. However, the estimates should be adjusted to reflect any differences in accounting policies.
As per Ind AS 101, where application of Ind AS requires an entity to make certain estimates that were not required under previous GAAP, those estimates should be made to reflect conditions that existed at the date of transitition (for preparing Ind AS balance sheet) or at the end of the comparative period (for presenting comparative information as per Ind AS).
The Company’s estimates under Ind AS are consistent with the above requirement. Key estimates considered in preparation of the financial statements that were not required under the previous GAAP are listed below:
- Fair valuation of financial instruments carried at FVTPL/ FVOCI.
- Impairment of financial assets based on the expected credit loss model.
- Determination of the discounted value for financial instruments carried at amortised cost.
- Discounted value of liability for decommissioning cost.
2 Classification and measurement of financial assets
Ind AS 101 requires an entity to assess classification of financial assets on the basis of facts and circumstances existing as on the date of transition. Further, the standard permits measurement of financial assets accounted at amortised cost based on facts and circumstances existing at the date of transition if restrospective application is impracticable.
Accordingly, the Company has determined the classification of financial assets based on facts and circumstances that exist on the date of transition. Measurement of the financial assets accounted at amortised cost has been done retrospectively except where the same is impracticable.
Notes to the reconciliation
Under the previous GAAP, investments in mutual funds were classified as non-current investments or current investments based on the intended holding period and realisability. Non-current investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under Ind AS, these investments are required to be measured at fair value. The resulting fair value changes of these investments have been recognised in retained earnings as at the date of transition 1 April 2015 and subsequently in the profit or loss for the year ended 31 March 2016.
Under the previous GAAP, interest free security deposits are recorded at their transaction value. Under Ind AS, all financial assets are required to be recognised at fair value. Accordingly, the Company has fair valued these security deposits under Ind AS. Difference between the fair value and transaction value of the security deposit has been recognised as prepaid rent.
c. deferred tax assets (net)
The (decreased) / increased in the deferred tax assets are on account of adjustments made on transition to Ind AS.
d. Reconciliation of total equity as at 31 March 2016 and 1 April 2015
e. Reconciliation of total comprehensive income for the year ended 31 March 2016
f. Proposed dividend
Under the previous GAAP, dividends proposed by the Board of Directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, provision for proposed dividend was recognised as a liability. Under Ind AS, such dividends are recognised when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend included under provisions has been reversed with corresponding adjustment to retained earnings. Consequently, the total equity increased by an equivalent amount.
g. Sale of goods
Under the previous GAAP scheme based discounts were grouped under other expenses, however, under Ind AS, these expenses are netted off against sale of goods.
h. deferred revenue- Customer loyalty program
The Company grants credit points to the customers as part of a sales transactions which allows customers to accumulate the credit points and these points can be redeemed by the customers. Under the previous GAAP, the Company had created a provision towards its liability under the programme. Under Ind AS, sales consideration received has been allocated between the goods sold and the credit points granted. The consideration allocated to the customer credit points has been deferred and will be recognised as revenue when the reward points are redeemed or lapsed. Accordingly, the Company has recognised deferred revenue with corresponding adjustment to retained earnings.
i. excise duty
Under the previous GAAP, revenue from sale of products was presented exclusive of excise duty. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty. The excise duty paid is presented on the face of the statement of profit and loss as part of expenses.This change has resulted in an increase in the revenue from operation and expenses for the year ended 31 March 2016. There is no impact on the total equity and profit.
j. Share based payment
Under the previous GAAP, the cost of equity-settled employee share-based plan were recognised using the intrinsic value method. Under Ind AS, the cost of equity settled share-based plan is recognised based on the fair value of the options as at the grant date. There is no impact on total equity.
k. Other comprehensive income
Under Ind AS, all items of income and expense recognised in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in profit or loss but are shown in the statement of profit and loss as ‘other comprehensive income’ includes remeasurements of defined benefit plans. The concept of other comprehensive income did not exist under previous GAAP.
l Lease arrangement
Under the previous GAAP, arrangements that did not take the legal form of lease were accounted for based on the legal form of such arrangements. Under Ind AS, any arrangement (even if not legally structured as lease) which conveys a right to use an asset in return for a payment or series of payments are identified as leases provided certain conditions are met. In case such arrangements are determined to be in the nature of leases, such arrangements are required to be classified into finance or operating leases as per the requirements of Ind AS 17, Lease.
The Company has certain arrangements with contract packers which have been identified to be in the nature of lease and have been classified as operating lease arrangements.
Note 19 The financial statements are presented in Rs. crores (rounded off to two decimal places). Those items which are required to be disclosed and which were not presented in the financial statements due to rounding off to the nearest Rs. crore are given below:
Note 20 During the year ended 31 March 2017 no material foreseeable loss (31 March 2016: Nil) was incurred for any long-term contract including derivative contracts.