1 Corporate Information
Kaveri Seed Company Limited ("the Company”) has been incorporated on August 27, 1986, as private limited company and converted into public limited company on November 07, 2006 . The company has been listed on 04.10.2007 on the Bombay Stock Exchange and the National Stock Exchange in India. The company is into research, production, processing and marketing of various high quality hybrid seeds.
The financial statements reflect the results of its operations carried on by the company.
2 Summary of significant accounting policies
2.1 Statement of Compliance:
The financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS) specified under Section 133 of the Companies Act, 2013, read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015. These are the Company''''s first financial statements prepared in accordance with Ind AS and Ind AS 101 First time adoption of Indian Accounting Standards has been applied.
Upto the year ended March 31, 2016, the company prepared its financial statements in accordance with the requirements of previous GAAP, which includes Standards notified under the Companies (Accounting Standards) Rules, 2006. These are the company''''s first Ind AS financial statements. The date of transition to Ind AS is April 1, 2015.
2.2 Basis for preparation of financial statements:
The financial statements have been prepared on accrual and going concern basis. The accounting policies are applied consistently to all the periods presented in the financial statements, including the preparation of the opening Ind AS Balance Sheet as at 1st April,2015 being the date of transition to Ind AS. All assets and liabilities have been classified as current or noncurrent as per the Company''''s normal operating cycle and other criteria as set out in the Division II of Schedule III of Companies Act 2013. Based on the nature of products and the time between acquisition of assets for processing and their realization in cash and cash equivalents, the company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.
2.3 Use of Estimates:
The preparation of financial statements requires the management of the company to make estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of financial statements, disclosure of contingent liabilities as at the date of the financial statements, and the reported amounts of income and expenses during the reported period. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the financial statements.
2.4 Property, Plant & Equipment and Other Intangible assets:
Property, plant and equipment is stated at acquisition cost net of accumulated depreciation and accumulated impairment losses, if any. Subsequent costs are included in the asset''''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Statement of Profit and Loss during the period in which they are incurred. Gains or losses arising on retirement or disposal of property, plant and equipment are recognized in the Statement of Profit and Loss. Property, plant and equipment which are not ready for intended use as on the date of Balance Sheet are disclosed as “Capital work-in-progress”. Depreciation is provided on a pro-rata basis on the WDV method based on estimated useful life prescribed under Schedule II to the Companies Act, 2013.
Freehold land is not depreciated.
Upon first-time adoption of Ind AS, the Company has elected to measure all its property, plant and equipment at the Previous GAAP carrying amount as its deemed cost on the date of transition to Ind AS i.e., 1st April,2015.
Separately purchased intangible assets are initially measured at cost. Intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any.
2.5 Biological Asset Recognition and measurement
The company recognizes the biological asset (agricultural produce) when:
(a) the company controls the asset as a result of past events;
(b) it is probable that future economic benefits associated with the asset will flow to the company; and
(c) the fair value or cost of the asset can be measured reliably.
The biological asset are measured on initial recognition and at the end of each reporting period at its fair value less costs to sell.
A gain or loss arising on initial recognition of biological asset at fair value less costs to sell is included in retained earnings and thereafter in profit or loss for the period in which it raised.
Leases in which a substantial portion of the risks and rewards of ownership are retained by the less or are classified as operating leases. Payments and receipts under such leases are recognized to the Statement of Profit and Loss on a straight-line basis over the term of the lease unless the lease payments to the less or are structured to increase in line with expected general inflation to compensate for the less or’s expected inflationary cost increases, in which case the same are recognized as an expense in line with the contractual term.
2.7 Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
2.8 Government Grants
Government Grants are recognized in profit or loss on a systematic basis over the periods in which the company recognizes as expenses the related cost for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the company purchase, construct or otherwise acquire non-current assets are recognized as deferred revenue in the balance sheet and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the company with no future related costs are recognized in profit or loss in the period in which they become receivable.
2.9 Impairment of Assets:
i) Financial assets
Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a company of financial assets is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.
Impairment loss on financial assets carried at amortized cost is measured at the difference between the asset''''s carrying amount and the present value of estimated future cash flows, discounted at the financial asset''''s original effective interest rate. In a subsequent period, if the amount of impairment loss decreases and the decreases can be related objectively to an event, the previously recognized impairment is reversed through profit or loss.
ii) Non-financial assets
Property, Plant & Equipment and Other Intangible assets
Property, Plant and Equipment and Other intangible assets with definite life are evaluated for recoverability whenever there is any indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognized in the profit or loss
2. 10 Revenue recognition:
Revenue from sale of goods is recognized when all the significant risks and rewards of ownership in the goods are transferred to the buyer as per the terms of the contract, there is no continuing managerial involvement with the goods and the amount of revenue can be measured reliably. The Company retains no effective control of the goods transferred to a degree usually associated with ownership and no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of goods. Revenue is measured at fair value of the consideration received or receivable, after deduction of any trade discounts, schemes, volume rebates and any taxes or duties collected on behalf of the government which are levied on sales such as sales tax, value added tax, etc
Income from export incentives such as duty drawback and premium on sale of import licenses, and lease license fee are recognized on accrual basis.
2.11 Dividend and Interest Income
Dividend income from investments is recognized when the shareholders right to receive payment has been established (provided that it is probable that the economic benefits will flow to the company and the amount of income can be measured reliably).
I nterest income from a financial asset is recognized when it is probable that the economic benefits will flow to the company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset''''s net carrying amount on initial recognition.
2.12 Foreign currency transactions:
The functional currency of the Company is Indian Rupees (INR).
Foreign currency transactions are recorded at exchange rates prevailing on the date of the transaction. Gains and losses arising on settlement are included in the profit or loss.
2.13 Financial Instruments
Financial assets and liabilities are recognized when the company becomes a party to the contractual provisions of the instrument.
Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value measured on initial recognition of financial asset or financial liability.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized in profit or loss.
i) Non-derivative financial instruments Cash and cash equivalents
The company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.
Financial assets at fair value through other comprehensive income
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business whose objective is achieved by both collecting contractual cash flows on specified dates that are solely payments of principal and interest on the principal amount outstanding and selling financial assets.
The company, has made an irrevocable election to present in other comprehensive income subsequent changes in fair value of investments not held for trading.
Financial assets at cost
Investment in subsidiaries are measured at cost. Financial liabilities
Financial liabilities at fair value through profit and loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit and loss.
For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
2.14 Employee Benefits:
The company accounts for its gratuity liability, a defined retirement benefit plan covering eligible employees. The gratuity plan provides for a lump sum payment to employees at retirement, death, incapacitation or termination of the employment based on the respective employee''''s salary and the tenure of the employment. Liabilities with regard to a Gratuity plan are determined based on the actuarial valuation carried out by an independent actuary as at the Balance Sheet date using the Projected Unit Credit method for the Company.
Actuarial gains and losses are recognized in full in other comprehensive income and accumulated in equity in the period in which they occur.
b) Provident fund:
The eligible employees of the Company are entitled to receive the benefits of Provident fund, a defined contribution plan, in which both employees and the Company and its subsidiaries make monthly contributions at a specified percentage of the covered employees'''' salary (currently at 12% of the basic salary) which are charged to the Statement of Profit and Loss on accrual basis. The provident fund contributions are paid to the Regional Provident Fund Commissioner by the Company.
The Company has no further obligations for future provident fund and superannuation fund benefits other than its annual contributions.
c) Compensated absences:
The company provides for the encashment of leave subject to certain company''''s rules. The employees are entitled to accumulate leave subject to certain limits, for future encashment or a ailment. The liability is provided based on the number of days of unveiled leave at each Balance Sheet date on the basis of an independent actuarial valuation using the Projected Unit Credit method for the Company and its subsidiaries.
The liability which is not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognized based on actuarial valuation as at the Balance Sheet date.
Actuarial gains and losses are recognized in full in the Statement of Profit and Loss in the period in which they occur.
The company also offers a short term benefit in the form of encashment of unveiled accumulated compensated absence above certain limit for all of its employees and same is being provided for in the books at actual cost.
d) Other short term employee benefits:
Other short-term employee benefits such as performance incentives expected to be paid in exchange for the services rendered by employees, are recognized during the period when the employee renders the service.
2.15 Share Based Payment Arrangements
Employees of the Company receive remuneration in the form of share based payments in consideration of the services rendered.
Under the equity settled share based payment, the fair value on the grant date of the awards given to employees is recognized as ''''employee benefit expenses'''' with a corresponding increase in equity over the vesting period. The fair value of the options at the grant date is calculated by an independent valuer basis Black Scholes model. At the end of each reporting period, apart from the non market vesting condition, the expense is reviewed and adjusted to reflect changes to the level of options expected to vest. When the options are exercised, the Company issues fresh equity shares.
For cash-settled share based payments, the fair value of the amount payable to employees is recognized as ''''employee benefit expenses'''' with a corresponding increase in liabilities, over the period of non market vesting conditions getting fulfilled. The liability is premeasured at each reporting period up to, and including the settlement date, with changes in fair value recognized in employee benefits expenses.
Inventories comprise of Raw and Packing Materials, Work in Progress, Finished Goods(Manufactured and Traded). Inventories are valued at the lower of cost or the net realizable value after providing for obsolescence and other losses, where considered necessary. Cost is determined on FIFO basis. Cost includes all charges in bringing the goods to their present location and condition, including octroi and other levies, transit insurance and receiving charges. The cost of work-in-progress and finished goods comprises of materials, direct labour, other direct costs and related production overheads. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
2.17 Trade Receivables
Trade receivables are stated at net of advances. Ageing of receivable are considered as tool to determine the degree of liquidity. Receivable due for more than two years and balance considered doubtful, referred for recovery through legal proceeding are considered for provision.
Tax expense comprises of current tax and deferred tax. Current tax is measured at the amount expected to be paid to / recovered from the tax authorities, based on estimated tax liability computed after taking credit for allowances and exemption in accordance with the tax laws applicable in India.
Minimum Alternative Tax (MAT) paid in accordance with the tax laws, which gives rise to future economic benefits in the form of adjustment of future income tax liability is considered as an asset if there is convincing evidence that the company will pay normal tax in future periods. Accordingly, it is recognized as an asset in the Balance Sheet when it is probable that the future economic benefit associated with it will flow to the company and the asset can be measured reliably.
Deferred income taxes
Deferred income tax is recognized using the balance sheet approach. Deferred income tax assets and liabilities are recognized for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount.
Deferred income tax asset are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized.
Deferred income tax liabilities are recognized for all taxable temporary differences except in respect of taxable temporary differences associated with investments in subsidiaries where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled.
2.19 Earnings per Share:
Basic earnings/ (loss) per share are calculated by dividing the net profit / (loss) for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings / (loss) per share, the net profit / (loss) for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
The dilutive potential equity shares are adjusted for the proceeds receivable, had the shares been issued at fair value. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date.
2. 20 Provision, Contingent Liabilities and Contingent Assets:
A provision is recognized when the company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which reliable estimate can be made. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
Contingent Liabilities and Contingent Assets are not recognized in the financial statements.
3 Explanation of Transition to Ind AS
The Transition as at April 1,2015 to Ind AS was carried out from Previous GAAP. The exemptions and exceptions applied by the company in accordance with Ind AS 101
- First-time Adoption of Indian Accounting Standards, the reconciliations of equity and total comprehensive income in accordance with previous GAAP to Ind AS are explained below.
The company has applied the following exemptions:
(a) Deemed cost for property, plant and equipment and intangible assets
The company has elected to continue with the carrying value of all its property, plant and equipment, investment property, and intangible assets recognized as of 01 April 2015 (the transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
(b) Investment in subsidiaries
The Company has elected to measure its investments in subsidiaries at the Previous GAAP carrying amount as its deemed cost on the date of transition to Ind AS.
(C) Reconciliation of Statement of Cash Flow
There are no material adjustments to the Statement of Cash Flow as reported under previous