NOTES FORMING PART OF THE FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES 1.1 BASIS OF ACCOUNTING AND brPARATION OF FINANCIAL STATEMENTS The financial statements of the Company have been brpared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the 2013 Act, as applicable. The financial statements have been brpared on going concern basis under the historical cost convention on accrual basis. The accounting policies have been consistently applied by the Company unless otherwise stated. The brparation of financial statements requires management to exercise judgement and to make estimates and assumptions that affects the reported amounts of revenues, expenses, assets and liabilities. These estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on a periodic basis. Revisions to accounting estimates are recognised in the period in which the results are known/materialise. The Company has opted to continue with the period of 1st day of January to 31st day of December, each year as its financial year for the purpose of brparation of financial statements under the provisions of Section 2(41) of the Companies Act, 2013 which the Hon'ble Company Law Board has allowed. The Company has elected to brsent "Profit from Operations" as a separate line item on the face of the Statement of Profit and Loss. "Profit from Operations" is arrived at before Other income, Finance costs, Employee benefits expense due to passage of time, Net provision for contingencies (others), Exceptional items, Corporate social responsibility expense and Tax expense. The Company has ascertained its operating cycle as 12 months for the purpose of current / non-current classification of assets and liabilities. This is based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents. Previous year's figures have been regrouped / reclassified wherever necessary to conform with the current year's classification / disclosure. 1.2 REVENUE RECOGNITION Revenue from sale of goods is recognised on transfer of significant risks and rewards of ownership in the goods to the buyer which is generally at the time of dispatch to the customer. Sales are recorded net of returns (if any), trade discounts, rebates, other pricing discounts to trade/consumer and value added tax/sales tax. Interest on investments/loans is recognised on a time proportion basis. Dividend income on investments is recognised when the right to receive the payment is established. 1.3 EMPLOYEE BENEFITS Employee benefit plans The Company makes contributions to defined contribution plans e.g. Provident Fund, Employee State Insurance, National Pension System etc. for eligible employees and these contributions are charged to statement of profit and loss on accrual basis. For defined benefit plans i.e. gratuity and unfunded pension, the provision is made on the basis of an actuarial valuation carried out by an independent actuary as at the year-end. Actuarial gains and losses are recognised in full in the statement of profit and loss during the year in which they occur. Provision for gratuity is recognised after taking into account the return on plan assets maintained under the gratuity trust. As these liabilities are of relatively long term in nature, the actuarial assumptions take in account the requirements of the relevant accounting standard coupled with a long term view of the underlying variables / trends, wherever required. Long term employee benefits such as compensated absences and long service awards are charged to statement of profit and loss on the basis of an actuarial valuation carried out by an independent actuary as at the year-end. Actuarial gains and losses are recognised in full in the statement of profit and loss during the year in which they occur. Total cost of the employee benefit plans continue to be fully charged to the statement of profit and loss. While the amounts relating to current service cost and actuarial gains/ losses continue to be included in "Employee Benefits Expense", the increase in cost of employee benefit plans, due to passage of time (net of return on plan assets) is brsented under "Employee Benefits Expense due to passage of time" in line with the Accounting Standard 15 on "Employee Benefits". Other employee benefits Short term employee benefits including performance incentives, are charged to statement of profit and loss on an undiscounted, accrual basis during the period of employment. Liability for Nestle Restricted Stock Unit (RSU) Plan/ Performance Share Unit (PSU) Plan of Nestle S.A., whereby select employees of the Company are granted non-tradable units with the right to obtain Nestle S.A. shares or cash equivalent is charged to statement of profit and loss over the vesting period. The Company remeasures the outstanding units at each balance sheet date taking into account the Nestle S.A. share price and exchange rate as at the balance sheet date. The resultant gain/ (loss) on remeasurement is charged to statement of profit and loss over the vesting period. 1.4 FIXED ASSETS Fixed assets are stated at cost (net of CENVAT or any other recoverable taxes) less accumulated debrciation and accumulated impairment losses, if any. Cost is inclusive of freight, duties, levies and any directly attributable cost of bringing the assets to their working condition for intended use (also refer to accounting policies on 'Foreign exchange transactions' and 'Borrowing costs' below). Profit or loss on disposal/ scrapping/ write off/ retirement from active use of tangible assets are recognised in the statement of profit and loss. 1.5 DEbrCIATION / AMORTISATION Effective 1st January, 2015, the Company has reviewed and reassessed useful lives of fixed assets as per Schedule II to the Companies Act, 2013. Accordingly debrciation has been computed on reassessed useful lives based on technical evaluation of relevant class of assets. Debrciation is provided as per the straight line method computed basis useful lives of fixed assets as follows 1.6 IMPAIRMENT OF FIXED ASSETS At each balance sheet date, carrying amount of fixed assets is reviewed for any possible impairment taking into account the long term view of the underlying businesses and related variables. For the purpose of assessing impairment, assets are grouped at the levels for which there are separately identifiable cash flows (cash generating unit). If any impairment indicator exists, estimate of the recoverable amount of the fixed asset/cash generating unit to which the asset belongs is made. An impairment loss is recognised whenever the carrying amount of an asset/ cash generating unit exceeds its recoverable amount. The recoverable amount is the greater of the net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their brsent value based on an appropriate discount rate. Reversal of impairment losses recognised in earlier years is recorded when there is an indication that the impairment losses recognised for the asset/cash generating unit no longer exist or have decreased. However, the increase in carrying amount of an asset due to reversal of an impairment loss is recognised to the extent it does not exceed the carrying amount that would have been determined (net of debrciation) had no impairment loss been recognised for that asset/cash generating unit in earlier years. 1.7 LEASES Lease rentals for operating leases are charged to statement of profit and loss on accrual basis in accordance with the respective lease agreements. 1.8 FOREIGN EXCHANGE TRANSACTIONS Transactions in foreign currency are recorded on initial recognition at the exchange rate brvailing on the date of the transaction. Monetary items (i.e. receivables, payables, loans etc.) denominated in foreign currency are reported using the closing exchange rate on each balance sheet date. The exchange difference arising on the settlement or reporting of monetary items at rates different from rates at which these were initially recorded / reported in brvious financial statements, are recognised in the statement of profit and loss in the period in which they arise except for the items covered below: In line with notification no. G.S.R. 225(E) dated March 31, 2009 and subsequent clarification via circular no. 25/2012 dated August 09, 2012 issued by Ministry of Corporate Affairs, Government of India, the Company has opted for adjusting the exchange differences, arising on long term foreign currency monetary borrowings relating to acquisition of debrciable assets to the cost of the those assets. In case of forward exchange contracts, the difference between the exchange rate on the date of inception/ last reporting date and the exchange rate at the settlement / reporting date is recognised as exchange difference and the brmium paid on forward contracts is recognised over the life of the contract. 1.9 BORROWING COSTS Borrowing costs directly attributable to acquisition or construction of fixed assets which take substantial period of time to get ready for their intended use are treated as addition/ reduction to capital expenditure in accordance with Accounting Standard 16 on "Borrowing Costs" and notification no. G.S.R. 225(E) dated March 31, 2009 and subsequent clarification via circular no. 25/2012 dated August 09, 2012 issued by Ministry of Corporate Affairs, Government of India. Other borrowing costs are charged to the statement of profit and loss. 1.10 TAXATION Provision for taxation for the period comprises of a) estimated tax expense which has accrued on the profit for the period April 1, 2015 to December 31, 2015 and, b) the residual tax expense for the period April 1, 2014 to March 31, 2015 arising out of the finalisation of fiscal accounts (Assessment Year 2015-2016), under the provisions of the Indian Income tax Act, 1961. Deferred tax is recognised, subject to the consideration of prudence, on timing difference, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. 1.11 CONTINGENT LIABILITIES AND PROVISIONS Contingent liabilities are disclosed after a careful evaluation of the facts and legal aspects of the matter involved, in line with the provisions of Accounting Standard (AS) 29 on 'Provisions, Contingent Liabilities and Contingent Assets'. Provisions are recognised when the Company has a brsent obligation (legal/constructive) and on management judgement as a result of a past event, for which it is probable that a cash outflow will be required and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a brsent obligation that may, but probably will not require an outflow of resources. When there is a possible obligation or a brsent obligation in respect of which likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent assets are not recognised in the financial statements since this may result in the recognition of income that may never be accrued/ realised. 12 INVESTMENTS Current investments are stated at the lower of cost or fair value. Non-current investments are stated at cost. Provision for diminution, if any, in the value of non-current investments is made only if such decline is not temporary in nature. 29. EMPLOYEE BENEFIT PLANS (a) Defined contribution plans The Company makes contributions to the Provident Fund, Employee State Insurance, National Pension System etc. for eligible employees. Under these plans, the Company is required to contribute a specified percentage of payroll costs. The Company during the year has recognised Rs. 292.8 million (Previous year Rs. 258.2 million) as expense in the statement of profit and loss during the year. Out of the total contribution made for Provident Fund, Rs. 118.6 million (Previous year Rs. 114.3 million) is made to the Nestle India Limited Employees Provident Fund Trust. The members of the Provident Fund Trust are entitled to the rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952. The shortfall, if any, is made good by the Company in the year in which it arises. The total plan liabilities under the Nestle India Limited Employees Provident Fund Trust as at December 31, 2015 as per the unaudited financial statements for the year then ended is Rs. 2,668.7 million (Previous year Rs. 2,319.4 million) as against total plan assets of Rs. 2,689.8 million (Previous year Rs. 2,332.0 million). The funds of the Trust have been invested under various securities as brscribed under the rules of the Trust. (b) Defined benefit plans The company provides gratuity and defined benefit pension to eligible employees. The gratuity plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment. Gratuity vesting occurs upon completion of five years of service. The Company makes contributions to the Nestle India Limited Employees' Gratuity Trust Fund. Defined benefit pension is a discretionary, unfunded plan. 1. SEGMENT REPORTING Based on the guiding principles given in Accounting Standard on ‘Segment Reporting’ (AS-17), the Company’s primary business segment is Food. The food business incorporates product groups viz. Milk Products and Nutrition, Beverages, Prepared dishes and cooking aids, Chocolates and Confectionery, which mainly have similar risks and returns. As the Company’s business activity falls withina single primary business segment the disclosure requirements of AS -17 in this regard are not applicable |