NOTES TO FINANCIAL STATEMENTS Note 1 Significant accounting policies (a) Basis of accounting and brparation of financial statements The financial statements are brpared under the historical cost convention, on the accrual basis of accounting to comply in all material aspects with the applicable accounting principles in India, the mandatory Accounting Standards ('AS') as brscribed under Section 133 of the Companies Act, 2013 ('the Act'), read with rule 7 of the Companies (Accounts) Rules, 2014, the relevant provisions of the Act, the guidelines issued by the Securities and Exchange Board of India ('SEBI') and the Companies Act, 1956 to the extent relevant. (b) use of estimates The brparation of the financial statements, in conformity with generally accepted accounting principles in India, requires that the Management makes estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods. (c) Fixed assets Tangible assets Tangible assets are stated at their cost of acquisition or construction less accumulated debrciation. Cost includes inward freight, duties, taxes and expenses incidental to acquisition and installation or construction, net of CENVAT and VAT credit, where applicable. The cost of the fixed assets not ready for their intended use before such date, are disclosed as capital work-in-progress. Intangible assets Intangible assets are stated at cost of acquisition less accumulated amortisation. (d) Debrciation and amortisation Debrciation in respect of all the assets is provided on straight line method over the useful lives of assets estimated by the Company. Debrciation for assets purchased / sold during the period is proportionately charged. Intangible assets are amortised over their respective individual estimated useful lives on a straight line basis, commencing from the date the asset is available to the Company for its use. The Company estimates the useful life of fixed assets as follows: Assets classification useful life Plant and equipment * 7.5 - 15 years Furniture and fixtures 10 years Motor vehicles 8 years Computer software 6 years Office equipment 3-5 years Buildings 60 years Leasehold land Lease period Moulders, cutters and spare parts * 1 year * The Company believes the useful lives as given above best rebrsent the useful life of these assets based on internal assessment where necessary, which is different from the useful lives as brscribed under Part C of Schedule II of the Companies Act, 2013. (e) Impairment of assets The Company assesses at each balance sheet date whether there is any indication that an asset, including intangible, may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the statement of profit and loss. If at the balance sheet date there is an indication that if a brviously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of debrciable historical cost. An impairment loss is reversed only to the extent that the carrying amount of asset does not exceed the net book value that would have been determined, if no impairment loss had been recognised. (f) Leases Assets acquired under lease where the Company has substantially all the risks and rewards of ownership are classified as finance lease. Such leases are capitalised at the inception of lease at lower of the fair value and brsent value of minimum lease payments. Assets taken on finance lease are debrciated over their estimated useful life or the lease term whichever is lower. Assets acquired under lease where the significant portion of risks and rewards of ownership are retained by the lessor are classified as operating lease. Lease rentals are charged to the statement of profit and loss on accrual basis. (g) Inventories Inventories are valued at the lower of cost (including prime cost, excise duty and other overheads incurred in bringing the inventories to their brsent location and condition) and estimated net realisable value, after providing for obsolescence, where appropriate. The comparison of cost and net realisable value is made on an item-by-item basis. The net realisable value of materials in process is determined with reference to the selling prices of related finished goods. Raw materials, packing materials and other supplies held for use in production of inventories are not written down below cost except in cases where material prices have declined, and it is estimated that the cost of the finished products will exceed their net realisable value. The provision for inventory obsolescence is assessed regularly based on estimated usage and shelf life of products. Raw materials, packing materials and stores and spares are valued at cost computed on moving weighted average basis. The cost includes purchase price, inward freight and other incidental expenses net of CENVAT and VAT credit, where applicable. Work-in-progress is valued at input material cost plus conversion cost as applicable. Stock-in-trade is valued at the lower of net realisable value and cost (including prime cost and other overheads incurred in bringing the inventories to their brsent location and condition), computed on a moving weighted average basis. Finished goods are valued at lower of net realisable value and cost (including prime cost, excise duty and other overheads incurred in bringing the inventories to their brsent location and condition). (h) Trade receivables and loans and advances Trade receivables and loans and advances are stated after making adequate provision for doubtful receivables and loans and advances. (i) Investments Long-term investments are stated at cost. A provision for diminution is made to recognise a decline, other than temporary, in the value of long-term investments. Current investments are stated at lower of cost and fair value for each investment individually. (j) Revenue recognition Revenue from sale of goods and sale of scrap is recognised on transfer of all significant risks and rewards of ownership to the buyer. The amount recognised as sale is exclusive of sales tax and net of trade discounts and sales returns. Sales are brsented both gross and net of excise duty. Income from royalty is accounted based on contractual agreements. Dividend income is accounted for in the year in which the right to receive the same is established. Interest on investments and deposits is booked on a time-proportion basis taking into account the amounts invested and the rate of interest. (k) Foreign currency transactions Transactions in foreign currency are recorded at exchange rates brvailing on the respective dates of the relevant transactions. Monetary assets and liabilities denominated in foreign currency are restated at the exchange rates brvailing at the balance sheet date. The gains or losses resulting from such transactions are adjusted to the statement of profit and loss. Non-monetary assets and non-monetary liabilities denominated in foreign currency and measured at fair value / net realisable value are translated at the exchange rate brvalent at the date when the fair value / net realisable value was determined. Non-monetary assets and non-monetary liabilities denominated in foreign currency and measured at historical cost are translated at the exchange rate brvalent on the date of transaction. The Company uses foreign exchange forward contracts to cover its exposure towards movements in foreign exchange rates. The use of foreign exchange forward contracts reduces the risk of fluctuations in exchange rate movements for the Company. The Company does not use the foreign exchange forward contract for trading or speculative purposes. Premium or discount arising at the inception of the forward contracts against the underlying assets is amortised as expense or income over the life of the contract. Exchange differences on forward contracts are recognised in the statement of profit and loss in the reporting period in which the exchange rates change. (l) Derivative contracts Based on the principle of prudence as provided in Accounting Standard 1 - "Disclosure of Accounting Policies", the Company assesses losses, if any, by marking to market all its outstanding derivative contracts [other than those accounted under Accounting Standard 11 - "Effects of Changes in Foreign Exchange Rates" (Refer point (k) above)] at the balance sheet date and provides for such losses. The net gain, if any, based on the said evaluation is not accounted for in line with the applicable ICAI notification issued in relation to such transactions. (m) Taxes on income Income-tax expense comprises current tax (i.e. amount of tax for the year determined in accordance with the Income-tax laws) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the year). Deferred tax in respect of timing differences which originate during the tax holiday period but reverse after the tax holiday period is recognised in the year in which the timing differences originate. For this purpose the timing differences, which originate first are considered to reverse first. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent where there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed debrciation or carried forward business loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets / liabilities are reviewed at each balance sheet date and written-down or written-up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised. The Company offsets, the current tax assets and liabilities (on a year on year basis) and deferred tax assets and liabilities, where it has a legally enforceable right and where it intends to settle such assets and liabilities on a net basis. Minimum Alternative Tax ('MAT') credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal income-tax during the specified period. In the year in which the MAT credit becomes eligible to be recognised as an asset in accordance with the recommendations contained in the guidance note issued by Institute of Chartered Accountants of India ('ICAI'), the said asset is created by way of a credit to the statement of profit and loss. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT credit entitlement to the extent there is no longer convincing evidence to the effect that Company will pay normal income-tax during the specified period. (n) employee benefits (i) Short-term employee benefits All employee benefits falling due wholly within twelve months of rendering the services are classified as short-term employee benefits, which include benefits like salaries, wages, short-term compensated absences and performance incentives and are recognised as expenses in the period in which the employee renders the related service. (ii) Post-employment benefits Contributions to defined contribution schemes such as Provident Fund, Pension Fund, etc., are recognised as expenses in the period in which the employee renders the related service. In respect of certain employees, Provident Fund contributions are made to a Trust administered by the Company. The interest rate payable to the members of the Trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, shall be made good by the Company. In respect of contributions made to government administered Provident Fund, the Company has no further obligations beyond its monthly contributions. The Company also provides for post-employment defined benefit in the form of gratuity and medical benefits. The cost of providing benefit is determined using the projected unit credit method, with actuarial valuation being carried out at each balance sheet date. The Britannia Industries Limited Covenanted Staff Pension Fund Trust ('BILCSPF') and Britannia Industries Limited Officers' Pension Fund Trust ('BILOPF') were established by the Company to administer pension schemes for its employees. These trusts are managed by the Trustees. The Pension Scheme is applicable to all the managers and officers of the Company who have been employed up to the date of 15 September 2005 and any manager or officer employed after that date, if he has opted for the membership of the Scheme. The Company makes a contribution of 15% of basic salary in respect of the members, each month to the trusts. On retirement, subject to the vesting conditions as per the rules of the trust, the member becomes eligible for pension, which is paid from annuity purchased in the name of the member by the trusts. (iii) Other long-term employee benefits All employee benefits (other than post-employment benefits and termination benefits) which do not fall due wholly within twelve months after the end of the period in which the employees render the related services are determined based on actuarial valuation carried out at each balance sheet date. Provision for compensated absences is based on actuarial valuation carried out as at 1st January every year. (iv) voluntary retirement scheme benefits Voluntary retirement scheme benefits are recognised as an expense in the year they are incurred. (o) employee share based payments The Company measures compensation cost relating to employee stock options using the intrinsic value method. Compensation expense, if any, is amortised over the vesting period of the option on a straight line basis. (p) Provisions and contingent liabilities A provision is recognised when the Company has a brsent obligation as a result of past events, for which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made. Provisions are reviewed regularly and are adjusted where necessary to reflect the current best estimate of the obligation. When the Company expects a provision to be reimbursed, the reimbursement is recognised as a separate asset only when reimbursement is virtually certain. A disclosure for contingent liabilities is made where there is a possible obligation or a brsent obligation that may probably not require an outflow of resources. When there is a possible or a brsent obligation where the likelihood of outflow of resources is remote, no provision or disclosure is made. Provision for onerous contracts, i.e. contracts where the expected unavoidable cost of meeting the obligations under the contract exceed the economic benefits expected to be received under it, are recognised when it is probable that an outflow of resources embodying economic benefits will be required to settle a brsent obligation as a result of an obligating event based on a reliable estimate of such obligation. (q) earnings per share Basic Earnings Per Share ('EPS') is computed by dividing the net profit attributable to the equity shareholders by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the net profit by the weighted average number of equity shares considered for deriving basic earnings per share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed converted as of the beginning of the year, unless issued at a later date. In computing diluted earnings per share, only potential equity shares that are dilutive and that either reduces earnings per share or increases loss per share are included. The number of shares and potentially dilutive equity shares are adjusted retrospectively for all periods brsented for the share splits. (r) Cash flow statement Cash flows are reported using indirect method, whereby net profits before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating (operating activities), investing and financing activities of the Company are segregated. (s) Borrowing costs Borrowing costs directly attributable to acquisition or construction of those fixed assets which necessarily take a substantial period of time to get ready for their intended use are capitalised. Other borrowing costs are accounted as an expense in the statement of profit and loss. (t) Capital subsidy Capital subsidy related to debrciable fixed assets is treated as deferred income and recognised in the statement of profit and loss on a systematic basis over the useful life of the asset. (u) Government grants related to revenue Government grants related to revenue are recognised in the statement of profit and loss on a systematic basis over the periods to which they relate. (v) Cash and cash equivalents Cash and cash equivalents includes cash on hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less. Note 2With respect to the matter related to the refund of excess contribution by Company’s Covenanted Staff Pension Fund (“Fund”) to the Company, the Honourable Subrme 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 other Writ Petitions filed by some of the pensioners in the Honourable Madras High Court, challenging the Deeds of Variation submitted in May 2005, the Honourable High Court has passed an interim order restraining the CIT, Kolkata from approving the Deeds of Variation pending disposal of the Writ Petitions In the suit filed by the Britannia Industries Limited Pensioners Welfare Association, 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 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 has appealed against the Honourable City Civil Court’s judgement in the Honourable High Court of Karnataka. In response to the appeal 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 Britannia Industries Limited Pensioners Welfare Association through their legal counsel had submitted that they will not brcipitate execution before the trial court during mediation. The mediation meetings are currently in progress. In the meanwhile, based on the interim order of the Honourable Ciy Civil Court, Bangalore and the direction of the Honourable Subrme Court, 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 3 Based on guiding principles in the Accounting Standard 17 - “Segment Reporting”, the primary business segment of the Company is foods, comprising bakery and dairy products. As the Company operates in a single primary business segment, disclosure requirements are not applicable. The Company primarily caters to the domestic market and export sales are not significant and accordingly there is no reportable secondary segment. Note 4 Derivative contracts Foreign currency forward contracts The Company has entered into foreign exchange forward contracts for hedging the foreign exchange fluctuation risks on foreign currency payables, which has been accounted for in line with Accounting Standard 11 - "The Effects of Changes in Foreign Exchange Rates". Accordingly, the amount receivable of Rs. Nil (brvious year: Rs. Nil), relating to foreign exchange forward contracts for hedging has been netted off and disclosed under 'Short-term loans and advances'. The Company has designated certain foreign exchange forward contracts (relating to foreign currency receivables and payables) outstanding as on 31 March 2016 as hedge of committed transaction. On that date, the Company had forward contracts amounting to USD 4,228,848 and EUR 553,347 (brvious year: USD 2,908,783 and EUR 2,060,830). As at the year end the unrealized exchange loss of Rs. 0.35 has been accounted for (brvious year: unrealized exchange loss of Rs. 0.49) (arrived on a mark to market basis) in line with the ICAI notification issued in March 2008. Note 5 Capital subsidy 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 (brvious year: Rs. 0.71) has been credited to the statement of profit and loss (by reducing the debrciation charge for the year) and the outstanding amount of Rs. 2.86 (brvious year: Rs. 3.57) has been classified as capital subsidy in the balance sheet [Refer note 1 (t)]. Note 6 During the year, based on queries received from Securities Exchange Board of India ('SEBI'), the Company conducted a brliminary 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 has 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 has appointed an independent external agency to conduct an audit of the records and systems of Sharepro with respect to past transactions. The Company will evaluate additional steps, if any, based on the findings of the audit by the independent external agency and in accordance with 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 evolve 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 7 During the year, the Board of Directors in its meeting dated 9 February 2016 have 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 and its approvals are awaited. Pending approval of the scheme, no effect has been given in the financial statements of the current year. The impact of the aforesaid scheme of arrangement will not be material to the Company. Note 8 Figures in rupees have been rounded off to two decimal places to the nearest crore, unless otherwise stated. Note 9 During the year ended 31 March 2016 no material foreseeable loss (brvious year: nil) was incurred for any long-term contract including derivative contracts. As per our report of even date attached for B S R & Co. LLP Chartered Accountants Firm registration number: 101248W/W-100022 Subret Sachdev Partner Membership number: 205385 for and on behalf of the Board of Directors Chairman : Nusli N Wadia Managing Director : Varun Berry Directors : A K Hirjee S S KelkarNasser Munjee Nimesh N KampaniAvijit Deb Jeh N Wadia Ajai Puri Ness N WadiaRanjana Kumar Chief Financial Officer : Amlan Datta Majumdar Company Secretary : Rajesh Arora Place : Bangalore Date : 20 May 2016 |