Note 1 : Significant Accounting Policies 1.1 Basis of Preparation These financial statements have been brpared in accordance with the generally accepted accounting principles in India under the historical cost convention on accrual basis. Pursuant to Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014, till the standards of accounting or any addendum thereto are brscribed by Central Government in consultation and recommendation of the National Financial Reporting Authority, the existing Accounting Standards notified under the Companies Act, 1956 shall continue to apply. Consequently these financial statements have been brpared to comply in all material aspects with the accounting standards notified under Section 211(3C) [Companies (Accounting Standards) Rules, 2006, as amended] and other relevant provisions of the Companies Act, 2013 (the Act). All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in the schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalent, the Company has ascertained its operating cycle as twelve months for the purpose of current/ non-current classification of assets and liabilities. 1.2 Use of Estimates The brparation of the financial statements in conformity with the generally accepted accounting principles in India requires, the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Future results could differ from these estimates and the differences between the actual and the estimates are recognised in the periods in which the actuals are known/ materialise. 1.3 Fixed Assets Fixed assets are stated at acquisition cost less accumulated debrciation/amortisation and accumulated impairment losses, if any. All direct costs are capitalised including freight, duties, taxes and other expenses incidental to acquisition and installation of fixed assets. Subsequent expenditures related to an item of fixed asset are added to its book value only if they increase the future benefits from the existing asset beyond its brviously assessed standard of performance. Items of fixed assets that have been retired from active use and are held for disposal are stated at the lower of their net book value and net realisable value and are shown separately as "Other Current Assets" in the Financial Statements. Any expected loss is recognised immediately in the Statement of Profit and Loss. Losses arising from the retirement of, and gains and losses arising from disposal of fixed assets which are carried at cost are recognised in the Statement of Profit and Loss. Tangible Assets Leasehold land is being amortised over the primary period of the lease. The useful lives of the assets are based on technical estimates approved by the Management, and are lower than or same as the useful lives brscribed under Schedule II to the Companies Act, 2013 in order to reflect the period over which debrciable assets are expected to be used by the Company. Debrciation is provided on a pro-rata basis on the straight-line method based on the estimated useful lives of the assets as stated below: Asset Useful Life Residential and Office Buildings 40 Years Factory Buildings 20 Years Plant and Equipment (other than 7 Years to Dies and Moulds) 15 Years Dies and Moulds 3 Years Furniture and Fixtures 5 Years Office Equipment (including 5 Years Computers) Assets individually costing less than Rs. 5,000 are fully debrciated in the year of acquisition. Intangible Assets Intangible Assets comprise of Goodwill, Trademarks, Copyrights and Technical Know-how. Goodwill and other Intangible Assets are amortised over the useful life of the assets, not exceeding 10 years. All the intangibles assets of the Company have been fully amortised as at the Balance Sheet date. Expenditure on research is recognised as an expense when it is incurred. Development costs of products are also charged to the Statement of Profit and Loss unless all the criteria for capitalisation as set out in paragraph 44 of AS 26 - 'Intangible Assets' have been met by the Company. Impairment At each balance sheet date, the Company reviews the carrying value of tangible and intangible assets for any possible impairment. An impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is determined as higher of the asset's net selling price or estimated future cash flows expected to arise from the continuing use of the assets and from their disposal at the end of their useful lives, which are discounted to their brsent value based on appropriate discount rates. For the purpose of assessing impairment, assets are grouped at the levels for which there are separately identifiable cash flows (cash generating unit). Assessment is done at each Balance Sheet date as to whether there is any indication that an impairment loss recognised for an asset in prior accounting period may no longer exist or may have decreased. An impairment loss is reversed to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had brviously been recognised. 1.4 Investments Investments that are readily realisable and are intended to be held for not more than one year year ended March 31, 2016 from the date on which such investments are made, are classified as current investments. All other investments are classified as long term investments. Long-term investments are valued at cost. The Company provides for diminution in the value of investments, other than temporary in nature as determined for each investment individually. Current investments are valued at the lower of cost and fair value as on the date of the Balance Sheet. 1.5 Inventories Inventories of raw and packing materials, work-in-progress and finished goods are valued at lower of cost and net realisable value. Cost of work-in-progress and finished goods includes materials, labour, manufacturing overheads and other costs incurred in bringing the inventories to their brsent location and condition. Cost is determined using standard cost method that approximates actual cost. Net realisable 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. 1.6 Revenue Recognition Sales are recognised when all the significant risks and rewards of ownership in the goods are transferred to the buyer as per the terms of the contract which usually coincide with the delivery of goods and are recorded net of trade discounts, rebates, sales tax/value added tax and excise duty on own manufactured and outsourced products. Service Income is recognised on cost plus basis as per the terms of the contract with customers, as the service is performed using the proportionate completion method. Interest Income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. Rental income is recognised on a straight-line basis over the term of the lease as per the terms of the lease agreement. 1.7 Provisions and Contingent Liabilities The Company recognises a provision when there is a brsent obligation as a result of a past event that probably requires an outflow of resources 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. Where there is a possible obligation or a brsent obligation that the likelihood of outflow of resources is remote, no provision or disclosure as specified in Accounting Standard 29 - 'Provisions, Contingent Liabilities and Contingent Assets' is made. 1.8 Expenditure Advertising expenses are consistently accrued and recognised in the year in which the related activities are carried out. Employee Benefits Defined Contribution Plans: The Company has Defined Contribution Plans for its employees such as Provident Fund, Superannuation Fund, Employee's State Insurance etc. Contributions to these plans are charged to the Statement of Profit and Loss as incurred, as the Company has no further obligation beyond making the contributions. In respect of certain employees, Provident Fund contributions are made to a Trust administered by the Company. The interest rates payable by the Trust to the beneficiaries every year shall not be lower than statutory rate of interest notified by the Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and the shortfall, if any, shall be made good by the Company. The Company's liability is actuarially determined (using the Projected Unit Credit Method) at the end of the year. Actuarial losses/ gains are recognised in the Statement of Profit and Loss in the year in which they arise. The Company provides for retirement/ post-retirement benefits in the form of Gratuity (funded) and Pension (Non-funded) which are in the nature of Defined Benefit Plans. Such benefits are provided for on the basis of an independent actuarial valuation done at the year-end using Projected Unit Credit Method. Actuarial Gains and Losses comprise experience adjustments and the effect of changes in the actuarial assumptions and are recognised in the Statement of Profit and Loss in the year in which they arise. The employees of the Company are also entitled for other long-term benefits in the form of compensated absences as per policy of the Company. The Company's liability is actuarially determined (using Projected Unit Credit Method) at the end of each year. Actuarial losses/gains are recognised in the Statement of Profit and Loss in the year in which they arise. Expenditure on voluntary retirement scheme is charged to the Statement of Profit and Loss in the year in which it is incurred. Share Based Compensation: The Company does not provide any equity-based compensation to its employees. However, the parent company, Colgate-Palmolive Company ("the Grantor") offers equity incentive plans that provide for the grant of stock-based awards to qualifying employees of the Company. The 2013 Equity Incentive Plan ("2013 Plan") of the Grantor provides for the grant of non-qualified stock options ("stock options") as well as restricted stock units ("together Stock-based compensation"). Each stock option gives the employee the right to purchase a share of Colgate-Palmolive Company stock at the grant price for a specific period of time, once certain vesting requirements have been met or to receive an amount in cash being the difference between the fair value on the date of grant and fair value on the date of exercise, or partly in stock and partly in cash. Stock options vest in three equal annual instalments from the date of grant, and will be fully exercisable three years from the date of grant. Stock options expire six years from the date of grant (exercise period). A restricted stock unit provides an employee with a share of Colgate-Palmolive Company common stock upon vesting. The restricted stock units vest three years from the grant date and is exercised on that date. During the vesting period the restricted stock units accrue dividend equivalents. Accordingly, upon vesting, the employee receives the stock in the amount of the restricted stock units, plus the value of accrued dividends paid out in the form of additional Colgate stock, less any stock retained and applied to tax withholding during or at the end of the vesting period. Stock-based compensation cost is accounted for in the books of the parent company and is passed on to Colgate-Palmolive (India) Limited at the time of exercise by the employee in respect of qualifying employees on the books of Colgate-Palmolive (India) Limited. The expense recognised in any given year therefore rebrsents the gain realized by Colgate-Palmolive (India) Limited employees that has been passed on by the parent company. 1.9 Foreign Currency Transactions and Translation Transactions in foreign currencies are recognised at the brvailing exchange rates on the transaction dates. Realised gains and losses on settlement of foreign currency transactions are recognised in the Statement of Profit and Loss. Foreign currency denominated monetary assets and liabilities at the year end are translated at the year-end exchange rates, and the resultant exchange difference is recognised in the Statement of Profit and Loss. Non Monetary foreign currency items are carried at cost. 1.10 Taxation Current tax is determined as the amount of tax payable in respect of taxable income for the year using the tax rates and tax laws that have been enacted or substantively enacted at the Balance Sheet date. Deferred tax is recognised for all the timing differences, subject to the consideration of prudence in respect of deferred tax assets. Deferred tax assets are recognised and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the Company has unabsorbed debrciation or carry forward tax losses, such deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities rebrsenting current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws. 1.11 Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the Statement of Profit and Loss on a straight-line basis over the period of the lease. 1.12 Earnings Per Share Basic earnings per share (EPS) is calculated by dividing the net profit or loss after tax for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by adjusting the number of shares used for basic EPS with the weighted average number of shares that could have been issued on the conversion of all dilutive potential equity shares. The weighted average number of equity shares and potential equity shares outstanding during the period and for all the period brsented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares, that have changed the number of equity shares outstanding, without a corresponding change in resources. 1.13 Cash and Cash Equivalents In the cash flow statement, cash and cash equivalents include cash in hand, demand deposits with banks and other short-term highly liquid investments with original maturities of three months or less. Note 2: Research and Development expenses during the year aggregated to Rs. 5,85.48 Lacs (Previous Year: Rs. 6,76.48 Lacs). Note 3: The Shareholders of the Company through a postal ballot approved the issue of bonus equity shares in the ratio of 1:1 by capitalization of general reserves. Accordingly, on September 28, 2015, the Company allotted 13,59,92,817 bonus equity shares of Rs. 1/- each fully paid-up to the existing shareholders as on the record date. The paid up share capital of the Company stands increased from Rs. 13,60 Lacs to Rs. 27,20 Lacs. Accordingly, the earnings per share have been adjusted for the bonus issue for the brvious year brsented in accordance with the provisions of Accounting Standard (AS) 20 - 'Earning Per Share'. Note 4: On April 29, 2015, the Company had announced a Voluntary Retirement Scheme (VRS) for the employees at the toothpowder manufacturing facility at Waluj, Aurangabad, Maharashtra. The scheme was accepted on May 4, 2015 by all affected employees. Post acceptance of the offer by all the workmen under the said Scheme, the toothpowder manufacturing operations at the Aurangabad factory were discontinued effective May 5, 2015. Exceptional items for year ended March 31, 2016 comprise of VRS expenses of Rs. 29,25.54 Lacs and other expenses of Rs. 2,08.93 Lacs pertaining to the discontinuance of the operations at the Aurangabad Factory. Assets pertaining to Aurangabad Factory have been disclosed as Assets held for sale [Refer Note 10(I)(iv) and Note 19]. Note 5: Previous year figures have been regrouped/reclassified, wherever necessary, to conform with current year's classification. For Price Waterhouse Firm Registration No. 301112E Chartered Accountants Pradip Kanakia Partner Membership Number - 39985 For and on behalf of the Board R. A. Shah Vice-Chairman (DIN : 00009851) I. Bachaalani Managing Director (DIN : 06975320) G. Nthunzi Whole-time Director & Chief Financial Officer (DIN : 06450693) N. Ghate Whole-time Director & Company Secretary (DIN :00001925) Mumbai, May 24, 2016 |