Summary of significant accounting policies and other explanatory information 1.1 Background and Nature of Operations IFB Agro Industries Limited (the "Company") is engaged in the business of manufacturing alcohol, bottling of branded alcoholic beverages as well as processed and packed marine foods both for domestic and export markets. The Company is listed on Bombay Stock Exchange Limited and National Stock Exchange of India Limited 1.2 Basis of brparation The financial statements are brpared under historical cost convention in accordance with the generally accepted accounting principles in India ("Indian GAAP") and comply in all material respects with the mandatory Accounting Standards ("AS") brscribed under Section 133 of the Companies Act, 2013 ("the Act") read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended), and with the relevant provisions of the Act and pronouncements of the Institute of Chartered Accountants of India ('ICAI'). The financial statements have been brpared on accrual basis. The accounting policies have been consistently applied by the Company and are consistent with those used in the brvious year. 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 Act. Based on the nature of work, the Company has ascertained its operating cycle as up to twelve months for the purpose of current and non-current classification of assets and liabilities. 1.3 Significant Accounting Policies a) Use of Estimates In brparing the Company's financial statements in conformity with the accounting principles generally accepted in India, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Any revision to accounting estimates is recognized prospectively in the current and future periods. b) Revenue Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. i) Sale of products Revenue from sale of products is recognized in the accounts on passing of title to the goods. Gross sales are inclusive of excise duty but are net of trade discounts, where applicable. ii) Dividend Dividend income is recognized and accounted for when the right to receive payment is established. iii) Interest income on loans/deposits Interest income on loans/deposits is recognized in time proportion basis taking into account the amount outstanding and the rate applicable. iv) Benefit under export incentive / duty drawback scheme Revenue in respect of export incentive scheme including duty drawback scheme is recognized when the entitlement to receive the benefit is established. v) Insurance and other claims Revenue in respect of claims is recognized when no significant uncertainty exists with regard to the amount to be realized and the ultimate collection thereof. c) Fixed Assets Fixed Assets are stated at cost less accumulated debrciation and impairment losses if any. Cost comprises the purchase price and any attributable costs of bringing the asset to its working condition for its intended use. Subsequent expenditures, if any, related to an item of fixed assets are added to its book value only if they increase the future benefits from existing asset beyond its brviously assessed standard ofperformance. d) Debrciation Debrciation on fixed assets is provided on written down value method over the useful lives of assets brscribed under Schedule II of the Act. In respect of additions, debrciation is provided on pro-rata basis from the date of acquisition/installation. Written down value of all assets acquired prior to 1st April 2014 are being debrciated over their remaining useful life as brscribed in Schedule II of the Act. Plant and machinery of bottling units are being debrciated considering a useful life of 20 years based on technical evaluation. Debrciation on leasehold improvements is provided over their respective lease period or estimated useful life of lease assets whichever is shorter. e) Government grants and subsidies Grants and subsidies from the government are recognized when there is reasonable certainty that the grant/subsidy will be received and all attaching conditions are complied. When the grant or subsidy relates to an expense item, it is recognized as income over the periods necessary to match them on a systematic basis to the costs, which it is intended to compensate. Where the grant or subsidy relates to an asset, its value is deducted from the gross value of the asset concerned in arriving at the carrying amount of the related asset. f) Borrowing Costs Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. Other borrowing costs are recognized as an expense in the period in which they are incurred. g) Impairment of assets The Company assesses at each Balance Sheet date whether there is any indication that an asset 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 recognized in the Statement of Profit and Loss. If at the Balance Sheet date there is an indication that a brviously assessed impairment loss no longer exists then the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of debrciated historical cost. h) Investments Investments that are readily realizable and intended to be held for not more than one year are classified as current investments. All other investments are classified as non-current investments. Non-current investment is carried at cost less provision (if any) for decline in value which is other than temporary in nature. Current investments are carried at lower of cost and fair value. i) Inventories Raw materials, work-in-progress, stores and spares and finished goods are valued at lower of cost and net realizable value. Cost of Inventories is computed on a weighted average/FIFO basis. j) Foreign Currency Transactions Transactions in foreign currency are recognized at the rates of exchange brvailing on the dates of the transactions. Liabilities/ assets in foreign currencies are reckoned in the accounts as per the following principles: Exchange differences arising on a monetary item for the purchase of debrciable asset is added to / deducted from the value of the asset and is debrciated over the life of the asset as per the notification in "Gazette of India" dated 31.3.2009 vide G.S.R. 225( E ) read with G.S.R. 913( E ) dated 29.12.2011. Exchange differences in respect of all other monetary assets and liabilities denominated in foreign currency are restated at the rates ruling at the year end and all exchange gains/ losses arising there from are adjusted to the Statement of Profit and Loss, except those covered by forward contracted rates where the brmium or discount arising at the inception of such forward exchange contract is amortized as expense or income over the life of the contract. Exchange differences on forward contracts are recognized in the Statement of Profit and Loss in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such forward contracts is recognized as income or expense for the year. For forward exchange contracts and other derivatives that are not covered by AS 11 'The Effects of Changes in Foreign Exchange Rates', the Company follows the guidance in the announcement of the Institute of Chartered Accountants of India (ICAI) dated 29 March, 2008, whereby for each category of derivatives, the Company records any net mark-to-market losses. Net mark-to-market gains are not recorded for such derivatives. k) Employee Retirement Benefits: i) Defined Contribution Plans: The Company provides Defined Contribution Plans for post employment benefits in the form of Provident Fund and Superannuation Fund administered by Regional Provident Fund Commissioner and Life Insurance Corporation respectively. The Company's contributions to Defined Contribution Plans are charged to the Statement of Profit and Loss as and when incurred. Provident Fund and Superannuation Fund are classified as Defined Contribution Plan as the Company has no further obligation beyond making the contributions. ii) Defined Benefit Plans: Liability for Compensated Absence and Gratuity is provided on the basis of valuation as at the Balance Sheet date carried out by independent actuary. Projected Unit Credit (PUC) actuarial method is used to measure the plan liabilities, including those to death-in-service and incapacity benefits. The plan liability is the actuarial brsent value of the 'projected accrued benefits' as of the beginning of the year for active members. Termination benefits are recognised as an expense as and when incurred. Actuarial gains and losses arising during the year are recognised in the Statement of Profit and Loss of the year. l) Leases Leases of assets under which significant risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments under an operating lease are recognized as expense in the Statement of Profit and Loss on a straight line basis over the lease term. m) Accounting for Taxes on Income The tax expense comprises of Current Taxes and Deferred Taxes. Current tax is the amount of income tax determined to be payable in respect of taxable income for a period as per the provisions of the Income-Tax Act, 1961 ("IT Act"). The Company accounts for tax credit in respect of Minimum Alternate Tax ("MAT") in situations where the MAT payable is higher than tax payable under normal provisions of the IT Act. The credit so availed is adjusted in future years when the tax under normal provisions is higher than MAT payable to the extent of the said difference. Deferred tax is the effect of timing differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax assets are reviewed at each Balance Sheet date and recognized/derecognized only to the extent that there is reasonable/ virtual certainty, depending on the nature of the timing differences, that sufficient future taxable income will be available against which such Deferred Tax assets can be realized. n) Provisions, Contingent Liabilities and Contingent Assets i) A provision is recognized when there is a brsent obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation and in respect of which reliable estimate can be made. Provisions are reviewed at each Balance Sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources would be required to settle the obligation, the provision is reversed. ii) A disclosure for a contingent liability is made when there is a possible obligation or a brsent obligation but probably will not require an outflow of resources. When there is a possible obligation or a brsent obligation in respect of which the likelihood on outflow of resources is remote, no provision or disclosure is made. iii) Contingent assets are not recognized in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognized in the period in which the change occurs. o) Segment Reporting The accounting policies adopted for segment reporting are in conformity with the accounting policies adopted for the Company. Further, a) Inter segment revenue has been accounted for based on the transaction price agreed between segments which is primarily market based. b) Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the Company as a whole and are not allocable to segments on a reasonable basis, have been included under "Un-allocated expenses net of fun-allocated income". p) Earnings per share Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events of bonus issue and share split. For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares. q) Cash and Cash Equivalents Cash and cash equivalents comprise of cash and deposits with banks. The Company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible into known amounts of cash to be cash equivalents. 2. In accordance with Accounting Standard 19 - 'Leases' issued by the Institute of Chartered Accountants of India (ICAI), the Company does not have any non cancellable operating lease. 3. Estimated amount of capital contracts remaining to be executed and not provided for, net of advances Rs. 838.40 lacs (Previous year Rs. 2,632.60 lacs). 4. Previous year's amounts have been regrouped/ rearranged wherever considered necessary to conform with the classification of current year. For Walker Chandiok & Co LLP Chartered Accountants per Anamitra Das Partner Membership No.: 062191 For and on behalf of the Board of Directors Bikram Nag Joint Executive Chairman Arup Kumar Banerjee Vice Chairman and Managing Director Ritesh Agarwal Company Secretary Dipak Sen Chief Financial Officer Kolkata, 14th May, 2016 |