NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST MARCH, 2016 1. Corporate information Avanti Feeds Limited, (the Company) is a listed public company under "The Companies Act, 1956", with its registered office in Visakhapatnam. Avanti Feeds Limited had started its commercial operations in 1993 and now stands as the leading manufacturer of Prawn Feed, Shrimp Processor and exporter from India catering to the quality standards of global shrimp customers and in providing best technical support to the former. During the year the Company divested its Shrimp Processing & Export Division to its subsidiary M/S Avanti Frozen Foods Private Limited (AFFPL) under slump sale. The effective date of transfer of the Shrimp Processing & Export Division to AFFPL was 01.11.2015. Being a food products exporting company, Company has to transfer the statutory and regulatory licenses with in India and in USA to AFFPL so as to enable AFFPL to carry on the business in its name. The process of obtaining the approvals from ail departments in India is a lengthy process. Once the inland approvals are obtained, Company has to approach US Department of Commerce for 'Changed Circumstances Review' to allow AFFPL to export to US at Anti Dumping Duty of 2.96% which is brsently applicable to Company. In the absence of this, ail exports to USA by AFFPL will attract 10.17% ADD. In order to maintain the continuity of the business during these statutory approvals period, your Company is continuing the Shrimp processing & Export business in its own name on behalf of AFFPL. 2. Basis of brparation The financial statements of the company have been brpared in accordance with generally accepted accounting principles in India (Indian GAAP) to comply in ail material respects with the accounting standards specified under section 133 of the Companies Act, 2013 read with rule 7 of the Company's (accounts) rules, 2014, and the relevant provisions of the Companies Act, 2013. The financial statements have been brpared on an accrual basis and under the historical cost convention. The accounting policies adopted in the brparation of financial statements are consistent with those of brvious year. 2.1 Summary of significant accounting policies a) Use of estimates The brparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management's best knowledge of current events and actions, uncertainty about these assumptions and estimates could resuit in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. b) Tangible fixed assets Fixed assets are stated at cost, net of accumulated debrciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its brviously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred. Assets individually costing less than Rs. 5,000 are fully debrciated in the year of acquisition. c) Debrciation on tangible fixed assets Debrciation on tangible assets is provided on the straight-line method over the useful lives of assets as brscribed in schedule II to the Companies Act, 2013. Debrciation for assets purchased /sold during the period is proportionately charges. d) Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred. e) Amortization of intangible assets Software acquired is measured at cost less accumulated amortisation and is amortised using the straight line method over a period of six years. f) Expenditure on new projects and substantial expansion Expenditure directly relating to construction activity is capitalized. Indirect expenditure incurred during construction year is capitalized as part of the indirect construction cost to the extent the expenditure is directly related to construction or is incidental thereto and rebrsents the marginal increase in such expenditure as a result of the capital expansion. Other indirect expenditure (including borrowing costs) incurred during the construction year, which is not related to the construction activity nor is incidental thereto, are charged to the statement of profit and loss. Related income earned during construction period is adjusted against the total of the indirect expenditure. g) Leases Company as a lessee Operating leases Leases, where the lesser effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term. h) Borrowing costs Borrowing cost includes interest and amortization of ancillary costs incurred in connection with the arrangement of borrowings. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur. i) Impairment of tangible and intangible assets The company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the company estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their brsent value using a br-tax discount rate that reflects current market assessments of the time value of money and the risks specifies to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. Impairment losses of continuing operations, including impairment on inventories, are recognized in the statement of profit and loss, except for brviously revalue tangible fixed assets, where the revaluation was taken to revaluation reserve. In this case, the impairment is also recognized in the revaluation reserve upto the amount of any brvious revaluation. An assessment is made at each reporting date as to whether there is any indication that brviously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the company estimates the asset's recoverable amount. A brviously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of debrciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit and loss unless the asset is carried at a revalue amount, in which case the reversal is treated as a revaluation increase. j) Government grants and subsidies Grants and subsidies from the government are recognized when there is reasonable assurance that (i) the company will comply with the conditions attached to them, and (ii) the grant/subsidy will be received. When the grant or subsidy relates to revenue, it is recognized as income on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs, which they are intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal amounts over the expected useful life of the related asset. Government grants of the nature of promoters' contribution are credited to capital reserve and treated as a part of the shareholders' funds. k) Investments Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. Ail other investments are classified as long-term investments. On initial recognition, ail investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties. If an investment is acquired, or partly acquired, by the issue of shares or other securities, the acquisition cost is the fair value of the securities issued. If an investment is acquired in exchange for another asset, the acquisition is determined by reference to the fair value of the asset given up or by reference to the fair value of the investment acquired, whichever is more clearly evident. Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments. On disposal of an investment, the difference between its carrying amount and net disposai proceeds is charged or credited to the statement of profit and loss. I) Inventories i. Raw Materials, Packing Materials and Stores & Spares are stated at weighted average cost. ii. Work-in -progress is valued atcost. iii. Stock in Transit is valued at lower of cost or net realizable value. iv. Finished goods are stated at lower of cost or net realizable value. Raw materials, components, stores and spares are valued at lower of cost and net realizable value. Cost of raw materials, components and stores and spares is determined on a weighted average basis. Work-in-progress, stock-in-transit and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost is determined on a weighted average basis. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. m) Revenue recognition Revenue is recognized to the extent that it is probable that the economies benefits will flow to the Company and the revenue can be reliably measured. The following specifies recognition criteria is also met before revenue is recognized: Sale of product Revenue from sale of goods is recognized when ail the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods. Sales are the invoiced value of goods supplied after deducting discount and allowances. Interest Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head "other income" in the statement of profit and loss. Dividends Dividend income is recognized when the Company's right to receive dividend is established by the reporting date. n) Foreign currency translation (i) Initial recognition Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. (ii) Conversion Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined. I) Inventories i. Raw Materials, Packing Materials and Stores & Spares are stated at weighted average cost. ii. Work-in -progress is valued at cost. iii. Stock in Transit is valued at lower of cost or net realizable value. iv. Finished goods are stated at lower of cost or net realizable value. Raw materials, components, stores and spares are valued at lower of cost and net realizable value. Cost of raw materials, components and stores and spares is determined on a weighted average basis. Work-in-progress, stock-in-transit and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost is determined on a weighted average basis. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. m) Revenue recognition Revenue is recognized to the extent that it is probable that the economie benefits will flow to the Company and the revenue can be reliably measured. The following specifie recognition criteria is also met before revenue is recognized: Sale of product Revenue from sale of goods is recognized when ail the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods. Sales are the invoiced value of goods supplied after deducting discount and allowances. Interest Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head "other income" in the statement of profit and loss. Dividends Dividend income is recognized when the Company's right to receive dividend is established by the reporting date. n) Foreign currency translation (i) Initial recognition Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. (ii) Conversion Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined. (iii) Exchange differences Exchange differences arising on the settlement of monetary items or on reporting company's monetary items at rates different from those at which they were initially recorded during the year, or reported in brvious financial statements, are recognized as income or as expenses in the year in which they arise. (iv) Forward exchange contracts entered into to hedge foreign currency risk of an existing asset/liability The brmium or discount arising at the inception of forward exchange contract is amortized and recognized as an expense/ income over the life of the contract. Exchange differences on such contracts, except the contracts which are long-term foreign currency monetary items, are recognized in the statement of profit and loss in the period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such forward exchange contract is also recognized as income or as expense for the period. o) Retirement benefits Retirement benefit in the form of provident fund is a defined contribution scheme. The company has no obligation, other than the contribution payable to the provident fund. The company recognizes contribution payable to the provident fund scheme as an expenditure, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the br payment will lead to, for example, a reduction in future payment or a cash refund. Gratuity is a defined benefit plan. The costs of providing benefits under the plan is determined on the basis of actuarial valuation at each year-end using the projected unit credit method. Actuarial gains and losses are recognized in full in the period in which they occur in the statement of profit and loss. Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The company brsents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date. p) Income taxes Tax expense comprises of current and deferred tax. Current taxis measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961 enacted in India. Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss. Deferred tax liabilities are recognized for ail taxable timing differences. Deferred tax assets are recognized for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the company has unabsorbed debrciation or carry forward tax losses, ail deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits. Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as "MAT Credit Entitlement." The company reviews the "MAT credit entitlement" asset at each reporting date and writes down the asset to the extent the company does not have convincing evidence that it will pay normal tax during the specified period. q) Segment reporting Identification of segments The company's operating businesses are organized and managed separately according to the nature of products and services provided, with each segment rebrsenting a strategie business unit that offers different products and serves different markets. The analysis of geographical segments is based on the areas in which major operating divisions of the company operate. Allocation of common costs Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs. Unallocated items Unallocated items include general corporate income and expense items which are not allocated to any business segment. Segment accounting policies The company brpares its segment information in conformity with the accounting policies adopted for brparing and brsenting the financial statements of the company as a whole. r) Earnings per share Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting brference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or 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 ail dilutive potential equity shares. s) Provisions A provision is recognized when the company has a brsent obligation as a result of past event, it is probable that an outflow of resources embodying economies benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not discounted to their brsent value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates. Where the company expects some or ail of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is brsented in the statement of profit and loss net of any reimbursement. t) Contingent liabilities A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the company or a brsent obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The company does not recognize a contingent liability but discloses its existence in the financial statements. u) Cash and cash equivalents Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less. v) Derivatives instruments The Company uses derivative financial instruments, such as, foreign currency forward contracts to hedge foreign currency risk arising from transactions in respect of which firm commitments are made or which are highly probable forecast transactions. As per the ICAI Announcement, derivative contracts, other than those covered under Accounting Standard-11, are accounted on the basis of hedging principles to the extent that the same does not conflict with the existing mandatory Accounting Standards, other Authoritative pronouncements and other regulatory requirements. 2. Details of dues to micro and small enterprises as defined under MSMED Act 2006. With the promulgation of the Micro, Small and Medium Enterprises Development Act, 2006, the Company is required to identify Micro, Small and Medium Suppliers and pay them interest on overdue beyond the specified period irrespective of the terms with the suppliers. The Company has circulated letter to ail suppliers seeking their status. Response from the suppliers is still awaited. In view of this, the liability of interest cannot be reliably estimated nor the required disclosures could be made, Accounting in this regard will be carried out after the process is completed and reliable estimate made in this regard. However management is of the opinion that liability in any case will be insignificant having regard to the supplier's profile of the company. 3. Previous year figures Previous year figures have been regrouped / reclassified, where necessary, to conform to this year's classification For and on behalf of the board A. Indra Kumar Chairman & Managing Director Place: Hyderabad Date : 21.05.2016 |