NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 NOTE 1 : COMPANY OVERVIEW Godrej Consumer Products Limited (the Company) was incorporated on November 29, 2000, to take over as a going concern the consumer products business of Godrej Soaps Limited (subsequently renamed as Godrej Industries Limited), pursuant to a Scheme of Arrangement as approved by the High Court, Mumbai. The Company is a focused fast moving consumer goods company, manufacturing and marketing Household and Personal Care products. The Company is domiciled in India and is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). NOTE 2 : SIGNIFICANT ACCOUNTING POLICIES a. Accounting Convention The financial statements are brpared under the historical cost convention, on accrual basis, in accordance with the Generally Accepted Accounting Principles in India. The Company has brpared these financial statements under the historical cost convention on an accrual basis to comply in all material respects with the Accounting Standards specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and other accounting principles generally accepted in India and the relevant provisions of the Companies Act 2013. The accounting policies have been consistently applied by the Company. All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria's set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and the time taken between acquisition of assets for processing and their realization in cash and cash equivalent, the Company has ascertain its operating cycle as twelve months for the purpose of the classification of assets and liabilities into current and non-current. b. Use of Estimates The brparation of financial statements in conformity with Generally Accepted Accounting Principles requires the Management to make estimates and assumptions that affect the reported balances of assets and liabilities as of the date of the financial statements and reported amounts of income and expenses during the period. Management believes that the estimates used in the brparation of financial statements are prudent and reasonable. Actual results could differ from the estimates and differences, if any, are recognised in the period in which the results are known / materialised. c. Fixed Assets Fixed assets are stated at cost (net of cenvat credit and capital subisidy / grant wherever applicable) less accumulated debrciation and impairment losses, if any. The cost includes cost of acquisition, construction, erection, installation etc, broperative expenses (including trial run) and borrowing costs incurred during construction period of the qualifying assets. Subsequent expenditure incurred on existing fixed assets is expensed out except where such expenditure increases the future economic benefits from the existing assets. d. Asset Impairment Management periodically assesses, using external and internal sources, whether there is an indication that an asset may be impaired. An impairment loss is recognised whenever the carrying value of the Asset exceeds its recoverable amount. Recoverable amount is higher of an asset's net selling price and its value in use. An impairment loss, if any, is recognised in the Statement of Profit and Loss in period in which the impairment takes place. e. Borrowing Costs Borrowing costs that are directly attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of that asset till the date it is ready for its intended use or sale. Other borrowing costs are recognised as an expense in the period in which they are incurred. f. Operating Leases Leases of assets under which significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Lease payments /receipts under operating leases are recognised as an expense / income on a straight-line basis over the lease term. g. Investments Investments are classified into current and non-current investments. Investments that are readily realizable and are intended to be held for a period less than twelve months from the date on which such investments are made are classified as 'Current Investments'. Investments other than Current Investments are classified as 'Non-current Investments'. Current Investments are stated at lower of cost and fair value and the resultant decline, if any, is charged to Statement of Profit and Loss. Non-Current Investments are carried at cost. Provision for diminution, if any, in the value of each non-current investment is made to recognise a decline, other than of a temporary nature. h. Inventories Inventories are valued at lower of cost and net realizable value. Cost is computed on the weighted average basis and is net of CENVAT credits. Finished goods and work in progress include cost of conversion and other costs incurred in bringing the inventories to their brsent location and condition. Finished goods valuation also includes excise duty. Provision is made for cost of obsolescence and other anticipated losses, whenever considered necessary. i. Provisions, Contingent Liabilities and Contingent Assets A provision is recognised when the enterprise has a brsent obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to their brsent values and are determined based on management estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates. Contingent Liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. Contingent Assets are neither recognised nor disclosed in the financial statements. j. Revenue Recognition i) Sales are recognised on supply of goods when significant risks and rewards of ownership in the goods are transferred to the buyer. Sales are recorded net of returns, trade discounts, rebates, sales taxes and excise duties. ii) Income from processing operations is recognised on completion of production / dispatch of the goods, as may be provided in the terms of contract. iii) Dividend income is recognised when the right to receive the same is established. iv) Interest income is recognised on a time proportion basis. k. Expenditure i) Expenses are accounted for on accrual basis, net of recoveries, if any and provision is made for all known losses and liabilities. ii) Revenue expenditure on research and development is charged to the Statement of Profit and Loss of the year in which it is incurred. Capital expenditure incurred during the year on research and development is shown as addition to fixed assets. l. Foreign Currency Transactions i) Transactions in foreign currency are recorded at the exchange rates brvailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currency remaining unsettled at the period end are translated at the period end exchange rates. The difference in translation of monetary assets and liabilities and realised gains and losses on foreign currency transactions are recognised in the Statement of Profit and Loss. ii) The Company uses forward exchange contracts to hedge its exposure against movements in foreign exchange rates. Forward exchange contracts, remaining unsettled at the period end, backed by underlying assets or liabilities are translated at period end exchange rates and the resultant gains and losses as well as the gains and losses on cancellation of such contracts are recognised in the Statement of Profit and Loss. Premium or discount on forward foreign exchange contracts is amortised over the period of the contract and recognised as income or expense for the period. Realised gain/losses on cancellation/settlement of forward exchange contracts are recognised in the Statement of Profit and Loss. m. Employee Benefits i) Short-term Employee benefits All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits. Short Term Employee Benefits are recognised as an expense at the undiscounted amount in the Statement of Profit and Loss of the year in which the employee renders the related service. ii) Post Employment Benefits a) Defined Contribution Plans Payments made to a defined contribution plan such as Provident Fund maintained with Regional Provident Fund Office and Superannuation Fund are charged as an expense in the Statement of Profit and Loss as they fall due. b) Defined Benefit Plans Gratuity Fund The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The Company's liability towards gratuity is actuarially determined using the Projected Unit Credit Method by an independent actuary. Actuarial gains and losses are recognised in the Statement of Profit and Loss as income or expense in the period in which they arise. Gratuity is payable to all eligible employees on death or on separation/termination in terms of the provisions of the payment of the Gratuity (Amendment) Act, 1997 or as per the Company's scheme whichever is more beneficial to the employees. Provident Fund Provident Fund Contributions which are made to a Trust administered by the Company are considered as Defined Benefit Plans. 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. The Company's liability towards interest shortfall, if any, is actuarially determined at the year end. c) Other Long Term Employee Benefits Other Long Term Employee Benefits viz, compensated absences and long service bonus are recognised as an expense in the Statement of Profit and Loss as and when it accrues. The Company determines the liability towards compensated absences based on an actuarial valuation carried out by an independent actuary as at the Balance Sheet date which is calculated using Projected Unit Credit Method. Actuarial gains and losses in respect of such benefits are charged to the Statement of Profit and Loss in the period in which they arise. n. Incentive Plans The Company has a scheme of Performance Linked Variable Remuneration (PLVR) which rewards its employees based on Economic Value Addition (EVA). The PLVR amount is related to actual improvements made in EVA over the brvious year when compared with expected improvements. Up to March 31, 2009, the EVA awards would flow through a notional bank whereby only the brscribed portion of the bank is distributed each year and the balance is carried forward. The amount distributed out of the notional bank is charged to the Statement of Profit and Loss. The notional bank was held at risk and charged to EVA of future years and was payable at that time, if future performance so warranted. The notional bank balance accumulated till March 31, 2009, as at the beginning of the current year is being paid @ 33% every year on reducing balance. The entire EVA award for the year has been charged to the Statement of Profit and Loss. o. Employee share based payments Equity settled stock options granted under the Company's Employee stock option (ESOP) scheme and Employee Stock Grant Scheme (ESGS) are accounted as per the accounting treatment brscribed by SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share based payments issued by ICAI. The Company measures compensation cost relating to employee stock options and stock grants using the intrinsic value method and compensation expense, if any, is amortised over the vesting period of the option on a straight line basis. p. Debrciation and Amortisation Debrciation is provided, under the Straight Line Method, pro rata to the period of use, based on useful lives specified in Schedule II to the Companies Act, 2013 except the following items where useful lives estimated by the management based on internal technical assessment, past trends and expected operational lives differ from those provided in Schedule II of the Companies Act 2013 : Tangible Assets i) Leasehold land is amortised equally over the lease period. ii) Leasehold Improvements are debrciated over the shorter of the unexpired period of the lease and the estimated useful life of the assets iii) Office Equipment are debrciated over 5 to 10 years iv) Tools, dies and moulds are debrciated over a period of 9 years and 3 years respectively. v) Vehicles are debrciated over a period ranging from 5 years to 8 years depending on the use of vehicles. Intangible Assets Intangible assets are amortised on straight line basis as given below: i) Software license is amortised over a period of 6 years. ii) SAP licenses acquired pursuant to the Scheme of the Amalgamation of the erstwhile Godrej Household Products Limited (GHPL) with the Company are amortised over a period of 4 years. The cost of SAP licenses incurred for certain subsidiaries are being recovered from respective subsidiaries. iii) Trademarks acquired are amortised equally over the best estimate of their useful life not exceeding a period of 10 years, except in the case of Goodknight and Hit brands where the brands are amortised equally over a period of 20 years. In accordance with the Court approved Scheme of Amalgamation of the erstwhile GHPL with the Company, an amount equivalent to the amortisation of the Goodknight and Hit brands at the end of each financial year is directly debited to the balance in the General Reserve Account. iv) Goodwill is amortised over a period of 5 years. v) Technical Knowhow is debrciated over a period of 10 years Residual value, is estimated to be immaterial by management and hence has been considered at Rs. 1. q. Taxes on Income Current tax is the amount of tax payable on the taxable income for the year determined in accordance with the provisions of the Income-tax Act, 1961. Deferred tax subject to consideration of prudence is recognised on timing differences; 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. Deferred tax asset / liabilities in respect of timing differences which originate and reverse during the tax holiday period are not recognised. Deferred tax assets are recognised and carried forward only to the extend that there is reasonable certainty that sufficient future taxable income will be available against which such deffered tax assets can be realized. Deferred tax assets on unabsorbed tax losses and tax debrciation are not recognised unless there is virtual certainty supported by convincing evidence that future taxable income will be available against which such deferred tax assets can be realized. MAT credit is recognized as an asset only when and to the extend there is convicing evidence that the company will pay normal tax during specified period. The tax effect is calculated on the accumulated timing differences at the year-end based on the tax rates and laws enacted or substantially enacted as on the balance sheet date. r. Cash and Cash Equivalents Cash and cash equivalents includes cash in hand, deposits with banks and short term highly liquid investments, which are readily convertible into cash and have maturities of three months or less from the Balance Sheet date. s. Earnings Per Share Basic Earnings per share is calculated by dividing the net profit for the period attributable to the equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit for the period attributable to the equity shareholders and the weighted average number of equity shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares. t. Segment Reporting The Company is considered to be a single segment company - engaged in the manufacture of Personal and Household Care products. Consequently, the Company has, in its primary segment, only one reportable business segment. As per AS-17 'Segment Reporting' if a single financial report contains both consolidated financial statements and the separate financial statement of the parent, segment information need be brsented only on the basis of the consolidated financial statements. Accordingly, information required to be brsented under AS-17 Segment Reporting has been given in the consolidated financial statements NOTE 3 : COMMITMENTS Estimated value of contracts remaining to be executed on capital account to the extent not provided for : Rs. 34.40 crore (brvious year Rs. 39.43 crore), net of advances there against of Rs. 3.40 crore (brvious year Rs. 20.30 crore). NOTE 4 : INCENTIVE PLAN The entire amount carried forward in notional bank as on March 31, 2016 amoutning to Rs. 0.38 crore has been provided for as PLVR for the financial year 2015-16 and the balance carried forward is NIL as on March 31, 2016 (brvious year Rs. 0.42 crore). NOTE 5 : DISCLOSURE U/S 186 (4) OF THE COMPANIES ACT, 2013 Details of Investments made are disclosed under Note 12 and details of corporate guarantees given to banks on behalf of other body corporates are disclosed under Note 31. NOTE 6 : GENERAL a) Other information required by Schedule III to the Companies Act, 2013, has been given only to the extent applicable. b) Figures for the brvious year have been regrouped / restated wherever necessary to conform to current year's brsentation. |