Mar 31, 2023
1. Corporate Information
Godrej Consumer Products Limited (the Company) was incorporated on November 29, 2000, to take over 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 fast moving consumer goods Company, manufacturing and marketing Household and Personal Care products. The Company is a public Company limited by shares, incorporated and domiciled in India and is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The Company''s registered office is at 4th Floor, Godrej One, Pirojshanagar, Eastern Express Highway, Vikhroli (East), Mumbai - 400 079.
2. Basis of preparation, Measurement and Significant Accounting Policies2.1 Basis of Preparation and measurementa) Basis of Preparation
The standalone financial statements have been prepared in accordance with Indian Accounting Standards ("Ind AS") as notified by Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act, 2013 (''Act'') read with the Companies (Indian Accounting Standards)
Rules, 2015 as amended from time to time and other relevant provisions of the Act.
The standalone financial statements have been prepared on accrual and going concern basis. The accounting policies are applied consistently to all the periods presented in the standalone financial statements.
All amounts disclosed in the standalone financial statements and notes have been rounded off to the nearest crore with 2 decimal places as per the requirements of Schedule III, unless otherwise stated.
The standalone financial statements of the Company for the year ended March 31, 2023 were approved for issue in accordance with the resolution of the Board of Directors on May 10, 2023.
Current versus non-current classification
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 taken between acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of the classification of assets and liabilities into current and noncurrent.
These standalone financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
⢠Certain financial assets and liabilities (including derivative instruments) measured at fair value (refer accounting policy regarding financial instruments -2.4.f),
⢠Defined benefit plans -plan assets/(liability) and share-based payments measured at fair value (Note 50 & 51).
2.2 Key judgements, estimates and assumptions
In preparing these standalone financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
The areas involving critical estimates or judgements are:
i. Determination of the
estimated useful lives of tangible assets and the assessment as to which components of the cost may be capitalized; (Note 2.4 (a))
ii. Determination of the estimated useful lives of intangible assets and determining intangible assets having an indefinite useful life; (Note 2.4 (b))
iii. Recognition and measurement of defined benefit obligations, key actuarial assumptions; (Note 50)
iv. Recognition and measurement of provisions and contingencies, key assumptions about the likelihood and magnitude of an outflow of resources; (Note 2.4 (j))
v. Fair valuation of employee share options, Key assumptions made with respect to expected volatility; (Note 2.4 (l)(ii)) and Note 51
vi. Fair values of financial instruments (Note 2.3)
vii. Impairment of financial and Non- Financial assets (Note 2.4.(f)(i) and 2.4(d))
viii. Recognition of deferred tax assets - availability of future taxable profits against which deferred tax assets (e.g. MAT) can be used (Note 12)
ix. Estimations of discounts, rebates and sales returns; (Note 2.4(k))
2.3 Measurement of fair values
The Company''s accounting policies and disclosures require financial instruments to be measured at fair values.
The Company has an established control framework with respect to the measurement of fair values. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
The management regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the management assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which such valuations should be classified.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. Further information about the assumptions made in measuring fair value is included in the Note 2.4.(f).
2.4 Significant Accounting Policiesa) Property, Plant and Equipment
Items of property, plant and equipment, other than freehold land, are measured at cost less accumulated depreciation and any accumulated impairment losses. Freehold land is carried at cost and is not depreciated.
The cost of an item of property, plant and equipment
comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable costs of bringing the asset to its working condition for its intended use and estimated costs of dismantling and removing the item and restoring the item and restoring the site on which it is located. If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.
Any gain or loss on derecognition of an item of property, plant and equipment is included in the statement of profit and loss when the item is derecognised.
Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate only if it is probable that the future economic benefits associated with the item will flow to the Company and that the cost of the item can be reliably measured. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to the statement of profit and loss during the reporting period in which they are incurred.
Property, plant and equipment which are not ready for
intended use as on the date of Balance Sheet are disclosed as "Capital work-in-progress".
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under "Other Non-Current Assets".
Depreciation
Depreciation 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 for 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:
⢠Leasehold land is amortised equally over the lease period.
⢠Leasehold Improvements are depreciated over the shorter of the unexpired period of the lease and the estimated useful life of the assets.
⢠Office Equipments are depreciated over 5 to 10 years.
⢠Tools (Die sets) are depreciated over a period of 9 years, and moulds over 3 years.
⢠Vehicles are depreciated over a period ranging from 5 years to 8 years depending on the use of vehicles.
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
b) Goodwill and other Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any amortisation and accumulated impairment losses. Internally generated intangibles, excluding eligible development costs are not capitalized and the related expenditure is reflected in the statement of profit and loss in the period in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Goodwill
Goodwill is not amortised but it is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset may be impaired, and is carried at cost less accumulated impairment
losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Other intangible assets
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization method and period are reviewed at least at the end of each reporting period. Changes in the expected useful life or expected pattern of consumption of future economic benefits embodied in the assets are considered to modify amortization period or method, as appropriate, and are treated as changes in accounting estimates.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually and whenever there is an indication that the intangible asset may be impaired. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the
net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
Amortisation
Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives, and is recognised in Statement of profit and loss.
The estimated useful lives for current and comparative periods are as follows:
Software licences 6 years Trademarks 10 years
Technical knowhow 10 years
Goodknight and Hit (Brands) are assessed as intangibles having indefinite useful life and are not amortised in the standalone financial statements.
Residual value, is estimated to be immaterial by management and hence has been considered at '' 1.
Interest and other borrowing costs attributable to qualifying assets are capitalized. Other interest and borrowing costs are recognised as an expense in the period in which they are incurred.
d) Impairment of non-financial assets
An impairment loss is recognised whenever the carrying value of an asset or a cash-generating unit exceeds its recoverable amount. Recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs of disposal and its value in use. An impairment loss, if any, is recognised in the Statement of Profit and Loss in the period in which the impairment takes place. The impairment loss is allocated first to reduce the carrying amount of any goodwill (if any) allocated to the cash generating unit and then to the other assets of the unit, pro rata based on the carrying amount of each asset in the unit.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events and changes in circumstances indicate the carrying amount may not be recoverable. An impairment loss recognized for goodwill is not reversed in a subsequent period.
Non-current assets or disposal groups comprising of assets
and liabilities are classified as ''held for sale'' if it is highly probable that they will be recovered primarily through sales rather than through continuing use.
Subsequently, such non-current assets and disposal groups classified as held for sale are measured at lower of its carrying value and fair value less costs to sell. Losses on initial classification as held for sale and subsequent gains and losses on re-measurement are recognised in profit and loss. Non-current assets held for sale are not depreciated or amortised.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial instruments also include derivative contracts such as foreign currency foreign exchange forward contracts, futures and currency options.
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales
of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset. However, trade receivables that do not contain a significant financing component are measured at transaction price.
Subsequent measurement
For the purpose of subsequent measurement, financial assets are classified in four categories on the basis of its business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.
⢠Financial assets at
amortised cost,
⢠Financial assets
at fair value through other comprehensive income (FVTOCI)
⢠Financial assets at
fair value through profit and loss (FVTPL)
⢠Equity instruments measured at fair value through other
comprehensive income (FVTOCI) or fair value through statement of profit and loss (FVTPL).
Financial assets at amortised cost
A financial asset is measured at the amortised cost if both the following conditions are met: The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the Effective Interest Rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the statement of profit and loss. The losses arising from impairment are recognised in the statement of profit and loss. This category generally applies to trade and other receivables.
For more information on receivables, refer to Note 54(B).
Financial assets at fair value through other comprehensive income (FVTOCI)
A debt instrument is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL
- the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment''s fair value in OCI (designated as
FVOCI - equity investment). This election is made on an investment-byinvestment basis.
Financial assets at fair value through profit or loss (FVTPL)
Any financial asset, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may, at initial recognition, irrevocably designate a financial asset, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch'').
Financial assets included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss. This includes all derivative financial assets.
Equity investments
All equity investments within the scope of Ind-AS 109 are measured at fair value. Equity instruments which are held for trading
are classified as at FVTPL. For all other equity instruments, the Company decides to classify the same either as at FVTOCI or FVTPL. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the Other Comprehensive Income (OCI). There is no recycling of the amounts from OCI to the statement of profit and loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the statement of profit and loss.
Investments in subsidiaries are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount
of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiaries, the difference between net disposal proceeds and the carrying amounts are recognized in the Statement of Profit and Loss.
A financial asset (or, where applicable, a part of a financial asset or a part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Company''s balance sheet) when:
⢠The contractual rights to receive cash flows from the financial asset have expired, or
⢠The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay
the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Company has
transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
The Company assesses on a forward looking basis the Expected Credit Losses (ECL) associated with its financial assets that are debt instruments and are carried
at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables, the Company applies a simplified approach. It recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. Trade receivables are tested for impairment on a specific basis after considering the sanctioned credit limits, security deposit collected etc. and expectations about future cash flows.
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss or at amortised cost.
A financial liability is classified at FVTPL if it is classified as held for trading or as derivatives designated as hedging instruments in an effective hedge, as appropriate. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value and net gains and losses including any interest expenses are recognised in the statement of profit or loss.
In the case of loans and borrowings and payables, these are measured at amortised cost and recorded, net of directly attributable and incremental transaction cost. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are derecognized as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
The Company''s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
Financial guarantee contracts issued by the Company are those contracts that require specified payments to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind-AS 109 and the amount recognised less cumulative amortisation.
Where guarantees to subsidiaries in relation to loans or other payables are provided for, at no
compensation, the fair values are accounted for as contributions and recognised as fees receivable under "other financial assets" or as a part of the cost of the investment, depending on the contractual terms.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to to realise the assets and settle the liabilities simultaneously.
g) Derivative financial
instruments and hedge accounting
The Company uses derivative financial instruments, such as forward currency contracts and cross currency interest rate swaps, to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Any changes therein are generally recognised in the statement of profit and loss account. Derivatives are carried as financial assets when the fair value is positive and as financial
liabilities when the fair value is negative.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Company''s risk management objective and strategy for undertaking the hedge, the hedging economic relationship between the hedged item or transaction and the nature of the risk being hedged, hedge rationale and how the entity will assess the effectiveness of changes in the hedging instrument''s fair value in offsetting the exposure to changes in hedged item''s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they are designated.
Cash flow hedges
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in OCI and
accumulated in the other equity under ''effective portion of cash flow hedges''. The effective portion of changes in the fair value of the derivative that is recognised in OCI is limited to the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the statement of profit and loss.
If a hedge no longer meets the criteria for hedge accounting or the hedging instrument is sold, expires, is terminated or is exercised, then hedge accounting is discontinued prospectively. When hedge accounting for a cash flow hedge is discontinued, the amount that has been accumulated in other equity remains there until it is reclassified to the statement of profit and loss account in the same period or periods as the hedged expected future cash flows affect the statement of profit and loss. If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in other equity are immediately re-classified to the statement of profit and loss.
Inventories are valued at the lower of cost and net realizable value. Net realizable
value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Costs are computed on the weighted average basis and are net of GST credits.
Raw materials, packing materials and stores: Costs includes cost of purchase and other costs incurred in bringing each product to its present location and condition.
Finish goods and work in progress: In the case of manufactured inventories and work in progress, cost includes all costs of purchases, an appropriate share of production overheads based on normal operating capacity and other costs incurred in bringing each product to its present location and condition
Provision is made for cost of obsolescence and other anticipated losses, whenever considered necessary.
If payment for inventory is deferred beyond normal credit terms, then the cost is determined by discounting the future cash flows at an interest rate determined with reference to market rates. The difference between the total cost and the deemed cost is recognised as interest expense over the period of financing under the effective interest method.
Cash and cash equivalents in the balance sheet includes cash at bank and on hand, deposits held at call with financial institutions, other short term highly liquid investments, with original maturities less than three months which are readily convertible into cash and which are subject to insignificant risk of changes in value.
j) Provisions, Contingent Liabilities and Contingent Assets
A provision is recognised when the enterprise has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, in respect of which a reliable estimate can be made. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows specific to the liability. The unwinding of the discount is recognised as finance cost.
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.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. Contingent Assets are not recognised till the realization of the income is virtually certain. However the same are disclosed in the standalone financial statements where an inflow of economic benefits is probable.
Revenue is recognized upon transfer of control of promised goods to customers for an amount specified in the customer contract that reflects the consideration expected to be received in exchange for those goods. Revenue excludes taxes or duties collected on behalf of the government.
Sale of goods
Revenue from sale of goods is recognized when control of goods are transferred to the buyer which is generally on delivery for domestic sales and on dispatch/delivery for export sales
The Company recognizes revenues on the sale of products, net of returns, discounts, amounts collected on behalf of third parties (such as GST) and payments or other consideration given to the customer that has impacted the pricing of the transaction.
Accumulated experience is used to estimate and accrue for the discounts (using the most likely method) and returns considering the terms of the underlying schemes and agreements with the customers. No element of financing is deemed present as the sales are made with normal credit days consistent with market practice. A liability is recognised where payments are received from customers before transferring control of the goods being sold
Royalty & Technical Fees
Royalty and Technical fees are recognized on accrual basis in accordance with the substance of their relevant agreements.
Interest income
For all debt instruments measured at amortised cost, interest income is recorded using the effective interest rate (EIR). EIR is the rate which exactly discounts the estimated future cash receipts over the expected life of the financial instrument to the gross carrying amount of the financial asset. When calculating the EIR, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayments, extensions, call and similar options). The expected credit losses are considered if the credit risk on that financial instrument has
increased significantly since initial recognition.
Dividend income
Dividends are recognised in the statement of profit and loss on the date on which the Company''s right to receive payment is established.
i) Short-term Employee benefits
Liabilities for wages and salaries including non-monetary benefits that are expected to be settled wholly within twelve months after the end of the period in which the employees render the related service are classified as short term employee benefits and are recognized as an expense in the Statement of Profit and Loss as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
The cost of equity settled transactions is determined by the fair value at the grant
date. The fair value of the employee share options is based on the Black Scholes model for time-based options and a combination of Monte-Carlo Simulation and Black-Scholes Merton model for performance-based options.
The grant-date fair value of equity-settled share-based payment granted to employees is recognized as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with market performance conditions and non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
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. Contributions to defined contribution schemes such as employees'' state insurance, labour welfare fund, superannuation scheme, employee pension scheme etc. are charged as an expense based on the amount of contribution required to be made as and when services are rendered by the employees. The above benefits are classified as Defined Contribution Schemes as the Company has no further defined obligations beyond the monthly contributions.
Defined Benefit Plans
The Company has an
obligation towards gratuity, a defined benefit retirement plan covering eligible employees. 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 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.
The Company''s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees
have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed at each reporting period by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.
Re-measurement of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to the statement of profit
and loss in subsequent periods.
Net interest expense (income) on the net defined liability (assets) is computed by applying the discount rate, used to measure the net defined liability (asset), to the net defined liability (asset) at the start of the financial year after taking into account any changes as a result of contribution and benefit payments during the year. Net interest expense and other expenses related to defined benefit plans are recognised in the statement of profit and loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in the statement of profit and loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
iv) Other Long Term Employee Benefits
The liabilities for earned leaves and other long term incentives are not expected to be settled wholly within 12 months after the end of the
period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees upto the end of the reporting period using the projected unit credit method based on actuarial valuation or based on management estimates
Actuarial gains and losses in respect of such benefits are charged to the Statement Profit or Loss account in the period in which they arise.
m) Leases
At the inception it is assessed, whether a contract is a lease or contains a lease. A contract is a lease or contains a lease if it conveys the right to control the use of an identified asset, for a period of time, in exchange for consideration.
To assess whether a contract conveys the right to control the use of an identified asset, company assesses whether the contract involves the use of an identified asset. Use may be specified explicitly or implicitly.
⢠Use should be physically distinct or represent substantially all of the
capacity of a physically distinct asset.
⢠If the supplier has a substantive substitution right, then the asset is not identified.
⢠Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use.
⢠Company has the right to direct the use of the asset.
⢠In cases where the usage of the asset is predetermined the right to direct the use of the asset is determined when the company has the right to use the asset or the company designed the asset in a way that predetermines how and for what purpose it will be used.
At the commencement or modification of a contract, that contains a lease component, company allocates the consideration in the contract, to each lease component, on the basis of its relative standalone prices. For leases of property, it is elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.
As a Lessee:
The Company recognizes a right-of-use asset and a lease liability at the lease commencement date.
Right-of-use asset (ROU):
The right-of-use asset is initially measured at cost.
Cost comprises of the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, any initial direct costs incurred by the lessee, an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located less any lease incentives received.
After the commencement date, a lessee shall measure the right-of-use asset applying cost model, which is Cost less any accumulated depreciation and any accumulated impairment losses and also adjusted for certain re-measurements of the lease liability.
Right-of-use asset is depreciated using straightline method from the commencement date to the end of the lease term. If the lease transfers the ownership of the underlying asset to the company at the end of the lease term or the cost of the right-of-use asset reflects company will exercise the purchase option, ROU will be depreciated over the useful life of the underlying asset, which
is determined based on the same basis as property, plant and equipment
Lease liability is initially measured at the present value of lease payments that are not paid at the commencement date. Discounting is done using the implicit interest rate in the lease, if that rate cannot be readily determined, then using company''s incremental borrowing rate. Incremental borrowing rate is determined based on entity''s borrowing rate adjusted for terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprises of fixed payments (including in substance fixed payments), variable lease payments that depends on an index or a rate, initially measured using the index or rate at the commencement date, amount expected to be payable under a residual value guarantee, the exercise price under a purchase option that the company is reasonably certain to exercise, lease payments in an optional renewal period if the company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the company is reasonably certain not to terminate early
Lease liability is measured at amortised cost using the effective interest method.
Lease liability is re-measured when there is a change in the lease term, a change in its assessment of whether it will exercise a purchase, extension or termination option or a revised in-substance fixed lease payment, a change in the amounts expected to be payable under a residual value guarantee and a change in future lease payments arising from change in an index or rate.
When the lease liability is re-measured corresponding adjustment is made to the carrying amount of the right-of-use asset. If the carrying amount of the right-of-use asset has been reduced to zero it will be recorded in statement of profit and loss.
Right-of-use asset and lease liabilities are presented separately in the balance sheet
Company has elected not to recognise right-of-use assets and lease liabilities for short term leases. The lease payments associated with these leases are recognised as an expense on a straight-line basis over the lease term.
At the commencement or modification of a contract, that contains a lease component, Company allocates the consideration in the contract, to each lease component, on the basis of its relative standalone prices.
At the inception of the lease, it is determined whether it is a finance lease or an operating lease. If the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset, then it is a financial lease, otherwise it is an operating lease.
If the lease arrangement contains lease and nonlease components, then the consideration in the contract is allocated using the principles of IND AS 115. The Company tests for the impairment losses at the year end. Payment received under operating lease is recognised as income on straight line basis, over the lease term.
Income tax expense/ income comprises current tax expense /income and deferred tax/ expense income. It is recognised in the statement of profit and loss except to the extent that it relates to items recognised directly in equity or in Other comprehensive income, in which case, the tax is also recognized directly in equity or other comprehensive income, respectively.
Current Tax
Current tax comprises the expected tax payable or recoverable on the taxable profit or loss for the year and any adjustment to the tax payable or recoverable in respect of previous years. It
is measured using tax rates enacted or substantively enacted by the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretations and establishes provisions where appropriate.
⢠Current tax assets and liabilities are offset only if, the Company has a legally enforceable right to set off the recognised amounts; and
⢠Intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred Tax
Deferred Income tax is recognised in respect of temporary difference between the carrying amount of assets and liabilities for financial reporting purpose and the amount considered for tax purpose.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilised such reductions are reversed when it becomes probable that sufficient taxable profits will be available.
Unrecognized deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be recovered.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if:
i. the entity has a legally enforceable right to set off current tax assets against current tax liabilities; and
ii. the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same
taxation authority on the same taxable entity.
Deferred tax asset / liabilities in respect of temporary differences which originate and reverse during the tax holiday period are not recognised. Deferred tax assets / liabilities in respect of temporary differences that originate during the tax holiday period but reverse after the tax holiday period are recognised
Minimum Alternate Tax (MAT) credit is recognized as an asset only when and to the extent there is a convincing evidence that the Company will pay normal tax during specified period.
o) Foreign Currency Transactions
i) Functional and Presentation currency
The Company''s standalone financial statements are prepared in Indian Rupees (INR "''") which is also the Company''s functional currency.
ii) Transactions and balances
Foreign currency transactions are recorded on initial recognition in the functional currency using the exchange rate at the date of the
transaction.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Nonmonetary items that are measured based on historical cost in a foreign currency are translated using the exchange rate at the date of the initial transaction. Nonmonetary items that are measured at fair value in a foreign currency are translated using the exchange rate at the date the fair value is determined.
Exchange differences arising on the settlement or translation of monetary items are recognized in the statement of profit and loss in the year in which they arise except for the qualifying cash flow hedge, which are recognised in OCI to the extent that the hedges are effective.
Government grants, including non-monetary grants at fair value are recognised when there is reasonable assurance that the grants will be received and the Company will comply with all the attached conditions.
When the grant relates to an expense item, it is recognised
as income on a systematic basis over the periods necessary to match them with the costs that they are intended to compensate.
Government grants relating to purchase of property, plant and equipment are included in noncurrent liabilities as deferred income and are credited to the the statement of profit and loss on a straight line basis over the expected lives of the related assets.
The Company recognises a liability for any dividend declared but not distributed at the end of the reporting period, when the distribution is authorised and the distribution is no longer at the discretion of the Company on or before the end of the reporting period.
As per Corporate laws in India, a distribution in the nature of final dividend is authorized when it is approved by the shareholders. A corresponding amount is recognized directly in equity.
Basic earnings per share is calculated by dividing the profit or loss 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 profit or loss for the period
attributable to the equity shareholders and the weighted average number of equity shares outstanding during the period is adjusted to take into account:
⢠The after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
⢠Weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
s) Segment Reporting
As per Ind AS-108 ''Operating Segments'', if a financial report contains both the consolidated financial statements of a parent that is within the scope of Ind AS-108 as well as the parent''s separate financial statements, segment information is required only in the consolidated financial statements. Accordingly, information required to be presented under Ind AS-108 Operating Segments has been given in the consolidated financial statements.
t) Business Combination
Business combinations are accounted for using the acquisition accounting method as at the date of the acquisition, which is the date at which control is transferred
to the Company. The consideration transferred in the acquisition and the identifiable assets acquired and liabilities assumed are recognised at fair values on their acquisition date. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. The Company recognises any non-controlling interest in the acquired entity on an acquisition-by acquisition basis either at fair value or at the noncontrolling interest''s proportionate share of the acquired entity''s net identifiable assets. Consideration transferred does not include amounts related to settlement of preexisting relationships. Such amounts are recognised in the Statement of Profit and Loss. Transaction costs are expensed as incurred, other than those incurred in relation to the issue of debt or equity securities.
Any contingent consideration payable is measured at fair value at the acquisition date. Subsequent changes in the fair value of contingent consideration are recognised in the Statement of Profit and Loss.
pronouncements which are not yet effective
The Ministry of Corporate Affairs (''MCA'') notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Amendment Rules as issued from time to time. On March 31,2023 MCA amended the Companies (Indian Accounting Standards) Rules, 2015 by issuing the Companies (Indian Accounting Standards) Amendment Rules, 2023, applicable from April 1,2023, as below :
Ind AS 1 - Presentation of Financial Statements The amendment require companies to disclose their material accounting policies rather than their significant accounting policies. Accounting policy information, together with other information, is material when it can reasonably be expected to influence decisions of primary users of general-purpose financial statements. The company does not expect this amendment to have any significant impact in its standalone financial statements.
Mar 31, 2022
(Indian Accounting Standards) Rules, 2015 as amended from time to time and other relevant provisions of the Act. The standalone financial statements have been prepared on accrual and going concern basis. The accounting policies are applied consistently to all the periods presented in the standalone financial statements. Current versus non-current classification 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 taken between acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of the classification of assets and liabilities into current and noncurrent. The standalone financial statements of the Company for theyearended March 31, 2022 were approved for issue in accordance with the resolution ofthe Board of Directors on May 19, 2022. b) Basis of Measurement These standalone financial statements have been prepared on a historical cost Godrej Consumer Products Limited (the Company) was incorporated on November 29, 2000, to take over the consumer products business of Godrej Soaps Limited (subsequently renamed as Godrej Industries Limited), pursuant to a Scheme of Arrangement as approved bythe High Court, Mumbai. The Company is a fast moving consumer goods Company, manufacturing and marketing Household and Personal Care products. The Company is a public Company limited by shares, incorporated and domiciled in India and is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The Company''s registered office is at 4th Floor, Godrej One, Pirojshanagar, Eastern Express Highway, Vikhroli (East), Mumbai - 400 079. 2. Basis of preparation, Measurement and Significant Accounting Policies 2.1 Basis of Preparation and measurementa) Basis of Preparation The standalone financial statements have been prepared in accordance with Indian Accounting Standards ("Ind AS") as notified by Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act, 2013 (''Act'') read with the Companies basis, except for the following assets and liabilities which have been measured at fair value: ⢠Certain financial assets and liabilities (including derivative instruments) measured at fair value (refer accounting policy regarding financial instruments -2.4.f), ⢠Defined benefit plans -plan assets/(liability) and share-based payments measured at fair value (Note 45 & 46). 2.2 Key judgements, estimates and assumptions In preparing these standalone financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The areas involving critical estimates orjudgements are: i. Determinationofthe estimated useful lives of tangible assets and the assessment as to which components of the cost may be capitalized; (Note 2.4 (a)) ii. Determinationofthe estimated useful lives of intangible assets and determining intangible assets having an indefinite useful life; (Note 2.4 (b)) iii. Recognition and measurement of defined benefit obligations, key actuarial assumptions; (Note 45) iv. Recognition and measurement of provisions and contingencies, key assumptions about the likelihood and magnitude of an outflow of resources; (Note 2.4 (j)) v. Fairvaluationof employee share options, Key assumptions made with respect to expected volatility; (Note 2.4 (l)(ii)) and note 46 vi. Fairvaluesoffinancial instruments (Note 2.3) vii. Impairmentoffinancial and Non- Financial assets (Note 2.4.(d) and (f)) viii. Recognition of deferred tax assets - availability of future taxable profits against which deferred tax assets (e.g. MAT) can be used (Note 9) 2.3 Measurement of fair values The Company''s accounting policies and disclosures require financial instruments to be measured at fair values. The Company has an established control framework with respect to the measurement of fair values. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. The management regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the management assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which such valuations should be classified. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows. Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognises transfers between levels ofthe fair value hierarchy at the end of the reporting period during which the change has occurred. Further information about the assumptions made in measuring fair value is included in the Note 2.4.(f). 2.4 Significant Accounting Policies a) Property, Plant and Equipment Recognition and measurement Items of property, plant and equipment, other than Freehold Land, are measured at cost less accumulated depreciation and any accumulated impairment losses. Freehold land is carried at cost and is not depreciated. The cost of an item of property, plant and equipment comprises its purchase price, Depreciation Depreciation 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 for 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: ⢠Leasehold land is amortised equally over the lease period. ⢠Leasehold Improvements are depreciated over the shorter of the unexpired period ofthe lease and the estimated useful life of the assets. ⢠Office Equipments are depreciated over 5to10 years. ⢠Tools (Die sets) are depreciated over a period of 9 years, and moulds over 3 years. ⢠Vehicles are depreciated over a period ranging from 5 years to 8 years depending on the use of vehicles. Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable costs of bringing the asset to its working condition for its intended use and estimated costs of dismantling and removing the item and restoring the item and restoring the site on which it is located. If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment. Any gain or loss on derecognition of an item of property, plant and equipment is included in the statement of profit and loss when the item is derecognised. Subsequent expenditure Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate only if it is probable that the future economic benefits associated with the item will flow to the Company and that the cost ofthe item can be reliably measured. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to the statement of profit and loss during the reporting period in which they are incurred. b) Goodwill and other Intangible Assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any amortisation and accumulated impairment losses. Internally generated intangibles, excluding eligible development costs are not capitalized and the related expenditure is reflected in the statement of profit and loss in the period in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite. Goodwill Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset may be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Other intangible assets Intangible assets with finite Amortisation Amortisation is calculated to write offthe cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives, and is recognised in Statement of profit and loss. The estimated useful lives for current and comparative periods are as follows: Software licences 6 years Trademarks 10years Technical knowhow 10 years Goodknight and Hit (Brands) are assessed as intangibles having indefinite useful life and are not amortised in the standalone financial statements. Residual value, is estimated to be immaterial by management and hence has been considered at '' 1. c) Borrowing Costs Interest and other borrowing costs attributable to qualifying assets are capitalized. Other interest and borrowing costs are recognised as an expense in the period in which they are incurred. d) Impairment of non-financial assets An impairment loss is recognised whenever the carryingvalueofanasset or a cash-generating unit exceeds its recoverable amount. Recoverable amount of an lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization method and period are reviewed at least at the end of each reporting period. Changes in the expected useful life or expected pattern of consumption of future economic benefits embodied in the assets are considered to modify amortization period or method, as appropriate, and are treated as changes in accounting estimates. Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually and whenever there is an indication that the intangible asset may be impaired. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized. asset or a cash-generating unit is the higher of its fair value less costs of disposal and its value in use. An impairment loss, if any, is recognised in the Statement of Profit and Loss in the period in which the impairment takes place. The impairment loss is allocated first to reduce the carrying amount of any goodwill (if any) allocated to the cash generating unit and then to the other assets of the unit, pro rata based on the carrying amount of each asset in the unit. Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events and changes in circumstances indicate the carrying amount may not be recoverable. An impairment loss recognized for goodwill is not reversed in a subsequent period. Non-current assets or disposal groups comprising of assets and liabilities are classified as ''held for sale'' if it is highly probable that they will be recovered primarily through sales rather than through continuing use. Subsequently, such non-current assets and disposal groups classified as held for sale are measured at lower of its carrying value and fair value less costs to sell. Losses on initial classification as held for sale and subsequent gains and losses on re-measurement are recognised in profit and loss. Non-current assets held for sale are not depreciated or amortised. f) Financial Instruments Afinancial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial instruments also include derivative contracts such as foreign currency foreign exchange forward contracts, futures and currency options. (i) Financial assets Initial recognition and measurement All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset. Subsequent measurement For the purpose of subsequent measurement, financial assets are classified in four categories: ⢠Financial assets at amortised cost, ⢠Financial assets at fair value through other comprehensive income (FVTOCI) ⢠Financial assets at fair value through profit or loss (FVTPL) ⢠Equity instruments measured at fair value through other comprehensive income (FVTOCI) on the basis of its business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. Financial assets at amortised cost ⢠Afinancialassetis measured at the amortised cost if both the following conditions are met: The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding. After initial measurement, such financial assets are subsequently measured at amortised cost using the Effective Interest Rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the statement of profit and loss. The losses arising from impairment are recognised in the statement of profit and loss. This category generally applies to trade and other receivables. For more information on receivables, refer to Note 49 (B). Financial assets at fair value through other comprehensive income (FVTOCI) A debt instrument is measured at FVOCI if it means both of the following conditions and is not designated as at FVTPL - the asset is held within a business model whose objective is achieved by both collecting contractual cash hows and selling financial assets; and - the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment''s fair value in OCI (designated as FVOCI - equity investment). This election is made on an investment-byinvestment basis. Financial assets at fair value through profit or loss (FVTPL) Any financial asset, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL. In addition, the Company may, at initial recognition, irrevocably designate a financial asset, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch''). Financial assets included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss. This includes all derivative financial assets. All equity investments within the scope of Ind-AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. For all other equity instruments, the Company decides to classifythe same either as at FVTOCI or FVTPL. The Company makes such election on an instrument-byinstrument basis. The classification is made on initial recognition and is irrevocable. If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the Other Comprehensive Income (OCI). There is no recycling of the amounts from OCI to the statement of profit and loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity. Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the statement of profit and loss. Investments in Subsidiaries and Associates: Investments in subsidiaries and associates are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiaries and associates, the difference between net disposal proceeds and the carrying amounts are recognized in the Statement of Profit and Loss. Afinancial asset (or, where applicable, a part of a financial asset or a part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Company''s balance sheet) when: ⢠The contractual rights to receive cash flows from the financial asset have expired, or ⢠The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards ofthe asset, but has transferred control of the asset. When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all ofthe risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay. Impairment of financial assets The Company assesses on a forward looking basis the Expected Credit Losses (ECL) associated with its financial assets that are debt instruments and are carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Company applies a simplified approach. It recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. Trade receivables are tested for impairment on a specific basis after considering the sanctioned credit limits, security deposit collected etc. and expectations about future cash flows. Initial recognition and measurement Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss or at amortised cost. A financial liability is classified at FVTPL if it is classified as held for trading or as derivatives designated as hedging instruments in an effective hedge, as appropriate. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value and net gains and losses including any interest expenses are recognised in the statement of profit or loss. In the case of loans and borrowings and payables, these are measured at amortised cost and recorded, net of directly attributable and incremental transaction cost. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are derecognized as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part ofthe EIR. The EIR amortisation is included as finance costs in the statement of profit and loss. The Company''s financial liabilities includetrade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss. Financial guarantee contracts issued by the Company are those contracts that require specified payments to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind-AS 109 and the amount recognised less cumulative amortisation. Where guarantees to subsidiaries in relation to loans or other payables are provided for, at no compensation, the fair values are accounted for as contributions and recognised as fees receivable under "other financial assets" or as a part of the cost of the investment, depending on the contractual terms. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to to realise the assets and settle the liabilities simultaneously. instruments and hedge accounting The Company uses derivative financial instruments, such as forward currency contracts to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Any changes therein are generally recognised in the statement of profit and loss account. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Company''s risk management objective and strategy for undertaking the hedge, the hedging economic relationship between the hedged item or transaction and the nature of the risk being hedged, hedge rationale and how the entity will assess the effectiveness of changes in the hedging instrument''s fair value in offsetting the exposure to changes in hedged item''s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they are designated. Cash flow hedges When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in OCI and accumulated in the other equity under ''effective portion of cash flow hedges''. The effective portion of changes in the fair value of the derivative that is recognised in OCI is limited to the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the statement of profit and loss. If a hedge no longer meets the criteria for hedge accounting or the hedging instrument is sold, expires, is terminated or is exercised, then hedge accounting is discontinued prospectively. When hedge accounting for a cash flow hedge is discontinued, the amount that has been accumulated in other equity remains there until it is reclassified to the statement of profit and loss account in the same period or periods as the hedged expected future cash flows affect the statement of profit and loss. If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in other equity are immediately re-classified to the statement of profit and loss. as interest expense over the period of financing under the effective interest method. i) Cash and Cash Equivalents Cash and cash equivalents in the balance sheet includes cash at bank and on hand, deposits held at call with financial institutions, other short term highly liquid investments, with original maturities less than three months which are readily convertible into cash and which are subject to insignificant risk of changes in value. For the purpose of the statement of cash flows, cash and cash equivalents as defined above is net of outstanding bank overdrafts as they are considered an integral part ofthe Company''s cash management. j) Provisions, Contingent Liabilities and Contingent Assets A provision is recognised when the enterprise has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, in respect ofwhich a reliable estimate can be made. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates. If the effect of the time value of money is material, provisions are determined by discounting Inventories are valued at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Costs are computed on the weighted average basis and are net of GST credits. Raw materials, packing materials and stores: Costs includes cost of purchase and other costs incurred in bringing each product to its present location and condition. Finish goods and work in progress: In the case of manufactured inventories and work in progress, cost includes all costs of purchases, an appropriate share of production overheads based on normal operating capacity and other costs incurred in bringing each product to its present location and condition. Provision is made for cost of obsolescence and other anticipated losses, whenever considered necessary. If payment for inventory is deferred beyond normal credit terms, then the cost is determined by discounting the future cash hows at an interest rate determined with reference to market rates. The difference between the total cost and the deemed cost is recognised the expected future cash flows specific to the liability. The unwinding ofthe discount is recognised as finance cost. 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. A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. Contingent Assets are not recognised till the realization of the income is virtually certain. However the same are disclosed in the standalone financial statements where an inflow of economic benefits is probable. Revenue is recognized upon transfer of control of promised goods to customers for an amount that reflects the consideration expected to be received in exchange for those goods. Revenue excludes taxes or duties collected on behalf of the government. Sale of goods Revenue from sale of goods is recognized when control of goods are transferred to the buyer which is generally on delivery for domestic sales and on dispatch/delivery for export sales. The Company recognizes revenues on the sale of products, net of returns, discounts (sales incentives/ rebates), amounts collected on behalf ofthird parties (such as GST) and payments or other consideration given to the customer that has impacted the pricing of the transaction. Accumulated experience is used to estimate and accrue for the discounts (using the most likely method) and returns considering the terms of the underlying schemes and agreements with the customers. No element of financing is deemed present as the sales are made with normal credit days consistent with market practice. A liability is recognised where payments are received from customers before transferring control of the goods being sold. Royalty & Technical Fees Royalty and Technical fees are recognized on accrual basis in accordance with the substance of their relevant agreements. Interest income For all debt instruments measured at amortised cost, interest income is recorded using the effective interest rate (EIR). EIR is the rate which exactly discounts the estimated future cash receipts over the expected life ofthe financial instrument to the gross carrying amount ofthefinancial asset. When calculating the EIR, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayments, extensions, call and similar options). The expected credit losses are considered ifthe credit risk on that financial instrument has increased significantly since initial recognition. Dividend income Dividends are recognised in the statement of profit and loss on the date on which the Company''s right to receive payment is established. i) Short-term Employee benefits Liabilities for wages and salaries including non-monetary benefits that are expected to be settled wholly within twelve months after the end ofthe period in which the employees render the related service are classified as short term employee benefits and are recognized as an expense in the Statement of Profit and Loss as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. The cost of equity settled transactions is determined by the fair value at the grant date and the fair value of the employee share options is based on the Black Scholes model. The grant-date fair value of equity-settled share-based payment granted to employees is recognised as an expense, with a corresponding increase in equity, over the vesting period ofthe awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share. iii) Post-Employment Benefits 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. Defined Benefit Plans Gratuity Fund The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. Gratuity is payable to all eligible employees on death or on separation/ termination in terms of the provisions of the Payment ofthe Gratuity (Amendment)Act, 1997 or as per the Company''s scheme whichever is more beneficial to the employees. 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. The Company''s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets. The calculation of defined benefit obligations is performed at each reporting period by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements. Re-measurement of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to the statement of profit and loss in subsequent periods. Net interest expense (income) on the net defined liability (assets) is computed by applying the discount rate, used to measure the net defined liability (asset), to the net defined liability (asset) at the start of the financial year after taking into account any changes as a result of contribution and benefit payments during the year. Net interest expense and other expenses related to defined benefit plans are recognised in the statement of profit and loss. When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in the statement of profit and loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs. iv) Other Long Term Employee Benefits The liabilities for earned leaves are not expected to be settled whollywithin 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by the employees upto the end of the reporting period using the projected unit credit method based on actuarial valuation. Re-measurements are recognised in the statement of profit and loss in the period in which they arise including actuarial gains and losses. At the inception it is assessed, whether a contract is a lease or contains a lease. A contract is a lease or contains a lease if it conveys the right to control the use of an identified asset, for a period of time, in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, company assesses whether the contract involves the use of an identified asset. Use may be specified explicitly or implicitly. ⢠Use should be physically distinct or represent substantially all ofthe capacity of a physically distinct asset. ⢠If the supplier has a substantive substitution right, then the asset is not identified. ⢠Company has the right to obtain substantially all of the economic benefits from use of the asset throughoutthe period of use. ⢠Company has the right to direct the use of the asset. ⢠Incaseswherethe usage ofthe asset is predetermined the right to direct the use of the asset is determined when the company has the right to use the asset or the company designed the asset in a way that predetermines how and for what purpose it will be used. At the commencement or modification of a contract, that contains a lease component, company allocates the consideration in the contract, to each lease component, on the basis of its relative standalone prices. For leases of property, it is elected not to separate non-lease components and account for the lease and non-lease components as a single lease component. As a Lessee: The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. Right-of-use asset (ROU): The right-of-use asset is initially measured at cost. Cost comprises of the initial amount ofthe lease liability adjusted for any lease payments made at or before the commencement date, any initial direct costs incurred by the lessee, an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located less any lease incentives received. After the commencement date, a lessee shall measure the right-of-use asset applying cost model, which is Cost less any accumulated depreciation and any accumulated impairment losses and also adjusted for certain re-measurements of the lease liability. Right-of-use asset is depreciated using straightline method from the commencement date to the end of the lease term. If the lease transfers the ownership ofthe underlying asset to the company at the end of the lease term or the cost of the right-of-use asset reflects company will exercise the purchase option, ROU will be depreciated over the useful life ofthe underlying asset, which is determined based on the same basis as property, plant and equipment. Lease liability: Lease liability is initially measured at the present value of lease payments that are not paid at the commencement date. Discounting is done using the implicit interest rate in the lease, if that rate cannot be readily determined, then using company''s incremental borrowing rate. Incremental borrowing rate is determined based on entity''s borrowing rate adjusted for terms of the lease and type of the asset leased. Lease payments included in the measurement of the lease liability comprises of fixed payments (including in substance fixed payments), variable lease payments that depends on an index or a rate, initially measured using the index or rate at the commencement date, amount expected to be payable under a residual value guarantee, the exercise price under a purchase option that the company is reasonably certain to exercise, lease payments in an optional renewal period if the company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the company is reasonably certain not to terminate early. Lease liability is measured at amortised cost using the effective interest method. Lease liability is re-measured when there is a change in the lease term, a change in its assessment of whether it will exercise a purchase, extension or termination option or a revised in-substance fixed lease payment, a change in the amounts expected to be payable under a residual value guarantee and a change in future lease payments arising from change in an index or rate. When the lease liability is re-measured corresponding adjustment is made to the carrying amount ofthe right-of-use asset. If the carrying amount of the right-of-use asset has been reduced to zero it will be recorded in statement of profit and loss. Right-of-use asset and lease liabilities are presented separately in the balance sheet. Company has elected not to recognise right-of-use assets and lease liabilities for short term leases. The lease payments associated with these leases are recognised as an expense on a straight-line basis over the lease term. At the commencement or modification of a contract, that contains a lease component, company allocates the consideration in the contract, to each lease component, on the basis of its relative standalone prices. At the inception ofthe lease, it is determined whether it is a finance lease or an operating lease. If the lease transfers substantially all of the risks and rewards incidental to ownership ofthe underlying asset, then it is a financial lease, otherwise it is an operating lease. If the lease arrangement contains lease and nonlease components, then the consideration in the contract is allocated using the principles of IND AS 115. The company tests for the impairment losses at the year end. Payment received under operating lease is recognised as income on straight line basis, over the lease term. n) Income Tax Income tax expense/ income comprises current tax expense /income and deferred tax/ expense income. It is recognised in the statement of profit and loss except to the extent that it relates to items recognised directly in equity or in Other comprehensive income, in which case, the tax is also recognized directly in equity or other comprehensive income, respectively. Current Tax Current tax comprises the expected tax payable or recoverable on the taxable profit or loss for the year and any adjustment to the tax payable or recoverable in respect of previous years. It is measured using tax rates enacted or substantively enacted by the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretations and establishes provisions where appropriate. ⢠Current tax assets and liabilities are offset only if, the Company has a legally enforceable right to set offthe recognised amounts; and ⢠Intendseithertosettleon a net basis, or to realise the asset and settle the liability simultaneously. Deferred Tax Deferred Income tax is recognised in respect of temporary difference between the carrying amount of assets and liabilities for financial reporting purpose and the amount considered for tax purpose. Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilised such reductions are reversed when it becomes probable that sufficient taxable profits will be available. Unrecognized deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be recovered. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset only if: i. the entity has a legally enforceable right to set off current tax assets against current tax liabilities; and ii. the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity. Deferred tax asset / liabilities in respect of temporary differences which originate and reverse during the tax holiday period are not recognised. Deferred tax assets / liabilities in respect of temporary differences that originate during the tax holiday period but reverse after the tax holiday period are recognised. Minimum Alternate Tax (MAT) credit is recognized as an asset only when and to the extent there is a convincing evidence that the Company will pay normal tax during specified period. o) Foreign Currency Transactions i) Functional and Presentation currency The Company''s standalone financial statements are prepared in Indian Rupees (INR "?") which is also the Company''s functional currency. ii) Transactions and balances Foreign currency transactions are recorded on initial recognition in the functional currency using the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Nonmonetary items that are measured based on historical cost in a foreign currency are translated using the exchange rate at the date of the initialtransaction. Nonmonetary items that are measured at fair value in a foreign currency are translated using the exchange rate at the date the fair value is determined. Exchange differences arising on the settlement or translation of monetary items are recognized in the statement of profit and loss in the year in which they arise except for the qualifying cash flow hedge, which are recognised in OCI to the extent that the hedges are effective. Government grants, including non-monetary grants at fair value are recognised when there is reasonable assurance that the grants will be received and the Company will comply with all the attached conditions. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods necessary to match them with the costs that they are intended to compensate. Government grants relating to purchase of property, plant and equipment are included in noncurrent liabilities as deferred income and are credited to the the statement of profit and loss on a straight line basis over the expected lives of the related assets. The Company recognises a liability for any dividend declared but not distributed at the end of the reporting period, when the distribution is authorised and the distribution is no longer at the discretion of the Company on or before the end of the reporting period. As per Corporate laws in India, a distribution in the nature of final dividend is authorized when it is approved by the shareholders. A corresponding amount is recognized directly in equity. r) Earnings Per Share Basic earnings per share is calculated by dividing the profit or loss 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 profit or loss for the period attributable to the equity shareholders and the weighted average number of equity shares outstanding during the period is adjusted to take into account: ⢠The after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and ⢠Weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares. s) Segment Reporting As per Ind AS-108 ''Operating Segments'', if a financial report contains both the consolidated financial statements of a parent that is within the scope of Ind AS-108 as well as the parent''s separate financial statements, segment information is required only in the consolidated financial statements. Accordingly, information required to be presented under Ind AS-108 Operating Segments has been given in the consolidated financial statements. t) Business Combination Business combinations are accounted for using the acquisition accounting method as at the date of the acquisition, which is the date at which control is transferred to the Company. The consideration transferred in the acquisition and the identifiable assets acquired and liabilities assumed are recognised at fair values on their acquisition date. Goodwill is initially measured at cost, being the excess ofthe aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. The Company recognises any non-controlling interest in the acquired entity on an acquisition-by acquisition basis either at fair value or at the noncontrolling interest''s proportionate share of the acquired entity''s net identifiable assets. Consideration transferred does not include amounts related to settlement of preexisting relationships. Such amounts are recognised in the Statement of Profit and Loss. Transaction costs are expensed as incurred, other than those incurred in relation to the issue of debt or equity securities. Any contingent consideration payable is measured at fair value at the acquisition date. Subsequent changes in the fair value of contingent consideration are recognised in the Statement of Profit and Loss. pronouncements which are not yet effective Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards. There is no such notification which would have been applicable to the Company from 1 April, 2022.
Mar 31, 2021
1. Corporate Information
Godrej Consumer Products Limited (the Company) was incorporated on November 29, 2000, to take over the consumer products business of Godrej Soaps Limited (subsequently renamed as Godrej Industries Limited), pursuant to a Scheme of Arrangement as approved bythe High Court, Mumbai. The Company is a fast moving consumer goods Company, manufacturing and marketing Household and Personal Care products. The Company is a public Company limited by shares, incorporated and domiciled in India and is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The Company''s registered office is at 4th Floor, Godrej One, Pirojshanagar, Eastern Express Highway, Vikhroli (East), Mumbai - 400 079.
2. Basis of preparation, Measurement and Significant Accounting Policies
2.1 Basis of Preparation and measurementa) Basis of Preparation
The standalone financial statements have been prepared in accordance with Indian Accounting Standards ("Ind AS") as notified by Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act, 2013 (''Act'') read with the Companies
(Indian Accounting Standards) Rules, 2015 as amended from time to time and other relevant provisions of the Act.
The standalone financial statements have been prepared on accrual and going concern basis. The accounting policies are applied consistently to all the periods presented in the standalone financial statements.
Current versus non-currentclassification
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 taken between acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of the classification of assets and liabilities into current and noncurrent.
The standalone financial statements of the Company for theyearended March 31, 2021 were approved for issue in accordance with the resolution of the Board of Directors on May 11, 2021.
These standalone financial statements have been prepared on a historical cost
basis, except for the following assets and liabilities which have been measured at fair value:
⢠Certain financial assets and liabilities (including derivative instruments) measured at fair value (refer accounting policy regarding financial instruments -2.4.f),
⢠Defined benefit plans -plan assets/(liability) and share-based payments measured at fair value (Note 45 & 46)
2.2 Key judgements, estimates and assumptions
In preparing these standalone financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
The areas involving critical estimates orjudgements are:
i. Determinationofthe estimated useful lives of tangible assets and the assessment as to which components of the cost may be capitalized; (Note 2.4 (a))
ii. Determinationofthe estimated useful lives of intangible assets and determining intangible
assets having an indefinite useful life;
(Note 2.4 (b))
iii. Recognition and measurement of defined benefit obligations, key actuarial assumptions; (Note 45)
iv. Recognition and measurement of provisions and contingencies, key assumptions about the likelihood and magnitude of an outflow of resources; (Note 2.4 (j))
v. Fairvaluationof employee share options, Key assumptions made with respect to expected volatility; (Note 2.4 (l)(ii)) and note 46
vi. Fair values of financial instruments (Note 2.3)
vii. Impairmentoffinancial and Non- Financial assets (Note 2.4.(d) and (f))
viii. Recognition of deferred tax assets - availability of future taxable profits against which deferred tax assets (e.g. MAT) can be used (Note 9)
2.3 Measurement of fair values
The Company''s accounting
policies and disclosures require
financial instruments to be
measured at fair values.
The Company has an established control framework with respect to the measurement of fair values. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
The management regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the management assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which such valuations should be classified.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. Further information about the assumptions made in measuring fair value is included in the Note 2.4.(f).
2.4 Significant Accounting Policies
a) Property, Plant and Equipment
Recognition and measurement
Items of property, plant and equipment, other than Freehold Land, are measured at cost less accumulated depreciation and any accumulated impairment losses. Freehold land is carried at cost and is not depreciated.
The cost of an item of property, plant and equipment comprises its purchase price,
including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable costs of bringing the asset to its working condition for its intended use and estimated costs of dismantling and removing the item and restoring the item and restoring the site on which it is located. If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.
Any gain or loss on derecognition of an item of property, plant and equipment is included in the statement of profit and loss when the item is derecognised.
Subsequent expenditure
Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate only if it is probable that the future economic benefits associated with the item will flow to the Company and that the cost of the item can be reliably measured. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to the statement of profit and loss during the reporting period in which they are incurred.
Depreciation
Depreciation 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 for 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:
⢠Leasehold land is amortised equally over the lease period.
⢠Leasehold Improvements are depreciated over the shorter ofthe unexpired period ofthe lease and the estimated useful life of the assets.
⢠Office Equipments are depreciated over 5to10 years.
⢠Tools (Die sets) are depreciated over a period of 9 years, and moulds over 3 years.
⢠Vehicles are depreciated over a period ranging from 5 years to 8 years depending on the use of vehicles.
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
b) Goodwill and other Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any amortisation and accumulated impairment losses. Internally generated intangibles, excluding eligible development costs are not capitalized and the related expenditure is reflected in the statement of profit and loss in the period in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Goodwill
Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset may be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Other intangible assets Intangible assets with finite
asset or a cash-generating unit is the higher of its fair value less costs of disposal and its value in use. An impairment loss, if any, is recognised in the Statement of Profit and Loss in the period in which the impairment takes place. The impairment loss is allocated first to reduce the carrying amount of any goodwill (if any) allocated to the cash generating unit and then to the other assets of the unit, pro rata based on the carrying amount of each asset in the unit.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events and changes in circumstances indicate the carrying amount may not be recoverable. An impairment loss recognized for goodwill is not reversed in a subsequent period.
e) Assets held for sale
Non-current assets or disposal groups comprising of assets and liabilities are classified as ''held for sale'' if it is highly probable that they will be recovered primarily through sales rather than through continuing use.
lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization method and period are reviewed at least at the end of each reporting period. Changes in the expected useful life or expected pattern of consumption offuture economic benefits embodied in the assets are considered to modify amortization period or method, as appropriate, and are treated as changes in accounting estimates.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually and whenever there is an indication that the intangible asset may be impaired. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
Amortisation
Amortisation is calculated to write offthe cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives, and is recognised in Statement of profit and loss.
The estimated useful lives for current and comparative periods are as follows:
Software licences 6 years
Trademarks 10years
Technical knowhow 10 years Product registrations 5 years
Goodknight and Hit (Brands) are assessed as intangibles having indefinite useful life and are not amortised in the standalone financial statements. Residual value, is estimated to be immaterial by management and hence has been considered at '' 1.
Interest and other borrowing costs attributable to qualifying assets are capitalized. Other interest and borrowing costs are recognised as an expense in the period in which they are incurred.
d) Impairment of non-financial assets
An impairment loss is recognised whenever the carryingvalueofanasset or a cash-generating unit exceeds its recoverable amount. Recoverable amount of an
Subsequently, such non-current assets and disposal groups classified as held for sale are measured at lower of its carrying value and fair value less costs to sell. Losses on initial classification as held for sale and subsequent gains and losses on re-measurement are recognised in profit and loss. Non-current assets held for sale are not depreciated or amortised.
Afinancial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial instruments also include derivative contracts such as foreign currency foreign exchange forward contracts, futures and currency options.
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way
trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For the purpose of subsequent measurement, financial assets are classified in four categories:
⢠Financial assets at
amortised cost,
⢠Financial assets
at fair value through other comprehensive income (FVTOCI)
⢠Financial assets at
fair value through profit or loss (FVTPL)
⢠Equity instruments measured at fair value through other comprehensive income (FVTOCI)
On the basis of its business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.
Financial assets at amortised cost
⢠Afinancialassetis measured at the amortised cost if both the following
conditions are met: The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the Effective Interest Rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the statement of profit and loss. The losses arising from impairment are recognised in the statement of profit and loss.
This category generally applies
to trade and other receivables. For more information on receivables, refer to Note 49 (B).
Financial assets at fair value through profit or loss (FVTPL)
Any financial asset, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may, at initial recognition, irrevocably designate a financial asset, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch'').
Financial assets included within the FVTPL category are measured at fair value with all changes recognized in the Statement
of Profit and Loss. This includes all derivative financial assets.
All equity investments within the scope of Ind-AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. For all other equity instruments, the Company decides to classify the same either as at FVTOCI or FVTPL. The Company makes such election on an instrument-byinstrument basis.
The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the Other Comprehensive Income (OCI). There is no recycling of the amounts from OCI to the statement of profit and loss, even on
sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the statement of profit and loss.
Investments in Subsidiaries and Associates:
Investments in subsidiaries and associates are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiaries and associates, the difference between net disposal proceeds and the carrying amounts are recognized in the Statement of Profit and Loss.
Afinancial asset (or, where applicable, a part of a financial asset or a part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Company''s balance sheet) when:
⢠The contractual rights to receive cash flows from the financial asset have expired, or
⢠The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay
the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards ofthe asset, but has transferred control of the asset. When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all ofthe risks and rewards of the
asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
The Company assesses on a forward looking basis the Expected Credit Losses (ECL) associated with its financial assets that are debt instruments and are carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables, the Company applies a simplified approach. It recognises impairment loss allowance based on lifetime ECLs at
each reporting date, right from its initial recognition. Trade receivables are tested for impairment on a specific basis after considering the sanctioned credit limits, security deposit collected etc. and expectations about future cash flows.
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss or at amortised cost.
A financial liability is classified at FVTPL if it is classified as held for trading or as derivatives designated as hedging instruments in an effective hedge, as appropriate. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value and net gains and losses including any interest expenses are recognised in the statement of profit or loss.
In the case of loans and borrowings and payables, these are measured at amortised cost and recorded, net of directly attributable and incremental transaction cost. Gains and losses are recognised in
Statement of Profit and Loss when the liabilities are derecognized as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
The Company''s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
Financial guarantee contracts issued by the Company are those contracts that require specified payments to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind-AS 109 and the amount recognised less cumulative amortisation.
Where guarantees to subsidiaries in relation to loans or other payables are provided for, at no compensation, the fair values are accounted for as contributions and recognised as fees receivable under "other financial assets" or as a part of the cost of the
investment, depending on the contractual terms.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to to realise the assets and settle the liabilities simultaneously.
g) Derivative financial
instruments and hedge accounting
The Company uses derivative financial instruments, such as forward currency contracts to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Any changes therein are generally recognised in the statement of profit and loss account. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply
Raw materials, packing materials and stores: Costs includes cost of purchase and other costs incurred in bringing each product to its present location and condition.
Finish goods and work in progress: In the case of manufactured inventories and work in progress, cost includes all costs of purchases, an appropriate share of production overheads based on normal operating capacity and other costs incurred in bringing each product to its present location and condition
Provision is made for cost of obsolescence and other anticipated losses, whenever considered necessary.
If payment for inventory is deferred beyond normal credit terms, then the cost is determined by discounting the future cash flows at an interest rate determined with reference to market rates. The difference between the total cost and the deemed cost is recognised as interest expense over the period of financing under the effective interest method.
i) Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet includes cash at bank and on hand, deposits held at call with financial institutions, other short term highly liquid investments, with original maturities less than three months which are readily convertible into cash and which
hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Company''s risk management objective and strategy for undertaking the hedge, the hedging economic relationship between the hedged item or transaction and the nature of the risk being hedged, hedge rationale and how the entity will assess the effectiveness of changes in the hedging instrument''s fair value in offsetting the exposure to changes in hedged item''s fair value or cash hows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash hows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they are designated.
Cash flow hedges
When a derivative is designated as a cash how hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in OCI and accumulated in the other equity under ''effective portion of cash how hedges''. The effective portion of changes in the fair value of the derivative that is recognised in OCI is limited to the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the statement of profit and loss.
If a hedge no longer meets the criteria for hedge accounting or the hedging instrument is sold, expires, is terminated or is exercised, then hedge accounting is discontinued prospectively. When hedge accounting for a cash flow hedge is discontinued, the amount that has been accumulated in other equity remains there until it is reclassified to the statement of profit and loss account in the same period or periods as the hedged expected future cash flows affect the statement of profit and loss. If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in other equity are immediately re-classified to the statement of profit and loss.
Inventories are valued at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Costs are computed on the weighted average basis and are net of GST credits.
are subject to insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents as defined above is net of outstanding bank overdrafts as they are considered an integral part ofthe Company''s cash management.
j) Provisions, Contingent Liabilities and Contingent Assets
A provision is recognised when the enterprise has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, in respect ofwhich a reliable estimate can be made. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows specific to the liability. The unwinding ofthe discount is recognised as finance cost.
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.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control ofthe entity. Contingent Assets are not recognised till the realization ofthe income is virtually certain. However the same are disclosed in the standalone financial statements where an inflow of economic benefits is probable.
Revenue is recognized upon transfer of control of promised goods to customers for an amount that reflects the consideration expected to be received in exchange for those goods. Revenue excludes taxes or duties collected on behalf of the government.
Sale of goods
Revenue from sale of goods is recognized when control of goods are transferred to the buyer which is generally on delivery for domestic sales and on dispatch/delivery for export sales
The Company recognizes revenues on the sale of products, net of returns, discounts (sales incentives/ rebates), amounts collected on behalf ofthird parties (such as GST) and payments or other consideration given to the customer that has impacted
Accumulated experience is used to estimate and accrue for the discounts (using the most likely method) and returns considering the terms of the underlying schemes and agreements with the customers. No element of financing is deemed present as the sales are made with normal credit days consistent with market practice. A liability is recognised where payments are received from customers before transferring control of the goods being sold.
Royalty & Technical Fees
Royalty and Technical fees are recognized on accrual basis in accordance with the substance of their relevant agreements.
Interest income
For all debt instruments measured at amortised cost, interest income is recorded using the effective interest rate (EIR). EIR is the rate which exactly discounts the estimated future cash receipts over the expected life ofthe financial instrument to the gross carrying amount ofthefinancial asset. When calculating the EIR, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayments, extensions, call and similar options). The expected credit losses are considered ifthe credit risk on that financial instrument has
increased significantly since initial recognition.
Dividend income
Dividends are recognised in the statement of profit and loss on the date on which the Company''s right to receive payment is established
I) Employee Benefits
i) Short-term Employee benefits
Liabilities for wages and salaries including non-monetary benefits that are expected to be settled wholly within twelve months after the end ofthe period in which the employees render the related service are classified as short term employee benefits and are recognized as an expense in the Statement of Profit and Loss as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
ii) Share-based payments
The cost of equity settled transactions is determined by the fair value at the grant date
and the fair value of the employee share options is based on the Black Scholes model.
The grant-date fair value of equity-settled share-based payment granted to employees is recognised as an expense, with a corresponding increase in equity, over the vesting period ofthe awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
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.
Defined Benefit Plans
The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. 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 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
economic benefits, consideration is given to any applicable minimum funding requirements.
Re-measurement of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to the statement of profit and loss in subsequent periods.
Net interest expense (income) on the net defined liability (assets) is computed by applying the discount rate, used to measure the net defined liability (asset), to the net defined liability (asset) at the start of the financial year after taking into account any changes as a result of contribution and benefit payments during the year. Net interest expense and other expenses related to defined benefit plans are recognised in the statement of profit and loss.
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.
The Company''s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed at each reporting period by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in the statement of profit and loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
iv) Other Long Term Employee Benefits
The liabilities for earned leaves are not expected to be settled whollywithin 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by the employees upto the end of the reporting period using the projected unit credit method based on actuarial valuation.
Re-measurements are recognised in the statement of profit and loss in the period in which they arise including actuarial gains and losses.
At the inception it is assessed, whether a contract is a lease or contains a lease. A contract is a lease or contains a lease if it conveys the right to control the use of an identified asset, for a period of time, in exchange for consideration.
To assess whether a contract conveys the right to control the use of an identified asset, company assesses whether the contract involves the use of an identified asset. Use may be specified explicitly or implicitly.
⢠Use should be physically distinct or represent substantially all ofthe capacity of a physically distinct asset.
⢠If the supplier has a substantive substitution right, then the asset is not identified.
⢠Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use
⢠Company has the right to direct the use of the asset.
⢠Incaseswherethe usage ofthe asset is predetermined the right to direct the use of the asset is determined when the company has the right to use the asset or
the company designed the asset in a way that predetermines how and for what purpose it will be used.
At the commencement or modification of a contract, that contains a lease component, company allocates the consideration in the contract, to each lease component, on the basis of its relative standalone prices. For leases of property, it is elected not to separate non-lease components and account for the lease and nonlease components as a single lease component.
GCPL recognizes a right-of-use asset and a lease liability at the lease commencement date.
Right-of-use asset (ROU):
The right-of-use asset is initially measured at cost.
Cost comprises of the initial amount ofthe lease liability adjusted for any lease payments made at or before the commencement date, any initial direct costs incurred by the lessee, an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located less any lease incentives received.
After the commencement date, a lessee shall measure the
right-of-use asset applying cost model, which is Cost less any accumulated depreciation and any accumulated impairment losses and also adjusted for certain re-measurements of the lease liability.
Right-of-use asset is depreciated using straightline method from the commencement date to the end of the lease term. If the lease transfers the ownership of the underlying asset to the company at the end of the lease term or the cost of the right-of-use asset reflects company will exercise the purchase option, ROU will be depreciated over the useful life of the underlying asset, which is determined based on the same basis as property, plant and equipment.
Lease liability is initially measured at the present value of lease payments that are not paid at the commencement date. Discounting is done using the implicit interest rate in the lease, if that rate cannot be readily determined, then using company''s incremental borrowing rate. Incremental borrowing rate is determined based on entity''s borrowing rate adjusted for terms of the lease and type of the asset leased.
Lease payments included in the measurement ofthe lease liability comprises of fixed payments (including in
n) Income Tax
Income tax expense/ income comprises current tax expense /income and deferred tax/ expense income. It is recognised in the statement of profit and loss except to the extent that it relates to items recognised directly in equity or in Other comprehensive income, in which case, the tax is also recognized directly in equity or other comprehensive income, respectively.
Current Tax
Current tax comprises the expected tax payable or recoverable on the taxable profit or loss for the year and any adjustment to the tax payable or recoverable in respect of previous years. It is measured using tax rates enacted or substantively enacted by the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretations and establishes provisions where appropriate.
⢠Current tax assets and liabilities are offset only if, the Company has a legally enforceable right to set offthe recognised amounts; and
⢠Intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
substance fixed payments), variable lease payments that depends on an index or a rate, initially measured using the index or rate at the commencement date, amount expected to be payable under a residual value guarantee, the exercise price under a purchase option that the company is reasonably certain to exercise, lease payments in an optional renewal period if the company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the company is reasonably certain not to terminate early
Lease liability is measured at amortised cost using the effective interest method.
Lease liability is re-measured when there is a change in the lease term, a change in its assessment of whether it will exercise a purchase, extension or termination option or a revised in-substance fixed lease payment, a change in the amounts expected to be payable under a residual value guarantee and a change in future lease payments arising from change in an index or rate.
When the lease liability is re-measured corresponding adjustment is made to the carrying amount ofthe right-of-use asset. If the carrying amount of the right-of-use asset has been reduced to zero it will be recorded in statement of profit and loss.
Right-of-use asset is presented under "Property, plant and equipment" and lease liabilities under "Financial liabilities" in the balance sheet
Company has elected not to recognise right-of-use assets and lease liabilities for short term leases. The lease payments associated with these leases are recognised as an expense on a straight-line basis over the lease term.
At the commencement or modification of a contract, that contains a lease component, company allocates the consideration in the contract, to each lease component, on the basis of its relative standalone prices.
At the inception ofthe lease, it is determined whether it is a finance lease or an operating lease. If the lease transfers substantially all of the risks and rewards incidental to ownership ofthe underlying asset, then it is a financial lease, otherwise it is an operating lease.
If the lease arrangement contains lease and nonlease components, then the consideration in the contract is allocated using the principles of IND AS 115. The company tests for the impairment losses at the year end. Payment received under operating lease is recognised as income on straight line basis, over the lease term.
The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if:
i. the entity has a legally enforceable right to set off current tax assets against current tax liabilities; and
ii. the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
Deferred tax asset / liabilities in respect of temporary differences which originate and reverse during the tax holiday period are not recognised. Deferred tax assets / liabilities in respect of temporary differences that originate during the tax holiday period but reverse after the tax holiday period are recognised.
Minimum Alternate Tax (MAT) credit is recognized as an asset only when and to the extent there is a convincing evidence that the Company will
Deferred Tax
Deferred Income tax is recognised in respect of temporary difference between the carrying amount of assets and liabilities for financial reporting purpose and the amount considered for tax purpose.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilised such reductions are reversed when it becomes probable that sufficient taxable profits will be available.
Unrecognized deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be recovered.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted by the end of the reporting period.
pay normal tax during specified period.
o) Foreign Currency Transactions
i) Functional and Presentation currency
The Company''s standalone financial statements are prepared in Indian Rupees (INR "?") which is also the Company''s functional currency.
ii) Transactions and balances
Foreign currency transactions are recorded on initial recognition in the functional currency using the exchange rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Nonmonetary items that are measured based on historical cost in a foreign currency are translated using the exchange rate at the date of the initialtransaction. Nonmonetary items that are measured at fair value in a foreign currency are translated using the exchange rate at the date the fair value is determined.
Exchange differences arising on the settlement or translation of monetary items are recognized in the statement of profit and loss in the year in which they arise except for the qualifying cash flow hedge, which are recognised in OCI to the extent that the hedges are effective.
p) Government grants
Government grants, including non-monetary grants at fair value are recognised when there is reasonable assurance that the grants will be received and the Company will comply with all the attached conditions.
When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods necessary to match them with the costs that they are intended to compensate.
Government grants relating to purchase of property, plant and equipment are included in noncurrent liabilities as deferred income and are credited to the the statement of profit and loss on a straight line basis over the expected lives of the related assets.
q) Dividend
The Company recognises a liability for any dividend declared but not distributed at the end of the reporting period, when the distribution is authorised and the distribution is no longer at the discretion of
the Company on or before the end of the reporting period.
As per Corporate laws in India, a distribution in the nature of final dividend is authorized when it is approved by the shareholders. A corresponding amount is recognized directly in equity.
Basic earnings per share is calculated by dividing the profit or loss 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 profit or loss for the period attributable to the equity shareholders and the weighted average number of equity shares outstanding during the period is adjusted to take into account:
⢠The after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
⢠Weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
As per Ind AS-108 ''Operating
Segments'', if a financial report contains both the consolidated financial statements of a parent that is within the scope of Ind AS-108 as well as the parent''s separate financial statements, segment information is required only in the consolidated financial statements. Accordingly, information required to be presented under Ind AS-108 Operating Segments has been given in the consolidated financial statements.
Business combinations are accounted for using the acquisition accounting method as at the date of the acquisition, which is the date at which control is transferred to the Company. The consideration transferred in the acquisition and the identifiable assets acquired and liabilities assumed are recognised at fair values on their acquisition date. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. The Company recognises any non-controlling interest in the acquired entity on an acquisition-by acquisition basis either at fair value or at the noncontrolling interest''s proportionate share of the acquired entity''s net identifiable assets.
value at the acquisition date. Subsequent changes in the fair value of contingent consideration are recognised in the Statement of Profit and Loss.
u) Recent accounting
pronouncements which are not yet effective
Ministry of Corporate Affairs ("MCA") notifies new standard
Consideration transferred does not include amounts related to settlement of preexisting relationships. Such amounts are recognised in the Statement of Profit and Loss. Transaction costs are expensed as incurred, other than those incurred in relation to the issue of debt or equity securities. Any contingent consideration payable is measured at fair
or amendments to the existing standards. There is no such notification which would have been applicablefrom 1 April, 2021.
Mar 31, 2019
a) Property, Plant and Equipment
Recognition and measurement Items of property, plant and equipment, other than Freehold Land, are measured at cost less accumulated depreciation and any accumulated impairment losses. Freehold land is carried at cost and is not depreciated.
The cost of an item of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable costs of bringing the asset to its working condition for its intended use and estimated costs of dismantling and removing the item and restoring the item and restoring the site on which it is located. If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.
Any gain or loss on derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised.
Subsequent expenditure Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate only if it is probable that the future economic benefits associated with the item will flow to the Company and that the cost of the item can be reliably measured. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit and loss during the reporting period in which they are incurred.
Depreciation
Depreciation 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 for 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:
- Leasehold land is amortised equally over the lease period.
- Leasehold Improvements are depreciated over the shorter of the unexpired period of the lease and the estimated useful life of the assets.
- Office Equipments are depreciated over 5 to 10 years.
- Tools are depreciated over a period of 9 years, and dies and moulds over 3 years.
- Vehicles are depreciated over a period ranging from 5 years to 8 years depending on the use of vehicles.
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
b) Goodwill and other Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any amortisation and accumulated impairment losses. Internally generated intangibles, excluding eligible development costs are not capitalized and the related expenditure is reflected in profit and loss in the period in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Goodwill
Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset may be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Other intangible assets Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization method and period are reviewed at least at the end of each reporting period. Changes in the expected useful life or expected pattern of consumption of future economic benefits embodied in the assets are considered to modify amortization period or method, as appropriate, and are treated as changes in accounting estimates.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit or loss when the asset is derecognized.
Amortisation
Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives, and is recognised in Statement of profit or loss.
The estimated useful lives for current and comparative periods are as follows:
Software licences 6 years
Trademarks 10 years
Technical knowhow 10 years
Goodknight and Hit (Brands) are assessed as intangibles having indefinite useful life and are not amortised in the financial statements.
Residual value, is estimated to be immaterial by management and hence has been considered at Rs.1.
c) Borrowing Costs
Interest and other borrowing costs attributable to qualifying assets are capitalized. Other interest and borrowing costs are charged to revenue.
d) Impairment of non-financial assets
An impairment loss is recognised whenever the carrying value of an asset or a cash-generating unit exceeds its recoverable amount. Recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs of disposal and its value in use.
An impairment loss, if any, is recognised in the Statement of Profit and Loss in the period in which the impairment takes place. The impairment loss is allocated first to reduce the carrying amount of any goodwill (if any) allocated to the cash generating unit and then to the other assets of the unit, pro rata based on the carrying amount of each asset in the unit.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events and changes in circumstances indicate the carrying amount may not be recoverable.
e) Assets held for sale
Non-current assets or disposal groups comprising of assets and liabilities are classified as âheld for saleâ if it is highly probable that they will be recovered primarily through sales rather than through continuing use.
Subsequently, such non-current assets and disposal groups classified as held for sale are measured at lower of its carrying value and fair value less costs to sell. Losses on initial classification as held for sale and subsequent gains and losses on re-measurement are recognised in profit and loss. Non-current assets held for sale are not depreciated or amortised.
f) Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial instruments also include derivative contracts such as foreign currency foreign exchange forward contracts, futures and currency options.
(i) Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement For the purpose of subsequent measurement, financial assets are classified in four categories:
- Financial assets at amortised cost.
- Financial assets at fair value through other comprehensive income (FVTOCI).
- Financial assets at fair value through profit (FVTPL).
- Equity instruments measured at fair value through other comprehensive income (FVTOCI).
On the basis of its business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.
Financial assets at amortised cost
- A financial asset is measured at the amortised cost if both the following conditions are met: The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the Effective Interest Rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss. This category generally applies to trade and other receivables. For more information on receivables, refer to Note 46 (B).
Financial assets at fair value through profit and loss (FVTPL)
Any financial asset, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may, at initial recognition, irrevocably designate a financial asset, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatchâ).
Financial assets included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Equity investments
All equity investments within the scope of Ind-AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. For all other equity instruments, the Company decides to classify the same either as at FVTOCI or FVTPL. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable. If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the Other Comprehensive Income (OCI). There is no recycling of the amounts from OCI to profit and loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the profit and loss.
Investments in Subsidiaries and Associates:
Investments in subsidiaries and associates are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiaries and associates, the difference between net disposal proceeds and the carrying amounts are recognized in the Statement of Profit and Loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or a part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Companyâs balance sheet) when:
- The contractual rights to receive cash flows from the financial asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass throughâ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
The Company assesses on a forward looking basis the Expected Credit Losses (ECL) associated with its financial assets that are debt instruments and are carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables, the Company applies a simplified approach. It recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. Trade receivables are tested for impairment on a specific basis after considering the sanctioned credit limits, security deposit collected etc. and expectations about future cash flows.
(ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss or at amortised cost. A financial liability is classified at FVTPL if it is classified as held for trading or as derivatives designated as hedging instruments in an effective hedge, as appropriate. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value and net gains and losses including any interest expenses are recognised in profit or loss.
In the case of loans and borrowings and payables, these are measured at amortised cost and recorded, net of directly attributable and incremental transaction cost. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are derecognized as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require specified payments to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind-AS 109 and the amount recognised less cumulative amortisation.
Where guarantees to subsidiaries in relation to loans or other payables are provided for, at no compensation, the fair values are accounted for as contributions and recognised as fees receivable under âother financial assetsâ or as a part of the cost of the investment, depending on the contractual terms.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to to realise the assets and settle the liabilities simultaneously.
g) Derivative financial instruments and hedge accounting
The Company uses derivative financial instruments, such as forward currency contracts to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Any changes therein are generally recognised in the profit or loss account. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Companyâs risk management objective and strategy for undertaking the hedge, the hedging economic relationship between the hedged item or transaction and the nature of the risk being hedged, hedge rationale and how the entity will assess the effectiveness of changes in the hedging instrumentâs fair value in offsetting the exposure to changes in hedged itemâs fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they are designated.
Cash flow hedges When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in OCI and accumulated in the other equity under âeffective portion of cash flow hedgesâ. The effective portion of changes in the fair value of the derivative that is recognised in OCI is limited to the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.
If a hedge no longer meets the criteria for hedge accounting or the hedging instrument is sold, expires, is terminated or is exercised, then hedge accounting is discontinued prospectively. When hedge accounting for a cash flow hedge is discontinued, the amount that has been accumulated in other equity remains there until it is reclassified to profit and loss account in the same period or periods as the hedged expected future cash flows affect profit or loss. If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in other equity are immediately re-classified to profit or loss.
h) Inventories
Inventories are valued at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Costs are computed on the weighted average basis and are net of CENVAT/GST credits.
Raw materials, packing materials and stores: Costs includes cost of purchase and other costs incurred in bringing each product to its present location and condition.
Finish goods and work in progress: In the case of manufactured inventories and work in progress, cost includes all costs of purchases, an appropriate share of production overheads based on normal operating capacity and other costs incurred in bringing each product to its present location and condition
Provision is made for cost of obsolescence and other anticipated losses, whenever considered necessary.
If payment for inventory is deferred beyond normal credit terms, then the cost is determined by discounting the future cash flows at an interest rate determined with reference to market rates.
The difference between the total cost and the deemed cost is recognised as interest expense over the period of financing under the effective interest method.
i) Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet includes cash at bank and on hand, deposits held at call with financial institutions, other short term highly liquid investments, with original maturities less than three months which are readily convertible into cash and which are subject to insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents as defined above is net of outstanding bank overdrafts as they are considered an integral part of the Companyâs cash management.
j) Provisions, Contingent Liabilities and Contingent Assets
A provision is recognised when the enterprise has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, in respect of which a reliable estimate can be made. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows specific to the liability. The unwinding of the discount is recognised as finance cost.
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.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. Contingent Assets are not recognised till the realization of the income is virtually certain. However the same are disclosed in the financial statements where an inflow of economic benefits is probable.
k) Revenue Recognition
Effective April1, 2018, the Company adopted Ind AS 115 âRevenue from Contracts with Customersâ. The effect on adoption of IND AS 115 is insignificant.
Revenue is recognized upon transfer of control of promised goods to customers for an amount that reflects the consideration expected to be received in exchange for those goods. Revenue excludes taxes or duties collected on behalf of the government.
Sale of goods
Revenue from sale of goods is recognized when control of goods are transferred to the buyer which is generally on delivery for domestic sales and on dispatch/ delivery for export sales
The Company recognizes revenues on the sale of products, net of returns, discounts (sales incentives/rebates), amounts collected on behalf of third parties (such as GST) and payments or other consideration given to the customer that has impacted the pricing of the transaction.
Accumulated experience is used to estimate and accrue for the discounts (using the most likely method) and returns considering the terms of the underlying schemes and agreements with the customers. No element of financing is deemed present as the sales are made with normal credit days consistent with market practice. A liability is recognised where payments are received from customers before transferring control of the goods being sold.
Royalty & Technical Fees Royalty and Technical fees are recognized on accrual basis in accordance with the substance of their relevant agreements.
Interest income
For all debt instruments measured at amortised cost, interest income is recorded using the effective interest rate (EIR). EIR is the rate which exactly discounts the estimated future cash receipts over the expected life of the financial instrument to the gross carrying amount of the financial asset. When calculating the EIR, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayments, extensions, call and similar options). The expected credit losses are considered if the credit risk on that financial instrument has increased significantly since initial recognition.
Dividend income Dividends are recognised in profit or loss on the date on which the Companyâs right to receive payment is established
l) Employee Benefits
i) Short-term Employee benefits
Liabilities for wages and salaries including non-monetary benefits that are expected to be settled wholly within twelve months after the end of the period in which the employees render the related service are classified as short term employee benefits and are recognized as an expense in the Statement of Profit and Loss as the related service is provided.
A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
ii) Share-based payments
The cost of equity settled transactions is determined by the fair value at the grant date and the fair value of the employee share options is based on the Black Scholes model.
The grant-date fair value of equity-settled share-based payment granted to employees is recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and nonmarket performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
iii) Post-Employment Benefits
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.
Defined Benefit Plans
Gratuity Fund
The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. 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 Companyâs 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 Companyâs liability towards interest shortfall, if any, is actuarially determined at the year end.
The Companyâs net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed at each reporting period by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.
Re-measurement of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Net interest expense (income) on the net defined liability (assets) is computed by applying the discount rate, used to measure the net defined liability (asset), to the net defined liability (asset) at the start of the financial year after taking into account any changes as a result of contribution and benefit payments during the year. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
iv) Other Long Term Employee Benefits
The liabilities for earned leaves are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by the employees upto the end of the reporting period using the projected unit credit method based on actuarial valuation.
Re-measurements are recognised in profit or loss in the period in which they arise including actuarial gains and losses.
m) Leases Lease payments
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in the arrangement.
As a lessee
Leases of assets where the Company has substantially all the risks and rewards of ownership are classified as finance leases. Minimum lease payments made under finance leases are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
The leased assets are measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that asset.
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 under operating leases are recognised as an expense on a straight-line basis over the lease term unless the payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
As a lessor
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Rental income from operating lease is recognized on a straight line basis over the term of the relevant lease unless such payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increase.
Income Tax
Income tax expense/ income comprises current tax expense /income and deferred tax/ expense income. It is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in Other comprehensive income, in which case, the tax is also recognized directly in equity or other comprehensive income, respectively.
Current Tax
Current tax comprises the expected tax payable or recoverable on the taxable profit or loss for the year and any adjustment to the tax payable or recoverable in respect of previous years. It is measured using tax rates enacted or substantively enacted by the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretations and establishes provisions where appropriate.
- Current tax assets and liabilities are offset only if, the Company has a legally enforceable right to set off the recognised amounts; and
- Intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred Tax
Deferred Income tax is recognised in respect of temporary difference between the carrying amount of assets and liabilities for financial reporting purpose and the amount considered for tax purpose.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilised such reductions are reversed when it becomes probable that sufficient taxable profits will be available.
Unrecognized deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be recovered.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if:
i. the entity has a legally enforceable right to set off current tax assets against current tax liabilities; and
ii. the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
Deferred tax asset / liabilities in respect of temporary differences which originate and reverse during the tax holiday period are not recognised. Deferred tax assets / liabilities in respect of temporary differences that originate during the tax holiday period but reverse after the tax holiday period are recognised.
Minimum Alternate Tax (MAT) credit is recognized as an asset only when and to the extent there is a convincing evidence that the Company will pay normal tax during specified period.
n) Foreign Currency Transactions i) Functional and Presentation currency
The Companyâs financial statements are prepared in Indian Rupees (INR âââ) which is also the Companyâs functional currency.
ii) Transactions and balances
Foreign currency transactions are recorded on initial recognition in the functional currency using the exchange rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary items that are measured based on historical cost in a foreign currency are translated using the exchange rate at the date of the initial transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rate at the date the fair value is determined.
Exchange differences arising on the settlement or translation of monetary items are recognized in profit or loss in the year in which they arise except for the qualifying cash flow hedge, which are recognised in OCI to the extent that the hedges are effective.
o) Government grants
Government grants, including non-monetary grants at fair value are recognised when there is reasonable assurance that the grants will be received and the Company will comply with all the attached conditions.
When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods necessary to match them with the costs that they are intended to compensate.
Government grants relating to purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to the profit and loss on a straight line basis over the expected lives of the related assets.
p) Dividend
The Company recognises a liability for any dividend declared but not distributed at the end of the reporting period, when the distribution is authorised and the distribution is no longer at the discretion of the Company on or before the end of the reporting period. As per Corporate laws in India, a distribution in the nature of final dividend is authorized when it is approved by the shareholders.
A corresponding amount is recognized directly in equity.
q) Earnings Per Share
Basic earnings per share is calculated by dividing the profit or loss 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 profit or loss for the period attributable to the equity shareholders and the weighted average number of equity shares outstanding during the period is adjusted to take into account:
- The after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
- Weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
r) Segment Reporting
As per Ind AS-108 âOperating Segmentsâ, if a financial report contains both the consolidated financial statements of a parent that is within the scope of Ind AS-108 as well as the parentâs separate financial statements, segment information is required only in the consolidated financial statements. Accordingly, information required to be presented under Ind AS-108 Operating Segments has been given in the consolidated financial statements.
Mar 31, 2018
1. CORPORATE INFORMATION
Godrej Consumer Products Limited (the Company) was incorporated on November 29, 2000, to take over 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 fast moving consumer goods company manufacturing and marketing Household and Personal Care products. The Company is a public company limited by shares, incorporated and domiciled in India and is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The Companyâs registered office is at 4th Floor, Godrej One, Pirojshanagar, Eastern Express Highway, Vikhroli (east), Mumbai -400 079.
2. BASIS OF PREPARATION, MEASUREMENTAND SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of Preparation and measurement
a) Basis of Preparation
The Standalone financial statements have been prepared in accordance with Indian Accounting Standards (âInd ASâ) as notified by Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act, 2013 (âActâ) read with the Companies (Indian Accounting Standards) Rules, 2015 as amended by the Companies (Indian Accounting Standards) Rules, 2016 and other relevant provisions of the Act.
Current versus non-current classification
All assets and liabilities have been classified as current or non-current as per the Companyâs 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 taken between acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of the classification of assets and liabilities into current and noncurrent.
The financial statements of the Company for the year ended March 31, 2018 were approved for issue in accordance with the resolution of the Board of Directors on May 8, 2018.
b) Basis of Measurement
These financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
- Certain financial assets and liabilities (including derivative instruments) measured at fair value (refer accounting policy regarding financial instruments -2.5.f),
- Defined benefit plans - plan assets/(liability) and share-based payments measured at fair value (Note 44 & 45)
- Assets held for sale -measured at lower of carrying value or fair value less cost to sell
2.2 Key judgments, estimates and assumptions
In preparing these financial statements, management has made judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates:
The areas involving critical estimates or judgments are:
i. Determination of the estimated useful lives of tangible assets and the assessment as to which components of the cost may be capitalized; (Note 2.5 (a))
ii. Determination of the estimated useful lives of intangible assets and determining intangible assets having an indefinite useful life; (Note 2.5 (b))
iii. Recognition and measurement of defined benefit obligations, key actuarial assumptions; (Note 44)
iv. Recognition and measurement of provisions and contingencies, key assumptions about the likelihood and magnitude of an outflow of resources; (Note 2.5 (j))
v. Fair valuation of employee share options, Key assumptions made with respect to expected volatility; (Note 2.5 (l)(ii))
vi. Fair value of financial instruments; (Note 2.3)
vii. Impairment of financial and Non-Financial assets; (Note 2.5.(d) and (f))
viii. Recognition of deferred tax assets - availability of future taxable profits against which deferred tax assets; (e.g. MAT) can be used (Note 22)
2.3 Measurement of fair values
The Companyâs accounting policies and disclosures require financial instruments to be measured at fair values.
The Company has an established control framework with respect to the measurement of fair values. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
The management regularly reviews significant unobservable inputs and valuation adjustments.
If third party information, such as broker quotes or pricing services, is used to measure fair values, then the management assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which such valuations should be classified.
Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. Further information about the assumptions made in measuring fair value is included in the Note 2.5.(f).
2.4 Standards issued but not yet effective
IND AS 115: Revenue from Contracts with Customers In March 2018, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendment) Rules, 2017, notifying Ind AS 115, âRevenue from Contracts with Customersâ. The Standard is applicable to the Company with effect from 1st April, 2018.
This standard establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede the current revenue recognition standards Ind AS 18 Revenue and Ind AS 11 Construction Contracts when it becomes effective. The core principle of Ind AS 115 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Under Ind AS 115, an entity recognizes revenue when (or as) a performance obligation is satisfied, i.e. when âcontrolâ of the goods or services underlying the particular performance obligation is transferred to the customer.
The Company has completed its preliminary evaluation of the possible impact of Ind AS 115 based on which no significant impact is expected, other than additional disclosures as required by the new standard.
2.5 Significant Accounting Policies
a) Property, Plant and Equipment
Recognition and measurement Items of property, plant and equipment, other than Freehold Land, are measured at cost less accumulated depreciation and any accumulated impairment losses. Freehold land is carried at cost and is not depreciated.
The cost of an item of property plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable costs of bringing the asset to its working condition for its intended use and estimated costs of dismantling and removing the item and restoring the item and restoring the site on which it is located.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.
Any gain or loss on derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognized.
Subsequent expenditure Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate only if it is probable that the future economic benefits associated with the item will flow to the Company and that the cost of the item can be reliably measured. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit and loss during the reporting period in which they are incurred. Depreciation
Depreciation 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 for 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:
- Leasehold land is amortized equally over the lease period.
- Leasehold Improvements are depreciated over the shorter of the unexpired period of the lease and the estimated useful life of the assets.
- Office Equipments are depreciated over 5 to 10 years.
- Tools are depreciated over a period of 9 years, and dies and moulds over 3 years.
- Vehicles are depreciated over a period ranging from 5 years to 8 years depending on the use of vehicles.
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
b) Goodwill and other Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any amortization and accumulated impairment losses. Internally generated intangibles, excluding eligible development costs are not capitalized and the related expenditure is reflected in profit and loss in the period in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite.
GoodwiH
Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is not amortized but it is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset may be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Other intangible assets Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization method and period are reviewed at least at the end of each reporting period. Changes in the expected useful life or expected pattern of consumption of future economic benefits embodied in the assets are considered to modify amortization period or method, as appropriate, and are treated as changes in accounting estimates.
Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit or loss when the asset is derecognized.
Amortization
Amortization is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives, and is recognized in Statement of profit or loss.
The estimated useful lives for current and comparative periods are as follows:
Software licences 6 years Trademarks 10 years
Technical knowhow 10 years Good knight and Hit (Brands) are assessed as intangibles having indefinite useful life and are not amortized in the financial statements.
Residual value, is estimated to be immaterial by management and hence has been considered at '' 1.
c) Borrowing Costs
Interest and other borrowing costs attributable to qualifying assets are capitalized. Other interest and borrowing costs are charged to revenue.
d) Impairment of non-financial assets
An impairment loss is recognized whenever the carrying value of an asset or a cash-generating unit exceeds its recoverable amount. Recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs of disposal and its value in use.
An impairment loss, if any, is recognized in the Statement of Profit and Loss in the period in which the impairment takes place. The impairment loss is allocated first to reduce the carrying amount of any goodwill (if any) allocated to the cash generating unit and then to the other assets of the unit, pro rata based on the carrying amount of each asset in the unit. Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events and changes in circumstances indicate the carrying amount may not be recoverable.
e) Assets held for sale
Non-current assets or disposal groups comprising of assets and liabilities are classified as âheld for saleâ if it is highly probable that they will be recovered primarily through sales rather than through continuing use.
Subsequently, such non-current assets and disposal groups classified as held for sale are measured at lower of its carrying value and fair value less costs to sell. Losses on initial classification as held for sale and subsequent gains and losses on re-measurement are recognized in profit and loss. Non-current assets held for sale are not depreciated or amortized.
f) Financial Instruments
A financial instrument is any
contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity, Financial instruments also include derivative contracts such as foreign currency foreign exchange forward contracts, futures and currency options.
i) Financial assets
Initial recognition and measurement
All financial assets are recognized initially at fair value plus, in thecase of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement For the purpose of subsequent measurement, financial assets are classified in four categories:
- Financial assets at amortized cost,
- Financial assets at fair value through other comprehensive income (FVTOCI)
- Financial assets at fair value through profit (FVTPL)
- Equity instruments measured at fair value through other comprehensive income (FVTOCI) on the basis of its business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.
Financial assets at amortized cost
A financial asset is measured at the amortized cost if both the following conditions are met: The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding. After initial measurement, such financial assets are subsequently measured at amortized cost using the Effective Interest Rate (EIR) method. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the profit or loss. The losses arising from impairment are recognized in the profit or loss. This category generally applies to trade and other receivables. For more information on receivables, refer to Note 48 (B).
Financial assets at fair value through profit and loss (FVTPL)
Any financial asset, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may, at initial recognition, irrevocably designate a financial asset, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatchâ). Financial asset included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss. Equity investments All equity investments within the scope of Ind-AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. For all other equity instruments, the Company decides to classify the same either as at FVTOCI or FVTPL. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the Other Comprehensive Income (OCI). There is no recycling of the amounts from OCI to profit and loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the profit and loss.
Investments in Subsidiaries and Associates:
Investments in subsidiaries and associates are carried at cost less accumulated impairment losses, if any, Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiaries and associates, the difference between net disposal proceeds and the carrying amounts are recognized in the Statement of Profit and Loss. Derecognition A financial asset (or, where applicable, a part of a financial asset or a part of a group of similar financial assets) is primarily derecognized (i.e. removed from the Companyâs balance sheet) when:
- The contractual rights to receive cash flows from the financial asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay. Impairment of financial assets
The Company assesses on a forward looking basis the Expected Credit Losses (ECL) associated with its financial assets that are debt instruments and are carried at amortized cost.
The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables, the
Company applies a simplified approach. It recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
Trade receivables are tested for impairment on a specific basis after considering the sanctioned credit limits, security deposit collected etc. and expectations about future cash flows.
ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through
profit or loss or at amortized cost. A financial liability is classified at
FVTPL if it is classified as held for trading or as derivatives designated as hedging instruments in an effective hedge, as appropriate. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value and net gains and losses including any interest expenses are recognized in profit or loss.
In the case of loans and borrowings and payables, these are measured at amortized cost and recorded, net of directly attributable and incremental transaction cost. Gains and losses are recognized in Statement of Profit and Loss when the liabilities are derecognized as well as through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit and loss.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments. Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of profit or loss.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require specified payments to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind-AS 109 and the amount recognized less cumulative amortization.
Where guarantees to subsidiaries in relation to loans or other payables are provided for, at no compensation, the fair values are accounted for as contributions and recognized as fees receivable under âother financial assetsâ or as a part of the cost of the investment, depending on the contractual terms.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously,
g) Derivative financial instruments and hedge accounting
The Company uses derivative financial instruments, such as forward currency contracts to hedge its foreign currency risks and interest rate risks respectively. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Any changes therein are generally recognized in the profit or loss account. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Companyâs risk management objective and
strategy for undertaking the hedge, the hedging economic relationship between the hedged item or transaction and the nature of the risk being hedged, hedge rationale and how the entity will assess the effectiveness of changes in the hedging instrumentâs fair value in offsetting the exposure to changes in hedged itemâs fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they are designated.
Cash flow hedges When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognized in OCI and accumulated in the other equity under âeffective portion of cash flow hedgesâ. The effective portion of changes in the fair value of the derivative that is recognized in OCI is limited to the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss.
If a hedge no longer meets the criteria for hedge accounting or the hedging instrument is sold, expires, is terminated or is exercised, then hedge accounting is discontinued prospectively When hedge accounting for a cash flow hedge is discontinued, the amount that has been accumulated in other equity remains there until it is reclassified to profit and loss account in the same period or periods as the hedged expected future cash flows affect profit or loss.
h) Inventories
Inventories are valued at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Costs are computed on the weighted average basis and are net of recoverable tax credits.
Raw materials, packing materials and stores: Costs includes cost of purchase and other costs incurred in bringing each product to its present location and condition. Finish goods and work in progress: In the case of manufactured inventories and work in progress, cost includes all costs of purchases, an appropriate share of production overheads based on normal operating capacity and other costs incurred in bringing each product to its present location and condition.
Finished goods valuation also includes excise duty (to the extent applicable). Provision is made for cost of obsolescence and other anticipated losses, whenever considered necessary,
If payment for inventory is deferred beyond normal credit terms, then the cost is determined by discounting the future cash flows at an interest rate determined with reference to market rates. The difference between the total cost and the deemed cost is recognized as interest expense over the period of financing under the effective interest method.
i) Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet includes cash at bank and on hand, deposits held at call with financial institutions, other short term highly liquid investments, with original maturities less than three months which are readily convertible into cash and which are subject to insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents as defined above is net of outstanding bank overdrafts as they are considered an integral part of the Companyâs cash management.
j) Provisions, Contingent Liabilities and Contingent Assets
A provision is recognized when the enterprise has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, in respect of which a reliable estimate can be made. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows specific to the liability. The unwinding of the discount is recognized as finance cost. 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, A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. Contingent Assets are not recognized till the realization of the income is virtually certain. However the same are disclosed in the financial statements where an inflow of economic benefit is probable.
k) 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. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government.
Sale of goods
Revenue from sale of goods is recognized when significant risks and rewards of ownership in the goods are transferred to the buyer. The Company recognizes revenues on the sale of products, net of returns, discounts, sales incentives/rebate, amounts collected on behalf of third parties (such as sales tax) and payments or other consideration given to the customer that has impacted the pricing of the transaction. Accumulated experience is used to estimate and provide for the discounts and returns. No element of financing is deemed present as
the sales are made with normal credit days consistent with market practice.
Customer Loyalty Programme Sales consideration is allocated between the loyalty programme and the other components of the transaction. The amount allocated to the loyalty programme is deferred, and is recognized as revenue when the Company has fulfilled its obligations to supply the products under the terms of the programme or when it is no longer probable that the points under the programme will be redeemed.
Royalty & Technical Fees Royalty is recognized on accrual basis in accordance with the substance of the relevant agreement.
Interest income
For all debt instruments measured at amortized cost, interest income is recorded using the effective interest rate (EIR). EIR is the rate which exactly discounts the estimated future cash receipts over the expected life of the financial instrument to the gross carrying amount of the financial asset. When calculating the EIR the company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayments, extensions, call and similar options). The expected credit losses are considered if the credit risk on that financial instrument has increased significantly since initial recognition.
Dividend income Dividends are recognized in profit or loss on the date on which the Companyâs right to receive payment is established.
l) Employee Benefits
i) Short-term Employee benefits
Liabilities for wages and salaries including nonmonetary benefits that are expected to be settled wholly within twelve months after the end of the period in which the employees render the related service are classified as short term employee benefits and are recognized as an expense in the Statement of Profit and Loss as the related service is provided. A liability is recognized for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably,
ii) Share-based payments The cost of equity settled transactions is determined by the fair value at the grant date and the fair value of the employee share options is based on the Black Scholes model.
The grant-date fair value of equity-settled share-based payment granted to employees is recognized as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
iii) Post-Employment Benefits 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.
Defined Benefit Plans Gratuity Fund The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. 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 Companyâs 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 Companyâs liability towards interest shortfall, if any, is actuarially determined at the year end. The Companyâs net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed at each reporting period by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan.
To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.
Re-measurement of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Net interest expense (income) on the net defined liability (assets) is computed by applying the discount rate, used to measure the net defined liability (asset), to the net defined liability (asset) at the start of the financial year after taking into account any changes as a result of contribution and benefit payments during the year. Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.
iv) Other Long Term Employee Benefits
The liabilities for earned leaves are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by the employees up to the end of the reporting period using the projected unit credit method based on actuarial valuation.
Re-measurements are recognized in profit or loss in the period in which they arise including actuarial gains and losses.
m) Leases
Lease payments
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in the arrangement.
As a lessee
Leases of assets where the company has substantially all the risks and rewards of ownership are classified as finance leases. Minimum lease payments made under finance leases are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
The leased assets are measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that asset.
Leases of assets under which significant portion of the risks and rewards of ownership are retained by the lesser are classified as operating leases. Lease payments under operating leases are recognized as an expense on a straight-line basis
over the lease term unless the payments are structured to increase in line with expected general inflation to compensate for the less orâs expected inflationary cost increases. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease. As a less or
Leases in which the company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Rental income from operating lease is recognized on a straight line basis over the term of the relevant lease unless such payments are structured to increase in line with expected general inflation to compensate for the less orâs expected inflationary cost increase.
Income Tax
Income tax expense/ income comprises current tax expense / income and deferred tax/ expense income. It is recognized in profit or loss except to the extent that it relates to items recognized directly in equity or in Other comprehensive income. In which case, the tax is also recognized directly in equity or other comprehensive income, respectively.
Current Tax
Current tax comprises the expected tax payable or recoverable on the taxable profit or loss for the year and any adjustment to the tax payable or recoverable in respect of previous years. It is measured using tax rates enacted or substantively enacted by the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretations and establishes provisions where appropriate.
- Current tax assets and liabilities are offset only if, the Company has a legally enforceable right to set off the recognized amounts; and
- intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously,
Deferred Tax
Deferred Income tax is recognized in respect of temporary difference between the carrying amount of assets and liabilities for financial reporting purpose and the amount considered for tax purpose. Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized such reductions are reversed when it becomes probable that sufficient taxable profits will be available. Unrecognized deferred tax assets are reassessed at each reporting date and recognized to the extent that it has become probable that future taxable profits will be available against which they can be recovered.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if:
i. the entity has a legally enforceable right to set off current tax assets against current tax liabilities; and
ii. the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
Deferred tax asset / liabilities in respect of temporary differences which originate and reverse during the tax holiday period are not recognized. Deferred tax assets / liabilities in respect of temporary differences that originate during the tax holiday period but reverse after the tax holiday period are recognized.
Minimum Alternate Tax (MAT) credit is recognized as an asset only when and to the extent there is a convincing evidence that the Company will pay normal tax during specified period.
n) Foreign Currency Transactions
i) Functional and Presentation currency
The Companyâs financial statements are prepared in Indian Rupees (INR â''â) which is also the Companyâs functional currency,
ii) Transactions and balances Foreign currency transactions are recorded on initial recognition in the functional currency using the exchange rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary items that are measured based on historical cost in a foreign currency are translated using the exchange rate at the date of the initial transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rate at the date the fair value is determined. Exchange differences arising on the settlement or translation of monetary items are recognized in profit or loss in the year in which they arise except for the qualifying cash flow hedge, which are recognized in OCI to the extent that the hedges are effective.
o) Government grants
Government grants, including non-monetary grants at fair value are recognized when there is reasonable assurance that the grants will be received and the Company will comply with all the attached conditions.
When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods necessary to match them with the costs that they are intended to compensate. Government grants relating to purchase of property, plant and equipment are included in noncurrent liabilities as deferred income and are credited to the profit and loss on a straight line basis over the expected lives of the related assets.
p) Dividend
The Company recognizes a liability for any dividend declared but not distributed at the end of the reporting period, when the distribution is authorized and the distribution is no longer at the discretion of the Company on or before the end of the reporting period. As per Corporate laws in India, a distribution in the nature of final dividend is authorized when it is approved by the shareholders.
A corresponding amount is recognized directly in equity,
q) Earnings Per Share
Basic earnings per share is calculated by dividing the profit or loss 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 profit or loss for the period attributable to the equity shareholders and the weighted average number of equity shares outstanding during the period is adjusted to take into account:
- The after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
- Weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
r) Segment Reporting
As per Ind AS-108 âOperating Segmentsâ, if a financial report contains both the consolidated financial statements of a parent that is within the scope of Ind AS-108 as well as the parentâs separate financial statements, segment information is required only in the consolidated financial statements. Accordingly, information required to be presented under Ind AS-108 Operating Segments has been given in the consolidated financial statements.
* Includes trademarks / brands amounting to Rs, 791.25 crore (31-Mar-17'' 791.25 crore) that have an indefinite life and are tested for impairment at every year end. Based on analysis of all relevant factors (brand establishment, stability, types of obsolescence etc.), there is no foreseeable limit to the period over which the assets are expected to generate net cash inflows for the Company Capital Advances include Rs, 13.96 crore (31-Mar-17Rs, 6.34 crore) paid to Related Parties.
The fixed deposits include deposits under lien against bank guarantees Rs, 2.82 crore (31-Mar-17Rs, 2.93 crore)
Mar 31, 2017
a) Property, Plant and Equipment
Recognition and measurement Items of property, plant and equipment, other than Freehold Land, are measured at cost less accumulated depreciation and any accumulated impairment losses, Freehold land is carried at cost and is not depreciated,
The cost of an item of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable costs of bringing the asset to its working condition for its intended use and estimated costs of dismantling and removing the item and restoring the item and restoring the site on which it is located,
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment,
Any gain or loss on derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised,
Subsequent expenditure Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate only if it is probable that the future economic benefits associated with the item will flow to the Company and that the cost of the item can be reliably measured, The carrying amount of any component accounted for as a separate asset is derecognized when replaced, All other repair and maintenance are charged to profit and loss during the reporting period in which they are incurred, Depreciation
Depreciation 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:
- Leasehold land is amortised equally over the lease period,
- Leasehold Improvements are depreciated over the shorter of the unexpired period of the lease and the estimated useful life of the assets,
- Office Equipments are depreciated over 5 to 10 years,
- Tools are depreciated over a period of 9 years, and dies and moulds over 3 years,
- Vehicles are depreciated over a period ranging from 5 years to 8 years depending on the use of vehicles,
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate,
b) Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost, The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition, Following initial recognition, intangible assets are carried at cost less any accumulated impairment losses, Internally generated intangibles, excluding eligible development costs are not capitalized and the related expenditure is reflected in profit and loss in the period in which the expenditure is incurred,
The useful lives of intangible assets are assessed as either finite or indefinite,
Goodwill
Goodwill on acquisition of subsidiaries is included in intangible assets, Goodwill is not amortised but it is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset may be impaired, and is carried at cost less accumulated impairment losses, Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold, Other intangible assets Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired, The amortization method and period are reviewed at least at the end of each reporting period, Changes in the expected useful life or expected pattern of consumption of future economic benefits embodied in the assets are considered to modify amortization period or method, as appropriate, and are treated as changes in accounting estimates,
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable, If not the change in useful life from indefinite to finite is made on a prospective basis,
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit or loss when the asset is derecognized,
Amortisation
Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives, and is recognised in profit or loss,
The estimated useful lives for current and comparative periods are as follows:
Software licences 6 years Trademarks 10 years
Technical knowhow 10 years Goodknight and Hit (Brands) are assessed as intangibles having indefinite useful life and are not amortised in the financial statements,
Residual value, is estimated to be immaterial by management and hence has been considered at Rs.1,
c) Borrowing Costs
Interest and other borrowing costs attributable to qualifying assets are capitalized, Other interest and borrowing costs are charged to revenue,
d) Impairment of non-financial assets
An impairment loss is recognised whenever the carrying value of an asset or a cash-generating unit exceeds its recoverable amount, Recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs of disposal and its value in use,
An impairment loss, if any, is recognised in the Statement of Profit and Loss in the period in which the impairment takes place, The impairment loss is allocated first to reduce the carrying amount of any goodwill (if any) allocated to the cash generating unit and then to the other assets of the unit, pro rata based on the carrying amount of each asset in the unit, Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired, Other assets are tested for impairment whenever events and changes in circumstances indicate the carrying amount may not be recoverable,
e) Assets held for sale
Non-current assets or disposal groups comprising of assets and liabilities are classified as âheld for saleâ when all of the following criteriaâs are met: (i) decision has been made to sell; (ii) the assets are available for immediate sale in its present condition; (iii) the assets are being actively marketed and (iv) sale has been agreed or is expected to be concluded within 12 months of the Balance Sheet date,
Subsequently, such non-current assets and disposal groups classified as held for sale are measured at lower of its carrying value and fair value less costs to sell, Non-current assets held for sale are not depreciated or amortised,
f) Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity, Financial instruments also include derivative contracts such as foreign currency foreign exchange forward contracts, futures and currency options,
i) Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset, Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i,e,, the date that the Company commits to purchase or sell the asset,
Subsequent measurement For the purpose of subsequent measurement, financial assets are classified in four categories:
- Debt instruments at amortised cost,
- Debt instruments at fair value through other comprehensive income (FVTOCI)
- Debt instruments, derivatives and equity instruments at fair value through profit (FVTPL)
- Equity instruments measured at fair value through other comprehensive income (FVTOCI)
On the basis of its business model for managing the financial assets and the contractual cash flow characteristics of the financial asset,
Debt instruments at amortised cost
- A âdebt instrumentâ is measured at the amortised cost if both the following conditions are met: The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding,
After initial measurement, such financial assets are subsequently measured at amortised cost using the Effective Interest Rate (EIR) method, Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The
EIR amortisation is included in finance income in the profit or loss, The losses arising from impairment are recognised in the profit or loss, This category generally applies to trade and other receivables, For more information on receivables, refer to Note 49 (b),
Debt instrument at fair value through profit and loss (FVTPL) Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL,
In addition, the Company may, at initial recognition, irrevocably designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL, However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatchâ),
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss, Equity investments All equity investments within the scope of Ind-AS 109 are measured at fair value, Equity instruments which are held for trading are classified as at FVTPL, For all other equity instruments, the Company decides to classify the same either as at FVTOCI or FVTPL, The Company makes such election on an instrument-by-instrument basis, The classification is made on initial recognition and is irrevocable,
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the Other Comprehensive Income (OCI), There is no recycling of the amounts from OCI to profit and loss, even on sale of investment, However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the profit and loss,
Investments in Subsidiaries and Associates:
Investments in subsidiaries and associates are carried at cost less accumulated impairment losses, if any Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount, On disposal of investments in subsidiaries and associates, the difference between net disposal proceeds and the carrying amounts are recognized in the Statement of Profit and Loss, Derecognition A financial asset (or, where applicable, a part of a financial asset or a part of a group of similar financial assets) is primarily derecognised (i,e, removed from the Companyâs balance sheet) when:
- The contractual rights to receive cash flows from the financial asset have expired, or The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpassthroughâ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained,
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets The Company assess on a forward looking basis the Expected Credit Losses (ECL) associated with its financial assets that are debt instruments and are carried at amortised cost,
The impairment methodology applied depends on whether there has been a significant increase in credit risk,
For trade receivables, the Company applies a simplified approach. It recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition,
Trade receivables are tested for impairment on a specific basis after considering the sanctioned credit limits, security deposit collected etc, and expectations about future cash flows,
ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value,
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable and incremental transaction cost, Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss,
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments,
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss,
Loans and borrowing After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are derecognized as well as through the EIR amortisation process, Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the Statement of Profit and Loss,
Financial guarantee contracts Financial guarantee contracts issued by the Company are those contracts that require specified payments to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument, Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee, Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind-AS 109 and the amount recognised less cumulative amortisation,
Where guarantees in relation to loans or other payables of subsidiaries are provided for no compensation, the fair values are accounted for as contributions and recognised as fees receivable under âother financial assetsâ or as a part of the cost of the investment, depending on the contractual terms,
Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to to realise the assets and settle the liabilities simultaneously,
g) Derivative financial instruments and hedge accounting
The Company uses derivative financial instruments, such as forward currency contracts to hedge its foreign currency risks and interest rate risks respectively, Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value, Any changes therein are generally recognised in the profit or loss account, Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative,
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge, The documentation includes the Companyâs risk management objective and strategy for undertaking the hedge, the hedging economic relationship the hedged item or transaction the nature of the risk being hedged, hedge ration and how the entity will assess the effectiveness of changes in the hedging instrumentâs fair value in offsetting the exposure to changes in hedged itemâs fair value or cash flows attributable to the hedged risk, Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they are designated,
Cash flow hedges When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in OCI and accumulated in the other equity under âeffective portion of cash flow hedgesâ, The effective portion of changes in the fair value of the derivative that is recognised in OCI is limited to the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge, Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss,
If a hedge no longer meets the criteria for hedge accounting or the hedging instrument is sold, expires, is terminated or is exercised, then hedge accounting is discontinued prospectively, When hedge accounting for a cash flow hedge is discontinued, the amount that has been accumulated in other equity remains there until is reclassified to profit and loss account in the same period or periods as the hedged expected future cash flows affect profit or loss,
h) Inventories
Inventories are valued at lower of cost and net realizable value, Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale, Costs are computed on the weighted average basis and are net of CENVAT credits,
Raw materials, packing materials and stores: Costs includes cost of purchase and other costs incurred in bringing each product to its present location and condition, Finish goods and work in progress: In the case of manufactured inventories and work in progress, cost includes all costs of purchases, an appropriate share of production overheads based on normal operating capacity and other costs incurred in bringing each product to its present location and condition
Finished goods valuation also includes excise duty, Provision is made for cost of obsolescence and other anticipated losses, whenever considered necessary.
If payment for inventory is deferred beyond normal credit terms, then the cost is determined by discounting the future cash flows at an interest rate determined with reference to market rates, The difference between the total cost and the deemed cost is recognised as interest expense over the period of financing under the effective interest method,
i) Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet includes cash at bank and on hand, deposits held at call with financial institutions, other short term highly liquid investments, with original maturities less than three months which are readily convertible into cash and which are subject to insignificant risk of changes in value,
For the purpose of the statement of cash flows, cash and cash equivalents cash and short term deposits as defined above is net of outstanding bank overdrafts as they are considered an integral part of the Companyâs cash management,
j) Provisions, Contingent Liabilities and Contingent Assets
A provision is recognised when the enterprise has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, in respect of which a reliable estimate can be made, These are reviewed at each balance sheet date and adjusted to reflect the current management estimates,
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows specific to the liability, The unwinding of the discount is recognised as finance cost, 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, A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity, Contingent Assets are not recognised till the realization of the income is virtually certain, However the same are disclosed in the financial statements where an inflow of economic benefit is probable,
k) 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, Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government,
Sale of goods
Revenue from sale of goods is recognised when significant risks and rewards of ownership in the goods are transferred to the buyer. The Company recognizes revenues on the sale of products, net of returns, discounts, sales incentives/rebate, amounts collected on behalf of third parties (such as sales tax) and payments or other consideration given to the customer that has impacted the pricing of the transaction, Accumulated experience is used to estimate and provide for the discounts and returns, No element of financing is deemed present as the sales are made with normal credit days consistent with market practice,
Customer Loyalty Programme Sales consideration is allocated between the loyalty programme and the other components of the transaction. The amount allocated to the loyalty programme is deferred, and is recognised as revenue when the Company has fulfilled its obligations to supply the products under the terms of the programme or when it is no longer probable that the points under the programme will be redeemed,
Royalty & Technical Fees Royalty is recognized on accrual basis in accordance with the substance of the relevant agreement,
Interest income
For all debt instruments measured at amortised cost, interest income is recorded using the effective interest rate (EIR). EIR is the rate which exactly discounts the estimated future cash receipts over the expected life of the financial instrument to the gross carrying amount of the financial asset. When calculating the EIR the company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayments, extensions, call and similar options). The expected credit losses are considered if the credit risk on that financial instrument has increased significantly since initial recognition.
Dividend income Dividends are recognised in profit or loss on the date on which the Companyâs right to receive payment is established
l) Employee Benefits
i) Short-term Employee benefits Liabilities for wages and salaries including nonmonetary benefits that are expected to be settled wholly within twelve months after the end of the period in which the employees render the related service are classified as short term employee benefits and are recognized as an expense in the Statement of Profit and Loss as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
ii) Share-based payments The cost of equity settled transactions is determined by the fair value at the grant date, the fair value of the employee share options is based on the Black Scholes model used for valuation of options,
The grant-date fair value of equity-settled share-based payment granted to employees is recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date, For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes,
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share,
iii) Post-Employment Benefits 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,
Defined Benefit Plans Gratuity Fund The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees, 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 Companyâs 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 Companyâs liability towards interest shortfall, if any, is actuarially determined at the year end,
The Companyâs net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets,
The calculation of defined benefit obligations is performed by a qualified actuary using the projected unit credit method, When the calculation results in a potential asset for the Company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan, To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements,
Re-measurement of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods,
Net interest expense (income) on the net defined liability (assets) is computed by applying the discount rate, used to measure the net defined liability (asset), to the net defined liability (asset) at the start of the financial year after taking into account any changes as a result of contribution and benefit payments during the year. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss,
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss, The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs,
iv) Other Long Term Employee Benefits
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by the employees upto the end of the reporting period using the projected unit credit method, Re-measurements are recognised in profit or loss in the period in which they arise, Actuarial gains and losses in respect of such benefits are charged to Statement of Profit and Loss in the period in which they arise,
m) Leases
Lease payments The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease, The arrangement is, or contains a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in the arrangement,
As a lessee
Leases of assets where the company has substantially all the risks and rewards of ownership are classified as finance leases, Minimum lease payments made under finance leases are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability,
The leased assets are measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that asset,
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 unless the payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases,
As a lessor
Leases in which the company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases, Rental income from operating lease is recognized on a straight line basis over the term of the relevant lease unless such payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increase. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease,
n) Income Tax
Income tax expense/ income comprises current tax expense income and deferred tax expense income. It is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in OCI,
In which case, the tax is also recognized directly in equity or other comprehensive income, respectively.
Current Tax
Current tax comprises the expected tax payable or recoverable on the taxable profit or loss for the year and any adjustment to the tax payable or recoverable in respect of previous years. It is measured using tax rates enacted or substantively enacted by the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretations and establishes provisions where appropriate,
- Current tax assets and liabilities are offset only if, the Company has a legally enforceable right to set off the recognised amounts; and
- intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously,
Deferred Tax
Deferred Income tax is recognised in respect of temporary difference between the carrying amount of assets and liabilities for financial reporting purpose and the amount considered for tax purpose, Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized,
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilised such reductions are reversed when it becomes probable that sufficient taxable profits will be available, Unrecognized deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be recovered,
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted by the end of the reporting period, The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities,
Deferred tax assets and liabilities are offset only if:
i) the entity has a legally enforceable right to set off current tax assets against current tax liabilities; and
ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity,
iii) Deferred tax asset / liabilities in respect of temporary differences which originate and reverse during the tax holiday period are not recognised, Deferred tax assets / liabilities in respect of temporary differences that originate during the tax holiday period but reverse after the tax holiday period are recognised, Minimum Alternate Tax (MAT) credit is recognized as an asset only when and to the extent there is a convincing evidence that the Company will pay normal tax during specified period,
o) Foreign Currency Transactions
i) Functional and Presentation currency
The Companyâs financial statements are prepared in Indian Rupees (INR â''â) which is also the Companyâs functional currency,
ii) Transactions and balances Foreign currency transactions are recorded on initial recognition in the functional currency using the exchange rate at the date of the transaction,
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date, Non-monetary items that are measured based on historical cost in a foreign currency are translated using the exchange rate at the date of the initial transaction, Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rate at the date the fair value is determined,
Exchange differences arising on the settlement or translation of monetary items are recognized in profit or loss in the year in which they arise except for the qualifying cash flow hedge, which are recognised in OCI to the extent that the hedges are effective,
p) Government grants
Government grants, including non-monetary grants at fair value are recognised when there is reasonable assurance that the grants will be received and the company will comply with all the attached conditions,
When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods necessary to match them with the costs that they are intended to compensate, Government grants relating to purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to the profit and loss on a straight line basis over the expected lives of the related assets
q) Dividend
The Company recognises a liability for any dividend declared but not distributed at the end of the reporting period, when the distribution is authorised and the distribution is no longer at the discretion of the Company on or before the end of the reporting period, As per Corporate laws in India, a distribution is authorized when it is approved by the shareholders, A corresponding amount is recognized directly in equity.
r) Earnings Per Share
Basic earnings per share is calculated by dividing the profit or loss 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 profit or loss for the period attributable to the equity shareholders and the weighted average number of equity shares outstanding during the period is adjusted to take into account:
- The after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
- Weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares,
s) 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 INDAS-108 âOperating Segmentsâ, if a financial report contains both the consolidated financial statements of a parent that is within the scope of Ind AS-108 as well as the parentâs separate financial statements, segment information is required only in the consolidated financial statements, Accordingly, information required to be presented under Ind AS-108 Operating Segments has been given in the consolidated financial statements,
Mar 31, 2015
A. Accounting Convention
The financial statements are prepared under the historical cost
convention, on accrual basis, in accordance with the Generally Accepted
Accounting Principles in India. The Company has prepared 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
info current and non-current.
b. Use of Estimates
The preparation 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 preparation 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/maferialised.
c. Fixed Assets
Fixed assets are stated at cost (net of cenvat credit and capital
subisidy/granf wherever applicable) less accumulated depreciation and
impairment losses, if any. The cost includes cost of acquisition,
construction, erection, installation etc., preoperative expenses
(including trial run) and borrowing costs incurred during construction
period. 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 occurs where 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. Value in use is the present value
of estimated future cash flows expected to arise from the continuing
use of an asset and from its disposal at the end of its useful life. An
impairment loss, if any, is recognised in the 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 all the risks and rewards of ownership are
effectively retained by the lessor are classified as operating leases.
Lease payments/receipfs 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 or those maturing within twelve months
from the balance sheet date 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 revenue. 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 present
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 present 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 present 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 if 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
prevailing 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 Lund
maintained with Regional Provident Lund Office and Superannuation Lund
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 gain and losses are
recognised immediately in the Statement of Profit and Loss as income or
expense. 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 Lund 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.
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 previous year when compared with expected improvements.
Up to March 31, 2009, the EVA awards would flow through a notional bank
whereby only the prescribed 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 prescribed 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. Depreciation and Amortisation
Depreciation 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 depreciated over the shorter of the
unexpired period of the lease and the estimated useful life of the
assets.
iii) Office Equipment are depreciated over 10 years.
iv) Tools, dies and moulds are depreciated over a period of 9 years and
3 years respectively.
v) Vehicles are depreciated 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 Good knight 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 Good knight 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 depreciated 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/liabilities in respect of timing differences that originate
during the tax holiday period but reverse after the tax holiday period
are recognised. Deferred tax assets on unabsorbed tax losses and tax
depreciation are recognised only to the extent that there is virtual
certainty supported by convincing evidence that future taxable income
will be available against which such deferred tax assets can be
realized and on other items including MAT credit entitlement when there
is reasonable certainty of realisation. 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 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 original maturities of three months or less.
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
presented only on the basis of the consolidated financial statements.
Accordingly, information required to be presented under AS-17 Segment
Reporting has been given in the consolidated financial statements.
Mar 31, 2013
A. Accounting Convention
The financial statements are prepared under the historical cost
convention, on accrual basis, in accordance with the generally accepted
accounting principles in India, the applicable Accounting Standards
notified under Section 211(3c) of the Companies Act, 1956 and specified
in the Companies (Accounting Standard) Rules, pronouncements of the
Institute of Chartered Accountants of India and the provisions of the
Companies Act, 1956.
b. Use of Estimates
The preparation 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 preparation of financial statements are
prudent and reasonable. Actual results could differ from the estimates.
c. Fixed Assets
Fixed Assets are stated at cost of acquisition or construction, less
accumulated depreciation. Cost includes all expenses related to
acquisition and installation of the concerned assets.
Direct financing cost incurred during the construction period on major
projects is also capitalised.
Fixed assets acquired under finance lease are capitalised at the lower
of their fair value and the present value of the minimum lease
payments.
d. Asset Impairment
Management periodically assesses, using external and internal sources,
whether there is an indication that an asset may be impaired. An
impairment occurs where 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. Value in use is the present value
of estimated future cash flows expected to arise from the continuing
use of an asset and from its disposal at the end of its useful life. An
impairment loss, if any, is recognized in the period in which the
impairment takes place.
e. Operating Leases
Leases of assets under which all the risks and rewards of ownership are
effectively retained by the lessor are classified as operating leases.
Lease payments under operating leases are recognized as an expense on a
straight- line basis over the lease term.
f. Investments
Investments are classified into current and long term investments. Long
term investments are carried at cost. Cost of acquisition includes all
costs directly incurred on the acquisition of the investment. Provision
for diminution, if any, in the value of long term investments is made
to recognize a decline, other than of a temporary nature. Current
investments are stated at lower of cost and net realisable value.
g. Inventories
Inventories are valued at lower of cost and estimated net realizable
value. Cost is computed on the weighted average basis and is net of
CENVAT. Finished goods and work-in-progress include cost of conversion
and other costs incurred in bringing the inventories to their present
location and condition. Finished goods valuation also includes excise
duty. Provision is made for cost of obsolescence and other anticipated
losses, whenever considered necessary.
h. Provisions and Contingent Liabilities
Provisions are recognized when the Company has a present obligation as
a result of a past event; it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and when a reliable estimate of the amount of the obligation can be
made.
No Provision is recognized for -
A. Any possible obligation that arises from past events and the
existence of which will be confirmed only by the occurrence or
non-occurrence of one or more uncertain future events not wholly within
the control of the Company; or
B. Any present obligation that arises from past events but is not
recognized because -
a) It is not probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; or
b) A reliable estimate of the amount of obligation cannot be made.
Such obligations are recorded as Contingent Liabilities. These are
assessed periodically and only that part of the obligation for which an
outflow of resources embodying economic benefits is probable, is
provided for, except in the extremely rare circumstances where no
reliable estimate can be made.
Contingent Assets are not recognized in the financial statements since
this may result in the recognition of income that may never be
realized.
i. Revenue Recognition
- Sales are recognised when goods are supplied and are recorded net
of returns, trade discounts, rebates, sales taxes and excise duties.
- Income from processing operations is recognised on completion of
production / dispatch of the goods, as per the terms of contract.
- Export incentives are accounted on accrual basis and include the
estimated value of export incentives receivable under the Duty
Entitlement Pass Book Scheme, Duty Drawback, Focus Product Scheme and
Focus Market Scheme.
- Dividend income is recognised when the right to receive the same is
established.
- Interest income is recognised on a time proportion basis.
- Insurance claims and transport and power subsidies from the
Government are accounted on cash basis when received.
j. Expenditure
- Expenses are accounted for on accrual basis and provision is made
for all known losses and liabilities.
- 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.
k. Borrowing Costs
Borrowing costs that are directly attributable to the acquisition 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 put to use. Other borrowing costs are recognised as
an expense in the period in which they are incurred.
l. Foreign Currency Transactions
i) Transactions in foreign currency are recorded at the exchange rates
prevailing 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) Forward exchange contracts, remaining unsettled at the period end,
backed by underlying assets or liabilities are also translated at
period end exchange rates. 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 or losses
on cancellation of forward exchange contracts are recognised in the
Statement of Profit and Loss of the period in which they are cancelled.
iii) Non Monetary foreign currency items like investments in foreign
subsidiaries are carried at cost and expressed in Indian currency at
the rate of exchange prevailing at the time of making the original
investment.
iv) Exchange differences arising on reporting of long term foreign
currency monetary items at rates different from those at which they
were initially recorded during the year in so far as they relate to the
acquisition of a depreciable capital asset, are added to or deducted
from the cost of the asset and are depreciated over the balance life of
the asset, and in other cases, are accumulated in a "Foreign Currency
Monetary Item Translation Difference Account" and amortised over the
balance period of such long term asset or liability, by recognising as
income or expense in each such periods.
m. Hedging
The Company uses forward exchange contracts to hedge its foreign
exchange exposures and commodity futures contracts to hedge the
exposure to oil price risks. Gains or losses on settled contracts are
recognized in the Statement of Profit and Loss. Gains or losses on the
commodity futures contracts are recorded in the Statement of Profit and
Loss under Cost of Materials Consumed.
n. 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. Benefits
such as salaries, performance incentives, etc., are recognized 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''s liability towards gratuity to past employees is
determined using the Projected Unit Credit Method which considers each
period of service as giving rise to an additional unit of benefit
entitlement and measures each unit separately to build up the final
obligation. Past services are recognized on a straight line basis over
the average period until the amended benefits become vested. Actuarial
gain and losses are recognized immediately in the Statement of Profit
and Loss as income or expense. Obligation is measured at the present
value of estimated future cash flows using a discounted rate that is
determined by reference to market yields at the Balance Sheet date on
Government Securities where the currency and terms of the Government
Securities are consistent with the currency and estimate terms of the
defined benefit obligations.
Provident Fund
Provident Fund Contributions other than those made to the Regional
Provident Fund Office of the Government which are made to the 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.
c) Other Long Term Employee Benefits
Other Long Term Employee Benefits viz., leave encashment 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
using the Projected Unit Credit Method, with the actuarial valuation
carried out as at the Balance Sheet date. Actuarial gains and losses in
respect of such benefits are charged to the Statement of Profit and
Loss.
o. 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 previous year when compared with expected improvements.
Up to March 31, 2009, the EVA awards would flow through a notional bank
whereby only the prescribed 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.
p. Depreciation and Amortisation
i) Leasehold land is amortised equally over the lease period.
ii) Leasehold Improvements are depreciated over the shorter of the
unexpired period of the lease and the estimated useful life of the
assets.
iii) Depreciation is provided, pro rata to the period of use, under the
Straight Line Method at the rates specified in Schedule XIV to the
Companies Act, 1956, except:
a) In case of computer hardware which is depreciated over 4 years.
b) 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 and 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.
c) The Cost of SAP licenses incurred for subsidiaries are being
recovered from respective subsidiaries.
d) Goodwill is amortised over a period of 5 years.
e) Tools, dies and moulds acquired are depreciated over a period of 9
years and 31/2 years respectively.
f) Technical Knowhow is depreciated over a period of 10 years.
g) In accordance with the Court order approving the 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) Assets costing less than Rs. 5,000 are depreciated at 100% in the
year of acquisition.
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 assets /
liabilities in respect of timing differences which originate and
reverse during the tax holiday period are not recognized. Deferred tax
assets / liabilities in respect of timing differences that originate
during the tax holiday period but reverse after the tax holiday period
are recognized. Deferred tax assets on unabsorbed tax losses and tax
depreciation are recognised only when there is a virtual certainty of
their realisation and on other items when there is reasonable certainty
of realisation. 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 on the balance sheet date.
r. 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
presented only on the basis of the consolidated financial statements.
Accordingly, information required to be presented under AS-17 Segment
Reporting has been given in the consolidated financial statements.
Mar 31, 2012
A. Accounting Convention
The financial statements are prepared under the historical cost
convention, on accrual basis, in accordance with the generally accepted
accounting principles in India, the applicable Accounting Standards
notified under Section 211(3c) of the Companies Act, 1956 and specified
in the Companies (Accounting Standard) Rules, pronouncements of the
Institute of Chartered Accountants of India and the provisions of the
Companies Act, 1956.
b. Use of Estimates
The preparation 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 preparation of financial statements are
prudent and reasonable. Actual results could differ from the estimates.
c. Fixed Assets
Fixed Assets are stated at cost of acquisition or construction, less
accumulated depreciation. Cost includes all expenses related to
acquisition and installation of the concerned assets.
Direct financing cost incurred during the construction period on major
projects is also capitalised.
Fixed assets acquired under finance lease are capitalised at the lower
of their fair value and the present value of the minimum lease
payments.
d. Asset Impairment
Management periodically assesses using, external and internal sources,
whether there is an indication that an asset may be impaired. An
impairment occurs where 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. Value in use is the present value
of estimated future cash flows expected to arise from the continuing
use of an asset and from its disposal at the end of its useful life. An
impairment loss, if any, is recognised in the period in which the
impairment takes place.
e. Operating Leases
Leases of assets under which all the risks and rewards of ownership are
effectively retained by the lessor are classified as operating leases.
Lease payments under operating leases are recognised as an expense on a
straight- line basis over the lease term.
f. Investments
Investments are classified into current and long-term investments. Long
term investments are carried at cost. Cost of acquisition includes all
costs directly incurred on the acquisition of the investment. Provision
for diminution, if any, in the value of long-term investments is made
to recognise a decline, other than of a temporary nature. Current
investments are stated at lower of cost and net realisable value.
g. Inventories
Inventories are valued at lower of cost and estimated net realisable
value. Cost is computed on the weighted average basis and is net of
CENVAT. Finished goods and work-in-progress include cost of conversion
and other costs incurred in bringing the inventories to their present
location and condition. Finished goods valuation also includes excise
duty. Provision is made for cost of obsolescence and other anticipated
losses, whenever considered necessary.
h. Provisions and Contingent Liabilities
Provisions are recognised when the Company has a present obligation as
a result of a past event; it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and when a reliable estimate of the amount of the obligation can be
made.
No Provision is recognized for -
A. Any possible obligation that arises from past events and the
existence of which will be confirmed only by the occurrence or
non-occurrence of one or more uncertain future events not wholly within
the control of the Company; or
B. Any present obligation that arises from past events but is not
recognised because -
a) It is not probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; or
b) A reliable estimate of the amount of obligation cannot be made.
Such obligations are recorded as Contingent Liabilities. These are
assessed periodically and only that part of the obligation for which an
outflow of resources embodying economic benefits is probable, is
provided for, except in the extremely rare circumstances where no
reliable estimate can be made.
Contingent Assets are not recognized in the financial statements since
this may result in the recognition of income that may never be
realized.
i. Revenue Recognition
- Sales are recognised when goods are supplied and are recorded net of
returns, trade discounts, rebates, sales taxes and excise duties.
- Income from processing operations is recognised on completion of
production / dispatch of the goods, as per the terms of contract.
- Export incentives are accounted on accrual basis and include the
estimated value of export incentives receivable under the Duty
Entitlement Pass Book Scheme.
- Dividend income is recognised when the right to receive the same is
established.
- Interest income is recognised on a time proportion basis.
- Insurance claims and transport and power subsidies from the
Government are accounted on cash basis when received.
j. Expenditure
- Expenses are accounted for on accrual basis and provision is made for
all known losses and liabilities.
- 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.
k. Borrowing Costs
Borrowing costs that are directly attributable to the acquisition 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 put to use. Other borrowing costs are recognised as
an expense in the period in which they are incurred.
l. Foreign Currency Transactions
i) Transactions in foreign currency are recorded at the exchange rates
prevailing 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) Forward exchange contracts, remaining unsettled at the period end,
backed by underlying assets or liabilities are also translated at
period end exchange rates. 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 or losses
on cancellation of forward exchange contracts are recognised in the
Statement of Profit and Loss of the period in which they are cancelled.
iii) Non-Monetary foreign currency items like investments in foreign
subsidiaries are carried at cost and expressed in Indian currency at
the rate of exchange prevailing at the time of making the original
investment.
iv) The Government of India, Ministry of Corporate Affairs has during
the year amended the Companies (Accounting Standards) Rules, 2006, in
respect of Accounting Standard (AS) 11 relating to "The Effects of
Changes in Foreign Exchange Rates", wherein enterprises have been given
an option to accumulate exchange differences in a "Foreign Currency
Monetary Item Translation Difference Account" subject to the conditions
specified in the Notification. Accordingly, the Company has exercised
the option to accumulate the foreign currency gain/losses in the
"Foreign Currency Monetary Item Translation Difference Account".
m. Hedging
The Company uses forward exchange contracts to hedge its foreign
exchange exposures and commodity futures contracts to hedge the
exposure to oil price risks. Gains or losses on settled contracts are
recognised in the Statement of Profit and Loss. Gains or losses on the
commodity futures contracts are recorded in the Statement of Profit and
Loss under Cost of Materials Consumed.
n. 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. Benefits
such as salaries, performance incentives, etc., 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.
Upto the previous year all provident fund contributions, whether made
to the Regional Provident Fund Office or to the Provident Fund Trust
administered by the Company were considered as Defined Contribution
Plans.
b) Defined Benefit Plans Gratuity Fund
Company's liability towards gratuity to past employees is determined
using the projected unit credit method which considers each period of
service as giving rise to an additional unit of benefit entitlement and
measures each unit separately to build up the final obligation. Past
services are recognised on a straight line basis over the average
period until the amended benefits become vested. Actuarial gain and
losses are recognised immediately in the Statement of Profit and Loss
as income or expense. Obligation is measured at the present value of
estimated future cash flows using a discounted rate that is determined
by reference to market yields at the Balance Sheet date on Government
Securities where the currency and terms of the Government Securities
are consistent with the currency and estimate terms of the defined
benefit obligations.
Provident Fund
Provident Fund Contributions other than those made to the Regional
Provident Fund Office of the Government which are made to the 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.
c) Other Long Term Employee Benefits
Other Long Term Employee Benefits viz., leave encashment 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
using the Projected Unit Credit Method, with the actuarial valuation
carried out as at the Balance Sheet date. Actuarial gains and losses in
respect of such benefits are charged to the Statement of Profit and
Loss.
o. 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 previous year when compared with expected improvements.
Up to March 31, 2009, the EVA awards would flow through a notional bank
whereby only the prescribed 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 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 the
reducing balance. The entire EVA award for the year has been charged
to the Statement of Profit and Loss.
p. Depreciation and Amortisation
i) Leasehold land is amortised equally over the lease period.
ii) Leasehold Improvements are depreciated over the shorter of the
unexpired period of the lease and the estimated useful life of the
assets.
iii) Depreciation is provided, pro rata to the period of use, under the
Straight Line Method at the rates specified in Schedule XIV to the
Companies Act, 1956, except:
a) In case of computer hardware which is depreciated over 4 years.
b) 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 and 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.
c) Goodwill is amortised over a period of 5 years.
d) Tools, dies and moulds acquired are depreciated over a period of
31/2 years.
e) Technical Knowhow is depreciated over a period of 10 years.
f) In accordance with the Court order approving the 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) Assets costing less than Rs. 5,000 are depreciated at 100% in the
year of acquisition.
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 on timing differences which originate and
reverse during the tax holiday period are not recognised. Deferred tax
asset / liabilities in respect of timing differences that originate
during the tax holiday period but reverse after the tax holiday period
are recognised. Deferred tax assets on unabsorbed tax losses and tax
depreciation are recognised only when there is a virtual certainty of
their realisation and on other items when there is reasonable certainty
of realisation. 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 on the balance sheet date.
r. 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
presented only on the basis of the consolidated financial statements.
Accordingly, information required to be presented under AS-17 Segment
Reporting has been given in the consolidated financial statements.
Mar 31, 2011
A) Accounting Convention:
The financial statements are prepared under the historical cost
convention, on accrual basis, in accordance with the generally accepted
accounting principles in India, the Accounting Standards issued by the
Institute of Chartered Accountants of India and the provisions of the
Companies Act, 1956.
b) Use of Estimates:
The preparation 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 preparation of financial statements are
prudent and reasonable. Actual results could differ from the estimates.
c) Fixed Assets:
Fixed Assets are stated at cost of acquisition or construction, less
accumulated depreciation. Cost includes all expenses related to
acquisition and installation of the concerned assets.
Direct fnancing cost incurred during the construction period on major
projects is also capitalised.
Fixed assets acquired under fnance lease are capitalised at the lower
of their fair value and the present value of the minimum lease
payments.
d) Asset Impairment:
Management periodically assesses using, external and internal sources,
whether there is an indication that an asset may be impaired. An
impairment occurs where the carrying value exceeds its recoverable
amount. An impairment loss, if any, is recognised in the period in
which the impairment takes place.
e) Leases:
Leases of assets under which all the risks and rewards of ownership are
effectively retained by the lessor are classifed as operating leases.
Lease payments under operating leases are recognised as an expense on a
straight-line basis over the lease term.
f) Investments:
Investments are classifed into current and long term investments. Long
term investments are carried at cost. Cost of acquisition includes all
costs directly incurred on the acquisition of the investment. Provision
for diminution, if any, in the value of long term investments is made
to recognise a decline, other than of a temporary nature. Current
investments are stated at lower of cost and net realisable value.
g) Inventories:
Inventories are valued at lower of cost and net realisable value. Cost
is computed on the weighted average basis and is net of Cenvat.
Finished goods and work-in-progress include cost of conversion and
other costs incurred in bringing the inventories to their present
location and condition. Finished goods valuation also includes excise
duty. Provision is made for cost of obsolescence and other anticipated
losses, whenever considered necessary.
h) Provisions and Contingent Liabilities:
Provisions are recognised when the Company has a present obligation as
a result of a past event, it is probable that an outfow of resources
embodying economic benefits will be required to settle the obligation
and when a reliable estimate of the amount of the obligation can be
made.
No Provision is recognised for Ã
A. Any possible obligation that arises from past events and the
existence of which will be confrmed only by the occurrence or
non-occurrence of one or more uncertain future events not wholly within
the control of the Company; or
B. Any present obligation that arises from past events but is not
recognised because.
a) It is not probable that an outfow of resources embodying economic
benefits will be required to settle the obligation; or
b) A reliable estimate of the amount of obligation cannot be made.
Such obligations are recorded as Contingent Liabilities. These are
assessed periodically and only that part of the obligation for which an
outfow of resources embodying economic benefits is probable, is provided
for, except in the extremely rare circumstances where no reliable
estimate can be made.
Contingent Assets are not recognized in the financial statements since
this may result in the recognition of income that may never be
realised.
i) Revenue Recognition:
Sales are recognised when goods are supplied and are recorded net of
returns, trade discounts, rebates, sales taxes and excise duties.
Income from processing operations is recognised on completion of
production/dispatch of the goods, as per the terms of contract.
Export incentives are accounted on accrual basis and include the
estimated value of export incentives receivable under the Duty
Entitlement Pass Book Scheme.
Dividend income is recognised when the right to receive the same is
established.
Interest income is recognised on a time proportion basis.
Insurance claims and transport and power subsidies from the Government
are accounted on cash basis when received.
j) Borrowing Costs:
Borrowing costs that are directly attributable to the acquisition 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 put to use. Other borrowing costs are recognised as
an expense in the period in which they are incurred.
k) Foreign Currency Transactions:
i) Transactions in foreign currency are recorded at the exchange rates
prevailing 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 Proft and Loss Account.
ii) Forward exchange contracts, remaining unsettled at the period end,
backed by underlying assets or liabilities are also translated at
period end exchange rates. 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 or losses
on cancellation of forward exchange contracts are recognised in the
Proft and Loss Account of the period in which they are cancelled.
iii) Non Monetary foreign currency items like investments in foreign
subsidiaries are carried at cost and expressed in Indian currency at
the rate of exchange prevailing at the time of making the original
investment.
l) Research and Development Expenditure:
Revenue expenditure on research and development is charged to the Proft
and Loss Account of the year in which it is incurred. Capital
expenditure incurred during the year on research and development is
shown as addition to fxed assets.
m) Employee benefits:
Short term Employee benefits:
Al employee benefits payable wholly within twelve months of rendering
the service are classifed as short term employee benefits. benefits such
as salaries, performance incentives, etc., are recognized as an expense
at the undiscounted amount in the Proft and Loss Account of the year in
which the employee renders the related service.
Post Employment benefits:
Defned Contribution Plans:
Payments made to a defned contribution plan such as Provident Fund and
Superannuation fund are charged as an expense in the Proft and Loss
Account as they fall due.
Defned benefit Plans:
Companys liability towards gratuity to past employees is determined
using the projected unit credit method which considers each period of
service as giving rise to an additional unit of benefit entitlement and
measures each unit separately to build up the fnal obligation. Past
services are recognised on a straight line basis over the average
period until the amended benefits become vested. Actuarial gain and
losses are recognised immediately in the statement of Proft and Loss
Account as income or expense. Obligation is measured at the present
value of estimated future cash flows using a discounted rate that is
determined by reference to market
yields at the Balance Sheet date on Government Securities where the
currency and terms of the Government Securities are consistent with the
currency and estimate terms of the defned benefit obligations.
Other Long Term Employee benefits:
Other Long Term Employee benefits viz., leave encashment and long
service bonus are recognised as an expense in the Proft and Loss
Account as and when it accrues. The Company determines the liability
using the Projected Unit Credit Method, with the actuarial valuation
carried out as at the Balance Sheet date. Actuarial gains and losses
in respect of such benefits are charged to the Proft and Loss Account.
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 previous year when compared with expected improvements.
Up to March 31, 2009 the EVA awards would fow through a notional bank
whereby only the prescribed 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 Proft and Loss Account. 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 opening
notional bank balance accumulated till March 31, 2009, is being paid @
33% every year on reducing balance.
The entire EVA award for the year has been charged to the Proft and
Loss Account.
o) Depreciation:
Leasehold land is amortised equally over the lease period.
Leasehold Improvements are depreciated over the shorter of the
unexpired period of the lease and the estimated useful life of the
assets.
Depreciation is provided pro rata to the period of use, under the
Straight Line Method at the rates specifed in Schedule XIV to the
Companies Act, 1956, except for computer hardware which is depreciated
over four years.
Pursuant to the Scheme of Amalgamation, the Company has acquired
certain SAP licenses and Trademarks. These SAP licenses acquired are
amortised over a period of four years. Tradmarks acquired are amortised
equally over the best estimate of their useful life not exceeding a
period of ten years, except in the case of Goodknight and Hit brands
where the brands are amortised equally over a period of twenty years.
The major infuencing factors behind amortising these brands over a
period of twenty years are that Goodknight has been in existence since
the last twenty seven years and been growing at a fast pace. Goodknight
has grown by 29% and HIT by 35% during the period under review.
Goodwill is amortised over a period of fve years. Tools, dies and
moulds acquired are depreciated over a period of three and half years.
Technical Knowhow is depreciated over a period of ten years.
In accordance with the Court order approving the Scheme of Amalgamation
of the erstwhile Godrej Household Products Limited, 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.
Assets costing less than Rs. 5,000 are depreciated at 100% in the year of
acquisition.
p) Hedging:
The Company uses forward exchange contracts to hedge its foreign
exchange exposures and commodity futures contracts to hedge the
exposure to oil price risks. Gains or losses on settled contracts are
recognised in the Proft and Loss Account. Gains or losses on the
commodity futures contracts are recorded in the Proft and Loss Account
under Cost of Materials Consumed.
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 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 assets on unabsorbed tax losses and tax depreciation are
recognised only when there is a virtual certainty of their realisation
and on other items when there is reasonable certainty of realisation.
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 on the balance sheet date.
r) Segment Reporting
The Company is considered to be a single segment company à 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 ÃSegment Reporting if a single financial report
contains both consolidated financial statements and the separate
financial statement of the parent, segment information need be presented
only on the basis of the consolidated financial statements. Accordingly,
information required to be presented under AS-17 Segment Reporting has
been given in the consolidated financial statements.
Mar 31, 2010
A) Accounting Convention:
The financial statements are prepared under the historical cost
convention, on accrual basis, in accordance with the generally accepted
accounting principles in India, the Accounting Standards issued by the
Institute of Chartered Accountants of India and the provisions of the
Companies Act, 1956.
b) Use of Estimates:
The preparation 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 preparation of financial statements are
prudent and reasonable. Actual results could differ from the estimates.
c) Fixed Assets:
Fixed Assets are stated at cost of acquisition or construction, less
accumulated depreciation. Cost includes all expenses related to
acquisition and installation of the concerned assets.
Direct financing cost incurred during the construction period on major
projects is also capitalised.
Fixed assets acquired under finance lease are capitalised at the lower
of their fair value and the present value of the minimum lease
payments.
d) Asset Impairment:
Management periodically assesses using, external and internal sources,
whether there is an indication that an asset may be impaired. An
impairment occurs where the carrying value exceeds its recoverable
amount. An impairment loss, if any, is recognized in the period in
which the impairment takes place.
e) Investments:
Investments are classified into current and long term investments.
Long-term investments are carried at cost. Cost of acquisition includes
all costs directly incurred on the acquisition of the investment.
Provision for diminution, if any, in the value of long-term investments
is made to recognize a decline, other than of a temporary nature.
Current investments are stated at lower of cost and net realisable
value.
f) Inventories:
Inventories are valued at lower of cost and net realisable value. Cost
is computed on the weighted average basis and is net of Cenvat.
Finished goods and work-in-progress include cost of conversion and
other costs incurred in bringing the inventories to their present
location and condition. Finished goods valuation also includes excise
duty. Provision is made for cost of obsolescence and other anticipated
losses, whenever considered necessary.
g) Provisions and Contingent Liabilities:
Provisions are recognized when the company has a present obligation as
a result of a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and when a reliable estimate of the amount of the obligation can be
made.
No Provision is recognized for -
A. Any possible obligation that arises from past events and the
existence of which will be confirmed only by the occurrence or
non-occurrence of one or more uncertain future events not wholly within
the control of the Company; or
B. Any present obligation that arises from past events but is not
recognized because -
a) It is not probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; or
b) A reliable estimate of the amount of obligation cannot be made.
Such obligations are recorded as Contingent Liabilities. These are
assessed periodically and only that part of the obligation for which an
outflow of resources embodying economic benefits is probable, is
provided for, except in the extremely rare circumstances where no
reliable estimate can be made.
Contingent Assets are not recognized in the financial statements since
this may result in the recognition of income that may never be
realized.
h) Revenue Recognition:
Sales are recognised when goods are supplied and are recorded net of
returns, trade discounts, rebates, sales taxes and excise duties.
Income from processing operations is recognised on completion of
production/dispatch of the goods, as per the terms of contract.
Export incentives are accounted on accrual basis and include the
estimated value of export incentives receivable under the Duty
Entitlement Pass Book Scheme.
Dividend income is recognised when the right to receive the same is
established.
Interest income is recognised on a time proportion basis.
Insurance claims and transport and power subsidies from the Government
are accounted on cash basis when received.
i) Borrowing Costs:
Borrowing costs that are directly attributable to the acquisition 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 put to use. Other borrowing costs are recognised as
an expense in the period in which they are incurred.
j) Foreign Currency Transactions:
i) Transactions in foreign currency are recorded at the exchange rates
prevailing 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 Profit and Loss Account.
ii) Forward exchange contracts, remaining unsettled at the period end,
backed by underlying assets or liabilities are also translated at
period end exchange rates. 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 or losses on cancellation of forward
exchange contracts are recognised in the Profit and Loss Account of the
period in which they are cancelled.
iii) Non Monetary foreign currency items like investments in foreign
subsidiaries are carried at cost and expressed in Indian currency at
the rate of exchange prevailing at the time of making the original
investment.
k) Research and Development Expenditure:
Revenue expenditure on research and development is charged to the
Profit and Loss Account 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) Employee Benefits:
Short-term Employee benefits:
All employee benefits payable wholly within twelve months of rendering
the service are classified as short-term employee benefits. Benefits
such as salaries, performance incentives, etc., are recognized as an
expense at the undiscounted amount in the Profit and Loss Account of
the year in which the employee renders the related service.
Post Employment Benefits:
(i) Defined ContriPution Plans:
Payments made to a defined contribution plan such as Provident Fund are
charged as an expense in the Profit and Loss Account as they fall due.
(ii) Defined Benefit Plans:
Companys liability towards gratuity to past employees is determined
using the projected unit credit method which considers each period of
service as giving rise to an additional unit of benefit entitlement and
measures each unit separately to build-up the final obligation. Past
services are recognized on a straight-line basis over the average
period until the amended benefits become vested. Actuarial gain and
losses are recognized immediately in the statement of Profit and Loss
Account as income or expense. Obligation is measured at the present
value of estimated future cash flows using a discounted rate that is
determined by reference to market yields at the Balance Sheet date on
Government Securities where the currency and terms of the Government
Securities are consistent with the currency and estimate terms of the
defined benefit obligations.
Other Long Term Employee Benefits:
Other Long Term Employee Benefits viz., leave encashment and long
service bonus are recognised as an expense in the Profit and Loss
Account as and when it accrues. The Company determines the liability
using the Projected Unit Credit Method, with the actuarial valuation
carried out as at the Balance Sheet date. Actuarial gains and losses in
respect of such benefits are charged to the Profit and Loss Account.
m) 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 previous year when compared with expected improvements.
Up to the previous year, the EVA awards would flow through a notional
bank whereby only the prescribed 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 Profit and Loss Account. 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
opening notional bank balance accumulated till March 31, 2009, is being
paid @ 33% every year.
During the year, the entire EVA award for the year has been charged to
the Profit and Loss Account and has not been routed through the
notional bank.
n) Depreciation:
Leasehold land is amortised equally over the lease period.
Leasehold Improvements are depreciated over the shorter of the
unexpired period of the lease and the estimated useful life of the
assets.
Depreciation is provided pro rata to the period of use, under the
Straight Line Method at the rates specified in Schedule XIV to the
Companies Act, 1956, except for computer hardware which is depreciated
over 4 years.
Assets costing less than Rs. 5,000 are depreciated at 100% in the year
of acquisition.
o) Hedging:
The Company uses forward exchange contracts to hedge its foreign
exchange exposures and commodity futures contracts to hedge the
exposure to oil price risks. Gains or losses on settled contracts are
recognized in the profit and loss account. Gains or losses on the
commodity futures contracts are recorded in the Profit and Loss Account
under Cost of Materials Consumed.
p) 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 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 assets on unabsorbed tax losses and tax depreciation are
recognised only when there is a virtual certainty of their realisation
and on other items when there is reasonable certainty of realisation.
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 on the balance sheet date.
q) Segment Reporting
The Company is considered to be a single segment company - engaged in
the manufacture of toilet soaps and other toiletries. 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
presented only on the basis of the consolidated financial statements.
Accordingly, information required to be presented under AS-17 Segment
Reporting has been given in the consolidated financial statements.