Mar 31, 2023
Significant accounting policies
2.1 Basis of preparation of Financial Statements
The standalone financial statements of the Company have
been prepared in accordance with Indian Accounting
Standards (Ind AS) notified under the section 133 of the
Companies Act 2013 (to the extent notified) read with Rule
3 of the Companies (Indian Accounting Standards) Rules,
2015 and relevant amendment rules issued thereafter
(Indian GAAP). Accordingly, the Company has prepared
these financial statements which comprise the Balance
Sheet as at 31 March 2023, the Statement of Profit and
Loss, the Statement of Cash Flows and the Statement of
Changes in Equity for the year ended 31 March 2023, and
a summary of significant accounting policies and other
explanatory information, on accrual and going concern
basis.
The accounting policies adopted in the preparation of the
financial statements are consistent with those followed in
the previous year.
2.2 Summary of significant accounting policiesa. Use of estimates
The preparation of financial statements in conformity
with Indian Accounting Standards (Ind AS) requires
management to make judgements, estimates and
assumptions that affect the reported amounts
of revenues, expenses, assets and liabilities and
disclosure of contingent liabilities at the end of the
reporting period. Although these estimates are based
upon management''s best knowledge of current events
and actions, uncertainty about these assumptions
and estimates could result in the outcomes requiring a
material adjustment to the carrying amounts of assets
or liabilities in future periods. Changes in estimates are
reflected in the financial statements in the period in
which changes are made and if material, their effects
are disclosed in the notes to the financial statements.
Critical accounting estimates and judgments:
The areas involving critical estimates and judgments
are:
(i) Useful lives and residual value of property,
plant and equipment and intangible assets
Useful life and residual value are determined by
the management based on a technical evaluation
considering nature of asset, past experience,
estimated usage of the asset, vendor''s advice
etc and same is reviewed periodically, including
at each financial year end. Management reviews
the useful economic lives atleast once a year and
any changes could affect the depreciation rates
prospectively and hence the asset carrying values
changes accordingly. The Company also reviews
its property, plant and equipment and intangible
assets, for possible impairment if there are
events or changes in circumstances that indicate
that carrying amount of assets may not be
recoverable. In assessing the property, plant and
equipment and intangible assets for impairment,
factors leading to significant reduction in profits,
the Company''s business plans and changes in
regulatory/ economic environment are taken into
consideration.
(ii) Impairment of investments
The Company has reviewed its carrying value
of long term investments in equity shares as
disclosed in note- 4 of standalone financial
statements at the end of each reporting period, for
possible impairment if there are events or changes
in circumstances that indicate that carrying
amount of assets may not be recoverable. If the
recoverable value, which is based upon market
price or economic circumstances and future plan
is less than its carrying amount, the impairment
loss is accounted.
The Company is the subject of lawsuits and
claims arising in the ordinary course of business
from time to time. The Company reviews any
such legal proceedings and claims on an ongoing
basis and follow appropriate accounting guidance
when making accrual and disclosure decisions.
The Company establishes accruals for those
contingencies where the incurrence of a loss
is probable and can be reasonably estimated,
and it discloses the amount accrued and the
amount of a reasonably possible loss in excess
of the amount accrued, if such disclosure is
necessary for the Company''s financial statements
to not be misleading. To estimate whether a loss
contingency should be accrued by a charge
to income, the Company evaluates, among
other factors, the degree of probability of an
unfavourable outcome and the ability to make a
reasonable estimate of the amount of the loss.
The Company does not record liabilities when the
likelihood that the liability has been incurred is
probable, but the amount cannot be reasonably
estimated. Based upon present information, the
Company determined that there were no matters
that required an accrual as of March 31,2023
other than the accruals already recognized, nor
were there any asserted or unasserted claims for
which material losses are reasonably possible.
(iv) Estimation of uncertainties relating to
investment in Sri Lanka subsidiary (Also refer
Note 38)
Considering continuing challenging economic
environment of Sri Lanka with sustained inflation,
depreciation of currency and depletion of forex
reserves, the management has considered all
internal and external sources of information
including economic forecasts and estimates from
market sources as at the date of the approval
of these financial statements. On the basis of
the evaluation and current indicators of future
economic conditions, the Company has provided
for necessary impairment charge on its investment
in Sri Lanka subsidiary and has concluded that
the provision considered for impairment of the
investment is sufficient as of reporting date.
Management will continue to monitor the situation.
(v) Estimation of uncertainties relating to
investment in DP Eurasia N.V. (DPEU)
As at March 31,2023, the Company has its
investments in DP Eurasia N.V. (DPEU) through its
subsidiary Jubilant Foodworks Netherlands B.V
(JFN) which has its further investments in Russia.
Due to the conflict between Russia and Ukraine,
the Company has noted that there is a negative
impact on the Russia''s commodity and financial
markets and increasing volatility, especially in
the exchange rates. In addition to this, Russian
economy has faced heavy sanctions imposed
mainly by the Western countries.
DPEUâs management is evaluating its presence
in Russia, the impact of sanctions and its
continuing ability to serve its customers in Russia.
Consequently, DPEU is considering various
options which may include a divestment of its
Russian operations. Whilst work on a potential
transaction is ongoing, there can be no certainty
as to the outcome. In the meantime, DPEU
continues to limit investment in Russia and
remains focused on optimising the existing store
coverage.
Considering continuing challenging economic
environment of Russia, the management has
considered various internal and external sources
of information including economic forecasts and
estimates from market sources as at the date of
the approval of these financial statements.
Revenue is recognized upon transfer of control of
promised products or services to customers in an
amount that reflects the consideration we expect to
receive in exchange for those products or services.
The Company is generally the principal as it typically
controls the goods or services before transferring them
to the customer.
The Company recognizes revenue from contracts with
customers based on a five-step model as set out in
Ind AS 115:
Step 1: Identify contract(s) with a customer: A contract
is defined as an agreement between two or more
parties that creates enforceable rights and obligations
and sets out the criteria for every contract that must
be met.
Step 2: Identify performance obligations in the
contract: A performance obligation is a promise in a
contract with a customer to transfer a good or service
to the customer.
Step 3: Determine the transaction price: The
transaction price is the amount of consideration to
which the Company expects to be entitled in exchange
for transferring promised goods or services to a
customer, excluding amounts collected on behalf of
third parties.
Step 4: Allocate the transaction price to the
performance obligations in the contract: For a contract
that has more than one performance obligation, the
Company allocates the transaction price to each
performance obligation in an amount that depicts
the amount of consideration to which the Company
expects to be entitled in exchange for satisfying each
performance obligation.
Step 5: Recognize revenue when (or as) the Company
satisfies a performance obligation.
The Company recognizes revenue from sale of food
through Company''s owned stores located in India
and are recognized at a point in time, upon transfer of
control of products to the customers, which happens
when the items are delivered to or carried out by
customers. Customer''s payments are generally due at
the time of sale.
The Company recognizes revenue from sale of
supplies to its franchised stores (including subsidiaries
operating Domino''s Restaurants in Srilanka and
Bangladesh) upon delivery or shipment of the related
products, based on shipping terms and payments
for supplies are generally due within 90 days of the
shipping date.
Revenue is measured based on the consideration
to which the Company expects to be entitled from a
customer, net of returns and allowances, discounts,
volume rebates and cash discounts and excludes
sales taxes or Goods and Service Tax collected from
customer and remitted to the appropriate taxing
authorities and are not reflecting in the Statement of
Profit and Loss as âRevenueâ.
For all financial instruments measured at amortized
cost, interest income is recorded using the effective
interest rate (âEIRâ), which is the rate that exactly
discounts the estimated future cash payments or
receipts through the expected life of the financial
instrument or a shorter period, where appropriate, to
the net carrying amount of the financial asset. When
calculating the effective interest rate, the Company
estimates the expected cash flows by considering all
the contractual terms of the financial instrument but
does not consider the expected credit losses.
Revenue is recognized when the unconditional right
to receive the payment is established by the balance
sheet date.
Franchisee Fee (Sub franchisee income)
Franchisee fee is based on a percentage of franchise
retail sales and are recognized when the items are
delivered to or carried out by franchisees'' customers,
on accrual basis in accordance with the terms of the
relevant agreement.
Store opening fees and area development fee received
from international sub-franchisees are recognized
as revenue on a straight-line basis over the term of
respective franchise store agreement. Fee received in
excess of revenues are classified as contract liabilities
(which we refer to as unearned income).
Foreign currency transactions
Initial Recognition
Foreign currency transactions are recorded in the
functional currency, by applying to the foreign currency
amount the exchange rate between the reporting
currency and the foreign currency on the date of the
transaction.
Foreign currency monetary items are reported using
the closing rate. Non-monetary items which are carried
in terms of historical cost denominated in a foreign
currency are reported using the exchange rate at the
date of the transaction.
Exchange differences arising on the settlement of
monetary items, or on reporting such monetary items
of Company at rates different from those at which
they were initially recorded during the year, or reported
in previous financial statements, are recognized as
income or as expenses in the year in which they arise.
Functional and presentation currency
The functional currency of the Company in the Indian
rupee. These financial statements are presented in
Indian rupees.
Income tax expense represents the sum of the tax
currently payable and deferred tax.
The income tax expense or credit for the period is the
tax payable on the current period''s taxable income
based on the applicable income tax rate adjusted by
unused tax losses/credits.
The current income tax charge is calculated on the
basis of the tax laws enacted or substantively enacted
at the end of reporting period in the country where the
Company operate and generate taxable income.
Provision is made for uncertain tax positions when it is
considered probable that there will be a future outflow
of funds to a tax authority. The provision is calculated
using the best estimate where that outcome is more
likely than not and a weighted average probability in
other circumstances. The position is reviewed on an
ongoing basis, to ensure appropriate provision is made
for each known tax risk.
Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities
in the standalone financial statements and the
corresponding tax bases used in the computation
of taxable profit. Deferred tax liabilities are generally
recognised for all taxable temporary differences. Deferred
tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable
that taxable profits will be available against which those
deductible temporary differences can be utilised.
Deferred tax liabilities and assets are measured at the
tax rates that are expected to apply in the period in
which the liability is settled or the asset realised, based
on tax rates (and tax laws) that have been enacted
or substantively enacted by the end of the reporting
period.
The carrying amount of deferred tax assets is reviewed
at the end of each reporting period and reduced to
the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the
asset to be recovered.
Current and deferred tax for the year
Current and deferred tax are recognised in profit
or loss, except when they relate to items that are
recognised in other comprehensive income or directly
in equity, in which case, the current and deferred tax
are also recognised in other comprehensive income.
Expenses and assets are recognized net of the amount
of Goods and Service Tax paid, except:
(i) When the tax incurred on a purchase of assets
or services is not recoverable from the taxation
authority, in which case, the tax paid is recognized
as part of the cost of acquisition of the asset or as
part of the expense item, as applicable
(ii) When receivables and payables are stated with
the amount of tax included.
The net amount of tax recoverable from, or payable
to, the taxation authority is included as part of
receivables or payables in the balance sheet.
e. Property, Plant and Equipment
Property, plant and equipment are carried at cost
less accumulated depreciation and accumulated
impairment losses, if any. Cost includes its purchase
price, including import duties and non-refundable
purchase taxes, after deducting trade discounts and
rebates. It includes other costs directly attributable
to bringing the asset to the location and condition
necessary for it to be capable of operating in the
manner intended by management.
Depreciation on property, plant and equipment is
calculated on straight line basis using the rates
arrived at based on the useful lives estimated by the
management.
When significant parts of plant and equipment are
required to be replaced at intervals, the Company
depreciates them separately based on their specific
useful lives. Likewise, when a major inspection is
performed, its cost is recognised in the carrying
amount of the plant and equipment as a replacement
if the recognition criteria are satisfied. The present
value of the expected cost for the decommissioning
of an asset after its use is included in the cost of
the respective asset if the recognition criteria for a
provision are met.
Subsequent expenditures relating to property, plant
and equipment is capitalized only when it is probable
that future economic benefits associated with these
will flow to the Company and the costs of the item can
be measured reliably. All other repair and maintenance
costs are recognised in profit or loss as incurred.
The management has estimated, supported by
assessment by internal professionals, the useful lives
of the following classes of assets and has used the
following rates to provide depreciation on its property,
plant and equipment which are different from those
indicated in schedule II to Companies Act, 2013.
The management believe that the above assessment
truly represents the useful life of assets in the
specific condition, these assets are put to use by the
Company.
An item of property, plant and equipment and any
significant part initially recognised is derecognised
upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or loss
arising on derecognition of the asset (calculated as the
difference between the net disposal proceeds and the
carrying amount of the asset) is included in the income
statement when the asset is derecognised.
The residual values, useful lives and methods of
depreciation of property, plant and equipment are
reviewed at each financial year end and adjusted
prospectively, if appropriate.
Investment properties are properties held to earn
rentals and/or for capital appreciation. Investment
properties are measured initially at cost, including
transaction costs. Subsequent to initial recognition,
investment properties are measured in accordance
with Ind AS 40''s requirements for cost model.
Intangible assets acquired separately are measured on
initial recognition at cost. Following initial recognition,
intangible assets are carried at cost less accumulated
amortization and accumulated impairment losses, if any.
Internally-generated intangible assets - Software
Expenditure on research activities is recognised as
an expense in the period in which it is incurred. An
internally-generated intangible asset arising from
development (or from the development phase of an
internal project) is recognised if, and only if, all of the
following have been demonstrated:
(I) the technical feasibility of completing the
intangible asset so that it will be available for use
or sale;
(II) the intention to complete the intangible asset and
use or sell it;
(III) the ability to use or sell the intangible asset;
(IV) how the intangible asset will generate probable
future economic benefits;
(V) the availability of adequate technical, financial and
other resources to complete the development and
to use or sell the intangible asset; and
(VI) the ability to measure reliably the expenditure
attributable to the intangible asset during its
development.
The amount initially recognised for internally-generated
intangible assets is the sum of the expenditure incurred
from the date when the intangible asset first meets the
recognition criteria listed above. Where no internally-
generated intangible asset can be recognised,
development expenditure is recognised in profit or loss
in the period in which it is incurred.
Intangible assets are amortized on a straight line
basis over the estimated useful economic life. If the
persuasive evidence exists to the affect that useful life
of an intangible asset exceeds ten years, the Company
amortizes the intangible asset over the best estimate
of its useful life. Such intangible assets are tested
for impairment annually, either individually or at the
cash-generating unit level. All other intangible assets
are assessed for impairment whenever there is an
indication that the intangible asset may be impaired.
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.
over the period of contract, during which the Company
shall be deriving the economic benefits.
Subsequent to initial recognition, internally-generated
intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses, on
the same basis as intangible assets that are acquired
separately.
Cost of property, plant and equipment not ready for
use as at the reporting date are disclosed as capital
work-in-progress.
i. Expenditure during construction period
Expenditure directly relating to construction activity
are capitalized. Other expenditure incurred during the
construction period which neither are related to the
construction activity nor are incidental thereto, are
charged to the statement of profit and loss.
j. Impairment of tangible and intangible assets
The Company assesses at each reporting date
whether there is an indication that an asset may be
impaired. If any indication exists, or when annual
impairment testing for an asset is required, the
Company estimates the asset''s recoverable amount.
An asset''s recoverable amount is the higher of an
asset''s or cash-generating unit''s (CGU) net selling
price and its value in use. The recoverable amount
is determined for an individual asset, unless the
asset does not generate cash inflows that are largely
independent of those from other assets or groups
of assets. Where the carrying amount of an asset
or CGU exceeds its recoverable amount, the asset
is considered impaired and is written down to its
recoverable amount. In assessing value in use, the
estimated future cash flows are discounted to their
present value using a pre-tax discount rate that
reflects current market assessments of the time
value of money and the risks specific to the asset.
In determining net selling price, recent market
transactions are taken into account, if available. If no
such transactions can be identified, an appropriate
valuation model is used.
The Company bases its impairment calculation on
detailed budgets and forecast calculations which are
prepared separately for each of the Company cash¬
generating units to which the individual assets are
allocated. These budgets and forecast calculations are
generally covering a period of five years. For longer
periods, a long term growth rate is calculated and
applied to project future cash flows after the fifth year.
After impairment, depreciation is provided on the
revised carrying amount of the asset over its remaining
useful life.
An assessment is made at each reporting date as
to whether there is any indication that previously
recognized impairment losses may no longer exist
or may have decreased. If such indication exists, the
Company estimates the asset''s or cash-generating
unit''s recoverable amount. A previously recognized
impairment loss is reversed only if there has been a
change in the assumptions used to determine the
asset''s recoverable amount since the last impairment
loss was recognized. The reversal is limited so that
the carrying amount of the asset does not exceed its
recoverable amount, nor exceed the carrying amount
that would have been determined, net of depreciation,
had no impairment loss been recognized for the
asset in prior years. Such reversal is recognized in the
statement of profit and loss.
The investments in subsidiaries are carried at cost.
An investor, regardless of the nature of its involvement
with an entity (the investee), shall determine whether
it is a parent by assessing whether it controls the
investee. An investor controls an investee when it
is exposed, or has rights, to variable returns from
its involvement with the investee and has the ability
to affect those returns through its power over the
investee. Thus, an investor controls an investee if and
only if the investor has all the following:
(a) power over the investee;
(b) exposure, or rights, to variable returns from its
involvement with the investee and
(c) the ability to use its power over the investee to
affect the amount of the investor''s returns
On disposal of investment, the difference between its
carrying amount and net disposal proceeds is charged
or credited to the statement of profit and loss.
The investment in associate are carried at cost. The
Company assesses existence of significant influence
in order to determine if an investee is an associate.
Below criteria usually evidence existence of significant
influence:
(a) holding of 20 percent or more of voting power of
investee
(b) representation on the board of directors or
equivalent governing body of the investee
(c) participation in policy-making processes, including
participation in decisions about dividends or other
distributions;
(d) material transactions between the entity and its
investee;
(e) interchange of managerial personnel; or
(f) provision of essential technical information.
In accordance with Ind AS 116 - Leases, at inception
of the contract, the Company assesses whether a
contract is, or contains a lease. A lease is defined as
âa contract, or part of a contract, that conveys the
right to control the use an asset (the underlying 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, the Company assesses
whether:
⢠The contract involves the use of an identified
asset - this may be specified explicitly or implicitly,
and 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;
⢠The Company has the right to obtain substantially
all of the economic benefits from use of the asset
throughout the period of use; and
⢠The Company assesses whether it has the right
to direct âhow and for what purpose'' the asset is
used throughout the period of use.
At inception or on reassessment of a contract that
contains a lease component, the Company allocates
the consideration in the contract to each lease
component on the basis of their relative standalone
prices. However, for the leases of land and buildings
in which it is a lessee, the Company has elected not
to separate non-lease components and account for
the lease and non-lease components as a single lease
component.
Leases are classified as finance leases whenever the
terms of the lease transfer substantially all the risks
and rewards of ownership to the lessee. All other
leases are classified as operating leases.
For the lease contracts where the Company is a
lessee, it recognizes right-of-use asset and lease
liability at the date at which the leased asset is
available for use by the Company. Assets and
Liabilities arising from a lease are initially measured on
a present value basis.
At the commencement of lease, right-of-use asset is
recognized at cost which comprises the following:
⢠Initial measurement of lease liability
⢠Lease payments made before commencement
date less lease incentives
At the commencement of lease the Company
measures the lease liability at the present value of
lease payments not paid at commencement date. The
lease payments are discounted using the Company''s
incremental borrowing rate.
The lease payments include fixed payments (including
in- substance fixed payments) and does not include
any variable lease payments that depend on an index
or a rate.
Subsequently, the lease liability is measured at
amortised cost using the effective interest method.
It is adjusted to reflect any reassessment or lease
modifications.
Short term lease and low value leases:
The Company does not recognise right-of-use assets
and lease liabilities for short-term leases that have
a lease term of 12 months or less and leases of low
value assets. The Company recognises the lease
payments associated with these leases as an expense
on a straight line basis over the lease term.
Basis of valuation:
Inventories other than scrap materials are valued
at lower of cost and net realizable value, if any. The
comparison of cost and net realizable value is made on
an item-by-item basis.
⢠Cost of raw materials has been determined by
using FIFO method and comprises all costs
of purchase, duties, taxes (other than those
subsequently recoverable from tax authorities) and
all other costs incurred in bringing the inventories
to their present location and condition.
⢠Cost of traded goods has been determined by
using FIFO method and comprises all costs
of purchase, duties, taxes (other than those
subsequently recoverable from tax authorities) and
all other costs incurred in bringing the inventories
to their present location and condition.
⢠Net realizable value is the estimated selling price
in the ordinary course of business, less estimated
costs of completion and estimated costs
necessary to make the sale.
Mar 31, 2022
1. CORPORATE INFORMATION
Jubilant FoodWorks Limited (the Company) is a public limited Company domiciled in India and incorporated under the provisions of Companies Act, 1956. The Company was incorporated in 1995 and initiated operations in 1996. The Companyâs share is listed on National Stock Exchange of India Limited and Bombay Stock Exchange Limited. The Company is a food service company and engaged in retail sales of food through strong international and home grown brands addressing different food market segments. International brands include Dominoâs Pizza, Dunkinâ Donuts and Popeyes. For Dominoâs Pizza, the Company has exclusive rights to open and operate Dominoâs Pizza Restaurants in India, Sri Lanka, Bangladesh and Nepal. Currently, Dominoâs Pizza is operated by the Company in India and by its subsidiaries in Sri Lanka and Bangladesh. Home grown brands include Hongâs Kitchen and Ekdum through which the Company has entered into Chinese and Indian cuisine segments respectively. Leveraging its strong Supply Chain the Company has also entered into FMCG food vertical with its brand ChefBoss. The registered office of the Company is located at Plot No. 1A, Sector 16-A, Noida-201301, UP, India.
The standalone financial statements were authorised for issue in accordance with a resolution of the directors on 30th May, 2022.
2. SIGNIFICANT ACCOUNTING POLICIES2.1 Basis of preparation of Financial Statements
The standalone financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the section 133 of the Companies Act 2013 (to the extent notified) read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued thereafter (Indian GAAP). Accordingly, the Company has prepared these financial statements which comprise the Balance Sheet as at 31 March 2022, the Statement of Profit and Loss, the Statement of Cash Flows and the Statement of Changes in Equity for the year ended 31 March 2022, and a summary of significant accounting policies and other explanatory information, on accrual and going concern basis.
The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.
2.2 Summary of significant accounting policiesa. Use of estimates
The preparation of financial statements in
conformity with Indian Accounting Standards
(Ind AS) requires management to make
judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and disclosure of contingent liabilities at the end of the reporting period. Although these estimates are based upon managementâs best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. Changes in estimates are reflected in the financial statements in the period in which changes are made and if material, their effects are disclosed in the notes to the financial statements.
Critical accounting estimates and judgments:
The areas involving critical estimates and judgments are:
() Useful lives and residual value of property, plant and equipment and intangible assets
Useful life and residual value are determined by the management based on a technical evaluation considering nature of asset, past experience, estimated usage of the asset, vendorâs advice etc and same is reviewed periodically, including at each financial year end. Management reviews the useful economic lives atleast once a year and any changes could affect the depreciation rates prospectively and hence the asset carrying values changes accordingly. The Company also reviews its property, plant and equipment and intangible assets, for possible impairment if there are events or changes in circumstances that indicate that carrying amount of assets may not be recoverable. In assessing the property, plant and equipment and intangible assets for impairment, factors leading to significant reduction in profits, the Companyâs business plans and changes in regulatory/ economic environment are taken into consideration.
(ii) impairment of investments
The Company has reviewed its carrying value of long term investments in equity shares as disclosed in note- 4 of standalone financial statements at the end of each reporting period, for possible impairment if there are events or changes in circumstances that indicate that carrying amount of assets may not be recoverable. If the recoverable value, which is based upon market price or economic circumstances and future plan is less than its carrying amount, the impairment loss is accounted.
(iii) Claims and Litigations
The Company is the subject of lawsuits and claims arising in the ordinary course of business from time to time. The Company reviews any such legal proceedings and claims on an ongoing basis and follow appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and it discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for the Companyâs financial statements to not be misleading. To estimate whether a loss contingency should be accrued by a charge to income, the Company evaluates, among other factors, the degree of probability of an unfavourable outcome and the ability to make a reasonable estimate of the amount of the loss. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated. Based upon present information, the Company determined that there were no matters that required an accrual as of March 31, 2022 other than the accruals already recognized, nor were there any asserted or unasserted claims for which material losses are reasonably possible.
(iv) Estimation of uncertainties relating to the global health pandemic from COVID-IQ
The COVID-19 situation across the country prevailed during the financial year and has posted challenges in restaurant sales. However, the Company took various measures to protect profit margins. The Company has made detailed assessments of its liquidity position for the next one year and of the recoverability and carrying values of all its assets and liabilities as at 31st March 2022 and on the basis of evaluation based on the current estimates has concluded that no material adjustments is required in the standalone financial statements.
Given the uncertainties associated with nature, condition and duration of COVID-19, the impact assessment on the Companyâs financial statements will be continuously made and provided for as required.
(v) Estimation of uncertainties relating to investment in Sri Lanka subsidiary (Also refer Note 38)
Considering the macroeconomic challenges currently faced by Sri Lanka on account of rising prices, depletion of forex reserves, significant
depreciation of Sri Lankan currency to '' and other inflationary pressures, the management has considered all internal and external sources of information including economic forecasts and estimates from market sources as at the date of the approval of these financial statements. On the basis of the evaluation and current indicators of future economic conditions, the Company has concluded that no adjustments are required as of reporting date. Management will continue to monitor the situation.
(vi) Estimation of uncertainties relating to investment in DP Eurasia N.V. (Associate Company)
As at March 31, 2022, the Company has its investments in DP Eurasia N.V. through its subsidiary Jubilant Foodworks Netherlands B.V. (JFN) which has its further investments in Russia.
Due to the conflict between Russia and Ukraine, the Company has noted that there is a negative impact on the Russiaâs commodity and financial markets and increasing volatility, especially in the exchange rates. In addition to this, Russian economy has faced heavy sanctions imposed mainly by the Western countries. To minimise the impact of unstable market conditions and sanctions, the Russian financial authorities introduced new measures to support domestic financial stability and protect the national currency.
The European Union also announced an important financial restriction on Russia with a new ban that blocks several Russian banks from using SWIFT system. As of reporting date, the Associate company maintains its financial operations in this territory through its subsidiaries established and operating in the Russian Federation. Accordingly, none of the sanctions announced to date preclude the Associateâs Russian subsidiaries to carry out any transactions with those financial institutions that have been subjected to the financial restrictions. The Associate company is closely monitoring the additional regulations and its contractual undertakings to ensure its continued compliance with the legal and contractual framework. The Associate company already announced that royalty payments from its Russian operations have been suspended until further notice. In terms of the Associate companyâs financial position, devaluation of Russian currency (RUB) does not constitute a threat to the Associate company with regards to the financial liabilities.
The Associate companyâs management analysed the possible impact of changing micro and
macroeconomic conditions on the Associate companyâs financial position and results of operations, parallel with the developments on a daily basis and planning and implementing business continuity measures for various adverse scenarios. If the geopolitical situation in Russia persists or continues to develop adversely, there might be a material uncertainty in the Russian subsidiaryâs financial position and performance. Currently, the situation is evolving and therefore the Associate company cannot reliably estimate the magnitude of the impact, if any. However, based upon the current situation, the associate company is of the view that this will not expected to materially impact the financial position of the Associate Company and accordingly no impact has been considered by the Company management on the recoverability of its investment.
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. The Company is generally the principal as it typically controls the goods or services before transferring them to the customer.
The Company recognizes revenue from contracts with customers based on a five-step model as set out in Ind AS 115:
Step 1: Identify contract(s) with a customer: A contract is defined as an agreement between two or more parties that creates enforceable rights and obligations and sets out the criteria for every contract that must be met.
Step 2: Identify performance obligations in the contract: A performance obligation is a promise in a contract with a customer to transfer a good or service to the customer.
Step 3: Determine the transaction price: The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.
Step 4: Allocate the transaction price to the performance obligations in the contract: For a contract that has more than one performance obligation, the Company allocates the transaction price to each performance obligation in an amount that depicts the amount of consideration to which
the Company expects to be entitled in exchange for satisfying each performance obligation.
Step 5: Recognize revenue when (or as) the Company satisfies a performance obligation.
The Company recognizes revenue from sale of food through Companyâs owned stores located in India and are recognized at a point in time, upon transfer of control of products to the customers, which happens when the items are delivered to or carried out by customers. Customerâs payments are generally due at the time of sale.
The Company recognizes revenue from sale of supplies to its franchised stores (including subsidiaries operating Dominoâs Pizza Restaurants in Srilanka and Bangladesh) upon delivery or shipment of the related products, based on shipping terms and payments for supplies are generally due within 90 days of the shipping date.
Revenue is measured based on the consideration to which the Company expects to be entitled from a customer, net of returns and allowances, discounts, volume rebates and cash discounts and excludes sales taxes or Goods and Service Tax collected from customer and remitted to the appropriate taxing authorities and are not reflecting in the Statement of Profit and Loss as âRevenueâ.
For all financial instruments measured at amortized cost, interest income is recorded using the effective interest rate (âEIRâ), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit losses.
Revenue is recognized when the unconditional right to receive the payment is established by the balance sheet date.
Franchisee Fee (Sub franchisee income)
Franchisee fee is based on a percentage of franchise retail sales and are recognized when the items are delivered to or carried out by franchiseesâ customers, on accrual basis in accordance with the terms of the relevant agreement.
Store opening fees and area development fee received from international sub-franchisees are recognized as revenue on a straight-line basis over the term of respective franchise store agreement. Fee received in excess of revenues are classified as contract liabilities (which we refer to as unearned income).
Foreign currency transactions Initial Recognition
Foreign currency transactions are recorded in the functional currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the date of the transaction.
Conversion
Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.
Exchange Differences
Exchange differences arising on the settlement of monetary items, or on reporting such monetary items of Company at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise.
Functional and presentation currency
The functional currency of the Company in the Indian rupee. These financial statements are presented in Indian rupees.
I ncome tax expense represents the sum of the tax currently payable and deferred tax.
The income tax expense or credit for the period is the tax payable on the current periodâs taxable income based on the applicable income tax rate adjusted by unused tax losses/credits.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of reporting period in the country where the Company operate and generate taxable income.
Provision is made for uncertain tax positions when it is considered probable that there will
be a future outflow of funds to a tax authority. The provision is calculated using the best estimate where that outcome is more likely than not and a weighted average probability in other circumstances. The position is reviewed on an ongoing basis, to ensure appropriate provision is made for each known tax risk.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the standalone financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income.
Expenses and assets are recognized net of the amount of Goods and Service Tax paid, except:
(i) When the tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the tax paid is recognized as part of the cost of acquisition of the asset or as part of the expense item, as applicable.
(ii) When receivables and payables are stated with the amount of tax included.
The net amount of tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
e. Property, Plant and Equipment
Property, plant and equipment are carried at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates. It includes other costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Depreciation on property, plant and equipment is calculated on straight line basis using the rates arrived at based on the useful lives estimated by the management.
When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the costs of the item can be measured reliably. All other repair and maintenance costs are recognised in profit or loss as incurred.
The management has estimated, supported by assessment by internal professionals, the useful lives of the following classes of assets and has used the following rates to provide depreciation on its property, plant and equipment which are different from those indicated in schedule II to Companies Act, 2013. The management believe that the above assessment truly represents the useful life of assets in the specific condition, these assets are put to use by the Company.
Property, Plant and Equipment |
Estimated Useful Life (in no. of years) |
Leasehold Improvements |
9 or Actual lease period, whichever is lower |
Building |
30 |
Plant and Machinery |
5 to 20 |
Office Equipment |
2 to 10 |
Furniture and Fixtures |
5 to 10 |
Vehicles |
6 |
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured in accordance with Ind AS 40âs requirements for cost model.
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any.
Internally-generated intangible assets -Software
Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:
(I) the technical feasibility of completing the intangible asset so that it will be available for use or sale;
(II) the intention to complete the intangible asset and use or sell it;
(III) the ability to use or sell the intangible asset;
(IV) how the intangible asset will generate probable future economic benefits;
(V) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
(VI) the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.
Intangible assets are amortized on a straight line basis over the estimated useful economic life. If the persuasive evidence exists to the affect that useful life of an intangible asset exceeds ten years, the Company amortizes the intangible asset over the best estimate of its useful life. Such intangible assets are tested for impairment annually, either individually or at the cash-generating unit level. All other intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired.
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.
A summary of amortization policies applied to the Company intangible assets is as below:
Intangible assets |
Estimated Useful Life (in no. of years) |
Software |
4 - 7 |
Store opening fees |
5 |
Territory fees |
15-20 |
The territory fee has been paid to the franchisor for running and operating restaurants.
This is amortized over the period of contract, during which the Company shall be deriving the economic benefits.
Subsequent to initial recognition,
internally-generated intangible assets are
reported at cost less accumulated amortisation and accumulated impairment losses, on
the same basis as intangible assets that are acquired separately.
Cost of property, plant and equipment not ready for use as at the reporting date are disclosed as capital work-in-progress.
i. Expenditure during construction period Expenditure directly relating to construction activity are capitalized. Other expenditure
incurred during the construction period which neither are related to the construction activity nor are incidental thereto, are charged to the statement of profit and loss.
j. Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash-generating unitâs (CGU) net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.
The Company bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Company cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of five years. For longer periods, a long term growth rate is calculated and applied to project future cash flows after the fifth year.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the assetâs or cash-generating unitâs recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the assetâs recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor
exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit and loss.
The investments in subsidiaries are carried at cost. An investor, regardless of the nature of its involvement with an entity (the investee), shall determine whether it is a parent by assessing whether it controls the investee. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Thus, an investor controls an investee if and only if the investor has all the following:
(a) power over the investee;
(b) exposure, or rights, to variable returns from its involvement with the investee and
(c) the ability to use its power over the investee to affect the amount of the investorâs returns
On disposal of investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.
The investment in associate are carried at cost. The Company assesses existence of significant influence in order to determine if an investee is an associate. Below criteria usually evidence existence of significant influence:
(a) holding of 20 percent or more of voting power of investee
(b) representation on the board of directors or equivalent governing body of the investee
(c) participation in policy-making processes, including participation in decisions about dividends or other distributions;
(d) material transactions between the entity and its investee;
(e) interchange of managerial personnel; or
(f) provision of essential technical information.
In accordance with Ind AS 116 - Leases, at inception of the contract, the Company assesses whether a contract is, or contains a lease. A lease is defined as âa contract, or part of a contract, that conveys the right to control the use an asset (the
underlying asset) for a period of time in exchange for considerationâ. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:
⢠The contract involves the use of an identified asset - this may be specified explicitly or implicitly, and 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;
⢠The Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
⢠The Company assesses whether it has the right to direct âhow and for what purposeâ the asset is used throughout the period of use.
At inception or on reassessment of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative standalone prices. However, for the leases of land and buildings in which it is a lessee, the Company has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
For the lease contracts where the Company is a lessee, it recognizes right-of-use asset and lease liability at the date at which the leased asset is available for use by the Company. Assets and Liabilities arising from a lease are initially measured on a present value basis.
At the commencement of lease, right-of-use asset is recognized at cost which comprises the following:
⢠Initial measurement of lease liability
⢠Lease payments made before commencement date less lease incentives
⢠Initial direct costs incurred by the Company and estimate of any dismantling cost.
Right-of-use assets are depreciated on a straight line basis over the lease term as below:
Right-of-use assets |
Estimated Useful Life (in no. of years) |
Right-of-use buildings |
1-30 |
Right-of-use land |
90 |
Right-of-use Equipment |
3-5 |
The right-of-use assets are subsequently measured at cost less accumulated depreciation and any accumulated impairment. Adjustment is made for any re-measurement of lease liability.
At the commencement of lease the Company measures the lease liability at the present value of lease payments not paid at commencement date. The lease payments are discounted using the Companyâs incremental borrowing rate.
The lease payments include fixed payments (including in-substance fixed payments) and does not include any variable lease payments that depend on an index or a rate.
Subsequently, the lease liability is measured at amortised cost using the effective interest method. It is adjusted to reflect any reassessment or lease modifications.
Short term lease and low value leases:
The Company does not recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 1 2 months or less and leases of low value assets. The Company recognises the lease payments associated with these leases as an expense on a straight line basis over the lease term.
n. InventoriesBasis of valuation:
Inventories other than scrap materials are valued at lower of cost and net realizable value, if any. The comparison of cost and net realizable value is made on an item-by-item basis.
⢠Cost of raw materials has been determined by using FIFO method and comprises all costs of purchase, duties, taxes (other than those subsequently recoverable from tax authorities) and all other costs incurred in bringing the inventories to their present location and condition.
⢠Cost of traded goods has been determined by using FIFO method and comprises all costs of purchase, duties, taxes (other than those subsequently recoverable from tax authorities) and all other costs incurred in bringing the inventories to their present location and condition.
⢠Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
A provision is recognised when the Company has a present obligation (legal or constructive) as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
The Company recognizes a liability to make payment of dividend to owners of equity when the distribution is authorized and is no longer at the discretion of the Company and is declared by the shareholders. A corresponding amount is recognized directly in equity.
The Company measures financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1- Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2- Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3- Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by
re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
⢠Short-term obligations
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 recognized in respect of employee service upto the end of the reporting period and are measured at the amount expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
⢠Post-employment benefit obligations Gratuity
The Employeeâs Gratuity Fund Scheme, which is defined benefit plan, is managed by Trust maintained with SBI Life Insurance Company Limited. The liabilities with respect to Gratuity Plan are determined by actuarial valuation on projected unit credit method on the balance sheet date, based upon which the Company contributes to the Company Gratuity Scheme. The difference, if any, between the actuarial valuation of the gratuity of employees at the year end and the balance of funds with SBI Life Insurance Company Limited is provided for as assets/ (liability) in the books. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. Future salary increases and pension increases are based on expected future inflation rates for the respective countries. Further details about the assumptions used, including a sensitivity analysis, are given in Note 34.
The Company recognises the following changes in the net defined benefit obligation under Employee benefit expense in statement of profit or loss:
⢠Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements
⢠Net interest expense or income
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), 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.
Certain employees of the Company are also participants in the superannuation plan (âthe Planâ), a defined contribution plan. Contribution made by the Company to the plan during the year is charged to Statement of Profit and Loss.
The Company makes contribution to the recognised provident fund - âJUBILANT FOODWORKS EMPLOYEES PROVIDENT FUND TRUSTâ, which is a defined benefit plan to the extent that the Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate. The Companyâs obligation in this regard is determined by an independent actuary and provided for if the circumstances indicate that the Trust may not be able to generate adequate returns to cover the interest rates notified by the Government.
Companyâs contribution to the provident fund is charged to Statement of Profit and Loss
⢠Other long-term employee benefit obligationCompensated Absences / Leave Encashment
Accumulated leaves which is expected to be utilized within next 12 months is treated as short term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement and discharge at the year end.
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date.
Employees (including senior executives) of the Company receive remuneration in the form of share-based payments, whereby employees
render services as consideration for equity instruments (equity-settled transactions).
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model.
That cost is recognised, together with a corresponding increase in share-based payment (SBP) reserves in equity, over the period in which the performance and/or service conditions are fulfilled in employee benefits expense. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company best estimate of the number of equity instruments that will ultimately vest. The statement of profit and loss expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense.
Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Company best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the expense had the terms had not been modified, if the original terms of the award are met. An additional expense is recognised for any modification that increases the total fair value of the share-based payment transaction, or is
otherwise beneficial to the employee as measured at the date of modification. Where an award is cancelled by the entity or by the counterparty, any remaining element of the fair value of the award is expensed immediately through profit or loss.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Exceptional items are transactions which due to their size or incidence are separately disclosed to enable a full understanding of the Company financial performance.
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period and all periods presented is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares), etc that have changed the number of equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effect of all potentially dilutive equity shares.
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.
The Company classifies its financial assets in the following measurement categories:
⢠Those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss)
⢠Those measured at amortized cost
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.
For purposes of subsequent measurement, financial assets are classified in four categories:
⢠Debt instruments at fair value through other comprehensive income (FVTOCI)
⢠Debt instruments at fair value through profit and loss (FVTPL)
⢠Debt instruments at amortized cost
⢠Equity instruments
Debt instruments at amortized cost
A debt instrument is measured at amortized cost if both the following conditions are met:
⢠Business model test: The objective is to hold the debt instrument to collect the contractual cash flows (rather than to sell the instrument prior to its contractual maturity to realise its fair value changes).
⢠Cash flow characteristics test: The
contractual terms of the Debt instrument give rise on specific dates to cash flows that are solely payments of principal and interest on principal amount outstanding.
This category is most relevant to the Company. 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 EIR. EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit losses. The EIR amortisation is included in finance income in profit or loss. The losses arising from impairment are recognised in the profit or loss. This category generally applies to trade and other receivables.
Debt instruments at fair value through OCI
A Debt instrument is measured at fair value through other comprehensive income if following criteria are met:
⢠Business model test: The objective of financial instrument is achieved by both collecting contractual cash flows and for selling financial assets.
⢠Cash flow characteristics test: The
contractual terms of the financial asset give rise on specific dates to cash flows that are solely payments of principal and interest on principal amount outstanding.
Financial Asset included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). However, the Company recognized the interest income, impairment losses and reversals and foreign exchange gain or loss in the Profit or Loss. On dereognition of asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to Profit or Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
FVTPL is a residual category for financial instruments. Any financial instrument, which does not meet the criteria for amortized cost or FVTOCI, is classified as at FVTPL. A gain or loss on a debt instrument that is subsequently measured at FVTPL and is not a part of a hedging relationship is recognized in profit or loss and presented net in the statement of profit and loss within other gains or losses in the period in which it arises. Interest income from these Debt instruments is included in other income.
Equity investments of other entities
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognized by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income all subsequent changes in the fair value. 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 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.
A financial asset (or,where applicable, a part of a financial asset or part of a Company of similar financial assets) is primarily derecognised (i.e removed from the Company statement of financial position) when:
⢠The rights to receive cash flows from the 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;
⢠The Company has transferred the rights to receive cash flows from the financial assets or
⢠The Company has retained the contractual right to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the Company has transferred an asset, the Company evaluates whether it has transferred substantially all the risks and rewards of the ownership of the financial assets. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all the risks and rewards of the ownership of the financial assets, the financial asset is not derecognised.
Where the Company has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset
Mar 31, 2021
1. CORPORATE INFORMATION
Jubilant FoodWorks Limited (the Company) is a public limited Company domiciled in India and incorporated under the provisions of Companies Act, 1956. The Company was incorporated in 1995 and initiated operations in 1996. The Company''s share is listed on National Stock Exchange of India Limited and Bombay Stock Exchange Limited. The Company is a food service company and engaged in retail sales of food through strong international and home grown brands addressing different food market segments. International brands include Domino''s Pizza, Dunkin'' Donuts and recently acquired Popeyes. For Domino''s Pizza, the Company has exclusive rights to open and operate Domino''s Pizza Restaurants in India, Sri Lanka, Bangladesh and Nepal. Currently, Domino''s Pizza is operated by the Company in India and by its subsidiaries in Sri Lanka and Bangladesh. Home grown brands include Hong''s Kitchen and Ekdum through which the Company has entered into Chinese and Indian cuisine segments respectively. Leveraging its strong Supply Chain the Company has also entered into FMCG food vertical with the launch of its brand ChefBoss. The registered office of the Company is located at Plot No. 1A, Sector 16-A, Noida-201301, UP, India.
The standalone financial statements were authorised for issue in accordance with a resolution of the directors on June 15, 2021.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation of Financial Statements
The standalone financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the section 133 of the Companies Act 2013 (to the extent notified) read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued thereafter (Indian GAAP).
The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.
2.2 Summary of significant accounting policies
a. Use of estimates
The preparation of financial statements in conformity with Indian Accounting Standards (Ind AS) requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and disclosure of contingent liabilities at the end of the reporting period. Although these estimates are based upon management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in
the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. Changes in estimates are reflected in the financial statements in the period in which changes are made and if material, their effects are disclosed in the notes to the financial statements.
The areas involving critical estimates and judgments are:
(i) Useful lives and residual value of property, plant and equipment and intangible assets
Useful life and residual value are determined by the management based on a technical evaluation considering nature of asset, past experience, estimated usage of the asset, vendor''s advice etc and same is reviewed periodically, including at each financial year end. Management reviews the useful economic lives atleast once a year and any changes could affect the depreciation rates prospectively and hence the asset carrying values changes accordingly. The Company also reviews its property, plant and equipment and intangible assets, for possible impairment if there are events or changes in circumstances that indicate that carrying amount of assets may not be recoverable. In assessing the property, plant and equipment and intangible assets for impairment, factors leading to significant reduction in profits, the Company''s business plans and changes in regulatory/ economic environment are taken into consideration.
(ii) Impairment of investments
The Company has reviewed its carrying value of long term investments in equity shares as disclosed in note- 4 of standalone financial statements at the end of each reporting period, for possible impairment if there are events or changes in circumstances that indicate that carrying amount of assets may not be recoverable. If the recoverable value, which is based upon economic circumstances and future plan is less than its carrying amount, the impairment loss is accounted.
(iii) Claims and Litigations
The Company is the subject of lawsuits and claims arising in the ordinary course of business from time to time. The Company reviews any such legal proceedings and claims on an ongoing basis and follow appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and it discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for the Company''s financial statements to not be misleading. To estimate whether a loss contingency should be accrued by a charge to income, the Company evaluates, among other factors, the degree of probability of an unfavourable outcome and the ability to make a reasonable estimate of the amount of the loss. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated. Based upon present information, the Company determined that there were no matters that required an accrual as of March 31, 2021 other than the accruals already recognized, nor were there any asserted or unasserted claims for which material losses are reasonably possible.
(iv) Estimation of uncertainties relating to the global health pandemic from COVID-19
The COVID-19 situation across the country affected the normal dine-in operations of the restaurants resulting in lower sales. However the Company has taken various measures to protect profit margins. The Company has made detailed assessments of its liquidity position for the next one year and of the recoverability and carrying values of all its assets and liabilities as at 31st March 2021 and on the basis of evaluation based on the current estimates has concluded that no material adjustments is required in the standalone financial statements.
Given the uncertainties associated with nature, condition and duration of COVID-19, the impact assessment on the Company''s financial statements will be continuously made and provided for as required.
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.
The Company recognizes revenue from sale of food through Company''s owned stores located in India and are recognized when the items are delivered to or carried out by customers. Customer''s payments are generally due at the time of sale.
The Company recognizes revenue from sale of supplies to its franchised stores (including subsidiaries operating Domino''s Pizza Restaurants in Srilanka and Bangladesh) upon delivery or shipment
of the related products, based on shipping terms and payments for supplies are generally due within 90 days of the shipping date.
Revenue is measured based on the consideration to which the Company expects to be entitled from a customer, net of returns and allowances, discounts, volume rebates and cash discounts and excludes sales taxes or Goods and Service Tax collected from customer and remitted to the appropriate taxing authorities and are not reflecting in the Statement of Profit and Loss as âRevenueâ.
Revenue is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.
Revenue is recognized when the right to receive the payment is established by the balance sheet date.
Franchisee fee is based on a percentage of franchise retail sales and are recognized when the items are delivered to or carried out by franchisees'' customers, on accrual basis in accordance with the terms of the relevant agreement.
Store opening fees and area development fee received from international sub-franchisees are recognized as revenue on a straight-line basis over the term of respective franchise store agreement. Fee received in excess of revenues are classified as contract liabilities (which we refer to as unearned income).
Foreign currency transactions are recorded in the functional currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the date of the transaction.
Conversion
Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.
Exchange Differences
Exchange differences arising on the settlement of monetary items, or on reporting such monetary
items of Company at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise.
Functional and presentation currency
The functional currency of the Company in the Indian rupee. These financial statements are presented in Indian rupees.
Income tax expense represents the sum of the tax currently payable and deferred tax.
The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate adjusted by unused tax losses/credits.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of reporting period in the country where the Company operate and generate taxable income.
Provision is made for uncertain tax positions when it is considered probable that there will be a future outflow of funds to a tax authority. The provision is calculated using the best estimate where that outcome is more likely than not and a weighted average probability in other circumstances. The position is reviewed on an ongoing basis, to ensure appropriate provision is made for each known tax risk.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the standalone financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income.
Expenses and assets are recognized net of the amount of Goods and Service Tax paid, except:
(i) When the tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the tax paid is recognized as part of the cost of acquisition of the asset or as part of the expense item, as applicable
(ii) When receivables and payables are stated with the amount of tax included.
The net amount of tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
Property, plant and equipment are carried at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates. It includes other costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Depreciation on property, plant and equipment is calculated on straight line basis using the rates arrived at based on the useful lives estimated by the management.
When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of
the respective asset if the recognition criteria for a provision are met.
Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the costs of the item can be measured reliably. All other repair and maintenance costs are recognised in profit or loss as incurred.
The management has estimated, supported by assessment by internal professionals, the useful lives of the following classes of assets and has used the following rates to provide depreciation on its property, plant and equipment which are different from those indicated in schedule II to Companies Act, 2013. The management believe that the above assessment truly represents the useful life of assets in the specific condition, these assets are put to use by the Company.
Property, Plant and Equipment |
Estimated Useful Life (in no. of years) |
Leasehold Improvements |
9 or Actual lease period, whichever is lower |
Building |
30 |
Plant and Machinery |
5 to 20 |
Office Equipment |
2 to 10 |
Furniture and Fixtures |
5 to 10 |
Vehicles |
6 |
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured in accordance with Ind AS 40''s requirements for cost model.
Intangible assets acquired separately are measured on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any.
Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:
(I) t he technical feasibility of completing the intangible asset so that it will be available for use or sale;
(II) the intention to complete the intangible asset and use or sell it;
(III) the ability to use or sell the intangible asset;
(IV) how the intangible asset will generate probable future economic benefits;
(V) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
(VI) the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.
Intangible assets are amortized on a straight line basis over the estimated useful economic life. If the persuasive evidence exists to the affect that useful life of an intangible asset exceeds ten years, the Company amortizes the intangible asset over the best estimate of its useful life. Such intangible assets are tested for impairment annually, either individually or at the cash-generating unit level. All other intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired.
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.
A summary of amortization policies applied to the Company intangible assets is as belo\w
Intangible assets |
Estimated Useful Life (in no. of years) |
Software |
5 - 7 |
Store opening fees |
5 |
Territory fees |
15 |
The territory fee has been paid to the franchisor for running and operating Dunkin'' Donuts restaurants. The period of contract is for 15 years, during which the Company shall be deriving the economic benefits, and has accordingly amortised the same.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Expenditure directly relating to construction activity are capitalized. Other expenditure incurred during the construction period which neither are related to the construction activity nor are incidental thereto, are charged to the statement of profit and loss.
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.
The Company bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Company cashgenerating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of five years. For longer periods, a long term growth rate is calculated and applied to project future cash flows after the fifth year.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset''s or cash-generating unit''s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit and loss.
The investment in subsidiary are carried at cost. An investor, regardless of the nature of its involvement with an entity (the investee), shall determine whether it is a parent by assessing whether it controls the investee. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Thus, an investor controls an investee if and only if the investor has all the following:
(a) power over the investee;
(b) exposure, or rights, to variable returns from its involvement with the investee and
(c) the ability to use its power over the investee to affect the amount of the investor''s returns
On disposal of investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.
Where the Company is a lessor
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
For the lease contracts where the Company is a lessee, it recognizes right-of-use asset and lease liability at the date at which the leased asset is available for use by the Company. Assets and Liabilities arising from a lease are initially measured on a present value basis.
At the commencement of lease, right-of-use asset is recognized at cost which comprises the following:
⢠Initial measurement of lease liability
⢠Lease payments made before commencement date less lease incentives
⢠Initial direct costs incurred by the Company and estimate of any dismantling cost.
Right-of-use assets are depreciated over the lease term as below:
Right-of-use assets |
Estimated Useful |
Life (in no. of years) |
|
Right-of-use buildings |
1-30 |
Right-of-use land |
90 |
Right-of-use Equipment |
3-5 |
The right-of-use assets are subsequently measured at cost less accumulated depreciation and any accumulated impairment. Adjustment is made for any remeasurement of lease liability.
At the commencement of lease the Company measures the lease liability at the present value of lease payments not paid at commencement date. The lease payments are discounted using the Company''s incremental borrowing rate.
Lease liability are subsequently increased by interest on the lease liability and reduced by the lease payments. It is adjusted to reflect any reassessment or lease modifications.
The Company does not recognise right-of-use assets and lease liabilities for short-term leases that have
a lease term of 12 months or less and leases of low value assets. The Company recognises the lease payments associated with these leases as an expense on a straight line basis over the lease term.
Inventories other than scrap materials are valued at lower of cost and net realizable value, if any. The comparison of cost and net realizable value is made on an item-by-item basis.
⢠Cost of raw materials has been determined by using FIFO method and comprises all costs of purchase, duties, taxes (other than those subsequently recoverable from tax authorities) and all other costs incurred in bringing the inventories to their present location and condition.
⢠Cost of traded goods has been determined by using FIFO method and comprises all costs of purchase, duties, taxes (other than those subsequently recoverable from tax authorities) and all other costs incurred in bringing the inventories to their present location and condition.
⢠Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
m. Provisions
A provision is recognised when the Company has a present obligation (legal or constructive) as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates. If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle
the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
The Company recognizes a liability to make payment of dividend to owners of equity when the distribution is authorized and is no longer at the discretion of the Company and is declared by the shareholders. A corresponding amount is recognized directly in equity.
The Company measures financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1- Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2- Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3- Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
⢠Short-term obligations
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 recognized in respect of employee service upto the end of the reporting period and are measured at the amount expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
The Employee''s Gratuity Fund Scheme, which is defined benefit plan, is managed by Trust maintained with SBI Life Insurance Company Limited. The liabilities with respect to Gratuity Plan are determined by actuarial valuation on projected unit credit method on the balance sheet date, based upon which the Company contributes to the Company Gratuity Scheme. The difference, if any, between the actuarial valuation of the gratuity of employees at the year end and the balance of funds with SBI Life Insurance
Company Limited is provided for as assets/ (liability) in the books. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. Future salary increases and pension increases are based on expected future inflation rates for the respective countries. Further details about the assumptions used, including a sensitivity analysis, are given in Note no 34.
The Company recognises the following changes in the net defined benefit obligation under Employee benefit expense in statement of profit or loss:
⢠Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements
⢠Net interest expense or income
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), 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.
Certain employees of the Company are also participants in the superannuation plan (''the Plan''), a defined contribution plan. Contribution made by the Company to the plan during the year is charged to Statement of Profit and Loss.
The Company makes contribution to the recognised provident fund - "JUBILANT FOODWORKS EMPLOYEES PROVIDENT FUND TRUST", which is a defined benefit plan to the extent that the Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate. The Company''s obligation in this regard is determined by an independent actuary and provided for if the circumstances indicate that the Trust may not be able to generate adequate returns to cover the interest rates notified by the Government.
Company''s contribution to the provident fund is charged to Statement of Profit and Loss
Accumulated leaves which is expected to be utilized within next 12 months is treated as short term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement and discharge at the year end.
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date.
Employees (including senior executives) of the Company receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions).
Equity-settled transactions
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model.
That cost is recognised, together with a corresponding increase in share-based payment (SBP) reserves in equity, over the period in which the performance and/ or service conditions are fulfilled in employee benefits expense. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company best estimate of the number of equity instruments that will ultimately vest. The statement of profit and loss expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense.
Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Company best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/ or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the expense had the terms had not been modified, if the original terms of the award are met. An additional expense is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification. Where an award is cancelled by the entity or by the counterparty, any remaining element of the fair value of the award is expensed immediately through profit or loss.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Exceptional items are transactions which due to their size or incidence are separately disclosed to enable a full understanding of the Company financial performance.
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, rights issue etc that have changed the number of equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effect of all potentially dilutive equity shares.
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.
The Company classifies its financial assets in the following measurement categories:
⢠Those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss)
⢠Those measured at amortized cost
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.
For purposes of subsequent measurement, financial assets are classified in four categories:
⢠Debt instruments at fair value through other comprehensive income (FVTOCI)
⢠Debt instruments at fair value through profit and loss (FVTPL)
⢠Debt instruments at amortized cost
⢠Equity instruments
A debt instrument is measured at amortized cost if both the following conditions are met:
⢠Business model test: The objective is to hold the debt instrument to collect the contractual cash flows (rather than to sell the instrument prior to its contractual maturity to realise its fair value changes).
⢠Cash flow characteristics test: The contractual terms of the Debt instrument give rise on specific dates to cash flows that are solely payments of principal and interest on principal amount outstanding.
This category is most relevant to the Company. 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 EIR. EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying
amount of the financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit losses. The EIR amortisation is included in finance income in profit or loss. The losses arising from impairment are recognised in the profit or loss. This category generally applies to trade and other receivables.
A Debt instrument is measured at fair value through other comprehensive income if following criteria are met:
⢠Business model test: The objective of financial instrument is achieved by both collecting contractual cash flows and for selling financial assets.
⢠Cash flow characteristics test: The contractual terms of the financial asset give rise on specific dates to cash flows that are solely payments of principal and interest on principal amount outstanding.
Financial Asset included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). However, the Company recognized the interest income, impairment losses and reversals and foreign exchange gain or loss in the Profit or Loss. On dereognition of asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to Profit or Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
Debt instruments at FVTPL
FVTPL is a residual category for financial instruments. Any financial instrument, which does not meet the criteria for amortized cost or FVTOCI, is classified as at FVTPL. A gain or loss on a debt instrument that is subsequently measured at FVTPL and is not a part of a hedging relationship is recognized in profit or loss and presented net in the statement of profit and loss within other gains or losses in the period in which it arises. Interest income from these Debt instruments is included in other income.
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognized by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income all subsequent changes in the fair value. 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 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.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is primarily derecognised (i.e removed from the Company statement of financial position) when:
⢠The rights to receive cash flows from the 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;
⢠The Company has transferred the rights to receive cash flows from the financial assets or
⢠The Company has retained the contractual right to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the Company has transferred an asset, the Company evaluates whether it has transferred substantially all the risks and rewards of the ownership of the financial assets. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all the risks and rewards of the ownership of the financial assets, the financial asset is not derecognised.
Where the Company has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognized to the extent of continuing involvement in the financial asset.
In accordance with Ind AS 109, the Company applies expected credit losses( ECL) model for measurement and recognition of impairment loss on the following financial asset and credit risk exposure
⢠Financial assets measured at amortised cost;
⢠Financial assets measured at fair value through other comprehensive income(FVTOCI);
The Company follows "simplified approach" for recognition of impairment loss allowance on:
⢠Trade receivables or contract revenue receivables;
⢠All lease receivables resulting from the transactions within the scope of Ind AS 116
Under the simplified approach, the Company does not track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of trade receivable and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward looking estimates are analysed.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the Company reverts to recognising impairment loss allowance based on 12- months ECL.
Initial recognition and measurement
Financial liabilities are classified at initial recognition as financial liabilities at fair value through profit or loss, loans and borrowings, and payables, net of directly attributable transaction costs. The Company financial liabilities include loans and borrowings including trade payables, trade deposits, retention money and liability towards services, sales incentive, other payables and derivative financial instruments.
The measurement of financial liabilities depends on their classification, as described below:
Trade Payables
These amounts represents liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 to 60 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at fair value and subsequently measured at amortized cost using EIR method.
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
The Company has not designated any financial liability as at fair value through profit and loss.
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those
assets. Changes to the business model are expected to be infrequent. The Company senior management determines change in the business model as a result of external or internal changes which are significant to the Company operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
As the Company business activity primarily falls within a single business and geographical segment and the Executive Management Committee monitors the operating results of its business units not separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the standalone financial statements, thus there are no additional disclosures to be provided under Ind AS 108 - âSegment Reportingâ. The management considers that the various goods and services provided by the Company constitutes single business segment, since the risk and rewards from these services are not different from one another. The Company operating businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The analysis of geographical segments is based on geographical location of the customers.
w. Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before tax is adjusted for the effects
transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, financing and investing activities of the Company are segregated. Cash and cash equivalents in the cash flow comprise cash at bank, cash/cheques in hand and short-term investments with an original maturity of three months or less.
The Company presents assets and liabilities in the balance sheet based on current/non- current classification. An asset is treated as current when it is:
⢠Expected to be realised or intended to be sold or consumed in normal operating cycle;
⢠Held primarily for the purpose of trading;
⢠Expected to be realised within twelve months after the reporting period, or
⢠Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
⢠It is expected to be settled in normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠It is due to be settled within twelve months after the reporting period, or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as noncurrent.
Deferred tax assets and liabilities and advance against current tax are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
Mar 31, 2018
a. Use of estimates
The preparation of financial statements in conformity with Indian Accounting Standards (Ind AS) requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and disclosure of contingent liabilities at the end of the reporting period. Although these estimates are based upon managementâs best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.
Critical accounting estimates and judgments:
The areas involving critical estimates and judgments are:
I. Useful lives and residual value of property, plant and equipment and intangible assets
Useful life and residual value are determined by the management based on a technical evaluation considering nature of asset, past experience, estimated usage of the asset, vendorâs advice etc and same is reviewed periodically, including at each financial year end. Management reviews the useful economic lives atleast once a year and any changes could affect the depreciation rates prospectively and hence the asset carrying values. The Company also reviews its property, plant and equipment and intangible assets, for possible impairment if there are events or changes in circumstances that indicate that carrying amount of assets may not be recoverable. In assessing the property, plant and equipment and intangible assets for impairment, factors leading to significant reduction in profits, the Companyâs business plans and changes in regulatory/ economic environment are taken into consideration.
II. Impairment of investments and property, plant and equipment
The Company has reviewed its carrying value of long term investments in equity shares as disclosed in note- 4 of standalone financial statements at the end of each reporting period, for possible impairment if there are events or changes in circumstances that indicate that carrying amount of assets may not be recoverable. If the recoverable value, which is based upon economic circumstances and future plan is less than its carrying amount, the impairment loss is accounted.
III. Claims and Litigations
The Company is the subject of lawsuits and claims arising in the ordinary course of business from time to time. The Company reviews any such legal proceedings and claims on an ongoing basis and follow appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and it discloses the amountaccrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for the Companyâs financial statements to not be misleading. To estimate whether a loss contingency should be accrued by a charge to income, the Company evaluates, among other factors, the degree of probability of an unfavourable outcome and the ability to make a reasonable estimate of theamount of the loss. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated. Based upon present information, the Company determined that there were no matters that required an accrual as of March 31, 2018 other than the accruals already recognized, nor were there any asserted or unasserted claims for which material losses are reasonably possible.
b. Revenue recognition
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. 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, regardless of when the payment is being made. Amounts disclosed are net of returns, trade discounts, rebates, value added taxes (VAT)/ goods and service taxes (GST).
The Company assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The Company has concluded that it is acting as a principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing latitude and is also exposed to inventory and credit risks. The specific recognition criteria described below must also be met before revenue is recognized:
Sale of Goods
Revenue from the sale of goods is recognized upon passage of title to the customers which coincides with their delivery and is measured at fair value of consideration received/receivable, net of returns and allowances, discounts, volume rebates and cash discounts. The Company collects sales taxes and VAT/ GST on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue.
Interest
Revenue is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.
Dividends
Revenue is recognized when the right to receive the payment is established by the balance sheet date.
Franchisee Fee (Sub franchisee income)
Revenue is recognized on accrual basis in accordance with the terms of the relevant agreement, if there is significant certainty as to its collectability.
c. Foreign currencies
Foreign currency transactions Initial Recognition
Foreign currency transactions are recorded in the functional currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the date of the transaction.
Conversion
Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.
Exchange Differences
Exchange differences arising on the settlement of monetary items, or on reporting such monetary items of Company at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise.
Functional and presentation currency
The functional currency of the Company in the Indian rupee. These financial statements are presented in Indian rupees.
d. Taxes
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The income tax expense or credit for the period is the tax payable on the current periodâs taxable income based on the applicable income tax rate for each jurisdiction adjusted by unused tax losses/credits.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of reporting period in the country where the Company operate and generate taxable income.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the standalone financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income.
Value Added Tax/Goods and Service Tax - GST
Expenses and assets are recognized net of the amount of sales/value added taxes/Goods and Service Tax paid, except:
- When the tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the tax paid is recognized as part of the cost of acquisition of the asset or as part of the expense item, as applicable
- When receivables and payables are stated with the amount of tax included.
The net amount of tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
e. Property, Plant and Equipment
Property, plant and equipment are carried at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates. It includes other costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Depreciation on property, plant and equipment is calculated on straight line basis using the rates arrived at based on the useful lives estimated by the management.
When significant parts of plant and equipment are required to be replaced at intervals, the
Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the company and the costs of the item can be measured reliably. All other repair and maintenance costs are recognised in profit or loss as incurred.
The management has estimated, supported by assessment by internal professionals, the useful lives of the following classes of assets and has used the following rates to provide depreciation on its property, plant and equipment which are different from those indicated in schedule II to Companies Act, 2013. The management believe that the above assessment truly represents the useful life of assets in the specific condition, these assets are put to use by the company.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
f. Investment properties
Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are are measured in accordance with Ind AS 16âs requirements for cost model.
g. Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any.
Internally-generated intangible assets -Software
Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:
- the technical feasibility of completing the intangible asset so that it will be available for use or sale;
- the intention to complete the intangible asset and use or sell it;
- the ability to use or sell the intangible asset;
- how the intangible asset will generate probable future economic benefits;
- the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
- the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.
Intangible assets are amortized on a straight line basis over the estimated useful economic life. If the persuasive evidence exists to the affect that useful life of an intangible asset exceeds ten years, the Company amortizes the intangible asset over the best estimate of its useful life. Such intangible assets are tested for impairment annually, either individually or at the cash-generating unit level. All other intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired.
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.
A summary of amortization policies applied to the Company intangible assets is as below:
The territory fee has been paid to the franchisor for running and operating Dunkinâ Donuts restaurants. The period of contract is for 15 years, during which the Company shall be deriving the economic benefits, and has accordingly amortised the same.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
h. Expenditure during Construction Period
Expenditure directly relating to construction activity are capitalized. Other expenditure incurred during the construction period which are not related to the construction activity nor are incidental thereto, are charged to the statement of profit and loss.
i. Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash-generating unitâs (CGU) net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.
The Company bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Company cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of five years. For longer periods, a long term growth rate is calculated and applied to project future cash flows after the fifth year.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the assetâs or cash-generating unitâs recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the assetâs recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit and loss.
j. Investment in Subsidiary
The investment in subsidiary are carried at cost. An investor, regardless of the nature of its involvement with an entity (the investee), shall determine whether it is a parent by assessing whether it controls the investee. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Thus, an investor controls an investee if and only if the investor has all the following:
(a) power over the investee;
(b) exposure, or rights, to variable returns from its involvement with the investee and
(c) the ability to use its power over the investee to affect the amount of the investorâs returns
On disposal of investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.
k. Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Where the Company is a lessee
Finance Lease, which effectively transfer to the Company substantially all the risks and benefits incidental to the ownership of the leased items, are capitalized at the inception of the lease term at the lower of fair value of the leased item and the present value of minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the statement of profit and loss. Lease management fees, legal charges and other initial direct costs of lease are capitalized.
A leased asset is depreciated on a straight-line basis over the useful life of the asset except if the escalation in lease is within General inflation rate and Consumer price index. However, if there is no reasonable certainty that the Company will obtain the ownership by the end of the term of hire, the capitalized asset is depreciated on a straight-line basis over the shorter of the estimated useful life of the asset.
Rental expense from operating leases is generally recognised on a straight-line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases, such increases are recognised in the year in which such benefits accrue. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
l. Inventories
Basis of valuation:
Inventories other than scrap materials are valued at lower of cost and net realizable value, if any. The comparison of cost and net realizable value is made on an item-by-item basis.
Method of Valuation:
- Cost of raw materials has been determined by using FIFO method and comprises all costs of purchase, duties, taxes (other than those subsequently recoverable from tax authorities) and all other costs incurred in bringing the inventories to their present location and condition.
- Cost of traded goods has been determined by using FIFO method and comprises all costs of purchase, duties, taxes (other than those subsequently recoverable from tax authorities) and all other costs incurred in bringing the inventories to their present location and condition.
- Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
m. Provisions
A provision is recognised when the Company has a present obligation (legal or constructive) as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
n. Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
o. Dividend Distributions
The Company recognizes a liability to make payment of dividend to owners of equity when the distribution is authorized and is no longer at the discretion of the Company and is declared by the shareholders. A corresponding amount is recognized directly in equity.
p. Fair value measurement
The Company measures financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1- Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2- Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3- Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
q. Employee Benefits
- Short-term obligations
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 recognized in respect of employee service upto the end of the reporting period and are measured at the amount expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
- Post-employment benefit obligations Gratuity
The Employeeâs Gratuity Fund Scheme, which is defined benefit plan, is managed by Trust maintained with SBI Life Insurance Company limited. The liabilities with respect to Gratuity Plan are determined by actuarial valuation on projected unit credit method on the balance sheet date, based upon which the Company contributes to the Company Gratuity Scheme. The difference, if any, between the actuarial valuation of the gratuity of employees at the year end and the balance of funds with SBI Life Insurance Company limited is provided for as assets/ (liability) in the books. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. Future salary increases and pension increases are based on expected future inflation rates for the respective countries. Further details about the assumptions used, including a sensitivity analysis, are given in Note no 34.
The Company recognises the following changes in the net defined benefit obligation under Employee benefit expense in statement of profit or loss:
- Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements
- Net interest expense or income
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), 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.
Superannuation
Certain employees of the Company are also participants in the superannuation plan (âthe Planâ), a defined contribution plan. Contribution made by the Company to the plan during the year is charged to Statement of Profit and Loss.
Provident Fund
The Company makes contribution to the recognised provident fund - âJUBILANT FOODWORKS EMPLOYEES PROVIDENT FUND TRUSTâ, which is a defined benefit plan to the extent that the Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate. The Companyâs obligation in this regard is determined by an independent actuary and provided for if the circumstances indicate that the Trust may not be able to generate adequate returns to cover the interest rates notified by the Government. For other employees in India, provident fund is deposited with Regional Provident Fund Commissioner. This is treated as defined contribution plan.
Companyâs contribution to the provident fund is charged to Statement of Profit and Loss
- Other long-term employee benefit obligation
Compensated Absences/Leave Encashment
Accumulated leaves which is expected to be utilized within next 12 months is treated as short term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement and discharge at the year end.
Liabilities recognised in respect of other longterm employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date.
Share-based payments
Employees (including senior executives) of the Company receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions).
Equity-settled transactions
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model.
That cost is recognised, together with a corresponding increase in share-based payment (SBP) reserves in equity, over the period in which the performance and/or service conditions are fulfilled in employee benefits expense. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company best estimate of the number of equity instruments that will ultimately vest. The statement of profit and loss expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense.
Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Company best estimate of the number of equity instruments that will ultimately vest.
Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or nonvesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the expense had the terms had not been modified, if the original terms of the award are met. An additional expense is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification. Where an award is cancelled by the entity or by the counterparty, any remaining element of the fair value of the award is expensed immediately through profit or loss.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
r. Exceptional Items
Exceptional items are transactions which due to their size or incidence are separately disclosed to enable a full understanding of the Company financial performance. Items relates to one time separation cost incurred as part of manpower rationalisation exercise carried out by the Company.
s. Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effect of all potentially dilutive equity shares.
t. 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 assets
The Company classifies its financial assets in the following measurement categories:
- Those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss)
- Those measured at amortized cost
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.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
i. Debt instruments at fair value through other comprehensive income (FVTOCI)
ii. Debt instruments at fair value through profit and loss (FVTPL)
iii. Debt instruments at amortized cost
iv. Equity instruments
Debt instruments at amortized cost
A debt instrument is measured at amortized cost if both the following conditions are met:
- Business Model Test: The objective is to hold the debt instrument to collect the contractual cash flows (rather than to sell the instrument prior to its contractual maturity to realise its fair value changes).
- Cash flow characteristics test: The contractual terms of the Debt instrument give rise on specific dates to cash flows that are solely payments of principal and interest on principal amount outstanding.
This category is most relevant to the Company. 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 EIR. EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit losses. The EIR amortisation is included in finance income in profit or loss. The losses arising from impairment are recognised in the profit or loss. This category generally applies to trade and other receivables.
Debt instruments at fair value through OCI
A Debt instrument is measured at fair value through other comprehensive income if following criteria are met:
- Business Model Test: The objective of financial instrument is achieved by both collecting contractual cash flows and for selling financial assets.
- Cash flow characteristics test: The contractual terms of the financial asset give rise on specific dates to cash flows that are solely payments of principal and interest on principal amount outstanding.
Financial Asset included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). However, the Company recognized the interest income, impairment losses and reversals and foreign exchange gain or loss in the profit or loss. On dereognition of asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to profit or loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
Debt instruments at FVTPL
FVTPL is a residual category for financial instruments. Any financial instrument, which does not meet the criteria for amortized cost or FVTOCI, is classified as at FVTPL. A gain or loss on a debt instrument that is subsequently measured at FVTPL and is not a part of a hedging relationship is recognized in profit or loss and presented net in the statement of profit and loss within other gains or losses in the period in which it arises. Interest income from these Debt instruments is included in other income.
Equity investments of other entities
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognized by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income all subsequent changes in the fair value. 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 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.
Derecognition
A financial asset (or ,where applicable, a part of a financial asset or part of a Company of similar financial assets) is primarily derecognised (i.e removed from the Company statement of financial position) when:
i. The rights to receive cash flows from the asset have expired, or
ii. 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;
iii. The Company has transferred the rights to receive cash flows from the financial assets or
iv. The Company has retained the contractual right to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the Company has transferred an asset, the Company evaluates whether it has transferred substantially all the risks and rewards of the ownership of the financial assets. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all the risks and rewards of the ownership of the financial assets, the financial asset is not derecognised.
Where the Company has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognized to the extent of continuing involvement in the financial asset.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit losses( ECL) model for measurement and recognition of impairment loss on the following financial asset and credit risk exposure
- Financial assets measured at amortised cost;
- Financial assets measured at fair value through other comprehensive income(FVTOCI);
The Company follows âsimplified approachâ for recognition of impairment loss allowance on:
- Trade receivables or contract revenue receivables;
- All lease receivables resulting from the transactions within the scope of Ind AS 17
Under the simplified approach, the Company does not track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of trade receivable and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward looking estimates are analysed.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the Company reverts to recognising impairment loss allowance based on 12- months ECL.
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, and payables, net of directly attributable transaction costs. The Company financial liabilities include loans and borrowings including trade payables, trade deposits, retention money and liability towards services, sales incentive, other payables and derivative financial instruments.
The measurement of financial liabilities depends on their classification, as described below:
Trade Payables
These amounts represents liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 to 180 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at fair value and subsequently measured at amortized cost using EIR method.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
The Company has not designated any financial liability as at fair value through profit and loss.
Reclassification of financial assets:
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company senior management determines change in the business model as a result of external or internal changes which are significant to the Company operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
u. Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and shortterm deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
v. Segment Reporting Policies
As the Company business activity primarily falls within a single business and geographical segment and the Executive Management Committee monitors the operating results of its business units not separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the standalone financial statements, thus there are no additional disclosures to be provided under Ind AS 108 - âSegment Reportingâ. The management considers that the various goods and services provided by the Company constitutes single business segment, since the risk and rewards from these services are not different from one another. The Company operating businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The analysis of geographical segments is based on geographical location of the customers.
w. Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before tax is adjusted for the effects transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, financing and investing activities of the Company are segregated. Cash and cash equivalents in the cash flow comprise cash at bank, cash/cheques in hand and shortterm investments with an original maturity of three months or less.
x. Current/Non-Current classification
The Company presents assets and liabilities in the balance sheet based on current/non- current classification. An asset is treated as current when it is:
- Expected to be realised or intended to be sold or consumed in normal operating cycle;
- Held primarily for the purpose of trading;
- Expected to be realised within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle;
- It is held primarily for the purpose of trading;
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities and advance against current tax are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
Mar 31, 2017
1. Corporate information
Jubilant Food Works Limited (the Company) is a Jubilant Bhartia Group Company. The Company was incorporated in 1995 and initiated operations in 1996. The Company is listed in India on National Stock Exchange and BSE. The Company is a food service Company. The Company & its subsidiary have the exclusive rights to develop and operate Domino''s Pizza brand in India, Sri Lanka, Bangladesh and Nepal, at present it operates in India and Sri Lanka. The Company also have exclusive rights for developing and operating Dunkin'' Donuts restaurants for India. The registered office of the Company is located at Plot No. 1A, Sector 16-A, Noida-201301, UP, India.
The standalone financial statements were authorized for issue in accordance with a resolution of the Directors on May 29, 2017.
2. Significant accounting policies
2.1 Basis of preparation
The standalone financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015.
For all periods up to and including the year ended March 31, 2016, the Company prepared its financial statements in accordance accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP). These financial statements for the year ended March 31, 2017 are the first Company has prepared in accordance with Ind AS. Refer to Note 48 for information on how the Company adopted Ind AS.
2.2 Current/Non Current classification
The Company presents assets and liabilities in the balance sheet based on current/non- current classification. An asset is treated as current when it is:
Expected to be realized or intended to be sold or consumed in normal operating cycle,
Held primarily for the purpose of trading,
Expected to be realized within twelve months after the reporting period, or
Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
It is expected to be settled in normal operating cycle,
It is held primarily for the purpose of trading,
It is due to be settled within twelve months after the reporting period, or
There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities and advance against current tax are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
a. Foreign currencies
Foreign currency transactions
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the date of the transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items, or on reporting such monetary items of Company at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise.
b. Revenue recognition
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. 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, regardless of when the payment is being made. Amounts disclosed are net of returns, trade discounts, rebates, value added taxes.
The Company assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The Company has concluded that it is acting as a principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing latitude and is also exposed to inventory and credit risks. The specific recognition criteria described below must also be met before revenue is recognized:
Sale of Goods
Revenue from the sale of goods is recognized upon passage of title to the customers which coincides with their delivery and is measured at fair value of consideration received/receivable, net of returns and allowances, discounts, volume rebates and cash discounts. The Company collects sales taxes and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue.
Interest
Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.
Dividends
Revenue is recognized when the right to receive the payment is established by the balance sheet date.
Franchisee Fee (Sub franchisee income)
Revenue is recognized on accrual basis in accordance with the terms of the relevant agreement, if there is significant certainty as to its collectability.
c. Taxes
Tax expense for the year comprises of current tax and deferred tax.
Current income tax
The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of reporting period in the countries where the Company and its subsidiaries, associates and joint ventures operate and generate taxable income.
Deferred tax
Deferred tax is provided using the liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date in the standalone financial statements. However, deferred tax liabilities are not recognized if they arise from initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at time of transaction affects neither accounting profit nor taxable profit or loss.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss
In respect of taxable temporary differences associated with investments in subsidiaries, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except:
When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss
In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.
Value Added Tax
Expenses and assets are recognized net of the amount of sales/ value added taxes paid, except:
When the tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the tax paid is recognized as part of the cost of acquisition of the asset or as part of the expense item, as applicable
When receivables and payables are stated with the amount of tax included
The net amount of tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
d. Property, Plant and Equipment
Under the previous GAAP (Indian GAAP), Leasehold land and buildings (property), other than investment property, were carried in the balance sheet on the basis of cost less accumulated depreciation. The Company has elected to regard the carrying amount under previous GAAP of an item of property, plant and equipment as the deemed cost.
Capital work in progress, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the plant and equipment for long-term construction projects if the recognition criteria are met. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
Depreciation on fixed assets is calculated on straight line basis using the rates arrived at based on the useful lives estimated by the management.
The management has estimated, supported by assessment by internal professionals, the useful lives of the following classes of assets and has used the following rates to provide depreciation on its fixed assets which are different from those indicated in schedule II. The management believe that the above assessment truly represents the useful life of assets in the specific condition, these assets are put to use by the Company.
An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognized.
other intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired.
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.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
e. Investment properties
Since there is no change in the functional currency, the Company has elected to continue with the carrying value for all of its investment property as recognized in its Indian GAAP financial statements as deemed cost at the transition date, viz., April 1, 2015.
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at cost.
f. Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any.
Intangible assets are amortized on a straight line basis over the estimated useful economic life. If the persuasive evidence exists to the affect that useful life of an intangible asset exceeds ten years, the Company amortizes the intangible asset over the best estimate of its useful life. Such intangible assets are tested for impairment annually, either individually or at the cash-generating unit level. All
The territory fee has been paid to the franchisor for running and operating Dunkin'' Donuts restaurants. The period of contract is for 15 years, during which the Company shall be deriving the economic benefits, and has accordingly amortized the same.
The Company has elected to regard the carrying amount under previous GAAP of an item of intangible assets as the deemed cost.
g. Non-current assets held for sale
The Company classifies non-current assets as held sale if their carrying amounts will be recovered principally through its sale rather than through continuing use. Such non-current assets classified as held sale are measured at the lower of their carrying amount and fair value less costs to sale. Any expected loss is recognized immediately in the statement of profit and loss.
The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or disposal Company is available for immediate sale in its present condition and the assets must have actively marketed for sale at a price that is reasonable in relation to its current fair value. Actions required to complete the sale should indicate that it is unlikely that significant changes to plan to sale these assets will be made. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Property, plant and equipment and intangible assets are not depreciated or mortised once classified as held for sale. Assets and liabilities classified as held for sale are presented separately as current items in the balance sheet.
h. Expenditure during Construction Period
Expenditure directly relating to construction activity are capitalized. Other expenditure incurred during the construction period which are not related to the construction activity nor are incidental thereto, are charged to the statement of profit and loss.
i. Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.
The Company bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Company cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of five years. For longer periods, a long term growth rate is calculated and applied to project future cash flows after the fifth year.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset''s or cash-generating unit''s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit and loss.
j. Investment in Subsidiaries
The investment in subsidiary are carried at cost as per Ind AS 27. Investment accounted for at cost is accounted for in accordance with Ind AS 105 when they are classified as held for sale and Investment carried at cost is tested for impairment as per Ind AS 36 . An investor, regardless of the nature of its involvement with an entity (the investee), shall determine whether it is a parent by assessing whether it controls the investee. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Thus, an investor controls an investee if and only if the investor has all the following:
(a) power over the investee;
(b) exposure, or rights, to variable returns from its involvement with the investee and
(c) the ability to use its power over the investee to affect the amount of the investor''s returns
On disposal of investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.
k. Leases
For arrangements entered into prior to April 1, 2015, the Company has determined whether the arrangement contain lease on the basis of facts and circumstances existing on the date of transition.
Where the Company is a lessee
Finance Lease, which effectively transfer to the Company substantially all the risks and benefits incidental to the ownership of the leased items, are capitalized at the inception of the lease term at the lower of fair value of the leased item and the present value of minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the statement of profit and loss. Lease management fees, legal charges and other initial direct costs of lease are capitalized.
A leased asset is depreciated on a straight-line basis over the useful life of the asset except if the escalation in lease is within general inflation rate and consumer price index. However, if there is no reasonable certainty that the Company will obtain the ownership by the end of the term of hire, the capitalized asset is depreciated on a straight-line basis over the shorter of the estimated useful life of the asset.
Leases, where the less or effectively retains substantially all risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss on a straight line basis over the lease term.
l. Inventories
Basis of valuation:
Inventories other than scrap materials are valued at lower of cost and net realizable value, if any. The comparison of cost and net realizable value is made on an item-by-item basis.
Method of Valuation:
Cost of raw materials has been determined by using FIFO method and comprises all costs of purchase, duties, taxes (other than those subsequently recoverable from tax authorities) and all other costs incurred in bringing the inventories to their present location and condition.
Cost of traded goods has been determined by using FIFO method and comprises all costs of purchase, duties, taxes (other than those subsequently recoverable from tax authorities) and all other costs incurred in bringing the inventories to their present location and condition.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
m. Provisions
A provision is recognized when the Company has a present obligation (legal or constructive) as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
n. Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
o. Dividend Distributions
The Company recognizes a liability to make payment of dividend to owners of equity when the distribution is authorized and is no longer at the discretion of the Group and is declared by the shareholders. A corresponding amount is recognized directly in equity.
p. Fair value measurement
The Company measures financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
(i) In the principal market for asset or liability, or
(ii) In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
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.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1- Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2- Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3- Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and
liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
q. Employee Benefits 1. Short-term obligations
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 recognized in respect of employee service up to the end of the reporting period and are measured at the amount expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
2. Other long-term employee benefit obligations
a. Gratuity
The Employee''s Gratuity Fund Scheme, which is defined benefit plan, is managed by Trust maintained with Life Insurance Corporation of India (LIC). The liabilities with respect to Gratuity Plan are determined by actuarial valuation on projected unit credit method on the balance sheet date, based upon which the Company contributes to the Company Gratuity Scheme. The difference, if any, between the actuarial valuation of the gratuity of employees at the year end and the balance of funds with Life Insurance Corporation of India is provided for as assets/ (liability) in the books. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. Future salary increases and pension increases are based on expected future inflation rates for the respective countries. Further details about the assumptions used, including a sensitivity analysis, are given in Note 33.
The Company recognizes the following changes in the net defined benefit obligation under Employee benefit expense in statement of profit or loss:
Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements
Net interest expense or income Remeasurements, comprising of
actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), 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.
b. Provident Fund
Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expenditure, when an employee renders the related services. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
c. Compensated Absences/Leave Encashment
Accumulated leaves which is expected to be utilized within next 12 months is treated as short term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement and discharge at the year end.
d. Share-based payments
Employees (including senior executives) of the Company receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions).
Equity-settled transactions
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model.
That cost is recognized, together with a corresponding increase in share-based payment (SBP) reserves in equity, over the period in which the performance and/or service conditions are fulfilled in employee benefits expense. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company best estimate of the number of equity instruments that will ultimately vest. The statement of profit and loss expense or credit for a period represents the movement in cumulative expense recognized as at the beginning and end of that period and is recognized in employee benefits expense.
Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Company best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be nonvoting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.
No expense is recognized for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognized is the expense had the terms had not been modified, if the original terms of the award are met. An additional expense is recognized for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at
the date of modification. Where an award is cancelled by the entity or by the counterparty, any remaining element of the fair value of the award is expensed immediately through profit or loss.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
r. Exceptional Items
Exceptional items are transactions which due to their size or incidence are separately disclosed to enable a full understanding of the Company financial performance. Items relates to one time separation cost incurred as part of manpower rationalization exercise carried out by the Company.
s. Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effect of all potentially dilutive equity shares.
t. 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 assets
The Group classifies its financial assets in the following measurement categories:
Those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss)
Those measured at amortized cost.
Initial recognition and measurement
All financial assets are recognized 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.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
Debt instruments at fair value through other comprehensive income (FVTOCI),
Debt instruments at fair value through profit and loss (FVTPL),
Debt instruments at amortized cost, Equity instruments.
Debt instruments at amortized cost
A debt instrument is measured at amortized cost if both the following conditions are met:
a. Business Model Test : The objective is to hold the debt instrument to collect the contractual cash flows (rather than to sell the instrument prior to its contractual maturity to realize its fair value changes).
b. Cash flow characteristics test: The contractual terms of the Debt instrument give rise on specific dates to cash flows that are solely payments of principal and interest on principal amount outstanding.
This category is most relevant to the Company. After initial measurement, such financial assets are subsequently measured at mortised 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 EIR. EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit losses. The EIR amortization is included in finance income in profit or loss. The losses arising from impairment are recognized in the profit or loss. This category generally applies to trade and other receivables.
Debt instruments at fair value through OCI
A Debt instrument is measured at fair value through other comprehensive income if following criteria are met:
a. Business Model Test: The objective of financial instrument is achieved by both collecting contractual cash flows and for selling financial assets.
b. Cash flow characteristics test: The contractual terms of the financial asset give rise on specific dates to cash flows that are solely payments of principal and interest on principal amount outstanding.
Financial Asset included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). However, the Group recognized the interest income, impairment losses and reversals and foreign exchange gain or loss in the P&L. On dereognition of asset, cumulative gain or loss previously recognized in OCI is reclassified from the equity to P&L. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
Debt instruments at FVTPL FVTPL is a residual category for financial instruments. Any financial instrument, which does not meet the criteria for amortized cost or FVTOCI, is classified as at FVTPL. A gain or loss on a debt instrument that is subsequently measured at FVTPL and is not a part of a hedging relationship is recognized in profit or loss and presented net in the statement of profit and loss within other gains or losses in the period in which it arises. Interest income from these Debt instruments is included in other income.
Equity investments of other entities
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognized by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income all subsequent changes in the fair value. 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 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.
Derecognition
A financial asset (or ,where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e removed from the Company statement of financial position) when:
The rights to receive cash flows from the 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 the rights to receive cash flows from the financial assets or
b. The Company has retained the contractual right to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the Company has transferred an asset, the Company evaluates whether it has transferred substantially all the risks and rewards of the ownership of the financial assets. In such cases, the financial asset is derecognized. Where the entity has not transferred substantially all the risks and rewards of the ownership of the financial assets, the financial asset is not derecognized.
Where the Company has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognized if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognized to the extent of continuing involvement in the financial asset.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit losses (ECL) model for measurement and recognition of impairment loss on the following financial asset and credit risk exposure
Financial assets measured at mortised cost;
Financial assets measured at fair value through other comprehensive income(FVTOCI);
The Company follows "simplified approach" for recognition of impairment loss allowance on:
Trade receivables or contract revenue receivables;
All lease receivables resulting from the transactions within the scope of Ind AS 17.
Under the simplified approach, the Company does not track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of trade receivable and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward looking estimates are analysed.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the Company reverts to recognizing impairment loss allowance based on 12- months ECL.
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, and payables, net of directly attributable transaction costs. The Company financial liabilities include loans and borrowings including trade payables, trade deposits, retention money and liability towards services, sales incentive, other payables and derivative financial instruments.
The measurement of financial liabilities depends on their classification, as described below:
Trade Payables
These amounts represents liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 120 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at fair value and subsequently measured at amortized cost using EIR method.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognized in the statement of profit and loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in Ind As 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ loss are not subsequently transferred to P&L. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognized in the statement of profit or loss. The Company has not designated any financial liability as at fair value through profit and loss.
Reclassification of financial assets:
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company senior management determines change in the business model as a result of external or internal changes which are significant to the Company operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognized gains, losses (including impairment gains or losses) or interest.
u. Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
v. Segment Reporting Policies
As the Company business activity primarily falls within a single business and geographical segment and the Executive Management
Committee monitors the operating results of its business units not separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the standalone financial statements, thus there are no additional disclosures to be provided under Ind AS 108 -"Segment Reporting". The management considers that the various goods and services provided by the Company constitutes single business segment, since the risk and rewards from these services are not different from one another. The Company operating businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The analysis of geographical segments is based on geographical location of the customers.
w. Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before tax is adjusted for the effects transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, financing and investing activities of the Group are segregated. Cash and cash equivalents in the cash flow comprise cash at bank, cash/ cheques in hand and short-term investments with an original maturity of three months or less.
(b) Terms/rights attached to equity shares
The Company has only one class of equity shares having par value of '' 10 per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. During the year ended March 31, 2017, the amount of per share dividend recognized as distributions to equity shareholders was '' 2.5 (PY March 31, 2016: '' 2.5).
(c) Shares held by holding/ultimate holding Company and/or their subsidiaries/associates
No shares are held by the subsidiary of the Company. The Company does not have holding, ultimate holding Company and associates.
* The outstanding options under the ESOP 2007 at the end of year are 6,000 (PY 93,114), outstanding options under the ESOP 2011 at the end of year are 472,309 (PY 622,828) & outstanding options under the ESOP 2016 at the end of year are 14,528 (PY NIL) (Refer Note 31)
Mar 31, 2016
1. Corporate Information
Jubilant FoodWorks Limited ("the Company") is a Jubilant Bhartia Group
Company. The Company was incorporated in 1995 and initiated operations
in 1996. The Company is listed in India on National Stock Exchange of
India Limited and BSE Ltd. The Company is a food service Company. The
Company & its subsidiary have the exclusive rights to develop and
operate Domino''s Pizza brand in India, Sri Lanka, Bangladesh and Nepal,
at present it operates in India and Sri Lanka. The Company also have
exclusive rights for developing and operating Dunkin'' Donuts
restaurants for India.
2. Basis of Preparation
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP). The Company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under section 133 of the Companies Act, 2013, read together with
paragraph 7 of the Companies (Accounts) Rules, 2014 and Companies
(Accounting Standards) Amendment Rules, 2016. The financial statements
have been prepared on an accrual basis and under the historical cost
convention.
The accounting policies adopted in the preparation of financial
statements are consistent with those of previous year.
2.1 Summary of significant accounting policies a) Use of Estimates
The preparation of financial statements in conformity with Indian GAAP,
requires Management to make judgments, estimates and assumptions that
affect the reported amounts of revenue, expenses, assets and
liabilities and disclosure of contingent liabilities at the end of the
reporting period end. Although these estimates are based upon
Management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
b) Tangible Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation and
impairment losses, if any. The cost comprises purchase price, borrowing
cost if capitalization criteria are met and directly attributable cost
of bringing the asset to its working condition for the intended use.
Each part of an item of property, plant and equipment with a cost that
is significant in relation to the total cost of the item is depreciated
separately. This applies mainly to components for machinery. When
significant parts of fixed assets are required to be replaced at
intervals, the Company recognizes such parts as individual assets with
specific useful lives and depreciates them accordingly. Likewise, when
a major inspection is performed, its cost is recognized in the carrying
amount of the fixed assets as a replacement if the recognition criteria
are satisfied. Any trade discounts and rebates are deducted in arriving
at the purchase price.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from derecognition of fixed assets 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.
c) Depreciation
Depreciation on fixed assets is calculated on straight line basis using
the rates arrived at based on the useful lives estimated by the
Management.
The Management has estimated, supported by assessment by internal
professionals, the useful lives of the following classes of assets and
has used the following rates to provide depreciation on its fixed
assets which are different from those indicated in schedule II. The
Management believe that the above assessment truly represents the
useful life of assets in the specific condition, these assets are put
to use by the Company.
d) Intangibles
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any.
Intangible assets are amortized on a straight line basis over the
estimated useful economic life. If the persuasive evidence exists to
the affect that useful life of an intangible asset exceeds ten years,
the Company amortizes the intangible asset over the best estimate of
its useful life. Such intangible assets are tested for impairment
annually, either individually or at the cash-generating unit level. All
other intangible assets are assessed for impairment whenever there is
an indication that the intangible asset may be impaired.
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.
A summary of amortization policies applied to the Company''s intangible
assets is as below:
The territory fee has been paid to the franchisor for running and
operating Dunkin'' Donuts restaurants. The period of contract is for 15
years, during which the Company shall be deriving the economic
benefits, and has accordingly amortised the same.
e) Expenditure during Construction Period
Expenditure directly relating to construction activity are capitalized.
Other expenditure incurred during the construction period which are not
related to the construction activity nor are incidental thereto, are
charged to the statement of profit and loss.
f) Impairment of Tangible and Intangible Assets
The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Company
estimates the asset''s recoverable amount. An asset''s recoverable amount
is the higher of an asset''s or cash- generating unit''s (CGU) net
selling price and its value in use. The recoverable amount is
determined for an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from other assets or
group of assets. Where the carrying amount of an asset or CGU exceeds
its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. In assessing value in use, the
estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. In determining
net selling price, recent market transactions are taken into account,
if available. If no such transactions can be identified, an appropriate
valuation model is used.
The Company bases its impairment calculation on detailed budgets and
forecast calculations which are prepared separately for each of the
Company''s cash- generating units to which the individual assets are
allocated. These budgets and forecast calculations are generally
covering a period of five years. For longer periods, a long term growth
rate is calculated and applied to project future cash flows after the
fifth year.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the Company
estimates the asset''s or cash-generating unit''s recoverable amount. A
previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset''s
recoverable amount since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years. Such reversal is
recognized in the statement of profit and loss.
g) Leases
Where the Company is a lessee
Finance Lease, which effectively transfer to the Company substantially
all the risks and benefits incidental to the ownership of the leased
items, are capitalized at the inception of the lease term at the lower
of fair value of the leased item and the present value of minimum lease
payments. Lease payments are apportioned between the finance charges
and reduction of the lease liability so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance charges
are recognized as finance costs in the statement of profit and loss.
Lease management fees, legal charges and other initial direct costs of
lease are capitalized.
A leased asset is depreciated on a straight-line basis over the useful
life of the asset. However, if there is no reasonable certainty that
the Company will obtain the ownership by the end of the term of hire,
the capitalized asset is depreciated on a straight-line basis over the
shorter of the estimated useful life of the asset.
Leases, where the lessor effectively retains substantially all risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight line basis over the
lease term.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and to make the
sale.
i) Investments
Investments which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statement at lower of
cost and fair value determined on an individual investment basis. Long-
term investments are carried at cost. However, provision for diminution
in value is made to recognize a decline other than temporary in the
value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
j) Revenue Recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sale of Goods
Revenue from the sale of goods is recognised upon passage of title to
the customers which coincides with their delivery. The Company collects
sales taxes and value added taxes (VAT) on behalf of the government
and, therefore, these are not economic benefits flowing to the Company.
Hence, they are excluded from revenue.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
Dividends
Revenue is recognized when the right to receive the payment is
established by the balance sheet date.
Franchisee Fee (Sub franchisee income)
Revenue is recognized on accrual basis in accordance with the terms of
the relevant agreement, if there is significant certainty as to its
collectability.
k) Foreign Currency Translation
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency on the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items, or on
reporting such monetary items of Company at rates different from those
at which they were initially recorded during the year, or reported in
previous financial statements, are recognized as income or as expenses
in the year in which they arise.
l) Retirement and other Employment Benefits
(i) Gratuity liability under the Payment of Gratuity Act is a defined
benefit obligation and is provided for on the basis of an actuarial
valuation on projected unit credit method made at the end of each
financial year. The gratuity plan has been funded by policy taken from
a Life Insurance Company. Actuarial gains and losses for defined
benefit plan are recognized in full in the period in which they occur
in the statement of profit and loss.
(ii) Provident Fund (administered by a Trust) is a defined benefit
scheme whereby the Company deposits an amount determined as a fixed
percentage of basic pay to the fund every month. The benefit vests upon
commencement of employment. The interest credited to the accounts of
the employees is adjusted on an annual basis to confirm to the interest
rate declared by the Government for the Employees Provident Fund. The
Guidance Note on implementing AS-15, Employee Benefits (revised 2005)
states that provident funds set up by employers, which requires
interest shortfall to be met by the employer, needs to be treated as
defined benefit plan. The Actuarial Society of India has issued the
final guidance for measurement of provident fund liabilities. The
Company has adopted actuary valuation on projected unit credit method
to arrive at provident fund liability as at the reporting date.
Retirement benefits in the form of Pension cost is a defined
contribution scheme and the contributions are charged to the Statement
of profit and loss for the year when the contributions to the
respective funds are incurred. There are no other obligations other
than the contribution payable to the respective trusts.
(iii) Accumulated leave, which is expected to be utilized within the
next 12 months, is treated as short-term employee benefit. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for measurement
purpose. Such long term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year-end. Actuarial gains/losses are immediately taken to the statement
of profit and loss, and are not deferred. The Company presents the
entire leave as a current liability in the balance sheet, since it does
not have an unconditional right to defer its settlement for 12 months
after the reporting date.
(iv) Actuarial gains/losses are immediately taken to statement of
profit and loss and are not deferred.
m) Income Tax
Tax expense comprises of current & deferred tax.
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Indian Income Tax Act, 1961.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. If the Company
has carry forward of unabsorbed depreciation and tax losses, deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that such deferred tax assets can be realized
against future taxable profits.
Unrecognised deferred tax assets of earlier years are reassessed and
recognized to the extent that it has become reasonably certain or
virtually certain, as the case may be that sufficient future taxable
income will be available against which such deferred tax assets can be
realized.
n) Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year.
For the purpose of calculating diluted earning per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
o) Provisions
A provision is recognised when the Company 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 its
present value and are determined based on best 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
best management estimates.
p) Segment Reporting Policies
As the Company''s business activity primarily falls within a single
business and geographical segment, thus there are no additional
disclosures to be provided under Accounting Standard 17 - "Segment
Reporting". The management considers that the various goods and
services provided by the Company constitutes single business segment,
since the risk and rewards from these services are not different from
one another. The Company''s operating businesses are organized and
managed separately according to the nature of products and services
provided, with each segment representing a strategic business unit that
offers different products and serves different markets. The analysis of
geographical segments is based on geographical location of the
customers.
q) Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before
tax is adjusted for the effects transactions of a non-cash nature and
any deferrals or accruals of past or future cash receipts or payments.
The cash flows from regular revenue generating, financing and investing
activities of the Company are segregated. Cash and cash equivalents in
the cash flow comprise cash at bank, cash/cheques in hand and
short-term investments with an original maturity of three months or
less.
r) Employee Stock Compensation Cost
The Company accounts for equity settled stock options as per the
accounting treatment prescribed by Securities and Exchange Board of
India (Share Based Employee Benefits) Regulations, 2014 and the
Guidance Note on Employee Share- Based Payment issued by the Institute
of Chartered Accountants of India using the intrinsic value method.
s) Contingent Liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does not
recognize a contingent liability but discloses its existence in the
financial statements.
Mar 31, 2015
A) Change in accounting policy Depreciation
Till the year ended 31 March 2014, Schedule XIV to the Companies Act,
1956, prescribed requirements concerning depreciation of fixed assets.
From the current year, Schedule XIV has been replaced by Schedule II to
the Companies Act, 2013. The applicability of Schedule II has resulted
in the following changes related to depreciation of fixed assets.
Unless stated otherwise, the impact mentioned for the current year is
likely to hold good for future years also.
(i) Useful lives/ depreciation rates
Till the year ended 31 March 2014, depreciation rates prescribed under
Schedule XIV were treated as minimum rates and the Company was not
allowed to charge depreciation at lower rates even if such lower rates
were justified by the estimated useful life of the asset. Schedule II
to the Companies Act 2013 prescribes useful lives for fixed assets
which, in many cases, are different from lives prescribed under the
erstwhile Schedule XIV. However, Schedule II allows companies to use
higher/ lower useful lives and residual values if such useful lives and
residual values can be technically supported and justification for
difference is disclosed in the financial statements.
Considering the applicability of Schedule II, the management has
re-estimated useful lives and residual values of all its fixed assets,
though these rates in certain cases are different from lives prescribed
under Schedule II.
This change in accounting policy did not have any material impact on
financial statements of the company.
(ii) Depreciation on assets costing less than Rs. 5,000/-
Till year ended 31 March 2014, to comply with the requirements of
Schedule XIV to the Companies Act, 1956, the Company was charging 100%
depreciation on assets costing less than Rs. 5,000/- in the year of
purchase. However, Schedule II to the Companies Act 2013, applicable
from the current year, does not recognize such practice. Hence, to
comply with the requirement of Schedule II to the Companies Act, 2013,
the company has changed its accounting policy for depreciations of
assets costing less than Rs. 5,000/-. As per the revised policy, the
company is depreciating such assets over their useful life as assessed
by the management. The management has decided to apply the revised
accounting policy prospectively from accounting periods commencing on
or after April 1, 2014.
The change in accounting for depreciation of assets costing less than
Rs.5,000/- did not have any material impact on financial statements of
the company for the current year.
b) Use of estimates
The preparation of financial statements in conformity with Indian GAAP,
requires management to make judgments, estimates and assumptions that
affect the reported amounts of revenue, expenses, assets and
liabilities and disclosure of contingent liabilities at the end of the
reporting period. Although these estimates are based upon management's
best knowledge of current events and actions, uncertainty about these
assumptions and estimates could result in the outcomes requiring a
material adjustment to the carrying amounts of assets or liabilities in
future periods.
c) Tangible Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation and
impairment losses, if any. The cost comprises purchase price, borrowing
cost if capitalization criteria are met and directly attributable cost
of bringing the asset to its working condition for the intended use.
Each part of an item of property, plant and equipment with a cost that
is significant in relation to the total cost of the item is depreciated
separately. This applies mainly to components of machinery When
significant parts of fixed assets are required to be replaced at
intervals, the company recognizes such parts as individual assets with
specific useful lives and depreciates them accordingly. Likewise, when
a major inspection is performed, its cost is recognized in the carrying
amount of the fixed assets as a replacement if the recognition criteria
are satisfied. Any trade discounts and rebates are deducted in arriving
at the purchase price.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from derecognition of fixed assets 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.
d) Depreciation
Depreciation on fixed assets is calculated on straight line basis using
the rates arrived at based on the useful lives estimated by the
management.
The management has estimated, supported by assessment by internal
professionals, the useful lives of the following classes of assets and
has used the following rates to provide depreciation on its fixed
assets which are different from those indicated in Schedule II. The
management believe that the above assessment truly represents the
useful life of assets in the specific condition, these assets are put
to use by the company.
Fixed Assets Estimated Useful Life
(in no. of years)
Leasehold Improvements 9 or actual lease period,
whichever is lower
Plant & Machinery 5 to 20
Office Equipment 2 to 10
Furniture & Fixtures 5 to 10
Vehicles 6
e) Intangibles
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any.
Intangible assets are amortized on a straight line basis over the
estimated useful economic life. If the persuasive evidence exists to
the affect that useful life of an intangible asset exceeds ten years,
the company amortizes the intangible asset over the best estimate of
its useful life. Such intangible assets are tested for impairment
annually, either individually or at the cash-generating unit level. All
other intangible assets are assessed for impairment whenever there is
an indication that the intangible asset may be impaired.
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.
A summary of amortization policies applied to the company's intangible
assets is as below:
Intangible assets Estimated Useful Life
(in no. of years)
Software 5
Store opening fees 5
Territory fees 15
The territory fee has been paid to the franchisor for running and
operating Dunkin' Donuts restaurants. The period of contract is for 15
years, during which the Company shall be deriving the economic
benefits, and has accordingly amortised the same.
f) Expenditure during Construction Period
Expenditure directly relating to construction activity are capitalized.
Other expenditure incurred during the construction period which are not
related to the construction activity nor are incidental thereto, are
charged to the statement of profit and loss.
g) Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Company
estimates the asset's recoverable amount. An asset's recoverable amount
is the higher of an asset's or cash-generating unit's (CGU) net selling
price and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money
and the risks specific to the asset. In determining net selling price,
recent market transactions are taken into account, if available. If no
such transactions can be identified, an appropriate valuation model is
used.
The Company bases its impairment calculation on detailed budgets and
forecast calculations which are prepared separately for each of the
Company's cash- generating units to which the individual assets are
allocated. These budgets and forecast calculations are generally
covering a period of five years. For longer periods, a long term growth
rate is calculated and applied to project future cash flows after the
fifth year
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the Company
estimates the asset's or cash-generating unit's recoverable amount. A
previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset's
recoverable amount since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years. Such reversal is
recognized in the statement of profit and loss
h) Leases
Where the Company is a lessee
Finance Lease, which effectively transfer to the Company substantially
all the risks and benefits incidental to the ownership of the leased
items, are capitalized at the inception of the lease term at the lower
of fair value of the leased item and the present value of minimum lease
payments. Lease payments are apportioned between the finance charges and
reduction of the lease liability so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges are
recognized as finance costs in the statement of profit and loss. Lease
management fees, legal charges and other initial direct costs of lease
are capitalized.
A leased asset is depreciated on a straight-line basis over the useful
life of the asset. However, if there is no reasonable certainty that
the company will obtain the ownership by the end of the term of hire,
the capitalized asset is depreciated on a straight-line basis over the
shorter of the estimated useful life of the asset.
Leases, where the lessor effectively retains substantially all risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an
expense in the Statement of Profit and Loss on a straight line basis
over the lease term.
i) Inventories
Inventories are valued as follows:
Raw Materials, Stores, At the lower of cost and Spares and Packing net
realizable value. The Materials, Traded Goods cost for this purpose has
and Work in progress been computed on FIFO basis.
Material in process Lower of cost and net realizable value.
Cost includes direct materials and labour and a proportion of
manufacturing overheads computed on FIFO basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and to make the
sale.
j) Investments
Investments which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statement at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
k) Revenue Recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sale of Goods
Revenue from the sale of goods is recognised upon passage of title to
the customers which coincides with their delivery. The company collects
sales taxes and value added taxes (VAT) on behalf of the government
and, therefore, these are not economic benefits flowing to the company.
Hence, they are excluded from revenue.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
Dividends
Revenue is recognized when the right to receive the payment is
established by the balance sheet date.
Franchisee Fee (Sub franchisee income)
Revenue is recognized on accrual basis in accordance with the terms of
the relevant agreement, if there is significant certainty as to its
collectability.
l) Foreign Currency Translation
Foreign currency transactions
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency on the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items, or on
reporting such monetary items of company at rates different from those
at which they were initially recorded during the year, or reported in
previous financial statements, are recognized as income or as expenses
in the year in which they arise.
m) Retirement and other Employment Benefits
(i) Gratuity liability under the Payment of Gratuity Act is a defined
benefit obligation and is provided for on the basis of an actuarial
valuation on projected unit credit method made at the end of each
financial year The gratuity plan has been funded by policy taken from a
Life Insurance Company. Actuarial gains and losses for defined benefit
plan are recognized in full in the period in which they occur in the
statement of profit and loss.
(ii) Provident Fund (administered by a Trust) is a defined benefit
scheme whereby the Company deposits an amount determined as a fixed
percentage of basic pay to the fund every month. The benefit vests upon
commencement of employment. The interest credited to the accounts of
the employees is adjusted on an annual basis to confirm to the interest
rate declared by the government for the Employees Provident Fund. The
Guidance Note on implementing AS-15 - 'Employee Benefits' (revised
2005) states that provident funds set up by employers, which requires
interest shortfall to be met by the employer, needs to be treated as
defined benefit plan. The Actuarial Society of India has issued the
final guidance for measurement of provident fund liabilities. The
Company has adopted actuary valuation on projected unit credit method
to arrive at provident fund liability as at the reporting date.
Retirement benefits in the form of Pension cost is a defined
contribution scheme and the contributions are charged to the statement
of profit and loss for the year when the contributions to the
respective funds are incurred. There are no other obligations other
than the contribution payable to the respective trusts.
(iii) Accumulated leave, which is expected to be utilized within the
next 12 months, is treated as short-term employee benefit. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for measurement
purpose. Such long term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year-end. Actuarial gains/losses are immediately taken to the statement
of profit and loss, and are not deferred. The company presents the
entire leave as a current liability in the balance sheet, since it does
not have an unconditional right to defer its settlement for 12 months
after the reporting date.
(iv) Actuarial gains/losses are immediately taken to statement of
profit and loss and are not deferred.
n) Income Tax
Tax expense comprises of current & deferred tax.
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Indian Income Tax Act, 1961.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. If the Company
has carry forward of unabsorbed depreciation and tax losses, deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that such deferred tax assets can be realized
against future taxable profits.
Unrecognised deferred tax assets of earlier years are reassessed and
recognized to the extent that it has become reasonably certain or
virtually certain, as the case may be that sufficient future taxable
income will be available against which such deferred tax assets can be
realized.
o) Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year
For the purpose of calculating diluted earning per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
p) Provisions
A provision is recognised when the Company 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 its
present value and are determined based on best 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
best management estimates.
q) Segment Reporting Policies
As the Company's business activity primarily falls within a single
business and geographical segment, thus there are no additional
disclosures to be provided under Accounting Standard 17 - 'Segment
Reporting'. The management considers that the various goods and
services provided by the Company constitutes single business segment,
since the risk and rewards from these services are not different from
one another. The Company's operating businesses are organized and
managed separately according to the nature of products and services
provided, with each segment representing a strategic business unit that
offers different products and serves different markets. The analysis of
geographical segments is based on geographical location of the
customers.
r) Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before
tax is adjusted for the effects transactions of a non-cash nature and
any deferrals or accruals of past or future cash receipts or payments.
The cash flows from regular revenue generating, financing and investing
activities of the Company are segregated. Cash and cash equivalents in
the cash flow comprise cash at bank, cash/cheques in hand and
short-term investments with an original maturity of three months or
less.
s) Employee Stock Compensation Cost
The Company accounts for equity settled stock options as per the
accounting treatment prescribed by Securities and Exchange Board of
India (Share Based Employee Benefits) Regulations, 2014 and the
Guidance Note on Employee Share-Based Payment issued by the Institute
of Chartered Accountants of India using the intrinsic value method.
t) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The company does not
recognize a contingent liability but discloses its existence in the
financial statements.
Mar 31, 2014
A) Use of estimates
The preparation of financial statements in conformity with Indian GAAP,
requires management to make judgments, estimates and assumptions that
affect the reported amounts of revenue, expenses, assets and
liabilities and disclosure of contingent liabilities at the end of the
reporting period. Although these estimates are based upon management''s
best knowledge of current events and actions, uncertainty about these
assumptions and estimates could result in the outcomes requiring a
material adjustment to the carrying amounts of assets or liabilities in
future periods.
b) Tangible Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation and
impairment losses, if any. The cost comprises purchase price,
borrowing cost if capitalisation criteria are met and directly
attributable cost of bringing the asset to its working condition for
the intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it
increases the future benefits from the existing asset beyond its
previously assessed standard of performance. All other expenses on
existing fixed assets, including day-to-day repair and maintenance
expenditure and cost of replacing parts, are charged to the statement
of profit and loss for the period during which such expenses are
incurred.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognised in the statement of profit and
loss when the asset is derecognised.
c) Depreciation
Depreciation on fixed assets is calculated on a straight-line basis
using the rates arrived at based on the useful lives estimated by the
management, or those prescribed under the Schedule XIV to the Companies
Act, 1956, whichever is higher. The Company is charging depreciation on
fixed assets based on the following estimated useful life.
Fixed Assets Estimated Useful Life
(in no. of years)
Leasehold 9 or Actual lease period,
Improvements whichever is lower
Plant & Machinery 5 to 20
Office Equipment 2 to 10
Furniture & Fixtures 5 to 10
Vehicles 5
Fixed Assets costing below Rs. 5,000 are depreciated @ 100% p.a.
d) Intangibles
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortisation and accumulated
impairment losses, if any.
Intangible assets are amortised on a straight line basis over the
estimated useful economic life. If the persuasive evidence exists to
the affect that useful life of an intangible asset exceeds ten years,
the Company amortises the intangible asset over the best estimate of
its useful life. Such intangible assets are tested for impairment
annually, either individually or at the cash-generating unit level. All
other intangible assets are assessed for impairment whenever there is
an indication that the intangible asset may be impaired.
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 recognised in the statement of
profit and loss when the asset is derecognised.
A summary of amortisation policies applied to the Company''s intangible
assets is as below:
Intangible assets Estimated Useful
Life (in no. of years)
Software 5
Territory fees & Store 15 & 5
opening fees
The territory fee has been paid to the franchisor for running and
operating Dunkin'' Donuts restaurants. The period of contract is for 15
years, during which the Company shall be deriving the economic
benefits, and has accordingly amortised the same.
e) Expenditure during Construction Period
Expenditure directly relating to construction activity are capitalised.
Expenditure which is not directly attributable to the construction
activity incurred during the construction period are capitalised as
part of the indirect construction cost. Other indirect expenditure
incurred during the construction period which are not related to the
construction activity nor are incidental thereto, are charged to the
statement of profit and loss.
f) Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Company
estimates the asset''s recoverable amount. An asset''s recoverable amount
is the higher of an asset''s or cash- generating unit''s (CGU) net
selling price and its value in use. The recoverable amount is
determined for an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from other assets or
groups of assets. Where the carrying amount of an asset or CGU exceeds
its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. In assessing value in use, the
estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. In
determining net selling price, recent market transactions are taken
into account, if available. If no such transactions can be identified,
an appropriate valuation model is used.
The Company bases its impairment calculation on detailed budgets and
forecast calculations which are prepared separately for each of the
Company''s cash-generating units to which the individual assets are
allocated. These budgets and forecast calculations are generally
covering a period of five years. For longer periods, a long term growth
rate is calculated and applied to project future cash flows after the
fifth year.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer
exist or may have decreased. If such indication exists, the Company
estimates the asset''s or cash-generating unit''s recoverable amount. A
previously recognised impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset''s
recoverable amount since the last impairment loss was recognised. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognised for the asset in prior years. Such reversal is
recognised in the statement of profit and loss.
g) Leases
Where the Company is a lessee
Finance Lease, which effectively transfer to the Company substantially
all the risks and benefits incidental to the ownership of the leased
items, are capitalised at the inception of the lease term at the lower
of fair value of the leased item and the present value of minimum lease
payments. Lease payments are apportioned between the finance charges
and reduction of the lease liability so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance charges
are recognised as finance costs in the statement of profit and loss.
Lease management fees, legal charges and other initial direct costs of
lease are capitalised.
A leased asset is depreciated on a straight- line basis over the useful
life of the asset or the useful life envisaged in Schedule XIV to the
Companies Act, 1956, whichever is lower. However, if there is no
reasonable certainty that the Company will obtain the ownership by the
end of the term of hire, the capitalised asset is depreciated on a
straight-line basis over the shorter of the estimated useful life of
the asset, the term of hire or the useful life envisaged in Schedule
XIV to the Companies Act, 1956.
Leases, where the lessor effectively retains substantially all risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognised as an expense
in the Statement of Profit and Loss on a straight line basis over the
lease term.
h) Inventories
Inventories are valued as follows:
Raw Materials, Stores Spares and Packing Materials, Traded Goods and
Work in progress
At the lower of cost and net realisable value. The cost for this
purpose has been computed on FIFO basis.
Work in progress
Lower of cost and net realisable value. Cost includes direct materials
and labour and a proportion of manufacturing overheads computed on FIFO
basis.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and to make the
sale.
i) Investments
Investments which are readily realisable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statement at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognise a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
j) Revenue Recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sale of Goods
Revenue from the sale of goods is recognised upon passage of title to
the customers which coincides with their delivery.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
Dividends
Revenue is recognised when the right to receive the payment is
established by the balance sheet date.
Franchisee Fee (Sub franchisee income)
Revenue is recognised on accrual basis in accordance with the terms of
the relevant agreement, if there is significant certainty as to its
collectability.
k) Foreign Currency Translation
Foreign currency transactions
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency on the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non- monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items, or on
reporting such monetary items of company at rates different from those
at which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or as expenses
in the year in which they arise.
l) Retirement and other employment Benefits
(i) Gratuity liability under the Payment of Gratuity Act is a defined
benefit obligation and is provided for on the basis of an actuarial
valuation on projected unit credit method made at the end of each
financial year. The gratuity plan has been funded by policy taken from
a Life Insurance company. Actuarial gains and losses for defined
benefit plan are recognised in full in the period in which they occur
in the statement of profit and loss.
(ii) Provident Fund (administered by a Trust) is a defined benefit
scheme whereby the Company deposits an amount determined as a fixed
percentage of basic pay to the fund every month. The benefit vests upon
commencement of employment. The interest credited to the accounts of
the employees is adjusted on an annual basis to confirm to the interest
rate declared by the government for the Employees Provident Fund. The
Guidance Note on implementing AS-15, Employee Benefits (revised 2005)
states that provident funds set up by employers, which requires
interest shortfall to be met by the employer, needs to be treated as
defined benefit plan. The Actuarial Society of India has issued the
final guidance for measurement of provident fund liabilities. The
Company has adopted actuary valuation to arrive at provident fund
liability as at the reporting date.
Retirement benefits in the form of Pension cost is a defined
contribution scheme and the contributions are charged to the Statement
of profit and loss for the year when the contributions to the
respective funds are due. There are no other obligations other than the
contribution payable to the respective trusts.
(iii) Accumulated leave, which is expected to be utilised within the
next 12 months, is treated as short-term employee benefit. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date. The Company treats accumulated
leave expected to be carried forward beyond twelve months, as long-term
employee benefit for measurement purpose. Such long term compensated
absences are provided for based on the actuarial valuation using the
projected unit credit method at the year-end. Actuarial gains/ losses
are immediately taken to the statement of profit and loss, and are not
deferred. The Company presents the entire leave as a current liability
in the balance sheet, since it does not have an unconditional right to
defer its settlement for 12 months after the reporting date.
(iv) Actuarial gains/losses are immediately taken to statement of
profit and loss and are not deferred.
m) Income Tax
Tax expense comprises of current & deferred tax.
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Indian Income Tax Act, 1961.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. If the Company
has carry forward of unabsorbed depreciation and tax losses, deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that such deferred tax assets can be realised
against future taxable profits.
Unrecognised deferred tax assets of earlier years are reassessed and
recognised to the extent that it has become reasonably certain or
virtually certain, as the case may be that sufficient future taxable
income will be available against which such deferred tax assets can be
realised.
n) Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year.
For the purpose of calculating diluted earning per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
o) Provisions
A provision is recognised when the Company 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 its
present value and are determined based on best 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
best management estimates.
p) Segment Reporting Policies
As the Company''s business activity primarily falls within a single
business and geographical segment, thus there are no additional
disclosures to be provided under Accounting
Standard 17 - "Segment Reporting". The management considers that the
various goods and services provided by the Company constitutes single
business segment, since the risk and rewards from these services are
not different from one another. The Company''s operating businesses are
organised and managed separately according to the nature of products
and services provided, with each segment representing a strategic
business unit that offers different products and serves different
markets. The analysis of geographical segments is based on geographical
location of the customers.
q) Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before
tax is adjusted for the effects transactions of a non-cash nature and
any deferrals or accruals of past or future cash receipts or payments.
The cash flows from regular revenue generating, financing and investing
activities of the Company are segregated. Cash and cash equivalents in
the cash flow comprise cash at bank, cash/cheques in hand and
short-term investments with an original maturity of three months or
less.
r) Employee Stock Compensation Cost
Measurement and disclosure of the employee share-based payment plans is
done in accordance with 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 the Institute
of Chartered Accountants of India. The Company measures compensation
cost relating to employee stock options using the intrinsic value
method.
s) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognised
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognised because it cannot be measured reliably. The Company does not
recognise a contingent liability but discloses its existence in the
financial statements.
(b) Terms/rights attached to equity shares
The Company has only one class of equity shares having par value of Rs.
10 per share. Each holder of equity shares is entitled to one vote per
share. In the event of liquidation of the Company, the holders of
equity shares will be entitled to receive remaining assets of the
Company, after distribution of all preferential amounts. The
distribution will be in proportion to the number of equity shares held
by the shareholders.
(c) Shares held by holding/ultimate holding Company and/or their
subsidiaries/associates
No shares are held by the subsidary of the Company. The Company does
not have holding, ultimate holding company and associates.
(e) Shares reserved for issue under options
For details of shares reserved for issue under the employee stock
option (ESOP) plan of the Company, please refer note 29.
The equity shares are expected to be allotted against the share
application money within a reasonable period, not later than three
months from the Balance Sheet date. As mentioned in note no 3, the
Company has sufficient authorised share capital to cover the share
capital amount on allotment of shares out of share application money
Mar 31, 2013
A) Use of estimates
The preparation of financial statements in conformity with Indian GAAP,
requires management to make judgments, estimates and assumptions that
affect the reported amounts of revenue, expenses, assets and
liabilities and disclosure of contingent liabilities at the end of the
reporting period. Although these estimates are based upon management''s
best knowledge of current events and actions, uncertainty about these
assumptions and estimates could result in the outcomes requiring a
material adjustment to the carrying amounts of assets or liabilities in
future periods.
b) Tangible Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation and
impairment losses, if any. The cost comprises purchase price,
borrowing cost if capitalisation criteria are met and directly
attributable cost of bringing the asset to its working condition for
the intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognised in the statement of profit and
loss when the asset is derecognised.
c) Depreciation
Depreciation on fixed assets is calculated on a straight-line basis
using the rates arrived at based on the useful lives estimated by the
management, or those prescribed under the Schedule XIV to the Companies
Act, 1956, whichever is higher. The Company is charging depreciation on
fixed assets based on the following estimated useful life.
Fixed Assets costing below Rs. 5,000 are depreciated @ 100% p.a.
d) Intangibles
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortisation and accumulated
impairment losses, if any.
Intangible assets are amortised on a straight line basis over the
estimated useful economic life. If the persuasive evidence exists to
the affect that useful life of an intangible asset exceeds ten years,
the Company amortises the intangible asset over the best estimate of
its useful life. Such intangible assets are tested for impairment
annually, either individually or at the cash-generating unit level.
All other intangible assets are assessed for impairment whenever there
is an indication that the intangible asset may be impaired.
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 recognised in the statement of
profit and loss when the asset is derecognised.
A summary of amortisation policies applied to the Company''s intangible
assets is as below:
The territory fee has been paid to the franchisor for running and
operating Dunkin'' Donuts restaurants. The period of contract is for 15
years, during which the Company shall be deriving the economic
benefits, and has accordingly amortised the same.
e) Expenditure during Construction Period
Expenditure directly relating to construction activity are capitalised.
Expenditure which is not directly attributable to the construction
activity incurred during the construction period are capitalised as
part of the indirect construction cost. Other indirect expenditure
incurred during the construction period which are not related to the
construction activity nor are incidental thereto, are charged to the
statement of profit and loss.
f) Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Company
estimates the asset''s recoverable amount. An asset''s recoverable amount
is the higher of an asset''s or cash-generating unit''s (CGU) net selling
price and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre- tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. In determining net
selling price, recent market transactions are taken into account, if
available. If no such transactions can be identified, an appropriate
valuation model is used.
The Company bases its impairment calculation on detailed budgets and
forecast calculations which are prepared separately for each of the
Company''s cash-generating units to which the individual assets are
allocated. These budgets and forecast calculations are generally
covering a period of five years. For longer periods, a long term growth
rate is calculated and applied to project future cash flows after the
fifth year.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer
exist or may have decreased. If such indication exists, the Company
estimates the asset''s or cash-generating unit''s recoverable amount. A
previously recognised impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset''s
recoverable amount since the last impairment loss was recognised. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognised for the asset in prior years. Such reversal is
recognised in the statement of profit and loss.
g) Leases
Where the Company is a lessee Finance Lease, which effectively transfer
to the Company substantially all the risks and benefits incidental to
the ownership of the leased items, are capitalised at the inception of
the lease term at the lower of fair value of the leased item and the
present value of minimum lease payments. Lease payments are apportioned
between the finance charges and reduction of the lease liability so as
to achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are recognised as finance costs in the
statement of profit and loss. Lease management fees, legal charges and
other initial direct costs of lease are capitalised.
A leased asset is depreciated on a straight-line basis over the useful
life of the asset or the useful life envisaged in Schedule XIV to the
Companies Act, 1956, whichever is lower. However, if there is no
reasonable certainty that the Company will obtain the ownership by the
end of the term of hire, the capitalised asset is depreciated on a
straight-line basis over the shorter of the estimated useful life of
the asset, the term of hire or the useful life envisaged in Schedule
XIV to the Companies Act, 1956.
Leases, where the lessor effectively retains substantially all risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognised as an expense
in the Statement of Profit & Loss on a straight line basis over the
lease term.
h) Inventories
Inventories are valued as follows:
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and to make the
sale.
i) Investments
Investments which are readily realisable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long- term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statement at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognise a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
Statement of Profit & Loss.
j) Revenue Recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sale of Goods
Revenue from the sale of goods is recognised upon passage of title to
the customers which coincides with their delivery.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
Dividends
Revenue is recognised when the right to receive the payment is
established by the balance sheet date.
Franchisee Fee
Revenue is recognised on accrual basis in accordance with the terms of
the relevant agreement, if there is significant certainty as to its
collectability.
k) Foreign Currency Translation
Foreign currency transactions
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency on the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non- monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items, or on
reporting such monetary items of Company at rates different from those
at which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or as expenses
in the year in which they arise.
l) Retirement and other Employment Benefits
(i) Gratuity liability under the Payment of Gratuity Act is a defined
benefit obligation and is provided for on the basis of an actuarial
valuation on projected unit credit method made at the end of each
financial year. The gratuity plan has been funded by policy taken from
SBI Life Insurance. Actuarial gains and losses for defined benefit
plan are recognised in full in the period in which they occur in the
statement of profit and loss.
(ii) The Provident Fund (administered by a Trust) is a defined benefit
scheme whereby the Company deposits an amount determined as a fixed
percentage of basic pay to the fund every month. The benefit vests upon
commencement of employment. The interest credited to the accounts of
the employees is adjusted on an annual basis to confirm to the interest
rate declared by the government for the Employees Provident Fund. The
Guidance Note on implementing AS-15, Employee Benefits (revised 2005)
states that provident funds set up by employers, which requires
interest shortfall to be met by the employer, needs to be treated as
defined benefit plan. Such liability is provided for on the basis of an
actuarial valuation on projected unit credit method.
The remaining contributions are made to government administered
Provident funds, towards which the Company has no further obligations
beyond its monthly contribution.
(iii) Accumulated leave, which is expected to be utilised within the
next 12 months, is treated as short-term employee benefit. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for measurement
purpose. Such long term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year-end. Actuarial gains/ losses are immediately taken to the
statement of profit and loss, and are not deferred. The Company
presents the entire leave as a current liability in the balance sheet,
since it does not have an unconditional right to defer its settlement
for 12 months after the reporting date.
(iv) Actuarial gains/losses are immediately taken to Statement of
Profit & Loss and are not deferred.
m) Income Tax
Tax expense comprises of current & deferred tax.
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Indian Income Tax Act, 1961.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. If the Company
has carry forward of unabsorbed depreciation and tax losses, deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that such deferred tax assets can be realised
against future taxable profits.
Unrecognised deferred tax assets of earlier years are reassessed and
recognised to the extent that it has become reasonably certain or
virtually certain, as the case may be that sufficient future taxable
income will be available against which such deferred tax assets can be
realised.
MAT credit is recognised as an asset only when and to the extent there
is convincing evidence that the Company will pay normal income tax
during the specified period. In the year in which the Minimum
Alternative Tax (MAT) credit becomes eligible to be recognised as an
asset in accordance with the recommendations contained in Guidance Note
issued by the Institute of Chartered Accountants of India, the said
asset is created by way of a credit to the Statement of Profit & Loss
and shown as MAT Credit Entitlement. The Company reviews the same at
each balance sheet date and writes down the carrying amount of MAT
Credit Entitlement to the extent there is no longer convincing evidence
to the effect that Company will pay normal income-tax during the
specified period
n) Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year.
For the purpose of calculating diluted earning per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
o) Provisions
A provision is recognised when the Company 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 its
present value and are determined based on best 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
best management estimates.
p) Segment Reporting Policies
As the Company''s business activity primarily falls within a single
business and geographical segment, thus there are no additional
disclosures to be provided under Accounting Standard 17 - "Segment
Reporting". The management considers that the various goods and
services provided by the Company constitutes single business segment,
since the risk and rewards from these services are not different from
one another. The Company''s operating businesses are organised and
managed separately according to the nature of products and services
provided, with each segment representing a strategic business unit that
offers different products and serves different markets. The analysis of
geographical segments is based on geographical location of the
customers.
q) Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before
tax is adjusted for the effects transactions of a non-cash nature and
any deferrals or accruals of past or future cash receipts or payments.
The cash flows from regular revenue generating, financing and investing
activities of the Company are segregated. Cash and cash equivalents in
the cash flow comprise cash at bank, cash/ cheques in hand and
short-term investments with an original maturity of three months or
less.
r) Employee Stock Compensation Cost
Measurement and disclosure of the employee share-based payment plans is
done in accordance with 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 the Institute
of Chartered Accountants of India. The Company measures compensation
cost relating to employee stock options using the intrinsic value
method.
s) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or non-
occurrence of one or more uncertain future events beyond the control of
the Company or a present obligation that is not recognised because it
is not probable that an outflow of resources will be required to settle
the obligation. A contingent liability also arises in extremely rare
cases where there is a liability that cannot be recognised because it
cannot be measured reliably. The Company does not recognise a
contingent liability but discloses its existence in the financial
statements.
Mar 31, 2012
A) Change in accounting policy
Presentation and disclosure of financial statements During the year
ended March 31, 2012, the revised Schedule VI notified under the
Companies Act 1956, has become applicable to the Company, for
preparation and presentation of its financial statements. The adoption
of revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it has significant impact on presentation and disclosures made in the
financial statements. The Company has also reclassified the previous
year figures in accordance with the requirements applicable in the
current year,
b) Use of estimates
The preparation of financial statements in conformity with Indian GAAP,
requires management to make judgments, estimates and assumptions that
affect the reported amounts of revenue, expenses, assets and
liabilities and disclosure of contingent liabilities at the end of the
reporting period. Although these estimates are based upon management's
best knowledge of current events and actions, uncertainty about these
assumptions and estimates could result in the outcomes requiring a
material adjustment to the carrying amounts of assets or liabilities in
future periods.
c) Tangible Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation and
impairment losses, if any. The cost comprises purchase price, borrowing
cost if capitalisation criteria are met and directly attributable cost
of bringing the asset to its working condition for the intended use.
Any trade discounts and rebates are deducted in arriving at the
purchase price.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognised in the statement of profit and
loss when the asset is derecognised.
d) Depreciation
Depreciation on fixed assets is calculated on a straight-line basis
using the rates arrived at based on the useful lives estimated by the
management, or those prescribed under Schedule XIV to the Companies
Act, 1956, whichever is higher. The Company is charging depreciation
on fixed assets based on the following estimated useful life.
Fixed Assets costing below Rs 5,000 are depreciated @ 100% p.a.
e) Intangibles
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortisation and accumulated
impairment losses, if any.
Intangible assets are amortised on a straight line basis over the
estimated useful economic life.
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 recognised in the statement of
profit and loss when the asset is derecognised.
A summary of amortisation policies applied to the Company's intangible
assets is as below:
f) Expenditure during Construction Period
Expenditure directly relating to construction activity of New
Commissary / Outlets is capitalised (net of income, if any). Indirect
expenditure incurred during construction period is capitalised as part
of the indirect construction cost to the extent to which the
expenditure is indirectly related to construction or is incidental
thereto. Other indirect expenditure incurred during the construction
period which is not related to construction activity nor is incidental
thereto is charged to Statement of Profit & Loss.
g) Borrowing Costs
Borrowing cost includes interest, amortisation of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are expensed in the period they occur.
h) Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Company
estimates the asset's recoverable amount. An asset's recoverable amount
is the higher of an asset's or cash-generating unit's (CGU) net selling
price and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. In determining net
selling price, recent market transactions are taken into account, if
available. If no such transactions can be identified, an appropriate
valuation model is used.
The Company bases its impairment calculation on detailed budgets and
forecast calculations which are prepared separately for each of the
Company's cash-generating units to which the individual assets are
allocated. These budgets and forecast calculations are generally
covering a period of five years. For longer periods, a long term growth
rate is calculated and applied to project future cash flows after the
fifth year.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer
exist or may have decreased. If such indication exists, the Company
estimates the asset's or cash- generating unit's recoverable amount. A
previously recognised impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset's
recoverable amount since the last impairment loss was recognised. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognised for the asset in prior years. Such reversal is
recognised in the statement of profit and loss.
i) Leases
Where the Company is a lessee
Finance Lease, which effectively transfer to the Company substantially
all the risks and benefits incidental to the ownership of the leased
items, are capitalised at the inception of the lease term at the lower
of fair value of the leased item and the present value of minimum lease
payments. Lease payments are apportioned between the finance charges
and reduction of the lease liability so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance charges
are recognised as finance costs in the statement of profit and loss.
Lease management fees, legal charges and other initial direct costs of
lease are capitalised.
A leased asset is depreciated on a straight-line basis over the useful
life of the asset or the useful life envisaged in Schedule XIV to the
Companies Act, 1956, whichever is lower. However, if there is no
reasonable certainty that the Company will obtain the ownership by the
end of the term of hire, the capitalised asset is depreciated on a
straight-line basis over the shorter of the estimated useful life of
the asset, the term of hire or the useful life envisaged in Schedule
XIV to the Companies Act, 1956.
Leases, where the lessor effectively retains substantially all risks
and benefits of ownership of the leased item, are
classified as operating leases. Operating lease payments are recognised
as an expense in the Statement of Profit and Loss on a straight line
basis over the lease term.
j) Inventories
Inventories are valued as follows:
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and to make the
sale.
k) Investments
Investments which are readily realisable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statement at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognise a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
l) Revenue Recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sale of Goods
Revenue from the sale of goods is recognised upon passage of title to
the customers which coincides with their delivery.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
Dividends
Revenue is recognised when the right to receive the payment is
established by the balance sheet date.
Franchisee Fee
Revenue is recognised on accrual basis in accordance with the terms of
the relevant agreement, if there is significant certainty as to its
collectability,
m) Foreign Currency Translation
Foreign currency transactions
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency on the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items, or on
reporting such monetary items of Company at rates different from those
at which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or as expenses
in the year in which they arise.
n) Retirement and other employment Benefits
(i) Gratuity liability is defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit credit
method made at the end of each financial year. The liability so
provided is unfunded.
(ii) The Provident Fund (administered by a Trust) is a defined benefit
scheme whereby the Company deposits an amount determined as a fixed
percentage of basic pay to the fund every month. The benefit vests upon
commencement of employment. The interest credited to the accounts of
the employees is adjusted on an annual basis to confirm to the interest
rate declared by the government for the Employees Provident Fund. The
Guidance Note on implementing AS-15, Employee Benefits (revised 2005)
states that provident funds set up by employers, which requires
interest shortfall to be met by the employer, needs to be treated as
defined benefit plan.
(iii) Short term compensated absences are provided for based on
estimates. Long term compensated absences are provided for based on
actuarial valuation carried by an actuary as at the end of the year.
The actuarial valuation is done as per projected unit credit method.
(iv) Actuarial gains/losses are immediately taken to Statement of
Profit and Loss and are not deferred.
o) Income Tax
Tax expense comprises of current & deferred tax.
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Indian Income Tax Act, 1961.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. If the Company
has carry forward of unabsorbed depreciation and tax losses, deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that such deferred tax assets can be realised
against future taxable profits.
Unrecognised deferred tax assets of earlier years are reassessed and
recognised to the extent that it has become reasonably certain or
virtually certain, as the case may be that sufficient future taxable
income will be available against which such deferred tax assets can be
realised.
MAT credit is recognised as an asset only when and to the extent there
is convincing evidence that the Company will pay normal income tax
during the specified period. In the year in which the Minimum
Alternative Tax (MAT) credit becomes eligible to be recognised as an
asset in accordance with the recommendations contained in Guidance Note
issued by the Institute of Chartered Accountants of India, the said
asset is created by way of a credit to the Statement of Profit and Loss
and shown as MAT Credit Entitlement. The Company reviews the same at
each balance sheet date and writes down the carrying amount of MAT
Credit Entitlement to the extent there is no longer convincing evidence
to the effect that Company will pay normal income tax during the
specified period.
p) Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year.
For the purpose of calculating diluted earning per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
q) Provisions
A provision is recognised when an 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
its present value and are determined based on best 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
best management estimates.
r) Segment Reporting Policies
As the Company's business activity primarily falls within a single
business and geographical segment, thus there are no additional
disclosures to be provided under Accounting Standard 17 - "Segment
Reporting'. The management considers that the various goods and
services provided by the Company constitutes single business segment,
since the risk and rewards from these services are not different from
one another. The Company's operating businesses are organised and
managed separately according to the nature of products and services
provided, with each segment representing a strategic business unit that
offers different products and serves different markets. The analysis of
geographical segments is based on geographical location of the
customers.
s) Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before
tax is adjusted for the effects transactions of a non-cash nature and
any deferrals or accruals of past or future cash receipts or payments.
The cash flows from regular revenue generating, financing and investing
activities of the Company are segregated. Cash and cash equivalents in
the cash flow comprise cash at bank, cash/cheques in hand and
short-term investments with an original maturity of three months or
less.
t) Employee Stock Compensation Cost
Measurement and disclosure of the employee share-based payment plans is
done in accordance with 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 the Institute
of Chartered Accountants of India. The Company measures compensation
cost relating to employee stock options using the intrinsic value
method.
Mar 31, 2011
A) Basis of Accounting
The financial statements have been prepared to comply in all material
aspects in respect with the Notified accounting standard by Companies
(Accounting Standards) Rules, 2006, (as amended) and the relevant
provisions of the Companies Act, 1956. The financial statements have
been prepared under the Historical Cost Convention on an accrual basis.
The accounting policies have been consistently applied by the Company
and are consistent with those used in the previous year.
b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period end. Although these estimates are based upon management's best
knowledge of current events and actions, actual results could differ
from these estimates.
c) Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price and any
attributable cost of bringing the asset to its working condition for
its intended use.
d) Impairment
i) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on internal/
external factors. An impairment loss is recognised wherever the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the asset's net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value, using a pre-tax discount
rate that reflects current market assessment of the time value of money
and risks specific to the assets.
ii) After impairment, depreciation/amortisation is provided on the
revised carrying amount of the asset over its remaining useful life.
e) Depreciation
Depreciation is provided on Straight Line Method at the rates
prescribed in Schedule XIV of the Companies Act, 1956 or the rates
determined based on the technically assessed useful lives of the
respective assets, whichever is higher, except for Plant & Machinery
wherein depreciation is provided on straight line basis at the rates
prescribed in Schedule XIV, of the Companies Act. 1956, as per details
given below:
* As per schedule XIV of Companies Act, 1956
Fixed Assets costing below Rs5,000 are depreciated @ 100% p.a.
f) Intangibles
Software: Cost of software are capitalised and amortised on a straight
line basis over their estimated useful life of 5 years.
Store Opening Fees: Fees paid to franchisor for store opening are
capitalised and amortised on a straight line basis over 5 years.
g) Expenditure during Construction Period
Expenditure directly relating to construction activity of New
Commissary / Outlets is capitalised (net of income, if any). Indirect
expenditure incurred during construction period is capitalised as part
of the indirect construction cost to the extent to which the
expenditure is indirectly related to construction or is incidental
thereto. Other indirect expenditure incurred during the construction
period which is not related to construction activity nor is incidental
thereto is charged to Profit & Loss Account.
h) Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to revenue.
i) Leases
Where the Company is a lessee
Assets acquired under hire purchase, which effectively transfer to the
Company substantially all the risks and benefits incidental to the
ownership of hired assets, are capitalised at the lower of fair value
and present value of equated monthly installments at the inception of
the term of hire and disclosed as hired assets. Equated monthly
installments are apportioned between the hire purchase charges and
reduction of the liability so as to achieve a constant rate of interest
on the remaining balance of the liability. Hire purchase charges are
charged directly against income.
Leases, where the lessor effectively retains substantially all risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognised as an expense
in the Profit & Loss Account on a straight line basis over the lease
term.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and to make the
sale.
k) Revenue Recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sale of Goods
Revenue from the sale of goods is recognised upon passage of title to
the customers which coincides with their delivery.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
Dividends
Revenue is recognised when the right to receive the payment is
established by the Balance Sheet date.
Franchisee Fee
Revenue is recognised on accrual basis in accordance with the terms of
the relevant agreement, if there is significant certainty as to its
collectability.
I) Foreign Currency Translation
Foreign currency transactions
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency on the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
(iii)Exchange Differences
Exchange differences arising on the settlement of monetary items, or on
reporting such monetary items of company at rates different from those
at which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or as expenses
in the year in which they arise.
m) Retirement and other employment Benefits
(i) Gratuity liability is defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit credit
method made at the end of each financial year. The liability so
provided is unfunded.
(ii) The Provident Fund (administered by a Trust) is a defined benefit
scheme whereby the Company deposits an amount determined as a fixed
percentage of basic pay to the fund every month. The benefit vests upon
commencement of employment. The interest credited to the accounts of
the employees is adjusted on an annual basis to confirm to the interest
rate declared by the government for the Employees Provident Fund. The
Guidance Note on implementing AS-15, Employee Benefits (revised 2005)
states that provident funds set up by employers, which requires
interest shortfall to be met by the employer, needs to be treated as
defined benefit plan. Pending the issuance of the Guidance Note from
the Actuarial Society of India, the Company's actuary has expressed his
inability to reliably measure the provident fund liability. There is no
deficit in the fund at the year end.
(iii) Short term compensated absences are provided for based on
estimates. Long term compensated absences are provided for based on
actuarial valuation carried by an actuary as at the end of the year.
(iv) Actuarial gains/losses are immediately taken to Profit & Loss
Account and are not deferred.
n) Income Tax
Tax expense comprises of current & deferred tax.
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Indian Income Tax Act, 1961.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlieryears.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. If the Company
has carry forward of unabsorbed depreciation and tax losses, deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that such deferred tax assets can be realised
against future taxable profits.
Unrecognised deferred tax assets of earlier years are reassessed and
recognised to the extent that it has become reasonably certain or
virtually certain, as the case may be that sufficient future taxable
income will be available against which such deferred tax assets can be
realised.
MAT credit is recognised as an asset only when and to the extent there
is convincing evidence that the company will pay normal income tax
during the specified period. In the year in which the Minimum
Alternative Tax (MAT) credit becomes eligible to be recognised as an
asset in accordance with the recommendations contained in Guidance Note
issued by the Institute of Chartered Accountants of India, the said
asset is created by way of a credit to the Profit & Loss Account and
shown as MAT Credit Entitlement. The Company reviews the same at each
balance sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the
effect that Company will pay normal income tax during the specified
period
o) Earnings PerShare
Basic earnings per share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year.
For the purpose of calculating diluted earning per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
p) Provisions
A provision is recognised when an 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
its present value and are determined based on best 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
best management estimates.
q) Segment Reporting Policies
The Company's operating businesses are organised and managed separately
accoRiding to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on geographical location of the customers.
r) Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before
tax is adjusted for the effects transactions of a non-cash nature and
any deferrals or accruals of past or future cash receipts or payments.
The cash flows from regular revenue generating, financing and investing
activities of the Company are segregated. Cash and cash equivalents in
the cash flow comprise cash at bank, cash/cheques in hand and
short-term investments with an original maturity of three months
orless.
s) Employee Stock Compensation Cost
Measurement and disclosure of the employee share- based payment plans
is done in accordance with 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 the
Institute of Chartered Accountants of India. The Company measures
compensation cost relating to employee stock options using the
intrinsic value method.
t) Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long- term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognise a
decline other than temporary in the value of the investments.
Mar 31, 2010
A) Basis of Accounting
The financial statements have been prepared to comply in all material
respects in respects with the Notified accounting standard by Companies
(Accounting Standards) Rules, 2006, (as amended) and the relevant
provisions of the Companies Act, 1956. The financial statements have
been prepared under the historical cost convention on an accrual basis.
The accounting policies have been consistently applied by the Company
and are consistent with those used in the previous year.
b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period end. Although these estimates are based upon managements best
knowledge of current events and actions, actual results could differ
from these estimates.
c) Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price and any
attributable cost of bringing the asset to its working condition for
its intended use.
d) Impairment
i) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on internal/
external factors. An impairment loss is recognized wherever the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the assets net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value at the weighted average
cost of capital.
ii)After impairment, depreciation/amortization is provided on the
revised carrying amount of the asset over its remaining useful life.
e) Depreciation
Depreciation is provided on Straight Line Method at the rates
prescribed in Schedule XIV of the Companies Act, 1956 or the rates
determined based on the technically assessed useful lives of the
respective assets, whichever is higher, except for Plant & Machinery
wherein depreciation is provided on straight line basis at the rates
prescribed in Schedule XIV, of the Companies Act. 1956, as per details
given below:
f) Intangibles
Software: Cost of software are capitalized and amortized on a straight
line basis over their estimated useful life of 5 years.
Store Opening Fees: Fees paid to franchisor for store opening are
capitalized and amortized on a straight line basis over 5 years.
g) Expenditure during Construction Period
Expenditure directly relating to construction activity of New
Commissary / Outlets is capitalized (net of income, if any). Indirect
expenditure incurred during construction period is capitalized as part
of the indirect construction cost to the extent to which the
expenditure is indirectly related to construction or is incidental
thereto. Other indirect expenditure incurred during the construction
period which is not related to construction activity nor is incidental
thereto is charged to Profit & Loss account.
h) Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to revenue.
i) Leases
Where the Company is a lessee
Assets acquired under hire purchase, which effectively transfer to the
Company substantially all the risks and benefits incidental to the
ownership of hired assets, are capitalized at the lower of fair value
and present value of equated monthly installments at the inception of
the term of hire and disclosed as hired assets. Equated monthly
installments are apportioned between the hire purchase charges and
reduction of the liability so as to achieve a constant rate of interest
on the remaining balance of the liability. Hire purchase charges are
charged directly against income.
Leases, where the lessor effectively retains substantially all risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss Account on a straight line basis over the lease
term.
j) Revenue Recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sale of Goods
Revenue from the sale of goods is recognised upon passage of title to
the customers which coincides with their delivery.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
Franchisee Fee
Revenue is recognized on accrual basis in accordance with the terms of
the relevant agreement, if there is significant certainty as to its
collectability.
k) Foreign Currency Translation
Foreign currency transactions
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency on the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items, or on
reporting such monetary items of company at rates different from those
at which they were initially recorded during the year, or reported in
previous financial statements, are recognized as income or as expenses
in the year in which they arise.
l) Retirement and other employment Benefits
(i) Gratuity liability is defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit credit
method made at the end of each financial year. The liability so
provided is unfunded.
(ii) The Provident Fund (administered by a Trust) is a defined benefit
scheme whereby the Company deposits an amount determined as a fixed
percentage of basic pay to the fund every month. The benefit vests upon
commencement of employment. The interest credited to the accounts of
the employees is adjusted on an annual basis to confirm to the interest
rate declared by the government for the Employees Provident Fund. The
Guidance Note on implementing AS-15, Employee Benefits (revised 2005)
states that provident funds set up by employers, which requires
interest shortfall to be met by the employer, needs to be treated as
defined benefit plan. Pending the issuance of the Guidance Note from
the Actuarial Society of India, the Companys actuary has expressed his
inability to reliably measure the provident fund liability. There is no
deficit in the fund at the year end.
(iii) Short term compensated absences are provided for based on
estimates. Long term compensated absences are provided for based on
actuarial valuation carried by an actuary as at the end of the year.
(iv) Actuarial gains/losses are immediately taken to profit and loss
account and are not deferred.
n) Income Tax
Tax expense comprises of current & deferred tax.
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Indian Income Tax Act, 1961.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. If the Company
has carry forward of unabsorbed depreciation and tax losses, deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that such deferred tax assets can be realized
against future taxable profits.
Unrecognised deferred tax assets of earlier years are reassessed and
recognized to the extent that it has become reasonably certain or
virtually certain, as the case may be that sufficient future taxable
income will be available against which such deferred tax assets can be
realized.
MAT credit is recognised as an asset only when and to the extent there
is convincing evidence that the company will pay normal income tax
during the specified period. In the year in which the Minimum
Alternative Tax (MAT) credit becomes eligible to be recognized as an
asset in accordance with the recommendations contained in Guidance Note
issued by the Institute of Chartered Accountants of India, the said
asset is created by way of a credit to the profit and loss account and
shown as MAT Credit Entitlement. The Company reviews the same at each
balance sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the
effect that Company will pay normal income -tax during the specified
period
o) Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year.
For the purpose of calculating diluted earning per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
p) Provisions
A provision is recognised when an 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 its present value and are determined based on best 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 best management estimates.
q) Segment Reporting Policies
The Companys operating businesses are organized and managed separately
according to the nature of products
and services provided, with each segment representing a strategic
business unit that offers different products and serves different
markets. The analysis of geographical segments is based on geographical
location of the customers.
r) Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before
tax is adjusted for the effects transactions of a non-cash nature and
any deferrals or accruals of past or future cash receipts or payments.
The cash flows from regular revenue generating, financing and investing
activities of the Company are segregated. Cash and cash equivalents in
the cash flow comprise cash at bank, cash/cheques in hand and
short-term investments with an original maturity of three months or
less.
s) Employee Stock Compensation Cost
Measurement and disclosure of the employee share-based payment plans is
done in accordance with 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 the Institute
of Chartered Accountants of India. The Company measures compensation
cost relating to employee stock options using the intrinsic value
method.
t) Expenses incurred on Initial Public Offer [IPO]
Expenses incurred on Initial Public Offer, is adjusted against the
securities premium account.