1. Company overview

The Mandhana Retail Ventures Limited (formerly known as Mandhana Retail Ventures Limited) (“the Company”) was incorporated under the Companies Act, 1956 (“the Act”) on 12 February 2011. The Company has been converted into a public limited company by getting its shares listed on the Bombay Stock Exchange and the National Stock Exchange w.e.f. 14 December 2016. The Company is engaged in the business of designing, retailing, marketing and distributing men’s wear, women’s wear and accessories under “Being Human” trademark.

Pursuant to the approval of the scheme of demerger, the Company has acquired the demerged undertaking of Mandhana Industries Limited (“MIL”) which was engaged in the above mentioned business under the global exclusive trademark license agreement with The Salman Khan Foundation.

The Salman Khan Foundation has entered into a new agreement with the Company till 31 March 2020 to be its global license partner.

a. Terms / Rights attached to equity shares and note on shares issued

1. Terms / Rights attached to Equity shares

The Company has a single class of equity shares. Accordingly, all equity shares rank equally with regard to dividends and share in the Company’s residual assets. The equity shares are entitled to receive dividend as declared from time to time. The voting rights of an equity shareholder on a poll (not on show of hands) are in proportion to its share of the paid-up equity capital of the Company. Voting rights cannot be exercised in respect of shares on which any call or other sums presently payable have not been paid. Failure to pay any amount called up on shares may lead to forfeiture of the shares. On winding up of the Company, the holders of equity shares will be entitled to receive the residual assets of the Company, remaining after distribution of all preferential amounts in proportion to the number of equity shares held.

2. Issue of Shares

Pursuant to the scheme of arrangement (‘the Scheme’) between Mandhana Industries Limited (MIL) with the Company under Sections 391 to 394 of the Companies Act, 1956 (or re-enactment thereof upon effectiveness of the Companies Act, 2013) as sanctioned by Honourable High Court of Judicature of Bombay vide its Order dated 29 March 2016, which has been adopted by the Board of Directors of the Company on 22 November 2014 and filed with the Registrar of Companies on 31 March 2016 to make the scheme effective, the entire retail business and all assets and liabilities of MIL were transferred and vested in the Company effective from the appointed date, i.e. 1 April 2014. Accordingly the Scheme has been given effect to in the financial statements for the year ended 31 March 2016. In consideration of the transfer of the business as a going concern, the Company has issued 2 fully paid up equity shares of Rs.10 each for every 3 fully paid up equity shares of Rs.10 each of the Transferor Company to the equity shareholders of the Transferor Company. Accordingly, 22,082,609 equity shares of the Company of Rs.10 each fully paid up are issued to the shareholders of the Transferor Company. The initial share capital of 50,000 equity share of Rs.10 each issued by the Company stands canceled.

Nature of reserves

a) Capital reserve - The capital reserve has been created on giving effect to the demerger of Mandhana Retail Ventures Limited from Mandhana Industries limited from the appointed date of 1st April 2014. Refer to note 37 for details of the demerger.

Terms of Loan:

i) The term loan from one of the banks carries an interest rate of 12.15% P.A. and is repayable in 20 quarterly installments commencing from 26 June 201 4.

ii) Aforesaid term loan is secured by way of paripassu charge over all the property, plant and equipment procured including hypothecation of movable properties .

iii) Current maturity of term loan as on 31 March 2017 of Rs.212.56 Lakh (Previous year Rs.1,250 Lakh) is disclosed under ‘Other current financial liabilities’. (Refer Note 21)

Terms of loan:

i) Cash credit facility taken from a bank is secured by hypothecation by way of first and exclusive charges on all present and future current financial and non-financial assets inclusive of all inventories and book debts, carries an interest based on prevalent MCLR plus margin and the same is repayable on demand.

ii) Loans from related parties are interest free loans and repayable on demand.

The Company’s weighted average tax rates for the years ended March 31, 2018 and 2017 were 36.17% and 38.74%, respectively. Income tax expense was ‘648.42 Lakh for the year ended 31 March 2018, as compared to income tax expense of Rs.884.16 Lakh for the year ended 31 March 2017.

The company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

Significant management judgement is required in determining provision for income tax, deferred income tax assets and liabilities and recoverability of deferred income tax assets. The recoverability of deferred income tax assets is based on estimates of future taxable income and the period over which deferred income tax assets will be recovered.

Note 3 Earnings per share (EPS)

Basic EPS amounts are calculated by dividing the profit for the year attributable to equity holders of the parent by the weighted average number of Equity shares outstanding during the year.

Diluted EPS amounts are calculated by dividing the profit attributable to equity holders of the parent (after adjusting for interest on the convertible preference shares) by the weighted average number of Equity shares outstanding during the year plus the weighted average number of Equity shares that would be issued on conversion of all the dilutive potential Equity shares into Equity shares.

Note 4 Financial instruments - Fair values and risk management

A. Accounting classification and fair values

The following table shows the carrying amount and fair values of financial assets and liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilties not measured at fair value if the carrying amount is a reasonable approximation of its fair value.

(1) Assets that are not financial assets (such as receivables from statutory authorities, export benefit receivables, prepaid expenses, advances paid and certain other receivables) amounting to Rs.485.12, Rs.178.42 Lakh and ‘202.73 Lakh as of 31 March 2018, 31 March 2017 and 1 April 2016, respectively, are not included.

(2) Other liabilities that are not financial liabilities (such as statutory dues payable, deferred revenue, advances from customers and certain other accruals) amounting to Rs.191.88, Rs.166.55 Lakh and ‘223.91 Lakh as of 31 March 2018, 31 March 2017 and 1 April 201 6, respectively, are not included.

B. Measurement of fair values

The following tables show the valuation techniques used in measuring Level 2 fair values, as well as the significant unobservable inputs used.

C. Financial risk management

The Company has exposure to the following risks arising from financial instruments:

Credit risk ;

Liquidity risk ; and Market risk

i. Risk management framework

The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The board of directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The committee reports regularly to the board of directors on its activities

The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

The audit committee oversees how management monitors compliance with the company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The audit committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.

ii. Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers.

The carrying amount of following financial assets represents the maximum credit exposure:

Trade and other receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.

However, management also considers the factors that may influence the credit risk of its customer base, including the default risk of the industry and country in which customers operate.

The Risk Management Committee has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, if they are available, and in some cases bank references. Sale limits are established for each customer and reviewed quarterly. Any sales exceeding those limits require approval from the Risk Management Committee.

Goods are sold subject to retention of title clauses, so that in the event of non-payment the Company may have a secured claim. The Company does not otherwise require collateral in respect of trade and other receivables

Management believes that the unimpaired amounts that are past due by more than 30 days are still collectible in full, based on historical payment behaviour and extensive analysis of customer credit risk, including underlying customers’ credit ratings if they are available.

At 31 March 2018, the carrying amount of the Company’s most significant single customer, was Rs.417.26 Lakh (31 March 2017 : Rs.314.83 Lakh; 1 April 2016: Rs.167.49 Lakh).

Cash and cash equivalents

The Company held cash and cash equivalents of Rs.145.01 at 31 March 2018 (31 March 2017: Rs.45.58 Lakh; 1 April 2016: Rs.18.45 Lakh). The cash and cash equivalents are held with bank and financial institution counterparties, which have good credit ratings

Security deposits given to lessors

The Company has given security deposit to lessors of Rs.1,675.47 Lakh as at 31 March 2018 (31 March 2017: Rs.1,592.47 Lakh; 1 April 2016: Rs.1,429.65 Lakh) for premises leased to the Company. The credit worthiness of such lessors is considered to be good.

iii. Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The company has obtained fund and non fund based working capital requirments from HDFC Bank.

Exposure to liquidity risk

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments:

iv. Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will affect the Company’s income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables and long term debt. The Company is exposed to market risk primarily related to foreign exchange rate risk and interest rate risk. Thus, our exposure to market risk is a function of borrowing activities and revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in foreign currency revenues and costs.

Currency risk

The Company is exposed to currency risk on account of its trade receivables and payables in foreign currency. The functional currency of the Company is Indian Rupee. The Company does not use any forward exchange contracts to hedge its currency risk.

Exposure to currency risk

The currency profile of financial assets and financial liabilities in Indian Rupee terms as at 31 March 2018, 31 March 2017 and 1 April 2016 are as below:

Sensitivity analysis

A reasonably possible strengthening (weakening) of the Indian Rupee against US Dollar/Euro at March 31 would have affected the measurement of financial instruments denominated in these currencies and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.

Interest rate risk

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing investments will fluctuate because of fluctuations in the interest rates.

Exposure to interest rate risk

Company’s interest rate risk arises mainly from borrowings made. Borrowing made at fixed rates exposes the Company to fair value interest rate risk whereas borrowing at variable rate exposes the company to cash flow interest rate risk. The interest rate profile of the Company’s interest-bearing financial instruments as reported to the management of the Company is as follows.

Fair value sensitivity analysis for fixed-rate instruments

The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss.

Cash flow sensitivity analysis for variable-rate instruments

A reasonably possible change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.

Capital Disclosure

Equity share capital and other equity are considered for the purpose of Company’s capital management. The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital as well as the level of dividends to ordinary shareholders.

The board of directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.

The Company monitors capital using a ratio of ‘adjusted net debt’ to ‘adjusted equity’. For this purpose, adjusted net debt is defined as total liabilities, comprising interest-bearing loans and borrowings less cash and cash equivalents.

The Company’s policy is to keep the ratio below 1.00. The Company’s adjusted net debt to equity ratio at 31 March 2018 and 31 March 2017 was as follows:

Note 5 - Employee benefits

(i) Defined Contribution Plans:

The Company makes contributions, determined as a specific percentage of employee salaries, in respect of qualifying employees towards Provident Fund and Employees State Insurance, which is a defined contribution plan. The Company has no obligations other than to make the specified contibutions. The contributions are charged to the statement of profit and loss as they accrue. The amount recognised as an expense towards contribution to Provident Fund and Employees State Insurance for the year aggregated to Rs.156.95 Lakh (31 March 2017: 123.16 Lakh; 1 April 2016: Rs.73.53 Lakh)

The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.

(ii) Defined Benefit Plan:

A) The Company has a defined benefit gratuity plan. The plan provides for payment as under:

i) On normal retirement / early retirement / withdrawal / resignation:

As per the provisions of the Payment of Gratuity Act, 1972 with vesting period of 5 years of service.

ii) On death in service:

As per the provisions of the Payment of Gratuity Act, 1972 without any vesting period.

Actuarial valuation of plan assets and the present valuation of the defined benefit obligation for gratuity are carried out on a yearly basis, the most recent valuation being carried out as on 31 March 2018. The present value of the defined benefit obligations and the related current service cost and past service cost, are measured using the Projected Unit Credit Method.

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and the amounts recognised in the Company’s financial statements as at balance sheet date:

B. Movement in net defined benefit (asset) liability

The following table shows a reconciliation from the opening balances to the closing balances for net defined benefit liability and its components:

C. Defined benefit obligations

i. Actuarial assumptions

The following were the principal actuarial assumptions at the reporting date (expressed as weighted averages):

Assumptions regarding future mortality have been based on published statistics and mortality tables. The current longevities underlying the values of the defined benefit obligation at the reporting date were as follows

ii. Sensitivity analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.

Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumptions shown.

Notes

1. Comparative numbers are not available for the year 2016 since 2017 is the first year when the Company’s management has undertaken an actuarial valuation. The opening defined benefit obligation indicates the amount of liability taken over from Mandhana Industries Limited (MIL) in the scheme of demerger.

2. The discount rate is based on the prevailing market yields on Indian Government securities as at the balance sheet date for the estimated term of the obligations.

3. The Company does not have a carry forward or an encashment policy for compensated absences and hence no liability has been accrued in the financial statements.

Terms and conditions of transactions with related parties

The sales to and purchases from related parties are made in the ordinary course of business on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the year ended 31 March 2018, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (31 March 2017: ‘ Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

Details of compensation to key managerial personnel has been provided in table above. The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key management personnel.

Note 6 - Note on demerger

Salient features of the scheme of demerger

Mandhana Industries Limited (‘Transferor company’) is a public listed company incorporated under the Companies Act, 1956 on 25 July 1984. It is engaged in business of textile processes like calendering, sizing, dyeing, bleaching, shrinking finishing, mercerzing, texturing printing stamping and other textile processes of yarn, threads, woven / non woven fabrics, hosiery and aparels made from cotton, jute silk nylon wool and etc. It also had retail business for which it held exclusive license for manufacturing and merchandising of products under the brand ““Being Human”“.

The demerger is intended to drive simplification by separating both Companies on to a such that the Company gets strategic flexibility to build a vibrant platform, enable a dedicated management focus and to accelarate growth of retail business and to have access to various sources of funds for rapid business growth.

The appointed date for the purpose of this scheme was 1 April 2014 and effective date was 1 April 2016.

In accordance with the approved scheme, the accounting for this demerger was done in accordance with the pooling of interest method as prescribed under the previous GAAP.

Accordingly, the Company accounted for the Scheme in its books of accounts with effect from the appointed date i.e. 1 April 2014 as under -

(i) With effect from the appointed date, all the assets and liabilities appearing in the books of accounts of the Transferor Company were transferred to and vested in the Company and have been recorded in the financial statement of the Company at their respective book values.

(ii) In consideration of the transfer of the business as a going concern, the Company has issued 2 fully paid up equity shares of Rs.10 each for every 3 fully paid up equity shares of Rs.10 each of the Transferor Company to the equity shareholders of the Transferor Company.

(iii) Accordingly, 22,082,609 equity shares of the Company of Rs.10 each fully paid up are issued to the shareholders of the Transferor Company.

(iv) The initial share capital of 50,000 equity share of Rs.10 each issued by the Company stands cancelled. Further, on 14 December 2016, the Company got its shares listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).

(v) The value of assets and liabilities of the Transferor Company amalgamated with the Company is as under:

(Below table is as per previous GAAP)

(vi) The transactions of the business of MIL with effect from 1 April 2014 have been incorporated in the Company’s accounts on the basis of the audited Financial Statements of the business as at 31 March 2014, as audited by M/s. Vishal H Shah & Associates, Chartered Accountants, the statutory auditors of the Mandhana Industries Ltd.

(vii) The amount of share capital of the Transferor company is Rs.2,208.26 Lakh as stated in note 3.e.iv above. The consideration for the demerger being the value of the new equity shares issued and allotted by the Company is Rs.2,208 .26 Lakh as stated in note 3.e.iii above. There is no difference between the two, and hence no Goodwill or Capital Reserve has arisen on account of said demerger.

Note 7 - Dues to micro, small and medium enterprises

Under the Micro, Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from 2 October 2002, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. On the basis of the information and records available with the Management, the following are the amounts due to Micro, Small and Medium enterprises as defined in the Micro, Small and Medium Enterprises Development Act, 2006, as set out in the following disclosure:

Note 8 - Operating lease obligations

The Company has entered in to non-cancelable operating lease. The tenure of such agreements ranges from thirty six month to one hundred eight months. There are no purchase option in these agreements. Lease agreements provide the option to Company to renew the lease period at the end of lease period. Future minimum lease payments under non-cancellable operating leases comprise:

Note 9- Corporate Social Responsibility

The Company has spent Rs.4.60 Lakh (previous year : Nil) towards various schemes of Corporate Social Responsibility as prescribed under section 135 of the Companies Act, 2013. The details are as under:

a) Gross amount required to be spent by the Company during the year is Rs.63.99 Lakh (31 March 2017: Rs.Nil )

b) Amount spent during the year on:

The CSR Committee (the ‘Committee’) of the Company was constituted by the Board of Directors (the ‘Board’) at their meeting held on 7 Oct 2016. The Committee has finalised a CSR policy; The Company is dedicated towards its social responsibility and aims to contribute to society by supporting and enabling the social and economic development of local communities in India. In alignment with our vision and guiding principles, through our CSR initiatives we aim to address India’s most pressing challenges related to education and health. The CSR Policy of the Company sets out the Company’s commitment and approach towards Corporate Social Responsibility of improving the quality of life of the communities it serves. Our philosophy is interwoven in all the three thrust areas, i.e. Education, Employability and Entrepreneurship - the Company endeavours to enhance employability of youth and women.The initial CSR focus is driven by two broad themes, i.e. Educational initiatives for underprivileged, Employability / skill development (for underprivileged youth), for economic progress and social commitment. This has been recommended to the Board.

Note 10- Contingent liabilitites and commitments

i) The Company does not have any contingent liability (31 March,2017: NIL; 1 April 2016: NIL) which it has not disclosed for in the books of accounts.

ii) The estimated amount of contracts remaining to be executed on capital account to the extent not provided for is Rs.40.01 Lakh (31 March 2017: Rs.30.05 Lakh)

- Transfer pricing

The Company’s management is of the opinion that its domestic transactions are at arm’s length as per the independent accountants report for the year ended 31 March 2017.

Management continues to believe that its domestic transactions post 31 March 2017 are at arm’s length and that the transfer pricing legislation will not have any impact on these financial statements, particularly on amount of tax expense and that of provision of taxation.

Note 11- Recent accounting pronouncements Ind AS 115- Revenue from Contract with Customers

On March 28, 2018, Ministry of Corporate Affairs (““MCA”“) has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. The standard permits two possible methods of transition:

- Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8- Accounting Policies, Changes in Accounting Estimates and Errors

- Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach). The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018. The Company will adopt the standard on April 1, 2018 by using the cumulative catch-up transition method and accordingly comparatives for the year ending or ended March 31, 2018 will not be retrospectively adjusted. The effect on adoption of Ind AS 115 is expected to be insignificant.

Note 12- Segmental information

For management purposes, the company is organised into business units based on how reporting is done to the Chief Operating Decision Maker (CODM) in accordance with Ind AS 108. The Company has only one segment i.e. Garments which comprise almost 98% of the total business activities. Hence segment reporting is not applicable to the Company.

Geographical location wise segment data

The operations of the Company are in India and all assets and liabilities (except certain receivables and payables) are located in India.

An analysis of the segment revenue and segment assets by geographical market is given below :

(B) Notes

i) Accounting policies: Segment information is prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.

ii) Segment assets and liabilities: Segment assets include all operating assets used by a segment and consist principally of trade receivables, inventories and fixed assets, net of allowances and provisions which are reported as direct offsets in the balance sheet. While most such assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis. Segment liabilities include all operating liabilities and consist principally of trade payables and accrued liabilities. Segment assets and liabilities do not include those relating to income taxes.

Note 13- Transition to Ind AS:

For the purposes of reporting as set out in Note 1, we have transitioned our basis of accounting from Indian generally accepted accounting principles (“IGAAP”) to Ind AS. The accounting policies set out in Note 2 have been applied in preparing the financial statements for the year ended 31 March 2018, the comparative information presented in these financial statements for the year ended 31 March 2017 and in the preparation of an opening Ind AS balance sheet at 1 April 2016 (the “transition date”). In preparing our opening Ind AS balance sheet, we have adjusted amounts reported in financial statements prepared in accordance with IGAAP An explanation of how the transition from IGAAP to Ind AS has affected our financial performance, cash flows and financial position is set out in the following tables and the notes that accompany the tables. On transition, we did not revise estimates previously made under IGAAP except where required by Ind AS.

A. Exemptions and exceptions availed

Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS:

Ind AS optional exemptions

Business Combination

Ind AS 101 provides the option to apply Ind AS 103 prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date. The Company elected to apply Ind AS 103 prospectively to business combinations occurring after its transition date. Business combinations occurring prior to the transition date have not been restated.

Deemed Cost

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets and investment property covered by Ind AS 40 Investment Properties.

Leases

Appendix C to Ind AS 17 requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. Ind AS 101 provides an option to make this assessment on the basis of facts and circumstances existing at the date of transition to Ind AS, except where the effect is expected to be not material.

The Company has elected to apply this exemption for such contracts/ arrangements.

Ind AS mandatory exceptions

Estimates

An Company’s estimates in accordance with Ind ASs at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.

Ind AS estimates as at 1 April 2015 are consistent with the estimates as at the same date made in conformity with previous GAAP. The Company made estimates for impairment of financial assets based on expected credit loss model in accordance with Ind AS at the date of transition as these were not required under previous GAAP.

B. Reconciliation between previous GAAP and Ind AS

Ind AS 101 requires an entity to reconcile equity, total comprehensive income and cashflows for prior periods. The following tables represent the reconciliations from previous GAAP to Ind AS:

Notes to the reconciliation:

1 Security Deposit :

Under Indian GAAP interest free security deposits whether paid for exclusive brand outlets or received from franchisors were recognised at transaction price. Under IND AS, these security deposit should be recognised at its present value using an appropriate discount rate. The difference between the present value and the amount paid shall be recognised as a prepaid rent or advance income respectively which shall be then recognised as rent expense or other income respectively over the term of the base agreement.

2 Timing of recognition of revenue:

Under Ind AS, revenue generated on sales made to certain distribution channels like franchisors, shop in shop and e-commerce, which are on sale-or-return terms, are recognised when sale is made to end customer by the respective disribution channel. Hence revenue has been deferred for such sales.

3 Employee benefits :

Both under Indian GAAP and Ind-AS, the Group recognised costs related to its post-employment defined benefit plan on an actuarial basis. Under Indian GAAP the entire cost, including actuarial gains and losses, are charged to profit or loss. Under Ind-AS, 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.

4 Deferred tax

Indian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind-AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind-AS 12 approach has resulted in recognition of deferred tax on new temporary differences arising due to Ind AS adjustments made above.

14 - Net debt disclosure

In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, ‘Statement of Cash Flows’. These amendments are in accordance with the amendments made by International Accounting Standards Board (IASB) to IAS 7, ‘Statement of Cash Flows’. The below disclosure is in line with such amendments suggested:

15 - There are no long-term contracts (including derivative contract) that are outstanding at the year end,

16 - The previous year figures have been regrouped and reclassified whereever necessary to comply with requirements of IND AS.