BACKGROUND
Gokul Refoils and Solvent Limited ('the Company') is a Public Limited Company engaged primarily in the business of refining of crude oil for edible use. The Company is also engaged in trading in oil seeds and edible/non-edible oils. The Company is listed on the Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE). The Company's registered office is at State Highway No.41, Near Sujanpur Patia, Sidhpur, 384 151, Dist.Patan, Gujarat.
1 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
1.1 BASIS OF PREPARATION OF ACCOUNTS
a) Statement of compliance with Ind AS
In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted Ind AS notified under the Companies (Indian Accounting Standards) Rules, 2015 with effect from April 1, 2017. The transition from previous GAAP to Ind AS has been accounted for in accordance with the Ind AS 101 "First Time Adoption of Indian Accounting Standards", with April 1, 2016 being the transition date. The financial statements have also been prepared in accordance with the relevant presentation requirements of the Companies Act, 2013
In accordance with the Ind AS 101 "First time adoption of Indian Accounting Standard", the Company has presented a reconciliation [from the presentation of financial statements under accounting standards notified under the Companies (Accounting Standards) Rules, 2006 ("Previous GAAP") to Ind AS] of total equity as at April 1, 2016, March 31, 2017 and Statement of Profit and Loss for the year ended March 31, 2017.
These financial statements for the year ended March 31, 2018 are the first financials with comparatives, prepared under Ind AS. For all previous periods including the year ended March 31, 2017, the Company had prepared its financial statements in accordance with the accounting standards notified under companies (Accounting Standard) Rule, 2006 (as amended) and other relevant provisions of the Act (hereinafter referred to as 'Previous GAAP') used for its statutory reporting requirement in India.
b) Functional and presentation currency
These financial statements are presented in Indian rupees, which is the Company's functional currency. All amounts have been rounded to the nearest lakh, unless otherwise indicated.
c) Basis of Measurement
These financial statements have been prepared on a historical cost convention basis, except for the following:
(i) Certain financial assets and liabilities that are measured at fair value.
(ii) Assets held for sale- Measured at the lower of (a) carrying amount and (b) Fair Value less cost to sell.
(iii) Net defined benefit plans- Plan assets measured at Fair Value less present value of defined benefit obligation.
(iv) Determining the Fair Value
While measuring the Fair Value of an asset or a liability, the Company uses observable market data as far as possible. Fair values are categorised into different levels in a Fair Value hierarchy based on the inputs used in the valuation techniques as follows.
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the Fair Value of an asset or a liability fall into different levels of the Fair Value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the Fair Value hierarchy as the lowest level input that is significant to the entire measurement.
d) Use of Estimates and Judgement
The preparation of financial statements in accordance with Ind AS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to the accounting estimates are recognized in the period in which the estimates are known or materialised. The most significant estimates and assumptions are described below:
(i) Judgements
Information about judgments made in applying accounting policies that have the significant effect on amounts recognised in the financial statement are as below:
- Leases identification- Whether an agreement contains a lease.
- Classification of lease - Whether Operating or Finance
(ii) Assumptions and Estimations
Information about assumption and estimation uncertainties that have significant risk of resulting in a material adjustment are as below:
1. Impairment test of non-financial assets
For the purpose of assessing recoverability of non-financial assets, assets are grouped at the lower levels for which there are individually identifiable cash flows (Cash Generating Units).
2. Allowance for bad debts
The Management makes estimates related to the recoverability of receivables, whose book values are adjusted through an allowance for Expected losses. Management specifically analyzes accounts receivable, customers 'creditworthiness, current economic trends and changes in customer's collection terms when assessing the adequate allowance for expected losses, which are estimated over the lifetime of the debts.
3. Recognition and measurement of Provisions and Contingencies
The Company's Management estimates key assumptions about the likelihood and magnitude of an outflow of resources based on available information and the assumptions and methods deemed appropriate. Wherever required, these estimates are prepared with the assistance of legal counsel. As and when additional information becomes available to the Company, estimates are revised and adjusted periodically.
4. Recognition of Deferred Tax Assets
The Management makes estimates as regards to availability of future taxable profits against which unabsorbed depreciation/ tax losses carried forward can be used.
5. Measurements of Defined benefit obligations
The measurements are based on key actuarial assumptions.
Notes :
i) (a) Investments in Subsidiaries and Associates are measured at cost and tested for impairment. Impairment (if any) denotes permanent diminution and charged to Statement of Profit and loss. Impairment in cases of unlisted securities is determined based on the valuation reports and in case of listed securities the same is determined based on the prevailing market prices.
(b) Investments in other than Subsidiaries, Associates and Joint ventures are measured at FVTOCI. and is charged/ added to "Other Comprehensive Income". Fair Valuation of unlisted securities is determined based on the valuation reports and in case of listed securities the same is determined based on the prevailing market prices.
ii) Pursuant to the Scheme of Arrangement approved by the Hon'ble High Court of Gujarat in 2015, The Company was allotted 8,19,50,000 2% Non-cumulative Redeemable preference shares having face value of Rs. 10 each fully paid up by its wholly owned subsidiary company Gokul Agri International Limited (GAIL) in consideration for transfer by way of slump sale of its "Sidhpur Undertakings". With the consent of the Board of Directors, these shares have been reclassified as "2% Non-Cumulative Compulsory Convertible Preference shares.
iii) Effective from 30th December,2017 ,Company's wholly owned subsidiary Maurigo International Limited, Mauritius ceased to carry on its business and opted for winding up in accordance with its constitution and the Mauritius Companies Act,2001. Consequently the Company incurred a net loss of Rs. 2798.83 lakhs on investment made in the share capital of Maurigo International Limited due to extinguishment of the rights in the investment as below. The loss has been shown in the statement of profit and loss as an Exceptional item. [Refer Note 34].
b) Company has given loans and advances and interest there on of Rs. 2662.52 Lakhs to its associates, firm/companies in which directors are interested during the current financial year.
c) None of the loanees have made investment in share of the company.
* The Fixed Deposits have been pledged with banks as security for bank guarentee provided by Bank.
** Unpaid dividend is Rs. 0.14 Lakhs as at 31st March, 2018 (Previous Year Rs. 0.60 Lakhs as at 31st March, 2017 and Rs. 0.75 as at 1st April, 2016) which have been kept in seperate Earmarked accounts and no transactions except for the stated purpose are done through such accounts.
Note :
Outstanding amount of loan (including interest) as on 7th December 2017 USD 42,94,701 (INR 2772.74 Lakhs) given to Maurigo International Limited, a wholly owned subsidiary of the company, was converted into 42,94,701 equity shares of the face value of USD 1 aggregating to USD 42,94,701 (INR 2772.74 Lakhs).
b) Company has not given any loans and advances to any associates, firm/companies in which directors are interested during the current financial year.
c) None of the loans have made investment in share of the company.
Company has issued only one class of equity shares having a face value of Rs. 2/- per share. Each holder of such equity share 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. The distribution will be in proportion to the number of equity shares held by the share holders.
Nature and Purpose of Reserve:
Capital Subsidy:
Company had received government subsidy in the past, which was credited to capital reserve. As on the transition date 1st April, 2016, the same is transferred to retained earnings.
Capital Reserve:
Pursuant to the Scheme of arrangement approved by the Hon'ble High court of Gujarat in 2015 which became effective from 1st January, 2015 the company had reinstated its tangible fixed assets pertaining to "Haldia Undertaking "at its fair value and the difference between book value and fair value amounting to Rs. 8,808.69 Lakhs had been credited to Capital Reserve account. In terms of the scheme as and when deemed fit by the Board, the said Capital Reserve is available for adjusting various expenses and specified items. Due to disposal of the Haldia Undertaking during the year the balance of capital reserve has been transferred to General Reserve.
General Reserve:
The general reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassified subsequently to profit or loss.
Retained Earnings:
The same is created out of profits over the years and shall be utilised as per the provisions of the Act.
Company does not have any default as on the balance sheet date in the repayment of any loan and interest.
The rate of interest ranging from 9.75 % to 11.95 % P.A. in case of cash credit /overdraft and packing credit.
Cash Credit /Overdraft and Packing credit loans from banks are secured by hypothecation of current assests of the company on pari passu basis and collaterally secured by way of first charge /residual charge on all the fixed assets of the company and personal guarantee of shri B.C Rajput and corporate guarantee of M/S Gokul Overseas.
The disclosures as required to be made relating to Micro ,Small, and Medium enterprises under the Micro, small and Medium enterprises development Act 2006 (MSMED) are not furnished in view of non availability of information with the company from such enterprises. The Company making efforts to get the confirmations from the suppliers as regard to their status under the said act.
General Notes forming the parts of Accounts:
2 Corresponding figures for previous year presented have been regrouped, where necessary, to confirm to the current period's classification. Figures have been rounded off to nearest of rupee in Lakhs.
3 The balances of sundry debtors and sundry creditors are subject to confirmation from respective parties. Necessary adjustments, if any, will be made when accounts are reconciled / settled.
4 Contingent Liabilities and Commitments
B Capital Commitment
Estimated amount of contracts remaining to be executed on capital account and not provided (net of advances) of Rs. Nil (Previous year: as at 31st March, 2017 Rs. 0.32 Lakhs and as at 01.04.2016 Rs. 5.52 Lakhs).
5 To meet with the documentation requirement of the bank, who have extended working capital facilities to Gokul Agri International Limited, a wholly owned subsidiary of the company, the company has provided corporate guarantee to the bank to the extent Rs. 5,575 Lakhs, As the guarantee is for short-term and there is no interest benefit to subsidiary the company has not charged or provided any commission for the same.
6 Employee Benefits Obligations Defined Contribution Plan:
The company has recognised as an expense in the profit and loss account in respect of defined contribution plan - Provident and other fund of Rs. 9.45 Lakhs (Previous year Rs. 7.79 Lakhs) administered by the Government.
Retirement Benefits
As per Ind AS 19 the Company has recongnised "Employees Benefits", in the financial Statements in respect of the employee benefits Schemes as per Actuarial Valuation as on 31st March, 2018.
Defined benefit plan and long term employment benefit
a. Defined Benefit Plan (Gratuity)
The company has a defined benefit gratuity plan .every employee who has completed five years and more service gets a gratuity on death or resignation or retirement at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with insurance company in the form of qualifying insurance policy
b. Long Term Employment Benefit (Leave Wages)
Leave wages are payable to all eligible employees at the rate of daily salary for each day of accumulated leave on death or resignation or upon retirement on attaining superannuation age.
7 Segment Reporting
The Company has only one segment which is "Agro based commodities" and primarily operates in domestic market. The Company's Managing Director, reviews the operating performance of the Company as a whole on a periodic basis. Therefore disclosure relating to segments is not applicable and accordingly not made. The details of geographical segment for the year ended 31 March 2018 and 31 March 2017 is as under:
Analysis by Secondary Segment
Segment Revenue and Expense:
Segment Revenue and Expense are the operating revenue and expense reported in the Company's Statement of Profit and Loss that are directly attributable to a segment and the relevant portion of such revenue and expense that can be allocated on a reasonable basis to a segment.
Segment Assets and Liabilities:
Segment Assets include all operating assets used by a segment and consist principally of operating receivables, inventories and property, plant and equipment, net of allowances and provisions. Capital Expenditure includes the total cost incurred to acquire Property, Plant and Equipment directly attributable to the segment. Segment liabilities include all operating liabilities and consist principally of trade payables and accrued expenses.
The Company does not have any outstanding dilutive potential equity shares. Consequently the basic and dilutive earning per share of the Company remain the same.
8 Details of Loan given, Investment made and Guarantee given covered u/s 186(4) of the Companies Act.
Loans given, Investment made are given under the respective heads.
9 Details of Corporate Social Responsibilities (CSR) Expenditure
a) Company is required to spend Rs.16.11 Lakhs (Previous Year Rs. 19.31 Lakhs) on CSR activities
b) Amount Spent During the year on CSR Rs. Nil (Previous Year Rs. 19.31 Lakhs).
c) Details of amount spent towards CSR
10 FINANCIAL INSTRUMENTS - FAIR VALUES AND RISK MANAGEMENT
A. Accounting classification and Fair Values
The following table shows the carrying amounts and Fair Values of Financial Assets and Financial Liabilities, including their levels in the Fair Value hierarchy. It does not include Fair Value information for Financial Assets and Financial Liabilities not measured at Fair Value if the carrying amount is a reasonable approximation of Fair Value.
"(1) Investment in Subsidiary/Associate carried at amortised cost. Fair Value of financial Assets and Liabilities are measured at Amortized cost is not materially different from the Amortized cost Furthers impact of time value of money is not Significant for the financial instrument classified as current. Accordingly fair value has not been disclosed seperately. "
Types of inputs are as under:
Input Level I (Directly Observable) which includes quoted prices in active markets for identical assets such as quoted price for an Equity Security on Security Exchanges
Input Level II (Indirectly Observable) which includes prices in active markets for similar assets such as quoted price for similar assets in active markets, valuation multiple derived from prices in observed transactions involving similar businesses etc.
Input Level III (Unobservable) which includes management's own assumptions for arriving at a fair value such as projected cash flows used to value a business etc.
The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the significant unobservable inputs used.
Financial instruments measured at fair value Type Valuation technique
Currency Futures Based on exchange rates listed on NSE/MCX stock exchange Commodity futures Based on commodity prices listed on MCX/ NCDX/ACE stock exchange Forward contracts Based on FEDAI Rates Interest rate swaps Based on Closing Rates provided by Banks
Open purchase and sale contracts Based on commodity prices listed on NCDEX stock exchange, and prices Available on Solvent Extractor's association (SEA) along with quotations from brokers and adjustments made for gradeand location of commodity
Options Based on Closing Rates provided by Banks
B. Financial Risk Management:-
"The Company has exposure to the following risks arising from financial instruments:
- Credit Risk ;
- Liquidity Risk ; and
- Market Risk
- Currency Risk
- Interest Rate Risk
- Commodity Risk
- Equity Risk"
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 Company manages market risk through a treasury department, which evaluates and exercises independent control over the entire process of market risk management. The treasury department recommends risk management objectives and policies, which are approved by Board of Directors. The activities of this department include management of cash resources, borrowing strategies, and ensuring compliance with market risk limits and policies.
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.
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 and investments in debt securities.
The carrying amount of following Financial Assets represents the maximum credit exposure:
Other Financial Assets
The Company maintains its Cash and Cash equivalents and Bank deposits with banks having good reputation, good past track record and high quality credit rating and also reviews their credit-worthiness on an on-going basis. The derivatives are entered into with bank and financial institution counter parties, which are considered to be good.
Trade Receivables
The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of customers to which the Company grants credit terms in the normal course of business.
Exposures to customers outstanding at the end of each reporting period are reviewed by the Company to determine expected credit losses. Historical trends of impairment of trade receivables do not reflect any significant credit losses. Impaired amounts are based on lifetime expected losses based on the best estimate of the management. Further, management believes that the unimpaired amounts that are past due by more than 180 days are still collectible in full, based on historical payment behavior and extensive analysis of customer credit risk. The impairment loss related to several customers that have defaulted on the repayments to the Company and are not expected to be able to pay their outstanding balances, mainly due to economic circumstances.
II 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.
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 and exclude the impact of netting agreements.
The gross inflows/(outflows) disclosed in the above table represent the contractual undiscounted Cash Flows relating to derivative financial liabilities held for risk management purposes and which are not usually closed out before contractual maturity. The disclosure shows net cash flow amounts for derivatives that are net cash-settled and gross cash inflow and outflow amounts for derivatives that have simultaneous gross cash settlement.
Excessive Risk Concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company's performance to developments affecting a particular industry.
In order to avoid excessive concentrations of risk, the policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly. Selective hedging is used within the Group to manage risk concentrations at both the relationship and industry levels.
Financial instruments - Fair Values and Risk Management
III 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 short term debt. We are exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and the value of our investments. Thus, our exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs.
Currency Risk
The Company is exposed to currency risk on account of its borrowings and other payables in foreign currency. The functional currency of the Company is Indian Rupee. The Company uses forward exchange contracts to hedge its currency risk, most with a maturity of less than one year from the reporting date. The Company does not use derivative financial instruments for trading or speculative purposes.
Exposure to Currency Risk
The currency profile of Financial Assets and Financial Liabilities with exposure to foreign currency risk at the end of the reporting period expressed in rupees, are as follows
Sensitivity analysis
A reasonably possible strengthening / (weakening) of the Indian Rupee against US dollars at March 31 would have affected the measurement of financial instruments denominated in US dollars 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 is the risk that the fair value or future Cash Flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's short-term debt obligations with floating interest rates.
Exposure to Interest Rate Risk
The Company's Interest Rate Risk arises from borrowings obligations. Borrowings issued exposes to fair value 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:-
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.
Commodity Risk
The prices of agricultural commodities are subject to wide fluctuations due to unpredictable factors such as weather, government policies, changes in global demand resulting from population growth and changes in standards of living and global production of similar and competitive crops. During its ordinary course of business, the value of the Company's open sales and purchases commitments and inventory of raw material changes continuously in line with movements in the prices of the underlying commodities. To the extent that its open sales and purchases commitments do not match at the end of each business day, the Company is subjected to price fluctuations in the commodities market.
While the Company is exposed to fluctuations in agricultural commodities prices, its policy is to minimise its risks arising from such fluctuations by hedging its sales either through direct purchases of a similar commodity or through futures contracts on the commodity exchanges. The prices on the commodity exchanges are generally quoted up to twelve months forward.
In the course of hedging its sales either through direct purchases or through futures, the Company may also be exposed to the inherent risk associated with trading activities conducted by its personnel. The Company has in place a risk management system to manage such risk exposure.
At the balance sheet date, a 1% increase/decrease of the commodities price indices, with all other variables remaining constant, would result in (decrease)/increase in profit before tax and equity by the amounts as shown below:
Equity Risk
Equity Price Risk is related to the change in market reference price of the investments in equity securities. The fair value of some of the Company's investments in Fair value through Other Comprehensive Income securities exposes the Company to equity price risks. In general, these securities are not held for trading purposes. These investments are subject to changes in the market price of securities. The fair value of equity securities as of March 31, 2018, was Rs. Nil [FY 2016-2017 Rs. Nil Lakhs]. A Sensex standard deviation of 5% [FY 2016-2017 6%] would result in change in equity prices of securities held as of March 31, 2018 by Rs. Nil Lakhs. [ FY 2016-2017 Rs. Nil Lakhs]
11 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 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 and obligations under finance leases, less cash and cash equivalents. Adjusted equity comprises all components of equity.
12 Discontinued Operations Slump Sale
Pursuant to a Business Transfer Agreement (BTA) between the Company and Adani Wilmar Limited, the Company has transferred its Haldia Undertaking Business to Adani Wilmar Limited on a going concern basis by way of Slump Sale, for a lump sum consideration without values being assigned to individual assets and liabilities with effect from commencement of business hours of 13th October, 2017. The details of Assets and Liabilities disposed of and the calculation of profit on disposal are as under :
Analysis of Profit / (Loss) for the year from Discontinued Operations
The results of Discontinued operations included in the profit for the year set out below. The comparative profit from discontinued operations have been presented as if this operations were discontinued in the prior year as well.
In the absence of separate financial statement of the Haldia Undertaking for previous years, the disclosures relating to Cash flows attributable to the discontinued operations is not provided.
13 Transition to Ind AS:
These are the Company's first financial statements prepared in accordance with Ind AS.
The accounting policies set out in note 1 have been applied in preparing the financial statements for the year ended 31st March 2018, the comparative information presented in these financial statements for the year ended 31st March, 2017 and in the preparation of an opening Ind AS Balance Sheet at 1st April, 2016 (the Company's date of transition).
In preparing its opening Ind AS Balance Sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP). An explanation of how the transition from previous GAAP to Ind AS has affected the Company's financial position, financial performance and Cash Flows is set out in the following tables and notes
Exemption applied
Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:
Optional exemption
(i) Deemed cost- Fair value of Property, Plant and Equipment (PPE)
The Company has elected to measure all the items of PPE and intangible assets at its Indian GAAP carrying values which shall be the deemed cost as at the date of transition. As per Frequently Asked Questions (FAQs) issued by Accounting Standards Board (ASB) by Ind AS Transition Facilitation Group of Ind AS (IFRS) Implementation Committee of ICAI, deemed cost, is the amount used as a surrogate for the cost or depreciated cost and for the purpose of subsequent depreciation or amortisation, deemed cost becomes the cost as the starting point. Information regarding gross block of assets, accumulated depreciation and provision for impairment under Indian GAAP has been disclosed by way of a note forming part of the financial statements.
(ii) Investments in Subsidiaries, Joint Ventures and Associates
"Under, Ind AS 101 an entity can determine the value of investment in a Subsidiary, Associate or Joint ventures as either of the below:
- Cost determined in accordance with Ind AS 27 (i.e. retrospective application of Ind AS 27)
- Fair value at the entity's date of transition to Ind AS
- Previous GAAP carrying amount
Accordingly, if an entity chooses to measure its investment at fair value at the date of transition then that is deemed to be cost of such investment for the Company and, therefore, it shall carry its investment at that amount (i.e. fair value at the date of transition) after the date of transition. The Company has elected to carry forward the previous GAAP amounts as the deemed cost for investment in equity shares of Subsidiary, Associates and Joint Ventures in the Standalone Financial Statements."
(iii) Business combination
The company has applied the exemption as provided in Ind AS 101 for non application of Ind AS 103, "Business Combinations" to business combinations cosummated prior to the date of transition (1st April, 2016)
Mandatory exemption
(i) Estimates
On an assessment of the estimates made under Indian GAAP the Company has concluded that there was no necessity to revise the estimates under Ind AS except where estimates were required by Ind AS and not required by Indian GAAP or the basis of measurement were different.
(ii) Classification and measurement of Financial Assets
Ind AS 101 requires an entity to assess classification and measurement of Financial Assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS.
NOTES ON FIRST TIME ADOPTION:
1 Property, plant and equipments
As on the transition date to Ind AS i.e. April 1, 2016 the Company has elected to measure its Tangible assets and Intangible assets at carrying value as per previous GAAP as cost as per Ind AS. These assets included items of property, plant and equipments pertaining to Haldia undertaking which were revalued under previous GAAP before the date of transition to Ind AS. The same are considered as Deemed cost.
2 Investments
a) Investment in Other than subsidiary, associates and Joint Venture [Refer note 3.1 ]
b) Investment in subsidiary, associates and Joint Venture [Refer note 3 ]
c) Investments in Mutual funds and Partnership Firm [Refer note 9 ]
The same are measured at FVTPL. As on transition date i.e. April 1, 2016 the same are adjusted to retained earnings, subsequent gains /losses are charged to profit and loss account.
3 Leasehold land
The Company has certain lease hold land with a tenure ranging to 90 years. Under Ind-AS land is treated as finance lease if the lease term is over several decades or the present value of minimum lease payments is substantially equal to the fair value of land. Since the above condition is satisfied, lease arrangements in the range of 90 years from the date of investment to the date of transition have been classified as finance lease.
4 Reversal of premium amortised on forward contracts.
As per previous Indian GAAP, the premium paid on forward contract was amortised over the period of the contract. The said accounting treatment is not required under Ind AS. Hence, the same are now recorded as per requirements of Ind AS and the premium amortised earlier under Indian GAAP are reversed with corresponding amount recognised in retained earnings.
5 Currency Forward contracts
The Company has Fair Valued the Currency forward contracts on date of transition with a corresponding amount recognised in retained earnings as on transition date i.e April 1, 2016.
6 Deferred Tax
The Company has recognised deferred tax as per requirements of Ind AS -12 on "Income taxes" and recoginsed a deferred tax liability arising on account of the Ind AS adjustments as on April 1, 2016 to retained earnings.
7 Excise Duty
Under Indian GAAP, the Company used to present Revenue net off excise duty. The incidence of excise duty is on manufacture and not on sales since manufacturer is the primary obligor for the payment of excise duty. Management collects excise duty from its customers in the capacity as principal and not as an agent. As a result, excise duty recovered from customers would form part of revenue, with an corresponding equal amount charged to the statement of Profit and loss.
8 Employee Benefits
Both under Indian GAAP and Ind-AS, the Company 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 and loss. Under Ind-AS, remeasurements of defined benefits plans are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI.
NOTES TO THE FINANCIAL STATEMENTS
1 Interest free borrowing
Under Previous GAAP, Interest free borrowing were measured at historical value. Under Ind AS, Interest free borrowing are measured at fair value by applying effective interest rate mathod (EIR) as per Ind AS 109. The company has discounted the borrowing to present value at reporting dates resulting in the borrowing being decreased by Rs. Nil as at 31stMarch, 2017 (Rs. 525.10 lakhs as at 1st April, 2016). Consequently, the unwinding of interest has been recognised as a finance cost i.e. Rs. Nil for the year ended 31st March, 2017. Further, the corresponding differences in deferred taxes (net) have also been recognised as at 31st March, 2017 (Rs. Nil) and as at 1st April, 2016 (Rs. 91.26 Lakhs). The net effect of these changes is an increase in total equity as at 31st March, 2017 of Rs. Nil (as at 1st April, 2016 of Rs. 172.43 lakhs), and decrease in profit before tax of Rs. Nil, and in total profit of Rs. Nil for the year ended 31st March, 2017.
2 Interest Accrued but not due
Under Indian GAAP, the Company has invested in fixed deposits with the banks & the interest is accrued on the same at each reporting date. Under Ind AS Fixed Deposits are to be reported at amortised cost with reclassification of interest accrued but not due with fixed deposits. This has resulted in increase of current financial assets by Rs. 101.50 Lakhs Cash & cash equivalent with a corresponding decrease in other current assets as on 1st April 2016. As on 31st March 2017 Cash & cash equivalent increased by Rs. 78.56 Lakhs with resultant decrease in other Current Assets.
3 Currency forward contract
Under Indian GAAP, the Company has hedged the currency against borrowings payable in foreign currency i.e. Foreign LC. The exchanged effect of such outstanding currency hedged contract is netted off with borrowings and their premium is grouped with Other current liabilities. Under Ind AS the currency hedged contract has been reported at grossed value. This has resulted in increase of other current financial liabilities by Rs. 907.26 Lakhs with a corresponding decrease in other current liabilities of Rs. 1171.61 Lakhs and increase in current financial borrowings of Rs. 249.29 Lakhs as on 1st April 2016. As on 31st March 2017 increase in other current financial liabilities by Rs. 1000.00 Lakhs with a corresponding decrease in other current liabilities of Rs. 171.09 Lakhs and decrease in current financial borrowings of Rs. 884.95 Lakhs. The net effect of these changes is an increase in total equity as at 31st March, 2017 of Rs. 36.64 Lakhs (as at 1st April, 2016 of Rs. 9.85 Lakhs), and Increase in profit before tax of Rs. 56.04 Lakhs, and in total profit of Rs. 36.64 Lakhs for the year ended 31st March, 2017.
4 Employee Benefits
Under Ind AS, the Company recognises all remeasurement gains and losses arising from defined benefit plans in Other Comprehensive Income in the period in which they occur. Under Indian GAAP the Company recognised actuarial gains and losses in the statement of profit or loss in the period in which they occur, this has resulted in the increase of employee emolyments by Rs. 19.88 Lakhs for the year ended 31st March 2017. Further, this reclassification has no impact on the total comprehensive income for the year ended 31 March 2017 and on Equity as at that date.
5 Lease Hold Land
Under Indian GAAP, the Company had presented "Lease hold Land" as Finance Lease at amortised cost. While under Ind AS the effect of present value of future cash out flow of Lease rent payable for the tenure of such lease has re-capitalised under "Property, plant and equipment" and corresponding effect has shown as a Lease rent payable under "Other Non-Current financial liabilities". This has resulted in increase in Lease hold land under "Property, plant and equipment" by Rs. 24.22 Lakhs as at 1st April, 2016 (Rs. 23.08 Lakhs as at 31st March, 2017) and corresponding increase in Lease rent payable under "Other Non-Current financial liabilities" by Rs. 35.54 Lakhs as at 1st April, 2016 (Rs. 37.28 Lakhs as at 31st March, 2017) and increase in Accumulated depreciation on lease hold land by Rs. 0.87 Lakhs as at 1st April, 2016 (Rs. 1.14 Lakhs as at 31st March, 2017). The net effect of above changes is an decrease in Other equity by Rs. 7.97 Lakhs as at 1st April, 2016 (Rs. 9.29 Lakhs as at 31st March, 2017) and decrease in profit before tax by Rs. 2.01 Lakhs (profit after tax by Rs. 1.32 Lakhs) for the year ended on 31st March, 2017.
6 Depreciation and amortisation expense
Under Indian GAAP, the Company recognised amount of depreciation portion of revalued assets against "Capital reserve", as per the treatement approved by the Hon'ble High court of Gujarat under the scheme of arrangement. Under Ind As the company has recognised depreciation portion of revalued assets as "Depreciation and amortisation expenses". This has resulted increase in Capital reserve by Rs. Nil as at 1st April, 2016 and by Rs. 604.49 Lakhs as at 31st March, 2017 and decrease in profit before tax by Rs. 604.49 Lakhs for the year ended on 31st March, 2017. The net effect of above changes on other equity is Rs. Nil.
7 Sales of Goods
Under Indian GAAP cash incentives given to customer in the form of rebates and discount was accounted as other expense. Under Ind AS these are required to be netted off from revenue. Accordingly the rebates and cash discounts totalling to Rs. 31.21 Lakhs has been netted off from revenue.
8 Other Comprehensive Income
Under Indian GAAP, the Company has not presented Other Comprehensive Income (OCI) separately. Hence, it has reconciled Indian GAAP Profit or Loss to Ind AS Profit or Loss. Further, Indian GAAP Profit or Loss is reconciled to total Comprehensive Income as per Ind AS.
9 Statement of Cash Flows
The transition from Indian GAAP to Ind AS has not had a material impact on the statement of Cash Flows.
10 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 which was not required under Indian GAAP.
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