2.4 Significant accounting policies
a. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting
provided to the chief operating decision maker.
The Chairman and Managing Director (CMD) of the Company has been identified as the
chief operating decision maker for the segment information presented.
b. Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of the Company are measured using the
currency of its primary economic environment in which the Company operates ('the
functional currency'). The financial statements are presented in Indian rupees (INR), which
is the Company's functional and presentation currency.
(ii) Transactions and translations
Foreign-currency denominated monetary assets and liabilities are translated into the
relevant functional currency at exchange rates in effect at the Balance Sheet date. The
gains or losses resulting from such translations are included in net profit in the Statement
of Profit and Loss. Non-monetary assets and non-monetary liabilities denominated in a
foreign currency and measured at fair value are translated at the exchange rate prevalent
at the date when the fair value was determined. Non-monetary assets and nonmonetary
liabilities denominated in a foreign currency and measured at historical cost are translated
at the exchange rate prevalent at the date of the transaction.
Transaction gains or losses realized upon settlement of foreign currency transactions
are included in determining net profit for the period in which the transaction is settled.
Revenue, expense and cash-flow items denominated in foreign currencies are translated
into the relevant functional currencies using the exchange rate in effect on the date of the
transaction.
c. Revenue recognition
The Company earns revenue primarily from sale of Shrimp Feed. Revenue is recognized
upon transfer of control of promised products or services to customers in an amount that
reflects the consideration the Company expects to receive in exchange for those products
or services. To recognize revenues, we apply the following five step approach:
1. identify the contract with a customer,
2. identify the performance obligations in the contract,
3. determine the transaction price,
4. allocate the transaction price to the performance obligations in the contract, and
5. recognize revenues when a performance obligation is satisfied.
At contract inception, the Company assesses its promise to transfer products or services to
a customer to identify separate performance obligations. The Company applies judgement
to determine whether each product or services promised to a customer are capable of
being distinct, and are distinct in the context of the contract, if not, the promised product
or services are combined and accounted as a single performance obligation. The Company
allocates the arrangement consideration to separately identifiable performance obligation
based on their relative stand-alone selling price or residual method. Stand-alone selling
prices are determined based on sale prices for the components when it is regularly sold
separately, in cases where the Company is unable to determine the stand-alone selling
price, the Company uses third-party prices for similar deliverables or the company uses
expected cost plus margin approach in estimating the stand-alone selling price.
Revenue towards satisfaction of a performance obligation is measured at the amount of
transaction price (net of variable consideration) allocated to that performance obligation.
The transaction price of goods sold is net of variable consideration on account of various
discounts and schemes offered by the company as part of the contract.
d. Government grant
Grants from the government are recognised at their fair value where there is a reasonable
assurance that the grant will be received and the Company will comply with all attached
conditions.
Government grants relating to income are deferred and recognised in the Statement of
Profit and Loss over the period necessary to match them with the costs that they are
intended to compensate and presented within other income.
Government grants relating to the purchase of property, plant and equipment are included
in non-current liabilities as deferred income and are credited to Statement of Profit and
Loss on a straight-line basis over the expected lives of the related assets and presented
within other income.
Loans received from government in the nature of interest free deferred sales taxes are
treated in the nature of government grant. The difference between the fair value of the
loan and the amount of loan received is accounted as government grant. The government
grant is recognised in the Statement of Profit and Loss over the period of loan.
e. 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 the reporting period in the countries where the
Company operates and generates taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation
is subject to interpretation. It establishes provisions, where appropriate, on the basis of
amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the
financial statements. 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 the time of the transaction affects neither accounting profit nor taxable profit (tax loss).
Deferred income tax is determined using tax rates (and laws) that have been enacted or
substantially enacted by the end of the reporting period and are expected to apply when
the related deferred income tax asset is realised or the deferred income tax liability is
settled.
Deferred tax assets are recognised for all deductible temporary differences and unused
tax losses only if it is probable that future taxable amounts will be available to utilise those
temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to
offset current tax assets and liabilities and when the deferred tax balances relate to the
same taxation authority. Current tax assets and tax liabilities are offset where the entity
has a legally enforceable right to offset and intends either to settle on a net basis, or to
realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in Statement of Profit and Loss, except to the
extent that it relates to items recognised in other comprehensive income or directly in
equity. In this case, the tax is also recognised in other comprehensive income or directly in
equity, respectively.
f. Ind AS 116 - Leases
As a lessee
The Company's lease asset classes primarily consist of leases for land and buildings. The
Company assesses whether a contract contains a lease, at inception of a contract. A
contract is, or contains, a lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for consideration. To assess whether a
contract conveys the right to control the use of an identified asset, the Company assesses
whether: (i) the contract involves the use of an identified asset (ii) the Company has
substantially all of the economic benefits from use of the asset through the period of the
lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use (ROU)
asset and a corresponding lease liability for all lease arrangements in which it is a lessee,
except for leases with a term of 12 months or less (short-term leases) and low value leases.
For these short-term and low-value leases, the Company recognizes the lease payments
as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before
the end of the lease term. ROU assets and lease liabilities includes these options when it
is reasonably certain that they will be exercised. The ROU assets are initially recognized
at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or prior to the commencement date of the lease plus any initial direct
costs less any lease incentives. They are subsequently measured at cost less accumulated
depreciation and impairment losses.
g. Impairment of assets
Intangible assets that have an indefinite useful life are not subject to amortisation and are
tested annually for impairment, or more frequently if events or changes in circumstances
indicate that they might be impaired. Other assets are tested for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is higher of an asset's
fair value less costs of disposal and value in use. For the purpose of assessing impairment,
assets are grouped at the lowest levels for which there are separately identifiable cash
inflows which are largely independent of the cash flows from other assets or group of
assets (cash-generating units). Non-financial assets other than goodwill that suffered
an impairment are reviewed for possible reversal of the impairment at the end of each
reporting period.
h. Cash and cash equivalents
Cash and cash equivalents in the balance sheet includes cash at bank and cash on hand,
deposits held at call with financial institutions, other short-term, highly liquid investments
with original maturities of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value. Bank
overdrafts are shown within borrowings in current liabilities in the balance sheet. For
the purpose of statement of cash flows, cash and cash equivalents cash an short term
deposits as defined above is net of outstanding bank overdrafts as they are considered an
integral part of the Company's cash management.
i. Inventories
Inventories are valued at lower of cost and net realizable value. Cost of raw materials,
components and stores and spares is determined on a weighted average basis.
Cost of raw materials comprise of cost of purchase. Cost of work-in-progress and finished
goods comprises direct materials and labour and a proportion of manufacturing overheads
based on normal operating capacity. Cost is determined on a weighted average basis.
Cost of inventories also include all other costs incurred in bringing the inventories to their
present location and condition.
Net realisable value is the estimated selling price in the ordinary course of business less
the estimated costs of completion and the estimated costs necessary to make the sale.
j. Biological assets
The Company recognises biological assets only when, the Company controls the assets
as a result of past events, it is probable that future economic benefits associated with
such assets will flow to the Company. Biological assets of the Company are in the nature
of Consumable Biological Assets. It is bifurcated into Brood Stock, (the Parents) and
harvested species which undergo biological transformation under different stages as
Nauplius, Zoea, Mysis and Post Larvae. The Company sells the biological assets harvested
from brood stock at Nauplius and Post Larvae Stages. The Brood Stock has a maximum
useful life of 6 months for laying eggs and thereafter these are destroyed.
The valuation of the Brood stock biological assets are determined on the following basis:
Brood stock are used for captive consumption or to support farmers, it can not be sold
before the end of its useful life and as such, there is no active market. Other references
to market prices such as market prices for similar assets are also not available due to the
uniqueness of the breed. Valuation based on a discounted cash flow method is considered
to be unreliable given the uncertainty with respect to mortality rates and production.
Consequently, brood stock and Shrimp seed (Different stages) are measured at cost, less
depreciation and impairment losses.
The transmission phase from Nauplius to Zoea and Mysis are not considered as
significant transformation of biological asset and hence Zoea and Mysis are not valued as
per Ind AS - 41.
The Company recognises other biological assets at the fair value or cost of the assets
that can be measured reliably. Expenditure incurred on biological assets are measured on
initial recognition and at the end of each reporting period at its fair value less costs to sell.
The gain or loss arising from a change in fair value less costs to sell of biological assets are
included in Statement of Profit and Loss for the period in which it arises.
Management estimates the fair value less costs to sell of biological assets, taking into
account the most reliable evidence available at each reporting date. The future realization
of these biological assets may be affected by their survival rate, age and / or other market-
driven changes that may reduce the future economic benefits associated with such
assets. The fair value is arrived at based on the observable market prices of biological
assets adjusted for cost to sells, as applicable.
k. Investments and other financial assets
(i) Classification
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), and
- those measured at amortised cost.
The classification depends on the entity's business model for managing the financial
assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or
loss or other comprehensive income. For investments in debt instruments, this will
depend on the business model in which the investment is held. For investments in
equity instruments, this will depend on whether the Company has made an irrevocable
election at the time of initial recognition to account for the equity investment at fair
value through other comprehensive income.
The Company reclassifies debt investments when and only when its business model
for managing those assets changes.
(ii) Measurement
At initial recognition, the Company measures a financial asset at its fair value, plus in
the case of a financial asset not at fair value through profit or loss, transaction costs
that are directly attributable to the acquisition of the financial asset. Transaction
costs of financial assets carried at fair value through profit or loss are expensed
in Statement of Profit and Loss. However, trade receivables that do not contain a
significant financing component are measured at transaction price.
Debt instruments
Subsequent measurement of debt instruments depends on the Company's business
model for managing the asset and the cash flow characteristics of the asset. There
are three measurement categories into which the Company classifies its debt
instruments:
- Amortised cost: Assets that are held for collection of contractual cash flows where
those cash flows represent solely payments of principal and interest are measured
at amortised cost. A gain or loss on a debt investment that is subsequently
measured at amortised cost and is not part of a hedging relationship is recognised
in profit or loss when the asset is derecognised or impaired. Interest income from
these financial assets is included in finance income using the effective interest
rate method.
- Fair value through other comprehensive income (FVOCI): Assets that are held for
collection of contractual cash flows and for selling the financial assets, where
the assets cash flows represent solely payments of principal and interest, are
measured at fair value through other comprehensive income (FVOCI). Movements
in the carrying amount are taken through OCI, except for the recognition of
impairment gains or losses, interest revenue and foreign exchange gains and
losses which are recognised in Statement of Profit and Loss. When the financial
asset is derecognised, the cumulative gain or loss previously recognised in OCI is
reclassified from equity to profit or loss and recognised in other gains/(losses).
Interest income from these financial assets is included in other income using the
effective interest rate method.
- Fair value through profit or loss: Assets that do not meet the criteria for amortised
cost or FVOCI are measured at fair value through profit or loss. A gain or loss on
a debt investment that is subsequently measured at fair value through profit or
loss and is not part of a hedging relationship is recognised in profit or loss and
presented net in the Statement of Profit and Loss within other gains/(losses) in the
period in which it arises. Interest income from these financial assets is included in
other income.
Equity instruments
The Company subsequently measures all equity investments at fair value. Where
the Company elected to present fair value gains and losses on equity investments
in other comprehensive income, there is no subsequent reclassification of fair value
gains and losses to profit or loss. Dividends from such investments are recognised
in Statement of Profit and Loss as other income when the Company right to receive
payments is established.
Changes in the fair value of financial assets at fair value through profit or loss are
recognised in other gain/(losses) in the Statement of Profit and Loss. Impairment
losses (and reversal of impairment losses) on equity investments measured at FVOCI
are not reported separately from other changes in fair value.
(iii) Impairment of financial assets
The Company assesses on a forward booking basis the expected credit losses
associated with its assets carried at amortised cost and FVOCI debt instruments. The
impairment methodology applied depends on whether there has been a significant
increase in credit risk. Note 37 details how the Company determines whether there
has been a significant increase in credit risk.
For trade receivables only, the Company applies the simplified approach permitted
by Ind AS 109 Financial Instruments, which requires expected life time losses to be
recognised from initial recognition of the receivables.
(iv) Derecognition of financial assets
A financial asset is derecognised only when
- the Company has transferred the rights to receive cash flows from the financial
asset or
- retains the contractual rights 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 entity has transferred an asset, the Company evaluates whether it has
transferred substantially all risks and rewards of ownership of the financial asset. In
such cases, the financial asset is derecognised. Where the entity has not transferred
substantially all risks and rewards of ownership of the financial asset, the financial
asset is not derecognised.
Where the entity 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
recognised to the extent of continuing involvement in the financial asset.
(v) Income recognition
Interest income
Interest income from debt instruments is recognised using the effective interest
rate method. The effective interest rate is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset to the gross
carrying amount of a 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 (for example, prepayment, extension, call and similar
options) but does not consider the expected credit losses.
(vi) Dividends
Dividends are recognised in profit or loss only when the right to receive payment is
established, it is probable that the economic benefits associated with the dividend
will flow to the Company, and the amount of the dividend can be measured reliably.
l. Derivatives
Derivatives are initially recognised at fair value on the date a derivative contract is entered
into and are subsequently re-measured to their fair value at the end of each reporting
period and are included in other gains/(losses).
m. Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance
sheet where there is a legally enforceable right to offset the recognised amounts and
there is an intention to settle on a net basis or realise the asset and settle the liability
simultaneously. The legally enforceable right must not be contingent on future events
and must be enforceable in the normal course of business and in the event of default,
insolvency or bankruptcy of the Company or the counter party.
n. Property, plant and equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment
are stated at historical cost less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that future economic benefits associated
with the item will flow to the Company and the cost of the item can be measured reliably.
The carrying amount of any component accounted for as a separate asset is derecognised
when replaced. All other repairs and maintenance are charged to profit or loss during the
reporting period in which they are incurred.
Depreciation methods, estimated useful lives and residual value
Depreciation on tangible assets is calculated on a straight-line basis so as to expense the
cost less residual value over the estimated useful life's prescribed and in the manner laid
down under Schedule II to the Companies Act, 2013. The useful lives have been determined
based on technical evaluation done by the management's expert which are higher than
those specified by Schedule II to the Companies Act; 2013, in order to reflect the actual
usage of the assets. The estimated useful lives and residual values are reviewed at the
end of each reporting period, with the effect of any change in estimate accounted for on
a prospective basis. Assets costing individually rupee equivalent of INR 5,000 or less are
fully charged off on purchase. Depreciation for assets purchased / sold during the period
is proportionately charged.
An asset's carrying amount is written down immediately to its recoverable amount if
the asset's carrying amount is greater than its estimated recoverable amount. Gains or
losses arising from disposal of property, plant and equipment which are carried at cost are
recognised in the Statement of Profit and Loss.
o. Intangible assets
Intangible assets that are acquired are recognized at cost initially and carried at cost less
accumulated amortization and accumulated impairment loss, if any.
(i) Computer software
Computer software are stated at cost, less accumulated amortisation 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.
(ii) Amortisation methods and periods
Intangible assets with finite useful live are amortized over their respective individual
estimated useful lives (6 years in case of computer softwares) on a straight line basis.
p. Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior
to the year end which are unpaid . The amounts are unsecured and are usually paid as
per mutually agreed terms. Trade and other payables are presented as current liabilities
unless payment is not due within 12 months after the reporting period. They are recognised
initially at their fair value and subsequently measured at amortised cost using the effective
interest method.
q. Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred.
Borrowings are subsequently measured at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption amount is recognised in profit or
loss over the period of the borrowings using the effective interest method. Fees paid on
the establishment of loan facilities are recognised as transaction costs of the loan to the
extent that it is probable that some or all of the facility will be drawn down. In this case,
the fee is deferred until the draw down occurs. To the extent there is no evidence that it
is probable that some or all of the facility will be drawn down, the fee is capitalised as a
prepayment for liquidity services and amortised over the period of the facility to which it
relates.
Borrowings are removed from the balance sheet when the obligation specified in the
contract is discharged, cancelled or expired. The difference between the carrying amount
of a financial liability that has been extinguished or transferred to another party and the
consideration paid, including any non-cash assets transferred or liabilities assumed, is
recognised in profit or loss as other gains/(losses).
Borrowings are classified as current liabilities unless the Company has an unconditional
right to defer settlement of the liability for at least 12 months after the reporting period.
Where there is a breach of a material provision of a long-term loan arrangement on or
before the end of the reporting period with the effect that the liability becomes payable
on demand on the reporting date, the entity does not classify the liability as current, if
the lender agreed, after the reporting period and before the approval of the financial
statements for issue, not to demand payment as a consequence of the breach.
r. Borrowing Cost
General and specific borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset are capitalised during the period of time
that is required to complete and prepare the asset for its intended use or sale. Qualifying
assets are assets that necessarily take a substantial period of time to get ready for their
intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending
their expenditure on qualifying assets is deducted from the borrowing costs eligible for
capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.
|