3 STATEMENT OF COMPLIANCE AND MATERIAL ACCOUNTING POLICIES
3.1 STATEMENT OF COMPLIANCE
The financial statement have been prepared in accordance with Indian Accounting Standards (referred to as "Ind
AS") notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended) read with Section 133
of the Companies Act, 2013 ("the Act") and the Company has complied with Ind AS issued, notified and made
effective till the date of authorisation of the financial statements.
Accounting Policies have been consistently applied except where a newly issued Indian Accounting Standard is
initially adopted or a revision to an existing Indian Accounting Standard requires a change in the accounting policy
hitherto in use.
Basis of Preparation
The Financial Statements have been prepared under the historical cost convention on accrual basis except for:
i) Certain financial instruments that are measured in terms of relevant Ind AS at fair value/amortised cost at the
end of each reporting period;
ii) Certain Class of Property, Plant and Equipment (PPE) carried at deemed cost representing carrying value of PPE
(including revaluation surplus) as on the date of transition to Ind AS i.e. 1st April 2015 as per the previous
Generally Accepted Accounting Principles (Previous GAAP);
iii) Defined benefit plans - plan assets measured at fair value;
iv) Biological assets (including un plucked green leaves) - measured at fair value less cost to sell.
Historical cost convention is generally based on the fair value of the consideration given in exchange for goods and
services.
Current/ non - current classification
All the assets and liabilities have been classified as current or non-current as per the Company's normal operating
cycle and other criteria set out in Ind AS-1 'Presentation of Financial Statements' and Schedule III to the Companies
Act, 2013 (as ammended). Having regard to the nature of business being carried out by the Company, the Company
has determined its operating cycle as twelve months for the purpose of current and non-current classification.
Functional /presentation currency and rounding-off of amounts
The functional currency of the Company is determined as the currency of the primary economic environment in
which it operates. The Financial Statements are presented in Indian Rupees and all values are rounded off to the
nearest two decimal lakhs except otherwise stated.
Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date under current market conditions.
The Company categorizes assets and liabilities measured at fair value into one of three levels depending on the
ability to observe inputs employed for such measurements:
a) Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
b) Level 2: Inputs other than quoted prices that are observable, either directly or indirectly for the asset or liability.
c) Level 3: Inputs for the asset or liability which are not based on observable market data.
The Company has an established control framework with respect to the measurement of fair value. This includes a
finance team headed by Chief Financial Officer who has overall responsibility for overseeing all significant fair value
measurements who regularly reviews significant unobservable inputs, valuation adjustments and fair value
hierarchy under which the valuation should be classified.
3.2 MATERIAL ACCOUNTING POLICIES
A. PROPERTY, PLANT AND EQUIPMENT (PPE)
Property, plant and equipment are stated at cost of acquisition, construction and subsequent improvements
thereto less accumulated depreciation and impairment losses, if any. For this purpose cost includes deemed cost
which represents the carrying value of PPE (including Revaluation thereon) as at 1st April 2015 as per previous
generally accepted accounting principles (Previous GAAP) considered as deemed cost, purchase price of assets or its
construction cost including inward freight, duties and taxes (net of input tax credit availed) and other expenses
related to acquisition or installation and any cost directly attributable to bringing the assets into the location and
condition necessary for it to be capable of operating in the manner intended for its use.
Parts of an item of PPE having different useful lives and material value and subsequent expenditure on PPE arising on
account of capital improvement or other factors are accounted for as separate components.
The cost of replacing part of an item of PPE is recognised and added to the carrying amount of the item if it is
probable that the future economic benefits embodied within the part will flow to the Company and its cost can be
measured reliably. The costs of the day-to-day servicing of PPE are recognised in the statement of profit and loss
when incurred. Assets to be disposed off are reported at the lower of the carrying value or the fair value less cost to
sell.
Bearer plants comprising of mature tea bushes are stated at cost less accumulated depreciation and accumulated
impairment losses, if any.
Immature bearer plants, including the cost incurred for procurement of new seeds and maintenance of nurseries,
are carried at cost less impairment losses recognised thereagainst under capital work-in-progress. Cost includes the
cost of land preparation, new planting and maintenance of newly planted bushes until maturity. On maturity, these
costs are classified under bearer plants. Bearer Plants are depreciated from the date when they are ready for
commercial harvest.
The Company's leased assets comprises of land, building and plant and machinery and these have been separately
shown/disclosed under PPE as Right of Use (ROU) Assets Costs incurred for infilling are generally recognized in the
Statement of Profit and Loss. Gains and losses on disposals are determined by comparing proceeds with carrying
amount. These are included in profit or loss within other income/expenses.
Capital work in progress includes nurseries, young tea under plantation, equipments to be installed, construction
and erection costs and other costs incurred in relation thereto or attributable to the same. Such costs are added to
the related items of PPE and are classified to the appropriate categories when completed and ready for its intended
use.
B. LEASES
(i) Company as a Lessee
The Company's lease asset classes primarily consist of leases for land, warehouse, office space, factory etc. 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 asset ("ROU") and a
corresponding lease liability where applicable for all lease arrangements, except for 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 include these options considered for arriving at ROU and lease liability
when it is reasonably certain that they will be exercised.
The lease liability is initially measured at amortized cost at the present value of the future lease payments
where applicable. The lease payments are discounted using the interest rate implicit in the lease or, if not
readily determinable, using the incremental borrowing rates of these leases. Lease liabilities are remeasured
with a corresponding adjustment to the related right of use asset if the Company changes its assessment on
whether it will exercise an extension or a termination option. ROU asset are separately presented/disclosed
under PPE. Lease liability obligations is presented separately under "Financial Liabilities" and lease payments are
classified as financing cash flows.
The right-of-use 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.
(ii) Company as a Lessor
a. Finance Lease
Leases which effectively transfer to the lessee substantially all the risks and benefits incidental to
ownership of the leased item are classified and accounted for as finance lease. Lease rental receipts are
apportioned between the finance income and capital repayment based on the implicit rate of return.
Contingent rents are recognized as revenue in the period in which they are earned.
b. Operating Lease
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an
asset are classified as operating leases. Rental income from operating leases is recognized on a straight¬
line basis over the term of the relevant lease except where scheduled increase in rent compensates the
Company with expected inflationary costs.
C. DEPRECIATION
Depreciation on PPE except otherwise stated, is provided as per Schedule II of the Companies Act, 2013 on straight
line method over the estimated useful lives. Depreciation on upgradation of Property, Plant and Equipment is
provided over the remaining useful life of the related component/ PPE.
The useful life has been determined based on internal assessment and supported by an independent evaluation
carried out by technical experts. The company believes that the useful life as given above represents the period over
which the company expects to use the assets.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the
lease term and useful life of the underlying asset.
Machinery Spares which can be used in connection with an item of PPE and whose use are expected to be irregular,
are amortised over the useful life of the respective PPE.
Depreciation methods, useful lives and residual values are reviewed, and adjusted as appropriate, at each reporting
date.
D. INTANGIBLE ASSETS
D.1 Trademark
Separately acquired Trademark is shown at cost. It is amortised over expected useful life and is subsequently
carried at cost less accumulated amortisation and impairment losses, if any. For this purpose, cost includes
deemed cost which represents the carrying value of intangible assets recognised as at 1st April, 2015
measured as per the previous generally accepted accounting principles or at cost of acquisition comprising of
purchase price inclusive of duties and taxes (net of input tax credit availed).
D.2 Computer software
Costs associated with maintaining software programmes are recognised as an expense as incurred. Costs of
purchased software comprises cost of acquisition comprising of purchase price inclusive of duties and taxes
(net of input tax credit availed) are recorded as intangible assets and amortised from the point at which the
asset is available for use.
D.3 Amortisation
Accordingly, the Company amortises intangible assets with a finite useful life using the straight-line method
over a period of 20 years in case of Trademark and 5 years in case of Computer Software Amortisation
methods and useful lives are reviewed and adjusted as appropriate at each reporting date.
E. DERECOGNITION OF TANGIBLE AND INTANGIBLE ASSETS
An item of PPE/ROU/Intangible assets is de-recognised upon disposal or when no future economic benefits are
expected to arise from its use or disposal. Gain or loss arising on the disposal or retirement of an item of
PPE/Intangible Assets is determined as the difference between the sales proceeds and the carrying amount of the
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F. IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS
Tangible, Intangible and ROU assets are reviewed at each balance sheet date for impairment. In case events and
circumstances indicate any impairment, recoverable amount of assets is determined. An impairment loss is
recognized in the statement of profit and loss, whenever the carrying amount of assets either belonging to Cash
Generating Unit (CGU) or otherwise exceeds recoverable amount. The recoverable amount is the higher of assets'
fair value less cost to disposal and its value in use. In assessing value in use, the estimated future cash flows from the
use of the assets are discounted to their present value at appropriate rate.
Impairment losses recognized earlier may no longer exist or may have come down. Based on such assessment at
each reporting period the impairment loss is reversed and recognized in the Statement of Profit and Loss. In such
cases the carrying amount of the asset is increased to the lower of its recoverable amount and the carrying amount
that have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years.
G. NON-CURRENT ASSETS HELD FOR SALE
Non-current assets held for sale are presented separately in the balance sheet when the following criteria are met:
- the Company is committed to selling the asset;
- the assets are available for sale immediately;
- an active plan of sale has commenced; and
- Sale is expected to be completed within 12 months.
Assets held for sale and disposal groups are measured at the lower of their carrying amount and fair value less cost
to sell. Assets held for sale are no longer amortised or depreciated.
Non-current asset classified as held for sale are presented separately from the other assets in the balance sheet. The
liabilities of a Non-current asset classified as held for sale are presented separately from other liabilities in the
balance sheet.
H. FINANCIAL INSTRUMENTS
Financial assets and financial liabilities (financial instruments) are recognised when the company becomes a party
to the contractual provisions of the instruments. The company determines the classification of its financial assets
and financial liabilities at initial recognition based on its nature and characteristics.
The company categorizes financial assets and financial liabilities measured at fair value into one of three levels
depending on the ability to observe inputs employed for such measurement:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within level 1 that are observable, either directly or indirectly for
the asset or liability.
Level 3: Inputs for the asset or liability which are not based on observable market data (unobservable inputs).
The financial assets and financial liabilities are classified as current if they are expected to be realised or settled
within operating cycle of the company or otherwise these are classified as non-current.
The classification of financial instruments whether to be measured at Amortized Cost, at Fair Value Through Profit
and Loss (FVTPL) or at Fair Value through Other Comprehensive Income (FVTOCI) depends on the objective and
contractual terms to which they relate. Classification of financial instruments are determined on initial recognition.
I. Financial Assets
i. Initial Recognition and measurement
The financial assets include investments, trade receivable, loans and advances, cash and cash
equivalents, bank balances other than cash and cash equivalents, derivative financial instruments and
other financial assets.
Financial assets are initially measured at fair value. Transaction costs directly attributable to the
acquisition or issue of financial assets (other than financial assets at fair value through profit or loss) are
added to or are deducted from the fair value of the financial assets as appropriate in initial recognition.
However, trade receivable that do not contain a significant financing component are measured at
transaction price.
ii. Subsequent measurement
For the purpose of subsequent measurement, financial assets are classified in the following categories:
(i) at amortised cost,
(ii) at fair value through other comprehensive income (FVTOCI), and
(iii) at fair value through profit or loss (FVTPL).
Financial Assets at amortised cost
A 'financial Asset' is measured at the amortised cost if the following two conditions are met:
(i) The asset is held within a business whose objective is to hold these assets in order to collect
contractual cash flows and
(ii) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
Amortised Cost is determined using the Effective Interest Rate ("EIR") method. Discount or premium on
acquisition and other fees or costs forms an integral part of the EIR.
Financial Asset at Fair Value through Other Comprehensive Income (FVTOCI)
Financial assets are measured at fair value through other comprehensive income if these financial assets
are held both for collection of contractual cash flows and for selling the financial assets, and contractual
terms of the financial asset give rise to cash flows representing solely payments of principal and interest.
Financial Assets at Fair value through profit or loss (FVTPL)
Financial Assets which does not meet the criteria of amortised cost or fair value through other
comprehensive income are classified as Fair Value through Profit or loss. These are recognised at fair
value and changes therein are recognized in the Statement of profit and loss.
Equity Instruments
Equity instruments covered within the Scope of Ind AS 109 are measured at FVTPL except for
investments in Subsidiaries and Associate which are measured at cost.
The company makes an election to present changes in fair value through other comprehensive income or
through profit or loss on instrument-by instrument basis. The classification is made on initial recognition
and is irrevocable.
In case the company decides to classify an equity instrument at FVTOCI, then all fair value changes on the
instrument, excluding dividends, are recognized in the Other Comprehensive Income (OCI). In addition,
profit or loss arising on sale is taken to other comprehensive income. The amount accumulated in this
respect is transferred within the Equity on derecognition.
iii. Derecognition
The company derecognizes a financial asset or a group of financial assets when the contractual rights to
the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another party.
II. Financial Liabilities
i. Initial Recognition and measurement
The financial liabilities include trade and other payables, loan and borrowings including book overdraft,
derivative financial instruments and other financial liabilities.
Financial liabilities are initially measured at fair value. Transaction costs directly attributable to the
acquisition or issue of financial liabilities (other than financial liabilities at fair value through profit or loss)
are added to or are deducted from the fair value of the financial liabilities as appropriate in initial
recognition.
ii. Subsequent measurement
For the purpose of subsequent measurement, financial liabilities are classified in the following
categories:
(i) at amortised cost, and
(ii) at fair value through profit or loss (FVTPL).
Financial Liabilities at amortised cost
After initial recognition, financial liabilities are measured at amortized cost using Effective Interest Rate
(EIR) method. When the financial liabilities are derecognised, gain or losses are recognised in the
Statement of profit and loss. Discount or premium on acquisition and other fees or costs forms an
integral part of the EIR.
Financial Liabilities at Fair value through profit or loss (FVTPL)
Financial Liabilities which does not meet the criteria of amortised cost are classified as Fair Value through
Profit or loss. These are recognised at fair value and changes therein are recognized in the Statement of
profit and loss.
iii. Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or
expires.
MI. Derivative and Hedge Accounting
Initial Recognition and Subsequent measurement
The company on entering into derivative financial instruments such as foreign exchange forward, swap and
option contracts to mitigate the risk of changes in foreign exchange rates in respect of financial instruments
and forecasted cash flows denominated in certain foreign currencies. The company uses hedging instruments
which provide principles on the use of such financial derivatives consistent with the risk management strategy
of the company. The hedge instruments are designated and documented as hedges and effectiveness of
hedge instruments to reduce the risk associated with the exposure being hedged is assessed and measured at
inception and on an ongoing basis.
Any derivative that is either not designated as a hedge, or is so designated but is ineffective as per Ind AS 109
"Financial Instruments", is categorized as a financial asset/ financial liability, at fair value through profit or loss.
Transaction costs attributable are also recognized in Statement of profit and loss. Changes in the fair value of
the derivative hedging instrument designated as a fair value hedge are recognized in the Statement of profit
and loss.
Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognized
in other comprehensive income and presented within equity as cash flow hedging reserve to the extent that
the hedge is effective.
Hedging instrument which no longer meets the criteria for hedge accounting, expires or is sold, terminated or
exercised, then hedge accounting is discontinued prospectively. Any gain or loss recognised in other
comprehensive income and accumulated in equity remains therein till that time and thereafter to the extent
hedge accounting being discontinued is recognised in Statement of profit and loss. When a forecasted
transaction is no longer expected to occur, the cumulative gain or loss accumulated in equity is transferred to
the Statement of profit and loss.
IV. Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made
to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due.
Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs.
Subsequently in accordance with the terms of a debt instrument, the liability is measured at the higher of the
amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount
recognised less cumulative amortisation.
V. Offsetting financial instruments
Financial assets and liabilities including derivative financial instruments 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 counterparty.
VI. Impairment of financial assets
A financial asset is assessed for impairment at each balance sheet date. A financial asset is considered to be
impaired if objective evidence indicates that one or more events have had a negative effect on the estimated
future cash flows of that asset. The company recognises loss allowances using the Expected Credit Loss ("ECL")
model for financial assets measured at amortised cost.
The company recognises lifetime expected credit losses for trade receivables. Loss allowance equal to the
lifetime expected credit losses are recognised if the credit risk on that financial asset has increased significantly
since initial recognition. If the credit risk on a financial instrument has not increased significantly since initial
recognition, the company measures the loss allowance for that financial instrument at an amount equal to 12-
month expected credit losses.
VII. Cash and cash equivalents
All highly liquid financial instruments, which are readily convertible into determinable amounts of cash and
which are subject to an insignificant risk of change in value and are having original maturities of three months
or less from the date of purchase, are considered as cash equivalents. Cash and cash equivalents includes
balances with banks which are unrestricted for withdrawal and usage.
I. INVENTORIES
Inventories are valued at lower of cost or net realisable value. Inventories comprises of Raw materials i.e. purchased
and harvested tea leaves, stores and spare parts and finished goods. Cost in case of harvested tea leaves represents
fair value less cost to sell.
Cost of Finished Goods comprise of direct material including purchased tea leaves, direct labour and appropriate
portion of variable and fixed overhead expenditure. Cost of inventories also includes all costs incurred in bringing
the inventories to their present location and condition. Costs are assigned to individual items of inventory on the
basis of weighted average method. 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.
By-Products which are sold are valued at estimated net realisable value.
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
Tea leaves growing on tea bushes are measured at fair value less cost to sell with changes in fair value recognised in
Statement of Profit and Loss.
K. FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are translated into the functional currency at the exchange rates prevailing on the
date of the transactions. Foreign currency monetary assets and liabilities at the reporting date are translated at the
reporting date exchange rates. Non-monetary items which are carried in terms of historical cost denominated in a
foreign currency, are reported using the exchange rate at the date of transaction. Foreign exchange loss or gain
resulting from the settlement of the foreign currency transactions and translation of monetary assets and liabilities
are generally recognized as income or expense in the statement of Profit and Loss account in the year in which they
arise.
L. EQUITY SHARE CAPITAL
An equity instrument is a contract that evidences residual interest in the assets of the company after deducting all of
its liabilities. Par value of the equity shares is recorded as share capital and the amount received in excess of par value
is classified as Securities Premium.
Costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax
effects.
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