Note 2.2: Material Accounting Policies
(A) Current vs non-current classification
The Company presents assets and liabilities in the balance
sheet based on current / non-current classification. An asset
is treated as current when it is:
• Expected to be realised or intended to be sold or
consumed in normal operating cycle
• Held primarily for the purpose of trading
• Expected to be realised within twelve months after
the reporting period, or
• Cash or cash equivalent unless restricted from
being exchanged or used to settle a liability on the
reporting date.
All other assets are classified as non-current.
A liability is current when:
• It is expected to be settled in normal operating cycle
• It is held primarily for the purpose of trading
• It is due to be settled within twelve months after the
reporting period, or
• There is no unconditional right to defer the settlement
of the liability on the reporting date.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as
non-current assets and liabilities.
The operating cycle is the time between the acquisition of
assets for processing and their realisation in cash and cash
equivalents. The Company has identified twelve months as
its operating cycle.
(B) Revenue from operations
(i) Revenue from contract with customer
Revenue from contracts with customers is recognised
when control over the goods or services are
transferred to the customer at an amount that reflects
the consideration to which the Company expects to
be entitled in exchange for those goods or services.
Sale of goods
Revenue from sale of goods is recognised at the
point in time when control of the good is transferred
to the customer, generally on delivery of the goods.
The normal credit term is 0 to 20 days upon delivery.
The Company considers whether there are other
promises in the contract that are separate performance
obligations to which a portion of the transaction price
needs to be allocated. In determining the transaction
price for the sale of goods, the Company considers
the effects of variable consideration, the existence
of significant financing components, non-cash
consideration, and consideration payable to the
customer (if any).
Variable consideration
If the consideration in a contract includes a variable
amount, the Company estimates the amount of
consideration to which it will be entitled in exchange
for transferring the goods to the customer. The variable
consideration is estimated at contract inception and
constrained until it is highly probable that a significant
revenue reversal in the amount of cumulative revenue
recognised will not occur when the associated
uncertainty with the variable consideration is
subsequently resolved. Some contracts for the sale
of goods provide customers with a right to return
defective / damaged products and discount and
rebates on sales. The rights to return and discount and
rebates on sales give rise to variable consideration.
The Company provides discount and rebates on
sales to certain customers based on aggregate sales
covered by the schemes. Revenue from sales is
recognised based on the applicable price to a given
customer, net of the estimated pricing allowances,
discounts, rebates and other incentives to customers.
Accumulated experience and judgement based on
historical experience and the specific terms of the
scheme are used to estimate and provide for the
discount and rebates on sales and revenue is only
recognised to the extent that it is highly probable that
a significant reversal will not occur. The Company
does not generally provide a right of return on the
goods supplied to customers.
Contract balances
Trade receivables
A receivable represents the Company's right to an
amount of consideration that is unconditional (i.e.,
only the passage of time is required before payment
of the consideration is due).
Contract liabilities
A contract liability is the obligation to transfer goods
or services to a customer for which the Company
has received consideration from the customer.
If a customer pays consideration before the Company
transfers goods or services to the customer, a
contract liability is recognised when the payment
is made. Contract liabilities are recognised as
revenue when the Company performs its obligation
under the contract.
(C) Government grants
Government grants are recognised where there is
reasonable assurance that the grant will be received and
all attached conditions have been complied with. When the
grant relates to an expense item, it is recognised as other
operating revenue on a systematic basis over the periods
that the related costs, for which it is intended to compensate,
are expensed. When the grant relates to an asset, it is
initially recognised as deferred income at fair value if there
is reasonable assurance that they will be received, and the
Company will comply with the conditions associated with
the grant. Grants related to the acquisition of assets are
recognised in profit or loss as other operating income on a
systematic basis over the useful life of the asset.
(D) Property, plant and equipments
Property, plant and equipment is stated at cost, net of
accumulated depreciation and accumulated impairment
losses, if any. Cost is inclusive of freight, duties, taxes or
levies (net of recoverable taxes) and any directly attributable
cost of bringing the assets to their working condition for
intended use. Such cost includes the cost of replacing
part of the Property, plant and equipment and borrowing
costs for long-term construction projects if the recognition
criteria are met. When significant parts of Property, plant
and equipment are required to be replaced at intervals,
the Company depreciates them separately based on their
specific useful lives. Likewise, when a major inspection is
performed, its cost is recognised in the carrying amount
of the Property, plant and equipment if the recognition
criteria are satisfied.
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 the statement of profit and
loss during the reporting period in which they are incurred.
Property, plant and equipment which are not ready for
intended use as on the date of Balance Sheet are disclosed
as “Capital work-in-progress".
Items of stores and spares that meet the definition of
property, plant and equipment are capitalised at cost and
depreciated over their useful life. Otherwise, such items
are classified as inventories.
An item of property, plant and equipment and any significant
part initially recognised is derecognised upon disposal or
when no future economic benefits are expected from its
use or disposal. Any gain or loss arising on derecognition
of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset) is
included in the statement of profit and loss when the asset
is derecognised.
The residual values, useful lives and methods of
depreciation of property, plant and equipment are reviewed
at each financial year end and adjusted prospectively,
if appropriate.
Depreciation on property, plant and equipment is calculated
on a straight line method over estimated useful lives of
the assets. The management has estimated the below
useful life based on its estimate regarding the period over
which the assets are expected to be used and the same is
supported by technical evaluation:
Goodwill being an Intangible asset with indefinite useful
lives is not amortised, but tested for impairment annually,
either individually or at the cash-generating unit level.
The assessment of indefinite life is reviewed annually
to determine whether the indefinite life continues to be
supportable. If not, the change in useful life from indefinite
to finite is made on a prospective basis.
Gains or losses arising from derecognition of an intangible
asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset
and are recognised in the statement of profit or loss when
the asset is derecognised.
A summary of amortisation policies applied to the
Company's intangible asset is as below:
On Transition to Ind AS, the Company elected to continue
with the carrying value of all of its property, plant and
equipment recognised as at 1 April 2016 measured as
per the previous GAAP and use that carrying value as the
deemed cost of the property, plant and equipment.
Depreciation on additions/(disposals) is provided on a
pro-rata basis i.e. from/ (upto) the date on which asset is
ready for use/ (disposed off).
(E) Intangible assets
Intangible assets acquired separately are measured on
initial recognition at cost. The cost of intangible assets
acquired in a business combination is their fair value
at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated
amortisation and accumulated impairment losses.
The useful lives of intangible assets are assessed as either
finite or indefinite.
Intangible assets with finite lives are amortised on straight
line basis over the useful economic life and assessed
for impairment whenever there is an indication that the
intangible asset may be impaired. The amortisation
period and the amortisation method for an intangible
asset with a finite useful life are reviewed at least at the
end of each reporting period. Changes in the expected
useful life or the expected pattern of consumption of
future economic benefits embodied in the asset are
considered to modify the amortisation period or method,
as appropriate, and are treated as changes in accounting
estimates. The amortisation expense on intangible assets
with finite lives is recognised in the statement of profit and
loss unless such expenditure forms part of carrying value
of another asset.
Amortisation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
(F) Impairment of non-financial assets
At each reporting date, the Company reviews the carrying
amounts of its non-financial assets (other than inventories,
contract assets and deferred tax assets) to determine
whether there is any indication of impairment. If any such
indication exists, then the asset's recoverable amount is
estimated. Goodwill is tested annually for impairment.
For impairment testing, assets are grouped together into
the smallest group of assets that generates cash inflows
from continuing use that are largely independent of the
cash inflows of other assets or CGUs. Goodwill arising from
a business combination is allocated to CGUs or groups of
CGUs that are expected to benefit from the synergies of
the combination.
The recoverable amount of an individual asset or CGU is
the greater of its value in use and its fair value less costs of
disposal. Value in use is based on the estimated future cash
flows, discounted to their present value using a pre-tax
discount rate that reflects current market assessments
of the time value of money and the risks specific to
the asset or CGU.
An impairment loss is recognised if the carrying amount of
an asset or CGU exceeds its recoverable amount.
Impairment losses are recognised in profit or loss. They are
allocated first to reduce the carrying amount of any goodwill
allocated to the CGU, and then to reduce the carrying
amounts of the other assets in the CGU on a pro rata basis.
An impairment loss in respect of goodwill is not
subsequently reversed. In respect of other assets for which
impairment loss has been recognised in prior periods,
the Company reviews at each reporting date whether
there is any indication that the loss has decreased or no
longer exists. An impairment loss is reversed if there has
been a change in the estimates used to determine the
recoverable amount. Such a reversal is made only to the
extent that the asset's carrying amount does not exceed
the carrying amount that would have been determined, net
of depreciation or amortisation, if no impairment loss had
been recognised.
(G) Inventories
Raw materials, packing materials, stores, spares and other
consumables are valued at lower of cost and net realisable
value. However, materials and other items held for use
in the production of inventories are not written down
below cost if the finished products in which they will be
incorporated are expected to be sold at or above cost.
Cost of raw materials, packing materials, stores, spares and
other consumables are determined on a moving weighted
average basis. Stores and spares which do not meet the
definition of property, plant and equipment are accounted
as inventories.
Finished goods are valued at lower of cost and net
realisable value on an item-by-item basis. Cost includes
direct materials, labour and proportionate manufacturing
overheads based on normal operating capacity.
Traded goods are valued at lower of cost and net realisable
value. Cost includes cost of purchase and other costs
incurred in bringing the inventories to their present location
and condition. Cost is determined on moving weighted
average basis.
Net realisable value is the estimated selling price in the
ordinary course of business, less estimated costs of
completion and estimated cost necessary to make the sale.
(H) Leases
The company's leases mainly comprises of land, buildings
and facilities. The Company assesses whether a contract
is, or 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.
The Company as lessee
The Company applies a single recognition and measurement
approach for all leases, except for short-term leases and
leases of low-value assets. The Company recognises lease
liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.
i) Right-of-use assets
The Company recognises right-of-use assets at the
commencement date of the lease. The right-of-use
assets are initially recognised 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, if any. Right-of-use assets are depreciated on
a straight-line basis over the shorter of the lease term
and the estimated useful lives of the assets as follows:
If ownership of the leased asset transfers to the
Company at the end of the lease term or the
cost reflects the exercise of a purchase option,
depreciation is calculated using the estimated useful
life of the asset. The right-of-use assets are also
subject to impairment.
ii) Lease Liabilities
At the commencement date of the lease, the Company
recognises lease liabilities measured at the present
value of lease payments to be made over the lease
term. The lease payments include fixed payments
(including in substance fixed payments) less any lease
incentives receivable, variable lease payments that
depend on an index or a rate, and amounts expected
to be paid under residual value guarantees. The lease
payments also include the exercise price of a purchase
option reasonably certain to be exercised by the
Company and payments of penalties for terminating
the lease, if the lease term reflects the Company
exercising the option to terminate. Variable lease
payments that do not depend on an index or a rate
are recognised as expenses (unless they are incurred
to produce inventories) in the period in which the
event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the
Company uses its incremental borrowing rate at the
lease commencement date if the interest rate implicit
in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities
is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition,
the carrying amount of lease liabilities is remeasured
if there is a modification, a change in the lease term,
a change in the lease payments (e.g., changes to
future payments resulting from a change in an index
or rate used to determine such lease payments) or a
change in the assessment of an option to purchase
the underlying asset.
iii) Short-term leases and leases of low-value
assets
The Company applies the short-term lease recognition
exemption to its short-term leases of building (i.e.,
those leases that have a lease term of 12 months
or less from the commencement date and do not
contain a purchase option). It also applies the lease of
low-value assets recognition exemption to leases that
are considered to be low value. Lease payments of
short-term leases and leases of low-value assets are
recognised as expense on a straight-line basis over
the lease term.
(I) Segment reporting
The Company is engaged in the business of snacks food.
The Chief Operating Decision Maker reviews the operating
results of the Company as a whole for purposes of making
decisions about resources to be allocated and assess its
performance. The entire operations are classified as a
single segment, namely 'Snacks food'.
The Company prepares its segment information in
conformity with the accounting policies adopted for
preparing and presenting the financial statements of the
Company as a whole.
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