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Accounting Policies of Bata India Ltd. Company
Mar 31, 2025
Corporate information
Bata India Limited (the Company) (CIN: L19201WB1931PLC007261) is a public limited company incorporated and domiciled in India. The Company''s shares are listed on stock exchanges in India. The registered office of the Company is located at 27B, Camac Street, Ist floor, Kolkata - 700016.
The Company is primarily engaged in the business of manufacturing and trading of footwear and accessories through its retail and wholesale network.
1. Summary of material accounting policies
The material accounting policies adopted by the company in preparation of its standalone financial statements are listed below. Such accounting policies have been applied consistently to all the years presented in these standalone financial statements, unless otherwise stated.
The standalone financial statements (âfinancial statementsâ) comply in all material aspects with the Indian Accounting Standards (Ind AS) notified under section 133 of Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015 (as amended)] and other relevant provisions of the Act.
These financial statements are authorised for issue by Company''s Board of Directors on 28th May 2025.
The financial statements have been prepared on a historical cost basis except for the following:
|
Items |
Measurement Basis |
|
|
Defined Benefit Plan |
Plan measured value |
assets at fair |
|
Derivative instruments |
Fair value |
|
All the amounts included in the financial statements are reported in millions of Indian Rupee (INR) and are rounded off to the nearest million, except per share data and unless stated otherwise.
b. Property, plant and equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.
Capital work-in-progress is stated at cost, net of accumulated impairment losses, if any
Depreciation on property, plant and equipment
i. Leasehold improvements (LHI) are depreciated on straight line basis over the period of lease or useful life (not exceeding 9 years), whichever is lower.
ii. Furniture and fixture (at stores) are depreciated on straight line basis over the period of 5 years.
iii. Depreciati on on other property, pl ant and equipment is provided on written down value method at the rates based on the estimated useful life of the assets as described below:
|
Category of property, plant and equipment |
Useful Lives |
|
Buildings |
|
|
- Factory buildings |
30 years |
|
- Other than factory buildings* |
30 years - 60 Years |
|
- Fences, wells, tube wells |
5 years |
|
Plant and equipment |
|
|
- Moulds |
8 years |
|
- Data processing equipment |
3 years |
|
- Servers |
6 years |
|
- Other plant and equipment* |
5 years - 15 years |
|
Category of property, plant and equipment Useful Lives |
|
Furniture and fixture (other than stores) 10 years Vehicles 8 years Office equipment* 10 years *The Company, based on management estimates, depreciates certain items of buildings, plant and equipment and office equipment over estimated useful lives which is different than the useful life prescribed in Schedule II to the Act. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used. Refer note 1A(a) for the other accounting policies relevant to property, plant and equipment. |
Intangible assets acquired separately are recorded at cost at the time of initial recognition.
The Company amortises intangible assets using the straight-line method over the following periods:
Computer software 5 years
License rights Over the period of
license agreement
Refer note 1A(b) for the other accounting policies relevant to intangible assets.
The costs of individual items of inventory are determined on a first-in first-out basis. Volume rebates or discounts are taken into account when estimating the cost of inventory if it is probable that they have been earned and will take effect.
Inventories are valued at the lower of cost and 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.
Refer note 1A(c) for the other accounting policies relevant to inventories.
e. Revenue from contracts with customers
The Company manufactures and sells a range of footwear and accessories through its own retail and franchisee stores, wholesale network and e-commerce.
The Company operates a network of own and franchisee retail stores across India. Revenue from the sale of goods sold through own retail stores is recognised when the Company delivers goods to the customer.
Payment of the transaction price is due immediately when the customer purchases the goods and takes delivery in store.
Revenue from sale of goods sold through franchisee stores is recognised when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer''s acceptance of the products. Delivery occurs when the products have been shipped or delivered to the customer depending on the terms of arrangement.
The goods sold through franchisee stores are often sold with retrospective volume discounts based on aggregate sales over a 12 month period. Revenue from these sales is recognised based on the price specified in the contract, net of the estimated volume discounts. Accumulated experience is used to estimate and provide for the discounts, using the most likely method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. A liability for refund of volume discounts (included in other current liabilities- refund liabilities) is recognised for expected volume discounts payable to
customers in relation to sales made until the end of the reporting period. No significant element of financing is deemed present as the sales are generally made with a credit term of 30 to 90 days, which is consistent with market practice.
The Company''s obligation to repair or replace faulty products under the standard warranty terms is recognised as a provision, see note 17b.
Sale of goods - other than retaili. Wholesale
The Company sells products to distributors. Revenue from sale of goods in such arrangements is recognised when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer''s acceptance of the products. Delivery occurs when the products have been shipped or delivered to the customer depending on the terms of arrangement.
The goods are often sold with retrospective volume discounts based on aggregate sales over a 12 month period. Revenue from these sales is recognised based on the price specified in the contract, net of the estimated volume discounts. Accumulated experience is used to estimate and provide for the discounts, using the most likely method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. A liability for refund of volume discounts (included in other current liabilities- refund liabilities) is recognised for expected volume discounts payable to customers in relation to sales made until the end of the reporting period. No significant element of financing is deemed present as the sales are generally made with a credit term of 30
to 120 days, which is consistent with market practice. The Company''s obligation to repair or replace faulty products under the standard warranty terms is recognised as a provision, see note 17b.
The Company through marketplace and its own website sells its products to customers. Revenue from sale of goods through the website is recognised when control of the products has transferred, being when the products are delivered to the customer. For e-commerce sales, it is the Company''s policy to sell its products to the end customer with a right of return within 7 to 30 days. Therefore, a refund liability in relation to expected returns (included in other current liabilities- refund liabilities) and a right to recover the returned goods (included in other current assets) are recognised for the products expected to be returned. Accumulated experience is used to estimate such returns at the time of sale at a portfolio level (expected value method). Because the number of products returned has been steady for years, it is highly probable that a significant reversal in the cumulative revenue recognised will not occur. The validity of this assumption and the estimated amount of returns are reassessed at each reporting date.
Customer loyalty programme
The Company operates a loyalty points programme which allows customers to accumulate points when they purchase products in the Company''s retail stores. The points can be redeemed against consideration payable for subsequent purchases. Hence, consideration is allocated between the products sold and the points issued based on the relative stand-alone selling prices. For the allocation of consideration to points issued, relative stand-alone selling prices of the points
issued is determined by applying a statistical analysis (based on data available) of points redemption history of the customers. The transaction price allocated to the points issued is deferred (deferred revenue) and recognised as revenue when the points are redeemed or expire.
i) Retirement benefit in the form of pension costs is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the pension fund. The Company recognises contribution payable to the pension fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to a reduction in future payment or a cash refund.
ii) The Provident Fund (administered by a Trust) is a defined benefit scheme whereby the Company deposits an amount determined as a fixed percentage of basic pay to the fund every month. The benefit vests upon commencement of employment. The interest credited to the accounts of the employees is adjusted on an annual basis to conform to the interest rate declared by the government for the Employees Provident Fund. The Company has adopted actuarial valuation based on projected unit credit method to arrive at provident fund liability as at year end.
iii) The Company operates a defined benefit gratuity plan, which requires
contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan is determined using actuarial valuation based on the projected unit credit method.
Remeasurements, comprising of actuarial gains and losses, the effect of asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to other comprehensive income (OCI) in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Past service costs are recognised in profit or loss on the earlier of:
- The date of the plan amendment or curtailment, and
- The date that the Company recognises related restructuring costs.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
- Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
- Net interest expense or income
iv) Compensated absences are provided for based on actuarial valuation on projected unit credit method carried by an actuary, at each year end.
Actuarial gains/losses are immediately taken to the statement of profit and loss
and are not deferred. The Company presents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
v) Expenses incurred towards voluntary retirement scheme are charged to the standalone statement of profit and loss in the year such scheme is accepted by the employees/workers.
The Company''s lease asset classes primarily consist of leases for buildings taken for warehouses, offices and retail stores. 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: the contract involves the use of an identified asset, the Company has right to obtain substantially all of the economic benefits from use of the asset through the period of the use and the Company has the right to direct the use of the identified asset.
At the date of commencement of the lease, the Company recognises a right-of-use asset (ROU) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases). For these short-term leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements include the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities include these options when it is reasonably certain that they will be exercised.
The ROU 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.
ROU 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.
The lease liability is initially measured at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, which is generally the case for the Company, using the incremental borrowing rate, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value of ROU asset in a similar economic environment with similar terms, security and conditions.
The lease term is reassessed if an option is actually exercised (or not exercised) or the Company becomes obliged to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the lessee. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise or not exercise an extension or a termination option.
Variable lease payments that depend on sales are recognised in profit or loss in the period which the condition that triggers those payment occurs.
Trade receivables are amounts due from customers for goods sold in the ordinary
course of business and reflects the Company''s unconditional right to consideration (that is, payment is due only on the passage of time). Trade receivables are recognised initially at the transaction price as they do not contain significant financing components. The Company holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less loss allowance.
For trade receivables, the Company applies the simplified approach required by Ind AS 109, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
i. Financial assetsClassification of financial assets at amortised cost
The Company classifies its financial assets at amortised cost only if both of the following criteria are met:
- the asset is held within a business model whose objective is to collect the contractual cash flows, and
- the contractual terms give rise to cash flows that are solely payments of principal and interest.
Financial assets classified at amortised cost comprise trade receivables, loans, security deposits, deposits and other receivables.
''Remittance in transit'', which represent amount collected from customers through credit card / debit cards / UPI / Wallets / net banking, and not yet settled by the bank are classified as other financial assets.
Interest income on financial assets at amortised cost is calculated using the effective interest method is recognised in the standalone statement of profit and loss as part of other income.
Refer note 1A(n) for the other accounting policies relevant to financial instruments.
1A. Summary of other accounting policies
This note provides a list of other accounting policies adopted in the preparation of these standalone financial statements to the extent they have not already been disclosed as part of material accounting policy information (refer note 1). These policies have been consistently applied to all the years presented, unless otherwise stated.
(a) Property, plant and equipment
The cost comprises purchase price, borrowing costs if capitalisation criteria are met, directly attributable cost of bringing the asset to its working condition and location for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. 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.
The present value of the expected cost for decommissioning of an asset after its use is included in the cost of the respective asset, if the recognition criteria for a provision are met.
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property plant and equipment recognised as at 1st April 2015, measured as per the previous GAAP, and use that carrying value as the deemed cost of such property plant and equipment.
The Company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset.
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 standalone 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.
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
Intangible assets with finite lives are amortised 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 is recognised in the standalone statement of profit and loss.
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its intangible assets recognised as at 1st April 2015, measured as per the
previous GAAP, and use that carrying value as the deemed cost of such intangible assets.
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 standalone statement of profit or loss when the asset is derecognised.
The Company capitalises intangible asset under development for a project in accordance with the accounting policy. Initial capitalisation of costs is based on management''s judgement that technological and economic feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
- Raw materials, Traded Goods and Stores and spares: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition.
- Finished goods and work-in-progress: Cost includes cost of direct materials, direct labour and a proportion of variable and fixed manufacturing overhead expenditure, the latter being allocated based on the normal operating capacity.
Deferred revenue / Advance from customers (âcontract liabilitiesâ) is recognised if a payment is received or a payment is due (whichever is earlier) from a customer before the Company transfers the related goods. Contract liabilities are recognised as revenue when the Company performs under the contract (i.e., transfers control of the related goods or services to the customer).
(e) Foreign Currency TransactionsFunctional and presentation currency
The Company''s financial statements are presented in INR, which is also the Company''s functional and presentation currency.
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised in profit or loss.
The Company presents basic and diluted earnings per share.
Basic earnings per share
Basic earnings per share is calculated by dividing:
- the profit for the year
- by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
- the after-income tax effect of interest and other financing costs associated with dilutive potential equity shares the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
(g) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion
of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
(h) Taxation
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. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Company measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.
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 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) and does not give rise to equal taxable and deductible temporary differences.
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, unused tax credits 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 where there is a legally enforceable right to offset current tax assets and liabilities and where 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 profit or 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.
(i) Impairment of non-financial assets
Non-financial 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 the higher of an asset''s fair value less costs of disposal and value in use. For the purposes 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 inflows from other assets or groups 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.
These amounts represent liabilities for goods
and services provided to the Company prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 90 days of recognition except for outstanding dues to micro enterprises and small enterprises where the due date is within 45 days. 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.
(k) Provisions General
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses. The expense relating to any provision is presented in the standalone statement of profit and loss, net of any reimbursement. Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as part of finance costs.
Warranty provisions
Provisions for warranty-related costs are recognised when the product is sold to the customer. Initial recognition is based on actuarial valuation. The estimate of warranty related costs is revised semi-annually as per actuarial valuation.
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or a amount of obligation cannot be measured with sufficient reliability.
The Company does not recognise a contingent liability but discloses its existence in the standalone financial statements.
(m) Cash and cash equivalents
Cash and cash equivalents in the standalone balance sheet comprise cash at banks and on hand and short-term deposits with ''original maturities'' of three months or less, which are subject to an insignificant risk of changes in value.
''Funds in transit'', which represent cash collected from retail stores by the bank which is yet to be credited to the bank account, are considered as Cash and cash equivalents as such amounts are readily convertible to cash, there is an insignificant risk of changes in value, and the lapse of time is merely as a result of an administrative settlement process.
For the purpose of the standalone statement of cash flows, cash and cash equivalents consist of cash on hand, balances with banks and and deposits with original maturities of three months or less, net of outstanding bank overdrafts, if any if they are considered an integral part of the Company''s cash management.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Recognition and initial measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset''s contractual cash flow characteristics and the Company''s business model for managing them. With the exception of trade receivables that do not contain a significant financing component, the Company initially 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. Trade receivables that do not contain a significant financing component are measured at the transaction price.
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss. The Company''s financial assets at amortised cost includes trade receivables, security deposits & other receivables.
Equity investment in subsidiaries
The Company recognises its investment in subsidiaries at cost less any impairment losses. The said investments are tested for impairment whenever circumstances indicate that their carrying values may exceed the recoverable amount (viz. higher of the fair value less costs of disposal and the value in use).
Derecognition
A financial asset (or, where applicable, a part
of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e, removed from the Company''s standalone balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
The Company assesses on a forward-looking 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 35 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 required by Ind AS 109, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the standalone balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
(o) Non-current assets held for sale
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell.
Non-current assets are not depreciated while they are classified as held for sale.
(p) Government grants
Export benefits in the form of duty drawback, duty entitlement pass book (DEPB) and other schemes are recognised in the Standalone Statement of Profit and Loss when the right to receive credit as per the terms of the scheme is established in respect of exports made and when there is reasonable assurance that the grant will be received and the Company will comply with all the attached conditions.
2. Critical estimates and judgements
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results.
Management also needs to exercise judgement in applying the Company''s accounting policies.
Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances.
This note provides detailed information of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed.
The areas involving critical estimates or judgements are:
The cost of the defined benefit gratuity plan and other post-employment defined benefits (Provident Fund) are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The underlying bonds are further reviewed for quality.
The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based
on expected future inflation rates.
Further details about defined benefit obligations are given in note 28.
ii. Determination of lease term
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
For leases of offices, warehouses and retail stores, the following factors are normally the most relevant:
- If there are significant penalty payments to terminate (or not extend), the Company is typically reasonably certain to extend (or not terminate).
- If any leasehold improvements are expected to have a significant remaining value, the Company is typically reasonably certain to extend (or not terminate).
- Otherwise, the Company considers other factors including the costs and business disruption required to replace the leased asset.
Most extension options in above leases have been included in lease liabilities, because the lease is reasonably certain to be extended.
iii. Useful lives of property, plant and equipment:
Useful life is determined by the management based on a technical evaluation considering nature of asset, past experience, estimated usage of the asset, vendor''s advice etc and same is reviewed at each financial year end.
iv. Net Realisable value of inventory
The Company has defined policy for provision on inventory based on obsolete, damaged and slow moving inventories. The Company provides provision based on
policy, past experience, current trend and future expectations of these materials depending on the category of goods.
Amendments to standards adopted by the Company
The Ministry of Corporate Affairs vide notification dated 9th September 2024 and 28th September 2024 notified the Companies (Indian Accounting Standards) Second Amendment Rules, 2024 and Companies (Indian Accounting Standards) Third Amendment Rules, 2024,
respectively, which amended/ notified certain accounting standards (see below), and are effective for annual reporting periods beginning on or after 1st April 2024:
⢠Insurance contracts - Ind AS 117; and
⢠Lease Liability in Sale and Leaseback -Amendments to Ind AS 116
These amendments did not have any material impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
Mar 31, 2024
Corporate information
Bata India Limited (the Company) (CIN: L19201WB1931PLC007261) is a public limited company incorporated and domiciled in India. The Company''s shares are listed on stock exchanges in India. The registered office of the Company is located at 27B, Camac Street, Ist floor, Kolkata - 700016.
The Company is primarily engaged in the business of manufacturing and trading of footwear and accessories through its retail and wholesale network.
1. Summary of material accounting policies
The material accounting policies adopted by the company in preparation of its standalone financial statements are listed below. Such accounting policies have been applied consistently to all the years presented in these standalone financial statements, unless otherwise stated.
The standalone financial statements (âfinancial statementsâ) comply in all material aspects with the Indian Accounting Standards (Ind AS) notified under section 133 of Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015 (as amended)] and other relevant provisions of the Act.
These financial statements are authorised for issue by Company''s Board of Directors on 29th May 2024.
The financial statements have been prepared on a historical cost basis except for the following:
|
Items |
Measurement Basis |
|
|
Defined Benefit Plan |
Plan |
assets |
|
measured value |
at fair |
|
|
Derivative instruments |
Fair value |
|
All the amounts included in the financial statements are reported in millions of Indian Rupee (INR) and are rounded off to the nearest million, except per share data and unless stated otherwise.
b. Property, plant & equipment
Freehold land is carried at historical cost. All other items of property, plant & equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.
Capital work-in-progress is stated at cost, net of accumulated impairment losses, if any
Depreciation on property, plant & equipment
i. Leasehold improvements (LHI) are depreciated on straight line basis over the period of lease or useful life (not exceeding 9 years), whichever is lower.
ii. Furniture and fixture (at stores) are depreciated on straight line basis over the period of 5 years.
iii. Depreciation on other property, plant & equipment is provided on written down value method at the rates based on the estimated useful life of the assets as described below:
|
Category of property, plant & equipment |
Useful Lives |
|
Buildings |
|
|
- Factory buildings |
30 years |
|
- Other than factory buildings* |
30 years - 60 Years |
|
- Fences, wells, tube wells |
5 years |
|
Plant & equipment |
|
|
- Moulds |
8 years |
|
- Data processing equipment |
3 years |
|
- Servers |
6 years |
|
- Other plant and equipment* |
5 years - 15 years |
|
Furniture and fixture (other than stores) |
10 years |
|
Category of property, plant & equipment |
Useful Lives |
|
Vehicles |
8 years |
*The Company, based on management estimates, depreciates certain items of buildings, plant & equipment and office equipment over estimated useful lives which is different than the useful life prescribed in Schedule II to the Act. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
Refer note 1a(a) for the other accounting policies relevant to property, plant and equipment.
Intangible assets acquired separately are recorded at cost at the time of initial recognition.
The Company amortises intangible assets using the straight-line method over the following periods:
Computer software 5 years
License rights Over the period of
license agreement
Refer note 1a(b) for the other accounting policies relevant to intangible assets.
The costs of individual items of inventory are determined on a first-in first-out basis. Volume rebates or discounts are taken into account when estimating the cost of inventory if it is probable that they have been earned and will take effect.
Inventories are valued at the lower of cost and 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.
Refer note 1a(c) for the other accounting policies relevant to inventories.
The Company manufactures and sells a range of footwear and accessories through its own retail and franchisee stores, wholesale network and e-commerce.
The Company operates a network of own and franchisee retail stores across India. Revenue from the sale of goods sold through own retail stores is recognised when the Company delivers goods to the customer.
Payment of the transaction price is due immediately when the customer purchases the goods and takes delivery in store.
Revenue from sale of goods sold through franchisee stores is recognised when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer''s acceptance of the products. Delivery occurs when the products have been shipped or delivered to the customer depending on the terms of arrangement.
The Company''s obligation to repair or replace faulty products under the standard warranty terms is recognised as a provision, see note 17b.
Sale of goods - other than retaili. Wholesale
The Company sells products to distributors. Revenue from sale of goods in such arrangements is recognised when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the
channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer''s acceptance of the products. Delivery occurs when the products have been shipped or delivered to the customer depending on the terms of arrangement.
The goods are often sold with retrospective volume discounts based on aggregate sales over a 12 month period. Revenue from these sales is recognised based on the price specified in the contract, net of the estimated volume discounts. Accumulated experience is used to estimate and provide for the discounts, using the most likely method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. A liability for refund of volume discounts (included in other current liabilities- refund liabilities) is recognised for expected volume discounts payable to customers in relation to sales made until the end of the reporting period. No significant element of financing is deemed present as the sales are made with a credit term of 45 to 90 days, which is consistent with market practice. The Company''s obligation to repair or replace faulty products under the standard warranty terms is recognised as a provision, see note 17b.
The Company through marketplace and its own website sells its products to customers. Revenue from sale of goods through the website is recognised when control of the products has transferred, being when the products are delivered to the customer. For e-commerce sales, it is the Company''s policy to sell its products to the end customer with a right of return within 15 to 60 days. Therefore, a refund liability in relation to expected returns (included in other current liabilities- refund liabilities) and
a right to recover the returned goods (included in other current assets) are recognised for the products expected to be returned. Accumulated experience is used to estimate such returns at the time of sale at a portfolio level (expected value method). Because the number of products returned has been steady for years, it is highly probable that a significant reversal in the cumulative revenue recognised will not occur. The validity of this assumption and the estimated amount of returns are reassessed at each reporting date.
The Company operates a loyalty points programme which allows customers to accumulate points when they purchase products in the Company''s retail stores. The points can be redeemed against consideration payable for subsequent purchases. Hence, consideration is allocated between the products sold and the points issued based on the relative stand-alone selling prices. For the allocation of consideration to points issued, relative stand-alone selling prices of the points issued is determined by applying a statistical analysis (based on data available) of points redemption history of the customers. The transaction price allocated to the points issued is deferred (deferred revenue) and recognised as revenue when the points are redeemed or expire.
i) Retirement benefit in the form of pension costs is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the pension fund. The Company recognises contribution payable to the pension fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to a reduction in future payment or a cash refund.
ii) The Provident Fund (administered by a Trust) is a defined benefit scheme whereby the Company deposits an amount determined as a fixed percentage of basic pay to the fund every month. The benefit vests upon commencement of employment. The interest credited to the accounts of the employees is adjusted on an annual basis to conform to the interest rate declared by the government for the Employees Provident Fund. The Company has adopted actuarial valuation based on projected unit credit method to arrive at provident fund liability as at year end.
iii) The Company operates a defined benefit gratuity plan, which requires contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan is determined using actuarial valuation based on the projected unit credit method.
Remeasurements, comprising of actuarial gains and losses, the effect of asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to other comprehensive income (OCI) in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Past service costs are recognised in profit or loss on the earlier of:
- The date of the plan amendment or curtailment, and
- The date that the Company recognises related restructuring costs.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
- Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
- Net interest expense or income
iv) Compensated absences are provided for based on actuarial valuation on projected unit credit method carried by an actuary, at each year end.
Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The Company presents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
v) Expenses incurred towards voluntary retirement scheme are charged to the standalone statement of profit and loss in the year such scheme is accepted by the employees/workers.
The Company''s lease asset classes primarily consist of leases for buildings taken for warehouses, offices and retail stores. 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: the contract involves the use of an identified asset, the Company has right to obtain substantially all of the economic benefits from use of the asset through the period of the use and the Company has the right to direct the use of the identified asset.
At the date of commencement of the lease, the Company recognises a right-of-use asset (ROU) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases). For these short-term leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements include the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities include these options when it is reasonably certain that they will be exercised.
The ROU 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.
ROU 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.
The lease liability is initially measured at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, which is generally the
case for the Company, using the incremental borrowing rate, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value of ROU asset in a similar economic environment with similar terms, security and conditions.
Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option.
Variable lease payments that depend on sales are recognised in profit or loss in the period which the condition that triggers those payment occurs.
Trade receivables are amounts due from customers for goods sold in the ordinary course of business and reflects the Company''s unconditional right to consideration (that is, payment is due only on the passage of time). Trade receivables are recognised initially at the transaction price as they do not contain significant financing components. The Company holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less loss allowance.
For trade receivables, the Company applies the simplified approach required by Ind AS 109, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
i. Financial assetsClassification of financial assets at amortised cost
The Company classifies its financial assets at amortised cost only if both of the following criteria are met:
- the asset is held within a business model whose objective is to collect the contractual cash flows, and
- the contractual terms give rise to cash flows that are solely payments of principal and interest.
Financial assets classified at amortised cost comprise trade receivables, loans, security deposits, deposits with maturity of more than 12 months, and other receivables.
''Remittance in transit'', which represent amount collected from customers through credit card / debit cards / UPI / Wallets / net banking, and not yet settled by the bank are classified as other financial assets.
Interest income on financial assets at amortised cost is calculated using the effective interest method is recognised in the standalone statement of profit and loss as part of other income.
Refer note 1a(n) for the other accounting policies relevant to financial instruments.
1a. Summary of other accounting policies
This note provides a list of other accounting policies adopted in the preparation of these standalone financial statements to the extent they have not already been disclosed as part of material accounting policy information (refer note 1). These policies have been consistently applied to all the years presented, unless otherwise stated.
(a) Property, plant & equipment
The cost comprises purchase price, borrowing costs if capitalization criteria are met, directly attributable cost of bringing the asset to its working condition and location for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. 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.
The present value of the expected cost for decommissioning of an asset after its use is included in the cost of the respective asset, if the recognition criteria for a provision are met.
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property plant and equipment recognised as at 1st April 2015, measured as per the previous GAAP, and use that carrying value as the deemed cost of such property plant and equipment.
The Company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset.
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 standalone 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.
(b) Intangible assets
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
Intangible assets with finite lives are amortised 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 is recognised in the standalone statement of profit and loss.
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its intangible assets recognised as at 1st April 2015, measured as per the previous GAAP, and use that carrying value as the deemed cost of such intangible assets.
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 standalone statement of profit or loss when the asset is derecognised.
The Company capitalises intangible asset under development for a project in accordance with the accounting policy. Initial capitalisation of costs is based on management''s judgement that technological and economic feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
- Raw materials, Traded Goods and Stores and spares: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition.
- Finished goods and work-in-progress: Cost includes cost of direct materials, direct labour and a proportion of variable and fixed manufacturing overhead expenditure, the latter being allocated based on the normal operating capacity.
Deferred revenue / Advance from customers (âcontract liabilitiesâ) is recognised if a payment is received or a payment is due (whichever is earlier) from a customer before the Company transfers the related goods. Contract liabilities are recognised as revenue when the Company performs under the contract (i.e., transfers control of the related goods or services to the customer).
(e) Foreign Currency TransactionsFunctional and presentation currency
The Company''s financial statements are presented in INR, which is also the Company''s functional and presentation currency.
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised in profit or loss.
The Company presents basic and diluted earnings per share.
Basic earnings per share
Basic earnings per share is calculated by dividing:
- the profit for the year
- by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year.
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
- the after-income tax effect of interest and other financing costs associated with dilutive potential equity shares
- the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
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. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Company measures its
tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.
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 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) and does not give rise to equal taxable and deductible temporary differences.
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, unused tax credits 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 where there is a legally enforceable right to offset current tax assets and liabilities and where 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 profit or 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.
(i) Impairment of non-financial assets
Non-Financial 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 the higher of an asset''s fair value less costs of disposal and value in use. For the purposes 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 inflows from other assets or groups 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.
These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 90 days of recognition. 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.
(k) Provisions General
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not
recognised for future operating losses. The expense relating to any provision is presented in the standalone statement of profit and loss, net of any reimbursement. Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as part of finance costs.
Warranty provisions
Provisions for warranty-related costs are recognised when the product is sold to the customer. Initial recognition is based on actuarial valuation. The estimate of warranty related costs is revised semi-annually as per actuarial valuation.
(l) Contingent liability
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or a amount of obligation cannot be measured with sufficient reliability.
The Company does not recognise a contingent liability but discloses its existence in the standalone financial statements.
(m) Cash and cash equivalents
Cash and cash equivalents in the standalone balance sheet comprise cash at banks and on hand and short-term deposits with ''original maturities'' of three months or less, which are subject to an insignificant risk of changes in value.
''Funds in transit'', which represent cash collected from retail stores by the bank which is yet to be credited to the bank account, are considered as Cash and cash equivalents as such amounts are readily convertible to cash, there is an insignificant risk of changes in value, and the lapse of time is merely as a result of an administrative settlement process.
For the purpose of the standalone statement of cash flows, cash and cash equivalents consist of cash and short-term deposits with original maturities of three months or less, net of outstanding bank overdrafts, if any if they are considered an integral part of the Company''s cash management.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assetsRecognition and initial measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset''s contractual cash flow characteristics and the Company''s business model for managing them. With the exception of trade receivables that do not contain a significant financing component, the Company initially 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. Trade receivables that do not contain a significant financing component are measured at the transaction price.
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured using the effective
interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss. The company''s financial assets at amortised cost includes trade receivables, security deposits & other receivables.
Equity investment in subsidiaries
The Company recognises its investment in subsidiaries at cost less any impairment losses. The said investments are tested for impairment whenever circumstances indicate that their carrying values may exceed the recoverable amount (viz. higher of the fair value less costs of disposal and the value in use).
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e, removed from the Company''s standalone balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained
substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
The Company assesses on a forward-looking 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 35 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 required by Ind AS 109, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the standalone balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
(o) Non-current assets held for sale
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable.
They are measured at the lower of their carrying amount and fair value less costs to sell.
Non-current assets are not depreciated while they are classified as held for sale.
(p) Government grants
Export benefits in the form of duty drawback, duty entitlement pass book (DEPB) and other schemes are recognised in the Statement of profit and loss when the right to receive credit as per the terms of the scheme is established in respect of exports made and when there is reasonable assurance that the grant will be received and the Company will comply with all the attached conditions.
2. Critical estimates and judgements
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Company''s accounting policies.
Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances.
This note provides detailed information of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed.
The areas involving critical estimates or judgements are:
i. Defined benefit plans
The cost of the defined benefit gratuity plan and other post-employment defined benefits (Provident Fund) are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual
developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The underlying bonds are further reviewed for quality.
The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates.
Further details about gratuity obligations are given in note 28.
ii. Determination of lease term
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
For leases of warehouses, retail stores and equipment, the following factors are normally the most relevant:
- If there are significant penalty payments to terminate (or not extend), the Company is typically reasonably certain to extend (or not terminate).
- If any leasehold improvements are expected to have a significant remaining value, the Company is typically
reasonably certain to extend (or not terminate).
- Otherwi se, the Company considers
other factors including the costs and business disruption required to replace the leased asset.
iii. Useful lives of property, plant and equipment:
Useful life is determined by the management based on a technical evaluation considering nature of asset, past experience, estimated usage of the asset, vendor''s advice etc and same is reviewed at each financial year end.
iv. Net Realisable value of inventory
The Company has defined policy for provision on inventory based on obsolete, damaged and slow moving inventories. The Company provides provision based on policy, past experience, current trend and future expectations of these materials depending on the category of goods.
3. New and amended standards adopted by the Company
The Ministry of Corporate Affairs vide notification dated 31st March 2023 notified the Companies (Indian Accounting Standards) Amendment Rules, 2023, which amended certain accounting standards (see below), and are effective 1st April 2023:
⢠Disclosure of accounting policies -amendments to Ind AS 1
⢠Definition of accounting estimates -amendments to Ind AS 8
⢠Deferred tax related to assets and liabilities arising from a single transaction -amendments to Ind AS 12
The other amendments to Ind AS notified by these rules are primarily in the nature of clarifications.
These amendments did not have any material impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
Mar 31, 2023
Corporate information
Bata India Limited (the Company) (CIN: L19201WB1931PLC007261) is a public limited company incorporated and domiciled in India. The Company''s shares are listed on stock exchanges in India. The registered office of the Company is located at 27B, Camac Street, Ist floor, Kolkata - 700016.
The Company is primarily engaged in the business of manufacturing and trading of footwear and accessories through its retail and wholesale network.
1. Summary of significant accounting policies
The significant accounting policies adopted by the company in preparation of its standalone financial statements are listed below. Such accounting policies have been applied consistently to all the years presented in these standalone financial statements, unless otherwise stated.
a. Basis of Preparation
The standalone financial statements (financial statements) comply in all material aspects with the Indian Accounting Standards (Ind AS) notified under section 133 of Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015 (as amended)] and other relevant provisions of the Act.
These financial statements are authorised for issue by Company''s Board of Directors on 18 May 2023.
The financial statements have been prepared on a historical cost basis except for the following:
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Items |
Measurement Basis |
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Defined Benefit Plan |
Plan assets measured at fair value |
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Derivative instruments Fair Value |
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All the amounts included in the financial statements are reported in millions of Indian Rupee (INR) and are rounded off to the nearest million, except per share data and unless stated otherwise.
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
d. Property, plant & equipment
Freehold land is carried at historical cost. All other items of property, plant & equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met, directly attributable cost of bringing the asset to its working condition and location for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. 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.
The present value of the expected cost for decommissioning of an asset after its use is included in the cost of the respective asset, if the recognition criteria for a provision are met.
Capital work-in-progress is stated at cost, net of accumulated impairment losses, if any
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property plant and equipment recognised as at April 1, 2015, measured as per the previous GAAP, and use that carrying value as the deemed cost of such property plant and equipment.
The Company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset.
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 standalone 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.
e. Depreciation on property, plant & equipment
i. Leasehold improvements (LHI) & furniture & fixtures at stores are depreciated on straight line basis over the period of lease or useful life (not exceeding 9 years), whichever is lower.
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ii. Depreciation on other Property, plant & equipment is provided on written down value method at the rates based on the estimated useful life of the assets as described below: |
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Category of property, plant & equipment |
Useful Lives |
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Buildings |
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- Factory buildings |
30 years |
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- Other than factory buildings* |
10 years - 60 Years |
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- Fences, wells, tube wells |
5 years |
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Plant & equipments |
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- Moulds |
8 years |
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- Data processing equipment |
3 years |
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- Servers |
6 years |
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- Other plant and equipments* |
5 years - 15 years |
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Furniture and fixtures (other than stores) |
10 years |
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Vehicles |
8 years |
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Office equipments* |
10 years |
*The Company, based on management estimates, depreciates certain items of buildings, office equipments and plant and equipments over estimated useful lives which is different than the useful life prescribed in Schedule II to the Act. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
iii. Depreciation on property, plant & equipment added/disposed off during the year is provided on prorata basis with respect to date of acquisition/ disposal.
Intangible assets acquired separately are recorded at cost at the time of initial recognition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
Intangible assets with finite lives are amortised 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 is recognised in the standalone statement of profit and loss.
The Company amortises computer software over the period of five years.
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its intangible assets recognised as at April 1, 2015, measured as per the previous GAAP, and use that carrying value as the deemed cost of such intangible assets.
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 standalone statement of profit or loss when the asset is derecognised.
The Company capitalises intangible asset under development for a project in accordance with the accounting policy. Initial capitalisation of costs is based on management''s judgement that technological and economic feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model.
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
- Raw materials: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
- Finished goods and work in progress: Cost includes cost of direct materials, direct labour and a proportion of variable and fixed manufacturing overhead expenditure, the latter being allocated based on the normal operating capacity. Cost is determined on a weighted average basis.
- Traded goods: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on first-in first-out basis.
- Stores and spares: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
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.
The Company manufactures and sells a range of footwear and accessories through its own retail and franchisee stores, wholesale network and e-commerce.
The Company operates a network of own and franchisee retail stores across India. Revenue from the sale of goods sold through own retail stores is recognised when the Company delivers goods to the customer.
Payment of the transaction price is due immediately when the customer purchases the goods and takes delivery in store.
Revenue from sale of goods sold through franchisee stores is recognised when control of the products has transferred, being when the products are delivered to the customer, the
customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer''s acceptance of the products. Delivery occurs when the products have been shipped or delivered to the customer depending on the terms of arrangement.
The Company''s obligation to repair or replace faulty products under the standard warranty terms is recognised as a provision, see note 17.
Sale of goods - other than retaili. Wholesale
The Company sells products to distributors. Revenue from sale of goods in such arrangements is recognised when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer''s acceptance of the products. Delivery occurs when the products have been shipped or delivered to the customer depending on the terms of arrangement.
The goods are often sold with retrospective volume discounts based on aggregate sales over a 12 months period. Revenue from these sales is recognised based on the price specified in the contract, net of the estimated volume discounts. Accumulated experience is used to estimate and provide for the discounts, using the most likely method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. A liability for refund of volume discounts (included in other current liabilities- refund liabilities) is recognised for expected volume discounts payable to customers in relation to sales made until the end of the reporting period. No significant element of financing is deemed present as the sales are made with a credit term of 45 to 90 days, which is consistent with market practice. The Company''s obligation to repair or replace faulty products under the standard warranty terms is recognised as a provision, see note 17.
The Company through marketplace and its own website sells its products to customers. Revenue from sale of goods through the website is recognised when control of the products has transferred, being when the products are delivered to the customer. For e-commerce sales, it is the Company''s policy to sell its products to the end customer with a right of return within 15 to 60 days. Therefore, a refund liability in relation to expected returns (included in other current liabilities- refund liabilities) and a right to recover the returned goods (included in other current assets) are recognised for the products expected to be returned. Accumulated experience is used to estimate such returns at the time of sale at a portfolio level (expected value method). Because the number of products returned has been steady for years, it is highly probable that a significant reversal in the cumulative revenue recognised will not occur. The validity of this assumption and the estimated amount of returns are reassessed at each reporting date.
The Company operates a loyalty points programme which allows customers to accumulate points when they purchase products in the Company''s retail stores. The points can be redeemed against consideration payable for subsequent purchases. Hence, consideration is allocated between the products sold and the points issued based on the relative stand-alone selling prices. For the allocation of consideration to points issued, relative stand-alone selling prices of the points issued is determined by applying a statistical analysis (based on data available) of points redemption history of the customers. The transaction price allocated to the points issued is deferred (deferred revenue) and recognised as revenue when the points are redeemed or expire
Deferred revenue / Advance from customers
(âcontract liabilityâ) is recognised if a payment is received or a payment is due (whichever is earlier) from a customer before the Company transfers the related goods. Contract liabilities are recognised as revenue when the Company performs under the contract (i.e., transfers control of the related goods or services to the customer).
i. Foreign Currency TransactionsFunctional and presentation currency
The Company''s financial statements are presented in INR, which is also the Company''s functional and presentation currency.
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised in profit or loss.
j. Government grants:
Export benefits in the form of duty drawback, duty entitlement pass book (DEPB) and other schemes are recognised in the Statement of profit and loss when the right to receive credit as per the terms of the scheme is established in respect of exports made and when there is reasonable assurance that the grant will be received and the Company will comply with all the attached conditions.
i) Retirement benefit in the form of pension costs is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the pension fund. The Company recognizes contribution payable to the pension fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the
contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to a reduction in future payment or a cash refund.
ii) The Provident Fund (administered by a Trust) is a defined benefit scheme where by the Company deposits an amount determined as a fixed percentage of basic pay to the fund every month. The benefit vests upon commencement of employment. The interest credited to the accounts of the employees is adjusted on an annual basis to conform to the interest rate declared by the government for the Employees Provident Fund. The Company has adopted actuarial valuation based on projected unit credit method to arrive at provident fund liability as at year end.
iii) The Company operates a defined benefit gratuity plan, which requires contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan is determined using actuarial valuation based on the projected unit credit method
Remeasurements, comprising of actuarial gains and losses, the effect of asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Past service costs are recognised in profit or loss on the earlier of:
- The date of the plan amendment or curtailment, and
- The date that the Company recognises related restructuring costs.
Net interest is calculated by applying the discount rate to the net defined benefit
liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
- Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
- Net interest expense or income
iv) Compensated absences are provided for based on actuarial valuation on projected unit credit method carried by an actuary, at each year end.
Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The Company presents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
v) Expenses incurred towards voluntary retirement scheme are charged to the standalone statement of profit and loss in the year such scheme is accepted by the employees/workers.
l. LeasesCompany âas aâ lessee
The Company''s lease asset classes primarily consist of leases for buildings taken for warehouses, offices and retail stores. 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: the contract involves the use of an identified asset, the Company has right to obtain substantially all of the economic benefits from use of the asset through the period of the use and the Company has the right to direct the use of the identified asset.
At the date of commencement of the lease, the Company recognises a right-of-use asset
(ROU) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Company recognises 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 when it is reasonably certain that they will be exercised.
The ROU 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.
ROU 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. ROU assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost of disposal and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, which is generally the case for the company, using the incremental borrowing rate, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value of ROU asset in a similar economic environment with similar terms, security and conditions.
Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option.
Variable lease payments that depend on sales are recognised in profit or loss in the period which the condition that triggers those payment occurs.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases. When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease. For operating leases, rental income is recognized on a straight -line basis over the term of the relevant lease.
The Company presents basic and diluted earnings per share.
Basic earnings per share is calculated by dividing:
- the profit attributable to owners of the Company
- by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
- the after income tax effect of interest and other financing costs associated with dilutive
potential equity shares
- the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
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. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Company measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.
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 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, unused tax credits 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 where there is a legally enforceable right to offset current tax assets and liabilities and where 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 profit or 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.
o. Impairment of non-financial assets
Non-Financial 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 the higher of an asset''s fair value less costs of disposal and value in use. For the purposes 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 inflows from other assets or groups 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.
These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 90 days of recognition. 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.
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses. The expense relating to any provision is presented in the standalone statement of profit and loss, net of any reimbursement. Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as part of finance costs.
Provisions for warranty-related costs are recognised when the product is sold to the customer. Initial recognition is based on actuarial valuation. The estimate of warranty related costs is revised semi-annually as per actuarial valuation.
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or a amount of obligation cannot be measured with sufficient reliability.
The Company does not recognise a contingent liability but discloses its existence in the Financial Statements
Trade receivables are amounts due from customers
for goods sold in the ordinary course of business and reflects the Company''s unconditional right to consideration (that is, payment is due only on the passage of time). Trade receivables are recognised initially at the transaction price as they do not contain significant financing components. The Company holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less loss allowance.
t. Cash and cash equivalents
Cash and cash equivalents in the standalone balance sheet comprise cash at banks and on hand and short-term deposits with ''original maturities'' of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the standalone statement of cash flows, cash and cash equivalents consist of cash and short-term deposits with original maturities of three months or less, net of outstanding bank overdrafts, if any if they are considered an integral part of the Company''s cash management.
u. Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Recognition and initial measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset''s contractual cash flow characteristics and the Company''s business model for managing them. With the exception of trade receivables that do not contain a significant financing component, the Company initially 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. Trade receivables that do not contain a significant financing component are measured at the transaction price.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ''solely payments of principal and interest (SPPI)'' on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
For the purpose of subsequent measurement, financial assets are classified in four categories:
- ''Financial assets'' (debt instruments) at amortised cost
- ''Financial assets'' (debt instruments) at fair value through other comprehensive income (FVTOCI) with recycling of cumulative gains and losses (debt instruments)
- Financial assets designated at FVTOCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)
- Financial assets at fair value through profit or loss. (FVTPL)
The Company reclassifies debt investments when and only when its business model for managing those assets changes.
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation
is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss. The company''s financial assets at amortised cost includes trade receivables, security deposits & other receivables.
Financial assets at FVTOCI (debt instruments)
For debt instruments at fair value through OCI, movements in the carrying amount are taken through OCI, except for the recognition of interest income, foreign exchange gains and losses and impairment losses or reversals which are recognised in the standalone statement of profit and loss. Upon derecognition, the cumulative fair value change recognised in OCI is recycled to profit or loss.
Financial assets at FVTPL
Assets that do not meet the criteria for amortized cost or as FVTOCI, are measured at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognised in profit or loss. The Company currently does not have any debt instrument as at FVTPL.
Equity instruments other than equity investment in subsidiaries
The Company subsequently measures all equity investments (other than equity investment in subsidiaries) at fair value. Where the Company''s management has 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 following the derecognition of the investment. Dividends from such investments are recognised in profit or loss as other income when the Company''s 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 income/ other expenses in the standalone statement of profit and loss.
Equity investment in subsidiaries
The Company recognises its investment in subsidiaries at cost less any impairment losses. The said investments are tested for impairment
whenever circumstances indicate that their carrying values may exceed the recoverable amount (viz. higher of the fair value less costs of disposal and the value in use).
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e, removed from the Company''s standalone balance sheet) when:
-The rights to receive cash flows from the asset have expired, or
-The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
The Company assesses on a forward looking 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 35 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 required by Ind AS 109, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
Interest income on financial assets at amortised cost is calculated using the effective interest method is recognised in the standalone statement of profit and loss as part of other income.
Financial liabilitiesInitial recognition and measurement
Financial liabilities are classified, at initial recognition, as:
⢠financial liabilities at FVTPL,
⢠loans and borrowings and payables,
⢠derivatives designated as hedging instruments in an effective hedge relationship.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company''s financial liabilities include trade and other payables and lease liabilities.
Financial liabilities measured at amortised cost (loans and borrowings)
Other financial liabilities are subsequently measured at amortised cost using the effective interest rate method. Interest expense is recognised in standalone statement of profit and loss.
Derecognition of financial liability
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the
terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the standalone statement of profit and loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the standalone balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Derivative financial instrumentsInitial recognition and subsequent measurement
The Company uses derivative financial instruments, such as forward currency contracts, to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
2. Critical estimates and judgements
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Company''s accounting policies.
Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances.
This note provides detailed information of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and
assumptions turning out to be different than those originally assessed.
The areas involving critical estimates or judgements are:
i. Defined benefit plans
The cost of the defined benefit gratuity plan and other post-employment defined benefits (Provident Fund) are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The underlying bonds are further reviewed for quality.
The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates.
Further details about gratuity obligations are given in note 28.
ii. Determination of lease term
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
For leases of warehouses, retail stores and equipment, the following factors are normally the most relevant:
- If there are significant penalty payments to terminate (or not extend), the Company is typically reasonably certain to extend (or not terminate).
- If any leasehold improvements are expected to have a significant remaining value, the Company is typically reasonably certain to extend (or not terminate).
- Otherwise, the Company considers other factors including the costs and business disruption required to replace the leased asset.
iii. Useful lives of property, plant and equipment and intangible assets:
Useful life is determined by the management based on a technical evaluation considering nature of asset, past experience, estimated usage of the asset, vendor''s advice etc and same is reviewed at each financial year end.
iv. Net Realisable Value of inventory
The Company has defined policy for provision on inventory based on obsolete, damaged and slow moving inventories. The Company provides provision based on policy, past experience, current trend and future expectations of these materials depending on the category of goods.
3a. New and amended standards adopted by the Company
The Ministry of Corporate Affairs had vide notification dated 23 March 2022 notified Companies (Indian Accounting Standards) Amendment Rules, 2022 which amended certain accounting standards, and are effective 1 April 2022. These amendments did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
3b. New and amended standards issued but not effective
The Ministry of Corporate Affairs has vide notification dated 31 March 2023 notified Companies (Indian Accounting Standards) Amendment Rules, 2023 (the ''Rules'') which amends certain accounting standards, and are effective 1 April 2023.
The Rules predominantly amend Ind AS 12, Income taxes, and Ind AS 1, Presentation of Financial Statements. The other amendments to Ind AS notified by these rules are primarily in the nature of clarifications.
These amendments are not expected to have a material impact on the Company in the current or future reporting periods and on foreseeable future transactions.
Mar 31, 2022
1. Corporate information
Bata India Limited is primarily engaged in the business of manufacturing and trading of footwear and accessories through its retail and wholesale network.
Bata India Limited is a public company domiciled in India. Its shares are listed on stock exchanges in India. The registered office of the Company is located at 27B, Camac Street, Ist floor, Kolkata - 700016.
2. Significant Accounting Policies 2.1 Basis of Preparation
The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under section 133 of Companies Act 2013 (the Act and other relevant provisions of the Act).
The financial statements are authorised for issue by Company''s board of directors on May 25, 2022.
The financial statements have been prepared on a historical cost or at amortised cost except for the following assets and liabilities
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Items |
Measurement Basis |
||
|
Net defined benefit (asset)/liability |
Fair Value of plan assets less present value of defined benefit obligations |
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|
Derivatives |
Fair Value |
||
The financial statements are presented in INR and all values are rounded to the nearest Million (INR 000,000).
2.2 Summary of significant 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 for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
? Expected to be settled in normal operating cycle
? Held primarily for the purpose of trading
? Due to be settled within twelve months after the reporting period, or
? There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Based on the nature of products and 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.
Final equity dividend is recorded as liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the company''s Board of Directors.
The Company measures financial instruments, such as forward contracts at fair value at each balance sheet date.
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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
? In the principal market for the asset or liability, or
? In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market is accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
? Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
? Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is
directly or indirectly observable
? Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is
unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
d. Property, plant & equipment
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property plant and equipment recognised as at April 1, 2015, measured as per the previous GAAP, and use that carrying value as the deemed cost of such property plant and equipment
Property, plant & equipment and capital work-in-progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met, directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. Such cost includes the cost of replacing part of the plant and equipment.
The present value of the expected cost for decommissioning of an asset after its use is included in the cost of the respective asset, if the recognition criteria for a provision are met.
The Company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset.
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 or 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.
e. Depreciation on Property, plant & equipment
i. Lease hold improvements (LHI) & furniture & fixtures at stores are amortised on straight line basis over the period of lease or useful life (not exceeding 9 years), whichever is lower.
ii. Depreciation on other Property, plant & equipment is provided on written down value method at the rates based on the estimated useful life of the assets as described below:
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Companies Act, 2013 |
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Buildings - Factory Buildings - Other than Factory Buildings - Fences, Wells, Tube wells |
30 years 10 years - 60 Years 5 years |
30 years 30 years- 60 years 5 years |
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Plant & equipments - Moulds - Data processing equipment - Servers - Other Plant and Machinery and Equipments |
8 years 3 years 6 years 5 years - 15 years |
8 years 3 years 6 years 5 years - 15 years |
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Furniture & Fittings - Others |
10 years |
10 years |
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Vehicles |
8 years |
8 years |
The Company, based on management estimates, depreciates certain items of Property, Plant and Equipment''s over estimated useful lives which are lower than the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
iii. Depreciation on Property, plant & equipment added/disposed off during the year is provided on pro-rata basis with respect to date of acquisition/ disposal.
f. Intangible Assets
Intangible assets acquired separately are recorded at cost at the time of initial recognition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
Intangible assets with finite lives are amortised over the useful economic life (not exceeding five years) 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 is recognised in the statement of profit and loss.
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.
The Company capitalises intangible asset under development for a project in accordance with the accounting policy. Initial capitalisation of costs is based on management''s judgement that technological and economic feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model.
g. Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
? Raw materials: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
? Finished goods and work-in-progress: Cost includes cost of direct materials and labour and a proportion of fixed manufacturing overheads based on the normal operating capacity. Cost is determined on a weighted average basis.
? Traded goods: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
? Stores and spares: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
h. Revenue Recognition
Company has applied Ind AS 115 which establishes a comprehensive framework for determining whether, how much and when revenue is to be recognised.
Ind AS 115 five step model is used to determine whether revenue should be recognised at a point in time or over time, and at what amount is as below:
⢠Step 1: Identify the contract with the customer
⢠Step 2: Identify the performance obligations in the contract
⢠Step 3: Determine the transaction price
⢠Step 4: Allocate the transaction price to the performance obligations
⢠Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.
Revenue is recognised upon transfer of control of promised goods or services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those products or services.
- Revenue from sales of goods is recognised on output basis measured by units delivered, number of transactions etc.
- Revenue from the sale of goods is recognised at the point in time when control is transferred to the customer which coincides with the performance obligation under the contract with the customer.
- Revenue from services is recognized in accordance with the terms of contract when the services are rendered and the related costs are incurred
Revenue is measured based on the transaction price, which is the consideration, adjusted for discounts, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.
Revenue from related party is recognised based on transaction price which is at arm''s length.
Use of significant judgments in revenue recognition :-
- The Company''s contracts with customers could include promises to transfer multiple products and services to a customer. The Company assesses the products / services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligation involves judgments to determine the deliverables and the ability of the customer to benefit independently from such deliverables.
- Judgment is also required to determine the transaction price for the contract. The transaction price could be either a fixed amount of customer consideration or variable consideration with elements such as volume discounts, price concessions and incentives. The transaction price is also adjusted for the effects of the time value of money if the contract includes a significant financing component. Any consideration payable to the customer is adjusted to the transaction price, unless it is a payment for a distinct product or service from the customer. The estimated amount of variable consideration is adjusted in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur and is reassessed at the end of each reporting period. The Company allocates the elements of variable considerations to all the performance obligations of the contract unless there is observable evidence that they pertain to one or more distinct performance obligations.
The Company provides normal warranty expense provisions for manufacturing defects for 3 months on all its products sold, in line with the industry practice. The Company does not provide any extended warranties to its customers.
The Company operates a loyalty points programme which allows customers to accumulate points when they purchase products in the Company''s retail stores. The points can be redeemed against consideration payable for subsequent purchases. Hence, consideration is allocated between the products sold and the points issued. For the allocation of consideration to points issues, fair value of the points issued is determined by applying a statistical analysis (based on data available) of points redemption history of the customers. The fair value of the points issued is deferred based on actuarial valuation and recognised as revenue when the points are redeemed.
Interest Income is recognised on time proportion basis taking into account the amount outstanding and the applicable interest rates and is disclosed in "other income".
Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is pending) when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms.
Unearned and deferred revenue ("contract liability") is recognised when there is billings in excess of revenues.
i. Foreign Currency Transactions
The Company''s financial statements are presented in INR, which is also the Company''s functional currency. Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at their respective functional currency spot rates at the date the transaction first qualifies for recognition. However, for practical reasons, the Company uses an average rate if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of the following:
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.
j. Government grants:
Export benefits in the form of Duty Drawback, Duty Entitlement Pass Book (DEPB) and other schemes are recognized in the Statement of profit and loss when the right to receive credit as per the terms of the scheme is established in respect of exports made and when there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
k. Retirement and Other Employee Benefits
i) Retirement benefit in the form of pension costs is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the pension fund. The Company recognizes contribution payable to the pension fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to a reduction in future payment or a cash refund.
ii) The Provident Fund (administered by a Trust) is a defined benefit scheme where by the Company deposits an amount determined as a fixed percentage of basic pay to the fund every month. The benefit vests upon commencement of employment. The interest credited to the accounts of the employees is adjusted on an annual basis to confirm to the interest rate declared by the government for the Employees Provident Fund. The Company has adopted actuary valuation based on project unit credit method to arrive at provident fund liability as at year end.
iii) The Company operates a defined benefit gratuity plan, which requires contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method
Remeasurements, comprising of actuarial gains and losses, the effect of asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Past service costs are recognised in profit or loss on the earlier of:
? The date of the plan amendment or curtailment, and
? The date that the Company recognises related restructuring costs.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
? Service costs comprising current service costs, past-service costs, gains and losses on curtailments and nonroutine settlements; and
? Net interest expense or income
iv) Compensated absences are provided for based on actuarial valuation on projected unit credit method carried by an actuary, at each year end.
Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The Company presents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
v) Expenses incurred towards voluntary retirement scheme are charged to the statement of profit and loss in the year such scheme is accepted by the employees/workers.
Company is lessee
The Company''s lease asset classes primarily consist of leases for buildings taken for Warehouses, offices and retail stores. 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 for all lease arrangements in which it is a lessee, except for leases with a term of twelve 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 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.
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. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
The Company as a lessor
Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases. When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease. For operating leases, rental income is recognized on a straight -line basis over the term of the relevant lease.
m. Earnings per share
The Company presents basic and diluted earnings per share data for its equity shares. Basic and diluted earnings per share is calculated by dividing the profit or loss attributable to owners of the equity shares of the Company by the weighted average number of equity shares outstanding during the year.
n. Taxation Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Current tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
Deferred tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity).
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
o. Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) fair value less costs of disposal or its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
Impairment losses, are recognised in the statement of profit and loss.
Intangible assets with indefinite useful lives are tested for impairment annually, as appropriate and when circumstances indicate that the carrying value may be impaired.
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the statement of profit or loss, net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as part of finance costs.
Warranty provisions
Provisions for warranty-related costs are recognised when the product is sold or service provided to the customer. Initial recognition is based on actuarial valuation. The initial estimate of warranty-related costs is revised annually.
q. Contingent liability
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a Contingent liability but discloses its existence in the financial statements.
r. Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash, short-term deposits and unpaid dividend account, net of outstanding bank overdrafts as they are considered an integral part of the Company''s cash management.
s. Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one Company and a financial liability or equity instrument of another Company.
Recognition and initial measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
For the purpose of subsequent measurement, financial assets are classified in five categories:
? Debt Instrument at amortised cost
? Debt instruments at fair value through other comprehensive income (FVTOCI)
? Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL)
? Equity instruments measured at fair value through other comprehensive income (FVTOCI)
? Investments in equities of subsidiaries at cost Debt instruments at amortised cost
A ''debt instrument'' is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
This category is the most relevant to the Company. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss. This category generally applies to trade receivables, Security deposits & other receivables.
A ''debt instrument'' is classified as at the FVTOCI if both of the following criteria are met:
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
b) The asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVT OCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). However, the Company recognizes interest income, impairment losses & reversals and foreign exchange gain or loss in the P&L. On derecognition of the asset, cumulative gain or loss previously recognised in oCi is reclassified from the equity to P&L. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
Debt instrument at FVTPL
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch'').
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the P&L. The Company has not designated any debt instrument as at FVTPL.
Equity investments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income, subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to P&L, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the P&L. Investments in equities of subsidiaries
Investments in equities of subsidiaries are carried at cost in separate financial statements.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Company''s balance sheet) when:
> The rights to receive cash flows from the asset have expired, or
> The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are carried at amortised cost or at Fair value through OCI except equity investment which is carried at fair value through OCI. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. The application of simplified approach does not require the Company to track changes in credit risk. Based on the past history and track records the company has assessed the risk of default by the customer and expects the credit loss to be insignificant. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognized as an impairment gain or loss in profit or loss.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the statement of profit and loss (P&L).
The balance sheet presentation for various financial instruments is described below:
> Financial assets measured as at amortised cost. ECL is presented as an allowance, i.e., as an integral part of measurement of those assets in the balance sheet. The allowance reduces the net carrying amount until the asset meets write-off criteria.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as:
> financial liabilities at fair value through profit or loss,
> financial liabilities measured at amortised cost,
> loans and borrowings and payables,
> derivatives designated as hedging instruments in an effective hedge relationship.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company''s financial liabilities include trade and other payables and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include:
- financial liabilities held for trading
- financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind-AS 109.
Gains or losses on liabilities held for trading are recognised in the profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, if and only if, the criteria in Ind-AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/loss are not subsequently transferred to P&L. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of profit or loss. The Company has not designated any financial liability as at fair value through profit and loss.
Financial liabilities measured at amortised cost
Other financial liabilities are subsequently measured at amortised cost using the effective interest rate. Interest expense is recognised in statement of profit and loss.
Derecognition of financial liability
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest. The Company has not reclassified any financial asset during the current year or previous year.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when and only when there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Derivative financial instruments and hedge accounting Initial recognition and subsequent measurement
The Company uses derivative financial instruments, such as forward currency contracts, to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is unfavourable.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to profit or loss when the hedge item affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability.
For the purpose of hedge accounting, hedges are classified as:
? Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment.
? Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Company''s risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction, the nature of the risk being hedged, hedge ratio and how the Company will assess the effectiveness of changes in the hedging instrument''s fair value in offsetting the exposure to changes in the hedged item''s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:
(i) Fair value hedges
The change in the fair value of a hedging instrument is recognised in the statement of profit and loss as finance costs. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the statement of profit and loss as finance costs.
For fair value hedges relating to items carried at amortised cost, any adjustment to carrying value is amortised through profit or loss over the remaining term of the hedge using the EIR method. EIR amortisation may begin as soon as an adjustment exists and no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.
If the hedged item is derecognised, the unamortised fair value is recognised immediately in profit or loss. When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in profit and loss.
(ii) Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit and loss.
The Company uses forward currency contracts as hedges of its exposure to foreign currency risk in highly probable forecast transactions and firm commitments, the ineffective portion relating to foreign currency contracts is recognised in finance costs.
Amounts recognised as OCI are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs. When the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognised as OCI are transferred to the initial carrying amount of the non-financial asset or liability.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognised in OCI remains separately in equity until the forecast transaction occurs or the foreign currency firm commitment is met.
3. Significant accounting judgments, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the accounting policies and the reported amounts of income, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
a. Judgements
In the process of applying the Company''s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:
(i) Contingent liabilities
Contingent liabilities may arise from the ordinary course of business in relation to claims against the Company, including legal and other claims. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies inherently involves the exercise of significant judgement and the use of estimates regarding the outcome of future events.
(ii) Revenue recognition
The Company exercises judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time. The Company considers indicators such as how customer consumes benefits as services are rendered or who controls the asset as it is being created or existence of enforceable right to payment for performance to date and alternate use of such product or service, transfer of significant risks and rewards to the customer, acceptance of delivery by the customer, etc.
b. Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market change or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
b.1 Defined benefit plans
The cost of the defined benefit gratuity plan and other post-employment defined benefits are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The underlying bonds are further reviewed for quality.
The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates.
Further details about gratuity obligations are given in Note 30. b.2 Revenue recognition - Loyalty programme
The Company estimates the fair value of points awarded under the Loyalty programme by applying statistical techniques. Inputs to the model include making assumptions about expected redemption rates, the mix of products that will be available for redemption in the future and customer preferences. As points issued under the programme expire on expiry of specified period in accordance with the programme, such estimates are subject to significant uncertainty.
b.3 For details on warranty valuation refer note 2.2 (h).
c. Recent pronouncements
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On March 23, 2022, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2022, applicable from April 1st, 2022, as below:
Ind AS 103 - Business Combinations
The amendments specifiy that to qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must meet the definitions of assets and liabilities in the Conceptual Framework for Financial Reporting under Indian Accounting Standards (Conceptual Framework) issued by the Institute of Chartered Accountants of India at the acquisition date.
Ind AS 16 - Property, Plant and Equipment
For items produced during testing/ trail phase, clarification added that revenue generated out of the same shall not be recognised in statement of profit and loss and considered as part of cost of PPE.
Ind AS 37 - Provisions, Contingent Liabilities & Contingent Assets
Guidance on what constitutes cost of fulfilling contracts (to determine whether the contract is onerous or not) is included. Ind AS 109 - Financial instr
Mar 31, 2021
1. Corporate information
Bata India Limited is primarily engaged in the business of manufacturing and trading of footwear and accessories through its retail and wholesale network.
Bata India Limited is a public company domiciled in India. Its shares are listed on three stock exchanges in India. The registered office of the company is located at 27B, Camac Street, Ist floor, Kolkata - 700016.
2. Significant Accounting Policies 2.1 Basis of Preparation
The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under section 133 of Companies Act 2013 (the Act and other relevant provisions of the Act).
The financial statements are authorised for issue by Company''s Board of Directors on June 09, 2021.
The financial statements have been prepared on a historical cost or at amortised cost except for the following assets and liabilities
|
Items |
Measurement Basis |
|
|
Net defined benefit (asset)/liability |
Fair Value of plan assets less present value of defined benefit obligations |
|
|
Derivatives |
Fair Value |
The financial statements are presented in INR and all values are rounded to the nearest Million (INR 000,000).
2.2 Summary of significant accounting policiesa. 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 for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
? Expected to be settled in normal operating cycle
? Held primarily for the purpose of trading
? Due to be settled within twelve months after the reporting period, or
? There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Based on the nature of products and 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.
The Company recognises a liability to make cash distributions to equity holders when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
The Company measures financial instruments, such as forward contracts at fair value at each balance sheet date.
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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
? In the principal market for the asset or liability, or
? In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market is accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
? Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
? Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
? Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
d. Property, plant & equipment
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property plant and equipment recognised as at April 1, 2015, measured as per the previous GAAP, and use that carrying value as the deemed cost of such property plant and equipment
Property, plant & equipment and capital work in progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met, directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. Such cost includes the cost of replacing part of the plant and equipment.
The present value of the expected cost for decommissioning of an asset after its use is included in the cost of the respective asset, if the recognition criteria for a provision are met.
The Company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset.
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 or 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.
e. Depreciation on Property, plant & equipment
i. Lease hold improvements (LHI) & furniture & fixtures at stores are amortised on straight line basis over the period of lease or useful life (not exceeding 9 years), whichever is lower.
ii. Depreciation on other Property, plant & equipment is provided on written down value method at the rates based on the estimated useful life of the assets as described below:
|
Category of Property, plant & equipment |
Useful Lives |
|
|
Buildings - Factory Buildings - Other than Factory Buildings - Fences, Wells, Tube wells |
30 years 10 years - 60 Years 5 years |
|
|
Plant & equipments - Moulds - Data processing equipment - Servers - Other Plant and Machinery |
8 years 3 Years 6 Years 5 Years - 15 Years |
|
|
Furniture & Fittings - Others |
10 years |
|
|
Vehicles |
8 years |
|
|
Office equipment |
10 Years |
|
The Company, based on management estimates, depreciates certain items of building, plant and equipment over estimated useful lives which are lower than the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
iii. Depreciation on Property, plant & equipment added/disposed off during the year is provided on pro-rata basis with respect to date of acquisition/ disposal.
Intangible assets acquired separately are recorded at cost at the time of initial recognition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
Intangible assets (Computer Software) with finite lives are amortised over the useful economic life (not exceeding five years) 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 is recognised in the statement of profit and loss.
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.
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
? Raw materials: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
? Finished goods and work in progress: Cost includes cost of direct materials and labour and a proportion of fixed
manufacturing overheads based on the normal operating capacity. Cost is determined on a weighted average basis.
? Traded goods: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
? Stores and spares: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
During the year, an amount of INR 286.10 million (previous year INR 97.58 million (net of reversals)) was charged to the statement of profit and loss on account of obsolete, damaged and slow moving inventories.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
Company has applied Ind AS 115 which establishes a comprehensive framework for determining whether, how much and when revenue is to be recognised.
Ind AS 115 five step model is used to determine whether revenue should be recognised at a point in time or over time, and at what amount is as below:
⢠Step 1: Identify the contract with the customer
⢠Step 2: Identify the performance obligations in the contract
⢠Step 3: Determine the transaction price
⢠Step 4: Allocate the transaction price to the performance obligations
⢠Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.
Revenue is recognised upon transfer of control of promised goods or services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those products or services.
- Revenue from sales of goods is recognised on output basis measured by units delivered, number of transactions etc.
- Revenue from the sale of goods is recognised at the point in time when control is transferred to the customer which coincides with the performance obligation under the contract with the customer.
- Revenue from services is recognized in accordance with the terms of contract when the services are rendered and the related costs are incurred
Revenue is measured based on the transaction price, which is the consideration, adjusted for discounts, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.
Revenue from related party is recognised based on transaction price which is at arm''s length.
Use of significant judgments in revenue recognition :-
- The Company''s contracts with customers could include promises to transfer multiple products and services to a customer. The Company assesses the products / services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligation involves judgments to determine the deliverables and the ability of the customer to benefit independently from such deliverables.
- Judgment is also required to determine the transaction price for the contract. The transaction price could be either a fixed amount of customer consideration or variable consideration with elements such as volume discounts, price concessions and incentives. The transaction price is also adjusted for the effects of the time value of money if the contract includes a significant financing component. Any consideration payable to the customer is adjusted to the transaction price, unless it is a payment for a distinct product or service from the customer. The estimated amount of variable consideration is adjusted in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur and is reassessed at the end of each reporting period. The Company allocates the elements of variable considerations to all the performance obligations of the contract unless there is observable evidence that they pertain to one or more distinct performance obligations.
The Company provides normal warranty expense provisions for manufacturing defects for 3 months on all its products sold, in line with the industry practice. The Company does not provide any extended warranties to its customers.
The Company operates a loyalty points programme which allows customers to accumulate points when they purchase products in the Company''s retail stores. The points can be redeemed against consideration payable for subsequent purchases. Hence, consideration is allocated between the products sold and the points issued. For the allocation of consideration to points issues, fair value of the points issued is determined by applying a statistical analysis (based on data available) of points redemption history of the customers. The fair value of the points issued is deferred based on actuarial valuation and recognised as revenue when the points are redeemed.
Interest Income is recognised on time proportion basis taking into account the amount outstanding and the applicable interest rates and is disclosed in "other income".
Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is pending) when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms.
Unearned and deferred revenue (âcontract liabilityâ) is recognised when there is billings in excess of revenues.
i. Foreign Currency Transactions
The Company''s financial statements are presented in INR, which is also the Company''s functional currency. Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at their respective functional currency spot rates at the date the transaction first qualifies for recognition. However, for practical reasons, the Company uses an average rate if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of the following:
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.
Export benefits in the form of Duty Drawback, Duty Entitlement Pass Book (DEPB) and other schemes are recognized in the Statement of profit and loss when the right to receive credit as per the terms of the scheme is established in respect of exports made and when there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
k. Retirement and Other Employee Benefits
i) Retirement benefit in the form of pension costs is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the pension fund. The Company recognizes contribution payable to the pension fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to a reduction in future payment or a cash refund.
ii) The Provident Fund (administered by a Trust) is a defined benefit scheme where by the Company deposits an amount determined as a fixed percentage of basic pay to the fund every month. The benefit vests upon commencement of employment. The interest credited to the accounts of the employees is adjusted on an annual basis to confirm to the interest rate declared by the government for the Employees Provident Fund. The Company has adopted actuary valuation based on project unit credit method to arrive at provident fund liability as at year end.
iii) The Company operates a defined benefit gratuity plan, which requires contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method
Remeasurements, comprising of actuarial gains and losses, the effect of asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Past service costs are recognised in profit or loss on the earlier of:
? The date of the plan amendment or curtailment, and
? The date that the Company recognises related restructuring costs.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
? Service costs comprising current service costs, past-service costs, gains and losses on curtailments and nonroutine settlements; and
? Net interest expense or income
iv) Compensated absences are provided for based on actuarial valuation on projected unit credit method carried by an actuary, at each year end.
Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The Company presents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
v) Expenses incurred towards voluntary retirement scheme are charged to the statement of profit and loss in the year such scheme is accepted by the employees/workers.
The Company''s lease asset classes primarily consist of leases for buildings taken for Warehouses, offices and retail stores. 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 (âROUâ) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve 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 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.
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. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases. When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease. For operating leases, rental income is recognized on a straight -line basis over the term of the relevant lease.
m. Taxation Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Current tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
Deferred tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity).
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
n. Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) fair value less costs of disposal or its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount Impairment losses, are recognised in the statement of profit and loss
Intangible assets with indefinite useful lives are tested for impairment annually, as appropriate and when circumstances indicate that the carrying value may be impaired.
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the statement of profit or loss, net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as part of finance costs
Provisions for warranty-related costs are recognised when the product is sold or service provided to the customer. Initial recognition is based on actuarial valuation. The initial estimate of warranty-related costs is revised annually.
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a Contingent liability but discloses its existence in the financial statements.
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash, short-term deposits and unpaid dividend account, net of outstanding bank overdrafts as they are considered an integral part of the Company''s cash management.
A financial instrument is any contract that gives rise to a financial asset of one Company and a financial liability or equity instrument of another Company
Financial assetsRecognition and initial measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
For the purpose of subsequent measurement, financial assets are classified in five categories:
? Debt Instrument at amortised cost
? Debt instruments at fair value through other comprehensive income (FVTOCI)
? Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL)
? Equity instruments measured at fair value through other comprehensive income (FVTOCI)
? Investments in equities of subsidiaries at cost Debt instruments at amortised cost
A âdebt instrument'' is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
This category is the most relevant to the Company. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss. This category generally applies to trade receivables, Security deposits & other receivables.
A âdebt instrument'' is classified as at the FVTOCI if both of the following criteria are met:
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
b) The asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). However, the Company recognizes interest income, impairment losses & reversals and foreign exchange gain or loss in the P&L. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to P&L. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatch'').
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the P&L. The Company has not designated any debt instrument as at FVTPL.
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income, subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to P&L, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the P&L.
Investments in equities of subsidiaries
Investments in equities of subsidiaries are carried at cost in separate financial statements.
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Company''s balance sheet) when:
> The rights to receive cash flows from the asset have expired, or
> The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
The company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are carried at amortised cost or at Fair value through OCI except equity investment which is carried at fair value through OCI. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. The application of simplified approach does not require the Company to track changes in credit risk. Based on the past history and track records the company has assessed the risk of default by the customer and expects the credit loss to be insignificant. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognized as an impairment gain or loss in profit or loss.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the statement of profit and loss (P&L).
The balance sheet presentation for various financial instruments is described below:
> Financial assets measured as at amortised cost. ECL is presented as an allowance, i.e., as an integral part of measurement of those assets in the balance sheet. The allowance reduces the net carrying amount until the asset meets write-off criteria.
Financial liabilitiesInitial recognition and measurement
Financial liabilities are classified, at initial recognition, as:
> financial liabilities at fair value through profit or loss,
> financial liabilities measured at amortised cost,
> loans and borrowings and payables,
> derivatives designated as hedging instruments in an effective hedge relationship.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company''s financial liabilities include trade and other payables and derivative financial instruments.
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include:
- financial liabilities held for trading
- financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind-AS 109.
Gains or losses on liabilities held for trading are recognised in the profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, if and only if, the criteria in Ind-AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/loss are not subsequently transferred to P&L. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of profit or loss. The Company has not designated any financial liability as at fair value through profit and loss.
Financial liabilities measured at amortised cost
Other financial liabilities are subsequently measured at amortised cost using the effective interest rate. Interest expense is recognised in statement of profit and loss.
Derecognition of financial liability
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest. The Company has not reclassified any financial asset during the current year or previous year.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when and only when there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Derivative financial instruments and hedge accountingInitial recognition and subsequent measurement
The Company uses derivative financial instruments, such as forward currency contracts, to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative
contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is unfavourable.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to profit or loss when the hedge item affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability.
For the purpose of hedge accounting, hedges are classified as:
? Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment.
? Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Company''s risk management objective and strategy for undertaking hedge, the hedging / economic relationship, the hedged item or transaction, the nature of the risk being hedged, hedge ratio and how the Company will assess the effectiveness of changes in the hedging instrument''s fair value in offsetting the exposure to changes in the hedged item''s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:
The change in the fair value of a hedging instrument is recognised in the statement of profit and loss as finance costs. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the statement of profit and loss as finance costs.
For fair value hedges relating to items carried at amortised cost, any adjustment to carrying value is amortised through profit or loss over the remaining term of the hedge using the EIR method. EIR amortisation may begin as soon as an adjustment exists and no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.
If the hedged item is derecognised, the unamortised fair value is recognised immediately in profit or loss. When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in profit and loss.
The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit and loss.
The Company uses forward currency contracts as hedges of its exposure to foreign currency risk in highly probable forecast transactions and firm commitments, the ineffective portion relating to foreign currency contracts is recognised in finance costs.
Amounts recognised as OCI are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs. When the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognised as OCI are transferred to the initial carrying amount of the non-financial asset or liability.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognised in OCI remains separately in equity until the forecast transaction occurs or the foreign currency firm commitment is met.
Recent accounting pronouncements
On March 24 2021, the ministry of corporate affaires (â MCAâ) through a notification, amended schedule III of the companies act 2013 revising Division I,II and III and are applicable from April 1,2021. This amendment preliminary related to:
a) Change in existing presentation requirement for certain items in Balance sheet for e.g. lease liability security deposit, current maturities of long-term borrowing, effect of prior period error on equity share capital;
b) Additional discloser requirements in specified format, for e.g. aging of trade receivable trade payable capital work in progress, intangible assets shareholding of promoters, etc;
c) Discloser if fund have been used other than the specified purpose for which it was borrowed from bank and financial institutions;
d) Additional regulatory information for e.g. compliance with layers of companies, title deed of immoveable property financial ratios, loans and advances for key managerial personal etc;
e) Discloser related to Corporate Social Responsibility (CSR) undisclosed income and crypto or victual currency; The amendments are extensive and the company is evaluating the same.
3. Significant accounting judgments, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the accounting policies and the reported amounts of income, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
In the process of applying the Company''s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:
(i) Contingent liabilities
Contingent liabilities may arise from the ordinary course of business in relation to claims against the Company, including legal and other claims. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies inherently involves the exercise of significant judgement and the use of estimates regarding the outcome of future events.
(ii) Revenue recognition
The Company exercises judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time. The Company considers indicators such as how customer consumes benefits as services are rendered or who controls the asset as it is being created or existence of enforceable right to payment for performance to date and alternate use of such product or service, transfer of significant risks and rewards to the customer, acceptance of delivery by the customer, etc.
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market change or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur. b.1 Defined benefit plans
The cost of the defined benefit gratuity plan and other post-employment defined benefits are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The underlying bonds are further reviewed for quality.
The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates.
Further details about gratuity obligations are given in Note 30. b.2 Revenue recognition - Loyalty programme
The Company estimates the fair value of points awarded under the Loyalty programme by applying statistical techniques. Inputs to the model include making assumptions about expected redemption rates, the mix of products that will be available for redemption in the future and customer preferences. As points issued under the programme expire on expiry of specified period in accordance with the programme, such estimates are subject to significant uncertainty. For details on warranty valuation refer note 2.4 (h).
Mar 31, 2019
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2019
1. Corporate information
Bata India Limited is primarily engaged in the business of manufacturing and trading of footwear and accessories through its retail and wholesale network.
Bata India Limited is a public company domiciled in India. Its shares are listed on three stock exchanges in India. The registered office of the company is located at 27B, Camac Street, 1st floor, Kolkata - 700016.
2. Significant Accounting Policies
2.1 Basis of Preparation
The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under section 133 of Companies Act 2013 (the Act and other relevant provisions of the Act).
The financial statements are authorised for issue by Company''s board of directors on May 24, 2019.
The financial statements have been prepared on a historical cost or at amortised cost except for the following assets and liabilities
|
Items |
Measurement Basis |
|
Net defined benefit (asset)/liability |
Fair Value of plan assets less present value of defined benefit obligations |
|
Derivatives |
Fair Value |
The financial statements are presented in INR and all values are rounded to the nearest Million (INR 000,000). 2.2 Summary of significant 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 for at least twelve months after the reporting period
All other assets are classified as non-current. A liability is current when:
>- Expected to be settled in normal operating cycle
> Held primarily for the purpose of trading
> Due to be settled within twelve months after the reporting period, or
>- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Based on the nature of products and 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. Cash dividend
The Company recognises a liability to make cash distributions to equity holders when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
c. Fair Value Measurements
The Company measures financial instruments, such as forward contracts at fair value at each balance sheet date.
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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
>- In the principal market for the asset or liability, or
> In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market is accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
> Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
>- Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
> Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
d. Property, plant & equipment
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property plant and equipment recognised as at April 1, 2015, measured as per the previous GAAP, and use that carrying value as the deemed cost of such property plant and equipment.
Property, plant & equipment and capital work in progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met, directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. Such cost includes the cost of replacing part of the plant and equipment.
The present value of the expected cost for decommissioning of an asset after its use is included in the cost of the respective asset, if the recognition criteria for a provision are met.
The Company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset.
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 or 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 protectively, if appropriate.
e. Depreciation on Property, plant & equipment
i. Lease hold improvements (LHI) & furniture & fixtures at stores are amortised on straight line basis over the period of lease or useful life (not exceeding 9 years), whichever is lower.
ii. Depreciation on other Property, plant & equipment is provided on written down value method at the rates based on the estimated useful life of the assets as described below:
|
Category of Property, plant & equipment |
Useful Lives |
|
Buildings |
|
|
- Factory Buildings |
30 years |
|
- Other than Factory Buildings |
10 years -60 Years |
|
- Fences, Wells, Tube wells |
5 years |
|
Plant & equipments |
|
|
- Moulds |
8 years |
|
- Data processing equipment |
3 Years |
|
- Servers |
6 Years |
|
- Other Plant and Machinery |
5 Years -15 Years |
|
Furniture & Fittings |
|
|
- Others |
10 years |
|
Vehicles |
8 years |
|
Office equipments |
10 Years |
The Company, based on management estimates, depreciates certain items of building, plant and equipment over estimated useful lives which are lower than the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
iii. Depreciation on Property, plant & equipment added/disposed off during the year is provided on pro-rata basis with respect to date of acquisition/disposal.
f. Intangible Assets
Intangible assets acquired separately are recorded at cost at the time of initial recognition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
Intangible assets (Computer Software) with finite lives are amortised over the useful economic life (not exceeding five years) 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 is recognised in the statement of profit and loss.
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.
g. Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
>- Raw materials: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
>- Finished goods and work in progress: Cost includes cost of direct materials and labour and a proportion of fixed manufacturing overheads based on the normal operating capacity. Cost is determined on a weighted average basis.
> Traded goods: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
h. Revenue Recognition
Effective April 1, 2018, the Company has applied Ind AS 115 which establishes a comprehensive framework for determining whether, how much and when revenue is to be recognised. Ind AS 115 replaces Ind AS 18 Revenue and Ind AS 11 Construction Contracts. The Company has adopted Ind AS 115 using the cumulative effect method. The effect of initially applying this standard is recognised at the date of initial application (i.e. April 1, 2018). The standard is applied retrospectively only to contracts that are not completed as at the date of initial application and the comparative information in the statement of profit and loss is not restated - i.e. the comparative information continues to be reported under Ind AS 18. Refer note 2.2 (h) - Significant accounting policies - Revenue recognition in the Annual report of the Company for the year ended 31 March 2018, for the revenue recognition policy as per Ind AS 18. The impact of the adoption of the standard on the financial statements of the Company is insignificant.
Ind AS 115 five step model is used to determine whether revenue should be recognised at a point in time or over time, and at what amount is as below:
⢠Step 1: Identify the contract with the customer
⢠Step 2: Identify the performance obligations in the contract
⢠Step 3: Determine the transaction price
⢠Step 4: Allocate the transaction price to the performance obligations
⢠Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.
Revenue is recognised upon transfer of control of promised goods or services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those products or services.
- Revenue from sales of goods is recognised on output basis measured by units delivered, number of transactions etc.
- Revenue from the sale of goods is recognised at the point in time when control is transferred to the customer which coincides with the performance obligation under the contract with the customer.
- Revenue from services is recognized in accordance with the terms of contract when the services are rendered and the related costs are incurred.
Revenue is measured based on the transaction price, which is the consideration, adjusted for discounts, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.
Revenue from related party is recognised based on transaction price which is at arm''s length. Use of significant judgments in revenue recognition :-
- The Company''s contracts with customers could include promises to transfer multiple products and services to a customer. The Company assesses the products / services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligation involves judgments to determine the deliverables and the ability of the customer to benefit independently from such deliverables.
- Judgment is also required to determine the transaction price for the contract. The transaction price could be either a fixed amount of customer consideration or variable consideration with elements such as volume discounts, price concessions and incentives. The transaction price is also adjusted for the effects of the time value of money if the contract includes a significant financing component. Any consideration payable to the customer is adjusted to the transaction price, unless it is a payment for a distinct product or service from the customer. The estimated amount of variable consideration is adjusted in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur and is reassessed at the end of each reporting period. The Company allocates the elements of variable considerations to all the performance obligations of the contract unless there is observable evidence that they pertain to one or more distinct performance obligations.
The Company provides normal warranty expense provisions for manufacturing defects for 3 months on all its products sold, in line with the industry practice. The Company does not provide any extended warranties to its customers.
The Company operates a loyalty points programme "The Bata Club", which allows customers to accumulate points when they purchase products in the Company''s retail stores. The points can be redeemed against consideration payable for subsequent purchases. Hence, consideration is allocated between the products sold and the points issued. For the allocation of consideration to points issues, fair value of the points issued is determined by applying a statistical analysis (based on data available) of points redemption history of the customers. The fair value of the points issued is deferred based on actuarial valuation and recognised as revenue when the points are redeemed.
Interest Income is recognised on time proportion basis taking into account the amount outstanding and the applicable interest rates and is disclosed in "other income".
Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is pending) when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms.
Unearned and deferred revenue ("contract liability") is recognised when there is billings in excess of revenues. i. Foreign Currency Transactions
The Company''s financial statements are presented in INR, which is also the Company''s functional currency. Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at their respective functional currency spot rates at the date the transaction first qualifies for recognition. However, for practical reasons, the Company uses an average rate if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of the following:
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.
j. Government grants:
Export benefits in the form of Duty Drawback, Duty Entitlement Pass Book (DEPB) and other schemes are recognized in the Statement of profit and loss when the right to receive credit as per the terms of the scheme is established in respect of exports made and when there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
k. Retirement and Other Employee Benefits
i) Retirement benefit in the form of pension costs is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the pension fund. The Company recognizes contribution payable to the pension fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to a reduction in future payment or a cash refund.
ii) The Provident Fund (administered by a Trust) is a defined benefit scheme where by the Company deposits an amount determined as a fixed percentage of basic pay to the fund every month. The benefit vests upon commencement of employment. The interest credited to the accounts of the employees is adjusted on an annual basis to confirm to the interest rate declared by the government for the Employees Provident Fund. The Company has adopted actuary valuation based on project unit credit method to arrive at provident fund liability as at year end.
iii) The Company operates a defined benefit gratuity plan, which requires contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.
Remeasurements, comprising of actuarial gains and losses, the effect of asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Past service costs are recognised in profit or loss on the earlier of:
>- The date of the plan amendment or curtailment, and
>- The date that the Company recognises related restructuring costs.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
> Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
> Net interest expense or income
iv) Compensated absences are provided for based on actuarial valuation on projected unit credit method carried by an actuary, at each year end.
Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The Company presents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
v) Expenses incurred towards voluntary retirement scheme are charged to the statement of profit and loss in the year such scheme is accepted by the employees/workers.
I. Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Company is lessee
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. A lease which is not a finance lease is classified as Operating lease.
Operating lease payments are recognised as an expense in the statement of profit and loss on a straight-line basis over the lease term unless either (a) another systematic basis is more representative of the time pattern of the user''s benefit even if the payments to the lessors are not on that basis, or (b) the payments to the lessor are structured to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases.
m. Taxation
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Current tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
Deferred tax
Deferred tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity).
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
n. Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) fair value less costs of disposal or its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
Impairment losses, are recognised in the statement of profit and loss.
Intangible assets with indefinite useful lives are tested for impairment annually, as appropriate and when circumstances indicate that the carrying value may be impaired.
o. Provisions General
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the statement of profit or loss, net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as part of finance costs.
Warranty provisions
Provisions for warranty-related costs are recognised when the product is sold or service provided to the customer. Initial recognition is based on actuarial valuation. The initial estimate of warranty-related costs is revised annually.
p. Contingent liability
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a Contingent liability but discloses its existence in the financial statements.
q. Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash, short-term deposits and unpaid dividend account, net of outstanding bank overdrafts as they are considered an integral part of the Company''s cash management.
r. Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one Company and a financial liability or equity instrument of another Company.
Financial assets
Recognition and initial measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For the purpose of subsequent measurement, financial assets are classified in five categories:
> Debt Instrument at amortised cost
> Debt instruments at fair value through other comprehensive income (FVTOCI)
>- Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL)
> Equity instruments measured at fair value through other comprehensive income (FVTOCI) > Investments in equities of subsidiaries at cost
Debt instruments at amortised cost
A ''debt instrument'' is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
This category is the most relevant to the Company. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss. This category generally applies to trade receivables, Security deposits & other receivables.
Debt instrument at FVTOCI
A ''debt instrument'' is classified as at the FVTOCI if both of the following criteria are met:
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the
financial assets, and
b) The asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). However, the Company recognizes interest income, impairment losses & reversals and foreign exchange gain or loss in the P&L. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to P&L. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
Debt instrument at FVTPL
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch'').
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the P&L. The Company has not designated any debt instrument as at FVTPL.
Equity investments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income, subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to P&L, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the P&L.
Investments in equities of subsidiaries
Investments in equities of subsidiaries are carried at cost in separate financial statements.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Company''s balance sheet) when:
> The rights to receive cash flows from the asset have expired, or
> The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to
pay the received cash flows in full without material delay to a third party under a ''pass- through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
The company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are carried at amortised cost or at Fair value through OCI except equity investment which is carried at fair value through OCI. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. The application of simplified approach does not require the Company to track changes in credit risk. Based on the past history and track records the company has assessed the risk of default by the customer and expects the credit loss to be insignificant. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognized as an impairment gain or loss in profit or loss.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the statement of profit and loss (P&L).
The balance sheet presentation for various financial instruments is described below:
> Financial assets measured as at amortised cost. ECL is presented as an allowance, i.e., as an integral part of measurement of those assets in the balance sheet. The allowance reduces the net carrying amount until the asset meets write-off criteria.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as:
> financial liabilities at fair value through profit or loss,
> financial liabilities measured at amortised cost,
> loans and borrowings and payables,
> derivatives designated as hedging instruments in an effective hedge relationship.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company''s financial liabilities include trade and other payables and derivative financial instruments. Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below: Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include: -financial liabilities held for trading - financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind-AS 109.
Gains or losses on liabilities held for trading are recognised in the profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, if and only if, the criteria in Ind-AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/loss are not subsequently transferred to P&L. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of profit or loss. The Company has not designated any financial liability as at fair value through profit and loss.
Financial liabilities measured at amortised cost
Other financial liabilities are subsequently measured at amortised cost using the effective interest rate. Interest expense is recognised in statement of profit and loss.
Derecognition of financial liability
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification protectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest. The Company has not reclassified any financial asset during the current year or previous year.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when and only when there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Derivative financial instruments and hedge accounting Initial recognition and subsequent measurement
The Company uses derivative financial instruments, such as forward currency contracts, to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is unfavourable.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to profit or loss when the hedge item affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability.
For the purpose of hedge accounting, hedges are classified as:
> Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment.
> Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Company''s risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction, the nature of the risk being hedged, hedge ratio and how the Company will assess the effectiveness of changes in the hedging instrument''s fair value in offsetting the exposure to changes in the hedged item''s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Hedges that meet the strict criteria for hedge accounting are accounted for, as described below: (i) Fair value hedges
The change in the fair value of a hedging instrument is recognised in the statement of profit and loss as finance costs. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the statement of profit and loss as finance costs.
For fair value hedges relating to items carried at amortised cost, any adjustment to carrying value is amortised through profit or loss over the remaining term of the hedge using the EIR method. EIR amortisation may begin as soon as an adjustment exists and no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.
If the hedged item is derecognised, the unamortised fair value is recognised immediately in profit or loss. When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in profit and loss.
(ii) Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit and loss.
The Company uses forward currency contracts as hedges of its exposure to foreign currency risk in highly probable forecast transactions and firm commitments, the ineffective portion relating to foreign currency contracts is recognised in finance costs.
Amounts recognised as OCI are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs. When the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognised as OCI are transferred to the initial carrying amount of the non-financial asset or liability.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognised in OCI remains separately in equity until the forecast transaction occurs or the foreign currency firm commitment is met.
2.3 Significant accounting judgments, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the accounting policies and the reported amounts of income, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
a. Judgements
In the process of applying the Company''s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:
(i) Contingent liabilities
Contingent liabilities may arise from the ordinary course of business in relation to claims against the Company, including legal and other claims. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies inherently involves the exercise of significant judgement and the use of estimates regarding the outcome of future events.
(ii) Operating lease commitments - Company as lessee
The Company has taken various shop premises under operating lease agreements. The lease agreements generally have an escalation clause and there are no subleases. These leases are generally not non-cancellable and are renewable by mutual consent on mutually agreed terms. The Company based on an evaluation of the terms and conditions of the agreements assessed that the escalations are as per the mutually agreed terms and are not structured to increase necessarily in line with expected general inflation and hence operating lease payments are continued to be recognised as an expense in the statement of profit and loss on a straight-line basis over the lease term.
(iii)Revenue recognition
The Company exercises judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time. The Company considers indicators such as how customer consumes benefits as services are rendered or who controls the asset as it is being created or existence of enforceable right to payment for performance to date and alternate use of such product or service, transfer of significant risks and rewards to the customer, acceptance of delivery by the customer, etc.
b. Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market change or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
b.1 Defined benefit plans
The cost of the defined benefit gratuity plan and other post-employment defined benefits are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The underlying bonds are further reviewed for quality.
The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates.
Further details about gratuity obligations are given in Note 30. b.2 Revenue recognition - Loyalty programme
The Company estimates the fair value of points awarded under the Loyalty programme " The Bata Club", by applying statistical techniques. Inputs to the model include making assumptions about expected redemption rates, the mix of products that will be available for redemption in the future and customer preferences. As points issued under the programme expire on expiry of specified period in accordance with the programme, such estimates are subject to significant uncertainty.
For details on warranty valuation refer note 2.2 (h). 3. Recent accounting pronouncements
Ministry of Corporate Affairs ("MCA"), through Companies (Indian Accounting Standards) Amendment Rules, 2019 and Companies (Indian Accounting Standards) Second Amendment Rules, has notified the following new and amendments to IndASs which will be effective from April 1, 2019:
i) Ind AS-116-Leases
Ind AS 116 will replace the existing leases standard, Ind AS 17 Leases and related interpretation. Ind AS 116 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. It introduces a single, on-balance sheet lessee accounting model for lessees and requires a lessee to recognize assets and liabilities for all leases with a lease term of more than 12 months, unless the underlying asset is of low value. A lessee recognizes right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. The standard also contains enhanced disclosure requirements for lessees. Ind AS 116 substantially carries forward the lessor accounting requirements in Ind AS 17.
The Company will adopt Ind AS 116, effective annual reporting period beginning April 1, 2019. The Company will apply the standard to its leases, as per modified retrospective approach, with the cumulative effect of applying the standard, recognised on the date of initial application (April 1, 2019). Accordingly, the Company will not restate comparative information, instead, the cumulative effect of initially applying this Standard will be recognised as an adjustment to the opening balance of retained earnings as on April 1, 2019.
On that date, the Company will recognize a lease liability measured at the present value of the remaining lease payments. The right-of-use asset is recognised at its carrying amount as if the standard had been applied since the commencement date, but discounted using the lessee''s incremental borrowing rate as at April 1, 2019. In accordance with the standard, the Company will choose not to apply the requirements of Ind AS 116 to short-term leases and leases for which the underlying asset is of low value.
On transition, the Company will be using the practical expedient provided by the standard and therefore, will not reassess whether a contract, is or contains a lease, at the date of initial application.
With effect from April 01, 2019, the Company will recognize new assets and liabilities for its new operating leases of premises and other assets. The nature of expenses related to those leases will change from lease rent in previous periods to a) amortization charge for the right-to-use asset, and b) interest accrued on lease liability. Previously, the Company recognized operating lease expense on a straight-line basis over the term of the lease, and recognized assets and liabilities only to the extent that there was a timing difference between actual lease payments and the expense recognized.
The Company is in the process of finalising changes to systems and processes to meet the accounting and reporting requirements of the standard, including the alignment with its group accounting policies.
(ii) Ind AS 12 Income taxes (amendments relating to income tax consequences of dividend and uncertainty over income tax treatments)
The amendment relating to income tax consequences of dividend clarify that an entity shall recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events. The Company does not expect any impact from this pronouncement. It is relevant to note that the amendment does not amend situations where the entity pays a tax on dividend which is effectively a portion of dividends paid to taxation authorities on behalf of shareholders. Such amount paid or payable to taxation authorities continues to be charged to equity as part of dividend, in accordance with Ind AS 12.
The amendment to Appendix C of Ind AS 12 specifies that the amendment is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under Ind AS 12. It outlines the following: (1) the entity has to use judgement, to determine whether each tax treatment should be considered separately or whether some can be considered together. The decision should be based on the approach which provides better predictions of the resolution of the uncertainty (2) the entity is to assume that the taxation authority will have full knowledge of all relevant information while examining any amount (3) entity has to consider the probability of the relevant taxation authority accepting the tax treatment and the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates would depend upon the probability. The Company does not expect any impact of the amendment on the financial statements.
iii) Ind AS 19 - Plan Amendment, Curtailment or Settlement
The amendments clarify that if a plan amendment, curtailment or settlement occurs, it is mandatory that the current service cost and the net interest for the period after the re-measurement are determined using the assumptions used for the re-measurement. In addition, amendments have been included to clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling. The Company does not expect this amendment to have any impact on its financial statements.
Mar 31, 2018
. Corporate information
Bata India Limited is primarily engaged in the business of manufacturing and trading of footwear and accessories through its retail and wholesale network.
Bata India Limited is a public Company domiciled in India. Its shares are listed on three stock exchanges in India. The registered office of the company is located at 27B, Camac Street, 1st Floor, Kolkata - 700016.
2. Significant Accounting Policies
2.1 Basis of Preparation
The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under section 133 of the Companies Act 2013 (the Act and other relevant provisions of the Act).
The financial statements are authorized for issue by Company''s board of directors on May 22, 2018.
The financial statements have been prepared on a historical cost or at amortized cost except for the following assets and liabilities
The financial statements are presented in INR and all values are rounded to the nearest Million (INR 000,000).
2.2 Summary of significant 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 realized or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realized within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
- Expected to be settled in normal operating cycle
- Held primarily for the purpose of trading
- Due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Based on the nature of products and time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has identified twelve months as its operating cycle.
b. Cash dividend
The Company recognizes a liability to make cash distributions to equity holders when the distribution is authorized and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorized when it is approved by the shareholders. A corresponding amount is recognized directly in equity.
c. Fair Value Measurements
The Company measures financial instruments, such as forward contracts at fair value at each balance sheet date.
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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market is accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
- Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
- Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. This note summarizes accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
d. Property, plant & equipment
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognized as at April 1, 2015, measured as per the previous GAAP, and use that carrying value as the deemed cost of such property plant and equipment.
Property, plant & equipment and capital work in progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met, directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. Such cost includes the cost of replacing part of the plant and equipment.
The present value of the expected cost for decommissioning of an asset after its use is included in the cost of the respective asset, if the recognition criteria for a provision are met.
The Company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset.
An item of Property, plant and equipment and any significant part initially recognized is derecognized 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 or loss when the asset is derecognized.
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.
e. Depreciation on Property, plant & equipment
i. Lease hold improvements (LHI) & furniture & fixtures at stores are amortized on straight line basis over the period of lease or useful life (not exceeding 9 years), whichever is lower.
The Company, based on management estimates, depreciates certain items of building, plant and equipment over estimated useful lives which are lower than the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
iii. Depreciation on Property, plant & equipment added/disposed off during the year is provided on pro-rata basis with respect to date of acquisition/ disposal.
f. Intangible Assets
Intangible assets acquired separately are recorded at cost at the time of initial recognition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any. Internally generated intangibles, excluding capitalized development costs, are not capitalized and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
Intangible assets (Computer Software) with finite lives are amortized over the useful economic life (not exceeding five years) and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization 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 amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets is recognized in the statement of profit and loss.
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 recognized in the statement of profit or loss when the asset is derecognized.
g. Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
- Raw materials: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
- Finished goods and work in progress: Cost includes cost of direct materials and labour and a proportion of fixed manufacturing overheads based on the normal operating capacity. Cost is determined on a weighted average basis.
- Traded goods: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
h. Revenue Recognition
Revenue is recognized to the extent it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government. The Company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing latitude and is also exposed to inventory and credit risks.
Till June 30, 2017, based on the guidance note on accounting treatment of excise duty, the Company has assumed that recovery of excise duty flows to the Company on its own account. This is for the reason that it is a liability of the manufacturer which forms part of the cost of production, irrespective of whether the goods are sold or not. Since the recovery of excise duty flows to the Company on its own account, revenue includes excise duty. Post June 30, 2017 excise duty has been subsumed to Goods and Services Tax (GST) and hence the same is not received by the company on its own account, rather it is tax collected on commodity by the seller on behalf of the government. Accordingly, it is excluded from revenue.
The specific recognition criteria described below must also be met before revenue is recognized.
i. Sale of Goods:
Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. The Company provides normal warranty provisions for manufacturing defects for 3 months on all its products sold, in line with the industry practice. The Company does not provide any extended warranties to its customers.
The Company operates a loyalty points programme â The Bata Clubâ, which allows customers to accumulate points when they purchase products in the Company''s retail stores. The points can be redeemed against consideration payable for subsequent purchases. Consideration received is allocated between the products sold and the points issued, with the consideration allocated to the points equal to their fair value. Fair value of the points is determined by applying a statistical analysis (based on data available). The fair value of the points issued is deferred based on actuarial valuation and recognized as revenue when the points are redeemed.
ii. Interest:
For all debt instruments measured at amortized cost, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortized cost of a financial liability. 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, similar options) but does not consider the expected credit losses. Interest income is included in finance income in the statement of profit and loss.
i. Foreign Currency Transactions
The Company''s financial statements are presented in INR, which is also the Company''s functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at their respective functional currency spot rates at the date the transaction first qualifies for recognition. However, for practical reasons, the Company uses an average rate if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognized in profit or loss with the exception of the following:
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.
j. Government grants
Export benefits in the form of Duty Drawback, Duty Entitlement Pass Book (DEPB) and other schemes are recognized in the Statement of profit and loss when the right to receive credit as per the terms of the scheme is established in respect of exports made and when there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
k. Retirement and Other Employee Benefits
i) Retirement benefit in the form of pension costs is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the pension fund. The Company recognizes contribution payable to the pension fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to a reduction in future payment or a cash refund.
ii) The Provident Fund (administered by a Trust) is a defined benefit scheme where by the Company deposits an amount determined as a fixed percentage of basic pay to the fund every month. The benefit vests upon commencement of employment. The interest credited to the accounts of the employees is adjusted on an annual basis to confirm to the interest rate declared by the government for the Employees Provident Fund. The Company has adopted actuary valuation based on project unit credit method to arrive at provident fund liability as at year end.
iii) The Company operates a defined benefit gratuity plan, which requires contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.
Remeasurements, comprising of actuarial gains and losses, the effect of asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognized immediately in the balance sheet with a corresponding debit or credit to OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Past service costs are recognized in profit or loss on the earlier of:
- The date of the plan amendment or curtailment, and
- The date that the Company recognizes related restructuring costs.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognizes the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
- Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
- Net interest expense or income
iv) Compensated absences are provided for based on actuarial valuation on projected unit credit method carried by an actuary, at each year end.
Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The Company presents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
v) Expenses incurred towards voluntary retirement scheme are charged to the statement of profit and loss in the year such scheme is accepted by the employees/workers.
l. Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Company is lessee
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. A lease which is not a finance lease is classified as Operating lease.
Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term unless either (a) another systematic basis is more representative of the time pattern of the user''s benefit even if the payments to the lessons are not on that basis, or (b) the payments to the less or are structured to increase in line with expected general inflation to compensate for the less orâs expected inflationary cost increases.
m. Taxation
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in other comprehensive income or in equity). Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Current tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognized amounts, and it is intended to realize the asset and settle the liability on a net basis or simultaneously.
Deferred tax
Deferred tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognized for all taxable temporary differences.
Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in other comprehensive income or in equity).
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
n. Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating units (CGU) fair value less costs of disposal or its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
Impairment losses, are recognized in the statement of profit and loss.
Intangible assets with indefinite useful lives are tested for impairment annually, as appropriate and when circumstances indicate that the carrying value may be impaired.
o. Provisions General
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the statement of profit or loss, net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as part of finance costs.
Warranty provisions
Provisions for warranty-related costs are recognized when the product is sold or service provided to the customer. Initial recognition is based on actuarial valuation. The initial estimate of warranty-related costs is revised annually.
p. Contingent liability
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
q. Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits and unpaid dividend account, net of outstanding bank overdrafts as they are considered an integral part of the Company''s cash management.
r. Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one Company and a financial liability or equity instrument of another Company.
Financial assets
Recognition and initial measurement
All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For the purpose of subsequent measurement, financial assets are classified in five categories:
- Debt Instrument at amortized cost
- Debt instruments at fair value through other comprehensive income (FVTOCI)
- Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL)
- Equity instruments measured at fair value through other comprehensive income (FVTOCI)
- Investments in equities of subsidiaries at cost Debt instruments at amortized cost
A ''debt instrument'' is measured at the amortized cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
This category is the most relevant to the Company. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (EIR) method. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the profit or loss. The losses arising from impairment are recognized in the profit or loss. This category generally applies to trade receivables, Security deposits & other receivables.
Debt instrument at FVTOCI
A ''debt instrument'' is classified as at the FVTOCI if both of the following criteria are met:
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
b) The asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). However, the Company recognizes interest income, impairment losses & reversals and foreign exchange gain or loss in the P&L. On derecognition of the asset, cumulative gain or loss previously recognized in OCI is reclassified from the equity to P&L. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
Debt instrument at FVTPL
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch'').
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the P&L. The Company has not designated any debt instrument as at FVTPL.
Equity investments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognized by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income, subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to P&L, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the P&L.
Investments in equities of subsidiaries
Investments in equities of subsidiaries are carried at cost in separate financial statements. Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e. removed from the Company''s balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are carried at amortized cost or at Fair value through OCI except equity investment which is carried at fair value through OCI. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. The application of simplified approach does not require the Company to track changes in credit risk. Based on the past history and track records the Company has assessed the risk of default by the customer and expects the credit loss to be insignificant. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized is recognized as an impairment gain or loss in profit or loss.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the statement of profit and loss (P&L).
The balance sheet presentation for various financial instruments is described below:
- Financial assets measured as at amortized cost. ECL is presented as an allowance, i.e., as an integral part of measurement of those assets in the balance sheet. The allowance reduces the net carrying amount until the asset meets write-off criteria.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as:
- financial liabilities at fair value through profit or loss,
- financial liabilities measured at amortized cost,
- loans and borrowings and payables,
- derivatives designated as hedging instruments in an effective hedge relationship.
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company''s financial liabilities include trade and other payables and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below: Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include:
- financial liabilities held for trading
- financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind-AS 109.
Gains or losses on liabilities held for trading are recognized in the profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, if and only if, the criteria in Ind-AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/loss are not subsequently transferred to P&L. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognized in the statement of profit or loss. The Company has not designated any financial liability as at fair value through profit and loss.
Financial liabilities measured at amortized cost
Other financial liabilities are subsequently measured at amortized cost using the effective interest rate. Interest expense is recognized in statement of profit and loss.
Derecognition of financial liability
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of profit or loss.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognized gains, losses (including impairment gains or losses) or interest. The Company has not reclassified any financial asset during the current year or previous year.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when and only when there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Derivative financial instruments and hedge accounting Initial recognition and subsequent measurement
The Company uses derivative financial instruments, such as forward currency contracts, to hedge its foreign currency risks. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is unfavorable.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognized in OCI and later reclassified to profit or loss when the hedge item affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability.
For the purpose of hedge accounting, hedges are classified as:
- Fair value hedges when hedging the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment.
- Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognized firm commitment.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Company''s risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction, the nature of the risk being hedged, hedge ratio and how the Company will assess the effectiveness of changes in the hedging instrument''s fair value in offsetting the exposure to changes in the hedged item''s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:
(i) Fair value hedges
The change in the fair value of a hedging instrument is recognized in the statement of profit and loss as finance costs. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in the statement of profit and loss as finance costs.
For fair value hedges relating to items carried at amortized cost, any adjustment to carrying value is amortized through profit or loss over the remaining term of the hedge using the EIR method. EIR amortization may begin as soon as an adjustment exists and no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.
If the hedged item is derecognized, the unamortized fair value is recognized immediately in profit or loss. When an unrecognized firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in profit and loss.
(ii) Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognized in OCI in the cash flow hedge reserve, while any ineffective portion is recognized immediately in the statement of profit and loss.
The Company uses forward currency contracts as hedges of its exposure to foreign currency risk in highly probable forecast transactions and firm commitments, the ineffective portion relating to foreign currency contracts is recognized in finance costs.
Amounts recognized as OCI are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognized or when a forecast sale occurs. When the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognized as OCI are transferred to the initial carrying amount of the non-financial asset or liability.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognized in OCI remains separately in equity until the forecast transaction occurs or the foreign currency firm commitment is met.
i) Significant accounting judgments, estimates and assumptions
The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the accounting policies and the reported amounts of income, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
a. Judgments
In the process of applying the Company''s accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognized in the financial statements:
(i) Contingent liabilities
Contingent liabilities may arise from the ordinary course of business in relation to claims against the Company, including legal and other claims. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies inherently involves the exercise of significant judgment and the use of estimates regarding the outcome of future events.
(ii) Operating lease commitments - Company as lessee
The Company has taken various shop premises under operating lease agreements. The lease agreements generally have an escalation clause and there are no subleases. These leases are generally not non-cancellable and are renewable by mutual consent on mutually agreed terms. The Company based on an evaluation of the terms and conditions of the agreements assessed that the escalations are as per the mutually agreed terms and are not structured to increase necessarily in line with expected general inflation and hence operating lease payments are continued to be recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term.
b. Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market change or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
b.1 Defined benefit plans
The cost of the defined benefit gratuity plan and other post-employment defined benefits are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The underlying bonds are further reviewed for quality.
The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates.
Further details about gratuity obligations are given in Note 31.
b.2 Revenue recognition - Loyalty programme
The Company estimates the fair value of points awarded under the Loyalty programme â The Bata Clubâ, by applying statistical techniques. Inputs to the model include making assumptions about expected redemption rates, the mix of products that will be available for redemption in the future and customer preferences. As points issued under the programme expire on expiry of specified period in accordance with the programme, such estimates are subject to significant uncertainty.
3. (ii) Standards issued but not yet effective
Ind AS 115, Revenue from Contracts with Customers
Ind AS 115, establishes a comprehensive framework for determining whether, how much and when revenue should be recognized. It replaces existing revenue recognition guidance, including Ind AS 18 Revenue, Ind AS 11 Construction Contracts and Guidance Note on Accounting for Real Estate Transactions. Ind AS 115 is effective for annual periods beginning on or after 1 April 2018 and will be applied accordingly.
Sales of goods
For the sale of goods, revenue is currently recognized when the goods are delivered, which is taken to be the point in time at which the customer accepts the goods and the related risks and rewards of ownership are transferred. Revenue is recognized at this point provided that the revenue and costs can be measured reliably, the recovery of the consideration is probable and there is no continuing management involvement with the goods.
Under Ind AS 115, revenue will be recognized when a customer obtains control of the goods. The revenue from these contracts will be recognized as the products are being manufactured.
The Company has completed an initial assessment of the potential impact of the adoption of Ind AS 115 on accounting policies followed in its financial statements. The quantitative impact of adoption of Ind AS 115 on the financial statements in the period of initial application is not reasonably estimable as at present.
Mar 31, 2017
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 for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
- Expected to be settled in normal operating cycle
- Held primarily for the purpose of trading
- Due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
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 equivalent. The Company has identified twelve months as its operating cycle.
b. Cash dividend
The Company recognises a liability to make cash distributions to equity holders when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
Interim dividends, if any, are recorded as a liability on the date of declaration by the Companyâs Board of directors.
c. Fair Value Measurements
The Company measures financial instruments, such as forward contracts at fair value at each balance sheet date.
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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- Level 1 âQuoted (unadjusted) market prices in active markets for identical assets or liabilities
- Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
- Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
d. Property, plant & equipment
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognised as at April 1, 2015, measured as per the previous GAAP, and use that carrying value as the deemed cost of such property, plant and equipment (See Note 44).
Property, plant & equipment and capital work in progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met, directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. Such cost includes the cost of replacing part of the plant and equipment. In case of assets acquired in exchange for a non-monetary asset, the cost of such an item of property, plant and equipment is measured at fair value unless (a) the exchange transaction lacks commercial substance or (b) the fair value of neither the asset received nor the asset given up is reliably measurable. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a regular major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria is satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.
The present value of the expected cost for decommissioning of an asset after its use is included in the cost of the respective asset, if the recognition criteria for a provision are met.
The Company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset.
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 or 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.
e. Depreciation on Property, plant & equipment
i. Lease hold improvements (LHI) & furniture & fixtures at stores are amortised on straight line basis over the period of lease or useful life (not exceeding 9 years), whichever is lower.
ii. Depreciation on other Property, plant & equipment is provided on written down value method at the rates based on the estimated useful life of the assets as described below:
The Company, based on management estimates, depreciates certain items of building, plant and equipment over estimated useful lives which are lower than the useful life prescribed in Schedule II to the Companies Act, 2013.
The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
iii. Depreciation on Property, plant & equipment added/disposed off during the year is provided on pro-rata basis with respect to date of acquisition/ disposal.
f. Intangible Assets
Intangible assets acquired separately are recorded at cost at the time of initial recognition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
Intangible assets (Computer Software) with finite lives are amortised over the useful economic life (not exceeding five years) 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 is recognised in the statement of profit and loss.
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.
Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Company can demonstrate:
- The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
- Its intention to complete and its ability and intention to use or sell the asset
- How the asset will generate future economic benefits
- The availability of resources to complete the asset
- The ability to measure reliably the expenditure incurred during its development
g. Inventories
Inventories are valued at the lower of cost or net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
- Raw materials: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
- Finished goods and work in progress: Cost includes cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity. Cost of finished goods includes excise duty. Cost is determined on a weighted average basis.
- Traded goods: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
h. Revenue Recognition
Revenue is recognised to the extent it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value ofthe consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government. The Company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing latitude and is also exposed to inventory and credit risks.
Based on the Educational Material on Ind AS 18 issued by the ICAI, the Company has assumed that recovery of excise duty flows to the Company on its own account. This is for the reason that it is a liability of the manufacturer which forms part of the cost of production, irrespective of whether the goods are sold or not. Since the recovery of excise duty flows to the Company on its own account, revenue includes excise duty. However, sales tax/ value added tax (VAT) is not received by the company on its own account, rather it is tax collected on value added to the commodity by the seller on behalf of the government. Accordingly, it is excluded from revenue.
The specific recognition criteria described below must also be met before revenue is recognised.
i. Sale of Goods:
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. The Company provides normal warranty provisions for manufacturing defects for 3 months on all its products sold, in line with the industry practice. The Company does not provide any extended warranties to its customers.
The Company operates a loyalty points programme " The Bata Club", which allows customers to accumulate points when they purchase products in the Companyâs retail stores. The points can be redeemed against consideration payable for subsequent purchases. Consideration received is allocated between the products sold and the points issued, with the consideration allocated to the points equal to their fair value. Fair value of the points is determined by applying a statistical analysis. The fair value of the points issued is deferred based on actuarial valuation and recognised as revenue when the points are redeemed.
ii. Interest:
For all debt instruments measured at amortised cost, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a financial liability. 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, similar options) but does not consider the expected credit losses. Interest income is included in finance income in the statement of profit and loss.
iii. Export Benefits:
Export benefits in the form of Duty Drawback, Duty Entitlement Pass Book (DEPB) and other schemes are recognized in the Statement of profit and loss when the right to receive credit as per the terms of the scheme is established in respect of exports made and when there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
i. Foreign Currency Transactions
The Companyâs financial statements are presented in INR, which is also the Companyâs functional currency. Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at their respective functional currency spot rates at the date the transaction first qualifies for recognition. However, for practical reasons, the Company uses an average rate if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of the following:
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.
j. Borrowing Cost
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
k. Retirement and Other Employee Benefits
i) Retirement benefit in the form of pension costs is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the pension fund. The Company recognizes contribution payable to the pension fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to a reduction in future payment or a cash refund.
ii) The Provident Fund (administered by a Trust) is a defined benefit scheme where by the Company deposits an amount determined as a fixed percentage of basic pay to the fund every month. The benefit vests upon commencement of employment. The interest credited to the accounts of the employees is adjusted on an annual basis to confirm to the interest rate declared by the government for the Employees Provident Fund. The Company has adopted actuary valuation based on project unit credit method to arrive at provident fund liability as at year end.
Hi) The Company operates a defined benefit gratuity plan, which requires contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.
Remeasurements, comprising of actuarial gains and losses, the effect of asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Past service costs are recognised in profit or loss on the earlier of:
- The date of the plan amendment or curtailment, and
- The date that the Company recognises related restructuring costs.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
- Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non -routine settlements; and
- Net interest expense or income
iv) Compensated absences are provided for based on actuarial valuation on projected unit credit method carried by an actuary, at each year end.
Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The Company presents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
v) Expenses incurred towards voluntary retirement scheme are charged to the statement of profit and loss in the year such scheme is accepted by the employees/workers.
l. Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
For arrangements entered into prior to 1 April 2015, the Company has determined whether the arrangement contain lease on the basis of facts and circumstances existing on the date of transition.
Company is lessee
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. A lease which is not a finance lease is classified as Operating lease.
Operating lease payments are recognised as an expense in the statement of profit and loss on a straight-line basis over the lease term unless either (a) another systematic basis is more represantative of the time pattern of the userâs benefit even if the payments to the lessors are not on that basis, or (b) the payments to the lessor are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases.
m. Taxation Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Current tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
n. Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash-generating unitâs (CGU) fair value less costs of disposal or its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
Impairment losses, are recognised in the statement of profit and loss.
Intangible assets with indefinite useful lives are tested for impairment annually, as appropriate and when circumstances indicate that the carrying value may be impaired.
o. Provisions
General
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the statement of profit or loss, net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as part of finance costs.
Warranty provisions
Provisions for warranty-related costs are recognised when the product is sold or service provided to the customer. Initial recognition is based on actuarial valuation. The initial estimate of warranty-related costs is revised annually.
p. Contingent liability
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
q. Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity ofthree months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Companyâs cash management.
r. Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one Company and a financial liability or equity instrument of another Company.
Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For the purpose of subsequent measurement, financial assets are classified in five categories:
- Debt Instrument at amortised cost
- Debt instruments at fair value through other comprehensive income (FVTOCI)
- Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL)
- Equity instruments measured at fair value through other comprehensive income (FVTOCI)
- Investments in equities of subsidiaries at cost Debt instruments at amortised cost
A âdebt instrumentâ is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
This category is the most relevant to the Company. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss. This category generally applies to trade receivables, Security deposits & other receivables.
Debt instrument at FVTOCI
A âdebt instrumentâ is classified as at the FVTOCI if both of the following criteria are met:
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
b) The assetâs contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). However, the Company recognizes interest income, impairment losses & reversals and foreign exchange gain or loss in the P&L. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to P&L. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
Debt instrument at FVTPL
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatchâ). The Company has not designated any debt instrument as at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the P&L.
Equity investments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income, subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to P&L, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the P&L.
Investments in equities of subsidiaries
Investments in equities of subsidiaries are carried at cost in separate financial statements.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Companyâs balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
The company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are carried at amortised cost or at Fair value through OCI. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. The application of simplified approach does not require the Company to track changes in credit risk. Based on the past history and track records the company has assessed the risk of default by the customer and expects the credit loss to be insignificant. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognized as an impairment gain or loss in profit or loss.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the statement of profit and loss (P&L). This amount is reflected under the head âother expensesâ in the P&L.
The balance sheet presentation for various financial instruments is described below:
- Financial assets measured as at amortised cost. ECL is presented as an allowance, i.e., as an integral part of measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as:
- financial liabilities at fair value through profit or loss,
- financial liabilities measured at amortised cost,
- loans and borrowings and payables,
- derivatives designated as hedging instruments in an effective hedge relationship.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables and derivative financial instruments. Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include:
-financial liabilities held for trading
- financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind-AS 109.
Gains or losses on liabilities held for trading are recognised in the profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, if and only if, the criteria in Ind-AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/loss are not subsequently transferred to P&L. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of profit or loss. The Company has not designated any financial liability as at fair value through profit and loss.
Financial liabilities measured at amortised cost
Other financial liabilities are subsequently measured at amortised cost using the effective interest rate. Interest expense and foreign exchange gain and losses are recognised in statement of profit and loss.
Derecognition of financial liability
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Companyâs senior management determines change in the business model as a result of external or internal changes which are significant to the Companyâs operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest. The Company has not reclassified any financial asset during the current year or previous year.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Derivative financial instruments and hedge accounting
Initial recognition and subsequent measurement
The Company uses derivative financial instruments, such as forward currency contracts, to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
The purchase contracts that meet the definition of a derivative under Ind AS 109 are recognised in the statement of profit and loss.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to profit or loss when the hedge item affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability.
For the purpose of hedge accounting, hedges are classified as:
- Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment.
- Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Companyâs risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction, the nature of the risk being hedged, hedge ratio and how the Company will assess the effectiveness of changes in the hedging instrumentâs fair value in offsetting the exposure to changes in the hedged itemâs fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:
(i) Fair value hedges
The change in the fair value of a hedging instrument is recognised in the statement of profit and loss as finance costs. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the statement of profit and loss as finance costs.
For fair value hedges relating to items carried at amortised cost, any adjustment to carrying value is amortised through profit or loss over the remaining term of the hedge using the EIR method. EIR amortisation may begin as soon as an adjustment exists and no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.
If the hedged item is derecognised, the unamortised fair value is recognised immediately in profit or loss. When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in profit and loss.
(ii) Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit and loss.
The Company uses forward currency contracts as hedges of its exposure to foreign currency risk in forecast transactions and firm commitments, the ineffective portion relating to foreign currency contracts is recognised in finance costs.
Amounts recognised as OCI are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs. When the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognised as OCI are transferred to the initial carrying amount of the non-financial asset or liability.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognised in OCI remains separately in equity until the forecast transaction occurs or the foreign currency firm commitment is met.
Mar 31, 2016
1. CORPORATE INFORMATION
Bata India Limited is a public Company domiciled in India. Its shares
are listed on three stock exchanges in India. Bata India Limited is
primarily engaged in the business of manufacturing and trading of
footwear and accessories through its retail and wholesale network.
2. BASIS OF PREPARATION
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The Company has prepared these financial statements to
comply in all material respects with the Accounting Standards notified
under section 133 of the Companies Act 2013, read together with
paragraph 7 of the Companies (Accounts) Rules 2014. The financial
statements have been prepared on an accrual basis and under the
historical cost convention, except in case of assets for which
provision for impairment is made and revaluation is carried out. The
accounting policies adopted in the preparation of financial statements
are consistent with those of previous year, except for the change in
accounting policy explained below.
2.1 Summary of significant accounting policies
a. Change in accounting policy
i) Component Accounting
The Company has adopted component accounting as required under Schedule
II to the Companies Act, 2013 from 1 April 2015. The Company was
previously not identifying components of fixed assets separately for
depreciation purposes; rather, a single useful life/ depreciation rate
was used to depreciate each item of fixed assets. Due to application
of Schedule II to the Companies Act, 2013, the Company has changed the
manner of depreciation for its fixed assets. Now, the Company
identifies and determines cost of each component/ part of the asset
separately, if the component/ part has a cost which is significant to
the total cost of the asset and has useful life that is materially
different from that of the remaining asset. These components are
depreciated separately over their useful lives; the remaining
components are depreciated over the life of the principal asset. The
Company has used transitional provisions of Schedule II to adjust the
impact of component accounting arising on its first application. If a
component has zero remaining useful life on the date of component
accounting becoming effective, i.e., 1 April 2015, its carrying amount,
after retaining any residual value, is charged to opening balance of
retained earnings. The carrying amount of other components, i.e.,
components whose remaining useful life is not nil on 1 April 2015, is
depreciated over their remaining useful lives.
Had the Company continued to use the earlier policy of depreciating
fixed assets, depreciation for the current year would have been lower
by Rs. 25.29 million and Profit for the current period would have been
higher by Rs 16.54 million (net of tax impact of Rs. 8.75 million).
Fixed assets would correspondingly have been higher by Rs. 25.29
million.
On the date of component accounting becoming applicable, i.e., 1 April
2015, there was no component having zero remaining useful life. Hence,
no amount has been directly adjusted against retained earnings.
b. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon management''s best
knowledge of current events and actions, actual results could differ
from these estimates.
c. Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties. If an investment is acquired, or
partly acquired, by the issue of shares or other securities, the
acquisition cost is the fair value of the securities issued. If an
investment is acquired in exchange for another asset, the acquisition
is determined by reference to the fair value of the asset given up or
by reference to the fair value of the investment acquired, whichever is
more clearly evident. Current investments are carried in the financial
statements at lower of cost and fair value determined on an individual
investment basis. Long-term investments are carried at cost. However,
provision for diminution in value is made to recognize a decline other
than temporary in the value of the investments. On disposal of an
investment, the difference between its carrying amount and net disposal
proceeds is charged or credited to the statement of profit and loss.
d. Tangible Fixed Assets
Tangible Fixed Assets, capital work in progress are stated at cost of
acquisition (or revalue amounts, as the case may be), net of
accumulated depreciation and accumulated impairment losses, if any. The
cost comprises purchase price, borrowing costs if capitalization
criteria are met, directly attributable cost of bringing the asset to
its working condition for the intended use. Any trade discounts and
rebates are deducted in arriving at the purchase price. Such cost
includes the cost of replacing part of the plant and equipment. When
significant parts of 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 plant and
equipment as a replacement if the recognition criteria is satisfied.
All other repair and maintenance costs are recognised in profit or loss
as incurred. In case of revaluation of fixed assets, the revalue
amount as determined by the valour, is considered in the books of
account and the differential amount is transferred to Revaluation
Reserve.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
The Company identifies and determines cost of each component/ part of
the asset separately, if the component/ part has a cost which is
significant to the total cost of the asset and has useful life that is
materially different from that of the remaining asset.
e. Depreciation on Tangible fixed assets & Intangibles
i. Pursuant to the applicability of Schedule II of The Companies
Act,2013 w.e.f. 1st April, 2015, the company has reassessed the
estimated useful life of fixed assets. Accordingly, depreciation of Rs.
23.24 million (net of tax of Rs. 12.29 million) on account of assets
whose useful life is already exhausted as on 1st April, 2015 has been
adjusted to opening balance of retained earnings in terms of
transitional provision of the said Schedule II. Had the company
continued with the previously assessed useful lives, charge for the
depreciation for the current year would have been higher and profit for
the current year would have been lower by Rs 15.50 million.
ii. Lease hold improvements (LHI) included under building and furniture
& fixtures are amortised on straight line basis over the period of
lease or useful life (not exceeding 5 years), whichever is lower.
iii. Depreciation on other fixed Assets is provided on written down
value method at the rates based on the estimated useful life of the
assets, which is in accordance with the useful lives specified in
Schedule II of the Companies Act, 2013.
iv Depreciation on fixed assets added/disposed off during the year is
provided on pro-rata basis with respect to date of acquisition/
disposal.
f. Impairment
i. The carrying amounts of Tangibles Assets are reviewed at each
balance sheet date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the asset''s net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre tax discount
rate that reflects current market assessments of the time value of
money and risk specific to the asset.
ii. After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
g. Inventories
Raw materials, components, stores and spares are valued at lower of
cost and net realizable value. However, raw 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 is determined on a
weighted average basis.
Work in progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials and labour and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty. Cost is
determined on a weighted average basis. Cost of traded goods includes
purchase and allied costs incurred to bring inventory to its present
condition and location, determined on FIFO basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
h. Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognised :
i. Sale of Goods:
Revenue from sale of goods is recognized when the significant risks and
rewards of ownership of goods have passed to the buyer, which generally
coincides with delivery. It includes excise duty but excludes value
added tax/sales tax. Excise Duty deducted from turnover (gross) is the
amount that is included in the amount of turnover (gross) and not the
entire amount of liability that arose during the year.
ii. Interest:
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable. Interest income is
included under the head ''other income'' in the statement of profit and
loss.
iii. Export Benefits:
Export benefits in the form of Duty Drawback. Duty Entitlement Pass
Book (DEPB) and other schemes are recognized in the Statement of profit
and loss when the right to receive credit as perthe terms of the scheme
is established in respect of exports made and when there is no
significant uncertainty regarding the ultimate collection of the
relevant export proceeds.
i. Foreign Currency Transactions
i. Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
ii. Conversion
Foreign currency monetary items are reported using the closing rate.
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 the transaction.
iii. Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting Company''s monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or expenses in
the year in which they arise.
iv. Forward exchange contracts entered into to hedge foreign currency
risk of an existing asset/ liability The premium or discount arising at
the inception of forward exchange contract is amortized and recognized
as an expense/ income over the life of the contract. Exchange
differences on such contracts are recognized in the statement of profit
and loss in the period in which the exchange rates change. Any profit
or loss arising on cancellation or renewal of such forward exchange
contract is also recognized as income or expense for the period.
j. Government Grants and Subsidies
Grants and subsidies from the government are recognized when there is
reasonable assurance that the grant/ subsidy will be received and all
attaching conditions will be complied with. When the grant or subsidy
relates to an expense item, it is recognized as income over the periods
necessary to match them on a systematic basis to the costs, which it is
intended to compensate. Where the grant or subsidy relates to an asset,
its value is deducted from the gross value of the assets concerned in
arriving at the carrying amount of the related asset. Government
grants in the form of non-monetary assets given at a concessional rate
are accounted for on the basis of their acquisition cost.
k. Borrowing Cost
Borrowing costs that are directly attributable to the acquisition or
construction of qualifying assets, which take substantial period of
time to get ready for its intended use are capitalized until the time
all substantial activities necessary to prepare such assets for their
intended use are complete. Other Borrowing costs are recognized as an
expense in the year in which they are incurred.
l. Segment Reporting Policies
(i) Identification of Segments: Primary Segment
Business Segment:
The Company''s operating businesses are organized and managed separately
according to the nature of products, with each segment representing a
strategic business unit that offers different products and serves
different markets. The identified segments are Footwear & Accessories
and Investment in erstwhile Joint Venture for Surplus Property
Development.
Secondary Segment
Geographical Segment:
The analysis of geographical segment is based on the geographical
location of the customers. The geographical segments considered for
disclosure are as follows:
- Sales within India include sales to customers located within India.
- Sales outside India include sales to customers located outside India.
(ii) Allocation of Common Costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
(iii) Unallocated Items:
Includes general corporate income and expense items which are not
allocated to any business segment.
(iv) Segment Policies:
The Company prepare its segment information in conformity with the
Accounting Policies adopted for preparing and presenting the Financial
Statement of the Company as a whole.
m. Intangible Assets
i. Computer Software Acquired for Internal Use
Software is stated at cost of acquisition and includes all attributable
cost of bringing the software to its working condition for its intended
use, and amortized on a straight-line basis over its useful life of 5
years.
ii. Research and Development Costs
Research costs are expensed as incurred. Development expenditure
incurred on an individual project is carried forward when its future
recoverability can reasonably be regarded as assured. Any expenditure
carried forward is amortised over the period of expected future sales
from the related project, not exceeding ten years.
The carrying value of Intangible Assets is reviewed for impairment
annually, when the asset is not yet in use, and otherwise, when events
or changes in circumstances indicate that the carrying value may not be
recoverable.
n. Retirement and Other Employee Benefits
i Gratuity liability is defined benefit obligation and is provided for
on the basis of an actuarial valuation on projected unit credit method,
at each year end. The liability so provided is represented
substantially by creation of separate funds and is used to meet the
liability as and when it accrues for payment in future.
ii. The Provident Fund (administered by a Trust) is a defined benefit
scheme whereby the Company deposits an amount determined as a fixed
percentage of basic pay to the fund every month. The benefit vests upon
commencement of employment. The interest credited to the accounts of
the employees is adjusted on an annual basis to confirm to the interest
rate declared by the government for the Employees Provident Fund. The
Guidance Note on implementing AS-15, Employee Benefits (revised 2005)
states that provident funds set up by employers, which requires
interest shortfall to be met by the employer, needs to be treated as
defined benefit plan. The Actuarial Society of India has issued the
final guidance for measurement of provident fund liabilities. The
Company has adopted actuarial valuation based on project unit credit
method to arrive at provident fund liability as at March 31, 2016.
iii. Short term compensated absences are provided on estimated basis.
Long term compensated absences are provided for based on actuarial
valuation on projected unit credit method carried by an actuary, at
each year end. Accumulated leave, which is expected to be utilized
within the next 12 months, is treated as short-term employee benefit.
The Company measures the expected cost of such absences as the
additional amount that it expects to pay as a result of the unused
entitlement that has accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year-end. Actuarial gains/losses are immediately taken to the statement
of profit and loss and are not deferred. The Company presents the leave
as a current liability in the balance sheet, to the extent it does not
have an unconditional right to defer its settlement for 12 months after
the reporting date.
iv. Retirement benefits in the form of Pension cost is a defined
contribution scheme and the contributions are charged to the Statement
of profit and loss for the year when the employees render related
services. There are no other obligations other than the contribution
payable to the respective trusts.
v. Actuarial gains/losses are immediately taken to Statement of profit
and loss and are not deferred.
vi. Expenses incurred towards voluntary retirement scheme are charged
to the statement of profit and loss in the year such scheme is accepted
by the employees/workers.
o. Leases
Leases where the less or effectively retains substantially all the risks
and benefits of ownership of the leased term, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Statement of profit and loss on a straight-line basis over the
lease term.
p. Taxes on Income
Tax expense comprises of current and deferred tax. Current income tax
is measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act, 1961 enacted in India.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the Balance Sheet date. Deferred
tax assets and deferred tax liabilities are off set, if a legally
enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on Income levied by the same governing
taxation laws. Deferred tax assets are recognised only to the extent
that there is reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be
realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will not be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available
q. Provisions
A provision is recognised when there is a present obligation as a
result of past event and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
Warranty provisions for warranty-related costs are
recognized when the product is sold or service provided. Provision is
based on actuarial valuation. The estimate of such warranty-related
costs is revised annually.
r. Contingent liability
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does not
recognize a contingent liability but discloses its existence in the
financial statements.
s. Earnings Per Share (Basic & Diluted)
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they were entitled to participate in dividends relative to
a fully paid equity share during the reporting year. The weighted
average number of equity shares outstanding during the year is adjusted
for events of bonus issue, bonus element in a rights issue to existing
shareholders, share split, and reverse share split (consolidation of
shares). For the purpose of calculating diluted earnings per share,
the net profit or loss for the year attributable to equity shareholders
and the weighted average number of shares outstanding during the year
are adjusted for the effects of all dilutive potential equity shares.
t. Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
*Shares held in abeyance
42,460 equity shares of Rs.5/- each (Previous year: 21,230 equity
shares of Rs. 10 each) were held in abeyance on account of pending
adjudication of the shareholders'' right to receive those shares /
inability of depository to establish ownership rights.
** Sub division of Equity Shares
Pursuant to shareholders'' approval dated 5th August 2015, the company
has sub-divided face value of equity shares of Rs. 10/- each into two
equity shares of Rs. 5/- each. Accordingly, the basic and diluted
earnings per share and the number of shares disclosed in Note 24 have
been computed for the current year and re-computed for the previous
period based on the revised no. of shares and face value of Rs. 5/- per
equity shares.
Dec 31, 2013
1. BASIS OF PREPARATION
The financial statements have been prepared to comply in all material
respects with the Accounting Standard notified under Companies Act,
1956 read with General Circular 15/2013 dated 13th September 2013,
issued by the Ministry of Corporate Affairs, in respect of section 133
of the Companies Act, 2013. The financial statements have been prepared
under the historical cost convention on an accrual basis except in case
of assets for which provision for impairment is made and revaluation is
carried out.
The accounting policies have been consistently applied by the Company
and are consistent with those used in the previous year.
a. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon management''s best
knowledge of current events and actions, actual results could differ
from these estimates.
b. Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognise a
decline other than temporary in the value of long term investments.
c. Fixed Assets
Fixed Assets are stated at cost of acquisition (or revalued amounts, as
the case may be) less accumulated depreciation 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. In
case of revaluation of fixed assets, the revalued amount as determined
by the valuer, is considered in the books of account and the
differential amount is transferred to Revaluation Reserve. Depreciation
on the revalued amount is transferred from Revaluation Reserve to
Statement of profit and loss.
Gains or losses arising from de-recognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is de-recognized.
d. Depreciation
i. Fixed Assets costing below Rs. 5,000 are fully depreciated in the
year of acquisition.
ii. Lease hold improvements (LHI) included under building and
furniture & fixtures are amortised on straight line basis over the
period of lease or useful life (not exceeding 9 years), whichever is
lower.
iii. Depreciation on Other Fixed Assets is provided on Written Down
Value method at the rates based on the estimated useful life of the
assets, estimated by the management which is in accordance with the
rates specified in Schedule XIV of the Companies Act, 1956.
iv. Depreciation on fixed assets added/disposed off during the year is
provided on pro-rata basis with respect to date of acquisition/
disposal.
e. Impairment
i. The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the asset''s net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre tax discount
rate that reflects current market assessments of the time value of
money and risk specific to the asset.
ii. After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
f. Inventories
Raw materials, components, stores and spares are valued at lower of
cost and net realizable value. However, raw 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 is determined on a
weighted average basis.
Work in progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials and labor and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty. Cost is
determined on a weighted average basis. Cost of traded goods includes
purchase and allied costs incurred to bring inventory to its present
condition and location, determined on FIFO basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
g. Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
i. Sale of Goods:
Revenue is recognized when the significant risks and rewards of
ownership of goods have passed to the buyer, which generally coincides
with delivery. It includes excise duty but excludes value added
tax/sales tax. Excise Duty deducted from turnover (gross) is the amount
that is included in the amount of turnover (gross) and not the entire
amount of liability that arose during the year.
ii. Interest:
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
iii. Export Benefits:
Export Entitlements in the form of Duty Drawback. Duty Entitlement Pass
Book (DEPB) and other schemes are recognized in the Statement of profit
and loss when the right to receive credit as per the terms of the
scheme is established in respect of exports made and when there is no
significant uncertainty regarding the ultimate collection of the
relevant export proceeds.
h. Foreign Currency Transactions
i. Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
ii. Conversion
Foreign currency monetary items are reported using the closing rate.
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 the transaction.
iii. Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting company''s monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or expenses in
the year in which they arise.
iv. Forward exchange contracts entered into to hedge foreign currency
risk of an existing asset/ liability
The premium or discount arising at the inception of forward exchange
contract is amortized and recognized as an expense/ income over the
life of the contract. Exchange differences on such contracts, except
the contracts which are long-term foreign currency monetary items, are
recognized in the statement of profit and loss in the period in which
the exchange rates change. Any profit or loss arising on cancellation
or renewal of such forward exchange contract is also recognized as
income or expense for the period.
i. Government Grants and Subsidies
Grants and subsidies from the government are recognized when there is
reasonable assurance that the grant/subsidy will be received and all
attaching conditions will be complied with.
When the grant or subsidy relates to an expense item, it is recognized
as income over the periods necessary to match them on a systematic
basis to the costs, which it is intended to compensate. Where the grant
or subsidy relates to an asset, its value is deducted from the gross
value of the assets concerned in arriving at the carrying amount of the
related asset.
Government grants in the form of non-monetary assets given at a
concessional rate are accounted for on the basis of their acquisition
cost.
j. Borrowing Cost
Borrowing costs that are directly attributable to the acquisition or
construction of Qualifying Assets, which take substantial period of
time to get ready for its intended use are capitalized until the time
all substantial activities necessary to prepare such assets for their
intended use are complete. Other Borrowing costs are recognized as an
expense in the year in which they are incurred.
k. Segment Reporting Policies
i. Identification of Segments:
Primary Segment
Business Segment:
The Company''s operating businesses are organized and managed separately
according to the nature of products, with each segment representing a
strategic business unit that offers different products and serves
different markets. The identified segments are Footwear & Accessories
and Investment in erstwhile Joint Venture for Surplus Property
Development.
Secondary Segment
Geographical Segment:
The analysis of geographical segment is based on the geographical
location of the customers. The geographical segments considered for
disclosure are as follows:
- Sales within India include sales to customers located within India.
- Sales outside India include sales to customers located outside India.
ii. Allocation of Common Costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
iii. Unallocated Items :
Includes general corporate income and expense items which are not
allocated to any business segment.
iv. Segment Policies :
The Company prepare its segment information in conformity with the
Accounting Policies adopted for preparing and presenting the Financial
Statement of the company as a whole.
l. Intangible Assets
i. Computer Software Acquired for Internal Use
Costs relating to computer software which is acquired are capitalized
and amortized on a straight-line basis over its useful life of 5 years.
ii. Research and Development Costs
Research costs are expensed as incurred. Development expenditure
incurred on an individual project is carried forward when its future
recoverability can reasonably be regarded as assured. Any expenditure
carried forward is amortised over the period of expected future sales
from the related project, not exceeding ten years.
The carrying value of development cost is reviewed for impairment
annually when the asset is not yet in use, and otherwise when events or
changes in circumstances indicate that the carrying value may not be
recoverable.
m. Retirement and Other Employee Benefits
i Gratuity liability is defined benefit obligation and is provided for
on the basis of an actuarial valuation on projected unit credit method,
at each year end. The liability so provided is represented
substantially by creation of separate funds and is used to meet the
liability as and when it accrues for payment in future.
ii. The Provident Fund (administered by a Trust) is a defined benefit
scheme where by the Company deposits an amount determined as a fixed
percentage of basic pay to the fund every month. The benefit vests upon
commencement of employment. The interest credited to the accounts of
the employees is adjusted on an annual basis to confirm to the interest
rate declared by the government for the Employees Provident Fund. The
Guidance Note on implementing AS-15, Employee Benefits (revised 2005)
states that provident funds set up by employers, which requires
interest shortfall to be met by the employer, needs to be treated as
defined benefit plan. The Actuarial Society of India has issued the
final guidance for measurement of provident fund liabilities. The
Company has adopted actuary valuation to arrive at provident fund
liability as at 31st December, 2013.
iii. Short term compensated absences are provided on estimated basis.
Long term compensated absences are provided for based on actuarial
valuation on projected unit credit method carried by an actuary, at
each year end.
Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short-term employee benefit. The company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
The company treats accumulated leave expected to be carried forward
beyond twelve months, as long- term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year-end. Actuarial gains/losses are immediately taken to the
statement of profit and loss and are not deferred. The company
presents the leave as a current liability in the balance sheet, to the
extent it does not have an unconditional right to defer its settlement
for 12 months after the reporting date.
iv. Retirement benefits in the form of Pension cost is a defined
contribution scheme and the contributions are charged to the Statement
of profit and loss for the year when the contributions to the
respective funds are due. There are no other obligations other than the
contribution payable to the respective trusts.
v. Actuarial gains/losses are immediately taken to Statement of profit
and loss and are not deferred.
vi. Expenses incurred towards voluntary retirement scheme are charged
to the statement of profit and loss in the year such scheme is accepted
by the employees/workers.
n. Leases
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased term, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Statement of profit and loss on a straight-line basis over the
lease term.
o. Taxes on Income
Tax expense comprises of current and deferred tax. Current income tax
is measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act, 1961 enacted in India.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the Balance Sheet date. Deferred
tax assets and deferred tax liabilities are off set, if a legally
enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on Income levied by the same governing
taxation laws. Deferred tax assets are recognised only to the extent
that there is reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be
realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes- down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will not be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available
p. Provisions
A provision is recognised when there is a present obligation as a
result of past event and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
q. Earnings Per Share (Basic & Diluted)
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they were entitled to participate in dividends relative to
a fully paid equity share during the reporting year. The weighted
average number of equity shares outstanding during the year is adjusted
for events of bonus issue, bonus element in a rights issue to existing
shareholders, share split and reverse share split (consolidation of
shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
r. Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
b. Terms/rights attached to equity shares
The Company has only one class of equity shares having a par value of
Rs.10 per share. Each holder of equity shares is entitled to one vote
per share. The Company declares and pays dividends in Indian rupees.
The dividend proposed by the Board of Directors is subject to the
approval of the shareholders in the ensuing Annual General Meeting.
During the year, the amount of per share dividend recognized as
distributions to equity shareholders was Rs.6.50 (Previous year:
Rs.6.00).
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive remaining assets of the Company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the
shareholders.
The Company sets up and maintains provision for trade related and other
litigations or disputes when a reasonable estimate can be made. The
amount of provisions are based upon estimates provided by the Company''s
legal department, which are revisited on a timely basis. The exact
timing of the settlement of the litigations and consequently, the
outflow is uncertain.
In view of large number of labour cases, house tax and other civil
cases, it is not practicable to disclose the details of each case
separately. The exact timing of the settlement of the litigation and
consequently, the outflow is uncertain.
Dec 31, 2012
A. Change in Accounting policy Presentation and disclosure of
Financial statements
During the year ended 31st December 2012, the revised Schedule VI
notified under the Companies Act 1956, has become applicable to the
Company, for preparation and presentation of its financial statements.
The adoption of revised Schedule VI does not impact recognition and
measurement principles followed for preparation of financial
statements. However, it has significant impact on presentation and
disclosures made in the financial statements. The Company has also
reclassified the previous year figures in accordance with the
requirements applicable in the current year.
b. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon management''s best
knowledge of current events and actions, actual results could differ
from these estimates.
c. Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognise a
decline other than temporary in the value of long term investments.
d. Fixed Assets
Fixed Assets are stated at cost of acquisition (or revalued amounts, as
the case may be) less accumulated depreciation 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. In
case of revaluation of fixed assets, the revalued amount as determined
by the valuer, is considered in the books of account and the
differential amount is transferred to Revaluation Reserve. Depreciation
on the revalued amount is transferred from Revaluation Reserve to
Statement of profit and loss.
e. Depreciation
i. FixedAssets costing below Rs. 5,000 are fully depreciated in the
year of acquisition.
ii. Lease hold improvements (LHI) included under building and
furniture & fixtures are amortised on straight line basis over the
period of lease or useful life (not exceeding 9 years), whichever is
lower.
iii. Depreciation on other Fixed Assets is provided on Written Down
Value method at the rates based on the estimated useful life of the
assets, estimated by the management which is in accordance with the
rates specified in Schedule XIV of the CompaniesAct, 1956.
iv. Depreciation on fixed assets added/disposed off during the year is
provided on pro-rata basis with respect to date of acquisition/
disposal.
f. Impairment
i. The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the asset''s net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre tax discount
rate that reflects current market assessments of the time value of
money and risk specific to the asset.
ii. After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
g. Inventories
Raw materials, components, stores and spares are valued at lower of
cost and net realizable value. However, raw 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 is determined on a
weighted average basis.
Work in progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials and labour and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty. Cost is
determined on a weighted average basis. Cost of traded goods includes
purchase and allied costs incurred to bring inventory to its present
condition and location, determined on FIFO basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
h. Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
i. Sale of Goods:
Revenue is recognized when the significant risks and rewards of
ownership of goods have passed to the buyer, which generally coincides
with delivery. It includes excise duty but excludes value added
tax/sales tax. Excise Duty deducted from turnover (gross) is the amount
that is included in the amount of turnover (gross) and not the entire
amount of liability that arose during the year.
ii. Interest:
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
iii. Export Benefits:
Export Entitlements in the form of Duty Drawback. Duty Entitlement Pass
Book (DEPB) and other schemes are recognized in the Statement of profit
and loss when the right to receive credit as per the terms of the
scheme is established in respect of exports made and when there is no
significant uncertainty regarding the ultimate collection of the
relevant export proceeds.
i. Foreign Currency Transactions
i. Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
ii. Conversion
Foreign currency monetary items are reported using the closing rate.
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 the transaction.
iii. Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting company''s monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or as expenses
in the year in which they arise.
iv. Forward exchange contracts entered into to hedge foreign currency
risk of an existing asset/ liability
The premium or discount arising at the inception of forward exchange
contract is amortized and recognized as an expense/ income over the
life of the contract. Exchange differences on such contracts, except
the contracts which are long-term foreign currency monetary items, are
recognized in the statement of profit and loss in the period in which
the exchange rates change. Any profit or loss arising on cancellation
or renewal of such forward exchange contract is also recognized as
income or as expense for the period.
j. Government Grants and Subsidies
Grants and subsidies from the government are recognized when there is
reasonable assurance that the grant/subsidy will be received and all
attaching conditions will be complied with.
When the grant or subsidy relates to an expense item, it is recognized
as income over the periods necessary to match them on a systematic
basis to the costs, which it is intended to compensate. Where the grant
or subsidy relates to an asset, its value is deducted from the gross
value of the assets concerned in arriving at the carrying amount of the
related asset.
Government grants in the form of non-monetary assets given at a
concessional rate are accounted for on the basis of their acquisition
cost.
k. Borrowing Cost
Borrowing costs that are directly attributable to the acquisition or
construction of Qualifying Assets, which take substantial period of
time to get ready for its intended use are capitalized until the time
all substantial activities necessary to prepare such assets for their
intended use are complete. Other Borrowing costs are recognized as an
expense in the year in which they are incurred.
l. Segment Reporting Policies
i. Identification of Segments:
Primary Segment Business Segment:
The Company''s operating businesses are organized and managed separately
according to the nature of products, with each segment representing a
strategic business unit that offers different products and serves
different markets. The identified segments are Footwear & Accessories
and Investment in erstwhile Joint Venture for Surplus Property
Development.
Secondary Segment
Geographical Segment:
The analysis of geographical segment is based on the geographical
location of the customers. The geographical segments considered for
disclosure are as follows:
- Sales within India include sales to customers located within India.
- Sales outside India include sales to customers located outside
India.
ii. Allocation of Common Costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
iii. Unallocated Items :
Includes general corporate income and expense items which are not
allocated to any business segment.
iv. Segment Policies
The Company prepare its segment information in conformity with the
Accounting Policies adopted for preparing and presenting the Financial
Statement of the company as a whole.
m. Intangible Assets
i. Computer SoftwareAcquired for Internal Use
Costs relating to computer software which is acquired, are capitalized
and amortized on a straight-line basis over its useful life of 5 years.
ii. Research and Development Costs
Research costs are expensed as incurred. Development expenditure
incurred on an individual project is carried forward when its future
recoverability can reasonably be regarded as assured. Any expenditure
carried forward is amortised over the period of expected future sales
from the related project, not exceeding ten years.
The carrying value of development cost is reviewed for impairment
annually when the asset is not yet in use, and otherwise when events or
changes in circumstances indicate that the carrying value may not be
recoverable.
n. Retirement and Other Employee Benefits
i Gratuity liability is defined benefit obligation and is provided for
on the basis of an actuarial valuation on projected unit credit method
made at the end of each financial year. The liability so provided is
represented substantially by creation of separate funds and is used to
meet the liability as and when it accrues for payment in future.
ii. The Provident Fund (where administered by a Trust) is a defined
benefit scheme where by the Company deposits as amount determined as a
fixed percentage of basic pay to the fund every month. The benefit
vests upon commencement of employment. The interest credited to the
accounts of the employees is adjusted on an annual basis to confirm to
the interest rate declared by the government for the Employees
Provident Fund. The Guidance Note on implementing AS-15, Employee
Benefits (revised 2005) states that provident funds set up by
employers, which requires interest shortfall to be met by the employer,
need to be treated as defined benefit plan. The Actuarial Society of
India has issued the final guidance for measurement of provident fund
liabilities. The Company has adopted actuary valuation to arrive at
provident fund liability as at 31st December, 2012.
iii. Short term compensated absences are provided on estimated basis.
Long term compensated absences are provided for based on actuarial
valuation on project unit credit method carried by an actuary as at the
end of the year.
iv. Retirement benefits in the form of Pension cost is a defined
contribution scheme and the contributions are charged to the Statement
of profit and loss of the year when the contributions to the respective
funds are due. There are no other obligations other than the
contribution payable to the respective trusts.
v. Actuarial gains/losses are immediately taken to Statement of profit
and loss and are not deferred.
o. Leases
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased term, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Statement of profit and loss on a straight-line basis over the
lease term.
p. Taxes on Income
Tax expense comprises of current and deferred tax. Current income tax
is measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act 1961 enacted in India.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the Balance Sheet date. Deferred
tax assets and deferred tax liabilities are off set, if a legally
enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on Income levied by the same governing
taxation laws. Deferred tax assets are recognised only to the extent
that there is reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be
realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes- down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
q. Provisions
A provision is recognised when there is a present obligation as a
result of past event and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
r. Earnings Per Share (Basic & Diluted)
Basic earnings (loss) per share are calculated by dividing the net
profit or loss for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.
Partly paid equity shares are treated as a fraction of an equity share
to the extent that they were entitled to participate in dividends
relative to a fully paid equity share during the reporting year. The
weighted average number of equity shares outstanding during the year is
adjusted for events of bonus issue; bonus element in a rights issue to
existing shareholders; share split; and reverse share split
(consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
s. Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
Dec 31, 2010
A. Nature of operation
Bata India Limited is primarily engaged in the business of
manufacturing and trading of footwear and accessories through its
retail and wholesale network.
b. Basis of Accounting
The financial statements have been prepared to comply in all material
respects with the Accounting Standards notified by Companies
(Accounting Standards) Rules, 2006 (as amended) and the relevant
provisions of the Companies Act, 1956. The financial statements have
been prepared under the historical cost convention on an accrual basis
except in case of assets for which provision for impairment is made and
revaluation is carried out. The accounting policies have been
consistently applied by the Company and are consistent with those used
in the previous year.
c. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon managements best
knowledge of current events and actions, actual results could differ
from these estimates.
d. Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognise a
decline other than temporary in the value of long term investments.
e. Fixed Assets
Fixed Assets are stated at cost of acquisition (or revalued amounts, as
the case may be) less accumulated depreciation 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. In
case of revaluation of fixed assets, the revalued amount as determined
by the valuer, is considered in the books of account and the
differential amount is transferred to Revaluation Reserve. Depreciation
on the revalued amount is transferred from Revaluation reserve to
Profit and Loss Account.
f. Depreciation
i. Depreciation on Fixed Assets is provided on Written Down Value
method at the rates based on the estimated useful life of the assets,
estimated by the management which is in accordance with the rates
specified in Schedule XIV of the Companies Act, 1956.
ii. Fixed Assets costing below Rs. 5,000 are fully depreciated in the
year of acquisition.
iii. Depreciation on fixed assets added/disposed off during the year is
provided on pro-rata basis with respect to date of acquisition/
disposal.
iv. Lease hold improvements (LHI) included under building and furniture
& fixtures are amortised on straight line basis over the period of
lease or useful life (not exceeding 9 years), whichever is lower.
g. Impairment
i. The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the assets net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre tax discount
rate that reflects current market assessments of the time value of
money and risk specific to the asset.
ii. After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
h. Inventories
Raw materials, components, stores and spares are valued at lower of
cost and net realizable value. However, raw 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 is determined on a
weighted average basis.
Work in progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials and labour and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty. Cost is
determined on a weighted average basis. Cost of traded goods includes
purchase and allied costs incurred to bring inventory to its present
condition and location, determined on FIFO basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
i. Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
i. Sale of Goods:
Revenue is recognized when the significant risks and rewards of
ownership of goods have passed to the buyer, which generally coincides
with delivery. It includes excise duty but excludes value added
tax/sales tax. Excise Duty deducted from turnover (gross) is the amount
that is included in the amount of turnover (gross) and not the entire
amount of liability that arose during the year.
ii. Repairs and Chiropody:
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The revenue is recognised when services are rendered
based on completed contract method.
iii. Interest:
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
iv. Export Benefits:
Export Entitlements in the form of Duty Drawback and Duty Entitlement
Pass Book (DEPB) and other schemes are recognized in the Profit and
Loss account when the right to receive credit as per the terms of the
scheme is established in respect of exports made and when there is no
significant uncertainty regarding the ultimate collection of the
relevant export proceeds.
j. Foreign Currency Transactions
i. Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
ii. Conversion
Foreign currency monetary items are reported using the closing rate.
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 the transaction.
iii. Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting companys monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or as expenses
in the year in which they arise.
k. Government Grants and Subsidies
Grants and subsidies from the government are recognized when there is
reasonable assurance that the grant/subsidy will be received and all
attaching conditions will be complied with.
When the grant or subsidy relates to an expense item, it is recognized
as income over the periods necessary to match them on a systematic
basis to the costs, which it is intended to compensate. Where the grant
or subsidy relates to an asset, its value is deducted from the gross
value of the assets concerned in arriving at the carrying amount of the
related asset.
Government grants in the form of non-monetary assets given at a
concessional rate are accounted for on the basis of their acquisition
cost.
l. Borrowing Cost
Borrowing costs that are directly attributable to the acquisition or
construction of Qualifying Assets, which take substantial period of
time to get ready for its intended use are capitalized until the time
all substantial activities necessary to prepare such assets for their
intended use are complete. Other Borrowing costs are recognized as an
expense in the year in which they are incurred.
m. Segment Reporting Policies
(i) Identification of Segments:
Primary Segment
Business Segment:
The Companys operating businesses are organized and managed separately
according to the nature of products, with each segment representing a
strategic business unit that offers different products and serves
different markets. The identified segments are Footwear & Accessories
and Investment in Joint Venture for Surplus Property Development.
Secondary Segment Geographical Segment:
The analysis of geographical segment is based on the geographical
location of the customers. The geographical segments considered for
disclosure are as follows:
- Sales within India include sales to customers located within India.
- Sales outside India include sales to customers located outside India.
(ii) Allocation of Common Costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
(iii) Unallocated Items :
Includes general corporate income and expense items which are not
allocated to any business segment.
(iv) Segment Policies
The Company prepare its segment information in conformity with the
Accounting Policies adopted for preparing and presenting the Financial
Statement of the company as a whole.
n. Intangible Assets
i. Computer Software Acquired for Internal Use
Costs relating to computer software which is acquired, are capitalized
and amortized on a straight-line basis over its useful life of 5 years.
ii. Research and Development Costs
Research costs are expensed as incurred. Development expenditure
incurred on an individual project is carried forward when its future
recoverability can reasonably be regarded as assured. Any expenditure
carried forward is amortised over the period of expected future sales
from the related project, not exceeding ten years.
The carrying value of development cost is reviewed for impairment
annually when the asset is not yet in use, and otherwise when events or
changes in circumstances indicate that the carrying value may not be
recoverable.
o. Retirement and Other Employee Benefits
i Gratuity liability is defined benefit obligation and is provided for
on the basis of an actuarial valuation on projected unit credit method
made at the end of each financial year. The liability so provided is
represented substantially by creation of separate funds and is used to
meet the liability as and when it accrues for payment in future.
ii. The Provident Fund (where administered by a Trust) is a defined
benefit scheme where by the Company deposits as amount determine as a
fixed percentage of basic pay to the fund every month. The benefit
vests upon commencement of employment. The interest credited to the
accounts of the employees is adjusted on an annual basis to confirm to
the interest rate declared by the government for the Employees
Provident Fund. The Guidance Note on implementing AS-15, Employee
Benefits (revised 2005) states that provident funds set up by
employers, which requires interest shortfall to be met by the employer,
need to be treated as defined benefit plan. Pending the issuance of the
Guidance Note from the Actuarial Society of India, the Companys
actuary has expressed his inability to reliably measure the provident
fund liability. There is no deficit in the fund at the year end.
iii. Short term compensated absences are provided on estimated basis.
Long term compensated absences are provided for based on actuarial
valuation on project unit credit method carried by an actuary as at the
end of the year.
iv. Retirement benefits in the form of Pension cost is a defined
contribution scheme and the contributions are charged to the Profit and
Loss Account of the year when the contributions to the respective funds
are due. There are no other obligations other than the contribution
payable to the respective trusts.
v. Actuarial gains/losses are immediately taken to profit and loss
account and are not deferred.
p. Miscellaneous Expenditure
The Company recognises payments made under voluntary retirement schemes
upto March 31, 2009 as miscellaneous expenditure and write off the same
in monthly instalments over a period of 60 months or by March 31, 2010,
whichever is earlier. Payments made on or after April 1, 2009 under
Voluntary Retirement Scheme are immediately charged under the head
salaries, wages and bonus of the Profit and Loss Account.
q. Leases
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased term, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss account on a straight-line basis over the lease
term.
r. Taxes on Income
Tax expense comprises of current, deferred tax and fringe benefit tax.
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Income Tax Act 1961 enacted in
India. Deferred income taxes reflects the impact of current year
timing differences between taxable income and accounting income for the
year and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the Balance Sheet date. Deferred
tax assets and deferred tax liabilities are off set, if a legally
enforceable right exists to setoff current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on Income levied by the same governing
taxation laws. Deferred tax assets are recognised only to the extent
that there is reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be
realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes- down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
s. Provisions
A provision is recognised when there is a present obligation as a
result of past event and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
t. Earnings Per Share (Basic & Diluted)
Basic earnings (loss) per share are calculated by dividing the net
profit or loss for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.
Partly paid equity shares are treated as a fraction of an equity share
to the extent that they were entitled to participate in dividends
relative to a fully paid equity share during the reporting period. The
weighted average number of equity shares outstanding during the period
is adjusted for events of bonus issue; bonus element in a rights issue
to existing shareholders; share split; and reverse share split
(consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
u. Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before
tax is adjusted for the effects transactions of a non-cash nature and
any deferrals or accruals of past or future cash receipts or payments.
The cash flows from regular revenue generating, financing and investing
activities of the Company are segregated. Cash and cash equivalents in
the cash flow statement comprise cash at bank, cash and short- term
investments with an original maturity of three months or less.
Dec 31, 2009
A. Nature of operation
Bata India Limited is primarily engaged in the business of
manufacturing and trading of footwear and accessories items through its
retail and wholesale network.
b. Basis of Accounting
The financial statements have been prepared to comply in all material
respects with the Notified accounting standard by Companies (Accounting
Standards) Rules, 2006 (as amended) and the relevant provisions of the
Companies Act, 1956. The financial statements have been prepared under
the historical cost convention on an accrual basis except in case of
assets for which provision for impairment is made and revaluation is
carried out. The accounting policies have been consistently applied by
the Company and are consistent with those used in the previous year.
c. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon managements best
knowledge of current events and actions, actual results could differ
from these estimates.
d. Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognise a
decline other than temporary in the value of long term investments.
e. Fixed Assets
Fixed Assets are stated at cost of acquisition (or revalued amounts, as
the case may be) less accumulated depreciation 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. In
case of revaluation of fixed assets, the revalued amount as determined
by the valuer, is considered in the books of account and the
differential amount is transferred to Revaluation Reserve.
f. Depreciation
i. Depreciation on Fixed Assets is provided on Written Down Value
method at the rates based on the estimated useful life of the assets,
estimated by the management which is in accordance with the rates
specified in Schedule XIV of the Companies Act, 1956.
ii. Fixed Assets costing below Rs. 5,000 are fully depreciated in the
year of acquisition.
iii. Depreciation on fixed assets added/disposed off during the year is
provided on pro-rata basis with respect to date of acquisition/
disposal.
iv. Lease hold improvements (LHI) included under building and furniture
& fixtures are amortised on straight line basis over the period of
lease or useful life (not exceeding 9 years), whicheveris lower.
g. Impairment
i. The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the assets net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value at the weighted average
cost of capital.
ii. After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
h. Inventories
Raw materials, components, stores and spares are valued at lower of
cost and net realizable value. However, raw 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 is determined at
weighted average basis.
Work in progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials and labour and a
proportion of manufacturing overheads based on normal operating
capacity. Cost is determined on a weighted average basis and Cost of
finished goods includes excise duty. Cost of traded goods includes
purchase and allied costs incurred to bring inventory to its present
condition and location, determined on weighted average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale. r-
i. Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
i. Sale of Goods:
Revenue is recognized when the significant risks and rewards of
ownership of goods have passed to the buyer, which generally coincides
with delivery. It includes excise duty but excludes value added
tax/sales tax. Excise Duty deducted from turnover (gross) is the amount
that is included in the amount of turnover (gross) and not the entire
amount of liability that arose during the year.
ii. Repairs and Chiropody:
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The revenue is recognised when services are rendered
based on completed contract method.
iii. Interest:
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
iv. Dividends:
Dividend is recognised when the shareholders right to receive payment
is established by the balance sheet date. Dividend from subsidiaries is
recognised even if same are declared after the balance sheet date but
pertains to period on or before the date of balance sheet as per the
requirement of schedule VI of. the Companies Act, 1956.
v. Export Benefits:
Export Entitlements in the form of Duty Drawback and Duty Entitlement
Pass Book (DEPB) Scheme are recognized in the Profit and Loss account
when the right to receive credit as per the terms of the scheme is
established in respect of exports made and when there is no significant
uncertainty regarding the ultimate collection of the relevant export
proceeds.
j. Foreign Currency Transactions
i. Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the <
transaction.
ii. Conversion
Foreign currency monetary items are reported using the closing rate.
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 the transaction.
iii. Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting companys monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or as expenses
in the year in which they arise except those arising from investments
in non-integral operations.
iv. Forward Exchange Contracts (Derivative Instruments) not intended
for trading or speculation purposes
The Company uses derivative financial instruments including forward
exchange contracts to hedge its risk associated with foreign currency
fluctuations. The premium or discount arising at the inception of
forward exchange contracts is amortised as expense or income over the
life of the contract. Exchange differences on such contracts are
recognised in the statement of profit and loss in the year in which the
exchange rates change. Any profit or loss arising on cancellation or
renewal of forward exchange contract is recognised as income or as
expense for the year.
k. Government Grants and Subsidies
Grants and subsidies from the government are recognized when there is
reasonable assurance that the grant/subsidy will be received and all
attaching conditions will be complied with.
When the grant or subsidy relates to an expense item, it is recognized
as income over the periods necessary to match them on a systematic
basis to the costs, which it is intended to compensate. Where the grant
or subsidy relates to an asset, its value is deducted from the gross
value of the assets concerned in arriving at the carrying amount of the
related asset.
Government grants in the form of non-monetary assets given at a
concessional rate are accounted for on the basis of their acquisition
cost.
l. Borrowing Cost
Borrowing costs that are directly attributable to the acquisition or
construction of Fixed Assets, which take substantial period of time to
get ready for its intended use are capitalized until the time all
substantial activities necessary to prepare such assets for their
intended use are complete. Other Borrowing costs are recognized as an
expense in the year in which they are incurred.
m. Segment Reporting Policies
(i) Identification of Segments:
Primary Segment
Business Segment:
The Companys operating businesses are organized and managed separately
according to the nature of products, with each segment representing a
strategic business unit that offers different products and serves
different markets. The identified segments are Manufacturing & Sale of
Footwear & Accessories and Investment in Joint Venture for Surplus
Property Development.
Secondary Segment
Geographical Segment:
The analysis of geographical segment is based on the geographical
location of the customers. The geographical segments considered
fordisclosure are as follows:
- Sales within India include sales to customers located within India.
- Sales outside India include sales to customers located outside India.
(ii) Allocation of Common Costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
(iii) Unallocated Items:
Includes general corporate income and expense items which are
notallocated to any business segment.
(iv) Segment Policies
The Company prepare its segment information in confirmative with the
Accounting Policies adopted for preparing and presenting the Financial
Statement of the company as a whole.
n. Intangible Assets
i. Computer Software Acquired for Internal Use
Costs relating to computer software which is acquired, are capitalized
and amortized on a straight-line basis over its useful life of 5 years.
ii. Research and Development Costs
Research costs are expensed as incurred. Development expenditure
incurred on an individual project is carried forward when its future
recoverability can reasonably be regarded as assured. Any expenditure
carried forward is amortised over the period of expected future sales
from the related project, not exceeding ten years.
The carrying value of development cost is reviewed for impairment
annually when the asset is not yet in use, and otherwise when events or
changes in circumstances indicate that the carrying value may not be
recoverable.
o. Retirement and Other Employee Benefits
i Gratuity liability is defined benefit obligation and is provided for
on the basis of an actuarial valuation on projected unit credit method
made at the end of each financial year. The liability so provided is
represented substantially by creation of separate funds and is used to
meet the liability as and when it accrues for payment in future.
ii. The Provident Fund (where administered by a Trust) is a defined
benefit scheme where by the Company deposits as amount determine as a
fixed percentage of basic pay to the fund every month. The benefit
vests upon commencement of employment. The interest credited to the
accounts of the employees is adjusted on an annual basis to confirm to
the interest rate declared by the government for the Employees
Provident Fund. The Guidance Note on implementing AS-15, Employee
Benefits (revised 2005) states that provident funds set up by
employers, which requires interest shortfall to be met by the employer,
need to be treated as defined benefit plan. Pending the issuance of the
Guidance Note from the Actuarial Society of India, the Companys
actuary has expressed his inability to reliably measure the provident
fund liability. There is no deficit in the fund at the year end.
iii. Short term compensated absences are provided on estimated basis.
Long term compensated absences are provided for based on actuarial
valuation on project unit credit method carried by an actuary as at the
end of the year.
iv. Retirement benefits in the form of Pension cost is a defined
contribution scheme and the contributions are charged to the Profit and
Loss Account of the year when the contributions to the respective funds
are due. There are no other obligations other than the contribution
payable to the respective trusts.
v. Actuarial gains/losses are immediately taken to profit and loss
account and are not deferred.
p. Miscellaneous Expenditure
The Company recognises payments made under voluntary retirement schemes
upto March 31, 2009 as miscellaneous expenditure and write off the same
in monthly instalments over a period of 60 months or by March 31, 2010,
whichever is earlier. Payments made on or after April 1, 2009 under
Voluntary Retirement Scheme are immediately charged under the head
salaries, wages and bonus of the Profit and Loss Account.
q. Leases
Leases where the lesspr effectively retains substantially all the risks
and benefits of ownership of the leased term, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss account on a straight-line basis over the lease
term.
r. Taxes on Income
Tax expense comprises of current, deferred tax and fringe benefit tax.
Current income tax and fringe benefit tax is measured at the amount
expected to be paid to the tax authorities in accordance with the
Indian Income Tax Act 1961 enacted in India. Deferred income taxes
reflects the impact of current year timing differences between taxable
income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the Balance Sheet date. Deferred
tax assets and deferred tax liabilities are off set, if a legally
enforceable right exists to setoff current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on Income levied by the same governing
taxation laws. Deferred tax assets are recognised only to the extent
that there is reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be
realised. If the Company has carry forward of unabsorbed depreciation
and tax losses, deferred tax assets are recognised only if there is
virtual certainty supported by convincing evidence that such deferred
tax assets can be realised against future taxable profits.
At each balance sheet date the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that sufficient future taxable income will be
available against which such deferred tax assets carr be realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes- down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available
s. Provisions
A provision is recognised when there is a present obligation as a
result of past event and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates. Provision for expenditure relating to voluntary retirement
is made when the employee accepts the offer of early retirement.
t. Earnings Per Share (Basic & Diluted)
Basic earnings (loss) per share are calculated by dividing the net
profit or loss for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.
Partly paid equity shares are treated as a fraction of an equity share
to the extent that they were entitled to participate in dividends
relative to a fully paid equity share during the reporting period. The
weighted average number of equity shares outstanding during the period
is adjusted for events of bonus issue; bonus element in a rights issue
to existing shareholders; share split; and reverse share split
(consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
u. Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before
tax is adjusted for the effects transactions of a non-cash nature and
any deferrals or accruals of past or future cash receipts or payments.
The cash flows from regular revenue generating, financing and investing
activities of the Company are segregated. Cash and cash equivalents in
the cash flow statement comprise cash at bank, cash/cheques in hand and
short-term investments with an original maturity of three months or
less.
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