BASIS OF PREPARATION OF ACCOUNTS
The financial statements of Agro Tech Foods Limited have been prepared
and presented in accordance with Indian Generally Accepted Accounting
Principles (GAAP) under the historical cost convention on the accrual
basis. GAAP comprises accounting standards notifed by the Central
Government of India under Section 211 (3C) of the Companies Act, 1956,
read with the General Circular 15/2013 dated September 2013 of the
Ministry of Corporate Affairs in respect of Section 133 of the
Companies Act, 2013, other pronouncements of Institute of Chartered
Accountants of India, the provisions of Companies Act, 1956 and
guidelines issued by Securities and Exchange Board of India.
USE OF ESTIMATES
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles (GAAP) requires Management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent liabilities on the
date of the financial statements. Actual results could differ from
those estimates. Any revision to accounting estimates is recognised
prospectively in current and future periods.
CURRENT AND NON-CURRENT CLASSIFICATION
All assets and liabilities are classifed into current and non-current.
An asset is classifed as current when it satisfes any of the following
a. it is expected to be realised in, or is intended for sale or
consumption in the Company''s normal operating cycle;
b. it is held primarily for the purpose of being traded;
c. it is expected to be realised within 12 months after the reporting
d. it is cash or cash equivalent unless it is restricted from being
exchanged or used to settle a liability for at least 12 months after
the reporting date.
Apart from the above, current assets also include the current portion
of non-current financial assets. All other assets are classifed as
A liability is classifed as current when it satisfes any of the
a. it is expected to be settled in the Company''s normal operating
b. it is held primarily for the purpose of being traded;
c. it is due to be settled within 12 months after the reporting date;
d. the Company does not have an unconditional right to defer
settlement of the liability for at least 12 months after the reporting
date. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the issue of equity
instruments do not affect its classifcation.
Apart from the above, current liabilities also include current portion
of non-current financial liabilities. All other liabilities are
classifed as non-current.
Operating cycle is the time between the acquisition of assets for
processing and their realisation in cash or cash equivalents.
Revenue from sale of goods is recognised when Significant risks and
rewards in respect of ownership of products are transferred to
customers. Sales are stated net off sales returns, trade discounts,
Sales tax, value added tax and excise duty. Sales are recognised when
goods are dispatched or as per the terms of contract.
Income from interest on deposits, loans and interest bearing securities
is recognised on the time proportionate method.
FIXED ASSETS AND DEPRECIATION
Fixed assets are accounted for at cost of acquisition or construction
inclusive of inward freight, duties, taxes and directly attributable
costs of bringing the asset to its working condition for its intended
Advances paid towards the acquisition of fxed assets outstanding at
each Balance Sheet date are shown as Capital Advances under Long term
loans and advances and assets under installation or under construction
as at the Balance Sheet date are shown as Capital Work-in-Progress
under Fixed assets.
Depreciation is provided on straight line method at rates based on the
useful life of the fxed assets as estimated by the management as
specifed below, or the rates specifed in accordance with the provisions
of Schedule XIV to the Companies Act, 1956, whichever are higher.
- Leasehold land 1.01% to 3.59%
- Buildings 1.63% to 16.67%
- Office equipment, computer and related hardware 19% to 50%
(included in plant and machinery)
- Plant and machinery 4.75% to 9.5%
- Furniture and fxtures 5% to 10%
- Vehicles 19%
In respect of assets given to the employees under a scheme,
depreciation is provided at rates determined on the basis of the
economic useful life of these assets (5 years), and these rates are
higher than those specifed in Schedule XIV to the Companies Act, 1956.
Assets individually costing ^5,000 or less, are depreciated fully in
the year of purchase. Depreciation is charged on a proportionate basis
for all assets purchased and sold during the year.
INTANGIBLE ASSETS AND AMORTISATION
Brands and computer software acquired by the Company, the value of
which is not expected to diminish in the foreseeable future, are
capitalised and recorded in the Balance Sheet as Trade Marks and
computer software at cost of acquisition less accumulated amortisation.
These are being amortised on straight-line method over the estimated
useful life as mentioned below. Useful life of brands are determined by
persuasive evidences of expected usage contributing towards the
performance and Significant expenditure incurred to sustain the useful
life of brands. Recoverable value of such brands are assessed in each
The amortisation rates are as follows:
- Brands 40 years
- Computer Software 5 to 10 years
New licenses of software including their installation costs are charged
off over 10 years and the balance software including their installation
costs are charged off over 5 years.
IMPAIRMENT OF ASSETS
The Company assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belongs is less than its
carrying amount, impairment provision is created to bring down the
carrying value to its recoverable amount. The reduction is treated as
an impairment loss and is recognised in the Statement of Profit and
Loss. If at the Balance Sheet date there is an indication that if a
previously assessed impairment loss no longer exists, the recoverable
amount is reassessed and the impairment provision created earlier is
reversed to bring it at the recoverable amount subject to a maximum of
depreciated historical cost.
Investments that are readily realisable and intended to be held for not
more than a year from the date of acquisition are classifed as current
investments. All other investments are classifed as long-term
investments. However, that part of long term investments which is
expected to be realised within 12 months after the reporting date is
also presented under ''current investments'' as current portion of long
term investments in consonance with the current/non-current
classifcation scheme of revised Schedule VI.
Current investments are stated at the lower of cost and fair value.
Long-term investments are stated at cost. A provision for diminution is
made to recognise a decline, other than temporary, in the value of
long- term investments. Any reductions in the carrying amount and any
reversals of such reductions are charged or credited to the Statement
of Profit and Loss.
Inventories are valued at lower of weighted average cost and estimated
net realisable value after providing for cost of obsolescence, where
necessary. Cost of inventories comprises cost of purchase, cost of
conversion and other costs incurred in bringing the inventories to
their present location and condition. In the case of fnished goods,
cost comprises material, labour and applicable overhead expenses and
duties including excise duty paid/payable thereon.
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.
Goods in transit / with third parties and at godowns are valued at cost
which represents the costs incurred upto the stage at which the goods
are in transit / with third parties and at godowns.
FOREIGN EXCHANGE CONVERSION
The transactions in foreign currency are accounted for at a standard
exchange rate of the month in which the transactions take place.
Exchange differences arising on foreign currency transactions settled
during the year are recognised in the Statement of Profit and Loss.
Monetary assets and liabilities denominated in foreign currencies as at
the Balance Sheet date, not covered by forward exchange contracts, are
translated at year end rates. The resultant exchange differences are
recognised in the Statement of Profit and Loss. Non-monetary assets are
recorded at a standard exchange rate of the month in which the
transactions take place.
In respect of forward contracts, the differences between contracted
exchange rates and monthly standard exchange rates are recognised as
income or expense over the life of the contracts.
Gratuity which is defined benefit plan, is accrued based on an actuarial
valuation using the projected unit credit method at the Balance Sheet
Provident Fund, wherein Company provides the guarantees of a specifed
return on contribution are considered as defined benefit plans and are
accrued based on an actuarial valuation using the projected unit credit
method at the Balance Sheet date.
The employees can carry-forward a portion of the unutilised accrued
compensated absences and utilise it in future service periods or
receive cash compensation on termination of employment. Since the
compensated absences do not fall due wholly within twelve months after
the end of the period in which the employees render the related service
and are also not expected to be utilized wholly within twelve months
after the end of such period, the benefit is classifed as a long-term
employee benefit. The Company records an obligation for such compensated
absences in the period in which the employee renders the services that
increase this entitlement. The obligation is measured on the basis of
independent actuarial valuation using the projected unit credit method.
All actuarial gains and losses arising during the year are recognised
in the Statement of Profit and Loss of the year.
EMPLOYEE STOCK OPTION SCHEME
Stock options granted to the employees under the stock option scheme
are evaluated as per the accounting treatment prescribed by Employee
Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999
issued by the Securities and Exchange Board of India. Accordingly, the
excess of purchase price of the shares purchased by the ESOP Trust of
the Company over the exercise price of the options is recognised as
employee compensation in the Statement of Profit and Loss.
Leases that do not transfer substantially all the risks and rewards of
ownership are classifed as operating leases and recorded as expense in
Statement of Profit and Loss on a straight line basis.
EARNINGS PER SHARE
Basic earnings per share (EPS) is computed by dividing the net Profit
after tax for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, net Profit
after tax for the year and the weighted average number of shares
outstanding during the year are adjusted for the effects of all
dilutive potential equity shares. Dilutive potential equity shares are
deemed converted as of the beginning of the year, unless they have been
issued at a later date.
INCOME TAX EXPENSE
Income tax expense comprises current tax and deferred tax charge or
credit. Income tax expense is recognised in the Statement of Profit and
The current charge for income taxes is calculated in accordance with
the relevant tax regulations applicable to the Company.
Deferred tax charge or credit refects the tax effects of timing
differences between accounting income and taxable income for the
period. The deferred tax charge or credit and the corresponding
deferred tax liabilities or assets are recognised using the tax rates
that have been enacted or substantially enacted by the Balance Sheet
date. Deferred tax assets are recognised only to the extent there is
reasonable certainty that the assets can be realised in future.
Deferred tax assets are reviewed at each Balance Sheet date and is
written-down or written-up to refect the amount that is reasonably
certain to be realised. The break-up of the major components of the
deferred tax assets and liabilities as at Balance Sheet date has been
arrived at after setting off deferred tax assets and liabilities where
the Company has a legally enforceable right to set-off assets against
liabilities and where such assets and liabilities relate to taxes on
income levied by the same governing taxation laws.
PROVISIONS AND CONTINGENT LIABILITIES
The Company creates a provision when there is a present obligation as a
result of a past event that probably requires an outfow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outfow of resources. Where there is possible obligation or a
present obligation in respect of which the likelihood of outfow of
resources is remote, no provision or disclosure is made.