BASIS OF PREPARATION OF ACCOUNTS
The fnancial 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,
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.
Revenue from sale of goods is recognized when signifcant risks and
rewards in respect of ownership of products are transferred to
customers. Sales are recognized when goods are dispatched or as per the
terms of contract.
Income from interest on deposits, loans and interest bearing securities
is recognized 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 and assets under installation or under
construction as at the Balance Sheet date are shown as Capital Work-
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 of the Companies Act, 1956, whichever are higher.
- Offce equipment, Computer and related
hardware and Software (Included
in Plant and Machinery) 19% to 20%
- Plant and Machinery 6.33% to 9.5%
- Furniture and Fixtures 10%
- Factory Premises 3.34%
- Non Factory Premises 1.63% to 16.67%
- 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 of the Companies Act, 1956.
INTANGIBLE ASSETS AND AMORTIZATION
Brands acquired by the Company, the value of which is not expected to
diminish in the foreseeable future, are capitalized and recorded in the
Balance Sheet as Trade Marks at cost of acquisition less accumulated
amortisation. These are being amortized on straight- line method over
the estimated useful life of forty years determined by persuasive
evidences of expected usage contributing towards the performance and
signifcant expenditure incurred to sustain the useful life of brands.
Recoverable value of such brands is assessed in each fnancial year.
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 recognized in the profit and Loss Account. 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
Investments are classifed into current and long-term investments.
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.
Inventories are valued at lower of weighted average cost and estimated
net realizable value after providing for cost of obsolescence, where
necessary. In the case of fnished goods, cost comprises material,
labour and applicable overhead expenses and duties including excise
duty paid/payable thereon.
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 the exchange rate prevailing at the date of the
transactions. Exchange differences arising on foreign currency
transactions settled during the year are recognized in the profit and
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
recognized in the profit and Loss Account. Non-monetary assets are
recorded at the rates prevailing on the date of the transaction.
In respect of forward contracts, the differences between forward
exchange rates and the exchange rates at the date of transaction are
recognised as income or expense over the life of the contracts.
Gratuity and long term compensated absences, which are defned beneft
plans, are accrued based on an actuarial valuation at the Balance Sheet
Provident Fund, wherein Company provides the guarantee of a specifed
return on contribution are considered as defned beneft plans and are
accrued based on an actuarial valuation at the Balance Sheet date.
All actuarial gains and losses arising during the year are recognized
in the profit and Loss Account 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 (ESOP) and Employee Stock Purchase Scheme
Guidelines, 1999 issued by the Securities and Exchange Board of India.
Accordingly, the excess of market price of the shares as on the date of
grant over the exercise price of the options and the excess of purchase
price of the shares purchased by the ESOP Trust of the Company over the
exercise price of the options is recognized as employee compensation in
the profit and Loss Account and in case where exercise price is higher
than the purchase price, the gain is accounted in the period, when the
options are allotted to the employees.
Leases that do not transfer substantially all the risks and rewards of
ownership are classifed as operating leases and recorded as expense in
profit and Loss Account.
EARNINGS PER SHARE
The basic earnings per share (EPS) is computed by dividing the net
profit after tax for the year by the weighted average number of equity
shares outstanding during the year.
Income tax expense comprises current tax and deferred tax charge or
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 recognized using the tax rates
that have been enacted or substantially enacted by the Balance Sheet
date. Deferred tax assets are recognized only to the extent there is
reasonable certainity that the assets can be realized 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 realized. 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.