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Moneycontrol.com India | Notes to Account > Leather Products > Notes to Account from Relaxo Footwears - BSE: 530517, NSE: RELAXO
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Relaxo Footwears

BSE: 530517|NSE: RELAXO|ISIN: INE131B01039|SECTOR: Leather Products
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Notes to Accounts Year End : Mar '18

Rights, Preferences and Restrictions attached to Equity Shares

The Company has only one class of Equity Shares having a face value of Rs. 1/- each. Each holder of Equity Shares is entitled to one vote per share. The Dividend proposed by the Board of Directors is subject to the approval of the Shareholders in the ensuing Annual General Meeting. In the event of the Company being liquidated, since the Equity Shares of the Company are fully paid-up, there would be no additional liability on the Shareholders of the Company. However, post settlement of the liabilities of the Company, the surplus, if any, would be distributed to the Shareholders in proportion to the number of Shares held by each one of them.

Equity Shares reserved under Employee Stock Option Plan

For details of Shares reserved under Employee Stock Option Plan (ESOP) refer Note 40.

The Equity Shares of the Company are listed at Bombay Stock Exchange Limited and National Stock Exchange of India Limited. The Annual Listing Fee has been paid for the year.

Aggregate number of Equity Shares issued as Bonus during the period of five years immediately preceding the reporting date

Board of Directors in their meeting held on 3rd July 2015 allotted 6,00,06,000 fully paid up Bonus Shares in the ratio of 1:1 (i.e. one Bonus Share of Rs. 1/-each to every shareholder holding one equity share of Rs.1/-each).

Nature and Purpose of Reserves

Securities Premium Reserve - Securities Premium Reserve represents the amount received in excess of par value of equity shares of the Company. The same, interalia, may be utilized by the Company to issue fully paid-up bonus shares to its members and buying back the shares in accordance with the provisions of the Companies Act, 2013.

Share Based Payment Reserve - The company has Stock Option Plan under which Options to subscribe for the Company’s Equity Shares have been granted to the Permanent Employees, existing and future including Whole-time Director (but excluding the Independent Directors and Promoter Directors) of the Company. This Reserve is used to recognise the value of Equity-settled 5hare-Based payments provided to Employees, including Key Management Personnel, as part of their Remuneration. Refer Note 40 for further details of this plan.

General Reserve - General Reserve represents the reserve created by apportionment of profit generated during the year or transfer from other reserves either voluntarily or pursuant to statutory requirements. The same is a free reserve and available for distribution.

Retained Earnings - Retained Earnings represents the undistributed profits of the Company.

Nature of Securities

Secured byway of first Pari Passu charge on entire Current Assets, Movable Fixed Assets including Plant & Machinery, Immovable Property situated at Plot No.326, MIE, Bahadurgarh, Haryana and Personal Guarantee of Managing Director and Whole Time Director.

1. Company Information

Relaxo Footwears Limited (‘the Company’) is a Public Limited Company domiciled & incorporated in India and its shares are listed at Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). For Company’s principal shareholders referNote15.

The Company is a market leader in the Footwear Industry. The company has ‘state of the art’ manufacturing facilities at Bahadurgarh (Haryana), Bhiwadi (Rajasthan) and Haridwar (Uttarakhand). The selling arrangements are through its Wholesale Distribution, Export, Modern Trade and Company operated Retail Network.

*Cash Outflows related to disputed tax matters are determinable only on outcome of the pending cases at various forums/authorities. The potential undiscounted amount of total payments for taxes that the Company may be required to make if there was an adverse decision related to these disputed demands of regulators as of the date reporting period ends are as stated above.

** The matter was decided in favour of the Company and Department preferred appeal before Hon’ble Supreme Court of India. Supreme Court of India directed petitionerto file fresh Appeal in High Court. Matter is pending at High Court since 31st May, 2017.

Note 2 Disclosure on Operating Leases

The Company has entered into operating leases for Land and Building premises. These lease arrangements range for a period between 11 months to 20 years, which include both cancellable and non-cancellable leases. Most of the leases are renewable for further period on mutually agreeable terms and also include escalation clauses.

Note 3 Disclosure on Employee Benefits

Disclosure is hereby given in pursuant to Ind AS19 - “Employee Benefits”

(a) Defined Contribution Plan

During the year, the Company has recognised the following amounts in the Statement of Profit and Loss (Refer Note 30)

(b) Defined Benefit Plan-Gratuity (Funded): The Company pays annual contribution for Employees Croup Gratuity Scheme to Life Insurance Corporation of India (LIC) to fund its Plan. Linder the Gratuity Plan, every employee who has completed atleast five years of service gets Gratuity at the time of separation or retirement, whichever is earlier @ 15 days of last drawn salary for each completed year of service. The Present value of obligation is determined based on Actuarial Valuation using the Projected Unit Credit Method.

Changes in Defined Benefit Obligation due to 1% Increase / Decrease in Mortality Rate is negligible.

The above Sensitivity Analysis have been determined based on a method that extrapolates the Impact on Defined Benefit Obligation as a result of reasonable changes in significant assumptions occurring at the end of the reporting period if all other assumptions remain constant.

The above information is certified by Actuary. The estimates of escalation in salary take into account inflation, seniority, promotion and other relevant factors.

It includes Gratuity for KMP as it is worked out forthe Company as a whole (Refer Note 47).

Risk Exposure

Valuations are based on certain assumptions, which are dynamic in nature and vary overtime. As such Company is exposed to various risks as follows

Investment Risk-The Present value of the Defined Benefit Plan Liability is calculated using a discount rate determined by reference to Government Bonds yield. If Plan liability is funded and return on Plan Assets is belowthis rate, It will create a plan deficit.

Interest Risk (Discount Rate Risk)-A decrease in the bond interest rate (discount rate) will increase the Plan liability.

Mortality Risk-The Present value of the Defined Benefit Plan liability is calculated by reference to the best estimate of the mortality of Plan participants. Forthis report, Indian Assured Lives Mortality (2006-08) Ultimate table has been used. A change in mortality rate will have a bearing on the Plan’s liability.

Salary Risk-The Present value of the Defined Benefit Plan Liability is calculated with the assumption of salary increase rate of Plan participants in future. Deviation in the rate of increase of salary in future for Plan participants from the rate of increase in salary used to determine the Present value of obligation will have a bearing on the Plan’s liability.

Note 4 Employee Stock Option Plan

RFL Employee Stock Option Plan 2014 (hereinafter referred to as the “ESOP 2014” / “The Plan”), was approved by the Shareholders through Postal Ballot on 5th August, 2014. The Plan entitles the permanent employees, existing and future, including the Whole-Time Director (but excluding the Independent Directors and Promoter Directors) of the Company to exercise the option granted for purchase of Equity Shares in the Company at the exercise price i.e. the market price of the Equity Shares as on date of grant, subject to compliance with vesting conditions.

The weighted average remaining contractual life for the stock options outstanding as at 31st March, 2018 is 5.95 years (Previous Year 4.05 years). The weighted average exercise price for options outstanding as at 31st March, 2018 is Rs. 443.77 (Previous Year Rs. 245.46).

The weighted average Fair Value of stock options granted during the year ended on 31st March, 2018 is Rs. 327.05 per option (Previous Year Rs. 168.98 per option).

The Black Scholes valuation model has been used for computing weighted average Fair Value considering the following inputs

Note 5 Financial Risk Management

The Company’s principal financial liabilities other than derivatives comprises of borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets includes trade and other receivables, security deposits, Cash and cash equivalents and loans that derive directly from its operations. The Company also hold Investments carried at fair value through other Comprehensive Income (FVTOCI)/ Amortised cost. The Company is exposed to credit risk, liquidity risk and market risk that are summarised as under.

Credit Risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (Primarily trade receivables).

Management of Credit Risk

Concentration of credit risk with respect to trade receivables are limited, due to the customer base being large across all regions. All trade receivables are reviewed and assessed at every reporting period.

Historical experience of collecting receivables of the Company is supported by low level of past defaults and hence the credit risk is perceived to below.

The Credit risk on cash and bank balances and derivatives is negligible because the counterparties are Banks.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s main source of liquidity is cash and cash equivalents and the Cash flows that is generated from operations.The Company’s approach to manage liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. The Company manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast with actual cash flows and matching the maturity profiles of the financial assets and liabilities.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: foreign exchange risk, interest rate risk and other price risk, such as equity price risk and commodity price risk. Financial instruments affected by market risk include Indian rupee loans, foreign currency loans and buyer’s credit.

Foreign Exchange Risk

Foreign Exchange risk is the risk that the Fair Value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (When revenue or expense is denominated in a foreign currency). The Company uses forward exchange contracts to mitigate foreign exchange related risk exposures. The Company’s exposure to unhedged foreign currency risk as at 31st March 2018 ,31st March 2017 and 1st April 201E has been disclosed (Refer Note 42). Currency risks related to the principal amounts of the Company’s US dollar bank loans, have been hedged using currency swaps that mature when due for repayment.

Foreign Currency Risk Sensitivity

The following table demonstrate the sensitivity analysis on Profit before tax due to change in USD exchange rate, with all other variables held constant. The impact on the Company’s Profit Before Tax is due to changes in the Fair Value of monetary assets and liabilities.

The Company’s unhedged foreign currency exposure denominated in Euro & AED are insignificant, hence sensitivity analysis has not been disclosed.

Interest Rate Risk

Interest rate risk is the risk that the Fair Value or future cash flows of a Financial Instrument will fluctuate because of changes in market interest rates. The Company is mainly exposed to interest rate risk due to its variable interest rate borrowings. The interest rate risk arises due to uncertainties about the future market interest rate of these borrowings.

Exposure to Interest Rate Risk

As at 31st March, 2018, the exposure to interest rate risk due to variable interest rate borrowings amounted to Rs.127.34Crores (Previous year Rs. 118.99 Crores, 1st April 201G Rs. 145.74 Crores)

Interest Rate Risk Sensitivity

The following table demonstrate the sensitivity to a reasonably possible change in interest rate with all other variables held constant. The impact on the Company’s Profit Before Tax is due to changes in the interest rates on variable rate portion of loans & borrowings

Price Risk Equity Price Risk

The Company’s Unquoted Equity instruments are susceptible to market price risk arising from uncertainties about future values of the investment. The investment in Unquoted Equity instruments is not significant.

Commodity Price Risk

The key raw materials used in the manufacturing of footwear are Natural Rubber, Synthetic Rubber, EVA and PU Material. Price volatility of these commodities depend mainly on the international market conditions and fluctuation in the price of crude oil and its derivatives. To mitigate the risk, the Company has been constantly monitoring the price trend in domestic and international market.

Note 6 Capital Management

Capital includes Equity Share Capital and Other Equity attributable to the Equity holders of the Company. The Primary objective of the Company’s Capital Management is to ensure that it maintains an Efficient Capital Structure and maximise the Shareholder’s Value.

The Company manages its Capital Structure and makes adjustments in light of changes in economic conditions and all the requirements of the financial covenants. To maintain or adjust the Capital Structure, the Company may adjust the dividend payment to Shareholders, return Capital to Shareholders or issue newshares.

No Changes were made in the objectives, policies or processes for managing Capital during the year ended 31st March, 2018.

Note 7 Events Occurring after the Balance Sheet Date

The Board of Directors has recommended dividend at the rate of Rs. 1.50 per share of face value of Rs. 1/- each aggregating to Rs. 21.7G Crores (including Dividend distribution tax of Rs. 3.71 Crores) for the year ended 31st March, 2018.

Note 8 Collaterals

The Company has hypothecated/mortgaged its Current assets, Property Plant & Equipment as collateral against its borrowing. (Refer Note 17 & 21)

Note 9 Related Party Transactions

In pursuant to Ind A5 24 “Related Party Disclosures” are as under

i) Names of Related Parties and Related Party Relationship

(a) Individuals owning directly or indirectly, an interest in the voting power of the Company that gives them Significant Influence over the Company and Key Management Personnel (KMP)

Name Designation

Mr. Ramesh Kumar Dua Managing Director

Mr. Mukand Lai Dua Whole Time Director

(b) Key Management Personnel (KMP)

Name Designation

Mr. Nikhil Dua Whole Time Director

Mr. Deval Ganguly Whole Time Director

(c) Entities where Individuals and Key Management Personnel (KMP) as defined in Note 47 (i) (a) and 47 (i) (b) above Exercise Significant Influence.

Name of Entities

Marvel Polymers Private Limited Relaxo Rubber Private Limited Patel Oil Mills

Sh. Ramesh Kumar Dua (H.U.F)

Sh. Mukand Lai Dua (H.U.F)

Sh. Mool Chand Dua (H.U.F)

Relaxo Foundation

Shri Mool Chand Dua Memorial Society

(d) Relatives of Individuals owning directly or indirectly, an interest in the voting power of the Company that gives them Significant Influence over the Company and Relatives of Key Management Personnel (KMP)

Name Relationship

Ms. Usha Dua Wife of Whole Time Director

Ms. Lalita Dua Wife of Managing Director

Mr. Ritesh Dua Son of Whole Time Director

Mr. Nitin Dua Son of Whole Time Director

Mr. GauravDua Son of Managing Director

Ms. Sakshi Dua Daughter of Managing Director

Mr. Rahul Dua Son of Managing Director

(e) Independent Directors Name

Mr. Pankaj Shrimali Mr. Kuruvila Kuriakose Mr. Vivek Kumar Ms. Deepa Verma

(f) Employee Croup Gratuity Scheme Name of trust

Trustees Relaxo Footwears Limited Employee Croup Gratuity Scheme

Note 10 Fair Value Measurements

The Fair Value of the assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, otherthan in forced or liquidation sale.

The following methods, assumptions and valuation technique were used to estimate the Fairvalues

a) The Carrying amounts of Cash and cash equivalents, Other bank balances, Trade receivables, Trade payables, Borrowings and Other financial assets and liabilities are considered same as theirfair value due to their short term nature.

b) Financial Assets and Liabilities with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual creditworthiness of the counterparty.

c) The Management assessed that fairvalues of above financial assets and liabilities approximate their carrying value due to amortised cost being calculated based on the Effective Interest Rates.

d) The fair value of cross currency Interest rate swaps is determined as the present value of the estimated future cash flows based on observable yield curves.

e) The fairvalue of forward exchange contracts and currency swaps is determined using forward exchange rates at the Balance Sheet date.

Fair Value Hierarchy

This section explains the judgements and estimates made in determining the fairvalues of the financial instruments that are recognised and measured at fairvalue & amortised cost for which fairvalues are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed as per Ind AS 113-”Fair Value Measurement”. Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.

Level 2: Inputs otherthan quoted prices included within Level 1 that are observable forthe asset or liability, either directly or indirectly.

Level 3: Unobservable inputs forthe asset or liability.

The below table provides comparision by class of Carrying amount and Fair Value of the Company’s Financial Instruments along with Fair Value Hierarchy.

Note 11 Corporate Social Responsibility

Company implements its CSR activities through a registered society, namely Relaxo Foundation which focuses on bringing change in the lives of underprivileged communities surrounding Relaxo Plants. The thrust area of the Relaxo Foundation is ‘Education & Skill Development’, and ‘Health & Hygiene’ with particularfocus on women, children and youth.

Company has formed a CSR committee under Section 135 of the Companies Act 2013 for implementation of CSR policy.

Note 12 The Micro, Small and Medium Enterprises Development Act, 2006

The Information regarding Micro and Small Enterprises as defined underthe” The Micro, Small and Medium Enterprises Development Act, 2006” (“The Act”) has been determined to the extent such parties have been identified on the basis of information received by the Company (Refer Note 22). The impact of interest, if any, that may be payable to Micro and Small Enterprises in accordance with the provisions of the Act is not expected to be material, hence not provided in the Books of Accounts. Further, Company has not received such claim for interest from any vendor as at the Balance Sheet Date.

Note 13 Segment Reporting

Operating Segment

Based on guiding principles given in Ind AS 108 on “Operating Segments”, the Company’s business activity falls within a Single Operating Segment namely, “Footwear and Related Products”, hence, the disclosure requirements relating to “Operating Segments” of Ind AS 108 are not applicable.

Note 14 Authorisation for Issue of Financial Statements

The Financial Statements were authorised for issue by the Board of Directors at their meeting held on 11th May, 2018.

Note 15 Rounding off

Figures have been rounded off to the nearest crore of rupees upto two decimal places. The figure 0.00 wherever stated represents value less than Rs. 50,000/-.

Note 16 Regrouped, Recast and Reclassified

Previous year figures have been regrouped wherever necessary.

Note 17 Transition to Ind AS

These are the first financial statements of the Company prepared in accordance with Ind AS.

The accounting policies set out in Note 36 have been applied in preparing the financial statements for the year ended 31st March, 2018, the comparative information presented in these financial statements for the year ended 31st March, 2017 and in the preparation of an opening Ind AS Balance Sheet as at 1st April, 2016 (the date of transition). In preparing its opening Ind AS Balance Sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with Accounting Standards notified under section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 (IGAAP) and other relevant provisions of the act.

Exemptions

Ind AS 101 allows fi rst-time adopters exemptions of certain requirements under Ind AS. The Company has applied the following exemptions:

Deemed cost for Property, Plant and Equipment, Capital work-in-progress and Intangible assets

Ind AS 101 permits a first-time adopterto elect to continue with the carrying value for all of its property, plant and equipment & capital work-in-progress as recognised in the financial statements as at the date of transition to Ind AS, measured as per IGAAP and use that as its deemed cost as at the date of transition. This exemption can also be used for Intangible Assets & Intangible Assets under Development covered by Ind AS 38. Accordingly, the Company has elected to measure the above mentioned assets at IGAAP carrying value.

Exceptions

Estimates

On assessment of estimates made under the IGAAP financial statements, the Company has concluded that there is no necessity to revise the estimates under Ind AS, as there is no objective evidence of an error in those estimates. However, estimates that were required under Ind AS but not required under IGAAP are made by the Company forthe relevant reporting dates reflecting conditions existing as at that date.

Classification and measurement of financial assets

The Company has classified and measured the financial assets on the basis of facts and circumstances that exist atthedateoftransitiontolndA5. De-recognition of financial assets and liabilities

Ind AS 101 requires a first-time adopterto apply the de-recognition provisions of Ind A5109 prospectively for transactions occurring on or after the date of transition to Ind A5. However, Ind AS 101 allows a first-time adopterto apply the de-recognition requirements in Ind AS 109 retrospectively from a date of entity’s choosing provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognised as a result of past transactions was obtained at the time of initially accounting forthose transactions.

The Company has elected to apply the de-recognition provisions of Ind AS109 prospectively from the date of transition to Ind AS.

An explanation of how the transition from IGAAP to Ind AS has affected the Company’s financial position and financial performance is set out in the followingtables and notes.

Footnotes to the first time adoption of Ind AS

a) Property, Plant and Equipment

Under IGAAP, leasehold land pertaining to windmill was shown under this head. The same Is accounted for as an operating lease under Ind AS. Therefore, the net carrying amount of such leasehold land as at 31st March, 2017 amounting to 70.28 crore (1st April, 2016 7 0.31 crore) has been classified under other non current and current assets. Other non current and current assets as at 31st March, 2017 have increased by 7 0.2G crore (1st April, 2016 7 0.29 crore) and 7 0.02 crore (1st April 2016 7 0.02 crore) respectively. Further, depreciation on such leasehold land amounting to 70.02 crore was reclassified from depreciation and amortisation expense to other expenses. There is no impact on equity or profit and loss.

b) Derivatives

Under IGAAP, the premium on forward contracts was amortised as expense over the tenure of the contract. Further, the net mark to market losses on derivative financial instruments, as at the date of balance sheet, were recognised in the statement of profit and loss and the net gains, if any, were ignored. Under Ind AS, such derivative financial instruments are to be recognised at fairvalue and the changes are recognised in the statement of profit and loss. Therefore, unamortised premium on forward contracts as at 31st March, 2017 amounting to 7 0.10 crore (1st April, 2016 7 0.19 crore) under other current assets has been de-recognised and provision for mark to market loss on outstanding derivative instruments with firm commitments as at 31st March,2017amountingto 71.10 crores (1st April, 2016 7 0.68 crore) classified undershortterm provisions has been de-recognised.

Underlnd AS, non current derivative assets as at 31st March,2017 amounting to 7 0.77 crore (1st April, 2016 7 5.52 crores), current derivative assets as at 31st March,2017 amounting to 7 3.05 crores (1st April 2016 7 5.96 crores) and current derivative liabilities as at 31st March,2017 amounting to 7 2.00 crores (1st April, 2016 71.21 crores) have been recorded.

Further, the associated non current borrowings as at 31st March,2017 have increased by 7 1.13 crores (1st April, 2016 7 6.87 crores) and other financial liabilities- current borrowings as at 31st March,2017 have increased by 7 3.43 crores (1st April, 2016 7 6.89 crores).

As a result of the above adjustments, profit fortheyear ended 31st March, 2017 increased by 7 2.03 crores and total equity as at 31st March, 2017 decreased by 7 0.73 crore (1st April, 2016 7 2.76 crores).

c) Expected Credit Loss on Trade Receivables

Under IGAAP, the Company created provision for doubtful debts when loss event indicators are visible. Under Ind AS, allowances for doubtful trade receivables has been determined based on Life time Expected Credit Loss Model (ECL). As a result, trade receivables as at 31st March, 2017 decreased by 7 0.53 crore (1st April, 2016 Nil). Consequently, total equity as at 31st March, 2017 decreased by 70.53 crore (1st April, 2016 Nil) and profit for the year ended 31st March, 2017decreased by 7 0.53 crore.

d) Deferred Tax

Under ICAAP, deferred tax was recognized using the Income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind A512 requires entities to account for deferred tax using the Balance Sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the Balance Sheet and its tax base. The application of Ind A512 approach has resulted in various transitional adjustments which lead to temporary differences which were not required under IGAAP. The impact on deferred tax liabilities (net) as at 31st March, 2017 is a decrease of Rs. 2.84 crores (1st April, 201G Rs. 3.75 crores). The deferred taxfortheyear ended 31st March, 2017 reduced by Rs. 0.31 crore and the impact of deferred taxon other comprehensive income (OCI) is Rs. 1.22 crores.

e) Proposed Dividend

Under IGAAP, proposed dividend is recorded as a liability in the period to which it relates irrespective of when it is declared. Under Ind AS, proposed dividend is recognised as a liability in the period in which it is declared by the Company .Therefore, the proposed dividend, including the dividend distribution tax on such dividend as at 1st April, 2016 amounting to Rs. 8.67 crores has been de-recognised. Consequently, the total equity as at 1st April, 2016 has increased by an equivalent amount.

f) Deferred Revenue

Under IGAAP, the Company created a provision toward its liability for gift schemes. Under Ind AS, the consideration received is allocated between the products sold and gift schemes. The fair value of gift schemes is deferred and recognized as revenue (along with cost of gift schemes) when the obligation is actually redeemed by the customer or at the expiry of time period of the scheme. Therefore, provision for sales promotion schemes as at 31st March, 2017 amounting to Rs. 15.39 crores (1st April, 2016 Rs. 11.21 crores) has decreased with a corresponding increase in othercurrent liabilities.

g) Revenue from Operations

Under IGAAP, certain discounts and incentives to customers were disclosed as an expense in the statement of Profit and Loss. Under Ind A5, such expenses have been netted off from revenue. Further, under IGAAP, sale of goods was presented net of excise duty. However, under Ind AS, sale of goods includes excise duty and excise duty on sale of goods is separately presented on the face of statement of Profit and Loss. As a result, revenue for the year ended 31st March, 2017 is lower by Rs. 87.87 crores, other expenses have decreased by Rs. 108.69 crores and excise duty on sale of goods amounting to Rs.20.82 crores is separately disclosed. There is no impact on total equity or Profit and Loss.

h) Remeasurement of Defined Benefit Plan

Both under IGAAP and Ind AS, the Company recognised costs related to its post-employment defined benefit plan on an actuarial basis. Under IGAAP, the entire cost, including actuarial gains and losses, are charged to Profit and Loss. Under Ind AS, remeasurements [comprising of actuarial gains and losses, the effect of the 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 employee benefits expense with a corresponding debit or credit to retained earnings through other comprehensive income (OCI). Thus, the employee benefits expense increased by Rs. 3.51 crores for the year ended 31st March, 2017 and remeasurement gains on defined benefit plan of Rs. 2.29 crores (net of tax) has been recognized in other comprehensive income (OCI). There is no impact on total equity as at 31st March 2017.

i) Share Based Payments

Under IGAAP, the cost of equity settled employee share based payment plan was recognised using the Intrinsic value method wherein the difference between market price and exercise price was nil. Under Ind AS, the cost of equity settled employee share based payment plan is recognised based on fair valuation method using an appropriate pricing model over the vesting period. Accordingly, employee benefits expense forthe year ended 31st March, 2017 increased by Rs. 1.32 crores. There is no impact on total equity since the amount i.e. Rs. 3.16 crores as at 31st March, 2017 (1st April, 2016 Rs. 2.80 crores) has been recognised within equity.

j) Other Comprehensive Income

Under IGAAP, the Company has not presented other comprehensive income (OCI) separately. Items of income and expense that are recognised in “other comprehensive income” includes remeasurement of defined benefit plan. Further, IGAAP Profit is reconciled to total comprehensive income as per Ind A5.

k) Retained Earnings

Retained Earnings as at 1st April, 2016 has been adjusted consequent to the above Ind AS transition adjustments.

I) Statement of Cash Flows

The transition from IGAAP to Ind AS has not had a material impact on the Statement of Cash Flows.

Source : Dion Global Solutions Limited
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