NOTE NO. 1 : MATERIAL ACCOUNTING POLICY INFORMATION
1.1 Basis of Preparation
a) These financial statements have been prepared in accordance with the generally accepted accounting principles (GAAP) in India under the historical cost convention, except for the following :- (i) Financial Asset & Liabilities which are measured at Fair Value, (ii) Defined Benefit Plans which are measure at Fair Value, (iii) Biological Asset which are measured at Fair Value less cost to sell. The accounting polices applied by the Company are consistent with those applied in the previous year except as othewise stated elsewhere.
b) The company has prepared these financial statements to comply in all material respects with the Indian Accounting Standards notified ("Ind AS") under Section 133 of the Companies Act, 2013 ("the Act"), read with Rule 7 of the Companies (Accounts) Rules, 2014 and the Companies (Indian Accounting Standards) Rules, 2015 (as amended), and other pronouncements of the Institute of Chartered Accountants of India, and relevant applicable provisions of the Act, and other Generally Accepted Accounting Principles (GAAP) in India.
c) The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities including Contingent Liabilities as of the date of the financial statements and the reported income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.
d) All Assets and Liabilities have been classified as current or non-current as per the company's normal operating cycle and other criteria set out in the Ind AS 1 - Presentation of Financial Statements and Division II of Schedule III to the Companies Act, 2013. Based on the nature of products and time between the acquisition of assets for growing and manufacturing tea and their realization in cash and cash equivalents, the company has ascertained its operating cycle as 12 months for the purpose of current and non-current classification of assets and liabilities.
1.2 Property, Plant and Equipment And Depreciation/Amortisation
i) Tangible Assets (Other than Bearer Plants)
a) Property, Plant and Equipment held for use in the production or/and supply of goods or services, or for administrative purposes, are stated at cost less accumulated depreciation and cumulative impairment loss, if any. Cost includes taxes, duties, freight and incidental expenses related to the acquisition and installation of the assets.
b) An item of Property, Plant and Equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
c) Depreciation on Property, Plant and Equipment is provided to the extent of depreciable amount on the Written Down Value (WDV) Method based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 which reflects the management's estimate of the useful lives of the respective Property, Plant and Equipment.
The useful lives have been arrived at based on technical assessment of the management, in order to reflect the actual usage of the assets. 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.
Depreciation on additions (disposals) during the year is provided on a pro-rata basis i.e., from (up to) the date on which asset is ready for use (disposed off).
d) Leasehold land and development are not depreciated with effect from 30th June, 1986 in view of long term nature of lease.
e) Capital Work-in-Progress comprises the cost of property, plant and equpiments that are not yet ready for their intented use at the reporting date.
ii) Bearer Plants
a) Bearer Plants, comprising of mature tea bushes and shade trees are stated in the balance sheet at cost, less any accumulated depreciation and accumulated impairment losses (if any). Cost of 'bearer plants' includes the cost of uprooting, land development, rehabilitation, planting of Guatemala, planting of shade trees, cost of nursery, drainage, manual cultivation, fertilizers, vermi compost, organic manure, fencing, agro-chemicals, pruning and infilling etc.
b) An item of Bearer Plant is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the plant. Carrying amount of the bearer plant as on the date of derecognition is recognised in Profit & Loss as loss arising on the derecognition of Bearer Plant.
c) Depreciation on Bearer Plant is provided to the extent of depreciable amount on the Written Down Value (WDV) Method based on useful life of the assets and residual value. Estimated useful life of the bearer plants has been determined to be 50 years. The residual value in case of Bearer Plants has been considered as 2%.
The useful lives have been arrived at based on technical assessment of the management, in order to reflect the actual usage of the assets. 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.
d) Costs incurred for infilling including block infilling are generally recognized in the Statement of Profit and Loss unless there is a significant increase in the yield of the sections, in which case such costs are capitalised and depreciated over the remaining useful life of the respective sections.
e) The cost of plantation expenditures on new planting and replanting of bearer plants are recognised as capital work in progess. On maturity, these costs are classified under bearer plants. Depreciation commences when the bearer plants mature or when the assets are ready for use.
1.3 Investment Property
a) Property that is held for long-term rental yields or for capital appreciation or both is classified as investment property. Investment property is carried at cost including related transaction costs less accumulated depreciation and impairment losses, if any. Subsequent expenditure is included in the asset's book value 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. All other repairs and maintenance costs are expensed when incurred. When a part of an investment property is replaced, the carrying amount of the replaced part is derecognised.
b) Depreciation on Investment Property is provided to the extent of depreciable amount on the Written Down Value (WDV) Method based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 which reflects the management's estimate of the useful life of the respective Investment Property.
1.4 Leases
As a Lessee :
Leases are recognized as a right-of-use asset with a corresponding lease liability at the date on which the leased asset is available for use by the Company as a lessee except for payments associated with short term leases (lease term of 12 months or less) and low value leases, which are recognized on a straight-line basis as an expense in the profit or loss.
As a Lessor:
Lease income (Licence fees) from lease arrangements where the Company is a lessor is recognised in income on a straight line basis over the lease term unless the license fees is structured to increase in line with expected general inflation to compensate for the expected inflationary cost increases in which event such increases are recognised in the year in which such benefits accrue. The related leased assets are included in the balance sheet based on their nature.
1.5 Trade Receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment, if any.
1.6 Financial Instruments Financial Asset -
All financial assets are initially recognized when the Company becomes a party to the contractual provisions of the instruments. A financial asset is initially measured at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are atributable to the acquisition of the financial asset.
Classification
The Company classifies its financial assets in the following measurement categories:
a) those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
b) those measured at amortised cost
The classifiation depends on the Company's business model for managing the financial assets and the contractual terms of cash flow.
Financial Assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial Assets at fair value through other comprehensive income (FVTOCI)
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business whose objective is achieved by both collecting contractual cash flows that give rise on specified dates to solely payments of principal and interest on the principal amount outstanding and by selling financial assets.
The Company has made an irrevocable election to present subsequent changes in fair value of equity investments not held for trading in Other Comprehensive Income.
Financial Assets at fair value through profit or loss (FVTPL)
Financial assets are measured at fair value through profit and loss unless it is measured at amortised cost or at fair value through other comprehensive income on intial recognition. The transaction costs directly attributable to the acquistion of financial assets and liabilities at fair value through profit or loss are immediately recognised in profit or loss.
Equity instruments
An equity instrument is a contract that evidences residual interest in the assets of the Company after deducting all its liabilities. Equity instruments recognised by the Company are measured at the proceeds received net of direct issue cost.
Impairment
Financial assets (other than at fair value)
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVTOCI debt instruments. The impairment methodology applied depends on whether there has been significant increase in credit risk.
For trade receivables only, the Company applies the simplified approach permitted by Ind As 109 Financial Derecognition of financial assets A financial assets is derecognised only when
a) The Company has transferred the rights to receive cash flows from the financial assets,or
b) Retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recepients.
Where the entity has not transferred substantially all risk and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the entity has neither transferred a financial asset nor retains substantially all risk and rewards of ownership of the financial asset is derecognised if the Company has not retained control of the financial asset.
Financial liabilities
Financial liabilities are classified, at initial recognition, as at fair value through profit or loss, loans and borrowings, payables or as derivatives, as appropriate. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly atributable transaction costs.
Subsquently financial liabilities are measured at amortised cost using the effective interest method except the financial liabilities that are held for trading and the financial liablities designated upon initial recognition to be measured at fair value through profit or loss.
Financial Guarantee Contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly atributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirement of Ind AS 109 and the amount recognized less cumulative amortization.
Dereognition of Financial Libility
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. Offestting of financial instruments
Financial assets and financial liablities are offset and the net amount is reported in financial statements 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.
Derivates financial instruments
The Company enters into certains derivates contracts to hedge risks which are not desginated as hedges. Such contracts are accounted for at fair value through profit or loss and are included in other gains/ (losses).
Impairment of Non - Financial Assets
Wherever events or changes in circumstances indicate that the carrying value of fixed assets may be impaired, the company subjects such assets to test of recoverability, based on discounted cash flows expected from use or disposal of such assets. If the assets are impaired, the Company recognizes an impairment loss as difference between the carrying value and recoverable value.
After impairment, depreciation or amortisation on assets is provided on the revised carrying amount of the respective asset over its remaining useful life.
1.7 Fair Value Measurement
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:A) In the principal market for the asset or liability, orB) In the absence of a principal market, in the most advantageous market for the asset or liabilityThe 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 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, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.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 input that is significant to the fair value measurement as a whole : Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities Level 2 — Inputs other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and Level 3 — Inputs which are unobservable inputs for the asset or liability. External valuers are involved for valuation of significant assets and liabilities. Involvement of external valuers is decided by the management of the company considering the
requirements of Ind AS and selection criteria include market knowledge, reputation, independence and whether professional standards are maintained.
1.8 Inventories
a) Inventories (other than tea waste) are valued at lower of cost or net realizable value after providing for obsolescence, if any. Cost of inventory comprises of purchase price, cost of conversion and other cost incurred in bringing the Inventories to their respective present location and condition. The cost of Inventories is computed on weighted average basis.
b) Stock in Trade: Measured at cost (i.e., purchase cost) or net realizable value whichever is lower.
c) Tea wastes are valued at net realizable value.
1.9 Biological Assets other than Bearer Plant (Tea Leaves) and Agricutural Produce
a) Biological assets of the Company comprises of unharvested green tea leaves that are classified under current biological assets.The Company recognizes biological assets when, and only when, the Company controls the assets as a result of past events, it is probable that future economic benefits associated with such assets will flow to the Company and the fair value or cost of the assets can be measured reliably. Expenditure incurred on biological assets are measured on initial recognition and at the end of each reporting period at its fair value less costs to sell. The gain or loss arising from a change in fair value less costs to sell of biological assets are included in statement of profit and loss for the period in which it arises.
b) The Company's agricultural produce comprises of green leaves plucked from its tea estates. The Company recognizes agricultural produce when, and only when, the Company controls the assets as a result of past events, it is probable that future economic benefits associated with such assets will flow to the Company and the fair value or the cost of the assets can be measured reliably. Agricultural produce harvested from the Company's biological assets are valued at fair value less cost to sell at the point of harvest. A gain or loss arising on initial recognition of agricultural produce at fair value less cost to sell shall be included in Statement of Profit and Loss for the period in which it arises.
1.10 Revenue Recognition
Revenue from contract with customers is recognised when the Company satisfies performance obligation by transferring promised goods and services to the customer. Performance obligations are satisfied at a point of time or over a period of time. Performance obligations satisfied over a period of time are recognised as per the terms of relevant contractual agreements/ arrangements. Performance obligations are said to be satisfied at a point of time when the customer obtains controls of the asset.
Revenue is measured based on transaction price, which is the fair value of the consideration received or receivable, stated net of discounts and returns. Transaction price is recognised based on the price specified in the contract, net of the estimated sales incentives/ discounts. Accumulated experience is used to estimate and provide for the discounts/ right of return, using the expected value method.
A refund liability is recognised for expected returns in relation to sales made corresponding assets are recognised for the products expected to be returned.
The Company recognises as an asset, the incremental costs of obtaining a contract with a customer, if the Company expects to recover those costs. The said asset is amortised on a systematic basis consistent with the transfer of goods or services to the customer.
Interest Income : Interest Income from debt instruments is recognised using the effective interest rate method.
Other Income : Other items of income are accounted for as and when the right to receive such income arises, it is probable that the economic benefits will flow to the company and the amount of income can be measured reliably.
Dividend Income : It is recognised in statement of profit or loss only when the right to receive payment is established.
1.11 Expenses
All the expenses are accounted for on accrual basis.
1.12 Employee Benefits
a) Short-term employee benefits are recognized as an expense at the undiscounted amount in the Statement of Profit and Loss of the year in which the related service is rendered.
b) Post employment and other long-term employee benefits are recognized as an expense in the Statement of Profit and Loss for the year in which the employee has rendered services. The expense is recognized at the present
value of the amount payable determined using actuarial valuations. Actuarial gains and losses are recognised in full in the Other Comprehensive Income for the period in which they occur except for other long term employee benefit(unfunded) which immediately charged in the Profit and Loss account.
1.13 Borrowing Costs
Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such asset. A qualifying asset is one that necessarily takes a substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.
1.14 Insurance Claims
Insurance claims are recognized when the amount thereof can be reasonably ascertained and the claim is likely to be received.
1.15 Grants and Subsidies
a) Grants and subsidies from the Government are recognised when there is reasonable assurance that the Company would comply with the conditions attached with them and the grant/subsidy would be received.
b) Grants and subsidies related to replanting activities or capital assets are treated as Deferred Subsidy Income and transferred to Profit and Loss on Straight Line Basis over the useful life of the Property, Plant and Equipment.
c) Grants and subsidies related to revenue items are adjusted with the related expenditure. If not related to a specific expenditure, it is taken as income.
1.16 Foreign Currency Transactions
a) Foreign currency transactions are translated into Indian Rupee (INR) which is the functional currency using the exchange rates at the dates of the transactions .
b) Monetary assets and liabilities related to foreign currency transactions remaining outstanding at the year-end are translated at the year-end exchange rate.
c) Any income or expense on account of exchange difference either on settlement or on translation at the year end is recognized in the Statement of Profit and Loss.
1.17 Research & Development
Research and Development expenditure of revenue nature is written off in the Statement of Profit and Loss as incurred and such expenditure is capitalised if it is of capital nature.
1.18 Taxes on Income
Current tax is determined as the amount of tax payable in respect of taxable income computed at the applicable income tax rate and is recognised in the statement of profit and loss account . Deferred tax is recognized subject to the consideration of prudence in respect of deferred tax assets, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in or more subsequent periods. Deferred tax asset is recognized and carried forward only to the extent that it is probable that future taxable profit will allow the deferred tax asset to be recovered.
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