NOTES company domiciled in India and is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The Company is a market leader in the FMCG business comprising Home and Personal Care (HPC), Foods and Refreshments. The Company has manufacturing facilities across the country and Research and Development centres in Mumbai and Bengaluru and sells primarily in India through independent distributors and modern trade. 2) SIGNIFICANT ACCOUNTING POLICIES 2.1. Basis of brparation These financial statements have been brpared to comply in all material aspects with applicable accounting principles in India, the applicable Accounting Standards brscribed under Section 133 of the Companies Act, 2013 ('Act') read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified) and other accounting principles generally accepted in India, to the extent applicable. 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 Schedule III to the Act. Based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current/non-current classification of assets and liabilities. Transactions and balances with values below the rounding off norm adopted by the Company have been reflected as "0.00" in the relevant notes in these financial statements. 2.2. Revenue recognition Revenue from sale of goods is recognised when all the significant risks and rewards of ownership in the goods are transferred to the buyer as per the terms of the contract, the Company retains no effective control of the goods transferred to a degree usually associated with ownership and no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of goods. Sales are recognized net of trade discounts, rebates, sales taxes and excise duties (on goods manufactured and outsourced). Income from export incentives such as duty drawback and brmium on sale of import licenses, and lease license fee are recognised on accrual basis. Income from services rendered is recognized based on agreements/arrangements with the customers as the service is performed using the proportionate completion method when no significant uncertainty exists regarding the amount of the consideration that will be derived from rendering the service and is recognized net of service tax, as applicable. Interest on investments is recognized on a time proportion basis taking into account the amounts invested and the rate of interest Dividend income on investments is recognized when the right to receive dividend is established. 2.3. Expenditure Expenses are accounted on accrual basis. Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss. Development costs of products are also charged to the Statement of Profit and Loss unless a product's technical feasibility and other criteria as set out in paragraph 44 of AS 26 - 'Intangible Assets' have been established, in which case such expenditure is capitalized. The amount capitalized comprises expenditure that can be directly attributed or allocated on a reasonable and consistent basis to creating, producing and making the asset ready for its intended use. Fixed assets utilised for research and development are capitalized and debrciated in accordance with the policies stated for Tangible assets. 2.4. Tangible assets Tangible assets are stated at acquisition cost, net of accumulated debrciation and accumulated impairment losses, if any. Subsequent expenditures related to an item of tangible asset are added to its book value only if they increase the future benefits from the existing asset beyond its brviously assessed standard of performance. Items of tangible assets that have been retired from active use and are held for disposal are stated at the lower of their net book value and net realisable value and are shown separately in the financial statements under "Other current assets". Any expected loss is recognised immediately in the Statement of Profit and Loss. Tangible assets not ready for the intended use on the date of Balance Sheet are disclosed as "Capital work-in-progress". Losses arising from the retirement of, and gains or losses arising from disposal of tangible assets which are carried at cost are recognised in the Statement of Profit and Loss. Debrciation is provided on a pro-rata basis on the straight line method over the useful lives as brscribed under Schedule II to the Companies Act, 2013 with the exception of the following: - plant and equipment is debrciated over 3 to 21 years based on the technical evaluation of useful life done by the management. - assets costing Rs. 5,000 or less are fully debrciated in the year of purchase. Intangible assets are stated at acquisition cost, net of accumulated amortisation and accumulated impairment losses, if any. Intangible assets are amortised on a straight line basis as per rates mentioned below: .6. Impairment Assessment for impairment is done at each Balance Sheet date as to whether there is any indication that an asset (tangible and intangible) may be impaired. For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets is considered as a cash generating unit. If any such indication exists, an estimate of the recoverable amount of the individual asset/cash generating unit is made. Assets whose carrying value exceeds their recoverable amount are written down to the recoverable amount by recognising the impairment loss as an expense in the Statement of Profit and Loss. Recoverable amount is higher of an asset's or cash generating unit's net selling price and its value in use. Value in use is the brsent value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Assessment is also done at each Balance Sheet date as to whether there is any indication that an impairment loss recognised for an asset in prior accounting periods may no longer exist or may have decreased. 2.7. Investments Investments are classified 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, separately for each individual long term investments. Investments that are readily realisable and are 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". Investment in land and buildings that are not intended to be occupied substantially for use by, or in the operations of the Company, have been classified as investment property. Investment properties are carried at cost less accumulated debrciation and accumulated impairment losses, if any. Debrciation on the building component of the investment property is provided in line with the policy on tangible assets 2.8. Inventories Inventories are valued at the lower of cost and net realisable value. Cost is computed on a weighted average basis. The net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and estimated costs necessary to make the sale. Finished goods and work-in-progress include all costs of purchases, conversion costs and other costs incurred in bringing the inventories to their brsent location and condition. 2.9. Trade receivables and Loans and advances Trade receivables and Loans and advances are stated after making adequate provisions for doubtful balances. 2.10. Provisions and Contingent liabilities Provisions are recognised when there is a brsent obligation 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 there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the brsent obligation at the Balance Sheet date and are not discounted to its brsent value. These are reviewed at each year end date and adjusted to reflect the best current estimate. Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which 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 brsent obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made. 2.11. Retirement/ post retirement benefits Defined contribution plans Contributions to defined contribution schemes such as employees' state insurance, labour welfare fund, superannuation scheme, employee pension scheme etc. are charged as an expense based on the amount of contribution required to be made as and when services are rendered by the employees. Company's provident fund contribution, in respect of certain employees, is made to a government administered fund and charged as an expense to the Statement of Profit and Loss. The above benefits are classified as Defined Contribution Schemes as the Company has no further defined obligations beyond the monthly contributions. Defined benefit plans In respect of certain employees, provident fund contributions are made to a trust administered by the Company. The interest rate payable to the members of the trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, shall be made good by the Company. The liability in respect of the shortfall of interest earnings of the Fund is determined on the basis of an actuarial valuation. The Company also provides for retirement/post-retirement benefits in the form of gratuity, pensions (in respect of certain employees), compensated absences (in respect of certain employees) and medical including to the employees of Indian subsidiaries and a subsidiary of parent company. The Company's liability towards such defined benefit plans is determined based on valuations, as at the Balance Sheet date, made by independent actuaries using the projected unit credit method. Actuarial gains and losses in respect of the defined benefit plans are recognised in the Statement of Profit and Loss in the year in which they arise. The classification of the Company's net obligation into current and non- current is as per the actuarial valuation report. Termination benefits Termination benefits, in the nature of voluntary retirement benefits or termination benefits arising from restructuring, are recognised in the Statement of Profit and Loss when: a) the Company has a brsent obligation as a result of past event; b) a reliable estimate can be made of the amount of the obligation; and c) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. 2.12. Income taxes Tax expense for the year comprises current tax and deferred tax. Current tax is measured at the amount expected to be paid to (recovered from) the taxation authorities using the applicable tax rates and tax laws. Deferred tax is recognised for all the timing differences, subject to the consideration of prudence in respect of deferred tax assets. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are recognised and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the Company has unabsorbed debrciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits. The carrying amount of (All amounts in Rs. crores, unless otherwise stated) deferred tax assets is reviewed at each Balance Sheet date for any write down, as considered appropriate. Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities rebrsenting current tax and where the deferred tax assets and deferred tax liabilities relate to taxes on income levied by the same governing taxation laws. 2.13. Foreign currency translations Foreign currency transactions are accounted for at the exchange rates brvailing at the date of the transaction. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Profit and Loss. Forward exchange contracts outstanding as at the year end on account of firm commitment transactions are marked to market and the losses, if any, are recognised in the Statement of Profit and Loss, and gains are ignored in accordance with the announcement of the Institute of Chartered Accountants of India on 'Accounting for Derivatives' issued in March 2008. 2.14. Operating leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. The Company is both a lessee and a lessor under such arrangements. Payments and receipts under such leases are charged or credited to the Statement of Profit and Loss on a straight line basis over the primary period of the lease. 2.15. Segment reporting The accounting policies adopted for segment reporting are in conformity with the accounting policies adopted for the Company. Further, a) I nter segment revenue has been accounted for based on the transaction price agreed to between segments which is primarily market based. b) Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the Company as a whole and are not allocable to segments on a reasonable basis, have been included under "Unallocated corporate expenses net of un-allocated income". 2.16. Cash and cash equivalents In the cash flow statement, cash and cash equivalents include cash in hand, term deposits with banks and other short-term Basic earnings per share is calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period and for all periods brsented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares, that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares. 2.18. Employee share based payments Equity settled stock options granted under "HUL ESOP/ Performance Shares Schemes" are accounted for under the intrinsic value method as per the accounting treatment brscribed by Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, issued by Securities and Exchange Board of India and the Guidance Note on Employee Share-based Payments issued by the Institute of Chartered Accountants of India 2.19. Use of estimates The brparation of the financial statements in conformity with the generally accepted accounting principles requires that the management makes estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as at the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. 2.20. Government Grants Government Grants and subsidies are received and recognised after fulfilling the conditions attached to them. Government grants are of the nature of promoters' contribution and are credited to Capital Subsidy which is treated as part of Reserves and Surplus 3) DEFINED BENEFIT PLANS Gratuity is funded through investment mostly with an insurance service provider and partly through direct investment under Hind Lever Gratuity Fund. Pension for most employees are managed through a trust, investments with an insurance service provider and for some employees investments are managed through company managed trust Post-retirement medical benefits are managed through investment made under company managed trust Provident Fund for most of the employees are managed through trust investments and for some employees through government administered fund. 4) DEFINED BENEFIT PLANS (CONTD.) The Guidance Note on Implementing AS 15, 'Employee Benefits' issued by the Accounting Standard Board (ASB) of the Institute of Chartered Accountants of India states that Provident Funds set up by employers that guarantee a specified rate of return and which require interest shortfall to be met by the employer would be defined benefit plans in accordance with the requirements of paragraph 26(b) of AS 15. The year 2012-13 was the first year in which the actuary had given the detailed disclosures in the actuarial valuation report, in view of the issuance of the Guidance Note by the Institute of Actuaries of India. Accordingly the compliance with the disclosure requirements of paragraph 120(n) of AS 15: Employee Benefits in respect of Provident Fund has been done prospectively from 2012-13. 5) EMPLOYEE STOCK OPTION PLAN The members of the Company had approved '2001 HLL Stock Option Plan' at the Annual General Meeting held on 22nd June, 2001. The plan envisaged grant of share options to eligible employees at market price as defined in Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014. This plan was amended and revised vide '2006 HLL Performance Share Scheme' at the Annual General Meeting held on 29th May, 2006. This scheme provided for conditional grant of Performance Shares at nominal value to eligible management employees as determined by the Compensation Committee of the Board of Directors from time to time, at the end of 3-year performance period. The performance measures under this scheme include group underlying sales growth and free cash flow. The scheme also provided for 'Par' awards for the managers at different work levels. The 2006 scheme was further amended and revised vide '2012 HUL Performance Share Scheme' at the Annual General Meeting held on 23rd July, 2012. This scheme provided for conditional grant of Performance Shares at nominal value to eligible management employees as determined by the Nomination and Remuneration Committee of the Board of Directors from time to time, at the end of 3-year performance period. The performance measures under this scheme include group underlying sales growth, core operating margin improvement and operating cash flow 6) EMPLOYEE STOCK OPTION PLAN (CONTD.) for Employee Share Based Payment issued by the Institute of Chartered Accountants of India in respect of stock options granted. The Employee Stock Option Plan includes employees of Hindustan Unilever Limited, its subsidiaries and a subsidiary of parent company. The cost reimbursed by subsidiary and a subsidiary of parent company for the year is Rs. 3.69 crores. The Company's profit for the year and earnings per share would have been as under, had the compensation cost for employees' stock options been recognized based on the fair value at the date of grant in accordance with Black Scholes model. The fair value of the underlying shares has been determined by an independent valuer. 7) The Company has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under any law/accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of accounts. 8) A profit of Rs. 50.05 crores, hitherto is recognised in the Statement of Profit and Loss under Exceptional Items on sale of bread and bakery business under the brand 'Modern' to Modern Foods Enterprises Private Limited (formerly known as Nimman Foods Private Limited), in line with our strategy to exit non-core businesses. Sales upto March 31, 2016 of the aforesaid business is recognised in our books. 9) The amount of exchange differences included in the net profit for the period is Rs. 3.86 crores gain (2014-15: Rs. 24.41 crs loss). Net foreign exchange (gain)/loss includes exchange differences on settlement/restatement of all monetary items and mark to market valuation of outstanding forward contracts on account of firm commitments. 10) brVIOUS YEAR FIGURES Previous year's figures have been regrouped/restated wherever necessary to conform with this year's classification. 11) SEGMENT REPORTING The Company has brsented segment information in the consolidated financial statements which are brsented in the same financial report. Accordingly, in terms of paragraph 4 of the Accounting Standard 17 (AS-17) 'Segment Reporting', no disclosures related to segments are brsented in this standalone financial statements. As per our report of even date For B S R & Co. LLP Firm Registration No. 101248W/W -Chartered Accountants Akeel Master Partner Membership No. 046768 For and on behalf of Board of Directors Sanjiv Mehta 100022 Managing Director and CEO [DIN: 06699923] Aditya Narayan Chairman - Audit Committee [DIN: 00012084] Aasif Malbari Group Controller PB Balaji Executive Director (Finance & IT) and CFO [DIN: 02762983] Dev Bajpai Executive Director Legal and Company Secretary [Membership No. FCS 3354] Place : Mumbai date : : 9th May, 2016 |