To the Members of ADF Foods Limited
Report on the Audit of the Standalone Ind AS Financial Statement Opinion
We have audited the accompanying standalone Ind AS Financial Statements of ADF FoodsLimited (the Company) which comprise the Balance Sheet as at March312019 the Statement of Profit and Loss (including other comprehensive income) theStatement of Changes in Equity and Statement of Cash Flows for the year then ended andnotes to the Financial Statements including a summary of significant accounting policiesand other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS Financial Statements give the informationrequired by the Companies Act 2013 (the Act) in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India of the state of affairs of the Company as at March 312019 and profit changesin equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Companies Act 2013 (the Act). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of standalone Ind AS Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the Financial Statements under the provisions of the Actand the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Standalone Ind AS Financial Statements of the currentperiod. These matters were addressed in the context of our audit of the standaloneFinancial Statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters.
We have determined the matters described below to be the key audit matters to becommunicated in our report.
|Key Audit Matter Description ||Our Response |
|1. Impairment of Indefinite-lived intangible assets |
|Indefinite-lived intangible assets (Brands) as at March 312019 amount to Rs.2132.84 lakhs. |
The impairment assessment must be performed at least annually and involves the determination of the recoverable amount being the higher of the value-in-use and the fair value less costs to dispose.
We consider this to be a key audit matter because the recoverability assessment of such assets involves complex and subjective estimates and judgements.
These estimates and judgements are entrenched with inherent uncertainty as they include assumptions in relation to forecasting revenue growth rates direct costs foreign exchange rates discount rates and future cash flows.
|We have assessed the valuation methodology and challenged management's analysis and assumptions around the key drivers of cash flow forecasts including discount rate terminal growth rate royalty rate etc. by comparing them to relevant market data and with the assistance from our inhouse specialists. We also performed sensitivity analysis in respect of the above assumptions. |
We assessed the appropriateness and completeness of the related disclosures in the financial statements.
|2. Derivative Instruments and Hedge Accounting || |
|The Company enters into a high volume of derivative financial instrument contracts to manage its exposure to foreign currency risk. These contracts gave rise to derivative Assets of Rs.213.55 lakhs as at March 312019. These contracts are recorded at fair value and for the majority of them hedge accounting is applied such that gains and losses arising from fair value changes are deferred in equity and recognised in the Statement of Profit or Loss when hedges mature. The high volume of contracts necessitates a sophisticated system to record and track each contract and calculate the related valuations at each financial reporting date. The valuation of hedging instruments and consideration of hedge effectiveness can involve a significant degree of both complexity and management judgement and are subject to an inherent risk of error. ||Ensure that the entity's Hedging policy is documented validated by adequate level of management and those charged with governance and communicated to all stakeholders within the entity. |
Assess the process and controls to validate hedging requests to ensure that all hedging requests were duly validated by adequate level of management and are in line with the entity's documented hedging policy.
Verify that all derivatives documented in hedging relationships are allocated to a specific hedged risk from their inception.
Testing management's controls over derivative financial instruments and hedge accounting. Inspecting on a sample basis appropriateness of hedging documentation and contracts. Obtaining confirmation in respect of derivative financial instruments from counterparties. Re-performing the year end valuations of derivative financial instruments and calculations of hedge effectiveness; and
We have also evaluated whether the liabilities and potential exposures were appropriately disclosed in the Financial Statements.
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual Report namely FinancialHighlights Management Discussion and Analysis Director's report Corporate GovernanceReport but does not include the Financial Statements and our auditor's report thereon.The information is expected to be made available to us after the date of this auditor'sreport.
Our opinion on the Financial Statements does not cover the other information and we donot express any form of assurance conclusion thereon.
In connection with our audit of the Financial Statements our responsibility is to readthe other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the StandaloneFinancial Statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.
When we read the other information if we conclude that there is a materialmisstatement therein we are required to communicate the matter to those charged withgovernance and review the steps taken by the Management to communicate with those inreceipt of the other information if previously issued to inform them of the revision
Management's Responsibility for the Standalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone Ind AS FinancialStatements that give a true and fair view of the financial position financial performance(including other comprehensive income) changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS ) specified under section 133 of the Act. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the Standalone Ind AS FinancialStatement that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the Standalone Ind AS Financial Statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Standalone Ind ASFinancial Statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these Standalone Ind AS Financial Statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
(a) Identify and assess the risks of material misstatement of the Standalone Ind ASFinancial Statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
(b) Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls system with reference to Financial Statements inplace and the operating effectiveness of such controls.
(c) Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
(d) Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe Standalone Ind AS Financial Statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern.
(e) Evaluate the overall presentation structure and content of the Standalone Ind ASFinancial Statements including the disclosures and whether the Standalone Ind ASFinancial Statements represent the underlying transactions and events in a manner thatachieves fair presentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of theusers of the Financial Statements may be influenced. We consider quantitative materialityand qualitative factors in (i) planning the scope of our audit work and in evaluating theresults of our work; and (ii) to evaluate the effect of any identified misstatements inthe financial statements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone Ind AS financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.
Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditor's Report) Order 2016 (the Order)issued by the Central Government of India in terms of subsection (11) of section 143 ofthe Companies Act 2013 we give in the Annexure A a statement on thematters specified in paragraphs 3 and 4 of the Order to the extent applicable.
As required by Section 143(3) of the Act we report that:
(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
(c) The Standalone Balance Sheet the Standalone Statement of Profit and Loss(including Other Comprehensive Income) the Standalone Statement of Changes in Equity andthe Standalone Statement of Cash Flows dealt with by this Report are in agreement with thebooks of account.
(d) In our opinion the aforesaid standalone Ind AS financial statements comply withthe Accounting Standards specified under Section 133 of the Act read with relevant rulesissued thereunder.
(e) On the basis of the written representations received from the directors as on March31 2019 taken on record by the Board of Directors none of the directors of the Companyis disqualified as on March 312019 from being appointed as a director in terms of Section164 (2) of the Act.
(f) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in Annexure B.
(g) According to information and explanations given to us and based on our examinationof the records of the Company the Company has paid/provided managerial remuneration inaccordance with the provisions of Section 197 of the Act.
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its Standalonefinancial position in its Standalone Ind AS financial statements - Refer Note 40 to thefinancial statements;
ii. The Company did not have any material foreseeable losses on long-term contractsincluding derivative contracts.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
|For KALYANIWALLA & MISTRY LLP |
|CHARTERED ACCOUNTANTS |
|Firm Registration Number 104607W/W100166 |
|FARHAD M. BHESANIA |
|Membership Number 127355 |
|Place: Mumbai |
|Date: May 22 2019 |