Cargills Ceylon PLC

Company Profile

• Cargills (Ceylon) PLC is a Sri Lankan corporate established in 1844 and built on a strong foundation of values and ethics. Guided by trusted leadership it spearheads the sustainable development of the food industry in Sri Lanka.
• Its continuous investment in retail has made the Cargills retail arm Cargills Food City the largest retailer in the island in all categories.
• Pursuing innovation and food safety its manufacturing brands Cargills Supremo and Cargills Finest (processed meats) Cargills Kist (processed fruits and vegetables) and Cargills Magic (ice cream and dairy products) lead sectoral growth.
• KFC franchise is the largest international restaurant chain in Sri Lanka. Through its marketing and distribution arm spread across the island Cargills distributes its manufactured brands as well as internationally renowned food and non-food brands.
• The Cargills agribusiness model has gained global recognition for linking farmers and entrepreneurs to the market through a sustainable and inclusive value creation process.

Cargills History

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• In 1844, William Miller and David Sime Cargill commenced a general warehouse, import and wholesale business in Colombo, Fort.
• The establishment was named the 'House of Cargills'. A successful bid by Sir Chittampalam A. Gardiner saw the House of Cargills being incorporated as a Public Limited Liability Company on 1 March 1946.
• In 1981 Ceylon Theatres acquired controlling interest of the Company and Mr. Albert A. Page was appointed the Managing Director. Mr. Albert Page went on to become the Chairman of Cargills on 26 November 1982.

Vision & Mission

Vision

To be a global corporate role model in community – friendly national development.

Mission

Serve the rural community, our customers and all other stakeholders, through our core business – food with love – and other

related businesses, based on the three main principles of

• � reducing the cost of living
• � enhancing youth skills
• � bridging regional disparity

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by enhancing local and global markets.

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Subsidiary Companies

• Cargills Agrifoods Ltd

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• Cargills Distributors (Pvt) Ltd

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• Cargills Food Processors (Pvt) Ltd

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• Cargills Food Services (Pvt) Ltd

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• Cargills Quality Dairies (Pvt) Ltd

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• Cargills Quality Foods (Pvt) Ltd

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• Cargills Retail (Pvt) Ltd

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• C P C Lanka Limited

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• Diana Biscuits Manufac. (Pvt) Ltd

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• Kotmale Holdings PLC

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• Kotmale Kiri (Pvt) Ltd

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• Kotmale Marketing (Pvt) Ltd

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• Kotmale Milk Products Ltd

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• Kotmale Products Ltd

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• Milife Foods Ltd

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• Millers Limited

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Financial Highlights

Definition for Fair Value

An alternative approach to measurement that seeks to capture changes in asset and liability values over time. The International Accounting Standards Board (IASB) defines fair value as "... an amount at which an asset could be exchanged between knowledgeable and willing parties in an arm’s length transaction".

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Qualitative Characteristics of

Financial Information

Fair value hierarchy

The fair value hierarchy was developed by the Financial Accounting Standards Board(FASB) to increase consistency and comparability of fair value measurements in financial statements.

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Application of Accounting Standards

Following are the standards used in preparing financial statements

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• LKAS 08: Accounting Policies, Changes in Accounting Estimates and Errors
• LKAS 10: Events After the Balance Sheet Date
• LKAS 16 Property, plant and equipment
• LKAS 17: Leases
• LKAS 38: Intangible Assets
• LKAS 36: Impairment of Assets

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LKAS 08 - Accounting Policies, Changes in Accounting Estimates and Errors

A change in accounting estimate is an adjustment of the carrying amount of an asset or liability,or the amount of the periodic consumption of an asset, that result from the assessment of the present status of, and expected future benefits and obligations associated with, assets or liabilities changes in accounting estimates result from new information or new developments and, accordingly, are not correction of errors

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Applicability of LKAS 08 by Cargills (Ceylon) PLC

Brand name

• Externally acquired brand names are shown at their historical costs.
• Brand names which have a infinite useful life are carried at cost less accumulated impairment losses.
• The useful life of a brand name is reviewed in each year to determine whether events and circumstances continue to support an infinite useful life assessment.
• If they do not, the change in the useful life assessment from infinite to finite shall be accounted for as a change in an accounting estimate in accordance with LKAS 08

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LKAS 10: Events after the Balance Sheet Date

Events after the reporting period are those events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorized for issue.

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Non adjusting events after the reporting period

An entity shall not adjust the amounts recognized in its financial statement to reflect non adjusting events after the reporting period

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Dividends

If an entity declares dividends to holders or an equity instruments after the reporting period, the entity shall not recognize those dividends as a liability at the end of the reporting period

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Applicability of LKAS 10 by Cargills (Ceylon) PLC

• The Board of Directors have proposed a final dividend of Rs. 1.30 per share for the year ended 31 March 2013 which is to be approved by the shareholders at the Annual General Meeting.
• As required by the Section 56 (2) of the Companies Act No. 7 of 2007, the Board of Directors has confirmed the company satisfies the ‘Solvency Test’, and has obtained a certificate from auditors.
• In accordance with LKAS 10 - “Events after the reporting period”, the proposed dividend has not been recognized as a liability in the financial statements.
• An interim dividend of 70 Cents per share (Rs. 156,8Mn) was paid on 21 February 2013 for the year ended 31 March 2013. A final dividend of Rs. 1.30 per share is proposed for the year ended 31 March 2013. The Final dividend proposed on 27 August 2013 has not been recognized as at the balance sheet date in compliance with LKAS 10 - “Events after the Reporting period”.

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LKAS 16: Property, Plant and Equipment

• Recognition
• Depreciation charges
• Revaluation model

Applicability of LKAS 16 by Cargills (Ceylon)

• According to the Cargills Ceylon PLC annual report they recognize assets to the cost of an item of property, plant and equipment.
• When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.
• Carrying amounts of property plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable
• An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount
• Plant and equipment are stated at cost less accumulated depreciation

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LKAS 17:Leases

The group has changed the method of accounting operating lease payments of premises occupied by the Group in accordance with LKAS 17 - Leases

LKAS 38: Intangible Assets

• Requires an enterprise to recognize an intangible asset (at cost) if, and only if:
• It is probable that the future economic benefits that are attributable to the asset will flow to the enterprise; and
• The cost of the asset can be measured reliably.

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Applicability of LKAS 38 by Cargills (Ceylon)

• Management is in the view that the brand name has an infinite useful life and accordingly no amortisation is done. However, in accordance with LKAS 38 - ‘Intangible Assets’, any intangible asset which has infinite useful life is subject to annual impairment test which is to be carried out in accordance with LKAS 36 - ‘Impairment of Assets’. Brand has been tested for impairment and found no impairment during the year.

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• Amortisation of intangible assets of Rs. 9.43 Mn (2012 - 5.79 Mn) has been charged in cost of goods sold and Rs. 2.16 Mn (2012 - 3.86 Mn) in administrative expenses

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LKAS 36: Impairment of Assets

Applicability of LKAS 36 by Cargills (Ceylon) PLC

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• Goodwill as at the balance sheet date has been tested for impairment and found impairment in carrying value of Rs.102.5 Mn on acquisition of Cargills Quality Confectioneries (Private) Limited.

• Recoverable value has been estimated based on the value in use method as stipulated in LKAS 36 - ‘Impairment of Assets’.

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Companies Act No. 7 of 2007

• 168 d content of annual report

describe any change in accounting policies made during the accounting period

• 168(k) be signed on behalf of the board by-

(i) two directors of the company or if the company has only one director, by that director ; and

(ii) the secretary of the company

• 168(2) A company that is required to include group financial statements in its annual report shall include in relation to its subsidiaries,

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