UPL ZİRAAT VE KİMYA SANAYİ VE TİCARET LİMİTED ŞİRKETİ

Transcription

1 UPL ZİRAAT VE KİMYA SANAYİ VE TİCARET LİMİTED ŞİRKETİ Financial Statements As at and for the Year Ended 31 March 2018 With Independent Auditors Report 13 April 2018 This report includes 3 pages of independent auditor s report and 36 pages of financial statements together with their explanatory notes.

2 UPL ZİRAT VE KİMYA SANAYİ VE TİCARET LIMITED ŞİRKETİ Table of Contents Independent Auditor s Report Statement of Financial Position (Balance Sheet) Statement of Profit or Loss and Other Comprehensive Income Statement of Changes in Equity Statement of Cash Flows

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6 Statement of Financial Position (Balance Sheet) As at 31 March 2018 ASSETS Notes 31 March March 2017 Current assets Cash and cash equivalents 7 5,420,292 3,232,491 Trade receivables 8 97,676,073 73,977,745 Inventories 9 53,488,737 13,320,699 Other current assets 10 5,320,460 2,129,668 Total current assets 161,905,562 92,660,603 Non-current assets Property, plant and equipment , ,669 Intangible assets 12 4,501,115 3,560,824 Deferred tax assets 18 4,198,642 1,320,167 Total non-current assets 9,217,153 5,458,660 Total assets 171,122,715 98,119,263 The accompanying notes form an integral part of these financial statements. 1

7 Statement of Financial Position (Balance Sheet) As at 31 March 2018 LIABILITIES Notes 31 March March 2017 Current liabilities Bank loans 13 9,456,385 6,250,000 Trade payables ,847,331 74,634,452 Provisions , ,000 Other payables , ,453 Total current liabilities 163,130,548 81,201,905 Non-current liabilities Other payables 15 2,708,193 2,127,819 Provision for employment termination benefits , ,422 Total non-current liabilities 2,843,311 2,228,241 EQUITY Share capital 19 9,515,219 9,515,219 Legal reserves 28,000 28,000 Capital reserves 107, ,830 Retained earnings / (Accumulated losses) (4,502,193) 5,038,068 Total equity 5,148,856 14,689,117 Total equity and liabilities 171,122,715 98,119,263 The accompanying notes form an integral part of these financial statements. 2

8 Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 31 March 2018 Notes 1 April March April March 2017 Revenue 20 96,054,666 62,878,864 Cost of sales (-) 21 ( 84,394,875) (53,775,437) Gross profit 11,659,791 9,103,427 Marketing and sales expenses 22 ( 6,631,911) (4,740,846) Administrative expenses 23 ( 2,150,329) (1,366,067) Other gains and losses 24 ( 1,185,722) ( 2,985) Operating profit 1,691,829 2,993,529 Finance costs 26 (14,110,565) (9,054,915) Loss before tax ( 12,418,736) (6,061,386) Income tax ,309,511 Current income tax charge -- (53,557) Deferred tax income 2,878,475 1,363,068 Loss for the year ( 9,540,261) (4,751,875) Other comprehensive income - - Total comprehensive income ( 9,540,261) (4,751,875) The accompanying notes form an integral part of these financial statements. 3

9 Statement of Changes in Equity For the Year Ended 31 March 2018 Share capital Retained earnings / (Accumulated losses) Legal reserves Capital reserve Total Balance at 1 April ,994 9,789,943 28, ,830 10,228,767 Total comprehensive income for the year - (4,751,875) - - (4,751,875) Issuance of share capital 9,212, ,212,225 Balance at 31 March ,515,219 5,038,068 28, ,830 14,689,117 Balance at 1 April ,515,219 5,038,068 28, ,830 14,689,117 Total comprehensive income for the year - (9,540,261) - - (9,540,261) Balance at 31 March ,515,219 (4,502,193) 28, ,830 5,148,856 The accompanying notes form an integral part of these financial statements 4

10 Statement of Cash Flows For the Year Ended 31 March April March 2018 The accompanying notes form an integral part of these financial statements. 1 April March 2017 Notes Cash flows from operating activities Loss for the year (9,540,261) (4,751,875) Adjustments for: - Finance costs recognised in profit or loss 26 1,673,570 1,303,747 - Employee termination provision 84,093 40,432 - Impairment on trade receivables 8 1,147, Bonus accrual , ,000 - Increase in unused vacation provision 13,869 52,937 - Gain on disposal of property, plant and equipment 24 (29,820) (14,889) - Depreciation expense ,308 53,900 - Amortization expense , ,925 - Income tax recognized in profit or loss 16 (2,878,475) (1,309,511) (8,378,820) (4,288,334) Changes in: - Trade receivables (24,846,262) (27,160,070) - Inventories 9 (40,168,038) (6,209,595) - Other receivables (3,190,792) (529,934) - Trade payables 78,212,879 38,325,193 - Other payables 14 20,510 29,173 Cash generated from operations 1,649, ,433 Income tax paid (90,840) Employment termination benefits paid 17 (49,397) -- Bonus premium paid 16 (120,000) (100,000) Net cash (used in)/ generated by operating activities 1,480,080 (24,407) Cash flows for investing activities Payments to acquire property, plant and equipment and 11,12 intangible assets (1,435,772) (3,148,162) Proceeds from sale of property, plant and equipment 30, ,477 Net cash (used in) investing activities (1,405,468) (2,768,685) Cash flows from financing activities Proceeds on issue of equity shares -- 9,212,225 Interest paid (1,673,570) (1,303,747) Change in borrowings net 3,206,385 (3,250,000) Change in payables to related parties 580, ,761 Net cash from financing activities 2,113,189 5,031,239 Net change in cash and cash equivalents 2,187,801 2,238,147 Cash and cash equivalents at 1 April 6 3,232, ,344 Cash and cash equivalents at 31 March 6 5,420,292 3,232,491 5

11 Note Description Page 1 Reporting entity 7 2 Basis of preparation Significant Accounting Policies Determination of fair values 16 5 Financial risk management Related Party Transactions Cash and Cash Equivalents 19 8 Trade Receivables 19 9 Inventories Other Assets Property, Plant and Equipment Intangible Assets Bank Loans Trade Payables Other Payables Provisions Provisions for Employment Termination Benefits Taxation on Income Share Capital Revenue Cost of Sales Marketing and Sales Expenses Administrative Expenses Other Gains and Losses Expenses by Nature Finance Costs Financial Risk Management Objectives and Policies Commitments and Contingencies Events After The Reporting Period 36 6

12 1 Reporting entity (a) UPL Ziraat Kimya ve Ticaret Limited Şirketi, (the "Company") was established under the registered name of Ceraxagri Ziraat Kimya ve Ticaret Limited Şirketi, on 6 July 2001 which was subsequently changed its name to UPL Ziraat Kimya ve Ticaret Limited Şirketi in November The Company primarily involved in trading of all kinds of agricultural goods and products those are used in the protection of crops. The Company's main shareholder is Cerexagri B.V. with 99.99% share. The Company is registered in Turkey and has the following registered office adress: Adalet Mah. Manas Blv. Folkart Towers A Kule No: 47 Kat: 31 Daire: , Bayraklı /İzmir. The number of constant employees of the Company as at 31 March 2018 is 23. (31 March 2017: number of constant employees is 18 and number of temporary employees is 2) 2 Basis of preparation (b) (c) Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRSs ). They were authorized for issue by the Company s shareholders on 13 April The accompanying financial statements were approved by the Company management on 13 April The Shareholders Assembly has the right to change the financial statements. Basis of measurement The financial statements have been prepared on the historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The Company maintains its books of account and prepares its statutory financial statements in accordance with accounting principles in the Turkish Commercial Code and tax legislation. The accompanying financial statements are based on the statutory records, with adjustments and reclassifications, for the purpose of fair presentation in accordance with IFRS. Use of estimates and judgments The preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about significant areas of estimation uncertainty and critical judgment in applying accounting policies that have the most significant effect on the amount recognized in the financial statements are described in the following notes: Note Note 3 Note 3 Note 3 Note 3, 18 Definition Useful lives of property and equipment Useful lives of intangible assets Impairment of non-derivative financial assets Recognition of deferred tax assets 7

13 (d) UPL Ziraat ve Kimya Sanayi ve Ticaret Limited Şirketi 2 Basis of preparation (continued) Comparative Informations The Company has prepared the statement of financial position as at 31 March 2018 comparatively with the statement of financial position as at 31 March 2017, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year ended 31 March 2018 comparative to the year ended 31 March 2017 except for the following paragraph. The Company reclassified foreign exchange losses amounting to TL 7,721,061 from other gains and losses to finance costs as of 31 March Significant Accounting Policies Revenue recognition Revenue is recognised when the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured reliably. Revenue is measured net of returns, trade discounts and volume rebates. The timing of the transfer of risks and rewards varies depending on the individual terms of the sales agreement. For sales of agricultural goods and products, the transfer usually occurs when the product is dispatched from the Company s warehouse. 8

14 3 Significant Accounting Policies (continued) Foreign currency transactions Transactions in foreign currencies are translated to TL, which is the Company s functional currency, at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to TL at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortized cost in foreign currency translated at the exchange rate at the end of the year. Non-monetary items in foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognized in profit or loss. The foreign currency exchange rates of TL/ EURO and TL/ US Dollar as of the related periods are as follows: 31 March March 2017 TL/ EURO TL/ US Dollar Inventories Inventories are measured at the lower of cost and net realizable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventories. Inventories are valued on a weighted average out basis. Net realizable value represents the estimated selling price less all estimated costs of completion and costs necessary to make a sale. When the net realizable value of inventory is less than cost, the inventory is written down to the net realizable value and the expense is included in statement of income/ (loss) in the period the write-down or loss occurred. When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in net realizable value because of the changes in economic circumstances, the amount of the write-down is reversed. The reversal amount is limited to the amount of the initial write-down. Property, plant and equipment Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment. Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss. Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company. Depreciation on the property and equipment is provided on straight line method according to their useful lives from the date of recognition or assembly of the related assets. Depreciation on the leaseholds is provided on straight line method according to shortest of their rent period or useful lives. The estimated useful lives of property, plant and equipment for current and comparative periods are as follows: Years Furniture and fixtures 3-10 Machinery and equipment 15 Vehicles 5 9

15 3 Significant Accounting Policies (continued) Depreciation methods, useful lives and residual values are reviewed at each financial year-end reporting date and adjusted if appropriate. Intangible assets Intangible assets that are acquired by the Company and have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses. Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognized in profit or loss as incurred. Intangible assets are amortized on a straight line basis in profit or loss over their estimated useful lives, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows: Years Computer software 3-4 Other intangibles 3 Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Impairment Non-derivative financial assets A financial asset not classified at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that loss events had an impact on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets are impaired includes default or delinquency of a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy and the disappearance of an active market for a security. Non-derivative financial assets The Company considers evidence of impairment for financial assets measured at amortized cost (loans and receivables) at specific asset level. All individually significant receivables are assessed for specific impairment. The Company assesses impairment based on expected credit losses (ECL) model on trade receivables. The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over expected life of the trade receivable and is adjusted for forward looking estimates. At every reporting date, historical observed default rates are updated and changes in forward-looking estimates are analysed. This policy is in line with the group s policy on impairment of financial assets. An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset s original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account against loans and receivables. When an event occurring after the impairment was recognized causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. 10

16 3 Significant Accounting Policies (continued) Non-financial assets The carrying amounts of the Company s non-financial assets other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset s recoverable amount is estimated. An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other cash-generating unit. Impairment losses are recognized in profit or loss. Impairment losses in respect of cash-generating units are allocated to reduce the carrying amounts of the assets in the unit (group of cash generating units) on a pro rata basis. For other assets, an impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Income tax Income tax expense comprises current and deferred tax. Current and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognized in respect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax positions and whether any additional taxes and interest may be due. The Company believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of multifaceted judgments about future events. New information may become available that causes the Company to change its judgment regarding the adequacy of existing tax liabilities, such changes to tax liabilities will impact tax expense in the period that such a determination is made. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity or on different tax entities but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. 11

17 In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns within four months following the close of the accounting year to which they relate. Tax returns are open for five years from the beginning of the year that follows the date of filing during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings. Employee Benefits Termination and retirement benefits Under Turkish law and union agreements, lump sum payments are made to employees retiring or involuntarily leaving the Company. Such payments are considered as being part of defined retirement benefit plan as per International Accounting Standard No. 19 (revised) "Employee Benefits" ("IAS 19"). The retirement benefit obligation recognized in the statement of financial position represents the present value of the defined benefit obligation. The actuarial losses are immaterial, they are recognized in profit or loss. Profit-sharing and bonus plans The Company recognizes a liability and an expense for bonuses. The Company recognizes a provision where contractually obliged or where there is a past practice that has created a constructive obligation. Financial assets All financial assets are recognized and derecognized on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Financial assets are classified as 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including trade and other receivables, bank balances and cash, and others) are measured at amortized cost using the effective interest method, less any impairment. Interest income is recognized by applying the effective interest rate, except for shortterm receivables when the effect of discounting is immaterial. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments which their maturities are three months or less from the date of acquisition and that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Derecognition of financial assets The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received. 12

18 3 Significant Accounting Policies (continued) Financial liabilities Financial liabilities are classified as other financial liabilities. Other financial liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortized cost using the effective interest method, with interest expense recognized on an effective yield basis. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant year. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Derecognition of financial liabilities The Company derecognizes financial liabilities when, and only when, the Company's obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss. Provisions Provisions are recognized when the Company has a present obligation as a result of a past event, and it is probable that the Company will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Standards and interpretations issued but not yet effective Standards issued but not yet effective and not early adopted Standards, interpretations and amendments to existing standards that are issued but not yet effective up to the date of issuance of the financial statements are as follows. The Company will make the necessary changes if not indicated otherwise, which will be affecting the financial statements and disclosures, after the new standards and interpretations become in effect. IFRS 15 Revenue from Contracts with Customers The new standard replaces existing IFRS and US GAAP guidance and introduces a new control-based revenue recognition model for contracts with customers. In the new standard, total consideration measured will be the amount to which the Company expects to be entitled, rather than fair value and new guidance have been introduced on separating goods and services in a contract and recognizing revenue over time. The standard is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted under IFRS. The Company is assessing the potential impact on its financial statements resulting from the application of IFRS

19 3 Significant Accounting Policies (continued) Standards and interpretations issued but not yet effective (continued) Standards issued but not yet effective and not early adopted (continued) IFRS 9 Financial Instruments IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Company is assessing the potential impact on its financial statements resulting from the application of IFRS 9. Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions IFRS 2 Share-Based Payment has been amended by IASB to improving consistency and resolve some long-standing ambiguities in share-based payment accounting. The amendments cover three accounting areas: i) measurement of cash-settled share-based payments, ii) classification of share-based payments settled net of tax withholdings; and iii) accounting for modification of a share-based payment from cash-settled to equity-settled. Also, same approach has been adopted for the measurement of cashsettled share-based payments as equity-settled share-based payments. If certain conditions are met, share-based payments settled net of tax withholdings are accounted for as equity-settled share-based payments. The amendments are effective for periods beginning on or after 1 January 2018, with earlier application permitted. The Company does not expect that application of these amendments to IFRS 2 will have significant impact on its financial statements. The IASB issued Annual Improvements to IFRSs Cycle. The amendments are effective as of 1 January Earlier application is permitted. The Company does not expect that application of these improvements to IFRSs will have significant impact on its financial statements. Annual Improvements to IFRSs Cycle IFRS 1 First Time Adoption of International Financial Reporting Standards IFRS 1 is amended to clarify that the deletion of short-term exemptions for first-time adopters within the context of Annual Improvements to IFRSs Cycle related to disclosures for financial instruments, employee benefits and consolidation of investment entities. IAS 28 Investments in Associates and Joint Ventures The amendment enable when an investment in an associate or a joint venture is held by, or is held indirectly through, an entity that is a venture capital organization, or a mutual fund, unit trust and similar entities including investment-linked insurance funds, the entity may elect to measure that investment at fair value through profit or loss in accordance with IFRS 9. Improvements to IFRSs IAS 40 Transfers of Investment Property Amendments to IAS 40 - Transfers of Investment Property issued by IASB have been made to clarify uncertainty about that provide evidence of transfer of /from investment property to other asset groups. A change in management s intentions for the use of property does not provide evidence of a change in intended use. Therefore, when an entity decides to dispose of an investment property without development, it continues to treat the property as an investment property until it is derecognized (eliminated from the statement of financial position) and does not reclassify it as inventory. Similarly, if an entity begins to redevelop an existing investment property for continued future use as investment property, the property remains an investment property and is not reclassified as owner-occupied 14

20 property during the redevelopment. The amendment is effective for annual reporting periods beginning on or after 1 January 2018 with earlier application is permitted. The Company does not expect that application of IAS 40 will have significant impact on its financial statements. IFRIC 22 Foreign Currency Transactions and Advance Consideration On 8 December 2016, IASB issued IFRIC 22 Foreign Currency Transactions and Advance Consideration to clarify the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. The Interpretation covers foreign currency transactions when an entity recognizes a non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration before the entity recognizes the related asset, expense or income. The date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt. This IFRIC is effective for annual reporting periods beginning on or after 1 January 2018 with earlier application is permitted. The Company is assessing the potential impact on its financial statements resulting from the application of IFRIC 22. IFRS 16 Leases On 13 January 2016, IASB published the new leasing standard which will replace IAS 17 Leases, IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC 15 Operating Leases Incentives, and SIC 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease and consequently changes to IAS 40 Investment Properties. IFRS 16 eliminates the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance lease accounting. Lessor accounting remains similar to current practice. The standard is effective for annual periods beginning on or after 1 January 2019, with early adoption permitted provided that an entity also adopts IFRS 15 Revenue from Contracts with Customers. The Company is assessing the potential impact on its financial statements resulting from the application of IFRS 16. IFRIC 23 Uncertainty Over Income Tax Treatments On 17 June 2017, IASB issued IFRIC 23 Uncertainty over Income Tax Treatments to specify how to reflect uncertainty in accounting for income taxes. It may be unclear how tax law applies to a particular transaction or circumstance, or whether a taxation authority will accept a company s tax treatment. IAS 12 Income Taxes specifies how to account for current and deferred tax, but not how to reflect the effects of uncertainty. IFRIC 23 provides requirements that add to the requirements in IAS 12 by specifying how to reflect the effects of uncertainty in accounting for income taxes. The Interpretation is effective from 1 January 2019 with earlier application is permitted. The Company is assessing the potential impact on its financial statements resulting from the application of IFRIC 23. IFRS 17 Insurance Contracts On 18 May 2017, IASB issued IFRS 17 Insurance Contracts. This first truly international standard for insurance contracts will help investors and others better understand insurers risk exposure, profitability and financial position. IFRS 17 replaces IFRS 4, which was brought in as an interim Standard in IFRS 4 has given companies dispensation to carry on accounting for insurance contracts using national accounting standards, resulting in a multitude of different approaches. As a consequence, it is difficult for investors to compare and contrast the financial performance of otherwise similar companies. IFRS 17 solves the comparison problems created by IFRS 4 by requiring all insurance contracts to be accounted for in a consistent manner, benefiting both investors and insurance companies. Insurance obligations will be accounted for using current values instead of historical cost. The information will be updated regularly, providing more useful information to users of financial statements. IFRS 17 has an effective date of 1 January 2021 but companies can apply it earlier. The Company does not expect that application of IFRS 17 will have significant impact on its financial statements. 15

21 (a) (b) UPL Ziraat ve Kimya Sanayi ve Ticaret Limited Şirketi 4 Determination of fair values A number of the Company s disclosures require the determination of fair value, for financial assets and liabilities. Fair values have been determined for disclosure purposes based on the following methods (where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability). Trade and other receivables The fair value of trade and other receivables which is determined for disclosure purposes, is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. Non-derivative financial liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases the market rate of interest is determined by reference to similar lease agreements. 5 Financial risk management Overview The Company has exposure to the following risks from its use of financial instruments: credit risk liquidity risk market risk This note presents information about the Company s exposure to each of the above risks, the Company s objectives, policies and processes for measuring and managing risk, and the Company s management of capital. Further quantitative disclosures are included throughout these financial statements. Risk management framework The Shareholders of Company has overall responsibility for the establishment and oversight of the Company s risk management framework. The management reviews and agrees on policies for managing each of these risks which are summarized below: Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company s receivables from customers. Trade and other receivables The Company s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Company s customer base, including the default risk of the industry and country in which customers operate has an influence on credit risk. Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Company s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. Currency risk The Company is exposed to currency risk through its foreign currency transactions. 16

22 5 Financial risk management (continued) Interest rate risk The Company s operations are subject to the risk of interest rate fluctuations to the extent that interestearning assets and interest-bearing liabilities mature or reprice at different times or in differing amounts. Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company s approach to managing liquidity is to ensure, as far as possible, 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. 6 Related party transactions The Company's main shareholder Cerexagri B.V. and other group companies have been defined as related parties. 31 March 2018 Receivables Payables Balances with related parties Current Non- Current Current Non- Current Cerexagri B. V ,246 2,708,193 Cerexagri S.A.S ,477, UPL Agromed Tarım ilaçları ve Tohumculuk Sanayi ve Ticaret A.Ş. 17,711, ,094, ( UPL Agromed ) UPL Corporation Ltd ,261, UPL Limited, Gibraltar ,801, UPL Limited, Hong Kong ,549, UPL Ltd ,978, ,711, ,243,895 2,708, March 2017 Receivables Payables Balances with related parties Current Non- Current Current Non-Current Cerexagri B. V ,834 2,127,819 Cerexagri S.A.S ,914, UPL Agromed 3,992, ,128, UPL Corporation Ltd ,118, UPL Limited, Gibraltar ,902, UPL Limited, Hong Kong ,822, UPL Limited, India ,460, ,992, ,410,389 2,127,819 17

23 6 Related party transactions The trade receivables from related parties arise mainly from trade goods sales. These receivables are unsecured in nature and bear no interest. The short term trade payables to related parties arise mainly from purchase of goods. These payables bear no interest. 1 April March 2018 Interest Transactions with related parties Sales Purchases expense Other income UPL Agromed 18,151,298 6,479, ,824 UPL Vietnam CO., LTD UPL Corporation Ltd ,522, UPL Limited, Gibraltar -- 24,658, Cerexagri S.A.S -- 4,914, UPL Limited, Hong Kong -- 19,807, UPL Limited India -- 12,110, Cerexagri B. V , Decco Italia S.R.L ,151,298 99,494,162 79, ,824 1 April March 2017 Interest Transactions with related parties Sales Purchases expense Other expense UPL Agromed 5,076,580 3,285, ,875 UPL Vietnam CO., LTD 116, UPL Corporation Ltd ,392, UPL Limited, Gibraltar -- 13,868, Cerexagri S.A.S -- 3,494, UPL Limited, Hong Kong -- 3,166, UPL Limited India -- 2,233, Cerexagri B. V , Decco Italia S.R.L ,125 5,193,134 47,441,254 64, ,000 As of 31 March 2018, the Company has TL 7,117,076 (31 March 2017: TL 2,925,889) goods in transit that is purchased from related parties. Compensation of key management personnel: Key management personnel consists of members of Board of Directors and Executive Board members. The compensation of key management personnel includes salaries, bonus, health insurance, communication and transportation and total amount of compensation is explained below. The remuneration of key management personnel during the year were as follows: 1 April March April March 2017 Salaries and short-term benefits 596, , , ,000 18

24 7 Cash and cash equivalents The breakdown of cash and cash equivalents is as follows: 31 March March 2017 Cash on hand 221 2,560 Cash at banks 5,420,071 3,229,931 - Demand deposits 5,420,071 3,229,931 5,420,292 3,232,491 Cash and cash equivalents consist of balances in the following currencies: 31 March March 2017 EUR 2,942,237 2,534,058 USD 2,002, ,592 TL 475, ,841 5,420,292 3,232,491 8 Trade receivables The breakdown of trade receivables is as follows: 31 March March 2017 Trade receivables 56,546,698 48,736,760 Notes receivable 24,565,922 21,248,470 Receivables from related parties (Note 6) 17,711,387 3,992,515 Allowance for doubtful receivables (1,147,934) - 97,676,073 73,977,745 The average collection period for receivables is 324 days (31 March 2017: 345 days). The movement of provisions for doubtful trade and other receivables is disclosed in below. 31 March March April Balance at beginning of the year - - Provision provided during the year (Note 24) 1,147, March 1,147,934 - Credit risk and foreign currency risk with respect to trade and other receivables are disclosed in Note

25 9 Inventories The breakdown of inventories is as follows: 31 March March 2017 Trade goods 46,371,661 10,394,810 Goods in transit 7,117,076 2,925,889 53,488,737 13,320,699 As of 31 March 2018, the Company has TL 7,117,076 goods in transit that is purchased from related parties (31 March 2017: TL 2,925,889). 10 Other Assets The breakdown of other current assets is as follows: 31 March March 2017 VAT carried forward 5,231,305 1,864,179 Advances given - 52,358 Prepaid expenses - 37,283 Other receivables 89, ,848 5,320,460 2,129,668 20

26 11 Property, Plant and Equipment Machinery and Equipment Furniture and Fixtures Leasehold improvements Vehicles Total Cost Value Opening balance as of 1 April , , , , ,414 Additions ,347 13,171 46,519 Disposals - (72,640) (1,812) - (74,452) Transfers Closing balance as of 31 March ,307 37, , , ,480 11,307 37, , , ,480 Accumulated Depreciation Opening balance as of 1 April ,599 92,496 89,443 10, ,745 Charge for the year 1,131 3,143 70,783 31, ,308 Disposals - (72,640) (1,328) - (73,968) Transfers Closing balance as of 31 March ,730 22, ,898 41, ,084 Carrying value as of 31 March ,577 14, , , ,396 21

27 11 Property, Plant and Equipment (continued) Machinery and Equipment Furniture and Fixtures Leasehold improvements Construction in Progress Vehicles Total Cost Value Opening balance as of 1 April , , , ,426 Additions ,484 5, , ,128 Disposals ( 866) ( 26,908) (18,366) (46,140) Transfers , ,192 ( 495,282) -- Closing balance as of 31 March , , , , ,414 Accumulated Depreciation Opening balance as of 1 April , ,807 75, ,243 Charge for the year 1,131 7,544 35,018 10, ,900 Disposals (866) (26,908) (17,624) (45,398) Closing balance as of 31 March ,599 89,443 92,496 10, ,745 Carrying value as of 31 March ,708 20, , , ,669 As of 31 March 2018 and 2017 there are no borrowing costs capitalized on the Company's property, plant and equipment. There are no mortgages and restrictions on the Company's property, plant and equipment as of 31 March 2018 and

28 12 Intangible Assets Movements of intangible assets for the year ended 31 March 2018 comprised the following: Cost Value Licences Capitalized licence costs Other Total Opening balance as of 1 April ,095,591 1,718,740 32,841 3,847,172 Additions 789, ,703-1,389,253 Transfer Closing balance as of 31 March ,885,141 2,318,443 32,841 5,236,425 Accumulated Amortization Opening balance as of 1 April ,618-12, ,348 Charge for the year 440,364-8, ,962 Closing balance as of 31 March ,982-21, ,310 Net book value as of 31 March ,599,123 2,318,443 11,513 4,501,115 Movements of intangible assets for the year ended 31 March 2017 comprised the following: Cost Value Licences Capitalized licence costs Other Total Opening balance as of 1 April , ,365 15,690 1,632,755 Additions - 2,561,112 23,922 2,585,034 Disposal - (363,846) (6,771) ( 370,617) Transfer 1,364,891 (1,364,891) - - Closing balance as of 31 March ,095,591 1,718,740 32,841 3,847,172 Accumulated Amortization Opening balance as of 1 April ,504-14,690 76,194 Charge for the year 212,114-4, ,925 Disposal - - (6,771) (6,771) Closing balance as of 31 March ,618-12, ,348 Net book value as of 31 March ,821,973 1,718,740 20,111 3,560,824 Depreciation and amortization expense amounting to TL 3,543 has been charged in "marketing and sales expenses" (31 March 2017: TL 4,952) and TL 551,727 has been charged in "administrative expenses (31 March 2017: TL 265,873). 23

29 13 Bank Loans 31 March March 2017 Short term bank loans 9,456,385 6,250,000 Total Loans 9,456,385 6,250,000 Currency type Weighted average interest rate % 31 March % ,456,385 TL 9,456,385 Currency type Weighted average interest rate % 31 March % 6,250,000 TL 6,250, Trade Payables Short term trade payables 31 March March 2017 Trade payables 6,603,436 9,224,063 Trade payables to related parties (Note 6) 146,243,895 65,410, ,847,331 74,634,452 Explanations related to the nature and level of risks of trade payables are disclosed in Note Other payables As of 31 March 2018 and 2017, other payables comprised the following: Other current liabilities 31 March March 2017 Taxes and dues payable 119,359 98,548 Unused vacation provision 112,473 98,604 Other , ,453 Other non-current liabilities 31 March March 2017 Other payables due to related parties (Note 6) 2,708,193 2,127,819 2,708,193 2,127,819 24

30 16 Provisions As of 31 March 2018 and 2017, provisions comprised the following: 31 March March 2017 Bonus provision 595, , , ,972 Bonus accrual is paid within 3 months after the balance sheet date. Bonus accrual 1 April April March March 2017 Opening balance, 1 April 120, ,000 Provision recognized during the year 595, ,000 Bonus premium paid (120,000) (100,000) Closing balance, 31 March 595, ,000 Provisions for bonus premium amounting to TL 595,000 is recognized in administrative expenses (31 March 2017: TL 123,972) (Note: 23). 17 Provisions for Employment Termination Benefits Under the Turkish Labor Law, the Company is required to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause or who is called up for military service, dies or retires after completing 25 years of service (20 years for women) and achieves the retirement age (58 for women and 60 for men). Since the legislation was changed on 23 May 2002 there are certain transitional provisions relating to the length of service prior to retirement. The severance pay is calculated as one month gross salary for every employment year and as of 31 March 2018 the ceiling amount has been limited to TL 5, (31 March 2017: TL 4,426.16) The liability is not funded, as there is no funding requirement. The provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of the employees. IAS 19 Employee Benefits requires actuarial valuation methods to be developed to estimate the enterprise s obligation under defined benefit plans. The principal statistical assumptions used at 31 March, are as follows: 31 March March 2017 Discount rate % Expected rates of salary/limit increases % 7 7 Turnover rate % ,74 The principal assumption is that the maximum liability for each year of service will increase in line with inflation. Thus the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. 25