Consolidated STRATEGIC REVIEW STATUTORY REPORT FINANCIAL STATEMENTS 234 32ND ANNUAL REPORT 2023-24 | HERITAGE FOODS LTD Key audit matter How our audit addressed the key audit matter Considering the significance of amount, multiplicity of Holding Company’s products, volume of transactions including discounts offered, size of distribution network, nature of customers and significant attention required from us, revenue recognition is determined to be an area involving significant risk in line with the requirements of Standards on Auditing and has been determined as a key audit matter for the current year audit. • Performed analytical procedures such as customer group ratio analysis, price volume variance analysis, geographical area analysis, sales made during the specific period before the year end etc. for the revenue recorded considering both qualitative and quantitative factors to identify any unusual trends or any unusual items; and • Evaluated adequacy and appropriateness of disclosures made in the consolidated financial statements in accordance with applicable accounting standards. Impairment assessment of investment in Joint venture (Heritage Novandie Foods Private Limited) Refer Note 3(l) to the accompanying consolidated financial statements for material accounting policy on impairment assessment. As described in Note 9 and 47, the Holding Company has an investment amounting to INR 423.35 million in a joint venture, Heritage Novandie Foods Private Limited. The joint venture has incurred losses over the years and its networth has been substantially eroded on account of accumulated losses, indicating possible impairment. In view of above, the management of the Holding Company, during the current year ended 31 March 2024, has carried out an impairment assessment to assess recoverability of the aforesaid investment in accordance with Ind AS 36, Impairment of Assets (‘Ind AS 36’) by estimating the recoverable amount of investment with the help of an external valuation expert engaged by the management. The recoverable value of the investment is determined using a discounted cashflow method which require management to make significant estimates and assumptions such as expected growth rate basis business plans, successful launch of new products, industry outlook, EBDITA margins, selection of discount rates, etc. Considering the materiality of the amounts involved and significant degree of management judgement and subjectivity involved in business plans used in determining the recoverable value, and significant auditor attention required to test such management’s judgements, estimates and key assumptions, impairment assessment of such investment has been determined as a key audit matter for the current year audit. Our audit procedures relating to impairment assessment of investment in joint venture included, but was not limited to, the following: • Evaluated the design and tested the operating effectiveness of controls over the management’s assessment of the impairment indicators and the impairment testing performed; • Reconciled the cash flow projections to the business plans as approved by the Holding Company’s board of directors and evaluated the appropriateness of the assumptions used in such plan as revenue growth, expected EBIDTA margins, operating costs etc., basis our understanding of the business, market conditions and industry outlook, as relevant; • Assessed the professional competence, objectivity and capability of the external valuation expert engaged by the management for performing the required valuations to estimate the recoverable value of the amounts invested in the joint venture; • Involved auditors’ valuation expert to assess the reasonableness of the assumptions used such as discount rate, long-term growth rates including comparison to economic and industry forecasts where appropriate and evaluate the appropriateness of valuation methodology used by management’s expert; • Applied sensitivity analysis to certain key assumptions such as discount and growth rates to determine estimation uncertainty involved and impact on conclusions drawn basis headroom available; and • Assessed the appropriateness and adequacy of the disclosures made by the management in the consolidated financial statements, in accordance with applicable accounting standards. Information other than the Consolidated Financial Statements and Auditor’s Report thereon 6. The Holding Company’s Board of Directors are responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the consolidated financial statements and our auditor’s report thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
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