Northern Nigeria Flour Mills Plc Annual Report and Accounts For the year ended 31 March 2017
Northern Nigeria Flour Mills Plc
Annual Report and Accounts
For the year ended 31 March 2017
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
1
Board of Directors, Officers and Other Corporate Information
Country of incorporation and domicile Nigeria
Nature of business and principal activities
Directors
The Company's main business is milling of wheat and other
associated grains.
Alhaji (Dr,) Aminu Dantata, OFR Chairman
Mr. John G. Coumantaros (US Citizen) Vice Chairman
Alhaji Rabiu Muhammad Gwarzo,
OON
Vice Chairman
Mr. Gert Kriek (South
African)
Resigned 31 July
2016
Mr. Charl P.F. Marais (South
African)
Managing Director
Alhaji Sani Umar
Mr. Paul M. Gbededo
Alhaji Y. Olalekan A. Saliu
Mallam Mahmud Ahmed
Deputy Managing
Director
Mr. Peter Kradolfer
Dr. Jibrilla Mohammed
Sadiq A. Usman
(Swiss)
Registered office 15 Maimalari road,
Bompai Industrial Estate,
Kano.
Postal address P.O.Box 6640
Kano.
Holding company Flour Mills of Nigeria Plc
incorporated in Nigeria
Bankers Guaranty Trust Bank Plc
First Bank of Nigeria Plc
Access Bank Plc
Sterling Bank Plc
Union Bank of Nigeria Plc
Zenith Bank Plc
Joint Auditors Akintola Williams Deloitte
Chartered Accountants
4th floor, Bank of Industry Building,
Plot 256, Zone AO Cadastral,
Off Herbert Macaulay Way, Central Business District
Abuja, FCT.
Aminu Ibrahim & Co.
Chartered Accountants
City Plaza,
Plot 596, Ahmadu Bello Way, Garki,
FCT.
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Board of Directors, Officers and Other Corporate Information
Company Secretary Miyetti Nominees Limited
26, Post Office Road, Kano.
Registrars and Transfer Office Flour Mills Registrars Limited
45, Eric Moore Road
Iganmu
(BAGCO) Building
P.O. Box 341
Apapa
Lagos State
Solicitor Messrs J.B Majiyagbe & Co.
4, Human Rights Avenue
P.O. Box 726 Kano
2
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
3
Index
The reports and statements set out below comprise the financial statements presented to the shareholders:
Page
Directors' Report 4
Statement of Directors' Responsibilities in Relation to the Financial Statements 8
Independent Joint Auditors' Report 9
Statement of Financial Position 13
Statement of Profit or Loss and Other Comprehensive Income 14
Statement of Changes in Equity 15
Statement of Cash Flows 16
Notes to the Financial Statements 17
Other national disclosures 52
Statement of Value Added 53
Five Year Financial Summary 54
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Directors' Report
The directors present their annual report together with the financial statements and independent auditor's report on Northern
Nigeria Flour Mills Plc for the year ended 31 March 2017.
1. Legal form
The Company was incorporated as a private limited liability company on 29 October 1971. Its registered office is 15, Maimalari
road, Bompai Industrial Estate, Kano. It is a subsidiary of Flour Mills of Nigeria Plc, which holds 53.06%of the company's
equity. Flour Mills of Nigeria Plc is incorporated in Nigeria.
2. Principal activities
Northern Nigeria Flour Mills Plc was incorporated in Nigeria with interests in milling of wheat and other associated grains. The
Company operates in Kano state, Nigeria. There have been no material changes to the nature of the Company's business
from the prior year.
3. Results
The financial statements have been prepared in accordance with International Financial Reporting Standards and the
requirements of the Companies and Allied Matters Act of Nigeria, Cap C20 LFN 2004 and the Financial Reporting Council (FRC)
of Nigeria Act, 2011. The accounting policies have been applied consistently compared to the prior year except otherwise stated.
The summary of results for the year is as set out below:
31-Mar-17 31-Mar-16
N '000 N '000
Revenue 940,521 979,038
Operating profit (loss) 8,364 (280,480)
Profit (loss) before taxation 405 (233,071)
Loss for the year (16,234) (197,240)
Total comprehensive loss for the year
4. Directors and directors' interests
The directors that served in office during the year are as follows:
Directors Designation
Alhaji (Dr,) Aminu Dantata, OFR Chairman
Mr. John G. Coumantaros Vice Chairman
Alhaji Rabiu Muhammad Gwarzo, Vice Chairman OON
(11,359) (175,666)
Mr. Gert Kriek Executive
Mr. Charl P.F. Marais Managing Director
Alhaji Sani Umar Deputy Managing Director
Mr. Paul M. Gbededo Non-executive
Alhaji Y. Olalekan A. Saliu Non-executive
Mallam Mahmud Ahmed Non-executive
Mr. Peter Kradolfer Non-executive
Dr. Jibrilla Mohammed Non-executive
Sadiq A. Usman Non-executive
Resigned 31 July 2016
In accordance with Section 277 of the Companies and Allied Matters Act, Cap C.20 LFN 2004 none of the directors has notified
the Company of any declarable interests in contracts with the Company during the year.
5. Directors' interests in shares
The directors who served during the year and their respective interests in the share capital of the company as recorded in the
Register of members and/or notified for the purpose of Section 275 of the Company and Allied Matter Act, Cap C.20 LFN 2004
are as follows:
4
Interests in shares
Director 2017
Direct
2017
Indirect
2016
Direct
2016
Indirect
Alhaji (Dr,) Aminu Dantata, OFR 1,111,195 9,894,362 1,111,195 9,894,362
Mr. John G. Coumantaros - - - -
Alhaji Rabiu Muhammad Gwarzo, OON 609,598 - 609,598 -
Mr. Gert Kriek - - - -
Mr. Charl P.F. Marais - - - -
Alhaji Sani Umar 237,363 - 237,363 -
Mr. Paul M. Gbededo - - - -
Alhaji Y. Olalekan A. Saliu 97,881 - 97,881 -
Mallam Mahmud Ahmed - - - -
Mr. Peter Kradolfer - - - -
Dr. Jibrilla Mohammed - - - -
Sadiq A. Usman - - - -
2,056,037 9,894,362 2,056,037 9,894,362
6. Holding company
The company's holding company is Flour Mills of Nigeria Plc which holds 53% (2016: 53%) of the company's equity. Flour Mills
of Nigeria Plc is incorporated in Nigeria.
7. Directors' Responsibilities
In accordance with the provision of section 334 and 335 of Companies and Allied Matters Act of Nigeria, Cap C.20 LFN 2004,
the The Directors are responsible for the preparation of financial statements which give a true and fair view of the state of
affairs of the Company at the end of each financial year and of the profit or loss for that period. In doing so, they ensure that:
• proper accounting records are maintained;
• applicable accounting statements are followed;
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Directors' Report
5
• suitable accounting policies are adopted and consistently applied;
• judgments and estimates made are reasonable and prudent;
• the going concern basis is used, unless it is inappropriate to presume that the Company will continue in business and;
• Internal control procedures are instituted which, as far as is reasonably possible, safeguard the assets, prevent and
detect fraud and other irregularities.
8. Corporate Governance
The Company is committed to the best practice and procedures in corporate governance. Its business is conducted in a fair and
transparent manner and efforts are made to maintain high ethical standards.
Members of the Board of Directors hold regular meetings to decide on policy matters and to direct the affairs of the Company,
review its performance, its operations, finances and formulate growth strategy. In compliance with the provisions of Section
258(2) of the Companies and Allied Matters Act, the record of Directors attendance at Board meetings will be made available
for inspection at the Annual General Meeting.
9. Corporate social responsibility
The Company did not make any donations during the year (2016: Nil).
In compliance with Section 38(2) of the Companies and Allied Matters Act of Nigeria, the Company did not make any donation
or gift to any political party, political association or for any political purpose during the current year and preceding period.
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
6
10. Property, plant and equipment
Movements in property, plant and equipment during the year are shown in Note 17 to the financial statements.In the opinion
of the Directors, the market value of the Company's properties is not less than the value shown in the audited financial
statements.
11. Human Capital
The Company recognises its social and statutory duty to employ disabled people and follows a policy of providing, wherever
possible, the same employment opportunities for disabled people as for others. If employees become disabled every effort is
made to ensure their employment continues, with appropriate training where necessary.
Employment and Employees
The Company reviews its employment policy in line with the needs of the business. Careful recruitment is undertaken to ensure
that potential high performers are attracted and retained.
Employee Development
Local and Overseas Training and Development Programmes are organized to meet the needs of the Company’s modernization
/ automation strategy implementation.
The Company continues to place premium on its Human Capital Development arising from the fact that this would ensure
improved efficiency of the business and maintain strategic advantage over competition.
Equal Employment Opportunity and Diversity
Subject to the applicable laws, we recruit, hire, train, promote, discipline and provide other conditions of employment without
regard to a person’s race, colour, religion, sex, age, national origin, disability or other classifications protected under the law.
This includes providing reasonable accommodation for members’ disabilities or religious beliefs and practices. As at year end,
the Company had no physically challenged person in its employment (2016: Nil).
Health, Safety and Environment
The Company appreciates the value of safe work environment to business success and therefore embarks on periodic
assessment to ensure compliance and safety. Employees are continuously sensitized and talks on safe work procedures
precede the commencement of each shift in the operational areas. The Company provides Personal Protective Equipment to
employees as required by the nature of job and safety officers are on regular monitoring to ensure usage compliance.
The Company maintains fully equipped clinic at its place of operations. The Company also maintains staff canteen at its place
of operations and continue to provide nutritionally balanced meals in very conducive environment and at subsidized rates.
HIV/AIDS Policy
HIV/AIDS policy guidelines are in place and employees are encouraged to undertake voluntary counseling and testing (VCT)
in order to confirm their HIV status. Continuous interactions at workshops with known HIV positive individuals are arranged
from time to time to educate staff and eliminate discrimination and stigmatization. Regular educational programmes are
arranged to sustain the message as part of the activities to mark World’s AIDS day annually.
Performance Management/Target Setting
Performance Management/Target Setting is designed to achieve set strategic objectives for effective monitoring of performance
of the Company and employees.
12. Events after the reporting period
There were no significant developments since the reporting date which could have had a material effect on the state of affairs of
the company at 31 March, 2017 and the loss for the year ended on that date which have not been adequately provided for or
recognized.
7
33
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
8
9
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
10
11
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
12
13
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
14
Statement of Profit or Loss and Other Comprehensive Income
Revenue 5 940,521 979,038
Cost of sales 7 (967,784) (1,079,755)
Gross (loss) profit (27,263) (100,717)
Net operating gains and losses 8 429,984 246,552
Other gains and losses 9 (64,703) (90,330)
Selling and distribution 10 (50,086) (11,619)
Administrative expenses 11 (279,568) (324,366)
Operating profit (loss) 12 8,364 (280,480)
Investment revenue 13 23,983 47,409
Finance costs 14 (31,942) -
Profit (loss) before taxation 405
Taxation 15 (16,639)
Loss for the year (16,234)
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Remeasurements on net defined benefit liability/asset
Other comprehensive income for the year net of taxation
Total comprehensive loss for the year
Earning per share (kobo)
Basic (9) (111)
Diluted (9) (111)
The notes on pages 17 to 51 and other national disclosures on pages 52 to 54 form an integral part of these financial statements.
31- Mar -17 31- Mar -16 Note(s) N '000 N '000
(233,071)
35,831
(197,240)
4,875 21,574
4,875 21,574
(11,359) (175,666)
15
Statement of Changes in Equity
Share capital Share premium Total share Retained Total equity
in equity
Note(s) 23 23 23
The notes on pages 17 to 51 and other national disclosures on pages 52 to 54 form an integral part of these financial statements.
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
16
6,777
(868,704)
(2,826)
(871,530)
Statement of Cash Flows 31-Mar-17 31-Mar-16
Note(s) N '000 N '000
Cash flows from operating activities
Profit (loss) before taxation
Adjustments for:
405 (233,071)
Depreciation and amortisation 17 71,117 87,230
Profit on sale of assets (820) -
Interest received (23,983) (47,409)
Finance costs 31,942 -
Movements in retirement benefit assets and liabilities 9,243 (171,910)
Movement in long service award 1,928 (27,632)
Adjustment to property, plant and equipment
Changes in working capital:
- 45,824
Inventories (971,285) 31,581
Trade and other receivables (149,639) 27,424
Prepayments (8,349) (4,752)
Trade and other payables 163,960 (15,325)
Provision - (47,126)
Advance payments by customers (147,351)
(502,517)
Tax paid (24,875)
Net cash (used in)/provided by operating activities (527,392)
Cash flows from investing activities
Purchase of property, plant and equipment 17
(1,463,517) (20,191)
Sale of property, plant and equipment 17 820 -
Interest
Income 13 23,983
Net cash (used in)/provided by investing activities
Cash flows from financing activities
Proceeds from borrowings 26 2,423,606 -
47,409
(1,438,714) 27,218
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
17
Dividends paid - (53,460)
Finance costs -
Net cash provided by/(used in) financing activities
The notes on pages 17 to 51 and other national disclosures on page s 52 to 54 form an
integral part of these financial statements.
Total cash movement for the year 81,420 (553,634)
Cash at the beginning of the year 388,519 942,153
Total cash at end of the year 22 469,939 388,519
(31,942)
2,391,664 (53,460)
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
18
1 Corporate information
Northern Nigeria Flour Mills Plc was incorporated as a private limited company on 29 October 1971. The Company was converted
to a public limited liability company in 1978 and was quoted on the Nigeria Stock Exchange in the same year. The Company's
registered office and factory is located at No 15 Maimalari Road, Bompai, Kano. Its present ownership structure is 47% owned by
individuals and institutions in Nigeria and 53% owned by Flour Mills Nigeria Plc which is the parent Company and ultimate
controlling party.
1.1 Principal activities
The Company's main business is milling of wheat, maize and other associated grains. 1.2
Registered Office
The address of its registered office is:
15 Maimalari road,, Bompai Industrial Estate,, Kano.
1.3 Composition of financial statements
The financial statements are drawn up in Nigerian Naira, the functional currency of Northern Nigeria Flour Mills Plc in accordance
with International Financial Reporting Standards (IFRS). The Company's financial statements comprise:
Statement of profit or loss and other comprehensive Income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements.
Additional information provided by management in line with the requirements of the Company and Allied Matters Act (CAMA)
includes
Statement of value added
Statement of financial summary.
1.4 Financial period
These financial statements cover the financial year from 1 April 2016 to 31 March 2017 with comparatives for year ended 31
March 2016.
1.5 Going Concern
The Directors believe that there is no intention or threat from any source to curtail significantly its line of business in the foreseeable
future. Thus, these financial statements are prepared on going concern basis.
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
19
1.6 Statement of compliance
The annual report have been prepared in accordance with International Financial Reporting Standards as issued by the
International Accounting Standard Board (IASB) and the interpretations issued by International Financial Reporting Interpretation
Committee (IFRIC) and the requirements of the Companies and Allied Matters Act of Nigeria, Cap C20 LFN 2004 and the Financial
Reporting Council (FRC) Act of Nigeria 2011.
2. Significant accounting policies
The following is the summary of principal accounting policies applied in the preparation of these financial statements.
2.1 Basis of preparation
The financial statements have been prepared on the going concern basis in accordance with, and in compliance with, International
Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations
issued and effective at the time of preparing these financial statements and the Companies and Allied Matters Act of Nigeria, Cap
C20 LFN 2004.
The financial statements have been prepared on the historic cost basis except for financial instruments that are measured at fair
values, as explained in the accounting policies below. Historical cost is generally based on fair value of the consideration given in
exchange for assets.
2.2 Segmental reporting
The Company is involved in the milling of wheat and other associated grains as well as sales of other Golden Penny products
purchased from the Parent Company. There are two business segments and operating results of the segment reported regularly
to the Chief Operating Decision Maker (the Chief Executive Officer) for purposes of resource allocation and performance
assessment.
The basis of segmental reporting has been set out in note 6
2.3 Revenue
Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax.
Revenue from the sale of goods is recognised when all the following conditions have been satisfied:
the company has transferred to the buyer the significant risks and rewards of ownership of the goods;
the company retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction will flow to the company; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Deferred revenue represents the revenue collected from customers from which services is yet to be rendered. This is recognised
as a liability until the company fulfills its contractual obligation to provide the service.
Dividend and interest revenue
Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established
(provided that it is probable that the economic benefits will flow to the Company and the amount of revenue can be measured
reliably).
Interest income is recognised when it is probable that the economic benefits will flow to the Company and the amount of revenue
can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
20
interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the
financial asset to that asset’s net carrying amount on initial recognition.
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
2.4 Translation of foreign currencies
Foreign currency transactions
A foreign currency transaction is recorded, on initial recognition in Naira, by applying to the foreign currency amount the spot
exchange rate between the functional currency and the foreign currency at the date of the transaction.
At the end of the reporting period:
foreign currency monetary items are translated using the closing rate;
non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction; and
non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at
the date when the fair value was determined.
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognised in profit or loss in the period in which they arise.
When a gain or loss on a non-monetary item is recognised to other comprehensive income and accumulated in equity, any
exchange component of that gain or loss is recognised to other comprehensive income and accumulated in equity. When a gain
or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit
or loss.
Cash flows arising from transactions in a foreign currency are recorded in Naira by applying to the foreign currency amount the
exchange rate between the Naira and the foreign currency at the date of the cash flow.
2.5 Employee benefits
Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation
leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service
is rendered and are not discounted.
Defined contribution plans
The Company operates a defined contribution based retirement benefit scheme for its staff, in accordance with the Pension
Reform Act of 2014 with employee and employer contributing 8% and 10% respectively of the employee’s relevant emoluments
(salary, housing and transportation allowances). Payments to defined contribution benefit plans are recognised as an expense
when employees have rendered the service entitling them to the contributions.
Defined benefit plans
The Company also operates a gratuity scheme for its qualified staff. Benefits are related to the employees' length of service and
remuneration. The cost of providing gratuity benefits is determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at the end of each reporting period. The obligation is determined by an independent actuary at each
reporting period. Actuarial gains and losses (if any) are recognised fully in other comprehensive income. Also, past service cost
is recognised immediately in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
22
Long service award
The Company operates long service award for its qualified staff. The benefits are graduated depending on the employees number
of years in service to the company. The Company's obligation in respect of the scheme is the amount of future benefits that
employees have earned in return for their service in the current and prior periods. The benefit is discounted to determine its
present value. The obligation is determined by an independent actuary at each reporting period.
Gains or losses due to remeasurement of long service awards are recognised in profit or loss.
19
2.5 Employee benefits (continued)
Termination benefits
Termination benefits are expensed at the earlier of when the Company can no longer withdraw the offer of those benefits and
when the Company recognises costs for a restructuring. If benefits are not expected to be settled wholly within 12 months of the
reporting date, then they are discounted.
2.6 Taxation
Tax expenses
Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the
extent that the tax arises from:
a transaction or event which is recognised, in the same or a different period, to other comprehensive income, or
a business combination.
Current tax and deferred taxes are charged or credited to other comprehensive income if the tax relates to items that are credited
or charged, in the same or a different period, to other comprehensive income.
Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in
the same or a different period, directly in equity.
The tax currently payable is based on taxable profit for the period in accordance with the Company Income Tax Act, CAP C21,
LFN 2004 and Education Tax Act, CAP E4, LFN 2004. The Company’s liability for current tax is calculated using tax rates that
have been enacted or substantively enacted by the balance sheet date.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of
comprehensive income because of items of income or expense that are taxable or deductible in future years and items that are
never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or
substantively enacted at the reporting date.
Deferred tax assets and liabilities
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit.Deferred tax liabilities are generally
recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits will be available against which those deductible temporary
differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from
goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liabi lity is
settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the
reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
23
manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets
and liabilities.
Current and deferred tax are recognised in the statement of comprehensive income, except when they relate to items that are
recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised
in other comprehensive income or directly in equity respectively.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against
current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
2.7 Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as
part of the cost of that asset until such time as the asset is ready for its intended use. The amount of borrowing costs eligible for
capitalisation is determined as follows:
Actual borrowing costs on funds specifically borrowed for the purpose of obtaining a qualifying asset less any temporary
investment of those borrowings.
Weighted average of the borrowing costs applicable to the entity on funds generally borrowed for the purpose of
obtaining a qualifying asset. The borrowing costs capitalised do not exceed the total borrowing costs incurred.
The capitalisation of borrowing costs commences when:
expenditures for the asset have occurred;
borrowing costs have been incurred, and
activities that are necessary to prepare the asset for its intended use or sale are in progress.
Capitalisation is suspended during extended periods in which active development is interrupted.
Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are
complete.
All other borrowing costs are recognised as an expense in the period in which they are incurred.
Finance cost includes interest expense on borrowing.
2.8 Property, plant and equipment
Property, plant and equipment are tangible assets which the company holds for its own use or for rental to others and which are
expected to be used for more than one year.
An item of property, plant and equipment is recognised as an asset when it is probable that future economic benefits associated
with the item will flow to the company, and the cost of the item can be measured reliably.
Property, plant and equipment is initially measured at cost. Cost includes all of the expenditure which is directly attributable to the
acquisition or construction of the asset, including the capitalisation of borrowing costs on qualifying assets.
Expenditure incurred subsequently for major services, additions to or replacements of parts of property, plant and equipment are
capitalised if it is probable that future economic benefits associated with the expenditure will flow to the company and the cost
can be measured reliably. Day to day servicing costs are included in profit or loss in the year in which they are incurred.
Depreciation of an asset commences when the asset is available for use as intended by management. Depreciation is recognised
so as to write off the cost or valuation of assets (other than land and properties under construction) less their residual values over
their useful lives, using the straight-line method, on the following basis by the company. Depreciation on property, factory
buildings, machinery, vehicles, furniture and equipment is calculated on a straight-line basis at rates deemed appropriate to write
off the cost of the assets to their residual values over their expected useful lives.
The useful lives of items of property, plant and equipment have been assessed as follows:
Item
Buildings 50 years
Mobile plant Straight line 10 years
Plant and machinery Straight line 10-15 years
Furniture and fittings Straight line 10 years
Depreciation method Average useful life
Straight line
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
24
Motor vehicles Straight line 5 years
Loose tools & workshop equipment Straight line 10 years
IT equipment Straight line 4 years
Trailers Straight line 5 years
Pallets Straight line 3 years
2.8 Property, plant and equipment (continued)
The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting year. 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. Profits and losses on disposals of fixed assets are determined by comparing proceeds with the carrying
amounts. These profits and losses are included within ‘items of a capital nature’ in profit or loss. Properties in the course of
construction (capital work-in-progress) are carried at cost, less any recognised impairment losses. Cost includes professional
fees and for qualifying assets borrowing costs capitalised in accordance with the Company's accounting policy.
The depreciation charge for each year is recognised in profit or loss unless it is included in the carrying amount of another asset.
Impairment tests are performed on property, plant and equipment when there is an indicator that they may be impaired. When the
carrying amount of an item of property, plant and equipment is assessed to be higher than the estimated recoverable amount, an
impairment loss is recognised immediately in profit or loss to bring the carrying amount in line with the recoverable amount.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from
its continued use or disposal. Any gain or loss arising from the derecognition of an item of property, plant and equipment,
determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, is included in profit
or loss when the item is derecognised.
2.9 Impairment of other tangible and intangible assets
The company assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any
such indication exists, the company estimates the recoverable amount of the asset.
Irrespective of whether there is any indication of impairment, the company also tests intangible assets with an indefinite useful life
or intangible assets not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount.
This impairment test is performed during the annual period and at the same time every year.
If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not
possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which
the asset belongs is determined.
The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use.
If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable
amount. That reduction is an impairment loss.
An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit
or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease.
An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for
assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of
those assets are estimated.
The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does not exceed
the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods.
A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill is
recognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase.
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
25
2.10 Inventories
Inventories are measured at the lower of cost and net realisable value.
The Company's Inventories consist of raw materials, consumables, finished goods and spare parts.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and
the estimated costs necessary to make the sale.
2.10 Inventories (continued)
The cost of inventories comprises of all costs of purchase, costs of conversion and other costs incurred in bringing the inventories
to their present location and condition.
Raw Materials which include purchase cost and other costs incurred to bring the materials to their location and condition, are
valued at First-In-First-Out (FIFO). Cost of finished goods and work-in-progress include cost of materials used in production, direct
labour and factory overheads.
When inventories are sold, the carrying amount of those inventories are recognised as an expense in the period in which the
related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories
are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of
inventories, arising from an increase in net realisable value, are recognised as a reduction in the amount of inventories recognised
as an expense in the period in which the reversal occurs.
Engineering spare parts and other consumables are valued at standard cost and adjusted to reflect actual cost after making
allowance for obsolete and damaged stocks. Engineering spare parts with high value and held for commissioning of a new plant
or for infrequent maintenance of plants are capitalised and depreciated over their useful life and the useful life starts when they
are put to use. If the estimated useful life of the spare parts from installation exceeds that for the whole plant, depreciation is
limited to the remaining life of the plant.
2.11 Financial instruments
Initial recognition and measurement
Financial instruments are recognised initially when the company becomes a party to the contractual provisions of the instruments.
The company classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability
or an equity instrument in accordance with the substance of the contractual arrangement.
Financial instruments are measured initially at fair value, except for equity investments for which a fair value is not determinable,
which are measured at cost and are classified as available-for-sale financial assets.
For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement
of the instrument.
Transaction costs on financial instruments at fair value through profit or loss are recognised in profit or loss.
Classification
The company classifies financial assets and financial liabilities into the following categories:
Financial assets at fair value through profit or loss - held for trading
Financial assets at fair value through profit or loss - designated
Loans and receivables
Financial liabilities at fair value through profit or loss - held for trading
Financial liabilities at fair value through profit or loss - designated
Financial liabilities measured at amortised cost
Classification depends on the purpose for which the financial instruments were obtained / incurred and takes place at initial
recognition. Classification is re-assessed on an annual basis, except for derivatives and financial assets designated as at fair
value through profit or loss, which shall not be classified out of the fair value through profit or loss category.
The Company financial instrumrnts include loan and receivables financial assets and liabilities measured at amortised cost
Subsequent measurement
Loans and receivables are subsequently measured at amortised cost, using the effective interest method, less accumulated
impairment losses.
Financial liabilities at amortised cost are subsequently measured at amortised cost, using the effective interest method.
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
27
2.11 Financial instruments (continued)
Financial assets
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. Such assets are carried at amortised cost using the effective interest method if the time value of money is significant.
Gains and losses are recognised in the statement of comprehensive income when the loans and receivables are derecognised
or impaired, as well as through the amortisation process. This category of financial assets includes trade and other receivables
and cash and cash equivalents.
Trade and other receivables
Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the
effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when
there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will
enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered
indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial
recognition.
Trade and other receivables are classified as loans and receivables.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments generally
with maturities of three months or less from date of acquisition. They are readily convertible to a known amount of cash and are
subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value.
Impairment of financial assets
At each reporting date the company assesses all financial assets, other than those at fair value through profit or loss, to determine
whether there is objective evidence that a financial asset or group of financial assets has been impaired.
For amounts due to the company, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy
and default of payments are all considered indicators of impairment.
For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are,
in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could
include the Company's past experience of collecting payments, an increase in the number of delayed payments in the portfolio
past the average credit period of 90 days, as well as observable changes in national or local economic conditions that correlate
with default on receivables.
For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset's
carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest
rate.
Impairment losses are recognised in profit or loss.
Impairment losses are reversed when an increase in the financial asset's recoverable amount can be related objectively to an
event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset at
the date that the impairment is reversed shall not exceed what the carrying amount would have been had the impairment not
been recognised.
Reversals of impairment losses are recognised in profit or loss except for equity investments classified as available-for-sale.
Derecognition of financial assets
Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been
transferred and the company has transferred substantially all risks and rewards of ownership of the asset to another entity.
If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the
transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to
pay.
24
2.11 Financial instruments (continued)
Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the
substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instrument
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of i ts
liabilities. Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs.
Financial liabilities
Financial liabilities are classified as other financial liabilities measured at amortised cost.
Financial liabilities measured at amortised cost
All other financial liabilities are initially recognised at fair value. For interest-bearing loans and borrowings this is the fair value of
the proceeds received net of issue costs associated with the borrowing. After initial recognition, other financial liabilities are
subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account
any issue costs and any discount or premium on settlement. Gains and losses arising on the repurchase, settlement or
cancellation of liabilities are recognised respectively in interest and other revenues and finance costs. This category of financial
liabilities includes trade and other payables and finance debt.
Trade and other payables
Trade payables are stated at amortised cost. Payables principally comprise trade and other payables, accruals, taxes (withholding
tax and value-added tax) payablel and amounts due to related parties. Payables are only recognised if they qualify as a liability.
Bank overdraft and borrowings
Bank overdrafts and borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the
effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption
of borrowings is recognised over the term of the borrowings in accordance with the company’s accounting policy.
Derecognition of financial liabilities
The Company derecognises 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 derecognised and the consideration paid and
payable is recognised in profit or loss.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and
only when the Company has a legal right to offset the amounts and intends either to settle them on a net basis or to realise the
asset and settle the liabilities simultaneously.
2.12 Provisions and contingencies
Provisions are recognised when:
the company has a present 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
a reliable estimate can be made of the obligation.
The amount of a provision is the present value of the expenditure expected to be required to settle the 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 the
effect of the time value of money is material).
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
29
2.12 Provisions and contingencies (continued)
Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the
reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity
settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement
shall not exceed the amount of the provision.
Provisions are not recognised for future operating losses.
Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 38.
2.13 Leases
At inception date an arrangement is assessed to determine whether it is, or contains, a lease. An arrangement is accounted for
as a lease where it is dependent on the use of a specific asset and it conveys the right to use that asset.
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is
classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.
Finance leases - lessor
The company recognises finance lease receivables in the statement of financial position.
Finance income is recognised based on a pattern reflecting a constant periodic rate of return on the company’s net investment in
the finance lease.
Finance leases – lessee
Finance leases are recognised as assets and liabilities in the statement of financial position at amounts equal to the fair value of
the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is
included in the statement of financial position as a finance lease obligation.
The discount rate used in calculating the present value of the minimum lease payments is the .
The lease payments are apportioned between the finance charge and reduction of the outstanding liability.The finance charge is
allocated to each period during the lease term so as to produce a constant periodic rate on the remaining balance of the liability.
Operating leases - lessor
Operating lease income is recognised as an income on a straight-line basis over the lease term.
Initial direct costs incurred in negotiating and arranging operating leases are added to the carrying amount of the leased asset
and recognised as an expense over the lease term on the same basis as the lease income.
Income for leases is disclosed under revenue in profit or loss.
Operating leases – lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the
amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. This liability is not
discounted.
Any contingent rents are expensed in the period they are incurred.
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
30
2.14 Earnings per share
The company presents basic earnings per share(EPS) for its ordinary shares. Basic earnings per share is calculated by dividing
the profit or loss attributable to ordinary shareholders of the company by the weighted average number of ordinary shares in issue
during the year.
Diluted earnings per share
Diluted earnings per share are computed by dividing adjusted net income available to shareholders of the Company by the
weighted average number of common shares outstanding during the year adjusted to include any dilutive potential common
shares. Potential dilutive common shares result from stock options and convertible bonds issued by the Company on its own
common shares.
3 Significant judgements and sources of estimation uncertainty
The preparation of financial statements in conformity with IFRS requires management, from time to time, to make judgements,
estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses.
These estimates and associated assumptions are based on experience and various other factors that are believed to be
reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are
revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current
and future periods.
Critical judgements in applying accounting policies
The critical judgements made by management in applying accounting policies, apart from those involving estimations, that have
the most significant effect on the amounts recognised in the financial statements, are outlined as follows:
Taxation
The Company’s tax charge on ordinary activities is the sum of the total current and deferred tax charges. The calculation of the
of the Company’s total tax charge necessarily involves a degree of estimation and judgment in respect of certain items whose
treatment cannot be finally determined until resolution has been reached with the relevant tax authority. Under the Nigerian tax
system, self-assessment returns are subjected to a desk review for the determination of tax due for remittance in the relevant
year of assessment. This is however not conclusive as field audits are carried out within six years of the end of the relevant year
of assessment to determine the adequacy or otherwise of sums remitted under self-assessment thus making tax positions
uncertain.
Key sources of estimation uncertainty
Trade receivables
The company assesses its trade receivables for impairment at the end of each reporting period. In determining whether an
impairment loss should be recorded in profit or loss, the company makes judgements as to whether there is observable data
indicating a measurable decrease in the estimated future cash flows from the financial asset. Based on objective evidence of
impairment, the Company makes a collective impairment allowance for doubtful debt.
Impairment testing
The company reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying
amount may not be recoverable. When such indicators exist, management determine the recoverable amount by performing value
in use and fair value calculations. These calculations require the use of estimates and assumptions. When it is not possible to
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
31
determine the recoverable amount for an individual asset, management assesses the recoverable amount for the cash generating
unit to which the asset belongs.
3 Significant judgements and sources of estimation uncertainty (continued)
property, plant and equipment
Property, plant and equipment represent a significant proportion of the asset base of the Company, accounting for about 46% of
the Company’s total assets. Therefore the estimates and assumptions made to determine their carrying value and related
depreciation are critical to the Company’s financial position and performance.
The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the
expected residual value at the end of its life. Increasing an asset’s expected life or it’s residual value would result in the reduced
depreciation charge in the statement of comprehensive income.
The useful lives and residual values of property, plant and equipment are determined by management based on historical
experience as well as anticipation of future events and circumstances which may impact their useful lives Provision for gratuity
The Company operates an unfunded defined benefit scheme which entitles staff who put in a minimum qualifying working period
of five years to gratuity upon leaving the employment of the Company. IAS 19 requires the application of the Projected Unit Credit
Method for actuarial valuations. Actuarial measurements involve the making of several demographic projections regarding
mortality, rates of employee turnover etc and financial projections in the area of future salaries and benefit levels, discount rate,
inflation etc.
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
4. New Standards and Interpretations
32
4.1 Standards and interpretations effective and adopted in the current year
In the current year, the company has adopted the following standards and interpretations that are effective for the current financial
year and that are relevant to its operations:
Amendment to IFRS 7: Financial Instruments: Disclosures: Annual Improvements project
The amendment provides additional guidance regarding transfers with continuing involvement. Specifically, it provides that cash
flows excludes cash collected which must be remitted to a transferee. It also provides that when an entity transfers a financial
asset but retains the right to service the asset for a fee, that the entity should apply the existing guidance to consider whether it
has continuing involvement in the asset.
The effective date of the company is for years beginning on or after 01 January 2016.
The company has adopted the amendment for the first time in the 2017 financial statements.
The impact of the amendment is not material.
Amendment to IAS 19: Employee Benefits: Annual Improvements project
The amendment clarifies that when a discount rate is determined for currencies where there is no deep market in high quality
corporate bonds, then market yields on government bonds in that currency should be used.
The effective date of the company is for years beginning on or after 01 January 2016.
The company has adopted the amendment for the first time in the 2017 financial statements.
The impact of the amendment is not material.
Disclosure Initiative: Amendment to IAS 1: Presentation of Financial Statements
The amendment provides new requirements when an entity presents subtotals in addition to those required by IAS 1 in its financial
statements. It also provides amended guidance concerning the order of presentation of the notes in the financial statements, as
well as guidance for identifying which accounting policies should be included. It further clarifies that an entity's share of
comprehensive income of an associate or joint venture under the equity method shall be presented separately into its share of
items that a) will not be reclassified subsequently to profit or loss and b) that will be reclassified subsequently to profit or loss.
The effective date of the company is for years beginning on or after 01 January 2016.
The company has adopted the amendment for the first time in the 2017 financial statements.
The impact of the amendment is not material.
Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation
The amendment clarifies that a depreciation or amortisation method that is based on revenue that is generated by an activity that
includes the use of the asset is not an appropriate method. This requirement can be rebutted for intangible assets in very specific
circumstances as set out in the amendments to IAS 38.
The effective date of the amendment is for years beginning on or after 01 January 2016.
The company has adopted the amendment for the first time in the 2017 financial statements.
The impact of the amendment is not material.
4.2 Standards and interpretations not yet effective
The company has chosen not to early adopt the following standards and interpretations, which have been published and are
mandatory for the company’s accounting periods beginning on or after 01 April 2017 or later periods:
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
4. New Standards and Interpretations (continued)
33
IFRS 16 Leases
IFRS 16 Leases is a new standard which replaces IAS 17 Leases, and introduces a single lessee accounting model. The main
changes arising from the issue of IFRS 16 which are likely to impact the company are as follows:
Company as lessee:
Lessees are required to recognise a right-of-use asset and a lease liability for all leases, except short term leases or
leases where the underlying asset has a low value, which are expensed on a straight line or other systematic basis.
The cost of the right-of-use asset includes, where appropriate, the initial amount of the lease liability; lease payments
made prior to commencement of the lease less incentives received; initial direct costs of the lessee; and an estimate
for any provision for dismantling, restoration and removal related to the underlying asset.
The lease liability takes into consideration, where appropriate, fixed and variable lease payments; residual value
guarantees to be made by the lessee; exercise price of purchase options; and payments of penalties for terminating
the lease.
The right-of-use asset is subsequently measured on the cost model at cost less accumulated depreciation and
impairment and adjusted for any re-measurement of the lease liability. However, right-of-use assets are measured at
fair value when they meet the definition of investment property and all other investment property is accounted for on
the fair value model. If a right-of-use asset relates to a class of property, plant and equipment which is measured on
the revaluation model, then that right-of-use asset may be measured on the revaluation model.
The lease liability is subsequently increased by interest, reduced by lease payments and re-measured for
reassessments or modifications.
Re-measurements of lease liabilities are affected against right-of-use assets, unless the assets have been reduced to
nil, in which case further adjustments are recognised in profit or loss.
The lease liability is re-measured by discounting revised payments at a revised rate when there is a change in the
lease term or a change in the assessment of an option to purchase the underlying asset.
The lease liability is re-measured by discounting revised lease payments at the original discount rate when there is a
change in the amounts expected to be paid in a residual value guarantee or when there is a change in future payments
because of a change in index or rate used to determine those payments.
Certain lease modifications are accounted for as separate leases. When lease modifications which decrease the scope
of the lease are not required to be accounted for as separate leases, then the lessee re-measures the lease liability by
decreasing the carrying amount of the right of lease asset to reflect the full or partial termination of the lease. Any gain
or loss relating to the full or partial termination of the lease is recognised in profit or loss. For all other lease modifications
which are not required to be accounted for as separate leases, the lessee re-measures the lease liability by making a
corresponding adjustment to the right-of-use asset.
Right-of-use assets and lease liabilities should be presented separately from other assets and liabilities. If not, then the
line item in which they are included must be disclosed. This does not apply to right-of-use assets meeting the definition
of investment property which must be presented within investment property. IFRS 16 contains different disclosure
requirements compared to IAS 17 leases.
Company as lessor:
Accounting for leases by lessors remains similar to the provisions of IAS 17 in that leases are classified as either
finance leases or operating leases. Lease classification is reassessed only if there has been a modification.
A modification is required to be accounted for as a separate lease if it both increases the scope of the lease by adding
the right to use one or more underlying assets; and the increase in consideration is commensurate to the stand alone
price of the increase in scope.
If a finance lease is modified, and the modification would not qualify as a separate lease, but the lease would have
been an operating lease if the modification was in effect from inception, then the modification is accounted for as a
separate lease. In addition, the carrying amount of the underlying asset shall be measured as the net investment in the
lease immediately before the effective date of the modification. IFRS 9 is applied to all other modifications not required
to be treated as a separate lease.
Modifications to operating leases are required to be accounted for as new leases from the effective date of the
modification. Changes have also been made to the disclosure requirements of leases in the lessor's financial
statements.
Sale and leaseback transactions:
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
4. New Standards and Interpretations (continued)
34
In the event of a sale and leaseback transaction, the requirements of IFRS 15 are applied to consider whether a
performance obligation is satisfied to determine whether the transfer of the asset is accounted for as the sale of an
asset.
If the transfer meets the requirements to be recognised as a sale, the seller-lessee must measure the new right-ofuse
asset at the proportion of the previous carrying amount of the asset that relates to the right-of-use retained. The buyer-
lessor accounts for the purchase by applying applicable standards and for the lease by applying IFRS 16
If the fair value of consideration for the sale is not equal to the fair value of the asset, then IFRS 16 requires adjustments
to be made to the sale proceeds. When the transfer of the asset is not a sale, then the seller-lessee continues to
recognise the transferred asset and recognises a financial liability equal to the transfer proceeds. The buyer-lessor
recognises a financial asset equal to the transfer proceeds.
The effective date of the standard is for years beginning on or after 01 January 2019.
The company expects to adopt the standard for the first time in the 2020 financial statements.
The impact of this standard is currently being assessed.
Amendments to IFRS 15: Clarifications to IFRS 15 Revenue from Contracts with Customers
The amendment provides clarification and further guidance regarding certain issues in IFRS 15. These items include guidance in
assessing whether promises to transfer goods or services are separately identifiable; guidance regarding agent versus principal
considerations; and guidance regarding licenses and royalties.
The effective date of the amendment is for years beginning on or after 01 January 2018.
The company expects to adopt the amendment for the first time in the 2019 financial statements.
The impact of this amendment is currently being assessed. IFRS
9 Financial Instruments
IFRS 9 issued in November 2009 introduced new requirements for the classification and measurements of financial assets. IFRS
9 was subsequently amended in October 2010 to include requirements for the classification and measurement of financial
liabilities and for derecognition, and in November 2013 to include the new requirements for general hedge accounting. Another
revised version of IFRS 9 was issued in July 2014 mainly to include a)impairment requirements for financial assets and b) limited
amendments to the classification and measurement requirements by introducing a "fair value through other comprehensive
income" (FVTOCI) measurement category for certain simple debt instruments.
Key requirements of IFRS 9:
All recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement
are required to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held
within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows
that are solely payments of principal and interest on the outstanding principal are generally measured at amortised
cost at the end of subsequent reporting periods. Debt instruments that are held within a business model whose objective
is achieved by both collecting contractual cash flows and selling financial assets, and that have contractual terms of
the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on
outstanding principal, are measured at FVTOCI. All other debt and equity investments are measured at fair value at
the end of subsequent reporting periods. In addition, under IFRS 9, entities may make an irrevocable election to present
subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive
income with only dividend income generally recognised in profit or loss.
With regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9 requires
that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of the
liability is presented in other comprehensive income, unless the recognition of the effect of the changes of the liability's
credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Under IAS
39, the entire amount of the change in fair value of a financial liability designated as at fair value through profit or loss
is presented in profit or loss.
In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model, as opposed to an
incurred credit loss model under IAS 39. The expected credit loss model requires an entity to account for expected
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
4. New Standards and Interpretations (continued)
35
credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since
initial recognition. It is therefore no longer necessary for a credit event to have occurred before credit losses are
recognised.
The new general hedge accounting requirements retain the three types of hedge accounting mechanisms currently
available in IAS 39. Under IFRS 9, greater flexibility has been introduced to the types of transactions eligible for hedge
accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk
components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been
replaced with the principal of an "economic relationship". Retrospective assessment of hedge effectiveness is also no
longer required. Enhanced disclosure requirements about an entity's risk management activities have also been
introduced.
The effective date of the standard is for years beginning on or after 01 January 2018.
The company expects to adopt the standard for the first time in the 2019 financial statements.
The impact of this standard is currently being assessed.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 supersedes IAS 11 Construction contracts; IAS 18 Revenue; IFRIC 13 Customer Loyalty Programmes; IFRIC 15
Agreements for the construction of Real Estate; IFRIC 18 Transfers of Assets from Customers and SIC 31 Revenue - Barter
Transactions Involving Advertising Services.
The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An
entity recognises revenue in accordance with that core principle by applying the following steps:
Identify the contract(s) with a customer
Identify the performance obligations in the contract
Determine the transaction price
Allocate the transaction price to the performance obligations in the contract Recognise revenue when (or as) the
entity satisfies a performance obligation.
IFRS 15 also includes extensive new disclosure requirements.
The effective date of the standard is for years beginning on or after 01 January 2018.
The company expects to adopt the standard for the first time in the 2019 financial statements.
The impact of this standard is currently being assessed. Amendments
to IAS 7: Disclosure initiative
The amendment requires entities to provide additional disclosures for changes in liabilities arising from financing activities.
Specifically, entities are now required to provide disclosure of the following changes in liabilities arising from financing activities:
changes from financing cash flows;
changes arising from obtaining or losing control of subsidiaries or other businesses;
the effect of changes in foreign exchanges;
changes in fair values; and other changes.
The effective date of the amendment is for years beginning on or after 01 January 2017.
The company expects to adopt the amendment for the first time in the 2018 financial statements.
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
4. New Standards and Interpretations (continued)
36
The impact of this amendment is currently being assessed.
Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses
In terms of IAS 12 Income Taxes, deferred tax assets are recognised only when it is probable that taxable profits will be available
against which the deductible temporary differences can be utilised. The following amendments have been made, which may have
an impact on the company:
If tax law restricts the utilisation of losses to deductions against income of a specific type, a deductible temporary difference is
assessed in combination only with other deductible temporary differences of the appropriate type.
Additional guidelines were prescribed for evaluating whether the company will have sufficient taxable profit in future periods. The
company is required to compare the deductible temporary differences with future taxable profit that excludes tax deductions
resulting from the reversal of those deductible temporary differences. This comparison shows the extent to which the future taxable
profit is sufficient for the entity to deduct the amounts resulting from the reversal of those deductible temporary differences.
The amendment also provides that the estimate of probable future taxable profit may include the recovery of some of an entity ’s
assets for more than their carrying amount if there is sufficient evidence that it is probable that the entity will achieve this.
The effective date of the amendment is for years beginning on or after 01 January 2017.
The company expects to adopt the amendment for the first time in the 2018 financial statements.
The impact of this amendment is currently being assessed.
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
37
31- Mar -17 -16 31- Mar N '000 N '000
5. Revenue
Sale of goods 940,521 979,038
The amount included in revenue arising from exchanges of goods or
services included in revenue are as follows:
Golden penny wheat flour - 140,416
Semovita - 14,669
Wheat offal - 18,425
Massa flour 382,212 249,711
Germ flour 102,143 94,571
Corn offal 34,956 39,014
GP flour confectionery - 3,210
GP rice - 7
Massavita 419,015
979,038
6. Segmental information
Information reported to the Chief Operating Decision Maker (CODM) for the purpose of resources allocation and assessment of
segment performance focuses on the types of goods or services delivered or provided. The Company's reportable segments are
milling and sale of wheat/ maize products (wheat/ maize product segment), and sale of other Golden Penny (GP) products (Other
Golden Penny (GP) products segment).
Segmental revenue and results
Segment revenue Segment loss
31-Mar-17 31-Mar-16 N
'000 N '000
31-Mar-17 31-Mar-16
N '000 N '000
Wheat/ maize products 940,521 975,821 (27,263) (100,687)
Other Golden Penny (GP) products -
- (30)
Segment loss represent the loss before tax incurred by each segments without allocation of other operating income, other gains
and losses, selling and distribution expenses, administrative expenses, investment income and other expenses. This is the
measure reported to the Chief Operating Decision Maker for the purpose of resource allocation and assessment of segment
performance.
Segment assets and liabilities
Segment assets:
Wheat/ maize products 4,337,444 1,739,760
Other Golden Penny (GP) products - -
Segment liabilities
4,337,444 1,739,760
Wheat/ maize products 3,097,866 488,823
Other Golden Penny (GP) products - -
3,217
940,521 979,038 (27,263) (100,717)
3,097,866 488,823
421,210
940,521
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
38
31- Mar -17 -16 31- Mar N '000 N '000
(65,703)
(89,991)
7. Cost of sales
Raw materials consumed 684,584 808,278
Manufacturing - Employee costs 92,454 84,773
Manufacturing - Depreciation and impairments 63,006 67,907
Petrol, gas and oil 91,463 61,874
Rent and Rate 2,507 2,138
Repairs and maintenance 27,179 44,330
Insurance 5,724 7,251
Other expenses 867 3,204
967,784
8. Net operating gains and losses
Provision no longer required 5,979 22,097
Rental income 1,800 1,017
Insurance income - 557
Other income 32,190 222,881
Intragroup subsidy (a) 390,015 -
429,984
(a) The company ceased the milling of wheat in May 2015 and limits its production activities to the milling of maize products. The
parent Company, Flour Mills of Nigeria Plc resolved that for the transition period of three years, the targeted sales of
Masavita and Masaflour is 4,166.7 metric tonnes/month i.e. 50,000 metric tonnes per year. The parent company pays a
subsidy per metric tonne for every metric tonne short of 50,000 metric tonnes. In the current year the parent company
approved an increase in the subsidy from N5,000 per metric tonne to N9,000 per metric tonne.
9. Other gains and losses
Profit and loss on exchange differences 180 (5,099)
Profit and loss on sale of assets and liabilities 820 -
Provisions for obsolete stock (25,288) (28,281)
Inventory write off - (19,991)
Other operating charges (a) (36,959)
(90,330)
(a) The amount is majorly made up group cost allocated to Northern Nigeria Flour Mills by the Parent Company - Flour Mills
Nigeria Plc.
10. Selling and distribution expenses
Staff cost 1,210 710
Advertisement 38,172 192
Selling expense 10,704
50,086
11. Administrative expense
The following items are included within operating expenses:
Auditors remuneration 14,500 14,500
Bad debts allowance 62,369 84,111
Bank charges 5,103 6,212
Consulting and professional fees 9,479 14,500
1,079,755
246,552
10,717
11,619
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
39
31- Mar -17 -16 31- Mar N '000 N '000
Depreciation, amortisation and impairments 8,111 19,323
Donations 1,675 2,782
11. Administrative expense (continued)
13. Investment revenue
Interest income 23,983 47,409
14. Finance costs
Employee costs 84,191 100,312
Director expense 29,822 19,482
Bad debt written off - 12,614
Fines and penalties 11,235 873
Insurance 2,385 5,308
Medical expenses 398 551
Printing and stationery 1,459 1,262
Repairs and maintenance 26,970 18,921
Postage and communication expenses 4,407 6,162
Travel - local 7,437 12,514
General expenses
12. Operating profit (loss)
Operating profit (loss) for the year is stated after charging/(crediting) the following:
10,027
279,568
4,939
Profit on sale of property, plant and equipment (820) -
Profit on exchange differences (180) 5,099
Amortisation on intangible assets - 1,289
Depreciation on property, plant and equipment 71,117 85,941
Employee costs 176,645 185,085
Director expense 29,822 19,482
Auditors remuneration 14,500 14,500
Interest expense 31,942 -
Net operating gains and losses 429,984 246,552
Current tax expense 13,320 10,214
Under provision of deferred tax liabilities in prior year 3,142 16,156
Deferred tax credit recognised in current year 177 (62,201)
324,366
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
40
31- Mar -17 -16 31- Mar N '000 N '000
Interest expense 31,942 -
15. Taxation
Per profit or loss
Income tax charged 7,375 7,330
Under provision of education tax liabilities in prior year 3,119 2,872
Under provision of capital gains tax in prior year 2,826 -
Under provision of company income tax liabilities in prior year - 12
Corporation tax is calculated at 30% (2016: 30%) of the estimated taxable profit for the year while tertiary education tax is
calculated at 2% (2016: 2%) of the estimated assessable profit for the year.
Net income tax expense as per profit or loss 16,639 (35,831)
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
15. Taxation (continued)
Per statement of financial position
At 1 April 7,330 21,991
Charge for the year 13,320 7,330
Under provision in prior year
Payment during the year
- 2,884
Cash (2,826) (24,875)
Witholding tax utilized - -
Current tax payable
Reconciliation of effective tax rate
Profit before tax on continuing operations (A) 405 (233,071)
Tax at the statutory corporation tax rate of 30% (2016:30%) 122 (69,921)
Effect of minimum tax provisions 7,375 7,330
Effect of expenses that are not deductible in determining taxable profit 3,506 6,382
Effect of investment allowance (3,451) 1,339
Tertiary education tax at 2% of assessable profits 3,119 -
Adjustments recognized in the current period in relation to the deferred tax of
prior periods
3,142 16,155
Adjustments recognized in the current period in relation to income, capital gains
and education tax of prior years
2,826 2,883
Income tax expense recognized in profit or loss (relating to continuing operations) (B)
Effective tax rate (B/A above) 4,108 % 15 %
The tax rate used for the 2017 and 2016 reconciliations above is based on the minimum tax rates applicable to corporate entit ies
in Nigeria under Companies Income Tax Act, CAP C21 LFN 2004 as amended.
No income tax was recognised directly in equity.
No income tax was recognised in other comprehensive income.
16. Deferred tax
Analysis of deferred tax (assets)/liabilities
2017
Deferred tax
(assets)/liabilities in
relation to:
Opening balance
N'000
Recognised in profit or loss
N'000
Recognised in
other
comprehensiv
e income N'000
Prior year
adjustment
recognised in
current year N'000
Closing balance
N'000
17,824 7,330
31- Mar -17 -16 31- Mar N '000 N '000
16,639 (35,832)
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
42
2,090
2,090
Property, plant and
equipment
146,953 (24,786) - - 122,167
Tax losses and unutilised
capital allowances
(75,661) 47,931 - - (27,730)
Exchange difference (24,693) (1,451) - - (26,144)
Provisions (88,723) (18,375) - (105,008)
(42,124) 3,319 - (36,715)
37
16. Deferred tax (continued)
31 March 2016
Deferred tax
(assets)/liabilities in
relation to:
Opening balance
N'000
Recognised in profit or loss
N'000
Recognised in
other
comprehensiv
e income N'000
Prior year
adjustment
recognised in
current year N'000
Closing balance
N'000
Property, plant and
equipment
135,485 (19,314) - 30,782 146,953
Tax losses and unutilised
capital allowances
- (75,661) - - (75,661)
Exchange difference (24,693) - - - (24,693)
Provisions (116,117) 32,774 9,246 (14,626) (88,723)
Gain on fair valuation of
biological assets
- - - - -
Deferred tax assets and liabilities
Opening balance 42,124 5,325
Charge for the year (3,319) 46,045
Charge/(credit) to other comprehensive income (2,090) (9,246)
36,715 42,124
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
17. Property, plant and equipment
Company Land and
building
Plant and Furniture and Vehicles Capital work- Total
machinery equipment in-progress
Cost N'000 N'000 N'000 N'000 N'000 N'000
Balance at 01 April 2015 111,765 1,263,853 95,862 364,992 11,769 1,848,241
Additions - - - - 20,191 20,191
Disposals - - - (33,069) - (33,069)
Transfer - 18,299 - - (18,299) -
Write-off - (52,449) (10,473) - - -
Balance at 31 March 2016
Additions
Disposal
Reclassification
Adjustment
Balance at 31 March 2017
Accumulated depreciation
111,765 1,229,703 85,389 331,923 13,661 1,772,441
- 39,409 1,500 1,200 1,421,408 1,463,517
- - - (8,973) - (8,973)
- 75,637 - - (75,637) -
- - - (18,379) - (18,379)
111,765 1,344,749 86,889 305,771 1,359,432 3,208,606
39,897 674,662 80,893 324,682 - 1,120,134
2,198 52,768 4,718 26,257 - 85,941
- - - (33,069) - (33,069)
- - - - - -
- (6,625) (10,473) - - (17,098)
42,095 720,805 75,138 317,870 - 1,155,908
2,197 54,297 3,381 11,242 - 71,117
- - - (8,973) - (8,973)
(216) 4,670 - (4,454) - -
- - - (18,379) - (18,379)
44,076 779,772 78,519 297,306 - 1,199,673
67,689 564,977 8,370 8,465 1,359,432 2,008,933
69,670 508,898 10,251 14,053 13,661 616,533
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
44
Balance at 01 April 2015
Charge for the year
Disposals
Transfer
Adjustments
Balance at 31 March 2016
Charge for the year
Disposals
Transfer
Adjustments
Balance at 31 March 2017
Carrying amount
Balance as at 31 March 2017
Balance as at 31 March 2016
Capital work in progress relates to costs incurred on the redesign and upgrade of the D-Mill plant to enable the milling of sorghum.
The D-Mill will be commissioned and capitalized in July 2017.
Impairment losses recognised in the year
There are no indicators of impairment at the end of the reporting period (2016: Nil). Thus the directors are of the opinion that
allowance for impairment is not required. The D-Mill plant which was idle during the year has been upgraded to enable the milling
of sorghum which the Directors have projected to be a major source of revenue in the next financial year.
Contractual commitments
At 31 March 2017, the company had no contractual commitments for the acquisition of property, plant and equipment (2016: Nil).
Pledged as security
No asset of the Company was pledged as security for loans during the reporting period (2016: Nil).
39
18. Intangible assets
Computer
software
N'000
Cost
Balance at 01 April 2015 38,056
Addition -
Disposal -
Balance at 31 March 2016 38,056
Addition -
Disposal -
Balance at 31 March 2017
Accumulated amortisation
Balance at 01 April 2015 36,767
Charge for the year 1,289
Balance at 31 March 2016 38,056
Charge for the year
Balance at 31 March 2017
Carrying amount
Balance as at 31 March 2017
Balance as at 31 March 2016
Computer software relates to acquisition of software license and any other development costs directly attributable to the
preparation of the computer software for its intended use. Amortization of computer software is calculated based on
useful life of 3 years.
38,056
-
38,056
-
-
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
46
31-Mar-17 31-Mar-16 N '000 N
'000
19. Inventories
Raw materials, components 1,066,659 215,613
Finished goods 92,076 23,532
Maintenance spares and consumables 262,252 185,269
1,420,987 424,414
Inventories (write-downs) (53,569) (28,281)
1,367,418 396,133
The cost of inventories recognised as an expense during the year in respect of continuing operation was N684.6 million (2016: N
808.3 million).
20. Trade and other receivables
Trade receivables 156,719 156,726
Amount due from related companies 429,486 206,659
Staff debtors 19,088 23,977
Impairment for bad debts (178,708) (116,339)
426,585 271,023
Other receivables 10,848 16,771
437,433 287,794
Before accepting a new customer, the Company initially trades with the customer on a cash basis to assess the customer’s abil ity
and also determine the customer’s transaction volumes. This enables a reasonable credit limit to be set. Once these are
determined, the customer is then allowed to apply for a credit facility from the company through a rigorous process with several
levels of approval. Also credit customers provide bank guarantees before being accepted as credit customers of the company.
Credit sales form a small portion of overall sales. The concentration of credit risk is limited due to this fact and the large and
unrelated customer base. The company has pledged no trade receivables during the year.
Of the trade receivables balance at the end of the year, the largest customers in the company are:
N000 %
Customer A 27,010 17 %
Customer B 12,224 8 %
Customer C 10,269 7 %
Customer D 10,015 6 %
Customer E 8,277 5 %
No other customer represents more than 5% of the total balance of trade receivables.
There are no trade receivables which are past due at the reporting date for which the Company has not provided as there has not
been a significant change in the credit quality and the amounts are still considered recoverable. The Company does not hold any
collateral over these balances.
Fair value of trade and other receivables
The carrying amount of these assets approximate their fair value.
Reconciliation of provision for impairment of trade and other receivables
Opening balance 116,339 41,183
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
47
Allowance for impairment 62,369 75,156
178,708 116,339
31-Mar-17 31-Mar-16 N '000 N
'000
20. Trade and other receivables (continued)
In determining the recoverability of the trade receivable, company considers any change in the credit quality of the trade receivable
from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited because of the customer
base being large and unrelated and large credit risks are insured against irrecoverability. Accordingly, the directors believe that
there is no further credit provision required in excess of the allowance for doubtful debts.
The Company does not hold any collateral or other credit enhancements to cover its credit risks associated with its trade
receivables.
21. Prepayments
Bank balances 385,942
388,519
23. Share capital
Authorised
200,000,000 Ordinary shares of 50 kobo each 100,000 100,000
24. Retirement benefits
Defined benefit plan
The Company operates unfunded defined benefit plans for qualifying employees of the Company. Under the plans, the employees
are entitled to retirement benefits varying between1.25% and 2.5% of final salary on attainment of a retirement age of 60. No
other post-retirement benefits are provided to these employees.
Prepaid Expenses 2,363 1,997
Prepayments-Insurance Premium 8,019 243
Prepaid Rent & Rates 6,624 6,417
22. Cash and cash equivalents
Cash and cash equivalents consist of:
17,006 8,657
Cash on hand 334 2,577
Issued
178,200,000 Ordinary shares of 50 kobo each 89,100 89,100
Share premium 89,521 89,521
178,621 178,621
Mar 31- -17 -16 31- Mar N '000 N '000
469,605
469,939
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
48
The most recent actuarial valuations of the present value of the defined benefit obligation were carried out at 31 March 2017 by
HR Nigeria Limited (FRC registration number: 000000000738), a firm of independent actuarial consultants. The present value of
the defined benefit obligation, and the related current service cost and past service cost, were measured using the Projected Unit
Credit Method.
24. Retirement benefits (continued)
Carrying value
1 April 90,908 293,638
Service cost 5,514 22,654
Interest cost 11,765 43,958
Transfer - (120)
Curtailment - (59,355)
Payment during the year (6,228) (214,700)
Actuarial losses (8,773) 4,833
93,186
Key assumptions used
The principal assumptions used for the purpose of the actuarial valuations were as follows:
Financial assumptions
Discount rates used 16 % 13 %
Expected increase in salaries 15 % 12 %
Average rate of inflation 12 % 9 %
Demographic assumptions
Mortality in service
The rates of mortality assumed for employees are the rates published in the A49/52 Ultimate Tables, published jointly by the
Institute and Faculty of Actuaries in the UK.
Mortality in service Sample of age Number of deaths in year out of 10,000
lives
25 7
30 7
35 9
40 14
45 26
Withdrawal from service Age band Rate (%)
</=30 2.5 %
31-39 1.5 %
40-44 1.0 %
45-50 - %
Mar 31- -17 -16 31- Mar N '000 N '000
90,908
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
49
Amounts recognised in statement of profit or loss and other comprehensive income in respect of these defined benefit
schemes are as follows:
Current service cost 5,514 22,654
Interest cost 11,765 43,958
Actuarial (gains) losses (8,773) 4,833
8,506 71,445
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
24. Retirement benefits (continued)
Defined contribution plan
The employees of the Company are members of government approved Pension scheme (Pension Reform Act, 2014) which is
managed by several private sector service providers. The Company and employees are required to contribute a specified
percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Company with respect
to the retirement benefit plan is to make the specified contributions and remit to the nominated Pension Fund Administrators.
The Company is under no obligation to cover any unfunded benefits.
The total expense recognised in the Company's statement of profit or loss of N11.58 million (2016: N 14.06 million) represents
contributions payable to these plans by the Company at rates specified in the rules of the plans. As at 31 March 2017, contributions
of N1.64 million (2016: N 0.87 million) due in respect of 31 March 2017 reporting period had not been paid over to the plans. The
amounts were paid subsequent to the end of the reporting period.
Sensitivity analysis
Accrued
Liability
N'000
Base - - 93,186
Discount rate - +1% 86,495
- -1% 100,673
Salary increase - +1% 96,082
- -1% 90,531
Mortality experience - +1 year 93,337
- -1 year 93,049
25. Long service award
The Company operates a long service awardc scheme where employees are rewarded after a specific number of years in
service. Employees are entitled to the benefits after being in service for 10, 15, 20, 25, 30 and 35 years. The amounts and
items given are based on the number of years in service.
The most recent actuarial valuations of the present value of the defined benefit obligation were carried out at 31 March 2017
by HR Nigeria Limited, a firm of Independent Actuarial Consultants. The present value of the defined benefit obligation, and
the related current service cost and past service cost, were measured using the Projected Unit Credit Method.
The principal assumptions for the purpose of the actuarial valuations were as follows:
Valuation at
31-Mar-17 31-Mar-16
% %
Discount Rate 16 13
Salary increase 15 12
Average rate on inflation (p.a.) 12 10
At 1 April 22,638 50,270
Additional provision recognised 4,539 10,997
Payment during the year (4,419) (2,976)
Actuarial loss/(gains) 1,808 (35,653)
Mar 31- -17 -16 31- Mar N '000 N '000
24,566 22,638
Amounts recognised in the statement of profit or loss and other comprehensive income in respect of these defined benefit schemes
are as follows:
44
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
25. Long service award (continued)
Analysed into Current
Bank loan movement
Additions 2,194,965 -
Accrued interest 228,641 -
Closing balance 2,423,606
Details of Borrowings
During the year, the entity obtained loans from its parent company, Flour Mills of Nigeria Plc, to finance its working capital
requirements and the construction of the Sorghum Mill project. These loans were obtained as short term loans pending the
approval and disbursement of loans requested by the entity from the Bank of Industry (BOI) of Nigeria which will be used to repay
the intra-group loan.
The loans are not secured on any of the assets of the company and the rate of interest on the loan is the short term interest rate
of Zenith Bank of Nigeria Plc.
27. Trade and other payables
The average credit period on purchases is 58 days. No interest is charged on trade payables.
The Company have financial risk management policies in place to ensure that all payables
are paid within a reasonable time of the credit time frame.
28. Customers deposits
Current service cost 1,726 3,780
Interest on obligation 2,813 7,217
Actuarial loss / (gains) 1,808 (35,653)
26. Borrowings
Unsecured borrowings at amortised cost
6,347 (24,656)
Related party loan (Note a)
Secured Borrowings at amortised cost
2,423,606 -
Trade payables 157,719 54,156
VAT 1,257 1,905
Amount due to related companies 215,714 197,241
Accruals 75,790 61,244
Withholding tax 28,755 729
479,235 315,275
-
31- Mar -17 -16 31- Mar N '000 N '000
2,423,606 -
2,423,606 -
2,423,606 -
Advance payment by customers 59,449 52,672
29. Earnings per share
Basic earnings per share
Basic earnings per share is determined by dividing profit or loss attributable to the ordinary equity holders of the Company by the
weighted average number of ordinary shares outstanding during the year.
45
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
29. Earnings per share (continued)
Basic loss per share
From continuing operations (kobo per share) (9.11) (110.68)
Basic earnings per share was based on earnings (loss) of N (16.23) million (2016: N (197.24) million) and a weighted average
number of ordinary shares of 178,200,000 (2016: 178,200,000).
Reconciliation of profit or loss for the year to basic earnings
Profit or loss for the year attributable to equity holders of the parent
Adjusted for:
(16,234) (197,240)
After tax effect of preference dividends - -
Diluted earnings per share
Diluted loss per share
From continuing operations (kobo per share) (9.11) (110.68)
63
65
30. Employee costs
The following items are included within employee benefits expense:
Total employee costs
Direct employee costs 92,454 84,773
Indirect employee costs 84,191 100,312
Average number of persons employed during the year was:
176,645 185,085
Senior Management 2 2
Junior Management 7 7
Senior Staff 27 27
Junior Staff 27 29
31- Mar -17 -16 31- Mar N '000 N '000
(16,234) (197,240)
31. Major shareholders
According to the Register of Members, the following shareholders of the company held more than 5% of the issued share capital
of the company.
None of the Directors has notified the company for the purpose of Section 277 of the Companies and Allied Matters Act of Nigeria,
Cap C20 LFN 2004 of any declarable interest in contracts in which the company is involved as at 31 March 2017.
Shareholders Number of shares Percentage holding (%)
31-Mar-17 31-Mar-16 31-Mar-17 31-Mar-16
Flour Mills of Nigeria Plc 94,545,159 94,545,159 53.06 % 53.06 %
Northern Nigeria Investment Limited 12,955,000 12,955,000 7.27 % 7.27 %
Dantata Investment & Securities Limited 9,894,362 9,894,362 5.55 % 5.55 %
46
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
32. Related parties
Flour Mills of Nigeria Plc is the ultimate parent company which owns 53% (2016: 53%) of Northern Nigeria Flour Mills Plc.
Holding company Flour Mills of Nigeria Plc
Fellow subsidiaries Premier Feed Mills Company Limited
Apapa Bulk Terminal Limited
Golden Shipping Company Limited
Golden Sugar Company Limited
Kaboji Farms
Thai Farms International
Eastern Premier Feed Mills Company Limited Best
Chicken Limited
Related party balances
The Company entered into various transactions with related parties ranging from purchase and sale of goods and services to
expenses incurred by the related companies. The outstanding amounts are from the various transactions entered with the related
parties.
Amount due from related companies
Flour Mills of Nigeria Plc 419,924 183,635
Premier Feed Mills Company Limited - 13,428
Portharcourt Flour Mills Limited 9,562 9,562
Nigeria Eagle Flour Mills Limited - 34
Amount due to related companies
Flour Mills of Nigeria Plc 158,587 159,412
Golden Shipping Company Limited 14,043 14,043
Apapa Bulk Terminal Limited 33,319 23,761
Maiduguri Flour Mill Plc - 25
31- Mar -17 -16 31- Mar N '000 N '000
429,486 206,659
Northern Bag Manufacturing Company Limited -
Related party transactions
The following transactions were carried out with related parties during the year:
Purchases from related parties
Flour Mills of Nigeria Plc. 46,082 309,509
Premier Feed Mills Limited - 18,519
Apapa Bulk Terminal Limited 26,994 -
Northern Bag Manufacturing Company Limited 25,321
98,397
Sale of goods to related parties
Flour Mills of Nigeria Plc. 404,530 288,602
Premier Feed Mills Company Limited - 14,506
Eastern Premier Feed Mills Limited 75,858
378,966
The remuneration of executive management team excluding directors during the year was as follows. Fees
- Chairman 100 100
- Other Directors
Salaries, allowances and expenses
630 630
- Executive Directors 9,210 9,149
- Other Directors 16,086 16,086
26,026 25,965
47
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
33. Directors' emoluments
The remuneration of directors and key executives is determined by the Remuneration Committe having regard to the performance
of individuals and market trends.
Number of Directors whose emoluments were within the following ranges:
Range ( N) Number Number
1 - 5,000,000 9 9
5,000,001 - 20,000,000 2 2
- -
Emolument of highest paid director
Highest paid directors 16,086 16,086
34. Financial assets by category
The accounting policies for financial instruments have been applied to the line items below:
2017
9,765
215,714 197,241
31- Mar -17 -16 31- Mar N '000 N '000
11 11
30,272
358,300
69,368
473,898
Loans and
receivables
Total
Trade and other receivables 437,433 437,433
Cash and cash equivalents 469,939 469,939
Prepayments 17,006 17,006
2016
Trade and other receivables
Cash and cash equivalents Prepayments
35. Financial liabilities by category
The accounting policies for financial instruments have been applied to the line items below:
2017
Borrowing
Trade and other payables
2016
924,378 924,378
Loans and
receivables Total
287,794 287,794
388,519 388,519
8,657 8,657
684,970 684,970
Financial
liabilities at
amortised cost Total
2,423,606 2,423,606
479,235 479,235
2,902,841 2,902,841
Financial
liabilities at
amortised cost Total
- -
315,275 315,275
Borrowing
Trade and other payables
48
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
36. Risk management
57
Capital risk management
The company's objectives when managing capital are to safeguard the company's ability to continue as a going concern in order
to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the
cost of capital.
The company manages its capital to ensure that it is able to continue as a going concern while maximising the return to
shareholders through the optimisation of the debt and equity balance. The overall strategy remains unchanged from the previous
year.
The management of the Company reviews the capital structure on a frequent basis to ensure that gearing is within acceptable
limit.
The Company is not subject to any externally imposed capital requirements.
The gearing ratio at 2017 and 2016 respectively were as follows:
Total borrowings 2,423,606 -
Less: Cash and cash equivalents 22 469,939 388,519
Net debt 1,953,667 (388,519) Total equity 1,239,578 1,250,937
Total capital 3,193,245 862,418
Gearing ratio 158 % (31)%
Financial risk management
Risk management roles and responsibilities are assigned to stakeholders in the company at three levels: The board, executive
and line managers.
The Board oversight is performed by the Board of Directors through Board Risk and Ethics Committee.
The second level is performed by the Executive Management Committee (EXCOM).
The third level is performed by all line managers under EXCOM and their direct reports. They are required to comply with all risk
policies and procedures and to manage risk exposures that arise from daily operations.
The Internal Audit Department provides an independent assurance of the risk frame work. They assess compliance with
established controls and recommendations for improvement in processes are escalated to relevant management, Audit
Committee and Board of Directors.
The company monitors and manages financial risks relating to its operations through internal risk report which analyses exposures
by degree and magnitude of risks. These risks include market risk (including currency risk ), credit risk and liquidity risk.
Market risk
The company's activities expose it primarily to financial risks of changes in foreign currency exchange rates.
Market risk exposures are measured using sensitivity analysis.
There has been no change to the company's exposure to market risks or the manner in which these risks are managed and
measured.
Foreign exchange risk
The company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations
arise. The Company is mainly exposed to the US dollar, the European EUR and the UK pound.
The company does not hedge foreign exchange fluctuations.
(continued)
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
36. Risk management
58
The following table details the company's sensitivity to a 3%, increase and decrease in Naira against US dollar, UK pound and
European EUR currencies. Management believes that a 3% movement in either direction is reasonably possible at the balance
sheet date. The sensitivity analyses below include outstanding balances of US dollar, UK pound and European EUR denominated
assets and liabilities. A positive number indicates an increase in profit where Naira strengthens by 3% against the US dollar, UK
pound and European EUR. For a 3% weakening of Naira against the US dollar, UK pound and European EUR there would be an
equal and opposite impact on profit, and the balances below would be negative.
Naira strengthens by 3% against the US dollar 11 5
Naira weakens by 3% against the US dollar (11) (5)
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company.
The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where
appropriate, as a means of mitigating the risk of financial loss from defaults. The Company only transacts with entities that are
rated the equivalent of investment grade and above. This information is supplied by independent rating agencies where available
and, if not available, the Company uses other publicly available financial information and its own trading records to rate its major
customers. The Company's exposure and the credit ratings of its counterparties are continuously monitored and the aggregate
value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits
that are reviewed and approved by the executive committee periodically.
Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing
credit evaluation is performed on the financial condition of accounts receivable and, where appropriate, credit guarantee insurance
cover is purchased.
The carrying value of the Company's’s financial assets represents its maximum exposure to credit risk. The maximum exposure
to credit risk at the reporting date was:
Collateral held as security and other credit enhancements
The company does not hold any collateral or other credit enhancements to cover its credit risks associated with its financial assets.
Liquidity risk
Liquidity risk is the risk that the company will encounter difficulty in meeting obligations associated with financial liabilities that are
settled by delivering cash or another financial asset.
Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity
risk management framework for the management of the company’s short-, medium- and long-term funding and liquidity
management requirements. The company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve
borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial
assets and liabilities.
Maturity analysis of financial liabilities
The following tables details the company’s remaining contractual maturity for its non-derivative financial liabilities with agreed
repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the
earliest date on which the company can be required to pay. The table includes both interest and principal cash flows. To the extent
that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the balance sheet date. The
contractual maturity is based on the earliest date on which the entities may be required to pay.
(continued)
Financial instrument 2017 2016
Bank balances 469,605 385,942
Trade receivables
Other receivables
94 42,500 474,315 944,014 287,794 716,236
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Notes to the Financial Statements
36. Risk management
59
At 31 March 2017 0-3 months 3-6 months 6-12 months Over 12
months
Borrowings - - 2,423,606 -
Trade and other payables 479,235 - - -
At 31 March 2016 0-3 months 3-6 months 6-12 months Over 12
months
Borrowings - - - -
Trade and other payables 315,275 - - -
37. Fair value information
The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the
financial statements approximate their fair values.
38. Contingencies
The company has no contingent liability arising from pending or ongoing litigation at the year end.
39. Commitments
Financial commitments
The directors are of the opinion that all known liabilities and commitments which are relevant in assessing the company's state of
affairs have been taken into consideration in the preparation of these financial statements.
Capital commitments
There were no capital commitments entered into by the Company as at 31 March 2017 (2016: Nil).
40. Events after the reporting period
The Directors are of the opinion that there were no significant post balance sheet events which would have had any material effect
on the balance sheet and the loss for the year ended on that date, which have not been adequately provided for or disclosed in
the Company's financial statements.
Other national disclosures
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Statement of Value Added
31-Mar-1731-Mar-17 31-Mar-1631-Mar-16
N '000 % N '000 %
VALUE ADDED
Turnover: Local 940,521
979,038
Export - -
Interest received 23,983 47,409
Other income 429,984 246,552
Bought - in materials and services (1,114,379)
(1,233,755)
- Local - -
- Foreign
Total Value Added
VALUE DISTRIBUTED
To Pay Employees
Salaries, wages, medical and other benefits
To Pay Providers of Capital
Finance costs
- -
280,109 100 39,244 100
176,645
185,085
176,645 63 185,085 472
31,942
-
Dividend paid
To Pay Government
Income tax
- -
31,942 11 - -
13,320
10,214
Education tax
To be retained in the business for expansion and future wealth creation:
Depreciation, amortisation and impairments
- -
13,320 5 10,214 26
71,117
87,230
Restructuring - -
Deferred tax 3,319 (46,045)
Discontinued operations - -
Profit for the year
Total Value Distributed
(16,234) (197,240)
58,202 21 (156,055) (398)
280,109 100 39,244 100
Value added represents the additional wealth which the company has been able to create by its own and employees efforts.
53
Northern Nigeria Flour Mills Plc
Annual Report and Accounts for the year ended 31 March 2017
Five Year Financial Summary 31-Mar-17 31-Mar-16 31-Mar-15 31-Mar-14 31-Mar-
13
N '000 N '000 N '000 N '000 N '000
Statement of Financial Position
Assets
Non-current assets 2,045,648 658,657 734,721 689,689 857,706
Current assets
Total assets
Liabilities
Non-current liabilities
2,291,796 1,081,103 1,688,990 2,576,926 2,765,711
4,337,444 1,739,760 2,423,711 3,266,615 3,623,417
117,752 113,546 343,908 304,989 383,597
Current liabilities
Total liabilities
Equity
Share capital
2,980,114 375,277 599,740 1,187,714 1,634,103
3,097,866 488,823 943,648 1,492,703 2,017,700
89,100 89,100 89,100 89,100 89,100
Share premium 89,521 89,521 89,521 89,521 89,521
Retained income
Total equity
Total equity and liabilities
Profit and loss account
Revenue
Profit (loss) before taxation
(Loss) profit for the year
Other comprehensive income/(loss) net of taxes
Per share data
Earnings per share (Basic)
1,060,957 1,072,316 1,301,442 1,595,291 1,427,096
1,239,578 1,250,937 1,480,063 1,773,912 1,605,717
4,337,444 1,739,760 2,423,711 3,266,615 3,623,417
940,521 979,038 10,529,075 11,392,017 11,701,741
405 (233,071) (215,430) 341,800 330,377
(16,234) (197,240) (199,558) 233,545 225,145
4,875 21,574 (23,011) 5,930 27,427
(9) (111) (112) 131 126
Earnings per share (Diluted) (9) (111) (112) 131 126
Net assets per share 696 702 831 1,096 901
678 480 637 1,398 1,238
Loss/earnings per share are based on loss/profit after tax and the number of issued and fully paid ordinary shares at the end
of each financial year.
Net assets per share is based on the net assets total and the number of issued and fully paid ordinary shares at the end of
each financial year.
54