A Project Report On

“To analyze Non-Current Assets- Plant Property and Equipment”

Submitted in partial fulfillment of the requirement for the award of

POST GRADUATE DIPLOMA IN MANAGEMENT

From

NARAYANA BUSINESS SCHOOL, AHMEDABAD

Subject: Managerial Accounting II (2PGDM01)

Component : CEC-1 To analyze Non-Current Assets- Plant Property and Equipment of

nestle India

Submitted By- Arjun Sharma

BATCH : PGDM 2023-25
ROLL NO : PGDM23-005
SECTION : (Alpha)
DATE
OF SUBMISSION : 15-01-24

Under The Guidance Of

NAME : Dr. Anjali Shah
DESIGNATION : Associate Professor
DEPARTMENT : Accountancy

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Index
Contents
Index ....................................................................................................................................................... 2
Company Overview .............................................................................................................................. 3
Topic Overview ..................................................................................................................................... 4
Objective Of Research .......................................................................................................................... 5
Analyse of the data and framing of a report............................................................................................ 6
References ............................................................................................................................................. 12

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Company Overview

NESTLÉ's relationship with India dates back to 1912, when it began trading as The NESTLÉ
Anglo-Swiss Condensed Milk Company (Export) Limited, importing and selling finished
products in the Indian market.
After India's independence in 1947, the economic policies of the Indian Government
emphasised the need for local production. NESTLÉ responded to India's aspirations by forming
a company in India and set up its first factory in 1961 at Moga, Punjab, where the Government
wanted NESTLÉ to develop the milk economy. Progress in Moga required the introduction of
NESTLÉ's Agricultural Services to educate, advise and help the farmer in a variety of aspects.
From increasing the milk yield of their cows through improved dairy farming methods, to
irrigation, scientific crop management practices and helping with the procurement of bank
loans.
NESTLÉ set up milk collection centres that would not only ensure prompt collection and pay
fair prices, but also instil amongst the community, a confidence in the dairy business. Progress
involved the creation of prosperity on an on-going and sustainable basis that has resulted in not
just the transformation of Moga into a prosperous and vibrant milk district today, but a thriving
hub of industrial activity, as well.
NESTLÉ has been a partner in India's growth for over a century now and has built a very
special relationship of trust and commitment with the people of India. The Company's activities
in India have facilitated direct and indirect employment and provides livelihood to about one
million people including farmers, suppliers of packaging materials, services and other goods.
The Company continuously focuses its efforts to better understand the changing lifestyles of
India and anticipate consumer needs in order to provide Taste, Nutrition, Health and Wellness
through its product offerings. The culture of innovation and renovation within the Company
and access to the NESTLÉ Group's proprietary technology/Brands expertise and the extensive
centralized Research and Development facilities gives it a distinct advantage in these efforts.
It helps the Company to create value that can be sustained over the long term by offering
consumers a wide variety of high quality, safe food products at affordable prices.
NESTLÉ India manufactures products of truly international quality under internationally
famous brand names such as NESCAFÉ, MAGGI, MILKYBAR, KIT KAT, BAR-ONE,
MILKMAID and NESTEA and in recent years the Company has also introduced products of
daily consumption and use such as NESTLÉ Milk, NESTLÉ SLIM Milk, NESTLÉ Dahi and
NESTLÉ Jeera Raita.
NESTLÉ India is a responsible organisation and facilitates initiatives that help to improve the
quality of life in the communities where it operates.

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Topic Overview

Property, Plant, and Equipment is what the acronym "PPE" stands for. On a company's balance
sheet, it is a category of assets that includes long-term, tangible assets used for business
operations and production. Students would normally be examining the financial disclosures
pertaining to the company's tangible assets if they were given the assignment to study PPE
from the pertinent notes to accounts for any production-based company of their choice.

1. Definition of PPE: - PPE includes all tangible assets owned by a business, including real
estate, buildings, machinery, cars, and other equipment needed for regular business operations.

2. Recognition and Valuation: - The company's application of accounting rules and techniques,
such as historical cost, depreciation schedules, and impairment analyses, to the recognition and
valuation of its PPE assets.

3.Specifics for Every Category: -PPE assets are broken down into distinct categories (such as
land, buildings, and machinery), along with the corresponding values assigned to each
category.

4. Accumulated Depreciation: -Details regarding the overall cumulative depreciation for every
PPE category, accounting for wear and tear or obsolescence over time.

5. Residual value and useful life: - disclosure of the residual value and anticipated useful life
that were utilized to determine the depreciation costs for each category of PPE.

6. PPE Modifications: - Any changes in PPE during the reporting period, such as purchases,
disposals, or large additions, together with their related costs.

7. Impairment testing: - If relevant, details concerning impairment tests undertaken on PPE

assets, including any impairment losses reported during the reporting period.

8. Notes and Disclosures: - Explanatory notes that offer more details on the PPE policies of the
organization, methods, PPE rules, and any particular elements affecting the valuation or usable
life estimates of the company.

9. Balance of Modifications: - A reconciliation of the opening and closing balances of PPE,

indicating how the values have changed over the reporting period.

10. Adherence to Accounting Standards: - Confirmation of adherence to relevant accounting

standards (such as International Financial Reporting Standards - IFRS or Generally Accepted
Accounting Principles - GAAP) in the presentation and disclosure of PPE.

Students can learn about a production-based company's investment in tangible assets, how
those assets are accounted for, and how those assets affect the company's performance and
financial condition by looking through the pertinent notes to the accounts.

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Objective Of Research

The following are the goals of this Managerial Accounting II research assignment:

1. In accordance with IND AS 16, to analyze non-current assets, such as plant, property, and
equipment (PPE): The principal aim of this study is to examine the financial reporting of PPE
(personal property equipment) in accordance with the Indian Accounting Standards (IND AS
16). This entails a detailed analysis of the PPE accounting process used by a production-based
organization of the student's choosing.

2. To Understand the Different Classes of Assets and Their Useful Life: - Look into and make
sense of the different asset classes that the chosen organization possesses. This entails learning
how assets are classified and becoming knowledgeable about the anticipated useful life of each
class, as revealed by the business in its notes.

3. To ascertain the Share of Various Classes in the Total Plant, Property, and Equipment: -
Evaluate the proportionate share of every asset class in the total Plant, Property, and
Equipment. Understanding the non-current assets of the company and their importance within
the overall asset structure is made possible by this study.

4. The fourth step is to Assess the Ratio of Leased and Owned Assets: - Look at the ratio of
assets that the business owns outright to those that are acquired through leasing agreements.
Understanding this distinction is crucial to comprehending the company's financial obligations
and asset base management flexibility.

5. To Discuss the Assets' Life and Possible Replacements: - Provide insights into the state of
the assets, examining if they are relatively new or if there is a need for replacements due to low
carrying values. The company's asset management plans and capital expenditure requirements
are evaluated with the use of this study.

6. To Look into Impairment Testing: - Find out if any class of assets has been the subject of
impairment testing. In order to guarantee that asset valuations on the company's financial
statements are accurate, impairment testing evaluates if an asset's carrying value exceeds its
recoverable amount.

7. Encouragement for extra Analysis: - Students are encouraged to do extra analyses based on
their expertise and areas of interest, going beyond the specified questions in the assignment.
This adaptability enables pupils to investigate particular facets of the business's PPE that suit
their interests or areas of expertise.

With an emphasis on Plant, Property, and Equipment, the research seeks to improve students'
comprehension of how a production-based organization accounts for and maintains its non-
current assets in compliance with applicable accounting rules by addressing these goals.

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Analyse of the data and framing of a report

1. What are the different classes of Assets held by the company and their useful life as
stated by the company?

Answer -

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 Category Useful Life

Leased Assets Lower of lease term or useful

life
Buildings 25 - 40 years
Plant & equipment 5 - 25 years
Office equipment 5 years
Furniture and fixtures 5 years

Vehicles 5 years
Information Technology (IT) 3 - 5 years
equipment

Freehold land is not depreciated.

2. What is the proportion of the different classes in the total PPE?

Answer- there are three class of assets are used

Owned asset Values Percentage Capital Right to use Values Percentage

work-in- asset
progress
Free hold 175.2 0.353% 3,583.6 Leasehold 1,240.5 23.89%
land land
Building 11,735.2 23.684% Buildings 3,586.8 69.087%
Plant and 35,245.5 71.133% Plant and 211.1 4.066%
equipment Equipment
Furniture 644.1 1.29% Vehicles 153.3 2.9%
and fixture
Office 432.3 0.8724%
equipment’s
It 1,292.4 2.608%
equipment’s
Vehicles 23.6 0.04%
Total 49,548.3 3,583.6 5,191.7

Total (A+B+C) = 58,323.6

Based on the information given, the following are some important conclusions:

1. Owned Assets:

With a total value of Rs. 49,548.3 million, owned assets account for around 85.06% (or
49,548.3 / 58,323.6) of the asset value overall.

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 - The building, which is valued at Rs. 11,735.2 million and accounts for roughly 23.684% of
all assets, is the most important owned asset.

2. Capital Work-in-Progress (CWP): The entire value of Capital Work-in-Progress is Rs.

3,583.6 million, or approximately 6.15% of the asset value. This group usually consists of
assets in the process of development or construction.

3. Right to Use Assets: - The Right to Use Assets represent approximately 8.91% of the overall
asset value, with a total value of Rs. 5,191.7 million. Significant values can be found in
leasehold land and buildings under the Right to Use Assets category, which account for 23.89%
and 69.087% of this part, respectively.

4. Ownership Asset Composition: Approximately 71.133% of this section is made up of plant

& equipment, which is the largest owned asset category component with a value of Rs. 35,245.5
million.

5. Assets Percentage Composition: - A substantial amount of the total asset value is made up
of buildings, plant and equipment, and leasehold property, which account for 23.684%,
71.133%, and 23.89% of the total, respectively.

6. Right to Use Assets Distribution: - Buildings make up the majority of the Right to Use Assets
category, contributing to 69.087%, with the remainder being made up of machinery and
vehicles.

7. Asset Categories: - Freehold land, buildings, plant and equipment, furniture and fittings,
office equipment, IT equipment, and cars are only a few of the categories into which the assets
are divided.

8. Implications for the Balance Sheet - Comprehending the asset composition is essential for
financial analysis and making decisions. Stakeholders are better able to understand the
organization's asset structure and how it affects the balance sheet thanks to the values and
percentages.

To summarize, the available data presents a thorough analysis of the asset structure,
highlighting the importance of owned assets, current capital projects, and asset usage rights.
The percentages and numbers shed light on how important each asset class is in relation to the
portfolio as a whole.

3. What is the proportion of leased assets and owned assets?

Type of asset Value Proportion

Leased asset 5,191.7 8.901%
Owned asset 49,548.3 84.95%
Capital work in progress 3,583.6 6.14%
Total 58,323.6

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1. The composition of the organization's asset structure is as follows: the total assets of the
organization are Rs. 58,323.6 million. Notable among these are owned assets (84.95%), leased
assets (8.901%), and capital work in progress (6.14%).

2. Significant Ownership Presence: The organization's strong ownership position in its asset
portfolio is highlighted by the fact that owned assets make up the majority and account for
84.95% of the total asset value.

3. Strategic Focus on Leased Assets: - A significant amount (8.901%) of the total assets are
leased, demonstrating a strategic reliance on assets obtained through leasing agreements.

4. Investment in Ongoing Projects: - The company's commitment to future growth and

expansion is indicated by the presence of capital work in progress (6.14%), which shows
ongoing investments in projects or advancements.

5. Diverse Asset Portfolio: - The company keeps an asset portfolio that is balanced in terms of
ownership, lease and ongoing initiatives, exhibiting a methodical approach to the distribution
and management of assets.

4. Comment on the life of the Assets: Whether they are new or require replacements due
to low carrying values.

Answer Carrying value is a measure of value for a company's assets. Carrying value is
typically measured as the original cost of the asset, minus any depreciating factors.

Asset Value Depreciation Value

Free hold land 175.2 0 175.2
Building 11,735.2 8,954.9 2780.4
Plant and 35,245.5 18,214.3 17031.2
equipment
Furniture and 644.1 519.7 124.4
fixture
Office 432.3 188.6 243.7
equipment’s
It equipment’s 1,292.4 764.7 527.7
Vehicles 23.6 22.6 1.0
Total 49,548.3

Category Useful Life

Leased Assets Lower of lease term or useful

life

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 Buildings 25 - 40 years
Plant & equipment 5 - 25 years
Office equipment 5 years
Furniture and fixtures 5 years

Vehicles 5 years
Information Technology (IT) 3 - 5 years
equipment

When determining whether assets are relatively new or if their low carrying values mean they
may need to be replaced, the carrying value of each asset is essential. This analysis is based on
the data that was supplied.

1. Freehold Land: The carrying value of land stays at Rs. 175.2 million and there is no
depreciation applied to it. Since land typically doesn't lose value, its carrying value is a true
representation of its initial purchase price.

2. Building: - The building's carrying value is Rs. 2,780.4 million, computed as the original
value (Rs. 11,735.2 million) minus accumulated depreciation (Rs. 8,954.9 million). With a 25–
40-year useful life projected, the building appears to have been occupied for a substantial
amount of time.

3. Plant and Equipment: - Plant and equipment have a carrying value of Rs. 17,031.2 million.
indicating that a substantial depreciation charge of Rs. 18,214.3 million has been recorded.
Plant and equipment normally have a usable life of five to twenty-five years. It's possible that
some of these assets are nearing the middle or later phases of their useful lives given the
significant depreciation.

4. Office supplies, IT equipment, vehicles, and furniture and fixtures:

- These assets have carrying values ranging from Rs. 1.0 million to Rs. 527.7 million. Usage
over time is indicated by the depreciation subtracted from their initial values. These assets
typically have a useful life of three to five years, and their carrying values imply continued use.

conclusions

- Land: Has not experienced much depreciation, suggesting that it is probably a long-term asset.

- Structures: The cumulative depreciation indicates that the structures

5. Is any class of Asset tested for Impairment loss?

Answer - An impairment loss is the amount by which the carrying amount of an asset or
a cash-generating unit exceeds its recoverable amount.
Yes,

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 asset Impairment

Buildings 12.3

Plant and equipment 282.0

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References

C:\Users\ARJUN\OneDrive\Desktop\nestle report.pdf

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