Northern Nigeria Flour Mills Plc - Nigerian Stock Exchange

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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

Board of Directors, Officers and Other Corporate Information

Country of incorporation and domicile

Nigeria

Nature of business and principal activities

The Company's main business is milling of wheat and other associated grains.

Directors Alhaji (Dr,) Aminu Dantata, OFR Mr. John G. Coumantaros Alhaji Rabiu Muhammad Gwarzo, OON Mr. Gert Kriek Mr. Charl P.F. Marais

Chairman (US Citizen)

Vice Chairman (South African) (South African)

Alhaji Sani Umar Mr. Paul M. Gbededo Alhaji Y. Olalekan A. Saliu Mallam Mahmud Ahmed Mr. Peter Kradolfer Dr. Jibrilla Mohammed Sadiq A. Usman Registered office

Postal address

Holding company

Bankers

Joint Auditors

(Swiss)

P.O.Box 6640 Kano. [email protected] Flour Mills of Nigeria Plc incorporated in Nigeria Guaranty Trust Bank Plc First Bank of Nigeria Plc Access Bank Plc Sterling Bank Plc Union Bank of Nigeria Plc Zenith Bank Plc 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.

1

Resigned 31 July 2016 Managing Director Deputy Managing Director

15 Maimalari road, Bompai Industrial Estate, Kano.

Aminu Ibrahim & Co. Chartered Accountants City Plaza, Plot 596, Ahmadu Bello Way, Garki, FCT.

Vice Chairman

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

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Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

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:

Revenue Operating profit (loss) Profit (loss) before taxation Loss for the year 3

31-Mar-17

31-Mar-16

N '000

N '000

940,521 8,364 405 (16,234)

979,038 (280,480) (233,071) (197,240)

Total comprehensive loss for the year 4.

(11,359)

(175,666)

Directors and directors' interests

The directors that served in office during the year are as follows: Directors Alhaji (Dr,) Aminu Dantata, OFR Mr. John G. Coumantaros Alhaji Rabiu Muhammad Gwarzo,

Designation Chairman Vice Chairman Vice Chairman OON

Mr. Gert Kriek Executive Resigned 31 July 2016 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 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 Alhaji (Dr,) Aminu Dantata, OFR Mr. John G. Coumantaros Alhaji Rabiu Muhammad Gwarzo, OON Mr. Gert Kriek Mr. Charl P.F. Marais Alhaji Sani Umar Mr. Paul M. Gbededo Alhaji Y. Olalekan A. Saliu Mallam Mahmud Ahmed Mr. Peter Kradolfer Dr. Jibrilla Mohammed Sadiq A. Usman

6.

2017 Direct 1,111,195 609,598 237,363 97,881 2,056,037

2017 Indirect 9,894,362 9,894,362

2016 Direct 1,111,195 609,598 237,363 97,881 2,056,037

2016 Indirect 9,894,362 9,894,362

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 • •

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.

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Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017 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.

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33

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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

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Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

Statement of Profit or Loss and Other Comprehensive Income

Revenue Cost of sales

Note(s)

31-Mar-17 N '000

31-Mar-16 N '000

5 7

940,521 (967,784)

979,038 (1,079,755)

(27,263)

(100,717)

429,984 (64,703) (50,086) (279,568)

246,552 (90,330) (11,619) (324,366)

Gross (loss) profit Net operating gains and losses Other gains and losses Selling and distribution Administrative expenses

8 9 10 11

(233,071) 35,831 Operating profit (loss) Investment revenue Finance costs Profit (loss) before taxation Taxation

12 13 14 15

Loss for the year

8,364 23,983 (31,942) 405 (16,639)

(197,240) (280,480) 47,409 -

(16,234)

Other comprehensive income: Items that will not be reclassified to profit or loss: Remeasurements on net defined benefit liability/asset

4,875

21,574

Other comprehensive income for the year net of taxation

4,875

21,574

(11,359)

(175,666)

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.

14

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.

15

Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

Statement of Cash Flows Note(s)

31-Mar-17 N '000

31-Mar-16 N '000

405

(233,071)

Cash flows from operating activities Profit (loss) before taxation Adjustments for: Depreciation and amortisation Profit on sale of assets

17

Interest received Finance costs

71,117 (820)

87,230 -

(23,983)

(47,409)

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)

Trade and other payables Provision Advance payments by customers

(4,752)

163,960

(15,325)

-

(47,126)

6,777

(147,351)

Tax paid

(868,704) (2,826)

(502,517) (24,875)

Net cash (used in)/provided by operating activities

(871,530)

(527,392)

17

(1,463,517) 820

(20,191) 47,409 27,218

13

(1,438,714) 23,983

26

2,423,606

Cash flows from investing activities 17

Purchase of property, plant and equipment Sale of property, plant and equipment Interest Income Net cash (used in)/provided by investing activities Cash flows from financing activities Proceeds from borrowings

16

-

Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017 Dividends paid

-

Finance costs

-

(53,460)

(31,942) 2,391,664

(53,460)

81,420

(553,634)

Cash at the beginning of the year

388,519

942,153

Total cash at end of the year 22 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.

469,939

388,519

Net cash provided by/(used in) financing activities Total cash movement for the year

17

Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

Notes to the Financial Statements

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.

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Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017 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

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Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

Notes to the Financial Statements 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.

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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

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 liability 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 22

Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

Notes to the Financial Statements 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: Depreciation method

Average useful life

Straight line Item Buildings Mobile plant Plant and machinery Furniture and fittings

Straight line Straight line Straight line 23

50 years 10 years 10-15 years 10 years

Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

Notes to the Financial Statements Motor vehicles Loose tools & workshop equipment IT equipment Trailers Pallets 2.8

Straight line Straight line Straight line Straight line Straight line

5 years 10 years 4 years 5 years 3 years

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.

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Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

Notes to the Financial Statements

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.

25

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 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. 27

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 its 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 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.

29

Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

Notes to the Financial Statements 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

30

Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

Notes to the Financial Statements 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.

31

Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

Notes to the Financial Statements 4. 4.1

New Standards and Interpretations 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: 32

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) 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:

33

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)  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 buyerlessor 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 34

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) 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.

35

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) 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.

36

Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

31-Mar-17 N '000

31-Mar-16 N '000

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 Semovita Wheat offal Massa flour Germ flour Corn offal GP flour confectionery GP rice Massavita

419,015

382,212 102,143 34,956 421,210

979,038

940,521

Notes to the Financial Statements 5.

6.

Revenue

140,416 14,669 18,425 249,711 94,571 39,014 3,210 7

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

Wheat/ maize products Other Golden Penny (GP) products

31-Mar-17 '000 N '000 940,521 940,521

Segment loss

31-Mar-16 N

31-Mar-17

975,821 3,217

(27,263)

979,038

(27,263) -

31-Mar-16 N '000 N '000 (100,687) (100,717)-

(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

Wheat/ maize products Other Golden Penny (GP) products

Segment liabilities Wheat/ maize products Other Golden Penny (GP) products Segment assets:

37

4,337,444 4,337,444

1,739,760 1,739,760

3,097,866 -

488,823 -

3,097,866

488,823

Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

31-Mar-17 N '000

31-Mar-16 N '000

684,584 92,454 63,006 91,463 2,507 27,179 5,724 867

808,278 84,773 67,907 61,874 2,138 44,330 7,251 3,204

Notes to the Financial Statements 7.

Cost of sales

Raw materials consumed Manufacturing - Employee costs Manufacturing - Depreciation and impairments Petrol, gas and oil Rent and Rate Repairs and maintenance Insurance Other expenses

1,079,755 967,784 8.

Net operating gains and losses

Provision no longer required Rental income Insurance income Other income Intragroup subsidy (a)

5,979 1,800 32,190 390,015

22,097 1,017 557 222,881 246,552

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 Profit and loss on sale of assets and liabilities Provisions for obsolete stock Inventory write off Other operating charges (a)

180 820 (25,288) (65,703)

(5,099) (28,281) (19,991) (36,959)

(89,991)

(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 Advertisement Selling expense

1,210 38,172 10,704

710 192 10,717

50,086

11,619

11. Administrative expense The following items are included within operating expenses: Auditors remuneration Bad debts allowance Bank charges Consulting and professional fees

38

14,500 62,369 5,103 9,479

14,500 84,111 6,212 14,500

Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

31-Mar-17 N '000

31-Mar-16 N '000

8,111 1,675

19,323 2,782

84,191 29,822 11,235 2,385 398 1,459 26,970 4,407 7,437 10,027

100,312 19,482 12,614 873 5,308 551 1,262 18,921 6,162 12,514 4,939

Notes to the Financial Statements Depreciation, amortisation and impairments Donations Employee costs Director expense Bad debt written off Fines and penalties Insurance Medical expenses Printing and stationery Repairs and maintenance Postage and communication expenses Travel - local General expenses

279,568 12.

Operating profit (loss)

Operating profit (loss) for the year is stated after charging/(crediting) the following: Profit on sale of property, plant and equipment Profit on exchange differences Amortisation on intangible assets Depreciation on property, plant and equipment Employee costs Director expense Auditors remuneration Interest expense Net operating gains and losses 11. Administrative expense (continued)

(820) (180) 71,117 176,645 29,822 14,500 31,942 429,984

5,099 1,289 85,941 185,085 19,482 14,500 246,552 324,366

13. Investment revenue

Interest income

23,983

47,409

13,320 3,142 177

10,214 16,156 (62,201)

14. Finance costs

Current tax expense Under provision of deferred tax liabilities in prior year Deferred tax credit recognised in current year

39

Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

31-Mar-17 N '000

31-Mar-16 N '000

16,639 31,942

(35,831) -

7,375 3,119 2,826 -

7,330 2,872 12

Notes to the Financial Statements Net income tax expense as per profit or loss Interest expense

15.

Taxation

Per profit or loss Income tax charged Under provision of education tax liabilities in prior year Under provision of capital gains tax in prior year Under provision of company income tax liabilities in prior year

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.

40

Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

Notes to the Financial Statements 31-Mar-17 N '000

31-Mar-16 N '000

15. Taxation (continued) Per statement of financial position At 1 April Charge for the year Under provision in prior year Payment during the year Cash Witholding tax utilized Current tax payable

7,330 13,320 -

21,991 7,330 2,884

(2,826) -

(24,875) -

17,824

7,330

Reconciliation of effective tax rate Profit before tax on continuing operations

(A)

Tax at the statutory corporation tax rate of 30% (2016:30%) Effect of minimum tax provisions Effect of expenses that are not deductible in determining taxable profit Effect of investment allowance Tertiary education tax at 2% of assessable profits Adjustments recognized in the current period in relation to the deferred tax of prior periods Adjustments recognized in the current period in relation to income, capital gains and education tax of prior years Income tax expense recognized in profit or loss (relating to continuing operations) (B) Effective tax rate (B/A above)

405

(233,071)

16,639

(35,832)

122 7,375 3,506 (3,451) 3,119 3,142

(69,921) 7,330 6,382 1,339 16,155

2,826

2,883

4,108 %

15 %

The tax rate used for the 2017 and 2016 reconciliations above is based on the minimum tax rates applicable to corporate entities 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 Opening balance

Deferred tax (assets)/liabilities in relation to:

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

Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

Notes to the Financial Statements Property, plant and equipment Tax losses and unutilised capital allowances Exchange difference Provisions

146,953

(24,786)

-

-

122,167

(75,661)

47,931

-

-

(27,730)

(24,693) (88,723)

(1,451) (18,375)

2,090

-

(26,144) (105,008)

(42,124)

3,319

2,090

-

(36,715)

37

16. Deferred tax (continued) 31 March 2016

Deferred tax (assets)/liabilities in relation to: Property, plant and equipment Tax losses and unutilised capital allowances Exchange difference Provisions Gain on fair valuation of biological assets

Opening balance

Recognised in profit or loss

N'000

N'000

Recognised in other comprehensiv e income N'000

Prior year adjustment recognised in current year N'000

135,485

(19,314)

-

30,782

-

(75,661)

-

-

(24,693) (116,117) -

32,774 -

9,246 -

(14,626) -

Closing balance

N'000

146,953 (75,661) (24,693) (88,723) -

Deferred tax assets and liabilities Opening balance Charge for the year

42,124 (3,319)

5,325 46,045

Charge/(credit) to other comprehensive income

(2,090)

(9,246)

36,715

42,124

42

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

111,765

1,229,703

85,389

331,923

-

39,409 75,637 -

1,500 -

1,200 (8,973) (18,379)

1,421,408 (75,637) -

1,463,517 (8,973) (18,379)

111,765

1,344,749

86,889

305,771

1,359,432

3,208,606

674,662 52,768 (6,625)

80,893 4,718 (10,473)

324,682 26,257 (33,069) -

-

1,120,134 85,941 (33,069) (17,098)

42,095

720,805

75,138

317,870

-

1,155,908

54,297 4,670 -

3,381 -

11,242 (8,973) (4,454) (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

Land and building N'000

Cost Balance at 01 April 2015 Additions Disposals Transfer Write-off Balance at 31 March 2016 Additions Disposal Reclassification Adjustment Balance at 31 March 2017 Accumulated depreciation

1,772,441

39,897 2,198 2,197 (216) -

Company

13,661

111,765 -

Plant and Furniture and machinery equipment

Vehicles Capital workin-progress

71,117 (8,973) (18,379)

Total

N'000

N'000

N'000

N'000

N'000

1,263,853 18,299 (52,449)

95,862 (10,473)

364,992 (33,069) -

11,769 20,191 (18,299) -

1,848,241 20,191 (33,069) -

Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

Notes to the Financial Statements 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 Addition Disposal

38,056 -

44

Balance at 31 March 2016 Addition Disposal Balance at 31 March 2017

38,056 38,056 38,056

Accumulated amortisation Balance at 01 April 2015 Charge for the year Balance at 31 March 2016 Charge for the year

36,767 1,289 38,056

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.

Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

Notes to the Financial Statements 31-Mar-17 31-Mar-16 N '000 N '000

19. Inventories Raw materials, components Finished goods Maintenance spares and consumables Inventories (write-downs)

1,066,659 92,076 262,252 1,420,987 (53,569)

215,613 23,532 185,269 424,414 (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 Amount due from related companies Staff debtors Impairment for bad debts

156,719 429,486 19,088 (178,708) 426,585 10,848

Other receivables

156,726 206,659 23,977 (116,339) 271,023 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 ability 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 Customer B Customer C Customer D Customer E No other customer represents more than 5% of the total balance of trade receivables.

27,010 12,224 10,269 10,015 8,277

% 17 % 8% 7% 6% 5%

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

46

41,183

Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

Notes to the Financial Statements Allowance for impairment

62,369 178,708

75,156 116,339

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. 31-Mar-17 N '000

31-Mar-16 N '000

21. Prepayments Prepaid Expenses Prepayments-Insurance Premium Prepaid Rent & Rates

2,363 8,019 6,624 17,006

1,997 243 6,417 8,657

334 469,605

2,577

385,942 388,519

469,939

22. Cash and cash equivalents Cash and cash equivalents consist of: Cash on hand Bank balances

23.

Share capital

Authorised 200,000,000 Ordinary shares of 50 kobo each

100,000

100,000

89,100 89,521 178,621

89,100 89,521 178,621

Issued 178,200,000 Ordinary shares of 50 kobo each Share premium

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.

47

Northern Nigeria Flour Mills Plc Annual Report and Accounts for the year ended 31 March 2017

Notes to the Financial Statements 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 Service cost Interest cost Transfer Curtailment Payment during the year Actuarial losses

31-Mar-17 N '000

31-Mar-16 N '000

90,908 5,514 11,765 (6,228) (8,773)

293,638 22,654 43,958 (120) (59,355) (214,700) 4,833 90,908 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

Withdrawal from service

Number of deaths in year out of 10,000 lives 25 7 30 7 35 9 40 14 45 26 Age band