Accounting Policies of Fortis Healthcare Ltd. Company
Mar 31, 2023
| 1. CORPORATE INFORMATION
Fortis Healthcare Limited (the ''Company'' or ''FHL''), a public limited company, was incorporated on February 28, 1996. Its equity shares are listed on BSE Limited and National Stock Exchange of India Limited. Its registered office is located at Fortis Hospital Sector-62 Phase-VIII, Mohali 160062, Punjab and the corporate office of the Company is located at Tower A, Unitech Business Park, Block - F South City - 1, Sector-41, Gurugram 122001, Haryana.
Fortis Healthcare Limited is a leading integrated healthcare delivery service provider. The Company is primarily engaged in the business of healthcare services. The Company also holds interests in its subsidiaries, associates and joint ventures which manage and operate a network of multi-specialty hospitals and diagnostics centers.
On November 13, 2018, IHH Healthcare Berhad, Malaysia acquired 31.10% stake in the Company and appointed majority of board of directors, thereby, becoming the controlling shareholder of the Company.
| 2. SIGNIFICANT ACCOUNTING POLICIES
This note provides a list of the significant accounting policies adopted in the preparation of these standalone financial statements (''financial statements''). The accounting policies adopted are consistent with those of the previous financial year.
(a) Basis of preparation(i) Statement of compliance
These Standalone financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 as amended notified under Section 133 of Companies Act, 2013, ("the Act") and other relevant provisions of the Act. All the amounts included in the financial statements are reported in Lakhs of Indian Rupees and are rounded off to two decimals, except per share data.
The financial statements have been authorised for issue by the Company''s Board of Directors on May 23, 2023.
(ii) Functional and presentation currency
These financial statements are presented in Indian Rupees, which is also the Company''s functional currency.
(iii) Historical cost convention
The financial statements have been prepared under historical cost convention on accrual basis, unless otherwise stated. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
(b) Current versus non-current classification
The Company presents assets and liabilities in the Balance Sheet based on current/ non-current classification.
An asset is treated as current when:
⢠It is expected to be realised or intended to be sold or consumed in normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠I t is expected to be realised within twelve months after the reporting period; or
⢠I t is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
The Company classifies all other assets as non-current.
A liability is current when:
⢠It is expected to be settled in normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠It is due to be settled within twelve months after the reporting period; or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as noncurrent assets and liabilities respectively.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle for the purpose of current-noncurrent classification of assets and liabilities.
(c) Measurement of fair values
A number of the accounting policies and disclosures require measurement of fair values, for both financial and non-financial assets and liabilities. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Company has an established control framework with respect to the measurement of fair values. This includes a finance team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values.
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Capitalisation of borrowing costs ceases when substantially all the activities necessary to prepare the qualifying assets for their intended uses are complete. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing costs include exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for recognised.
All other borrowing costs are recognised in the statement of profit and loss in the period in which they are incurred.
(e) Property, plant and equipment (PPE) and intangible assets(i) Property, plant and equipment
Recognition & Measurement
The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if 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.
Freehold land is carried at cost. All other items of property, plant and equipment are stated at cost, which includes capitalised finance costs, less accumulated depreciation and any accumulated impairment loss. The cost of an item of property, plant and equipment comprises its purchase price, including import duties and other non-refundable taxes or levies, freight, any directly attributable cost of bringing the asset to its working condition for its intended use and estimated cost of dismantling and restoring onsite; any trade discounts and rebates are deducted in arriving at the purchase price.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only 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. The carrying amount of any component accounted for as a separate asset is recognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Advances paid towards acquisition of property, plant and equipment outstanding at each Balance Sheet date, are shown under other non-current assets and cost of assets not ready for intended use before the year end, are shown as capital work-in-progress.
I f significant parts of an item of property, plant and equipment have different useful lives, then they are
accounted for as separate items (major Components) of property, plant and equipment.
(ii) Goodwill and Intangible assets
⢠For measurement of goodwill that arises
from business combination. Subsequent measurement is at cost less any accumulated impairment losses.
⢠Internally generated goodwill is not recognised as an asset. With regard to other internally generated intangible assets:
- Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the statement of profit and loss as incurred.
- Development expenditure including regulatory cost and legal expenses leading to product registration/ market authorisation relating to the new and/or improved product and/or process development is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use the asset. The expenditure capitalised includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and directly attributable finance costs (in the same manner as in the case of property, plant and equipment). Other development expenditure is recognised in the Statement of Profit and Loss as incurred.
⢠Intangible assets that are acquired (including
goodwill recognised for business combinations) are measured initially at cost. After initial
recognition, an intangible asset is carried at its cost less accumulated amortisation (for finite lives intangible assets) and any accumulated impairment loss. Subsequent expenditure is capitalised only when it increases the future economic benefits from the specific asset to which it relates.
(iii) Depreciation and amortisation methods, estimated useful lives and residual value
Depreciation is provided on straight line basis on the original cost/ acquisition cost of assets or other amounts substituted for cost of property, plant and equipment as per the useful life specified in Part ''C'' of Schedule II of the Act, read with notification dated August 29, 2014 of the Ministry of Corporate Affairs, except for certain classes of property, plant and equipment which are depreciated based on the internal technical assessment of the management. The details of useful life are as under:
|
Category of assets |
Management estimate of useful life |
Useful life as per Schedule II |
|
Plant and machinery |
3-15 years |
15 years |
|
Medical equipment |
2-13 years |
13 years |
|
Computers |
3 years |
3 years |
|
Furniture and fittings |
4-10 years |
10 years |
|
Office equipment |
5 years |
5 years |
|
Vehicles |
4-8 years |
8 years |
Freehold land is not depreciated.
Depreciation on leasehold assets is provided over the lease term or expected useful life of the asset, whichever is lower.
Goodwill is not amortised and is tested for impairment annually or more frequently if events or changes in circumstances indicate that they might be impaired.
Estimated useful lives of the intangible assets are as follows:
|
Category of assets |
Management |
|
estimate of |
|
|
Useful Life |
|
|
Computer software |
3-6 years |
Depreciation and amortisation on property, plant and equipment and intangible assets added/disposed off during the year has been provided on pro-rata basis with reference to the date of addition/disposal.
Depreciation and amortisation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if appropriate.
Property, plant and equipment and intangible assets are recognised on disposal or when no future economic benefits are expected from their use and disposal. Losses arising from retirement and gains or losses arising from disposal of a tangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss.
(f) Impairment of non-financial assets
Goodwill and intangible assets that have an indefinite useful life are not subject to recognised and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. The Company''s non-financial assets other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset''s recoverable amount is estimated.
For impairment testing, assets that do not generate independent cash inflows (i.e. corporate assets) are grouped together into cash-generating units (CGUs). Each CGU represents the smallest group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or CGUs.
The recoverable amount of a CGU is the higher of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Impairment loss recognised in respect of a CGU is allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amount of the other assets of the CGU (or group of CGUs) on a pro rata basis.
An impairment loss in respect of goodwill is not subsequently reversed. In respect of other assets for which impairment loss has been recognised in prior periods, the Company reviews at reporting date whether there is any indication that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
Such a reversal is made only to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
A Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognised on the trade date, i.e. the date that the Company commits to purchase or sell the asset.
Initial recognition and measurement
Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Company becomes a party to the contractual provisions of the instrument.
A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus or minus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.
For purposes of subsequent measurement, financial assets are classified in four categories:
⢠Debt instruments at amortised cost
⢠Debt instruments at fair value through other comprehensive income (FVOCI)
⢠Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL)
⢠Equity instruments measured at fair value through other comprehensive income (FVOCI)
Debt instruments at amortised cost
A ''debt instrument'' is measured at the amortised cost if the asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the gross carrying amount of the financial asset or the amortised cost of the financial liability. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR recognised is included in other income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss. This category generally applies to trade and other receivables.
A ''debt instrument'' is classified as at the FVOCI if the objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and the asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognised in the other comprehensive income (OCI). On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified to the Statement of Profit and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for recognised as at amortised cost or as FVOCI, is classified as at FVTPL. In addition, at initial recognition, the Company may irrevocably elect to designate a debt instrument, which otherwise meets amortised cost or FVOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch'').
Debt instruments included within the FVTPL category are measured at fair value with all changes recognised in the Statement of Profit and Loss.
Equity investments in subsidiaries, jointly controlled entities and associates are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in such entities, the difference between net disposal proceeds and the carrying amounts are recognised in the Statement of Profit and Loss.
All other equity investments which are in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVTPL. For all other equity instruments in scope of Ind AS 109, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to the Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss to retained earnings.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the Statement of Profit and Loss.
Dividend income from investments is recognised in statement of profit and loss on the date that the right to receive payment is established.
Impairment of financial assets
The Company recognises loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all financial assets with contractual cash flows other than trade receivable, ECLs are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of ECL (or reversal) that is required to adjust the loss allowance at the reporting date is recognised as an impairment gain or loss in the Statement of Profit and Loss.
Credit-impaired financial assets
At each reporting date, the Company assesses whether financial assets carried at amortised cost and debt securities at FVOCI are credit-impaired. A financial asset is ''credit-impaired'' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:
⢠significant financial difficulty of the debtor;
⢠a breach of contract such as a default;
⢠the restructuring of a loan or advance by the Company on terms that the Company would not consider otherwise;
⢠it is probable that the debtor will enter bankruptcy or other financial recognised; or
⢠the disappearance of an active market for a security because of financial difficulties.
Presentation of allowance for ECL in the balance sheet
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Company''s balance sheet) when:
⢠The rights to receive cash flows from the asset have expired, or
⢠The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through''
arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognised an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Company expects no significant recovery from the amount written off.
However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company''s procedures for recovery of amounts due.
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in Statement of Profit and Loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in Statement of Profit and Loss. Any gain or loss on derecognition is also recognised in Statement of Profit and Loss.
A financial liability is recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Derivative financial instruments
Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Financial assets and financial liabilities are offset and the net amount presented in the Balance Sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of (i) the amount determined in accordance with the expected credit loss model as per Ind AS 109 and (ii) the amount initially recognised less, where appropriate, cumulative amount of income recognised in accordance with the principles of Ind AS 115.
The fair value of financial guarantees is determined based on the present value of the difference in cash flows between the contractual payments required under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations.
Where guarantees in relation to loans or other payables of subsidiaries are provided for no compensation by
the Holding Company, the fair values are accounted for as a deemed equity contribution (under the head ''Investment in subsidiaries'') in the books of Holding Company and as a part of ''Other Equity'' in the books of subsidiary.
Where guarantees in relation to loans or other payables of the Holding Company are provided by subsidiary for no compensation, the fair values are accounted for as a distribution and recognised under the head ''Other Equity'' in the books of subsidiary and credited to statement of profit and loss in the books of holding company.
(h) Inventories
Inventories are valued at lower of cost and net recognised value except scrap, which is valued at net estimated recognised value.
The Company uses weighted average method to determine cost for all categories of inventories except for goods in transit which is valued at specifically identified purchase cost and other direct costs incurred. Cost includes all costs of purchase, and other costs incurred in bringing the inventories to their present location and condition inclusive of non-refundable (adjustable) taxes wherever applicable.
Net recognised value is the estimated selling price in the ordinary course of business, less estimated costs necessary to make the sale. The comparison of cost and net recognised value is made on an item-by-item basis.
(i) Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits with banks and other short-term highly liquid investments with original maturities of three months or less.
For the purpose of cash flow statement, cash and cash equivalent includes cash in hand, in banks, demand deposits with banks and other short-term highly liquid investments with original maturities of three months or less, net of outstanding bank overdrafts that are repayable on demand and are considered part of the cash management system.
(j) Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the
occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The Company does not recognise a contingent liability but discloses its existence in the financial statements unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent liabilities and commitments are reviewed by the management at each balance sheet date.
Contingent assets are neither recognised nor disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received, and the amount of the receivable can be measured reliably.
A contract is considered to be onerous when the expected economic benefits to be derived by the Company from the contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision for an onerous contract is measured at the present value of the
lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before such a provision is made, the Company recognised any impairment loss on the assets associated with that contract.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed.
Revenue primarily comprises fees charged under contract for inpatient and outpatient hospital services and also includes sale of medical and non-medical items. Hospital services include charges for accommodation, medical professional services, equipment, radiology, laboratory and pharmaceutical goods used in treatments given to patients.
Contracts with customers could include promises to transfer multiple services/ products to a customer. The Company assesses the product/ services promised in a contract and identifies distinct performance obligation in the contract. Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation. The transaction price of services rendered and goods sold ifs net of variable consideration on account of various discounts and schemes offered by the Company as part of the contract including claims. Further, the Company also determines whether the performance obligation is satisfied at a point in time or over a period of time. These judgments and estimations are based on various factors including contractual terms and historical experience.
Revenue from hospital services is recognised as and when services are performed and from sale of products is recognised upon transfer of control of products to customers at the time of delivery of goods to the customers.
Revenue includes only those sales for which the Company has acted as a principal in the transaction, takes title to the products, and has the risks and rewards of ownership, including the risk of loss for collection, delivery and returns. Any revenue transaction for which the Company has acted as an agent or broker without assuming the risks and rewards of ownership have been reported on a net basis.
Excess of revenue earned over billings on contracts is recognised as unbilled revenue. Unbilled revenue is classified as Trade receivables when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms. Unearned and deferred revenue ("contract liability") is recognised as other current liability when there is billings in excess of revenues.
Other operating revenue comprises revenue from various ancillary revenue generating activities like operations and maintenance agreements, satellite centers, sponsorship arrangements and academic services. The revenue in respect of such arrangements is recognised as and when services are performed.
I ncome from export benefit schemes, included in other operating revenue, is recognised on accrual basis as and when eligible services are performed and convertible foreign exchange is received on a net basis to the extent it is certain that economic benefits will flow to the Company.
(m) Employee benefitsShort-term employee benefits
All employee benefits falling due within twelve months of the end of the period in which the employees render the related services are classified as short-term employee benefits, which include benefits like salaries, wages, short term compensated absences, performance incentives, etc. and are recognised as expenses in the period in which the employee renders the related service and measured accordingly. Short term employee benefits are measured on an undiscounted basis.
Post-employment benefit plans are classified into defined benefits plans and defined contribution plans as under:
a) Gratuity
The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount based on the respective employee''s salary and the tenure of employment. The liability in respect of gratuity is recognised in the books of account based on actuarial valuation by an independent actuary.
b) Superannuation
Certain employees of the Company are also participants in the superannuation plan (''the Plan''), a defined contribution plan. Contribution made by the Company to the plan during the year is charged to statement of profit and loss.
c) Provident fund
The Company makes contribution to the recognised provident fund - " Fortis Healthcare Limited Provident Fund Trust " for most of its employees in India, which is a defined benefit plan to the extent that the Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate. The Company''s obligation in this regard is determined by an independent actuary and provided for if the circumstances indicate that the Trust may not be able to generate adequate returns to cover the interest rates notified by the Government.
For other employees in India, provident fund is deposited with Regional Provident Fund Commissioner. This is treated as defined contribution plan.
The Company''s contribution to the provident fund is charged to statement of profit and loss.
Other long-term employee benefits:
As per the Company''s policy, eligible leaves can be accumulated by the employees and carried forward to future periods to either be recognised during the service, or encashed. Encashment can be made during service, on early retirement, on withdrawal of scheme, at resignation and upon death of the employee. Accumulated compensated absences are treated as other long-term employee benefits.
Termination benefits are recognised as an expense when, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Actuarial valuation
The liability in respect of all defined benefit plans and other long-term benefits is accrued in the books of account on the basis of actuarial valuation carried
out by an independent actuary using the Projected Unit Credit Method. The obligation is measured at the present value of estimated future cash flows. The discount rates used for determining the present value of obligation under defined benefit plans, is based on the market yields on Government securities as at the Balance Sheet date, having maturity periods approximating to the terms of related obligations.
Remeasurement gains and losses on other long-term benefits are recognised in the statement of profit and loss in the year in which they arise. Remeasurement gains and losses in respect of all defined benefit plans arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in other equity in the Statement of Changes in Equity and in the Balance Sheet. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service cost. Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs. Any differential between the plan assets (for a funded defined benefit plan) and the defined benefit obligation as per actuarial valuation is recognised as a liability if it is a deficit or as an asset if it is a surplus (to the extent of the lower of present value of any economic benefits available in the form of refunds from the plan or reduction in future contribution to the plan).
Past service cost is recognised as an expense in the statement of profit and loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits are already vested immediately following the introduction of, or changes to, a defined benefit plan, the past service cost is recognised immediately in the statement of profit and loss. Past service cost may be either positive (where benefits are introduced or improved) or negative (where existing benefits are reduced).
The grant date fair value of options granted (net of estimated forfeiture) to employees of the Company is recognised as an employee expense, and those granted to employees of subsidiaries is considered as the Company''s
equity contribution and is added to the carrying value of investment in the respective subsidiaries, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options. The expense is recorded for each separately vesting portion of the award as if the award was, in substance, multiple awards. The increase in equity recognised in connection with share-based payment transaction is presented as a separate component in equity under "share option outstanding account". The amount recognised as an expense is adjusted to reflect the actual number of stock options that vest. For the option awards, grant date fair value is determined under the option-pricing model (Black-Scholes-Merton). Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures materially differ from those estimates.
Corresponding balance of share-based payment reserve is transferred to general reserve upon expiry of grants or upon exercise of stock options by an employee.
Income tax comprises current and deferred tax. It is recognised in Statement of profit and loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI. Interest and penalties related to income taxes, including uncertain tax treatments, do not meet the definition of income taxes, and therefore accounted for them under Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets
Current tax comprises the best estimate of expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received after considering uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. Deferred tax is also recognised in respect of carried forward tax losses and tax credits. Deferred tax is not recognised for:
- temporary differences arising on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction;
- temporary differences related to investments in subsidiaries, associates or joint arrangements, to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets (DTA) include Minimum Alternate Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used. Deferred tax is measured at the tax rates that are expected to be applied to the period when the asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use
of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:
⢠the contract involves the use of an identified asset - this may be specified explicitly or implicitly and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;
⢠the Company has the right to obtain substantially all of the economic benefits from use of the asset through the period of use; and
⢠the Company has the right to direct the use of the asset. The Company has this right when it has the decision- making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases, where the decision about how and for what purpose the asset is used is predetermined, the Company has the right to direct the use of the asset if either:
⢠the Company has the right to operate the asset; or
⢠the Company designed the asset in a way that predetermines how and for what purpose it will be used
An entity shall reassess whether a contract is, or contains, a lease only if the terms and conditions of the contract are changed.
At inception or on reassessment of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Company has elected not to separate non- lease components and account for the lease and non-lease components as a single lease component.
The Company determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.
The Company accounts for assets taken under lease arrangement in the following manner:
The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right of use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentive received.
The right of use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. The estimated useful lives of right-of-use are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the Company''s incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise the fixed payments, including in-substance fixed payments.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in Company''s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
Short-term leases and leases of low-value assets The Company has elected not to recognise right-of use assets and lease liabilities for short term leases that have a lease term of 12 months or less and leases of low value assets. The Company recognises
the lease payments associated with these leases as an expense on a straight- line basis over the lease term.
The Company accounts for assets given under lease arrangement in the following manner:
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Assets subject to operating leases are included in Property, Plant and Equipment. Rental income on operating lease is recognised in the Statement of Profit and Loss on a straight-line basis over the lease term.
Costs, including depreciation, are recognised as an expense in the Statement of Profit and Loss. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased assets and recognised on a straight-line basis over the lease term.
Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Company''s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
(q) Foreign currency translation
The Company has adopted Appendix B, "Foreign currency transactions and advance consideration" to Ind AS 21, "the effects of changes in foreign exchange rates" effective from 1 April 2018 prospectively to all assets, expenses and income in the scope of the said Appendix. The adoption of the above Standard/Appendix does not have any significant impact on the financial position or performance of the Company.
Foreign currency transactions are translated into the functional currency using the exchange rates at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at balance sheet date exchange rates are generally recognised in Statement of Profit and Loss.
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. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets such as equity investments classified as FVOCI are recognised in other comprehensive income (OCI).
Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated. The Company considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company''s other components, and for which discrete financial information is available. Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker ("CODM"). Revenues, expenses, assets and liabilities, which are common to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been treated as "unallocated revenues/ expenses/ assets/ liabilities", as the case may be.
The Company is primarily engaged in the business of healthcare services which is the only reportable segment.
(t) Earnings per share(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
⢠the profit/ (loss) attributable to owners of the Company
⢠by the weighted average number of equity
shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
⢠the after-income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
⢠the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
~3T CRITICAL ESTIMATES AND JUDGEMENTS
The preparation of these financial statements
Mar 31, 2022
1) Corporate information
Fortis Healthcare Limited (the ''Company'' or ''FHL''), a public limited company, was incorporated on February 28, 1996. Its equity shares are listed on BSE Limited and National Stock Exchange of India Limited. Its registered office is located at Fortis Hospital Sector-62 Phase-VIII, Mohali 160062, Punjab and the corporate office of the Company is located at Tower A, Unitech Business Park, Block - F South City - 1, Sector-41, Gurugram 122001, Haryana.
Fortis Healthcare Limited is a leading integrated healthcare delivery service provider. The Company is primarily engaged in the business of healthcare services. The Company also holds interests in its subsidiaries, associates and joint ventures which manage and operate a network of multispecialty hospitals and diagnostics centres.
On November 13, 2018, IHH Healthcare Berhad, Malaysia acquired 31.10% stake in the Company and appointed majority of board of directors, thereby, becoming the controlling shareholder of the Company.
2) Significant accounting policies
This note provides a list of the significant accounting policies adopted in the preparation of these standalone financial statements (''financial statements''). The accounting policies adopted are consistent with those of the previous financial year.
(a) Basis of preparation
(i) Statement of compliance
These Standalone financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 as amended notified under Section 133 of Companies Act, 2013, ("the Act") and other relevant provisions of the Act. All the amounts included in the financial statements are reported in lacs of Indian Rupees and are rounded off to two decimals, except per share data.
The financial statements have been authorized for issue by the Company''s Board of Directors on May 25, 2022.
(ii) Functional and presentation currency
These financial statements are presented in Indian Rupees, which is also the Company''s functional currency.
(iii) Historical cost convention
The financial statements have been prepared under historical cost convention on accrual basis, unless otherwise stated. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
(b) Current versus non-current classification
The Company presents assets and liabilities in the Balance Sheet based on current/ non-current classification.
An asset is treated as current when:
⢠It is expected to be realised or intended to be sold or consumed in normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠It is expected to be realised within twelve months after the reporting period; or
⢠It is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
The Company classifies all other assets as non-current.
A liability is current when:
⢠It is expected to be settled in normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠It is due to be settled within twelve months after the reporting period; or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as noncurrent assets and liabilities respectively.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle for the purpose of current-non-current classification of assets and liabilities.
(c) Measurement of fair values
A number of the accounting policies and disclosures require measurement of fair values, for both financial and nonfinancial assets and liabilities. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Company has an established control framework with respect to the measurement of fair values. This includes a finance team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values.
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
(d) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Capitalization of borrowing costs ceases when substantially all the activities necessary to prepare the qualifying assets for their intended uses are complete. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing costs include exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in the statement of profit and loss in the period in which they are incurred.
(e) Property, plant and equipment (PPE) and intangible assets
(i) Property, plant and equipment
Freehold land is carried at cost. All other items of property, plant and equipment are stated at cost, which includes capitalized finance costs, less accumulated depreciation and any accumulated impairment loss. The cost of an item of property, plant and equipment comprises its purchase price, including import duties and other non-refundable taxes or levies, freight, any directly attributable cost of bringing the asset to its working condition for its intended use and estimated cost of dismantling and restoring onsite; any trade discounts and rebates are deducted in arriving at the purchase price.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only 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. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Advances paid towards acquisition of property, plant and equipment outstanding at each Balance Sheet date, are shown under other non-current assets and cost of assets not ready for intended use before the year end, are shown as capital work-in-progress.
(ii) Goodwill and Intangible assets
⢠For measurement of goodwill that arises from business combination. Subsequent measurement is at cost less any accumulated impairment losses.
⢠Internally generated goodwill is not recognised as an asset. With regard to other internally generated intangible assets:
- Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the statement of profit and loss as incurred.
- Development expenditure including regulatory cost and legal expenses leading to product registration/ market authorisation relating to the new and/or improved product and/or process development is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use the asset. The expenditure capitalised includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and directly attributable finance costs (in the same manner as in the case of property, plant and equipment). Other development expenditure is recognised in the Statement of Profit and Loss as incurred.
⢠Intangible assets that are acquired (including goodwill recognized for business combinations) are measured initially at cost. After initial recognition, an intangible asset is carried at its cost less accumulated amortization (for finite lives intangible assets) and any accumulated impairment loss. Subsequent expenditure is capitalised only when it increases the future economic benefits from the specific asset to which it relates.
(iii) Depreciation and amortization methods, estimated useful lives and residual value
Depreciation is provided on straight line basis on the original cost/ acquisition cost of assets or other amounts substituted for cost of property, plant and equipment as per the useful life specified in Part ''C'' of Schedule II of the Act, read with notification dated 29 August 2014 of the Ministry of Corporate Affairs, except for certain classes of property, plant and equipment which are depreciated based on the internal technical assessment of the management. The details of useful life are as under:
|
Category of assets |
Management estimate of useful life |
Useful life as per Schedule II |
|
Plant and machinery |
3-15 years |
15 years |
|
Medical equipment |
2-13 years |
13 years |
|
Computers |
3 years |
3 years |
|
Furniture and fittings |
4-10 years |
10 years |
|
Office equipment |
5 years |
5 years |
|
Vehicles |
4-8 years |
8 years |
Freehold land is not depreciated.
Depreciation on leasehold assets is provided over the lease term or expected useful life of the asset, whichever is lower.
Goodwill is not amortized and is tested for impairment annually or more frequently if events or changes in circumstances indicate that they might be impaired.
Estimated useful lives of the intangible assets are as follows:
|
Category of assets |
Management estimate of Useful Life |
|
Computer software |
3-6 years |
Depreciation and amortization on property, plant and equipment and intangible assets added/disposed off during the year has been provided on pro-rata basis with reference to the date of addition/disposal.
Depreciation and amortization methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if appropriate.
(iv) Derecognition
Property, plant and equipment and intangible assets are derecognised on disposal or when no future economic benefits are expected from their use and disposal. Losses arising from retirement and gains or losses arising from disposal of a tangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss.
(f) Impairment of non-financial assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or
changes in circumstances indicate that they might be impaired. The Company''s non-financial assets other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset''s recoverable amount is estimated.
For impairment testing, assets that do not generate independent cash inflows (i.e. corporate assets) are grouped together into cash-generating units (CGUs). Each CGU represents the smallest group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or CGUs.
The recoverable amount of a CGU is the higher of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Impairment loss recognized in respect of a CGU is allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amount of the other assets of the CGU (or group of CGUs) on a pro rata basis.
An impairment loss in respect of goodwill is not subsequently reversed. In respect of other assets for which impairment loss has been recognized in prior periods, the Company reviews at reporting date whether there is any indication that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. Such a reversal is made only to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
(g) Financial instrument
A Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value
through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognised on the trade date, i.e. the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
⢠Debt instruments at amortised cost
⢠Debt instruments at fair value through other comprehensive income (FVOCI)
⢠Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL)
⢠Equity instruments measured at fair value through other comprehensive income (FVOCI)
Debt instruments at amortised cost
A ''debt instrument'' is measured at the amortised cost if the asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the gross carrying amount of the financial asset or the amortised cost of the financial liability. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in other income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss. This category generally applies to trade and other receivables.
Debt instrument at FVOCI
A ''debt instrument'' is classified as at the FVOCI if the objective of the business model is achieved both by collecting contractual cash flows and selling the financial
assets, and the asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognised in the other comprehensive income (OCI). On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified to the Statement of Profit and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
Debt instrument at FVTPL
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorisation as at amortised cost or as FVOCI, is classified as at FVTPL. In addition, at initial recognition, the Company may irrevocably elect to designate a debt instrument, which otherwise meets amortised cost or FVOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch'').
Debt instruments included within the FVTPL category are measured at fair value with all changes recognised in the Statement of Profit and Loss.
Equity investments
Equity investments in subsidiaries, jointly controlled entities and associates are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in such entities, the difference between net disposal proceeds and the carrying amounts are recognized in the Statement of Profit and Loss.
All other equity investments which are in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVTPL. For all other equity instruments in scope of Ind AS 109, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to the Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss to retained earnings.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the Statement of Profit and Loss.
Dividend income from investments is recognised in statement of profit and loss on the date that the right to receive payment is established.
Impairment of financial assets
The Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all financial assets with contractual cash flows other than trade receivable, ECLs are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of ECL (or reversal) that is required to adjust the loss allowance at the reporting date is recognised as an impairment gain or loss in the Statement of Profit and Loss.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e., removed from the Company''s balance sheet) when:
⢠The rights to receive cash flows from the asset have expired, or
⢠The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangements and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a passthrough arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Write off of financial assets
The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Group expects no significant recovery from the amount written off.
Financial liabilities
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in Statement of Profit and Loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in Statement of Profit and Loss. Any gain or loss on derecognition is also recognised in Statement of Profit and Loss.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Derivative financial instruments
Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract
is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the Balance Sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
Financial guarantee contracts
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of (i) the amount determined in accordance with the expected credit loss model as per Ind AS 109 and (ii) the amount initially recognised less, where appropriate, cumulative amount of income recognised in accordance with the principles of Ind AS 115.
The fair value of financial guarantees is determined based on the present value of the difference in cash flows between the contractual payments required under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations.
Where guarantees in relation to loans or other payables of subsidiaries are provided for no compensation by the Holding Company, the fair values are accounted for as a deemed equity contribution (under the head ''Investment in subsidiaries'') in the books of Holding Company and as a part of ''Other Equity'' in the books of subsidiary.
Where guarantees in relation to loans or other payables of the Holding Company are provided by subsidiary for no compensation, the fair values are accounted for as a distribution and recognised under the head ''Other Equity'' in the books of subsidiary and credited to statement of profit and loss in the books of holding company.
(h) Inventories
Inventories are valued at lower of cost and net realisable value except scrap, which is valued at net estimated realisable value.
The Company uses weighted average method to determine cost for all categories of inventories except for goods in transit which is valued at specifically identified purchase cost and other direct costs incurred. Cost includes all costs of purchase, and other costs incurred in bringing the inventories to their present location and condition inclusive of non-refundable (adjustable) taxes wherever applicable.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs necessary to make the sale. The comparison of cost and net realisable value is made on an item-by-item basis.
(i) Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits with banks and other short-term highly liquid investments with original maturities of three months or less.
For the purpose of cash flow statement, cash and cash equivalent includes cash in hand, in banks, demand deposits with banks and other short-term highly liquid investments with original maturities of three months or less, net of outstanding bank overdrafts that are repayable on demand and are considered part of the cash management system.
(j) Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent liabilities and commitments are reviewed by the management at each balance sheet date.
Contingent assets are neither recognised nor disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.
(k) Provisions
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received, and the amount of the receivable can be measured reliably.
A contract is considered to be onerous when the expected economic benefits to be derived by the Company from the contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision for an onerous contract is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before such a provision is made, the Company recognises any impairment loss on the assets associated with that contract.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed.
(l) Revenue recognition
Revenue primarily comprises fees charged under contract for inpatient and outpatient hospital services and also includes sale of medical and non-medical items. Hospital services include charges for accommodation, medical professional services, equipment, radiology, laboratory and pharmaceutical goods used in treatments given to patients.
Contracts with customers could include promises to transfer multiple services/ products to a customer. The Company assesses the product/ services promised in a contract and identifies distinct performance obligation
in the contract. Revenue for each distinct performance obligation is measured to at an amount that reflects the consideration which the Company expects to receive in exchange for those products or services and is net of tax collected from customers and remitted to government authorities such as sales tax, excise duty, value added tax and applicable discounts and allowances including claims. Further, the Company also determines whether the performance obligation is satisfied at a point in time or over a period of time. These judgments and estimations are based on various factors including contractual terms and historical experience.
Revenue from hospital services is recognized as and when services are performed and from sale of products is recognised upon transfer of control of products to customers at the time of delivery of goods to the customers.
Revenue includes only those sales for which the Company has acted as a principal in the transaction, takes title to the products, and has the risks and rewards of ownership, including the risk of loss for collection, delivery and returns. Any revenue transaction for which the Company has acted as an agent or broker without assuming the risks and rewards of ownership have been reported on a net basis.
Excess of revenue earned over billings on contracts is recognised as unbilled revenue. Unbilled revenue is classified as Trade receivables when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms. Unearned and deferred revenue ("contract liability") is recognised as other current liability when there is billings in excess of revenues.
Other operating revenue comprises revenue from various ancillary revenue generating activities like operations and maintenance agreements, satellite centers, sponsorship arrangements and academic services. The revenue in respect of such arrangements is recognized as and when services are performed.
Income from export benefit schemes, included in other operating revenue, is recognized on accrual basis as and when eligible services are performed and convertible foreign exchange is received on a net basis to the extent it is certain that economic benefits will flow to the Company.
(m) Employee benefits
Short-term employee benefits
All employee benefits falling due within twelve months of the end of the period in which the employees render
the related services are classified as short-term employee benefits, which include benefits like salaries, wages, short term compensated absences, performance incentives, etc. and are recognised as expenses in the period in which the employee renders the related service and measured accordingly.
Post-employment benefits
Post-employment benefit plans are classified into defined benefits plans and defined contribution plans as under:
a) Gratuity
The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount based on the respective employee''s salary and the tenure of employment. The liability in respect of gratuity is recognised in the books of account based on actuarial valuation by an independent actuary.
b) Superannuation
Certain employees of the Company are also participants in the superannuation plan (''the Plan''), a defined contribution plan. Contribution made by the Company to the plan during the year is charged to statement of profit and loss.
c) Provident fund
The Company makes contribution to the recognised provident fund -" Fortis Healthcare Limited Provident Fund Trust" for most of its employees in India, which is a defined benefit plan to the extent that the Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate. The Company''s obligation in this regard is determined by an independent actuary and provided for if the circumstances indicate that the Trust may not be able to generate adequate returns to cover the interest rates notified by the Government.
For other employees in India, provident fund is deposited with Regional Provident Fund Commissioner. This is treated as defined contribution plan.
The Company''s contribution to the provident fund is charged to statement of profit and loss.
Other long-term employee benefits:
As per the Company''s policy, eligible leaves can be accumulated by the employees and carried forward to future periods to either be utilised during the service, or encashed. Encashment can be made during service, on early retirement, on withdrawal of scheme, at resignation and upon death of the employee. Accumulated compensated absences are treated as other long-term employee benefits.
Termination benefits are recognised as an expense when, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Actuarial valuation
The liability in respect of all defined benefit plans and other long-term benefits is accrued in the books of account on the basis of actuarial valuation carried out by an independent actuary using the Projected Unit Credit Method. The obligation is measured at the present value of estimated future cash flows. The discount rates used for determining the present value of obligation under defined benefit plans, is based on the market yields on Government securities as at the Balance Sheet date, having maturity periods approximating to the terms of related obligations.
Remeasurement gains and losses on other long-term benefits are recognised in the statement of profit and loss in the year in which they arise. Remeasurement gains and losses in respect of all defined benefit plans arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in other equity in the Statement of Changes in Equity and in the Balance Sheet. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service cost. Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs. Any differential between the plan assets (for a funded defined benefit plan) and the defined benefit obligation as per actuarial valuation is recognised as a liability if it is a deficit or as an asset if it is a surplus (to the extent of the lower of present value of any economic benefits available in the form of refunds from the plan or reduction in future contribution to the plan).
Past service cost is recognised as an expense in the statement of profit and loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits are already vested immediately following the introduction of, or changes to, a defined benefit plan, the past service cost is recognised immediately in the statement of profit and loss. Past service cost may be either positive (where benefits are introduced or improved) or negative (where existing benefits are reduced).
(n) Share-based payments
The grant date fair value of options granted (net of estimated forfeiture) to employees of the Company is recognized as an employee expense, and those granted to employees of subsidiaries is considered as the Company''s equity contribution and is added to the carrying value of investment in the respective subsidiaries, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options. The expense is recorded for each separately vesting portion of the award as if the award was, in substance, multiple awards. The increase in equity recognized in connection with share-based payment transaction is presented as a separate component in equity under "share option outstanding account". The amount recognized as an expense is adjusted to reflect the actual number of stock options that vest. For the option awards, grant date fair value is determined under the option-pricing model (Black-Scholes-Merton). Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures materially differ from those estimates.
Corresponding balance of share-based payment reserve is transferred to general reserve upon expiry of grants or upon exercise of stock options by an employee.
(o) Income tax
Income tax comprises current and deferred tax. It is recognised in Statement of profit and loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI.
Current taxes
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received after considering uncertainty related
to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
Deferred taxes
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
- temporary differences arising on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction;
- temporary differences related to investments in subsidiaries, associates or joint arrangements, to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets (DTA) include Minimum Alternate Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used. Deferred tax is measured at the tax rates that are expected to be applied to the period when the asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
(p) Leases
(i) As a lessee
The Company accounts for assets taken under lease arrangement in the following manner:
The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right of use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentive received.
The right of use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. The estimated useful lives of right-of-use are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the Company''s incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise the fixed payments, including in-substance fixed payments.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in Company''s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying
amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
Short-term leases and leases of low-value assets
The Company has elected not to recognise right-of use assets and lease liabilities for short term leases that have a lease term of 12 months or less and leases of low value assets. The Company recognises the lease payments associated with these leases as an expense on a straight- line basis over the lease term.
(ii) As a lessor
The Company accounts for assets given under lease arrangement in the following manner:
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Assets subject to operating leases are included in Property, Plant and Equipment. Rental income on operating lease is recognized in the Statement of Profit and Loss on a straight-line basis over the lease term.
Costs, including depreciation, are recognized as an expense in the Statement of Profit and Loss. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased assets and recognised on a straight-line basis over the lease term.
Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Company''s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
(q) Foreign currency translation
The Company has adopted Appendix B, "Foreign currency transactions and advance consideration" to Ind AS 21, "the effects of changes in foreign exchange rates" effective from 1 April 2018 prospectively to all assets, expenses and income in the scope of the said Appendix. The adoption of the above Standard/Appendix does not have any
significant impact on the financial position or performance of the Company.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at balance sheet date exchange rates are generally recognised in Statement of Profit and Loss.
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. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets such as equity investments classified as FVOCI are recognised in other comprehensive income (OCI).
(r) Statement of Cash flow
Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated. The Company considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
(s) Segment reporting
An operating segment is a component of the group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company''s other components, and for which discrete financial information is available. Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker ("CODM"). Revenues, expenses, assets and liabilities, which are common to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been treated as "unallocated revenues/ expenses/ assets/ liabilities", as the case may be.
The Company is primarily engaged in the business of healthcare services which is the only reportable segment.
(t) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
⢠the profit/ (loss) attributable to owners of the Company
⢠by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
⢠the after-income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
⢠the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
3) Critical estimates and judgements
The preparation of these financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Judgements
Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements is included in the following notes:
⢠Leasing arrangement (classification) - Note 7
⢠Recognition and measurement of contingency: Key assumption about the likelihood and magnitude of an outflow of resources - Note 1 1, 12, 26, 27 and 28
⢠Recognition and estimation of tax expense including deferred tax- Note 5(xxx) and 5(ix)
Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 31 March 2022 is included in the following notes:
⢠Leasing arrangement (accounting) - Note 7
⢠Financial instruments - Note 15
⢠Fair value measurement - Note 16
⢠Estimated impairment of financial assets and nonfinancial assets - Note 5(iv) and 5(v), 5(vi), 5(vii), 5(viii) and 5(xxix)
⢠Recognition and measurement of contingency: Key assumption about the likelihood and magnitude of an outflow of resources - Note 1 1, 12, 26, 27 and 28
⢠Recognition and estimation of tax expense including deferred tax- Note 5(xxx) and 5(ix)
⢠Assessment of useful life and residual value of property, plant and equipment and intangible asset -Note 2(e)(iii)
⢠Estimation of assets and obligations relating to employee benefits (including actuarial assumptions) -Note 14
⢠Share-based payments - Note 13
4) Recent Pronouncements but not yet effective
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On March 23, 2022, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2022, applicable from April 1, 2022, as below:
Ind AS 103 - Reference to Conceptual Framework
The amendments specifiy that to qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must meet the definitions of assets and liabilities in the Conceptual Framework for Financial Reporting under Indian Accounting Standards (Conceptual Framework) issued
by the Institute of Chartered Accountants of India at the acquisition date. These changes do not significantly change the requirements of Ind AS 103. The Company does not expect the amendment to have any significant impact in its financial statements.
Ind AS 16 - Proceeds before intended use
The amendments mainly prohibit an entity from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, an entity will recognise such sales proceeds and related cost in profit or loss. The Company does not expect the amendments to have any impact in its recognition of its property, plant and equipment in its financial statements.
I nd AS 37 - Onerous Contracts - Costs of Fulfilling a Contract
The amendments specify that that the ''cost of fulfilling'' a contract comprises the ''costs that relate directly to the contract''. Costs that relate directly to a contract can either
be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts. The amendment is essentially a clarification and the Company does not expect the amendment to have any significant impact in its financial statements.
Ind AS 109 - Annual Improvements to Ind AS (2021)
The amendment clarifies which fees an entity includes when it applies the ''10 percent'' test of Ind AS 109 in assessing whether to derecognise a financial liability. The Company does not expect the amendment to have any significant impact in its financial statements.
Ind AS 106 - Annual Improvements to Ind AS (2021)
The amendments remove the illustration of the reimbursement of leasehold improvements by the lessor in order to resolve any potential confusion regarding the treatment of lease incentives that might arise
Mar 31, 2021
1. | CORPORATE INFORMATION
Fortis Healthcare Limited (the ''Company'' or ''FHL''), a public limited Company, was incorporated on February 28, 1996. Its equity shares are listed on BSE Limited and National Stock Exchange of India Limited. Its registered office is located at Fortis Hospital Sector-62 Phase-VIII, Mohali 160062, Punjab and the corporate office of the Company is located at Tower A, Unitech Business Park, Block - F South City - 1, Sector-41, Gurugram 122001, Haryana.
Fortis Healthcare Limited is a leading integrated healthcare delivery service provider. The Company is primarily engaged in the business of healthcare services. The Company also holds interests in its subsidiaries, associates and joint ventures which manage and operate a network of multi-specialty hospitals and diagnostics centres.
On November 13, 2018, IHH Healthcare Berhad, Malaysia acquired 31.10% stake in the Company and appointed majority of board of directors, thereby, becoming the controlling shareholder of the Company.
2. [significant accounting policies
This note provides a list of the significant accounting policies adopted in the preparation of these standalone financial statements (''financial statements''). The accounting policies adopted are consistent with those of the previous financial year.
(a) Basis of preparation
(i) Statement of compliance
These Standalone financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 as amended notified under Section 133 of Companies Act, 2013, ("the Act") and other relevant provisions of the Act. All the amounts included in the financial statements are reported in lacs of Indian '' and are rounded off to two decimals, except per share data. The financial statements have been authorised for issue by the Company''s Board of Directors on May 29, 2021.
(ii) Functional and presentation currency
These financial statements are presented in Indian '', which is also the Company''s functional currency.
(iii) Historical cost convention
The financial statements have been prepared under historical cost convention on accrual basis, unless otherwise stated. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
(b) Current versus non-current classification
The Company presents assets and liabilities in the Balance Sheet based on current/ non-current classification.
An asset is treated as current when:
⢠It is expected to be realised or intended to be sold or consumed in normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠It is expected to be realised within twelve months after the reporting period; or
⢠It is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve
months after the reporting period.
The Company classifies all other assets as non-current.
A liability is current when:
⢠It is expected to be settled in normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠It is due to be settled within twelve months after the reporting period; or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting
period.
Freehold land is not depreciated.
Depreciation on leasehold assets is provided over the lease term or expected useful life of the asset, whichever is lower.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle for the purpose of current-non-current classification of assets and liabilities.
(c) Measurement of fair values
A number of the accounting policies and disclosures require measurement of fair values, for both financial and nonfinancial assets and liabilities. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Company has an established control framework with respect to the measurement of fair values. This includes a finance team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values.
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
(d) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Capitalisation of borrowing costs ceases when substantially all the activities necessary to prepare the qualifying assets for their intended uses are complete. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing costs include exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in the statement of profit and loss in the period in which they are incurred.
(e) Property, plant and equipment (PPE) and intangible assets
(i) Property, plant and equipment
Freehold land is carried at cost. All other items of property, plant and equipment are stated at cost, which includes capitalised finance costs, less accumulated depreciation and any accumulated impairment loss. The cost of an item of property, plant and equipment comprises its purchase price, including import duties and other non-refundable taxes or levies, freight, any directly attributable cost of bringing the asset to its working condition for its intended use and estimated cost of dismantling and restoring onsite; any trade discounts and rebates are deducted in arriving at the purchase price.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only 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. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Advances paid towards acquisition of property, plant and equipment outstanding at each Balance Sheet date, are shown under other non-current assets and cost of assets not ready for intended use before the year end, are shown as capital work-in-progress.
(ii) Goodwill and Intangible assets
⢠For measurement of goodwill that arises from business combination. Subsequent measurement is at cost less any accumulated impairment losses.
⢠Internally generated goodwill is not recognised as an asset. With regard to other internally generated intangible assets:
- Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the statement of profit and loss as incurred.
- Development expenditure including regulatory cost and legal expenses leading to product registration/ market authorisation relating to the new and/or improved product and/or process development is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use the asset. The expenditure capitalised includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and directly attributable finance costs (in the same manner as in the case of property, plant and equipment). Other development expenditure is recognised in the Statement of Profit and Loss as incurred.
⢠Intangible assets that are acquired (including goodwill recognised for business combinations) are measured initially at cost. After initial recognition, an intangible asset is carried at its cost less accumulated amortisation (for finite lives intangible assets) and any accumulated impairment loss. Subsequent expenditure is capitalised only when it increases the future economic benefits from the specific asset to which it relates.
(iii) Depreciation and amortisation methods, estimated useful lives and residual value
Depreciation is provided on straight line basis on the original cost/ acquisition cost of assets or other amounts substituted for cost of property, plant and equipment as per the useful life specified in Part ''C'' of Schedule II of the Act, read with notification dated August 29, 2014 of the Ministry of Corporate Affairs, except for certain classes of property, plant and equipment which are depreciated based on the internal technical assessment of the management. The details of useful life are as under:
|
Category of assets |
Management estimate of useful life |
Useful life as per Schedule II |
|
Plant and machinery |
3-15 years |
15 years |
|
Medical equipment |
2-13 years |
13 years |
|
Computers |
3 years |
3 years |
|
Furniture and fittings |
4-10 years |
10 years |
|
Office equipment |
5 years |
5 years |
|
Vehicles |
4-8 years |
8 years |
Goodwill is not amortised and is tested for impairment annually or more frequently if events or changes in circumstances indicate that they might be impaired.
Estimated useful lives of the intangible assets are as follows:
|
Category of assets |
Management estimate of Useful Life |
|
Computer software |
3-6 years |
Depreciation and amortisation on property, plant and equipment and intangible assets added/disposed off during the year has been provided on pro-rata basis with reference to the date of addition/disposal.
Depreciation and amortisation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if appropriate.
(iv) Derecognition
Property, plant and equipment and intangible assets are derecognised on disposal or when no future economic benefits are expected from their use and disposal. Losses arising from retirement and gains or losses arising from disposal of a tangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss.
(f) Impairment of non-financial assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. The Company''s non-financial assets other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset''s recoverable amount is estimated.
For impairment testing, assets that do not generate independent cash inflows (i.e. corporate assets) are grouped together into cash-generating units (CGUs). Each CGU represents the smallest group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or CGUs.
The recoverable amount of a CGU is the higher of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Impairment loss recognised in respect of a CGU is allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amount of the other assets of the CGU (or group of CGUs) on a pro rata basis.
An impairment loss in respect of goodwill is not subsequently reversed. In respect of other assets for which impairment loss has been recognised in prior periods, the Company reviews at reporting date whether there is any indication that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. Such a reversal is made only to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(g) Financial instrument
A Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the
marketplace (regular way trades) are recognised on the trade date, i.e. the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
⢠Debt instruments at amortised cost
⢠Debt instruments at fair value through other comprehensive income (FVOCI)
⢠Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL)
⢠Equity instruments measured at fair value through other comprehensive income (FVOCI)
Debt instruments at amortised cost
A ''debt instrument'' is measured at the amortised cost if the asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the gross carrying amount of the financial asset or the amortised cost of the financial liability. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in other income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss. This category generally applies to trade and other receivables.
Debt instrument at FVOCI
A ''debt instrument'' is classified as at the FVOCI if the objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and the asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognised in the other comprehensive income (OCI). On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified to the Statement of Profit and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
Debt instrument at FVTPL
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorisation as at amortised cost or as FVOCI, is classified as at FVTPL. In addition, at initial recognition, the Company may irrevocably elect to designate a debt instrument, which otherwise meets amortised cost or FVOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch'').
Debt instruments included within the FVTPL category are measured at fair value with all changes recognised in the Statement of Profit and Loss.
Equity investments
Equity investments in subsidiaries, jointly controlled entities and associates are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in such entities, the difference between net disposal proceeds and the carrying amounts are recognised in the Statement of Profit and Loss.
All other equity investments which are in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVTPL. For all other equity instruments in scope of Ind AS 109, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to the Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss to retained earnings.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the Statement of Profit and Loss.
Dividend income from investments is recognised in statement of profit and loss on the date that the right to receive payment is established.
Impairment of financial assets
The Company recognises loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all financial assets with contractual cash flows other than trade receivable, ECLs are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of ECL (or reversal) that is required to adjust the loss allowance at the reporting date is recognised as an impairment gain or loss in the Statement of Profit and Loss.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Company''s balance sheet) when:
⢠The rights to receive cash flows from the asset have expired, or
⢠The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement'' and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Write off of financial assets
The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Group expects no significant recovery from the amount written off.
Financial liabilities
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in Statement of Profit and Loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in Statement of Profit and Loss. Any gain or loss on derecognition is also recognised in Statement of Profit and Loss.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms
of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Derivative financial instruments
Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the Balance Sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
Financial guarantee contracts
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of (i) the amount determined in accordance with the expected credit loss model as per Ind AS 109 and (ii) the amount initially recognised less, where appropriate, cumulative amount of income recognised in accordance with the principles of Ind AS 115.
The fair value of financial guarantees is determined based on the present value of the difference in cash flows between the contractual payments required under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations.
Where guarantees in relation to loans or other payables of subsidiaries are provided for no compensation by the Holding Company, the fair values are accounted for as a deemed equity contribution (under the head ''Investment in subsidiaries'') in the books of Holding Company and as a part of ''Other Equity'' in the books of subsidiary.
Where guarantees in relation to loans or other payables of the Holding Company are provided by subsidiary for no compensation, the fair values are accounted for as a distribution and recognised under the head ''Other Equity'' in the books of subsidiary and credited to statement of profit and loss in the books of holding Company.
(h) Inventories
Inventories are valued at lower of cost and net realisable value except scrap, which is valued at net estimated realisable value.
The Company uses weighted average method to determine cost for all categories of inventories except for goods in transit which is valued at specifically identified purchase cost and other direct costs incurred. Cost includes all costs of purchase, and other costs incurred in bringing the inventories to their present location and condition inclusive of non-refundable (adjustable) taxes wherever applicable.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs necessary to make the sale. The comparison of cost and net realisable value is made on an item-by-item basis.
(i) Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits with banks and other short-term highly liquid investments with original maturities of three months or less.
For the purpose of cash flow statement, cash and cash equivalent includes cash in hand, in banks, demand deposits with banks and other short-term highly liquid investments with original maturities of three months or less, net of outstanding bank overdrafts that are repayable on demand and are considered part of the cash management system.
(j) Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the
obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The Company does not recognise a contingent liability but discloses its existence in the financial statements unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent liabilities and commitments are reviewed by the management at each balance sheet date.
Contingent assets are neither recognised nor disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.
(k) Provisions
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received, and the amount of the receivable can be measured reliably.
A contract is considered to be onerous when the expected economic benefits to be derived by the Company from the contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision for an onerous contract is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before such a provision is made, the Company recognises any impairment loss on the assets associated with that contract.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed.
(l) Revenue recognition
Revenue primarily comprises fees charged under contract for inpatient and outpatient hospital services and also includes sale of medical and non-medical items. Hospital services include charges for accommodation, medical professional services, equipment, radiology, laboratory and pharmaceutical goods used in treatments given to patients.
Contracts with customers could include promises to transfer multiple services/ products to a customer. The Company assesses the product/ services promised in a contract and identifies distinct performance obligation in the contract. Revenue for each distinct performance obligation is measured to at an amount that reflects the consideration which the Company expects to receive in exchange for those products or services and is net of tax collected from customers and remitted to government authorities such as sales tax, excise duty, value added tax and applicable discounts and allowances including claims. Further, the Company also determines whether the performance obligation is satisfied at a point in time or over a period of time. These judgments and estimations are based on various factors including contractual terms and historical experience.
Revenue from hospital services is recognised as and when services are performed and from sale of products is recognised upon transfer of control of products to customers at the time of delivery of goods to the customers.
Revenue includes only those sales for which the Company has acted as a principal in the transaction, takes title to the products, and has the risks and rewards of ownership, including the risk of loss for collection, delivery and returns. Any revenue transaction for which the Company has acted as an agent or broker without assuming the risks and rewards of ownership have been reported on a net basis.
Excess of revenue earned over billings on contracts is recognised as unbilled revenue. Unbilled revenue is classified as other financial assets when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms. Unearned and deferred revenue ("contract liability") is recognised as other current liability when there is billings in excess of revenues.
Other operating revenue comprises revenue from various ancillary revenue generating activities like operations and maintenance agreements, satellite centers, sponsorship arrangements and academic services. The revenue in respect of such arrangements is recognised as and when services are performed.
Income from ''Service Export from India Scheme'' (SEIS), included in other operating revenue, is recognised on accrual basis as and when eligible services are performed and convertible foreign exchange is received on a net basis to the extent it is certain that economic benefits will flow to the Company.
(m) Employee benefits
Short-term employee benefits
All employee benefits falling due within twelve months of the end of the period in which the employees render the related services are classified as short-term employee benefits, which include benefits like salaries, wages, short term compensated absences, performance incentives, etc. and are recognised as expenses in the period in which the employee renders the related service and measured accordingly.
Post-employment benefits
Post-employment benefit plans are classified into defined benefits plans and defined contribution plans as under:
a) Gratuity
The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount based on the respective employee''s salary and the tenure of employment. The liability in respect of gratuity is recognised in the books of account based on actuarial valuation by an independent actuary.
b) Superannuation
Certain employees of the Company are also participants in the superannuation plan (''the Plan''), a defined contribution plan. Contribution made by the Company to the plan during the year is charged to statement of profit and loss.
c) Provident fund
The Company makes contribution to the recognised provident fund - " Fortis Healthcare Limited Provident Fund Trust " for most of its employees in India, which is a defined benefit plan to the extent that the Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate. The Company''s obligation in this regard is determined by an independent actuary and provided for if the circumstances indicate that the Trust may not be able to generate adequate returns to cover the interest rates notified by the Government.
For other employees in India, provident fund is deposited with Regional Provident Fund Commissioner. This is treated as defined contribution plan.
The Company''s contribution to the provident fund is charged to statement of profit and loss.
Other long-term employee benefits:
As per the Company''s policy, eligible leaves can be accumulated by the employees and carried forward to future periods to either be utilised during the service, or encashed. Encashment can be made during service, on early retirement, on withdrawal of scheme, at resignation and upon death of the employee. Accumulated compensated absences are treated as other long-term employee benefits.
Termination benefits are recognised as an expense when, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Actuarial valuation
The liability in respect of all defined benefit plans and other long-term benefits is accrued in the books of account on the basis of actuarial valuation carried out by an independent actuary using the Projected Unit Credit Method. The obligation is measured at the present value of estimated future cash flows. The discount rates used for determining the present value of obligation under defined benefit plans, is based on the market yields on Government securities as at the Balance Sheet date, having maturity periods approximating to the terms of related obligations.
Remeasurement gains and losses on other long-term benefits are recognised in the statement of profit and loss in the year in which they arise. Remeasurement gains and losses in respect of all defined benefit plans arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in other equity in the Statement of Changes in Equity and in the Balance Sheet. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service cost. Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs. Any differential between the plan assets (for a funded defined benefit plan) and the defined benefit obligation as per actuarial valuation is recognised as a liability if it is a deficit or as an asset if it is a surplus (to the extent of the lower of present value of any economic benefits available in the form of refunds from the plan or reduction in future contribution to the plan).
Past service cost is recognised as an expense in the statement of profit and loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits are already vested immediately following the introduction of, or changes to, a defined benefit plan, the past service cost is recognised immediately in the statement of profit and loss. Past service cost may be either positive (where benefits are introduced or improved) or negative (where existing benefits are reduced).
(n) Share-based payments
The grant date fair value of options granted (net of estimated forfeiture) to employees of the Company is recognised as an employee expense, and those granted to employees of subsidiaries is considered as the Company''s equity contribution and is added to the carrying value of investment in the respective subsidiaries, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options. The expense is recorded for each separately vesting portion of the award as if the award was, in substance, multiple awards. The increase in equity recognised in connection with share-based payment transaction is presented as a separate component in equity under "share option outstanding account". The amount recognised as an expense is adjusted to reflect the actual number of stock options that vest. For the option awards, grant date fair value is determined under the option-pricing model (Black-Scholes-Merton). Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures materially differ from those estimates.
Corresponding balance of share-based payment reserve is transferred to general reserve upon expiry of grants or upon exercise of stock options by an employee.
(o) Income tax
Income tax comprises current and deferred tax. It is recognised in Statement of profit and loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI.
Current taxes
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received after considering uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax assets and liabilities are
offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
Deferred taxes
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
- temporary differences arising on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction;
- temporary differences related to investments in subsidiaries, associates or joint arrangements, to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets (DTA) include Minimum Alternate Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used. Deferred tax is measured at the tax rates that are expected to be applied to the period when the asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
(p) Leases
(i) As a lessee
The Company accounts for assets taken under lease arrangement in the following manner:
The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right of use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentive received.
The right of use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. The estimated useful lives of right-of-use are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the Company''s incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise the fixed payments, including insubstance fixed payments.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in Company''s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
Short-term leases and leases of low-value assets
The Company has elected not to recognise right-of use assets and lease liabilities for short term leases that have a lease term of 12 months or less and leases of low value assets. The Company recognises the lease payments associated with these leases as an expense on a straight- line basis over the lease term.
(ii) As a lessor
The Company accounts for assets given under lease arrangement in the following manner:
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Assets subject to operating leases are included in Property, Plant and Equipment. Rental income on operating lease is recognised in the Statement of Profit and Loss on a straight-line basis over the lease term.
Costs, including depreciation, are recognised as an expense in the Statement of Profit and Loss. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased assets and recognised on a straight-line basis over the lease term.
Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Company''s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
(q) Foreign currency translation Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at balance sheet date exchange rates are generally recognised in Statement of Profit and Loss.
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. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets such as equity investments classified as FVOCI are recognised in other comprehensive income (OCI).
(r) Statement of Cash flow
Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated. The Company considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
(s) Segment reporting
An operating segment is a component of the group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company''s other components, and for which discrete financial information is available. Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker ("CODM"). Revenues, expenses, assets and liabilities, which are common to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been treated as "unallocated revenues/ expenses/ assets/ liabilities", as the case may be.
The Company is primarily engaged in the business of healthcare services which is the only reportable segment.
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
⢠the profit/ (loss) attributable to owners of the Company
⢠by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
⢠the after-income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
⢠the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
3. | CRITICAL ESTIMATES AND JUDGEMENTS
The preparation of these financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
Judgements
Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements is included in the following notes:
⢠Leasing arrangement (classification) - Note 7
⢠Recognition and measurement of contingency: Key assumption about the likelihood and magnitude of an outflow of resources - Note 11, 12, 27 and 28
⢠Recognition and estimation of tax expense including deferred tax- Note 5(xxx) and 5(ix)
Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending March 31, 2021 is included in the following notes:
⢠Leasing arrangement (accounting) - Note 7
⢠Financial instruments - Note 15
⢠Fairvaluemeasurement-Note16
⢠Estimated impairment of financial assets and non-financial assets - Note 5(xxix), 5(iv), 5(v), 5(vii), 5(viii)
⢠Recognition and measurement of contingency: Key assumption about the likelihood and magnitude of an outflow of
resources - Note 11, 12, 27 and 28
⢠Recognition and estimation of tax expense including deferred tax- Note 5(xxx) and 5(ix)
⢠Assessment of useful life and residual value of property, plant and eguipment and intangible asset - Note 2(e)(iii)
⢠Estimation of assets and obligations relating to employee benefits (including actuarial assumptions) - Note 14
⢠Share-based payments - Note 13
4. | RECENT PRONOUNCEMENTS BUT NOT YET EFFECTIVE
On March 24, 2021, the Ministry of Corporate Affairs ("MCA") through a notification, amended Schedule III of the Companies
Act, 2013. The amendments revise Division I, II and III of Schedule III and are applicable from April 1, 2021. Key amendments
relating to Division II which relate to companies whose financial statements are required to comply with Companies (Indian
Accounting Standards) Rules 2015 are:
⢠Lease liabilities should be separately disclosed under the head ''financial liabilities'', duly distinguished as current or noncurrent.
⢠Certain additional disclosures in the statement of changes in equity such as changes in equity share capital due to prior period errors and restated balances at the beginning of the current reporting period.
⢠Specified format for disclosure of shareholding of promoters.
⢠Specified format for ageing schedule of trade receivables, trade payables, capital work-in-progress and intangible asset under development.
⢠If a Company has not used funds for the specific purpose for which it was borrowed from banks and financial institutions, then disclosure of details of where it has been used.
⢠Specific disclosure under ''additional regulatory requirement'' such as compliance with approved schemes of arrangements, compliance with number of layers of companies, title deeds of immovable property not held in name of Company, loans and advances to promoters, directors, key managerial personnel (KMP) and related parties, details of benami property held etc.
Statement of profit and loss:
⢠Additional disclosures relating to Corporate Social Responsibility (CSR), undisclosed income and crypto or virtual currency specified under the head ''additional information'' in the notes forming part of standalone financial statements.
The amendments are extensive, and the Company will evaluate the same to give effect to them as required by law.
Mar 31, 2018
NOTES FORMING PART OF THE STANDALONE FINANCIAL STATEMENTS
1) Nature of operations
Fortis Healthcare Limited (the âCompanyâ or âFHLâ) was incorporated on February 28, 1996 and commenced its hospital operations in the year 2001. As part of its business activities, the Company holds interests in its subsidiaries which includes the Companyâs interest in its associates and joint ventures through which it manages and operates a network of multi-specialty hospitals and diagnostic centers.
The registered office of the Company is located at Fortis Hospital Sector-62 Phase-VIII, Mohali 160062, Punjab and the corporate office of the Company is located at Tower A, Unitech Business Park, Block - F South City - 1, Sector-41, Gurugram 122001, Haryana.
The Companyâs equity shares are listed on both BSE Limited and National Stock Exchange of India Limited.
2) Recent Accounting Pronouncements
Appendix B to Ind AS 21, foreign currency transactions and advance consideration
On March 28, 2018, MCA has notified the Companies (Indian Accounting Standards) Amendment Rules 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. This amendment will come into force from April 1, 2018.
The Management of the Company does not expect that the adoption of the above amendments to the above standards will have an impact on the financial statements of the Company.
Ind AS 115, Revenue with Contract with Customers
On March 28, 2018, Ministry of Corporate Affairs has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize 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. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entityâs contracts with customers.
The standard permits two possible methods of transition:-
- Retrospective approach- Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8- Accounting Policies, Changes in Accounting Estimates and Errors.
- Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach)
The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018. The Company is evaluating the requirements of the amendment and its impact on the financial statements.
Amendments to Ind AS 12 - Recognition of Deferred tax assets for Unrealised Losses
The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount.
Entities are required to apply the amendments retrospectively. However, on initial application of the amendments, the change in the opening equity of the earliest comparative period may be recognized in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. Entities applying this relief must disclose that fact.
These amendments are effective for annual periods beginning on or after 1 April 2018. These amendments are not expected to have material effect on Companyâs financial statements.
3) Significant accounting policies
3.1 Statement of compliance
The financial statements of the Company has been prepared in accordance with Indian Accounting Standards (âInd ASâ) notified under section 133 of the Companies Act 2013, read together with the Companies (Indian Accounting Standards) Rules, 2015.
3.2 Basis of preparation and presentation
The financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period.
Historical cost is generally based on the fair value of the consideration given in exchange of goods and services. The accounting policies have been applied consistently over all the periods presented in the standalone financial statements.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company taken into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for, leasing transactions that are within the scope of Ind AS 17, and measurements that have some similarities to fair value but are not fair value, such as net realizable value in Ind AS 2 and value in use in Ind AS 36.
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
- Level 3 inputs are unobservable inputs for the asset or liability.
3.3 Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal Company) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset (or disposal group) and its sale is highly probable. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
When the Company is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Company will retain a non-controlling interest in its former subsidiary after the sale.
When the Company is committed to a sale plan involving disposal of an investment, or a portion of an investment, in an associate or joint venture, the investment or the portion of the investment that will be disposed of is classified as held for sale when the criteria described above are met, and the Company discontinues the use of the equity method in relation to the portion that is classified as held for sale. Any retained portion of an investment in an associate or a joint venture that has not been classified as held for sale continues to be accounted for using the equity method. The Company discontinues the use of the equity method at the time of disposal when the disposal results in the Group losing significant influence over the associate or joint venture.
After the disposal takes place, the Company accounts for any retained interest in the associate or joint venture in accordance with Ind AS 109 unless the retained interest continues to be an associate or a joint venture, in which case the Company uses the equity method (see the accounting policy regarding investments in associates or joint ventures above).
Non-current assets (and disposal Companyâs) classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.
3.4 Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated returns, trade allowances for deduction, rebates, goods and service tax or any other tax as applicable and amounts collected on behalf of third parties. Unbilled revenue is recorded for the patients where patient has not been discharged and invoice are not raised as on the reporting date.
The Company assessed its revenue arrangements against specific criteria to determine it is acting as principal or agent. The Company has concluded that it is acting as a principal in all its revenue arrangements.
Operating Income (IPD and OPD)
Operating income is recognized as and when the services are rendered / pharmacy items (medical consumables and drugs) are sold. Revenue from sale of goods are recognized when all the significant risks and rewards of ownership of goods have been passed to the buyer which coincides with the delivery of goods. The Company collects goods and service tax (GST) or any other tax as may be applicable on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue.
Management fee from hospitals and income from medical services is recognized as and when the contractual obligations arising out of the contractual arrangements with respective hospitals are fulfilled.
Income from Satellite Centers
Income from satellite centers is recognized on accrual basis in accordance with the terms of respective agreements entered into in respect thereof.
Income from Clinical Research
Income from clinical research is recognized as and when the services are rendered in accordance with the terms of the respective agreements.
Income from Sponsorships
Sponsorship income is recognized when the underlying obligations are completed as per contractual terms. Income from Academic Services
Revenue is recognized on pro-rata basis on the completion of such services over the duration of the program. Equipment Lease Rentals and Income from Rent
Revenue is recognized in accordance with the terms of lease agreements entered into with the respective lessees on straight line basis except where the rentals are structured solely to increase in line with expected general inflation to compensate for the companyâs expected inflationary cost increases.
Export benefits
Income from âService Export from India Schemeâ (SEIS) is recognized on accrual basis as and when eligible services are performed and convertible foreign exchange is received on a net basis to the extent it is certain that economic benefits will flow to the Company.
Interest income
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that assetâs net carrying amount on initial recognition.
3.5 Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Where the Company is the lessee
Rental expense form the operating lease is generally recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases, such increases are recognized in the year in which such benefits accrue. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.
Assets held under finance lease are initially recognized as assets of the Company at the lower of the fair value at inception of the leased property or, if lower, present value of minimum lease payments. The corresponding liability to the less or is included in the Balance Sheet as a finance lease obligation.
Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized immediately in the Statement of Profit and Loss, unless they are directly attributed to qualifying assets, in which they are capitalized in accordance with the Companyâs general accounting policy on borrowing cost. Lease management fees, legal charges and other initial direct costs of lease are capitalized. Contingent rentals are recognized as an expenses in the period in they are incurred.
Where the Company is the less or
Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Assets subject to operating leases are included in Property Plant and Equipment. Rental income on operating lease is recognized in the Statement of Profit and Loss on a straight-line basis over the lease term. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the Companyâs expected inflationary cost increases, such increases are recognized in the year in which such benefits accrue.
Costs, including depreciation, are recognized as an expense in the Statement of Profit and Loss. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased assets and recognized on a straight line basis over the lease term.
3.6 Foreign currencies
In preparing the financial statements, transactions in currencies other than the Companyâs functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.
At the end of each reporting period
i) Monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date.
ii) Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined.
iii) Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on settlement or restatement of monetary items are recognized in the Statement of Profit and Loss in the period in which they arise except for:
i) Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as adjustment to interest costs on those foreign currency borrowings;
ii) Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the investment in the foreign operation), which are recognized initially in other comprehensive income and reclassified from equity to the Statement of Profit and Loss on repayment of the monetary items.
3.7 Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other costs are recognized in the Statement of Profit and Loss in the period in which they are incurred.
3.8 Government grants
Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attaching to them and such grants can reasonably have a value placed upon them.
Government grants are recognized in profit or loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognized in profit or loss in the period in which they become receivable.
3.9 Employee benefits
i) Retirement benefit costs and termination benefits
Payments to defined contribution retirement benefit plans like provident fund and employee state insurance are recognized as an expense when employees have rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at each Balance Sheet date.
Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding net interest), is reflected immediately in the Balance Sheet with a charge or credit recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and is not reclassified to the Statement of Profit and Loss. Past service cost is recognized in the Statement of Profit and Loss in the period of a plan amendment.
Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
Defined benefit costs are categorized as follows:
- service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
- net interest expense; and
- remeasurement
The company presents the first two components of defined benefit costs in the Statement of Profit and Loss in the line item âEmployee benefits expenseâ and âFinance Costâ respectively. Curtailment gains and losses are accounted for as past service costs.
The retirement benefit obligation recognized in the Balance Sheet represents the actual deficit.
A liability for a termination benefit is recognized at the earlier of when the company can no longer withdraw the offer of the termination benefit and when the company recognizes any related restructuring costs.
ii) Short-term and other long-term employee benefits:
A liability is recognized for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognized in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the company in respect of services provided by employees up to the reporting date.
Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
The company treats accumulated leave expected to be carried forward beyond twelve months, as long term employee benefit for measurement purposes and liability is determined using the present value of the estimated future cash outflows expected to be made by the company in respect of services provided by employees up to the reporting date. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the Statement of Profit and Loss and are not deferred. The company presents the leave as a current liability in the Balance Sheet; to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date. Where company has the unconditional legal and contractual right to defer the settlement for a period beyond 12 months, the same is presented as noncurrent liability.
iii) Contributions to provident fund
The Company makes contributions to statutory provident fund in accordance with Employees Provident Fund and Miscellaneous Provisions Act, 1952. Provident Fund is a defined benefit scheme the contribution of which is being deposited with âEscorts Heart Institute and Research Centre Employees Provident Fund Trustâ managed by the Company; such contribution to the trust additionally requires the Company to guarantee payment of interest at rates notified by the Central Government from time to time, for which shortfall, if any has to be provided for as at the Balance Sheet date.
3.10 Share-based payment arrangements
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 12.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Companyâs estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in the Statement of Profit and Loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity settled share option outstanding account.
Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.
For cash-settled share-based payments, a liability is recognized for the goods or services acquired, measured initially at the fair value of the liability. At the end of each reporting period until the liability is settled, and at the date of settlement, the fair value of the liability is premeasured, with any changes in fair value recognized in Statement of profit or loss for the year.
3.11 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
i) Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from âprofit before taxâ as reported in the Statement of Profit and Loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The current tax is calculated using tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India and tax laws prevailing in the respective tax jurisdictions where the Company operates.
ii) Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in computation of taxable profit. Deferred tax is also recognized in case of unused tax credits such as minimum alternate tax paid in a year but is available for utilization in a subsequent year when tax is payable at the normative rates.
Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill.
In the case of unused tax losses probability is evaluated considering factors like existence of sufficient taxable temporary differences, convincing other evidence that sufficient taxable profit will be available. At the end of each reporting period, the Company reassesses unrecognized deferred tax assets and, the company recognizes a previously unrecognized Deferred tax asset to the extent that it has become probable that future taxable profit will allow the Deferred tax asset to be recovered.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all 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 realized, 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 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.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the deferred tax assets and deferred taxes relate to the same taxable company and the same taxation authority.
iii) Current and deferred tax for the year
Current and deferred tax are recognized in the Statement of Profit and Loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively.
3.12 Property, plant and equipment(PPE)
PPE held for use in the supply of services, or for administrative purposes, are stated in the Balance Sheet at cost less accumulated depreciation and accumulated impairment losses. Freehold land is not depreciated.
Cost includes professional fees and, for qualifying assets, borrowing costs capitalized in accordance with the Companyâs accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
Components of costs
The cost of an asset includes the purchase cost including import duties and non-refundable taxes, borrowing costs if capitalization criteria are met and any directly attributable costs of bringing an asset to the location and condition of its intended use.
Subsequent expenditure related to an item of PPE is added to its carrying value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance.
All other expenditure related to existing assets including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the Statement of Profit and Loss in the period during which such expenditure is incurred.
Projects under which Property, plant and equipment are not yet ready for their intended use are carried at cost, comprising of direct cost, related incidental expenses and attributable interest and such properties are classified to the appropriate categories of PPE when completed and ready to use.
Depreciation on Leasehold improvements is provided over the primary period of lease or over the useful lives of the respective PPE, whichever is shorter.
Buildings constructed over the land under lease are depreciated over the shorter of estimated life or lease period.
The useful life of PPE are reviewed at the end of each reporting period if the expected useful life of the asset changes significantly from previous estimates, the effect of such change in estimates are accounted for prospectively.
The carrying amount of a PPE is de-recognized upon disposal of PPE or when no future economic benefits are expected from its use. Any gain or loss arising on the disposal or retirement of an item of PPE is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the Statement of Profit and Loss. The carrying amount of PPE in case of assets held for sale is de-recognized from PPE and measured in accordance with Ind AS 105.
3.13 Intangible Assets
Intangible Assets Acquired Separately
Intangible assets with finite useful life that are acquired separately are carried on initial recognition at cost less accumulated amortization and accumulated impairment losses, if any. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.
Cost is the amount of cash or cash equivalents paid or the fair value of other consideration given to acquire an asset at the time of its acquisition or development, or, when applicable, the amount attributed to that asset when initially recognized in accordance with the specific requirements of other Indian Accounting Standards.
The Cost of Intangible assets are amortized on a straight line basis over their estimated useful life which is as follows.
Technical Know-how fees
Technical Know-how fees are amortized over a period of 3 - 5 years from the date of commencement of commercial operation by the respective entity.
Software
Cost of software is amortized over a period of 3-6 years, being the estimated useful life as per the management estimates.
License fee
License fees capitalized as intangible asset is amortized over a period of 4-10 years, being management estimate of the useful life of the asset.
Assets developed
Assets developed are amortized over a period of 5 years, being the estimated useful life as per the management estimates.
Non-Compete fee
Non-compete fee which is valued based on the incremental cash flows attributable to the non-compete covenant entered during the acquisition of business by a subsidiary is capitalized and amortized over an estimated useful life of 3-5 years over which the benefits are likely to accrue, on a straight line basis.
Internally-generated intangible assets - research and development expenditure
Expenditure on research activities is recognized as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognized if, and only if, all of the following have been demonstrated:
- the technical feasibility of completing the intangible asset so that it will be available for use or sale;
- the intention to complete the intangible asset and use or sell it;
- the ability to use or sell the intangible asset;
- how the intangible asset will generate probable future economic benefits;
- the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
- the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized, development expenditure is recognized in the Statement of profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Derecognition of intangible sssets
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains and losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss when the asset is derecognized.
3.14 Impairment of tangible and intangible assets other than goodwill
At the end of each reporting period, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication based on internal/ external factors that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the Statement of Profit and Loss.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in the Statement of Profit and Loss.
3.15 Inventories
Inventories of medical consumables, drugs, and stores and spares are valued at lower of cost and net releasable value. Cost is determined on weighted average basis.
Net realizable value represents the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
3.16 Provision
Provisions are recognized when the company has a present obligation (legal or constructive) as a result of a past event, it is probable that the company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
3.17 Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
3.18 Cash flows
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated. The company considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
3.19 Segment Reporting
The Company is primarily engaged in the business of healthcare services which is the only reportable business segment as per Ind AS 108 âOperating Segmentsâ. Healthcare services include various patient services delivered through clinical establishment, medical service companies, pathology and radiology services etc.
The Companyâs business activity primarily falls within a single geographical segment.
3.20 Earnings per share
The Company presents basic and diluted earnings per share (âEPSâ) data for its equity shares.
Basic EPS is calculated by dividing the profit or loss attributable to equity shareholders of the Company by the weighted average number of common shares outstanding during the period.
Diluted EPS is determined by adjusting the profit or loss attributable to equity shareholders and the weighted average number of equity shares outstanding, for the effects of all dilutive potential equity shares. For the purposes of calculating basic EPS, shares allotted to ESOP trust pursuant to employee share based payment plan are not included in the shares outstanding till the employees have exercised their rights to obtain shares after fulfilling the requisite vesting conditions. Till such time, the shares are allotted are considered as dilutive potential equity shares for the purposes of calculating diluted EPS.
Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease earning per share from continuing operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented.
3.21 Operating cycle
Based on the nature of products / activities of the Company and the normal time between acquisition of assets and their realization in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.
3.22 Financial Instrument
Financial assets and financial liabilities are recognized when a Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
All recognized financial assets are subsequently measured in their entirety at either amortized cost or fair value, depending on the classification of the financial assets
Classification of financial assets
Debt Instrument that meet the following conditions are subsequently measured at amortized cost (except for debt instrument that are designated as at fair value through profit or loss (âFCTPLâ) on initial recognition):
- the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
- the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Debt Instrument that meet the following conditions are subsequently measured at fair value through other comprehensive income (FVTOCI) (except for debt instrument that are designated as at FVPTL on initial recognition):
- the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and
- the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Interest income is recognized in profit or loss for FVTOCI debt instrument. For the purposes of recognizing foreign exchange gains and losses, FVTOCI debt instrument are treated as financial assets measured at amortized cost. Thus, the exchange differences on the amortized cost are recognized in profit or loss and other changes in the fair value of FVTOCI financial assets are recognized in other comprehensive income and accumulated under the heading of âReserve for debt instrument through other comprehensive incomeâ. When the investment is disposed of, the cumulative gain or loss previously accumulated in this reserve is reclassified to profit or loss.
All other financial assets are subsequently measured at fair value.
Effective interest method
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognized in profit or loss and is included in the âOther incomeâ line item.
Financial assets at fair value through profit or loss
Debt instrument that do not meet the amortized cost criteria or debt instrument that meet the FVTOCI criteria are measured at FVTPL. In addition, debt instrument that meet amortized cost criteria or the FVTOCI criteria but are designated as at FVTPL are measured at FVTPL.
A financial asset that meets the amortized cost criteria or debt instruments that meet the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases. The Company has not designated any debt instrument as at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the âOther incomeâ line item. Dividend on financial assets at FVTPL is recognized when the Companyâs right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
Impairment of financial assets
The Company applies the expected credit loss model for recognizing impairment loss on financial assets measured at amortized cost, debt instruments at FVTOCI, lease receivables, trade receivables, other contractual rights to receive cash or other financial asset, and financial guarantees not designated as at FVTPL.
Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights. Credit loss is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). The Company estimates cash flows by considering all contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) through the expected life of that financial instrument.
The Company measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses.
12-month expected credit losses are portion of the life-time expected credit losses and represent the lifetime cash shortfalls that will result if default occurs within the 12 months after the reporting date and thus, are not cash shortfalls that are predicted over the next 12 months.
If the Company measured loss allowance for a financial instrument at lifetime expected credit loss model in the previous period, but determines at the end of a reporting period that the credit risk has not increased significantly since initial recognition due to improvement in credit quality as compared to the previous period, the Company again measures the loss allowance based on 12-month expected credit losses.
When making the assessment of whether there has been a significant increase in credit risk since initial recognition, the Company uses the change in the risk of a default occurring over the expected life of the financial instrument instead of the change in the amount of expected credit losses. To make that assessment, the Company compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition.
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 11 and Ind AS 18, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.
Further, for the purpose of measuring lifetime expected credit loss allowance for trade receivables, the Company has used a practical expedient as permitted under Ind AS 109. This expected credit loss allowance is computed based on a provision matrix which takes into account historical credit loss experience and adjusted for forward-looking information.
The impairment requirements for the recognition and measurement of a loss allowance are equally applied to debt instruments at FVTOCI except that the loss allowance is recognized in other comprehensive income and is not reduced from the carrying amount in the Balance Sheet.
Derecognition of financial assets
The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the assetâs carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of that financial asset.
On derecognition of a financial asset other than in its entirety (e.g. when the Company retains an option to repurchase part of a transferred asset), the Company allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognizes on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of that financial asset. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts.
Foreign exchange gains and losses
The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period. For foreign currency denominated financial assets measured at amortized cost and FVTPL, the exchange differences are recognized in profit or loss except for those which are designated as hedging instruments in a hedging relationship.
Changes in the carrying amount of investment in equity instrument at FVTOCI relating to changes in foreign currency rates are recognized in other comprehensive income.
For the purpose of recognizing foreign exchange gains and losses, FVTOCI debt instrument are treated as financial assets measured at amortized cost. Thus, exchange difference on the amortized cost are recognized in profit and loss and other changes in the fair value of FVTOCI financial assets are recognized in the other comprehensive income.
Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments issued by an entity 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 instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.
Repurchase of the Companyâs own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Companyâs own equity instruments.
Compound financial instruments
The component parts of compound financial instruments (convertible notes) issued by the Company are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Companyâs own equity instruments is an equity instrument.
At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible instruments. This amount is recognized as a liability on an amortized cost basis using the effective interest method until extinguished upon conversion or at the instrumentâs maturity date.
The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound financial instrument as a whole. This is recognized and included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in equity until the conversion option is exercised, in which case, the balance recognized in equity will be transferred to other component of equity. When the conversion option remains unexercised at the maturity date of the convertible note, the balance recognized in equity will be transferred to retained earnings. No gain or loss is recognized in profit or loss upon conversion or expiration of the conversion option.
Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognized directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component and are amortized over the lives of the convertible notes using the effective interest method.
Financial liabilities
All financial liabilities are subsequently measured at amortized cost using the effective interest method or at FVTPL.
However, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies, financial guarantee contracts issued by the Company, and commitments issued by the Company to provide a loan at below-market interest rate are measured in accordance with the specific accounting policies set out below.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either contingent consideration recognized by the Company as an acquirer in a business combination to which Ind AS 103 applies or is held for trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if:
- it has been incurred principally for the purpose of repurchasing it in the near term; or
- on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or
- it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a finance liability held for trading or contingent consideration recognized by the Company as an acquirer in a business combination to which Ind AS 103 applies, may be designated as at FVTPL upon initial recognition if:
- such designated eliminates or significantly reduce a measurement or recognition inconsistency that would otherwise arise;
- the finance liability form part of a Company of finance assets or finance liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Companyâs document risk management or investment strategy, and information about the grouping is provided internally on that basis; or
- it forms part of a contract containing one or more embedded derivatives, and Ind AS 109 permits the entire combined contract to be designated as at FVTPL in accordance with Ind AS 109.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on the financial liability and is included in the âOther incomeâ line item.
However, for non-held-for-trading financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognized in other comprehensive income, unless the recognition of the effects of changes in the liabilityâs credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss, in which case these effects of changes in credit risk are recognized in profit or loss. The remaining amount of change in the fair value of liability is always recognized in profit or loss. Changes in fair value attributable to a financial liabilityâs credit risk that are recognized in other comprehensive income are reflected immediately in retained earnings and are not subsequently reclassified to profit or loss.
Gains or losses on financial guarantee contracts and loan commitments issued by the Company that are designated by the Company as at fair value through profit or loss are recognized in profit or loss.
Financial liabilities subsequently measured at amortized cost
Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortized cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortized cost are determined based on the effective interest method. Interest expense that is not capitalized as part of costs of an asset is included in the âFinance costsâ line item.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by a Company entity are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of:
- the amount of loss allowance determined in accordance with impairment requirements of Ind AS 109; and
- the amount initially recognized less, when appropriate, the cumulative amount of income recognized in accordance with the principles of Ind AS 18.
Foreign exchange gains and l
Mar 31, 2017
(a) Under previous GAAP foreign currency convertible Bonds (FCCBâs) are carried at the cost. Under IND AS, The fair value of the liability portion of such optional convertible bonds is determined using a market interest rate for an equivalent non-convertible bonds. This amount is recorded as liability on an amortized cost basis until extinguished on conversion or redemption of the bonds. The remainder of the proceeds received on issuance of FCCB is considered to be attributable to the equity portion of the compound instruments. This is recognized and included in the shareholdersâ equity, and not subsequently premeasured. When the (FCCBâs) are converted of redeemed the equity portion of the same is transferred to general reserve.
(b) Under Ind AS, security deposit have been measured at amortized cost. Accordingly, where security deposits of non-current nature didnât carry any contractual interest or the interest was below market interest rate, the deposit were discounted based on the interest rate determined by the management equal to its interest cost of borrowing of the Company.
(c) Under Ind AS, interest cost on loans is measured at mortised cost which have been determined using effective interest rate method.
(d) Under Ind AS, Technology renewal fund advance have been measured at amortized cost. Accordingly, where Technology renewal fund advance of non-current nature didnât carry any contractual interest or the interest was below market interest rate, the Technology renewal fund advance were discounted based on the interest rate determined by the management equal to its interest cost of borrowing of the company.
(e) Under Previous GAAP, Investments made in mutual fund by the Company were measured at lower of cost or fair value. Under Ind AS, the Company has recognized such investments at fair value through profit and loss thus leading to increase in the value of investment in mutual fund
(f) Under Previous GAAP, deferred taxes were recognized for the tax effect of timing differences between accounting profit and taxable profit for the year using the income statement approach. Under Ind AS, deferred taxes are recognized using the balance sheet for future tax consequences of temporary differences between the carrying value of assets and liabilities and their respective tax bases. The above difference, together with the consequential tax impact of the other Ind AS transitional adjustments lead to temporary differences. Deferred tax adjustments are recognized in correlation to the underlying transaction either in retained earnings or through profit and loss account or other comprehensive income.
(g) Under Ind AS, Long Term trade receivable have been measured at amortized cost. Accordingly, where receivable of non-current nature didnât carry any contractual interest or the interest was below market interest rate, the receivable were discounted based on the interest rate determined by the management equal to its interest cost of borrowing of the company.
(h) Under previous GAAP, Lease payments under an operating lease are recognized as an expense on a straight-line basis over the lease term. Under Ind AS, such expense is not recognized on a straight line basis for leases where the payments to the lesser are structured to increase in line with expected general inflation to compensate for the less orâs expected inflationary cost increases. The Management has analysed the increase in certain lease arrangements and has determined that such increase is to compensate the cost inflation, being in line with general cost inflation and therefore reversed the lease equalization reserve.
(i) Under previous GAAP, investment in Fortis Hospotel limited (FHTL) was carried at cost (refer note 22). On transition to Ind AS, the amount was considered to be recoverable in cash from the subsidiary company. The Company measured its investment in Fortis hospotel Limited at fair value in the opening balance sheet for '' 30,000 lacs aganist the carrying value of '' 20,739.71.
(j) Under IND AS, a financial instrument is a Derivative financial instruments which create rights and obligations that have the effect of transferring between the parties to the instrument one or more of the financial risks inherent in an underlying primary financial instrument. On inception, derivative financial instruments give one party a contractual right to exchange financial assets or financial liabilities with another party under conditions that are potentially favourable, or a contractual obligation to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavorable. The Company have recorded the fair value of the option in the standalone financial as per the agreeement.
(k) Under previous GAAP, actuarial gains and losses were recognized in profit or loss. Under Ind AS, the actuarial gains and losses form part of remeasurement of the net defined benefit liability / asset which is recognized in other comprehensive income. Consequently, the tax effect of the same has also been recognized in other comprehensive income under Ind AS instead of profit or loss. Also, Interest cost on defined benefit obligation have been classified under finance cost. However, this has no impact on the total comprehensive income and total equity as on April 01, 2015 or as on March 31, 2016.
(l) Under Previous GAAP, the intrinsic value of the employee stock option plan was recognized as an expense over the vesting period. Under Ind AS, the compensation cost of employee stock option plan is recognized based on the fair value of the options determined using an appropriate pricing model at the date of grant. Employee compensation cost for the unvested options as on the date of transition based on fair value method has been adjusted against retained earnings amounting to Rs, 554.64 lacs. The impact for the year ended 31st March, 2016 has been recognized in âEmployee benefits expensesâ in the Statement of Profit and Loss.
(m) The transition from previous GAAP to Ind AS has no material impact on the standalone cash flow of the Company.
(n) In case of lease which includes both land and buildings, the Company has separately assessed the classification of these elements as a finance or an operating lease as per requirement of Ind AS 17. Lease payments towards building, as determined by the Management, has been considered as finance lease and balance lease payments towards land is under operating lease. Under Indian GAAP, separate assessment was not made and such composite lease were considered as operating lease. Necessary adjustment to the carrying value of PPE, capital work in progress has been made in the financial statements under Ind AS.
NOTES FORMING PART OF THE STANDALONE FINANCIAL STATEMENTS 1) Nature of operations
Fortis Healthcare Limited (the âCompanyâ or âFHLâ) was incorporated on February 28, 1996 and commenced its hospital operations in the year 2001. As part of its business activities, the Company holds interests in its subsidiaries, joint ventures and associate companies through which it manages and operates a network of multispecialty hospitals and diagnostic centers.
The registered office of the Company is located Fortis Hospital Sector-62 Phase-VIII, Mohali 160062, Punjab and the corporate office of the Company is located at Tower A, Unitech Business Park, Block - F South City - 1, Sector- 41 Gurgaon 122001, Haryana.
The Companyâs equity shares are listed on both BSE Limited and National Stock Exchange of India Limited.
2) Application of new and revised Ind ASs
On 16 February 2015, the Ministry of Corporate Affairs (âMCAâ) notified the Companies (Indian Accounting Standards) Rules, 2015. The rules specify the Indian Accounting Standards (Ind AS) applicable to certain class of companies and set out dates of applicability. Ind AS is applicable from April 1, 2016 as defined in the said notification, is required to apply the standards as specified in Companies (Indian Accounting Standards) Rules
2015 and accordingly the Company has adopted Ind AS from April 1, 2016 with transition date as April 1, 2015.
As at the date of authorization of the financial statements, the Company has not applied the following revisions to the Ind AS that have been issued by MCA but are not yet effective:
Ind AS 102 (Amendment) Measurement of cash settled awards, modification of cash settled awards and equity settled awards that includes a ânet settlementâ feature Ind AS 7 (Amendment) Disclosure of changes in liabilities on account of financing activities.
The directors of the Company do not expect that the adoption of the amendments to the standards will have an impact on the financial statements of the Company.
3) Significant accounting policies
3.1 Statement of Compliance
The financial statements have been prepared in accordance with Indian Accounting Standards (âInd ASâ) notified under section 133 of the Companies Act 2013, read together with the Companies (Indian Accounting Standards) Rules, 2015.
For all the periods up to and including the year ended March 31, 2016, the Company prepared its financial statements in accordance with accounting standards notified under the section 133 of the Companies Act 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014 (âPrevious GAAPâ). These are the Company first Ind AS financial statements and the date of transition to Ind AS is April 1, 2015. Detailed explanation of how the transition from previous GAAP to Ind AS has affected the Company Balance Sheet, financial performance, statement of changes in equity and cash flows is given under Note 31.
3.2 Basis of preparation and presentation
The financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period.
Historical Cost is generally based on the fair value of the consideration given in exchange of goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company taken into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. air value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for, leasing transactions that are within the scope of Ind AS 17, and measurements that have some similarities to fair value but are not fair value, such as net realizable value in Ind AS 2.
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
- Level 3 inputs are unobservable inputs for the asset or liability.
3.3 Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset (or disposal group) and its sale is highly probable. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
When the Company is committed to a sale plan involving disposal of an investment, or a portion of an investment, in a subsidiary, associate or joint venture, the investment or the portion of the investment that will be disposed of is classified as held for sale when the criteria described above are met.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.
3.4 Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for returns, trade allowances for deduction, rebates, value added taxes and amounts collected on behalf of third parties.
The Company assessed its revenue arrangements against specific criteria to determine it is acting as principal or agent. The Company has concluded that it is acting as a principal in all its revenue arrangements.
Operating Income (IPD and OPD)
Operating income is recognized as and when the services are rendered / pharmacy items (medical consumables and drugs) are sold. Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods. The Company collects sales taxes and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue.
Management fee from hospitals and income from medical services is recognized as and when the contractual obligations arising out of the contractual arrangements with respective hospitals are fulfilled.
Income from Satellite Centers
Income from satellite centers is recognized on accrual basis in accordance with the terms of respective agreements entered into in respect thereof.
Income from Clinical Research
Income from clinical research is recognized as and when the services are rendered in accordance with the terms of the respective agreements.
Income from Sponsorships
Sponsorship income is recognized when the underlying obligations are completed as per contractual terms. Income from Academic Services
Revenue is recognized on pro-rata basis on the completion of such services over the duration of the program. Equipment Lease Rentals and Income from Rent
Revenue is recognized in accordance with the terms of lease agreements entered into with the respective lessees on straight line basis except where the rentals are structured solely to increase in line with expected general inflation to compensate for the companyâs expected inflationary cost increases.
Export benefits
Income from âService Export from India Schemeâ (SEIS) is recognized on accrual basis as and when eligible services are performed and convertible foreign exchange is received on a net basis to the extent it is certain that economic benefits will flow to the Company.
Interest income
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that assetâs net carrying amount on initial recognition.
3.5 Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Where the Company is the lessee
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased items are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases, such increases are recognized in the year in which such benefits accrue. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.
Leases where the lessor effectively transfers substantially all the risks and benefits of ownership of the asset are classified as finance leases and are capitalized at the inception of the lease term at the lower of the fair value of the leased property and present value of minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the statement of profit and loss. Lease management fees, legal charges and other initial direct costs of lease are capitalized.
Where the Company is the lessor
Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Assets subject to operating leases are included in PPE. Rental income on operating lease is recognized in the statement of profit and loss on a straight-line basis over the lease term. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the companyâs expected inflationary cost increases, such increases are recognized in the year in which such benefits accrue.
Costs, including depreciation, are recognized as an expense in the statement of profit and loss. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased assets and recognized on a straight line basis over the lease term.
3.6 Foreign currencies
In preparing the financial statements, transactions in currencies other than the Companyâs functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.
At the end of each reporting period
i) Monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date.
ii) Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined.
iii) Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognized in the statement of profit and loss in the period in which they arise except for:
i) Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as adjustment to interest costs on those foreign currency borrowings;
ii) Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the investment in the foreign operation), which are recognized initially in other comprehensive income and reclassified from equity to the statement of profit and loss on repayment of the monetary items.
3.7 Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in the statement of profit and loss in the period in which they are incurred.
3.8 Government grants
Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attaching to them and such grants can reasonably have a value placed upon them.
Government grants are recognized in profit or loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognized in profit or loss in the period in which they become receivable.
3.9 Employee benefits
i) Retirement benefit costs and termination benefits
Payments to defined contribution retirement benefit plans like provident fund and employee state insurance are recognized as an expense when employees have rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at each Balance Sheet date.
Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
Defined benefit costs are categorized as follows:
- service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
- net interest expense; and
- remeasurement
The company presents the first two components of defined benefit costs in the statement of profit and loss in the line item âEmployee benefits expenseâ and âFinance Costâ respectively. Curtailment gains and losses are accounted for as past service costs.
The retirement benefit obligation recognized in the balance sheet represents the actual deficit.
A liability for a termination benefit is recognized at the earlier of when the company can no longer withdraw the offer of the termination benefit and when the company recognises any related restructuring costs.
ii) Short-term and other long-term employee benefits:
A liability is recognized for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognized in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the company in respect of services provided by employees up to the reporting date.
Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
The company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes and liability is determined using the present value of the estimated future cash outflows expected to be made by the company in respect of services provided by employees up to the reporting date. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The company presents the leave as a current liability in the balance sheet; to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date. Where company has the unconditional legal and contractual right to defer the settlement for a period beyond 12 months, the same is presented as non-current liability.
iii) Contributions to provident fund
The Company makes contributions to statutory provident fund in accordance with Employees Provident Fund and Miscellaneous Provisions Act, 1952. Provident Fund is a defined benefit scheme the contribution of which is being deposited with âEscorts Heart Institute and Research Centre Employees Provident Fund Trustâ managed by the Company; such contribution to the trust additionally requires the Company to guarantee payment of interest at rates notified by the Central Government from time to time, for which shortfall, if any has to be provided for as at the balance sheet date.
3.10 Share-based payment arrangements
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 12.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Companyâs estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in the statement of profit and loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity settled share option outstanding account.
Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.
For cash-settled share-based payments, a liability is recognized for the goods or services acquired, measured initially at the fair value of the liability. At the end of each reporting period until the liability is settled, and at the date of settlement, the fair value of the liability is premeasured, with any changes in fair value recognized in profit or loss for the year.
3.11 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
i) Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from âprofit before taxâ as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The current tax is calculated using tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India and tax laws prevailing in the respective tax jurisdictions where the Company operates.
ii) Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in computation of taxable profit.
Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill.
In the case of unused tax losses probability is evaluated considering factors like existence of sufficient taxable temporary differences, convincing other evidence that sufficient taxable profit will be available. At the end of each reporting period, the Company reassesses unrecognized deferred tax assets and, the company recognizes a previously unrecognized Deferred Tax Asset to the extent that it has become probable that future taxable profit will allow the Deferred Tax Asset to be recovered.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all 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 realized, 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 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.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the deferred tax assets and deferred taxes relate to the same taxable company and the same taxation authority.
iii) Current and deferred tax for the year
Current and deferred tax are recognized in the statement of profit and loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively.
3.12 Property, plant and equipment(PPE)
For transition to Ind AS, The Company has elected to continue with the carrying value of all of its PPE recognized as of April 1, 2015 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
Land and Building held for use in the supply of services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses.
Cost includes professional fees and, for qualifying assets, borrowing costs capitalized in accordance with the Companyâs accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
Freehold Land is not depreciated
PPE are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.
Components of costs
The cost of an asset includes the purchase cost including import duties and non-refundable taxes, borrowing costs if capitalization criteria are met and any directly attributable costs of bringing an asset to the location and condition of its intended use.
Subsequent expenditure related to an item of PPE is added to its carrying value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance.
All other expenditure related to existing assets including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss in the period during which such expenditure is incurred.
Projects under which tangible fixed assets are not yet ready for their intended use are carried at cost, comprising of direct cost, related incidental expenses and attributable interest and such properties are classified to the appropriate categories of PPE when completed and ready to use.
The carrying amount of a PPE is de-recognized upon disposal of PPE or when no future economic benefits are expected from its use. Any gain or loss arising on the disposal or retirement of an item of PPE is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the statement of profit and loss.
Depreciation on Leasehold improvements is provided over the primary period of lease or over the useful lives of the respective fixed assets, whichever is shorter.
Buildings constructed over the land under lease are depreciated over the shorter of estimated life or lease period.
The useful life of PPE are reviewed at the end of each reporting period if the expected useful life of the asset changes significantly from previous estimates, the effect of such change in estimates are accounted for prospectively.
3.13 Intangible Assets
For transition to Ind AS, The Company has elected to continue with the carrying value of all of its intangible assets recognized as of April 1, 2015 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
Intangible assets acquired separately are measured on initial recognition at cost less accumulated amortization and accumulated impairment losses, if any.
Cost is the amount of cash or cash equivalents paid or the fair value of other consideration given to acquire an asset at the time of its acquisition or construction, or, when applicable, the amount attributed to that asset when initially recognized in accordance with the specific requirements of other Indian Accounting Standards.
Software
Cost of software is amortized over a period of 3-6 years, being the estimated useful life as per the management estimates.
The Cost of Intangible assets are amortized on a straight line basis over their estimated useful life which is as follows.
Goodwill
Goodwill arising on acquisition is recognized based on the difference between the purchase consideration and assets acquired during acquisition. The same is carried at cost and tested for impairment on an accrual basis in accordance with impairment policy stated below.
The amortization period and method are reviewed at the end of each reporting period if the expected useful life of the asset changes from previous estimates, the effect of such change in estimates are accounted for prospectively.
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains and losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is de-recognized.
3.14 Impairment of tangible and intangible asset other than goodwill
At the end of each reporting period, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication based on internal/ external factors that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the statement of profit and loss.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in the statement of profit and loss.
3.15 Inventories
Inventories of medical consumables, drugs, and stores and spares are valued at lower of cost or net releasable value. Cost is determined on weighted average basis.
Net realizable value represents the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
3.16 Provision
Provisions are recognized when the company has a present obligation (legal or constructive) as a result of a past event, it is probable that the company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
3.17 Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
3.18 Segment Reporting
The Company is primarily engaged in the business of healthcare services which is the only reportable business segment as per Ind AS 108 âOperating Segmentsâ. Healthcare services include various patient services delivered through clinical establishment, medical service companies, pathology and radiology services etc.
The Companyâs business activity primarily falls within a single geographical segment.
3.19 Earnings per share
The Company presents basic and diluted earnings per share (âEPSâ) data for its equity shares.
Basic EPS is calculated by dividing the profit or loss attributable to equity shareholders of the Company by the weighted average number of common shares outstanding during the period.
Diluted EPS is determined by adjusting the profit or loss attributable to equity shareholders and the weighted average number of equity shares outstanding, for the effects of all dilutive potential equity shares. For the purposes of calculating basic EPS, shares allotted to ESOP trust pursuant to employee share based payment plan are not included in the shares outstanding till the employees have exercised their rights to obtain shares after fulfilling the requisite vesting conditions. Till such time, the shares are allotted are considered as dilutive potential equity shares for the purposes of calculating diluted EPS.
Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease earning per share from continuing operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented.
3.20 Measurement of EBITDA
The Company has elected to present earnings before interest, tax, depreciation and amortization (EBITDA) as a separate line item on the face of the statement of profit and loss. The Company measures EBITDA on the basis of profit/ (loss) from continuing operations. In its measurement, the Company includes other income, but does not include depreciation and amortization expense, finance costs and tax expense.
3.21 Operating cycle
Based on the nature of products / activities of the Company and the normal time between acquisition of assets and their realization in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.
3.22 Financial Instrument
Financial assets and financial liabilities are recognized when a Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
All recognized financial assets are subsequently measured in their entirety at either amortized cost or fair value, depending on the classification of the financial assets
Classification of financial assets
Financial Assets that meet the following conditions are subsequently measured at amortized cost (except for financial assets that are designated as at fair value through profit or loss on initial recognition):
- the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
- the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial Assets that meet the following conditions are subsequently measured at fair value through other comprehensive income (except for financial assets that are designated as at fair value through profit or loss on initial recognition):
- the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and
- the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Interest income is recognized in profit or loss for FVTOCI financial assets. For the purposes of recognizing foreign exchange gains and losses, FVTOCI financial assets are treated as financial assets measured at amortized cost. Thus, the exchange differences on the amortized cost are recognized in profit or loss and other changes in the fair value of FVTOCI financial assets are recognized in other comprehensive income and accumulated under the heading of âReserve for financial assets through other comprehensive incomeâ. When the investment is disposed of, the cumulative gain or loss previously accumulated in this reserve is reclassified to profit or loss.
All other financial assets are subsequently measured at fair value.
Effective interest method
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognized in profit or loss and is included in the âOther incomeâ line item.
Financial assets at fair value through profit or loss (FVTPL)
A financial asset that meets the amortized cost criteria or debt instruments that meet the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases. The Company has not designated any debt instrument as at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the âOther incomeâ line item. Dividend on financial assets at FVTPL is recognized when the Companyâs right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
Impairment of financial assets
The Company applies the expected credit loss model for recognizing impairment loss on financial assets measured at amortized cost, debt instruments at FVTOCI, lease receivables, trade receivables, and other contractual rights to receive cash or other financial asset, and financial guarantees not designated as at FVTPL.
Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights. Credit loss is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). The Company estimates cash flows by considering all contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) through the expected life of that financial instrument.
The Company measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. 12-month expected credit losses are portion of the life-time expected credit losses and represent the lifetime cash shortfalls that will result if default occurs within the 12 months after the reporting date and thus, are not cash shortfalls that are predicted over the next 12 months.
If the Company measured loss allowance for a financial instrument at lifetime expected credit loss model in the previous period, but determines at the end of a reporting period that the credit risk has not increased significantly since initial recognition due to improvement in credit quality as compared to the previous period, the Company again measures the loss allowance based on 12-month expected credit losses.
When making the assessment of whether there has been a significant increase in credit risk since initial recognition, the Company uses the change in the risk of a default occurring over the expected life of the financial instrument instead of the change in the amount of expected credit losses. To make that assessment, the Company compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition.
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 11 and Ind AS 18, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.
Further, for the purpose of measuring lifetime expected credit loss allowance for trade receivables, the Company has used a practical expedient as permitted under Ind AS 109. This expected credit loss allowance is computed based on a provision matrix which takes into account historical credit loss experience and adjusted for forward-looking information.
The impairment requirements for the recognition and measurement of a loss allowance are equally applied to debt instruments at FVTOCI except that the loss allowance is recognized in other comprehensive income and is not reduced from the carrying amount in the balance sheet.
Derecognition of financial assets
The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the assetâs carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of that financial asset.
On derecognition of a financial asset other than in its entirety (e.g. when the Company retains an option to repurchase part of a transferred asset), the Company allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognizes on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of that financial asset. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts.
Foreign exchange gains and losses
The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period. For foreign currency denominated financial assets measured at amortized cost and FVTPL, the exchange differences are recognized in profit or loss since there are no designated hedging instruments in a hedging relationship.
Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments issued by a 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 instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.
Repurchase of the Companyâs own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Companyâs own equity instruments.
Compound financial instruments
All material component parts of compound financial instruments (convertible notes) issued by the Company are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Companyâs own equity instruments is an equity instrument.
At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible instruments. This amount is recognized as a liability on an amortized cost basis using the effective interest method until extinguished upon conversion or at the instrumentâs maturity date.
The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound financial instrument as a whole. This is recognized and included in equity, net of income tax effects, and is not subsequently premeasured. In addition, the conversion option classified as equity will remain in equity until the conversion option is exercised, in which case, the balance recognized in equity will be transferred to other component of equity. When the conversion option remains unexercised at the maturity date of the convertible note, the balance recognized in equity will be transferred to retained earnings. No gain or loss is recognized in profit or loss upon conversion or expiration of the conversion option.
Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognized directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component and are amortized over the lives of the convertible notes using the effective interest method.
Financial liabilities
All financial liabilities are subsequently measured at amortized cost using the effective interest method or at FVTPL.
However, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies, financial guarantee contracts issued by the Company, and commitments issued by the Company to provide a loan at below-market interest rate are measured in accordance with the specific accounting policies set out below.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either contingent consideration recognized by the Company as an acquirer in a business combination to which Ind AS 103 applies or is held for trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if:
- it has been incurred principally for the purpose of repurchasing it in the near term; or
- on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or
- it is a derivative that is not designated and effective as a hedging instrument.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on the financial liability and is included in the âOther incomeâ line item.
However, for non-held-for-trading financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognized in other comprehensive income, unless the recognition of the effects of changes in the liabilityâs credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss, in which case these effects of changes in credit risk are recognized in profit or loss. The remaining amount of change in the fair value of liability is always recognized in profit or loss. Changes in fair value attributable to a financial liabilityâs credit risk that are recognized in other comprehensive income are reflected immediately in retained earnings and are not subsequently reclassified to profit or loss.
Gains or losses on financial guarantee contracts and loan commitments issued by the Company that are designated by the Company as at fair value through profit or loss are recognized in profit or loss.
Financial liabilities subsequently measured at amortized cost
Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortized cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortized cost are determined based on the effective interest method. Interest expense that is not capitalized as part of costs of an asset is included in the âFinance costsâ line item.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by a group entity are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of:
- the amount of loss allowance determined in accordance with impairment requirements of lnd AS 109; and
- the amount initially recognized less, when appropriate, the cumulative amount of income recognized in accordance with the principles of Ind AS 18.
Commitments to provide a loan at a below-market interest rate
Commitments to provide a loan at a below-market interest rate are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of:
- the amount of loss allowance determined in accordance with impairment requirements of lnd AS 109; and
- the amount initially recognized less, when appropriate, the cumulative amount of income recognized in accordance with the principles of Ind AS 18.
Foreign exchange gains and losses
For financial liabilities that are denominated in a foreign currency and are measured at amortized cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortized cost of the instruments and are recognized in âOther incomeâ.
The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. For financial liabilities that are measured as at FVTPL, the foreign exchange component forms part of the fair value gains or losses and is recognized in profit or loss.
Derecognition of financial liabilities
The Company derecognizes financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or have expired. An exchange between with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modificatio
Mar 31, 2016
A. Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
Change in Estimate
Till the year ended March 31, 2014, depreciation was provided as per
rates prescribed under Schedule XIV of the Companies Act, 1956.
Schedule II to the Companies Act 2013 prescribes useful lives for fixed
assets which, in many cases, are different from lives prescribed under
the erstwhile Schedule XIV. However, Schedule II allows companies to
use higher/ lower useful lives and residual values if such useful lives
and residual values can be technically supported and justification for
difference is disclosed in the financial statements. Considering the
applicability of Schedule II, the management re-estimated the useful
lives and residual values of all its fixed assets. The management
believes that depreciation rates currently used based on Schedule II
fairly reflect its estimate of the useful lives and residual values of
fixed assets.
Where the asset had zero remaining useful life on the date of Schedule
II becoming effective, i.e., April 1, 2014, its carrying amount, after
retaining any residual value, was charged to the opening balance of
surplus in the statement of profit and loss, as a result an amount of
Rs.300.60 lacs had been charged to the opening balance of surplus as on
April 1, 2014 in the statement of profit and loss. The carrying amount
of other assets i.e. assets - whose remaining useful life was not nil
on April 1, 2014, is depreciated over their remaining useful life.
Had the Company continued to depreciate the assets at the earlier
rates, depreciation and loss for the previous year would have been
lower by Rs.607.52 lacs.
b. Inventories
Inventories of medical consumables, drugs, linen and stores and spares
are valued at lower of cost or net releasable value. Cost is determined
on weighted average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
c. Cash and cash equivalents (for the purpose of Cash Flow Statement)
Cash and cash equivalents in the cash flow statement comprise cash at
bank and in hand and short term investments with an original maturity
of three months or less.
d. Cash flow statement
Cash flows are reported using the indirect method, whereby profit /
(loss) before exceptional items, extraordinary items and tax is
adjusted for the effects of transactions of non-cash nature and any
deferrals or accruals of past or future cash receipts or payments. The
cash flows from operating, investing and financing activities of the
Company are segregated based on the available information.
e. Depreciation on tangible fixed assets and intangible assets
i. Depreciation on fixed assets is calculated on a straight-line basis
using the rates arrived at based on the useful lives estimated by the
management. The Company has used the following useful lives to provide
depreciation on its fixed assets.
ii. Depreciation on Leasehold improvements is provided over the
primary period of lease or over the useful lives of the respective
fixed assets, whichever is shorter.
iii. Buildings constructed over the land under lease are depreciated
over the shorter of estimated life or lease period.
Change in Accounting Policies
i. Till year ended March 31, 2014, in accordance with the requirements
of Schedule XIV to the Companies Act, 1956, the Company was charging
100% depreciation on assets costing less than Rs.5,000/- in the year of
purchase. However, Schedule II to the Companies Act 2013, applicable
from year ended March 31, 2015, does not recognize such practice.
Hence, to comply with the requirement of Schedule II to the Companies
Act, 2013, the Company had changed its accounting policy for
depreciations of assets costing less than Rs.5,000/- from the year
ended March 31, 2015. As per the revised policy, the Company is
depreciating such assets over their useful life as assessed by the
management. The management had decided to apply the revised accounting
policy prospectively from accounting periods commencing on or after 1
April 2014.
The change in accounting for depreciation of assets costing less than
Rs.5,000/- did not had any material impact on financial statements of
the Company for the year then ended.
ii. The Company was previously not identifying components of fixed
assets separately for depreciation purposes; rather, a single useful
life/ depreciation rate was used to depreciate each item of fixed
asset. Due to application of Schedule II to the Companies Act, 2013,
the Company has changed the manner of depreciation for its fixed
assets. Now, the Company identifies and determines separate useful life
for each major component of the fixed asset, if they have useful life
that is materially different from that of the remaining asset. This
change in accounting policy did not have any material impact on
financial statements of the Company for the current year and previous
year.
Software
Cost of software is amortized over a period of 3-6 years, being the
estimated useful life as per the management estimates.
Non-compete fees
Non-compete fee which is valued based on the incremental cash flows
attributable to the non-compete covenant entered during the acquisition
of business is capitalized and amortised over an estimated useful
period of 3-5 years over which the benefits are likely to accrue, on a
straight line basis.
Licence fee
License fees represents fees paid pursuant to Name User Agreement that
entitles the Company for carrying on business. The amount paid has been
capitalised and amortized over the useful life or 10 years, whichever
is shorter
f. Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognized:
Operating Income
Operating income is recognised as and when the services are rendered /
pharmacy items are sold. Revenue from sale of goods is recognized when
all the significant risks and rewards of ownership of the goods have
been passed to the buyer, usually on delivery of the goods. The Company
collects sales taxes and value added taxes (VAT) on behalf of the
government and, therefore, these are not economic benefits flowing to
the Company. Hence, they are excluded from revenue.
Management fee from hospitals and income from medical services is
recognised as and when the contractual obligations arising out of the
contractual arrangements with respective hospitals are fulfilled.
Income from Satellite Centers
Income from satellite centres is recognised on accrual basis in
accordance with the terms of respective agreements entered into in
respect thereof.
Income from Clinical Research
Income from clinical research is recognised as and when the services
are rendered in accordance with the terms of the respective agreements.
Income from Sponsorships
Sponsorship income is recognized when the underlying obligations are
completed as per contractual terms. Income from Academic Services
Revenue is recognized on pro-rata basis on the completion of such
services over the duration of the program.
Equipment Lease Rentals and Income from Rent
Revenue is recognised in accordance with the terms of lease agreements
entered into with the respective lessees on straight line basis.
Export benefits
Income from ''Served from India Scheme'' is recognized on accrual basis
as and when eligible services are performed and convertible foreign
exchange is received on a net basis.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
g. Tangible fixed assets
Fixed assets are stated at cost (or fair value, in case of acquisitions
under slump sale) less of accumulated depreciation and impairment loss,
if any. The cost comprises purchase price, borrowing costs if
capitalization criteria are met and directly attributable cost of
bringing the asset to its working condition for the intended use.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from derecognition/disposal of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized/disposed.
h. Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in an
amalgamation in the nature of purchase is their fair value as at the
date of amalgamation. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs which meet capitalization
criteria, are not capitalized and expenditure is reflected in the
statement of profit and loss in the year in which the expenditure is
incurred.
Intangible assets are amortized on a straight line basis over the
estimated useful economic life.
Gains or losses arising from derecognition/disposal of an intangible
asset are measured as the difference between the net disposal proceeds
and the carrying amount of the asset and are recognized in the
statement of profit and loss when the asset is derecognized/disposed.
Goodwill
Goodwill arising on acquisition is recognized based on the difference
between the purchase consideration and assets acquired during
acquisition. The same is carried at cost and tested for impairment on
an accrual basis in accordance with impairment policy stated below.
i. Capital work-in-progress
Project under which tangible fixed assets are not yet ready for their
intended use are carried at cost, comprising direct cost, related
incidental expenses and attributable interest.
j. Foreign Currency Transaction Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Non-monetary items, which are measured at fair value or other similar
valuation denominated in a foreign currency, are translated using the
exchange rate at the date when such value was determined.
Exchange differences
The Company accounts for exchange differences arising on translation/
settlement of foreign currency monetary items as below:
(a) Exchange differences arising on a monetary item that, in substance,
forms part of the Company''s net investment in a non-integral foreign
operation is accumulated in the foreign currency translation reserve
until the disposal of the net investment. On the disposal of such net
investment, the cumulative amount of the exchange differences which
have been deferred and which relate to that investment is recognized as
income or as expenses in the same period in which the gain or loss on
disposal is recognized.
(b) Exchange differences arising on long-term foreign currency monetary
items related to acquisition of a fixed asset are capitalized and
depreciated over the remaining useful life of the asset.
(c) Exchange differences arising on other long-term foreign currency
monetary items are accumulated in the "Foreign Currency Monetary Item
Translation Difference Account" and amortized over the remaining life
of the concerned monetary item.
(d) All other exchange differences are recognized as income or as
expenses in the period in which they arise.
For the purpose of b and c above, the Company treats a foreign monetary
item as "long-term foreign currency monetary item", if it has a term of
12 months or more at the date of its origination. In accordance with
MCA circular dated August 09, 2012 exchange differences for this
purpose are total differences arising on long- term foreign currency
monetary items for the period. In other words, the Company does not
differentiate between exchange differences arising from foreign
currency borrowings to the extent they are regarded as an adjustment to
the interest cost and other exchange difference.
k. Investments
Investments that are readily realisable and intended to be held for not
more than a year from the date on which such investments are made, are
classified as current investments. All other investments are classified
as long-term investments. Current investments are carried at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognise a decline other than temporary
in the value of the long term investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
l. Retirement and other employee benefits
i. Contribution to provident fund
The Company makes contributions to statutory provident fund in
accordance with Employees Provident Fund and Miscellaneous Provisions
Act, 1952. Provident Fund is a defined benefit scheme the contribution
of which is being deposited with "Escorts Heart Institute and Research
Centre Employees Provident Fund Trust" managed by the Company; such
contribution to the trust additionally requires the Company to
guarantee payment of interest at rates notified by the Central
Government from time to time, for which shortfall, if any has to be
provided for as at the balance sheet date.
ii. Gratuity
For defined benefit plans in the form of gratuity, the cost of
providing benefits is determined using the Projected Unit Credit
method, with actuarial valuations being carried out at each balance
sheet date. Actuarial gains and losses are recognised in the Statement
of Profit and Loss in the period in which they occur. Past service cost
is recognised immediately to the extent that the benefits are already
vested and otherwise is amortised on a straight-line basis over the
average period until the benefits become vested. The retirement
benefit obligation recognised in the Balance Sheet represents the
present value of the defined benefit obligation as adjusted for
unrecognised past service cost, as reduced by the fair value of scheme
assets. Any asset resulting from this calculation is limited to past
service cost, plus the present value of available refunds and
reductions in future contributions to the schemes.
iii. Compensated absences
Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short-term employee benefit. The company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date. The company treats accumulated
leave expected to be carried forward beyond twelve months, as long-term
employee benefit for measurement purposes. Such long-term compensated
absences are provided for based on the actuarial valuation using the
projected unit credit method at the year-end. Actuarial gains/losses
are immediately taken to the statement of profit and loss and are not
deferred. The company presents the leave as a current liability in the
balance sheet; to the extent it does not have an unconditional right to
defer its settlement for 12 months after the reporting date. Where
company has the unconditional legal and contractual right to defer the
settlement for a period beyond 12 months, the same is presented as
non-current liability.
iv. Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees are recognised
during the year when the employees render the service. These benefits
include bonus/incentives and compensated absences which are expected to
occur within twelve months after the end of the period in which the
employee renders the related service.
m. Borrowing cost
Borrowing cost includes interest, amortisation of ancillary costs
incurred in connection with the arrangement of borrowings.
Borrowing costs directly attributable to the acquisitions, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalised as
part of the cost of the respective assets. All other borrowing costs
are expensed in the year they occur.
n. Segment Reporting
The Company is primarily engaged in the business of healthcare services
which is the only reportable business segment as per Accounting
Standard 17 on ''Segment Reporting'' issued by The Institute of Chartered
Accountants of India as notified under section 133 of the Companies
Act, 2013. Healthcare services include various patient services
delivered through clinical establishment, medical service companies,
pathology and radiology services etc.
The Company''s business activity primarily falls within a single
geographical segment, there are no additional disclosures to be
provided in terms of Accounting Standard 17 on ''Segment Reporting''.
o. Leases
Where the Company is the lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased items are classified as
operating leases. Operating lease payments are recognised as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
Leases where the lessor effectively transfers substantially all the
risks and benefits of ownership of the asset are classified as finance
leases and are capitalized at the inception of the lease term at the
lower of the fair value of the leased property and present value of
minimum lease payments. Lease payments are apportioned between the
finance charges and reduction of the lease liability so as to achieve a
constant rate of interest on the remaining balance of the liability.
Finance charges are recognized as finance costs in the statement of
profit and loss. Lease management fees, legal charges and other initial
direct costs of lease are capitalized. Where the Company is the lessor
Leases in which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income on an operating lease is recognized in the
statement of profit and loss on a straight-line basis over the lease
term. Costs, including depreciation, are recognized as an expense in
the statement of profit and loss. Initial direct costs such as legal
costs, brokerage costs, etc. are recognized immediately in the
statement of profit and loss.
p. Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the year (including prior period items, if any) attributable
to the equity shareholders (after deducting attributable taxes, if any)
by the weighted average number of equity shares outstanding during the
period. For the purpose of calculating diluted earnings per share, net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
Potential equity shares are deemed to be dilutive only if their
conversion to equity shares would decrease the net profit per share
from continuing ordinary operations. Potential dilutive equity shares
are deemed to be converted as at the beginning of the period, unless
they have been issued at a later date. The dilutive potential equity
shares are adjusted for the proceeds receivable had the shares been
actually issued at fair value (i.e. average market value of the
outstanding shares). Dilutive potential equity shares are determined
independently for each period presented.
q. Income Taxes
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the Company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized directly in equity is
recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date. Deferred income tax
relating to items recognized directly in equity is recognized in equity
and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized. The carrying amount of
deferred tax assets are reviewed at each reporting date. The Company
writes-down the carrying amount of deferred tax asset to the extent
that it is no longer reasonably certain or virtually certain, as the
case may be, that sufficient future taxable income will be available
against which deferred tax asset can be realized. Any such write-down
is reversed to the extent that it becomes reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the Company recognizes MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement." The
Company reviews the "MAT credit entitlement" asset at each reporting
date and writes down the asset to the extent the Company does not have
convincing evidence that it will pay normal tax during the specified
period.
r. Impairment of tangible and intangible assets
i. The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on internal/
external factors. An impairment loss is recognised wherever the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the asset''s net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessment of the time value of money
and risk specific to asset. This rate is estimated from the rate
implicit in current market transactions for similar assets or from the
weighted average cost of capital of the Company. Impairment losses are
recognised in statement of profit and loss.
ii. After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
iii. An assessment is made at each reporting date as to whether there
is any indication that previously recognized impairment losses may no
longer exist or may have decreased. If such indication exists, the
Company estimates the asset''s or cash-generating unit''s recoverable
amount. A previously recognized impairment loss is reversed only if
there has been a change in the assumptions used to determine the
asset''s recoverable amount since the last impairment loss was
recognized. The reversal is limited so that the carrying amount of the
asset does not exceed its recoverable amount, nor exceed the carrying
amount that would have been determined, net of depreciation, had no
impairment loss been recognized for the asset in prior years. Such
reversal is recognized in the statement of profit and loss unless the
asset is carried at a revalued amount, in which case the reversal is
treated as a revaluation increase.
iv. The cash-generating unit to which goodwill has been allocated is
tested for impairment annually and whenever there is an indication that
the cash-generating unit may be impaired. Impairment is determined for
goodwill by assessing the recoverable amount of each cash-generating
unit (or group of cash-generating units) to which the goodwill relates.
Where the recoverable amount of the cash- generating unit is less than
the carrying amount, an impairment loss is recognized in the statement
of profit and loss.
s. Unamortised finance charges
Costs incurred in raising funds are amortised on straight line basis
over the period for which the funds have been obtained, using time
proportionate basis.
t. Measurement of EBITDA
As permitted by the Guidance Note on the Revised Schedule VI to the
Companies Act, 1956 (now Schedule III to the Companies Act, 2013), the
Company has elected to present earnings before interest, tax,
depreciation and amortization (EBITDA) as a separate line item on the
face of the statement of profit and loss. The Company measures EBITDA
on the basis of profit/ (loss) from continuing operations. In its
measurement, the Company includes under other income, but does not
include depreciation and amortization expense, finance costs and tax
expense.
u. Employee share based payments
Employee Stock Options granted on or after 1 April, 2005 are accounted
under the ''Intrinsic Value Method'' stated in the Guidance Note on
Employee Share Based Payments issued by the Institute of Chartered
Accountants of India (refer note 10).
v. Provisions and Contingencies
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
balance sheet date. These are reviewed at each balance sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are disclosed in the Notes. Contingent assets are not recognised in the
financial statements.
w. Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does not
recognize a contingent liability but discloses its existence in the
financial statements.
x. Operating cycle
Based on the nature of products / activities of the Company and the
normal time between acquisition of assets and their realisation in cash
or cash equivalents, the Company has determined its operating cycle as
12 months for the purpose of classification of its assets and
liabilities as current and non-current.
Mar 31, 2015
(a) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
Change in Estimate
Till the year ended March 31, 2014, depreciation was being provided as
per rates prescribed under Schedule XIV of the Companies Act, 1956.
Schedule II to the Companies Act 2013 prescribes useful lives for fixed
assets which, in many cases, are different from lives prescribed under
the erstwhile Schedule XIV. However, Schedule II allows companies to
use higher/ lower useful lives and residual values if such useful lives
and residual values can be technically supported and justification for
difference is disclosed in the financial statements.
Considering the applicability of Schedule II, the management has
re-estimated useful lives and residual values of all its fixed assets.
The management believes that depreciation rates currently used fairly
reflect its estimate of the useful lives and residual values of fixed
assets.
Where the asset has zero remaining useful life on the date of Schedule
II becoming effective, i.e., April 01, 2014, its carrying amount, after
retaining any residual value, is charged to the opening balance of
surplus in the statement of profit and loss, as a result an amount of
Rs. 300.60 lacs has been charged to the opening surplus in the
statement of profit and loss. The carrying amount of other assets,
i.e., assets whose remaining useful life is not nil on April 01, 2014,
is depreciated over their remaining useful life.
Had the Company continued to depreciate the assets at the earlier
rates, depreciation and loss for the year would have been lower by Rs.
607.52 lacs.
(b) Tangible fixed assets
Fixed assets are stated at cost less accumulated depreciation and
impairment loss, if any. The cost comprises purchase price, borrowing
costs if capitalization criteria are met and directly attributable cost
of bringing the asset to its working condition for the intended use.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
(c) Depreciation on tangible fixed assets
Depreciation on fixed assets is calculated on a straight-line basis
using the rates arrived at based on the useful lives estimated by the
management. The Company has used the following lives to provide
depreciation on its fixed assets.
S.No. Assets Useful Life
1 Plant & machinery 15 years
2 Medical equipments 13 years
3 Furniture and fittings 10 years
4 Computers 3 years
5 Office equipments 5 years
6 Vehicles 8 years
Depreciation on Leasehold improvements is provided over the primary
period of lease or over the useful lives of the respective fixed
assets, whichever is shorter.
Change in Accounting Policies
i. Till year ended March 31, 2014, to comply with the requirements of
Schedule XIV to the Companies Act, 1956, the Company was charging 100%
depreciation on assets costing less than 5,000/- in the year of
purchase. However, Schedule II to the Companies Act 2013, applicable
from the current year, does not recognize such practice. Hence, to
comply with the requirement of Schedule II to the Companies Act, 2013,
the Company has changed its accounting policy for depreciations of
assets costing less than 5,000/-. As per the revised policy,the Company
is depreciating such assets over their useful life as assessed by the
management. The management has decided to apply the revised accounting
policy prospectively from accounting periods commencing on or after
April 01, 2014.
The change in accounting for depreciation of assets costing less than
Rs. 5,000/- did not have any material impact on financial statements of
the Company for the current year.
ii. The Company was previously not identifying components of fixed
assets separately for depreciation purposes; rather, a single useful
life/ depreciation rate was used to depreciate each item of fixed
asset. Due to application of Schedule II to the Companies Act, 2013,
the Company has changed the manner of depreciation for its fixed assets
Now,the Company identifies and determines separate useful life for each
major component of the fixed asset, if they have useful life that is
materially different from that of the remaining asset. This change in
accounting policy did not have any material impact on financial
statements of the Company for the current year.
(d) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs which meet capitalization
criteria, are not capitalized and expenditure is reflected in the
statement of profit and loss in the year in which the expenditure is
incurred.
Intangible assets are amortized on a straight line basis over the
estimated useful economic life.
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
Technical Know-how Fees
Technical know-how fees are amortized over a period of 3 years.
Software
Cost of software is amortized over a period of 6 years, being the
estimated useful life as per the management estimates.
Goodwill on acquisition
Goodwill is initially measured at cost. Following initial recognition,
goodwill is measured at cost less any accumulated impairment losses.
(e) Impairment of tangible and intangible assets
a. The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on internal/
external factors. An impairment loss is recognized wherever the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the asset''s net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre tax discount
rate that reflects current market assessment of the time value of money
and risk specific to asset. This rate is estimated from the rate
implicit in current market transactions for similar assets or from the
weighted average cost of capital of the Company. Impairment losses are
recognized in the statement of profit and loss.
b. After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
c. An assessment is made at each reporting date as to whether there is
any indication that previously recognized impairment losses may no
longer exist or may have decreased. If such indication exists, the
Company estimates the asset''s or cash-generating unit''s recoverable
amount. A previously recognized impairment loss is reversed only if
there has been a change in the assumptions used to determine the
asset''s recoverable amount since the last impairment loss was
recognized. The reversal is limited so that the carrying amount of the
asset does not exceed its recoverable amount, nor exceed the carrying
amount that would have been determined, net of depreciation,
had no impairment loss been recognized for the asset in prior years.
Such reversal is recognized in the statement of profit and loss unless
the asset is carried at a revalued amount, in which case the reversal
is treated as a revaluation increase.
(f) Leases
Where the Company is the lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased items are classified as
operating leases. Operating lease payments are recognised as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
Where the Company is the lessor
Leases in which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income on an operating lease is recognized in the
statement of profit and loss on a straight-line basis over the lease
term. Costs, including depreciation, are recognized as an expense in
the statement of profit and loss. Initial direct costs such as legal
costs, brokerage costs, etc. are recognized immediately in the
statement of profit and loss.
(g) Investments
Investments that are readily realisable and intended to be held for not
more than a year from the date of the acquisition of such investments
are classified as current investments. All other investments are
classified as long-term investments. Current investments are carried at
lower of cost and fair value determined on an individual investment
basis. Long-term investments are carried at cost. However, provision
for diminution in value is made to recognise a decline other than
temporary in the value of such long term investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
(h) Inventories
Inventory of Medical consumables and drugs, Stores and spares are
valued at lower of cost and net realizable value. Cost is determined on
Weighted Average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
The inventories of medical consumables in OPD business are expensed off
on purchase.
(i) Revenue Recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognized:
Operating Income
Operating income is recognised as and when the services are rendered /
pharmacy items are sold. Revenue from sale of goods is recognized when
all the significant risks and rewards of ownership of the goods have
been passed to the buyer, usually on delivery of the goods. The Company
collects sales taxes and value added taxes (VAT) on behalf of the
government and, therefore, these are not economic benefits flowing to
the Company. Hence, they are excluded from revenue.
Management fee from hospitals and income from medical services is
recognised as and when the contractual obligations arising out of the
contractual arrangements with respective hospitals are fulfilled.
Income from Clinical Research
Income from clinical research is recognised as and when the services
are rendered in accordance with the terms of the respective agreements.
Income from Rehabilitation Centre and Sponsorships
Revenue is recognised as and when the services are rendered at the
rehabilitation centre. Sponsorship income is recognized when the
underlying obligations are completed as per contractual terms.
Income from Academic Services
Revenue is recognized on pro-rata basis on the completion of such
services over the duration of the program.
Equipment Lease Rentals and Income from Rent
Revenue is recognised in accordance with the terms of lease agreements
entered into with the respective lessees on straight line basis.
Export benefits
Income from ''Served from India Scheme'' is recognized on accrual basis
as and when eligible services are performed and convertible foreign
exchange is received on a net basis.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
(j) Unamortised finance charges
Costs incurred in raising funds are amortised on straight line basis
over the period for which the funds have been obtained, using time
proportionate basis.
(k) Foreign currency transactions and balances
i) Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
ii) Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Non- monetary items, which are measured at fair value or other similar
valuation denominated in a foreign currency, are translated using the
exchange rate at the date when such value was determined.
iii) Exchange differences
The Company accounts for exchange differences arising on translation/
settlement of foreign currency monetary items as below:
a. Exchange differences arising on a monetary item that, in substance,
forms part of the Company''s net investment in a non-integral foreign
operation is accumulated in the foreign currency translation reserve
until the disposal of the net investment. On the disposal of such net
investment, the cumulative amount of the exchange differences which
have been deferred and which relate to that investment is recognized as
income or as expenses in the same period in which the gain or loss on
disposal is recognized.
b. Exchange differences arising on long-term foreign currency monetary
items related to acquisition of a fixed asset are capitalized and
depreciated over the remaining useful life of the asset.
c. Exchange differences arising on other long-term foreign currency
monetary items are accumulated in the "Foreign Currency Monetary Item
Translation Difference Account" and amortized over the remaining life
of the concerned monetary item.
d. All other exchange differences are recognized as income or as
expenses in the period in which they arise.
For the purpose of b and c above, the Company treats a foreign monetary
item as "long-term foreign currency monetary item", if it has a term of
12 months or more at the date of its origination. In accordance with
MCA circular dated August 09, 2012, exchange differences for this
purpose, are total differences arising on long-term foreign currency
monetary items for the period. In other words, the Company does not
differentiate between exchange differences arising from foreign
currency borrowings to the extent they are regarded as an adjustment to
the interest cost and other exchange difference.
(l) Retirement and other employee benefits:
i) Contributions to provident fund
The Company makes contributions to statutory provident fund in
accordance with Employees Provident Fund and Miscellaneous Provisions
Act, 1952. Provident Fund is a defined contribution scheme for certain
employees, the contributions for these employees are charged to the
statement of profit and loss of the year when an employee renders the
related service.
For other employees, the provident fund is defined benefit scheme
contribution of which is being deposited with "Fortis Healthcare
Limited Provident Fund Trust" managed by the Company; such contribution
to the trust additionally requires the Company to guarantee payment of
interest at rates notified by the Central Government from time to time,
for which shortfall, if any has to be provided for as at the balance
sheet date. There are no other obligations other than the contribution
payable to the fund.
ii) Gratuity
Gratuity liability is a defined benefit obligation and is provided for
on the basis of an actuarial valuation made at the end of the year
using projected unit credit method.
iii) Compensated absences
Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short-term employee benefit. The Company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year-end. The Company presents the leave as a current liability in the
balance sheet; to the extent it does not have an unconditional right to
defer its settlement for 12 months after the reporting date.
iv) Actuarial gains/ losses
Actuarial gains/ losses are recognised in the statement of profit and
loss as they occur.
(m) Income Taxes
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the Company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized directly in equity is
recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years.
Deferred tax is measured using the tax rates and the tax laws enacted
or substantively enacted at the reporting date. Deferred income tax
relating to items recognized directly in equity is recognized in equity
and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the Company recognizes MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement." The
Company reviews the "MAT credit entitlement" asset at each reporting
date and writes down the asset to the extent the Company does not have
convincing evidence that it will pay normal tax during the specified
period.
(n) Employee stock compensation cost
In accordance with the Securities and Exchange Board of India (Share
Based Employee Benefits) Regulations, 2014 and the Guidance Note on
Accounting for Employee Share-based Payments, the cost of
equity-settled transactions is measured using the intrinsic value
method. The cumulative expense recognized for equity-settled
transactions at each reporting date until the vesting date reflects the
extent to which the vesting period has expired and the Company''s best
estimate of the number of equity instruments that will ultimately vest.
The expense or credit recognized in the statement of profit and loss
for a period represents the movement in cumulative expense recognized
as at the beginning and end of that period and is recognized in
employee benefits expense.
Till October 27, 2014, the Company was earlier complying with SEBI
(Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999 in accounting for employee stock options. From October
28, 2014, the SEBI (Employee Stock Option Scheme and Employee Stock
Purchase Scheme) Guidelines, 1999 have been replaced by the SEBI (Share
Based Employee Benefits) Regulations, 2014. The new regulations doesn''t
contain any specific accounting treatment; rather, they require ICAI
Guidance Note to be followed. Consequent to the application of the new
regulations, the Company has changed its accounting for equity settled
option expiring unexercised after vesting in line with accounting
prescribed in the Guidance Note, i.e., expense is not reversed through
the statement of profit and loss. The management has decided to apply
the revised accounting policy prospectively from the date of
notification of new regulation, i.e., October 28, 2014. The change in
accounting policy did not have any material impact on financial
statements of the Company for the current year.
(o) Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the year (including prior period items, if any) attributable
to the equity shareholders (after deducting preference dividends and
attributable taxes, if any) by the weighted average number of equity
shares outstanding during the year. For the purpose of calculating
diluted earnings per share, net profit or loss for the year
attributable to equity shareholders and the weighted average number of
shares outstanding during the year are adjusted for the effects of all
dilutive potential equity shares.
(p) Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
(q) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does not
recognize a contingent liability but discloses its existence in the
financial statements.
(r) Cash and cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at
bank and in hand and short term investments with an original maturity
of three months or less.
(s) Measurement of EBITDA
As permitted by the Guidance Note on the Revised Schedule VI to the
Companies Act, 1956 (now Schedule III to the Companies Act, 2013), the
Company has elected to present earnings before interest, tax,
depreciation and amortization (EBITDA) as a separate line item on the
face of the statement of profit and loss. The Company measures EBITDA
on the basis of profit/ (loss) from continuing operations. In its
measurement, the Company includes interest income included under other
income, but does not include depreciation and amortization expense,
finance costs and tax expense.
(t) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily take substantial period of
time to get ready for its intended use or sale are capitalized as part
of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
(u) Segment Reporting
As the Company''s business activity primarily falls within a single
business and geographical segment, there are no additional disclosures
to be provided in terms of Accounting Standard 17 on ''Segment
Reporting''.
Mar 31, 2013
(a) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions,
uncertainty about these assumptions and estimates could result in the
outcomes requiring a material adjustment to the carrying amounts of
assets or liabilities in future periods.
(b) Tangible fixed assets
Fixed assets are stated at cost less accumulated depreciation and
impairment loss, if any. The cost comprises purchase price, borrowing
costs if capitalization criteria are met and directly attributable cost
of bringing the asset to its working condition for the intended use.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
(c) Depreciation on tangible fixed assets
i. Depreciation on fixed assets is calculated on a straight-line basis
using the rates arrived at based on the useful lives estimated by the
management, or those prescribed under the Schedule XIV to the Companies
Act, 1956, whichever is higher. The Company has used the following
rates to provide depreciation on its fixed assets.
ii. Depreciation on Leasehold improvements is provided over the
primary period of lease of 10 years or over the useful lives of the
respective fixed assets, whichever is shorter.
iii. Individual assets not exceeding Rs. 5,000 are depreciated fully in
the year of purchase in accordance with Companies Act, 1956.
(d) Expenditure on new projects and substantial expansion
Expenditure directly relating to construction activity is capitalized.
Indirect expenditure incurred during construction period is capitalized
to the extent to which the expenditure is related to construction or is
incidental thereto. Other indirect expenditure (including borrowing
costs) incurred during the construction period, which is not related to
the construction activity nor is incidental thereto, is charged to the
statement of profit and loss.
All direct capital expenditures on expansion are capitalized. All
indirect expenses are usually excluded from the cost of fixed assets
because they do not relate to a specific fixed asset. However, where
such expenses are specifically attributable to construction of a
project or bringing it to its working condition, are included as part
of the cost of the construction project or as a part of the cost of the
fixed asset.
(e) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs which meet capitalization
criteria, are not capitalized and expenditure is reflected in the
statement of profit and loss in the year in which the expenditure is
incurred.
Intangible assets are amortized on a straight line basis over the
estimated useful economic life.
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
Technical Know-how Fees
Technical know-how fees are amortized over a period of 3 years.
Software
Cost of software is amortized over a period of 6 years, being the
estimated useful life as per the management estimates.
(f) Impairment of tangible and intangible assets
i) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on internal/
external factors. An impairment loss is recognized wherever the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the asset''s net selling price
and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre tax discount
rate that reflects current market assessment of the time value of money
and risk specific to asset. This rate is estimated from the rate
implicit in current market transactions for similar assets or from the
weighted average cost of capital of the Company. Impairment losses are
recognized in the statement of profit and loss.
ii) After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
iii) An assessment is made at each reporting date as to whether there
is any indication that previously recognized impairment losses may no
longer exist or may have decreased. If such indication exists, the
company estimates the asset''s or cash-generating unit''s recoverable
amount. A previously recognized impairment loss is reversed only if
there has been a change in the assumptions used to determine the
asset''s recoverable amount since the last impairment loss was
recognized. The reversal is limited so that the carrying amount of the
asset does not exceed its recoverable amount, nor exceed the carrying
amount that would have been determined, net of depreciation, had no
impairment loss been recognized for the asset in prior years. Such
reversal is recognized in the statement of profit and loss unless the
asset is carried at a revalued amount, in which case the reversal is
treated as a revaluation increase.
(g) Leases
Where the Company is the lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased items are classified as
operating leases. Operating lease payments are recognised as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
Where the Company is the lessor
Leases in which the company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income on an operating lease is recognized in the
statement of profit and loss on a straight-line basis over the lease
term. Costs, including depreciation, are recognized as an expense in
the statement of profit and loss. Initial direct costs such as legal
costs, brokerage costs, etc. are recognized immediately in the
statement of profit and loss.
(h) Investments
Investments that are readily realisable and intended to be held for not
more than a year from the date of the acquisition of such investments
are classified as current investments. All other investments are
classified as long-term investments. Current investments are carried at
lower of cost and fair value determined on an individual investment
basis. Long-term investments are carried at cost. However, provision
for diminution in value is made to recognise a decline other than
temporary in the value of such long term investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
(i) Inventories
Inventory of Medical consumables and drugs, Stores and spares are
valued at lower of cost and net realizable value. Cost is determined on
Weighted Average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
The inventories of medical consumables in OPD business are expensed off
on purchase.
(j) Revenue Recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognized:
Operating Income
Operating income is recognised as and when the services are rendered /
pharmacy items are sold. Revenue from sale of goods is recognized when
all the significant risks and rewards of ownership of the goods have
been passed to the buyer, usually on delivery of the goods. Management
fee from hospitals and income from medical services is recognised as
per the contractual terms of the agreement with respective hospitals.
Income from Rehabilitation Centre and Sponsorships
Revenue is recognised as and when the services are rendered at the
centre.
Income from Academic Services
Revenue is recognized on pro-rata basis on the completion of such
services over the duration of the program.
Equipment Lease Rentals and Income from Rent
Revenue is recognised in accordance with the terms of lease agreements
entered into with the respective lessees on straight line basis.
Income from Clinical Research
Income from clinical research is recognised as and when the services
are rendered in accordance with the terms of the respective agreements.
Export benefits
Income from ''Served from India Scheme'' is recognized on accrual
basis as and when eligible services are performed and convertible
foreign exchange is received.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
(k) Unamortised finance charges
Costs incurred in raising funds are amortised on straight line basis
over the period for which the funds have been obtained, using time
proportionate basis.
(l) Foreign Currency Transactions and balances
i) Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
ii) Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Non- monetary items, which are measured at fair value or other similar
valuation denominated in a foreign currency, are translated using the
exchange rate at the date when such value was determined.
iii) Exchange differences
From accounting periods commencing on or after 7 December 2006, the
Compnay accounts for exchange differences arising on translation/
settlement of foreign currency monetary items as below:
a. Exchange differences arising on a monetary item that, in substance,
forms part of the Company''s net investment in a non-integral foreign
operation is accumulated in the foreign currency translation reserve
until the disposal of the net investment. On the disposal of such net
investment, the cumulative amount of the exchange differences which
have been deferred and which relate to that investment is recognized as
income or as expenses in the same period in which the gain or loss on
disposal is recognized.
b. Exchange differences arising on long-term foreign currency monetary
items related to acquisition of a fixed asset are capitalized and
depreciated over the remaining useful life of the asset. For this
purpose, the company treats a foreign monetary item as "long-term
foreign currency monetary item", if it has a term of 12 months or
more at the date of its origination.
c. Exchange differences arising on other long-term foreign currency
monetary items are accumulated in the "Foreign Currency Monetary Item
Translation Difference Account" and amortized over the remaining life
of the concerned monetary item.
d. All other exchange differences are recognized as income or as
expenses in the period in which they arise.
For the purpose of b and c above, the company treats a foreign monetary
item as "long-term foreign currency monetary item", if it has a
term of 12 months or more at the date of its origination. In accordance
with MCA circular dated 09 August 2012, exchange differences for this
purpose, are total differences arising on long-term foreign currency
monetary items for the period. In other words, the company does not
differentiate between exchange differences arising from foreign
currency borrowings to the extent they are regarded as an adjustment to
the interest cost and other exchange difference.
iv) Forward exchange contracts entered into to hedge foreign currency
risk of an existing asset/ liability
The premium or discount arising at the inception of the forward
exchange contract is amortized as an income/expense over the life of
contract. Exchange difference on such contracts, except the contracts
which are long term foreign currency monetary items, are recognized in
the statement of profit and loss in the period in which the exchange
rates change. Any profit or loss arising on cancellation or renewal of
such forward exchange contract is also recognized as income or expense
for the period. Any gain/ loss arising on forward contracts which are
long-term foreign currency monetary items are recognized in accordance
with paragraph (iii) (b) and (iii) (c).
(m) Retirement and other employee benefits:
i) Contributions to provident fund
The Company makes contributions to statutory provident fund in
accordance with Employees Provident Fund and Miscellaneous Provisions
Act, 1952. Provident Fund is a defined contribution scheme for certain
employees, the contributions for these employees are charged to the
statement of profit and loss of the year when an employee renders the
related service. For other employees, the provident fund is defined
benefit scheme contribution of which is being deposited with "Fortis
Healthcare Limited Provident Fund Trust" managed by the Company; such
contribution to the trust additionally requires the Company to
guarantee payment of interest at rates notified by the Central
Government from time to time, for which shortfall, if any has to be
provided for as at the balance sheet date.
There are no other obligations other than the contribution payable to
the fund.
ii) Gratuity
Gratuity liability is a defined benefit obligation and is provided for
on the basis of an actuarial valuation made at the end of the year
using projected unit credit method.
iii) Compensated absences
Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short-term employee benefit. The company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
The company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year-end. The company presents the leave as a current liability in the
balance sheet; to the extent it does not have an unconditional right to
defer its settlement for 12 months after the reporting date. Where
company has the unconditional legal and contractual right to defer the
settlement for a period beyond 12 months, the same is presented as
non-current liability.
iv) Actuarial gains/losses
Actuarial gains/losses are recognised in the statement of profit and
loss as they occur.
(n) Income Taxes
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized directly in equity is
recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years.
Deferred tax is measured using the tax rates and the tax laws enacted
or substantively enacted at the reporting date. Deferred income tax
relating to items recognized directly in equity is recognized in equity
and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
At each reporting date, the company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the company recognizes MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement."
The company reviews the "MAT credit entitlement" asset at each
reporting date and writes down the asset to the extent the company does
not have convincing evidence that it will pay normal tax during the
specified period.
(o) Employee stock compensation cost
Recognition, measurement and disclosure of the employee share-based
payment plans is done in accordance with SEBI (Employee Stock Option
Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the
Guidance Note on Accounting for Employee Share-based Payments, issued
by the ICAI. The Company measures compensation cost relating to
employee stock options using the intrinsic value method. Compensation
expense is amortized over the vesting period of the option on a
straight line basis.
(p) Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the year (including prior period items, if any) attributable
to the equity shareholders (after deducting preference dividends and
attributable taxes, if any) by the weighted average number of equity
shares outstanding during the year. For the purpose of calculating
diluted earnings per share, net profit or loss for the year
attributable to equity shareholders and the weighted average number of
shares outstanding during the year are adjusted for the effects of all
dilutive potential equity shares.
(q) Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
(r) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The company does not
recognize a contingent liability but discloses its existence in the
financial statements.
(s) Cash and cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at
bank and in hand and short term investments with an original maturity
of three months or less.
(t) Measurement of EBITDA
As permitted by the guidance note on the Revised Schedule VI to the
Companies Act, 1956, the Company has elected to present earnings before
interest, tax, depreciation and amortization (EBITDA) as a separate
line item on the face of the statement of profit and loss. The Company
measures EBITDA on the basis of profit/ (loss) from continuing
operations. In its measurement, the Company includes interest income
included under other income, but does not include depreciation and
amortization expense, finance costs and tax expense.
(u) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings.
Borrowing costs directly attributable the acquisition, construction or
production of an asset that necessarily take substantial period of time
to get ready for its intended use or sale are capitalized as part of
the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
(v) Segment Reporting
As the Company''s business activity primarily falls within a single
business and geographical segment, there are no additional disclosures
to be provided in terms of Accounting Standard 17 on ''Segment
Reporting''.
Mar 31, 2012
(a) Change in accounting policy
(i) Presentation and disclosure of financial statements
During the year ended March 31, 2012, the revised Schedule VI notified
under the Companies Act 1956, has become applicable to the Company, for
preparation and presentation of its financial statements. The adoption
of revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it has significant impact on presentation and disclosures made in the
financial statements. The Company has also reclassified the previous
year figures in accordance with the requirements applicable in the
current year.
(ii) The Ministry of Corporate Affairs (MCA) has issued the amendment
dated December 29, 2011 to AS 11 The Effects of Changes in Foreign
Exchange Rates, to allow companies deferral/ capitalization of exchange
differences arising on long-term foreign currency monetary items.
In accordance with the amendment/ earlier amendment to AS 11, the
company has opted to amortise exchange differences relating to long
term foreign currency monetary items (other than relating to
acquisition of depreciable capital assets) over the balance period of
such long term monetary items effective April 1, 2011, as required by
paragraph 46A of said notification. Consequently, foreign exchange
loss (net) of Rs.153.77 lacs has been written back in current year as at
March 31, 2012, to be amortised over the remaining term of the monetary
items.
(b) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
liabilities at the date of the financial statements and the results of
operations during the reporting year end. Although these estimates are
based upon management's best knowledge of current events and actions,
actual results could differ from these estimates.
(c) Tangible fixed assets
Fixed assets are stated at cost less accumulated depreciation and
impairment loss, if any. The cost comprises purchase price, borrowing
costs if capitalization criteria are met and directly attributable cost
of bringing the asset to its working condition for the intended use.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
changed to the statement of profit and loss for the period during which
such expenses are incurred.
(d) Depreciation
i. Depreciation on fixed assets is calculated on a straight-line basis
using the rates arrived at based on the useful lives estimated by the
management, or those prescribed under the Schedule XIV to the Companies
Act, 1956, whichever is higher. The Company has used the following
rates to provide depreciation on its fixed assets.
ii. Depreciation on Leasehold improvements is provided over the primary
period of lease of 10 years or over the useful lives of the respective
fixed assets, whichever is shorter.
iii. Individual assets not exceeding Rs. 5,000 are depreciated fully in
the year of purchase.
(e) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs which meet capitalization
criteria, are not capitalized and expenditure is reflected in the
statement of profit and loss in the year in which the expenditure is
incurred.
Intangible assets are amortized on a straight line basis over the
estimated useful economic life.
Technical Know-how Fees
Technical know-how fees is amortized over a period of 3 years.
Software
Cost of software is amortized over a period of 6 years, being the
estimated useful life as per the management estimates.
(f) Impairment of tangible and intangible assets
i) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on internal/
external factors. An impairment loss is recognised wherever the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the asset's net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre tax discount
rate that reflects current market assessment of the time value of money
and risk specific to asset.This rate is estimated from the rate
implicit in current market transactions for similar assets or from the
weighted average cost of capital of the Company.
ii) After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
(g) Leases
Where the Company is the lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased items are classified as
operating leases. Operating lease payments are recognised as an expense
in the Profit and Loss account on a straight-line basis over the lease
term.
Where the Company is the lessor
Leases in which the company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income is recognised in the Profit and Loss account
on a straight-line basis over the lease term. Costs, including
depreciation are recognised as expense in the Profit and Loss account.
(h) Investments
Investments that are readily realisable and intended to be held for not
more than a year from the date of the acquisition of such investments
are classified as current investments. All other investments are
classified as long-term investments. Current investments are carried at
lower of cost and fair value determined on an individual investment
basis. Long-term investments are carried at cost. However, provision
for diminution in value is made to recognise a decline other than
temporary in the value of such long term investments.
(i) Inventories
Inventory of Medical consumables anddrugs, Stores and spares are valued
at lower of cost and net realizable value. Cost is determined on
Weighted Average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
(j) Revenue Recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Operating Income
Operating Income is recognised as and when the services are rendered /
pharmacy items are sold. Management fee from hospitals and income from
medical services is recognised as per the terms of the agreement with
respective hospitals.
Income from Rehabilitation Centre and Sponsorships
Revenue is recognised as and when the services are rendered.
Income from Academic Services
Revenue is recognized on pro-rata basis over the duration of the
program.
Equipment Lease Rentals and Income from Rent
Revenue is recognised in accordance with the terms of lease agreements
entered into with the respective lessees.
Export benefits
Export entitlements under the Served From India Scheme (SFIS) are
recognized in the profit and loss account when the right to receive
credit as per the terms of the scheme is established in respect of free
foreign exchange earned.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
(k) Unamortised finance charges
Costs incurred in raising funds are amortised over the period for which
the funds have been obtained,using time proportionate basis.
(l) Foreign Currency Transactions
i) Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items that are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
From accounting periods commencing on or after December 7,2006, the
Company accounts for exchange differences arising on translation/
settlement of foreign currency monetary items as below:
1. Exchange differences arising on a monetary item that, in substance,
forms part of the Company's net investment in a non-integral foreign
operation is accumulated in the foreign currency translation reserve
until the disposal of the net investment. On the disposal of such net
investment, the cumulative amount of the exchange differences which
have been deferred and which relate to that investment is recognized as
income or as expenses in the same period in which the gain or loss on
disposal is recognized.
2. Exchange differences arising on long-term foreign currency monetary
items related to acquisition of a fixed asset are capitalized and
depreciated over the remaining useful life of the asset. For this
purpose, the company treats a foreign monetary item as "long-term
foreign currency monetary item", if it has a term of 12 months or more
at the date of its origination.
3. Exchange differences arising on other long-term foreign currency
monetary items are accumulated in the "Foreign Currency Monetary Item
Translation Difference Account" and amortized over the remaining life
of the concerned monetary item.
All other exchange differences are recognized as income or expenses in
the period in which they arise.
(m) Employee benefits:
i) Contributions to Provident fund
The Company makes contributions to statutory provident fund in
accordance with Employees Provident Fund and Miscellaneous Provisions
Act, 1952. Provident Fund is a defined contribution scheme for certain
employees, the contributions for these employees are charged to the
Profit and Loss account of the year when the contributions to the
respective funds are due. For other employees, the provident fund is
defined benefit scheme contribution of which is being deposited with
"Fortis Healthcare Limited Provident Fund Trust" managed by the
Company; such contribution to the trust additionally requires the
Company to guarantee payment of interest at rates notified by the
Central Government from time to time, for which shortfall, if any has
to be provided for as at the balance sheet date.
ii) Gratuity
Gratuity liability is a defined benefit obligation and is provided for
on the basis of an actuarial valuation made at the end of the year
using projected unit credit method.
iii) Compensated Absences
Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short-term employee benefit. The Company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date. The Company presents the entire
leave as a current liability in the balance sheet, since it does not
have an unconditional right to defer its settlement for 12 months after
the reporting date.
iv) Actuarial gains/losses
Actuarial gains/losses are recognised in the Profit and Loss Account as
they occur.
(n) Income Taxes
Tax expense comprises current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act, 1961. Deferred income tax
reflect the impact of current year timing differences between taxable
income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. In situations
where the Company has unabsorbed depreciation or carry forward tax
losses, all deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that they can be realised
against future taxable profits.
At each balance sheet date, the Company re-assesses and recognises
unrecognised deferred tax assets. It recognises unrecognised deferred
tax asset to the extent that it has become reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which such deferred tax assets can be
realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Minimum Alternative Tax ('MAT') credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. In the year in
which the MAT credit becomes eligible to be recognized as an asset in
accordance with the recommendations contained in Guidance Note issued
by the Institute of Chartered Accountants of India ('ICAI'), the said
asset is created by way of a credit to the profit and loss account and
shown as MAT Credit Entitlement.
(p) Employee Stock Compensation Cost
Measurement and disclosure of the employee share-based payment plans is
done in accordance with SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
Accounting for Employee Share-based Payments, issued by the ICAI. The
Company measures compensation cost relating to employee stock options
using the intrinsic value method. Compensation expense, if any, is
amortized over the vesting period of the option on a straight line
basis.
(q) Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the year (including prior period items, if any) attributable
to the equity shareholders (after deducting preference dividends and
attributable taxes, if any) by the weighted average number of equity
shares outstanding during the year. For the purpose of calculating
diluted earnings per share, net profit or loss for the year
attributable to equity shareholders and the weighted average number of
shares outstanding during the year are adjusted for the effects of all
dilutive potential equity shares.
(r) Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
(s) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The company does not
recognize a contingent liability but discloses its existence in the
financial statements.
(t) Cash and cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at
bank and in hand and short term investments with an original maturity
of three months or less.
(u) Measurement of EBITDA
As permitted by the guidance note on the Revised Schedule VI to the
Companies Act, 1956, the Company has elected to present earnings before
interest, tax, depreciation and amortization (EBITDA) as a separate
line item on the face of the statement of profit and loss. The Company
measures EBITDA on the basis of profit/ (loss) from continuing
operations. In its measurement, the Company does not include
depreciation and amortization expense, finance costs and tax expense.
(v) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable the acquisition, construction or
production of an asset that necessarily take substantial period of time
to get ready for its intended use or sale are capitalized as part of
the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
(b) Terms/ rights attached to equity shares
The Company has only one class of equity shares having par value of Rs.
10 per share. Each holder of equity shares is entitled to one vote per
share. The Company declares and pays dividends in Indian rupees. The
dividend proposed by the Board of Directors is subject to the approval
of the shareholders in the ensuing Annual General Meeting. In the event
of liquidation of the Company, the holders of equity shares will be
entitled to receive remaining assets of the Company, after distribution
of all preferential amounts. The distribution will be in proportion to
the number of equity shares held by the shareholders.
(c) Terms of redemption of preference shares
During the year ended March 31, 2008, the Company issued 11,500,000
Class 'C' zero percent cumulative redeemable preference shares of Rs.10
each at a premium of Rs. 90 per share (3,196,000 zero percent cumulative
redeemable preference shares pending redemption). These shares are
redeemable at Rs. 175, including premium on October 18 of 2008, 2009,
2010, 2011 and 2012 in instalment of Rs. 1,437.50 lacs each and Rs.
12,937.50 lacs on October 18, 2013. However, the date of redemption in
2009, 2010 and 2011 has been postponed to 2012 and due to this, the
Company has agreed to pay redemption premium calculated at 12%, 12.5%
and 13% respectively on the deferred payments. The Issuer may make
voluntary premature redemption of the Shares in part or in full in
which event the Redemption Premium shall be computed @ 12% compounded
annually on the Subscription amount from the subscription date till the
redemption date. In the event of liquidation of the Company before
redemption of preference shares, the holder of preference shares will
have priority over equity shares in the repayment of capital.
During the year ended March 31, 2009, the Company issued 1,450,000
Class 'C' Zero Percent Cumulative Redeemable Preference Shares of Rs. 10
each at a premium of Rs. 90 per share. Preference shares were redeemable
at a premium of Rs. 117.69 per preference share, on October 18, 2010. The
Company and the Subscriber have an option for early redemption of the
Preference Shares. In case the early redemption option is exercised,
the amount payable on redemption at the end of year 1 shall be Rs.
1,638.50 lacs and at end of year 2 shall be Rs. 1,851.51 lacs. However,
the date of redemption in 2010 has been deferred to October 18, 2012.
(f) Shares reserved for issue under options
For details of shares reserved for issue under the employee stock
option (ESOP) plan of the Company, please refer note 12.
(g) Shares reserved for issued on conversion
For details of shares reserved for issue on conversion of bonds, please
refer note 20 regarding terms of conversion/ redemption of bonds.
Mar 31, 2011
(a) Basis of preparation
The financial statements have been prepared to comply in all material
respects in accordance with the Notified Accounting Standards by
Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared under the historical cost convention on
an accrual basis. The accounting policies have been consistently
applied by the Company and are consistent with those used in the
previous year.
(b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period end. Although these estimates are based upon management's best
knowledge of current events and actions, actual results could differ
from these estimates.
(c) Fixed Assets
Fixed assets are stated at cost less accumulated depreciation and
impairment loss, if any. Cost comprises the purchase price and any
directly attributable cost of bringing the asset to its working
condition for its intended use. Borrowing costs relating to acquisition
of fixed assets which take substantial period of time to get ready for
its intended use are also included to the extent they relate to the
period till such assets are ready to be put to use.
(d) Depreciation
i) Depreciation on Leasehold Improvements is provided over the primary
period of lease or over the useful lives of the respective fixed
assets, whichever is shorter.
ii) Depreciation on all other fixed assets is provided using the
Straight Line Method as per the useful lives of the assets estimated by
the management, or at the rates prescribed under Schedule XIV of the
Companies Act, whichever is higher.
iii) Individual assets not exceeding Rs. 5,000 are depreciated fully in
the year of purchase.
(e) Intangibles
Technical Know-how Fees
Technical know-how fees is amortized over a period of 3 years.
Software
Cost of software is amortized over a period of 6 years, being the
estimated useful life as per the management estimate.
(f) Impairment
i) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on internal/
external factors. An impairment loss is recognised wherever the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the asset's net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre tax discount
rate that reflects current market assessment of the time value of money
and risk specific to asset. This rate is estimated from the rate
implicit in current market transactions for similar assets or from the
weighted average cost of capital of the Company.
ii) After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
(g) Leases
Where the Company is the lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased items are classified as
operating leases. Operating lease payments are recognised as an expense
in the Profit and Loss account on a straight-line basis over the lease
term.
Where the Company is the lessor
Assets subject to operating leases are included in fixed assets. Lease
income is recognised in the Profit and Loss account on a straight-line
basis over the lease term. Costs, including depreciation are recognised
as expense in the Profit and Loss account.
(h) Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognise a
decline other than temporary in the value of such long term
investments.
(i) Inventories
Inventory of Medical Consumables, Drugs, Stores and Spares are valued
at Lower of cost and net realizable value. Cost is determined on
Weighted Average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
(j) Revenue Recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Operating Income
Operating Income is recognised as and when the services are rendered /
pharmacy items are sold. Management fee from hospitals and income from
medical services is recognised as per the terms of the agreement with
respective hospitals.
Rehabilitation Centre Income
Revenue is recognised as and when the services are rendered.
Income from Academic Services
Revenue is recognized on pro-rata basis over the duration of the
program.
Equipment Lease Rentals
Revenue is recognised in accordance with the terms of lease agreements
entered into with the respective lessees.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
Dividends
Dividend is recognised if the right to dividend is established by the
balance sheet date.
(k) Miscellaneous Expenditure (not written off)
Cost incurred in raising funds (Arrangement fees on term loan) is
amortised over the period for which the funds are obtained.
(l) Foreign Currency Transactions
i) Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items that are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
iii) Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting company's monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or as expenses
in the year in which they arise.
(m) Employee benefits:
i) Contributions to Provident fund
The Company makes contributions to statutory provident fund in
accordance with Employees Provident Fund and Miscellaneous Provisions
Act, 1952. Provident Fund is a defined contribution scheme for certain
employees, the contributions for these employees are charged to the
Profit and Loss account of the year when the contributions to the
respective funds are due. For other employees, the provident fund is
defined benefit scheme contribution of which is being deposited with
"Fortis Healthcare Limited Provident Fund Trust" managed by the
Company; such contribution to the trust additionally requires the
Company to guarantee payment of interest at rates notified by the
Central Government from time to time, for which shortfall, if any has
to be provided for as at the balance sheet date.
ii) Gratuity
Gratuity liability is a defined benefit obligation and is provided for
on the basis of an actuarial valuation made at the end of the year
using projected unit credit method.
iii) Compensated Absences
Long term compensated absences are provided for based on actuarial
valuation made at the end of the year using projected unit credit
method. Short term compensated absences are provided for based on
estimates.
iv) Actuarial gains/losses
Actuarial gains/losses are recognised in the Profit and Loss Account as
they occur.
(n) Income Taxes
Tax expense comprises current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act, 1961. Deferred income tax
reflect the impact of current year timing differences between taxable
income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. In situations
where the Company has unabsorbed depreciation or carry forward tax
losses, all deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that they can be realised
against future taxable profits.
At each balance sheet date, the Company re-assesses and recognises
unrecognised deferred tax assets. It recognises unrecognised deferred
tax asset to the extent that it has become reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which such deferred tax assets can be
realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Minimum Alternative Tax ('MAT') credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. In the year in
which the MAT credit becomes eligible to be recognized as an asset in
accordance with the recommendations contained in Guidance Note issued
by the Institute of Chartered Accountants of India ('ICAI'), the said
asset is created by way of a credit to the profit and loss account and
shown as MAT Credit Entitlement.
(0) Employee Stock Compensation Cost
Measurement and disclosure of the employee share-based payment plans is
done in accordance with SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
Accounting for Employee Share-based Payments, issued by the ICAI. The
Company measures compensation cost relating to employee stock options
using the intrinsic value method. Compensation expense is amortized
over the vesting period of the option on a straight line basis.
(p) Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the year (including prior period items, if any) attributable
to the equity shareholders (after deducting preference dividends and
attributable taxes, if any) by the weighted average number of equity
shares outstanding during the year. For the purpose of calculating
diluted earnings per share, net profit or loss for the year
attributable to equity shareholders and the weighted average number of
shares outstanding during the year are adjusted for the effects of all
dilutive potential equity shares.
(q) Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
(r) Cash and cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at
bank and in hand and short term investments with an original maturity
of three months or less.
Mar 31, 2010
(a) Basis of preparation
The financial statements have been prepared to comply in all material
respects in accordance with the Notified Accounting Standards by
Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared under the historical cost convention on
an accrual basis. The accounting policies have been consistently
applied by the Company and are consistent with those used in the
Previous Year.
(b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period end. Although these estimates are based upon managementÃs best
knowledge of current events and actions, actual results could differ
from these estimates.
(c) Fixed Assets
Fixed assets are stated at cost less accumulated depreciation and
impairment loss, if any. Cost comprises the purchase price and any
directly attributable cost of bringing the asset to its working
condition for its intended use. Borrowing costs relating to acquisition
of fixed assets which take substantial period of time to get ready for
its intended use are also included to the extent they relate to the
period till such assets are ready to be put to use.
(d) Depreciation
i. Depreciation on Leasehold Improvements is provided over the primary
period of lease or over the useful lives of the respective fixed
assets, whichever is shorter.
ii. Depreciation on all other fixed assets is provided using the
Straight Line Method as per the useful lives of the assets estimated by
the management, or at the rates prescribed under Schedule XIV of the
Companies Act, whichever is higher.
iii. Individual assets not exceeding Rs. 5,000 are depreciated fully
in the year of purchase.
(e) Intangibles
Technical Know-how Fees
Technical know-how fees is amortized over a period of 3 years.
Software
Cost of software is amortized over a period of 6 years, being the
estimated useful life as per the management estimate.
(f) Impairment
i) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on internal/
external factors. An impairment loss is recognised wherever the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the assetÃs net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value at the weighted average
cost of capital.
ii) After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
(g) Leases
Where the Company is the lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased items are classified as
operating leases. Operating lease payments are recognised as an expense
in the Profit and Loss account on a straight-line basis over the lease
term.
Where the Company is the lessor
Assets subject to operating leases are included in fixed assets. Lease
income is recognised in the Profit and Loss account on a straight- line
basis over the lease term. Costs, including depreciation are recognised
as expense in the Profit and Loss account.
(h) Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognise a
decline other than temporary in the value of such long term
investments.
(i) Inventories
Inventory of Medical Consumables, Drugs, Stores and Spares are valued
at Lower of cost and net realizable value. Cost is determined on
Weighted Average basis.Net realizable value is the estimated selling
price in the ordinary course of business, less estimated costs of
completion and estimated costs necessary to make the sale.
(j) Revenue Recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Operating Income
Operating Income is recognised as and when the services are rendered /
pharmacy items are sold. Management fee from hospitals and income from
medical services is recognised as per the terms of the agreement with
respective hospitals.
Rehabilitation Centre Income
Revenue is recognised as and when the services are rendered.
Equipment Lease Rentals
Revenue is recognised in accordance with the terms of lease agreements
entered into with the respective lessees.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
Dividends
Dividend is recognised if the right to dividend is established by the
balance sheet date.
(k) Miscellaneous Expenditure (not written off)
Cost incurred in raising funds (Arrangement fees on term loan) is
amortised over the period for which the funds are obtained.
(l) Foreign Currency Transactions
i) Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items that are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
iii) Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting companyÃs monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or as expenses
in the year in which they arise.
(m) Employee benefits:
i) Contributions to Provident fund
The Company makes contributions to statutory provident fund in
accordance with Employees Provident Fund and Miscellaneous Provisions
Act, 1952. Provident Fund is a defined contribution scheme and the
contributions are charged to the Profit and Loss account of the year
when the contributions to the respective funds are due. The provident
fund contribution of certain employees
is being deposited with ÃFortis Healthcare Limited Provident Fund
Trustà managed by the Company; such contribution to the trust
additionally requires the Company to guarantee payment of interest at
rates notified by the Central Government from time to time, for which
shortfall, if any has to be provided for as at the balance sheet date.
There are no other obligation other than the contribution payable to
the fund.
ii) Gratuity
Gratuity liability is a defined benefit obligation and is provided for
on the basis of an actuarial valuation made at the end of the year
using projected unit credit method.
iii) Compensated Absences
Long term compensated absences are provided for based on actuarial
valuation made at the end of the year using projected unit credit
method. Short term compensated absences are provided for based on
estimates.
iv) Actuarial gains/losses
Actuarial gains/losses are recognised in the Profit and Loss Account as
they occur.
(n) Income Taxes
Tax expense comprises current, deferred and fringe benefit tax. Current
income tax and fringe benefit tax is measured at the amount expected to
be paid to the tax authorities in accordance with the Indian Income Tax
Act, 1961. Deferred income tax reflect the impact of current year
timing differences between taxable income and accounting income for the
year and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. In situations
where the Company has unabsorbed depreciation or carry forward tax
losses, all deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that they can be realised
against future taxable profits.
At each balance sheet date, the Company re-assesses and recognises
unrecognised deferred tax assets. It recognises unrecognised deferred
tax asset to the extent that it has become reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which such deferred tax assets can be
realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Minimum Alternative Tax (ÃMATÃ) credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. In the year in
which the MAT credit becomes eligible to be recognized as an asset in
accordance with the recommendations contained in Guidance Note issued
by the Institute of Chartered Accountants of India (ÃICAIÃ), the said
asset is created by way of a credit to the profit and loss account and
shown as MAT Credit Entitlement.
(p) Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the year (including prior period items, if any) attributable
to the equity shareholders (after deducting preference dividends and
attributable taxes, if any) by the weighted average number of equity
shares outstanding during the year. For the purpose of calculating
diluted earnings per share, net profit or loss for the year
attributable to equity shareholders and the weighted average number of
shares outstanding during the year are adjusted for the effects of all
dilutive potential equity shares.
(q) Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
(r) Cash and cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at
bank and in hand and short term investments with an original maturity
of three months or less.
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