Mar 31, 2023
IA. OVERVIEW:
Lupin Limited, (âthe Companyâ) incorporated in 1983, is an innovation led Transnational Pharmaceutical Company producing, developing and marketing a wide range of branded and generic formulations, biotechnology products and active pharmaceutical ingredients (APIs) globally. The Company has significant presence in the Cardiovascular, Diabetology, Asthama, Pediatrics, Central Nervous System, Gastro-Intestinal, Anti-Infectives and Nonsteroidal Anti Inflammatory Drug therapy segments and is a global leader in the Anti-TB and Cephalosporins segments.
The Company along with its subsidiaries has manufacturing locations spread across India,
USA, Mexico and Brazil with trading and other incidental and related activities extending to the global markets. The Companyâs shares are listed on Bombay Stock Exchange Limited and National Stock Exchange of India Limited. These Standalone Financial Statements were authorized for issue by the Companyâs Board of Directors on May 09,2023.
The Company is a public limited company incorporated and domiciled in India. The address of its registered office is Kalpataru Inspire, 3rd floor, Western Express Highway, Santacruz (East), Mumbai 400055.
IB. SIGNIFICANT ACCOUNTING POLICIES:a) Basis of accounting and preparation of Standalone Financial Statements:Basis of preparation
i) These Standalone Financial Statements of the Company have been prepared and presented in all material aspects in accordance with the recognition and measurement principles laid down in Indian Accounting Standards (hereinafter referred to as the âInd ASâ) as notified under section 133 of the Companies Act, 2013 (âthe Actâ) read with Rule 4 of the Companies (Indian Accounting Standards) Rules, 2015 as amended and other relevant provisions of the Act and accounting principles generally accepted in India.
Functional and Presentation Currency
ii) These Standalone Financial Statements are presented in Indian rupees, which is the functional currency of the Company.
All financial information presented in Indian rupees has been rounded to the nearest million, except otherwise indicated.
iii) These Standalone Financial Statements are prepared under the historical cost convention unless otherwise indicated.
Use of Estimates and Judgements
iv) The preparation of the Standalone Financial Statements in conformity with Ind AS requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the Standalone Financial Statements
are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known/materialised. Estimates and underlying assumptions are reviewed on an ongoing basis.
Information about critical judgements made in applying accounting policies, as well as estimates and assumptions that have the most significant effect to the carrying amounts of assets and liabilities within the next financial year, are included in the following accounting policies.
- Measurement and likelihood of occurrence of provisions and contingencies (Refer note q)
- Impairment of non-financial assets (Refer note f)
- Impairment of financial assets (Refer note h)
- Provision for Income taxes and uncertain tax positions (Refer note j)
- Goodwill impairment (Refer note l)
b) Property, Plant and Equipment & Depreciation:
Freehold land is carried at historical cost. Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses, if any. The cost of an item of property, plant and equipment comprises:
- its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates.
- any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
- the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which the Company incurs either when the item
is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.
- income and expenses related to the incidental operations, not necessary to bring the item to the location and condition necessary for
it to be capable of operating in the manner intended by management, are recognised in Statement of Profit and Loss. If 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.
An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal of an item of property, plant and equipment is recognised in Statement of Profit and Loss.
Capital work-in-progress in respect of assets which are not ready for their intended use are carried at cost, comprising of direct costs, related incidental expenses and attributable interest.
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
III. Depreciation
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.
Depreciation on property, plant and equipment of the Company has been provided on the straight-line method as per the useful life prescribed in Schedule II to the Act, except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on independent technical evaluation and management''s assessment thereof, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.
Particulars |
Estimated Useful Life |
Improvements on |
Over the period of |
Leased Premises |
lease |
Building |
5 to 80 years |
Plant and Equipment |
10 to 15 years |
Office Equipment (Desktop and Laptop) |
4 years |
Depreciation method, useful live and residual values are reviewed at each financial year end and adjusted if appropriate.
Depreciation on additions (disposals) is provided on a pro-rata basis i.e. from (upto) the date on which asset is ready for use (disposed of).
Intangible assets are carried at cost less accumulated amortisation and impairment losses, if any. The cost of an intangible asset comprises of its purchase price, including any import duties and other taxes (other than those subsequently recoverable from the taxing authorities), and any directly attributable expenditure on making the asset ready for its intended use.
Expenditure on research and development eligible for capitalisation are carried as Intangible assets under development where such assets are not yet ready for their intended use.
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
Intangible assets are derecognised either on their disposal or where no future economic benefits are expected from their use.
Losses arising on such derecognition are recorded in the profit or loss, and are measured as the difference between the net disposal proceeds, if any, and the carrying amount of respective intangible assets as on the date of derecognition.
Intangible assets are amortised over their estimated useful life on Straight Line Method as follows:
Particulars |
Estimated Useful Life |
Computer Software |
5 to 6 years |
Trademark and Licenses |
4 to 5 years |
Dossiers/Marketing Rights |
10 years |
Knowhow |
5 years |
The estimated useful lives of intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation method is revised to reflect the changed pattern, if any.
d) Non-current assets held for sale:
Assets are classified as held for sale and stated at the lower of carrying amount and fair value less
costs to sell if the asset is available for immediate sale and its sale is highly probable. Such assets or group of assets are presented separately in the Balance Sheet as "Assets Classified as Held for Saleâ. Once classified as held for sale, intangible assets and property, plant and equipment are no longer amortised or depreciated.
Revenue expenditure pertaining to research is charged to the respective heads in the Statement of Profit and Loss in the year it is incurred. Development costs of products are also charged to the Statement of Profit and Loss in the year it is incurred, unless following conditions are satisfied in which case such expenditure is capitalized:
- a productâs technological feasibility has been established
- development costs can be measured reliably
- future economic benefits are probable
- the company intends to and has sufficient resources/ability to complete development and to use or sell the asset
The amount capitalised comprises of expenditure that can be directly attributed or allocated on a reasonable and consistent basis for creating, producing and making the asset ready for its intended use. Property, Plant and Equipment utilised for research and development are capitalised and depreciated in accordance with the policies stated for Property, Plant and Equipment.
Expenditure on in-licensed development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised, if the cost can be reliably measured, the product or process is technically and commercially feasible and the Company has sufficient resources to complete the development and to use and sell the asset.
Payments to third parties that generally take the form of up-front payments and milestones for in-licensed products, compounds and intellectual property are capitalised since the probability of expected future economic benefits criterion is always considered to be satisfied for separately acquired intangible assets.
f) Impairment of non-financial assets:
The carrying values of Property, Plant and Equipment and Intangible assets at each balance sheet date are reviewed for impairment if any indication of impairment exists. The following intangible assets are tested for impairment each financial year even if there is no indication that the assets is impaired:
i) an intangible asset that is not yet available for use; and
ii) an intangible asset that is having indefinite useful life.
If the carrying amount of the Property, Plant and Equipment and Intangible assets exceed the estimated recoverable amount, an impairment is recognised for such excess amount.
The impairment loss is recognised as an expense in the Statement of Profit and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for that asset.
The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor.
When there is indication that an impairment loss recognised for an asset (other than a revalued asset) in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss, to the extent the amount was previously charged to the Statement of Profit and Loss. In case of revalued assets, such reversal is not recognised.
g) Foreign Currency Transactions/ Translations:
i) Transactions denominated in foreign currency are recorded at exchange rates prevailing
at the date of transaction or at rates that closely approximate the rate at the date of the transaction.
ii) Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency
at the exchange rate of the reporting date. Non-monetary assets and liabilities that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.
iii) Exchange differences arising on the settlement of monetary items or on translating monetary items at reporting date at rates different from those at which they were translated on initial recognition during the period or in previous Standalone Financial Statements are recognized in the Statement of Profit and Loss in the period in which they arise.
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.
On initial recognition the Company classifies financial assets as subsequently measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss on the basis of its business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.
All financial assets are recognised initially at fair value plus, in case of financial assets not recorded at fair value through Profit or Loss (FVTPL), transaction costs that are attributable to the acquisition of the financial asset.
However, Companyâs trade receivables that do not contain a significant financial component are measured at transaction price under Ind AS 115 "Revenue from Contracts with Customersâ. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e. the date that the Company commits to purchase or sell the asset.
A âfinancial assetâ is measured at the amortised cost if both the following conditions are met:
i) the asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
ii) 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. Amortised cost is calculated by taking into account any discount or premium and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance 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.
Financial assets included within the fair value through profit and loss (FVTPL) category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
For purposes of subsequent measurement, financial assets are classified in below categories:
i) Debt instruments at amortised costs
ii) Debt instruments at fair value through other comprehensive income (FVTOCI)
iii) Derivative and equity instruments at fair value through profit or loss (FVTPL)
iv) Equity instruments measured at fair value through other comprehensive income (FVTOCI)
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. For all other equity instruments, the Company decides to classify the same either as at fair value through other comprehensive income (FVTOCI) or FVTPL. The Company makes such election on an instrument-byinstrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in other comprehensive income (OCI).
There is no recycling of the amounts from OCI to Statement of Profit and Loss, even on sale of such investments.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Investments in subsidiaries and joint venture 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 subsidiaries and joint venture, the difference between net disposal proceeds and the carrying amounts are recognized in the statement of profit and loss.
A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is primarily derecognised (i.e. removed from the Companyâs 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 âpass-throughâ arrangement; and either:
i) the Company has transferred substantially all the risks and rewards of the asset, or
ii) 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 Companyâs 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.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
In accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
i) financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities, deposits, and bank balance.
ii) trade receivables.
The Company follows âsimplified approachâ for recognition of impairment loss allowance on trade receivables which do not contain a significant financing component.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
Classification
The Company classifies all financial liabilities as subsequently measured at amortised cost, except for financial liabilities measured at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, are subsequently measured at fair value with changes in fair value being recognised in the Statement of Profit and Loss.
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, at amortised cost (loans, borrowings and payables) or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments.
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the Statement of Profit and Loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in Ind-AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/losses attributable to changes in own credit risk are recognized in OCI. These gains/losses are not subsequently transferred to Statement of Profit and Loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the Statement of Profit and Loss.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at
amortised cost using the EIR method. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are derecognised.
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 as finance costs in the Statement of Profit and Loss.
This category generally applies to interest-bearing loans and borrowings.
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.
If the hybrid contract contains a host that is a financial asset within the scope Ind-AS 109, the Company does not separate embedded derivatives. Rather, it applies the classification requirements contained in Ind AS 109 to the entire hybrid contract. Derivatives embedded in all other host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in Statement of Profit and Loss, unless designated as effective hedging instruments. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows.
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
The Company uses derivative financial instruments, such as foreign exchange forward contracts, interest rate swaps and currency options to manage its exposure to interest rate and foreign exchange risks. Such 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.
The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to highly probable forecast transactions. The Company designates such forward contracts in a cash flow hedging relationship by applying the hedge accounting principles. These forward contracts are stated at fair value at each reporting date. Changes in the fair value of these forward contracts that are designated and effective as hedges of future cash flows are recognised directly in (OCI) and accumulated in "Cash Flow Hedge Reserve Accountâ under Other Equity, net of applicable deferred income taxes and the ineffective portion is recognised immediately in the Statement of Profit and Loss. Amounts accumulated in the "Cash Flow Hedge Reserve Accountâ are reclassified to the Statement of Profit and Loss in the same period during which the forecasted transaction affects Statement of Profit and Loss. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting.
For forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in "Cash Flow Hedge Reserve Accountâ is retained until the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognised in "Cash Flow Hedge Reserve Accountâ is immediately transferred to the Statement of Profit and Loss.
The Company determines the fair value of its financial instruments on the basis of the following hierarchy:
(a) Level 1: The fair value of financial instruments quoted in active markets is based on their quoted closing price at the balance sheet date.
(b) Level 2: The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques using observable market data. Such valuation techniques include discounted cash flows, standard valuation models based on market parameters for interest rates, yield curves or foreign exchange rates, dealer quotes for similar instruments and use of comparable armâs length transactions.
(c) Level 3: The fair value of financial instruments that are measured on the basis of entity specific valuations using inputs that are not based on observable market data (unobservable inputs).
i) The Company accounts for each business combination by applying the acquisition method. The acquisition date is the date on which control is transferred to the acquirer. Judgment is applied in determining the acquisition date and determining whether control is transferred from one party to another.
ii) Control exists when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through power over the entity. In assessing control, potential voting rights are considered only if the rights are substantive.
iii) The Company measures goodwill as of the applicable acquisition date at the fair value of the consideration transferred, including the recognized amount of any non-controlling interest in the acquiree, less the net recognized amount of the identifiable assets acquired
and liabilities assumed (including contingent liabilities in case such a liability represents a present obligation and arises from a past event, and its fair value can be measured reliably). When the fair value of the net identifiable assets acquired and liabilities assumed exceeds the consideration transferred, a bargain purchase gain is recognized as capital reserve.
iv) Consideration transferred includes the fair values of the assets transferred, liabilities
incurred by the Company to the previous owners of the acquiree, and equity interests issued by the Company. Consideration transferred also includes the fair value of any contingent consideration. Consideration transferred does not include amounts related to settlement of pre-existing relationships.
v) Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise subsequent changes in the fair value of the contingent consideration are recognized in the Statement of Profit and Loss.
vi) Transaction costs that the Company incurs in connection with a business combination, such as finderâs fees, legal fees, due diligence fees and other professional and consulting fees, are expensed as incurred.
vii) On an acquisition-by-acquisition basis, the Company recognizes any non-controlling interest in the acquiree either at fair value or at the non-controlling interestâs proportionate share of the acquireeâs identifiable net assets.
viii) Any goodwill that arises on account of such business combination is tested annually for impairment.
j) Income tax:
Income tax expense consists of current and deferred tax. Income tax expense is recognised in the Statement of Profit and Loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity.
In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
Current tax
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. It is measured using tax rates enacted or substantively enacted at the reporting date.
Current tax assets and liabilities are offset only if, the Company:
i) has a legally enforceable right to set off the recognised amounts; and
ii) Intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax
Deferred taxes are 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 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. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.
Deferred tax is not recognized for the 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 transaction.
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.
The Company recognises deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint arrangements, except to the extent that both of the following conditions are satisfied:
i) When the Company is able to control the timing of the reversal of the temporary difference; and
ii) it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred taxes are measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
The measurement of deferred taxes 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:
i) The Company has a legally enforceable right to set off current tax assets against current tax liabilities; and
ii) The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
Accruals for uncertain tax positions require management to make judgments of potential exposures. Accruals for uncertain tax positions are measured using either the most likely amount or the expected value amount depending on which method the entity expects to better predict the resolution of the uncertainty. Tax benefits are not recognised unless the management based upon its interpretation of applicable laws and regulations and the expectation of how the tax authority will resolve the matter concludes that such benefits will be accepted by the authorities. Once considered probable of not being accepted, management reviews each material tax benefit and reflects the effect of the uncertainty in determining the related taxable amounts.
Inventories of all procured materials, Stock-in-Trade, finished goods and work-in-progress are valued at the lower of cost (on moving weighted average basis) and the net realisable value after providing for obsolescence and other losses, where considered necessary. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
Cost of raw material, packing materials and Stock-inTrade includes all charges in bringing the goods to their present location and condition, including non-creditable taxes and other levies, transit insurance and receiving charges. However, raw materials and packing materials are considered to be realisable at cost if the finished products, in which they will be used, are expected to be sold at or above cost.
Cost of finished goods and work-in-progress includes the cost of raw materials, packing materials, an appropriate share of fixed and variable production overheads, non-creditable duties and taxes as applicable and other costs incurred in bringing the inventories to their present location and condition. Fixed production overheads are allocated on the basis of normal capacity of production facilities.
Goodwill is tested for impairment annually. If events or changes in circumstances indicate a potential impairment, as part of the review process, the carrying amount of the Cash Generating Units (CGUs) (including allocated goodwill) is compared with its recoverable amount by the Company.
The recoverable amount is the higher of fair value less costs to sell and value in use, both of which are calculated by the Company using a discounted cash flow analysis. Calculating the future net cash flows expected to be generated to determine if impairment exists and to calculate the impairment involves significant assumptions, estimation and judgment. The estimation and judgment involves, but is not limited to, industry trends including pricing, estimating long-term revenues, revenue growth and operating expenses.
Sale of Goods
The majority of the Companyâs contracts related to product sales include only one performance obligation, which is to deliver products to customers based on purchase orders received. Revenue from sales of products is recognized at a point in time when control of the products is transferred to the customer, generally upon delivery, which the Company has determined is when physical possession, legal title of the products transfer to the customer and the Company is entitled to payment. The timing of the transfer of risks and rewards varies depending on the individual terms of the sales agreements.
Revenue from the sale of goods is measured at the transaction price which is consideration received or receivable, net of returns, Goods and Service Tax (GST) and applicable trade discounts, allowances and chargeback. Revenue includes shipping and handling costs billed to the customer.
In arriving at the transaction price, the Company considers the terms of the contract with the customers and its customary business practices.
The transaction price is the amount of consideration the Company is entitled to receive in exchange for transferring promised goods or services, excluding amounts collected on behalf of third parties.
The Company accounts for refund liabilities (sales returns) accrual by recording an allowance for sales returns concurrent with the recognition of revenue at the time of a product sale. This allowance is based on the Companyâs estimate of expected sales returns. The Company considers its historical experience of sales returns, levels of inventory in the distribution channel, estimated shelf life, product discontinuances, price changes of competitive products, and the introduction of competitive new products, to the extent each of these factors impact the Companyâs business and markets.
The Company disaggregates revenue from contracts with customers by major Products/Service lines, geography and timing of the revenue recognition.
Any amount of variable consideration is recognised as revenue only to the extent that it is highly probable that a significant reversal will not occur.
The Company estimates the amount of variable consideration using the expected value method.
Income from research services including sale of technology/know-how (rights, licenses and other intangibles) is recognised in accordance with the terms of the contract with customers when the related performance obligation is completed, or when risks and rewards of ownership are transferred, as applicable.
The Company enters into certain dossier sales, licensing and supply arrangements that, in certain instances, include certain performance obligations. Based on an evaluation of whether or not these obligations are inconsequential or perfunctory, the Company recognise or defer the upfront payments received under these arrangements.
Interest income is recognised with reference to the Effective Interest Rate method.
Dividend from investment is recognised as revenue when right to receive is established.
Export benefits available under prevalent schemes are accrued as revenue in the year in which the goods
are exported and/or services are rendered only when there reasonable assurance that the conditions attached to them will be complied with, and the amounts will be received.
Short term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Obligations for contributions to defined contribution plans are expensed as the related service is provided and the Company will have no legal or constructive obligation to pay further amounts. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
If the contribution payable to the scheme for service received before the reporting date exceeds the contribution already paid, the deficit payable to the scheme is recognised as a liability after deducting the contribution already paid.
The Companyâs net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed periodically by an independent qualified actuary using the projected unit credit method.
When the calculation results in a potential asset for the Company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan.
To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.
Remeasurement of the net defined benefit liability, which comprise actuarial gains and losses and the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income (OCI). Net interest expense (income) on the net defined liability (asset) is computed by applying the discount rate, used to measure the net defined liability (asset). Net interest expense and other expenses related to defined benefit plans are recognised in Statement of Profit and Loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in Statement of Profit and Loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
The Companyâs net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is measured on the basis of a periodical independent actuarial valuation using the projected unit credit method. Remeasurement are recognised in Statement of Profit and Loss in the period in which they arise.
Liability in respect of compensated absences becoming due or expected to be availed within one year from the reporting date is recognised on the basis of undiscounted value of estimated amount required to be paid or estimated value of benefit expected to be availed by the employees. Liability in respect of compensated absences becoming due or expected to be availed more than one year after the reporting date is estimated on the basis of an actuarial valuation performed by an independent actuary using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the profit or loss and are not deferred.
o) Share-based payment transactions:
Employees Stock Options Plans ("ESOPsâ):
The grant date fair value of options granted to employees is recognized as an employee expense, 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 Other Equity under "Employee Stock Options Outstanding Reserveâ.
The amount recognized as an expense is adjusted to reflect the actual number of stock options that vest.
Cash-settled Transactions: The cost of cash-settled transactions is measured initially at fair value at the grant date using a Binomial Option Pricing Model. This fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is re-measured to fair value at each reporting date up to, and including the settlement date, with changes in fair value recognised in employee benefits expense.
The approach used to account for vesting conditions when measuring equity-settled transactions also applies to cash-settled transactions.
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 uses the definition of a lease in Ind AS 116.
The Company accounts for each lease component within the contract as a lease separately from non-lease components of the contract and allocates the consideration in the contract to each lease component on the basis of the relative standalone price of the lease component and the aggregate standalone price of the non-lease components.
The Company recognises right-of-use asset representing its right to use the underlying asset for the lease term at the lease commencement date. The cost of the right-of-use asset measured at inception shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received, plus any initial direct costs incurred and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset or restoring the underlying asset or site on which it is located. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability.
The right-of-use assets is depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use asset. The estimated useful lives of right-of- use assets are determined on the same basis as those of property, plant and equipment. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.
The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The lease payments are discounted using the interest rate implicit in the lease, if that rate cannot be readily determined, the Company uses incremental borrowing rate. The lease payments shall include fixed payments, variable lease payments, residual value guarantees, exercise price of a purchase option where the Company is reasonably certain to exercise that option and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.
The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in-substance fixed lease payments. The company recognises the amount of the re-measurement of lease liability due to modification as an adjustment to the right-of-use asset and statement of profit and loss depending upon the nature of modification. Where the carrying amount of the right-of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability, the Company recognises any remaining amount of the re-measurement in statement of profit and loss.
iii) Short-term lease and leases of low value assets
The Company has elected not to apply the requirements of Ind AS 116 Leases to short-term leases of all assets that have a lease term of 12 months or less and leases for which the underlying asset is of low value. The lease
payments associated with these leases are recognized as an expense on a straight-line basis over the lease term.
q) Provisions and Contingent Liabilities:
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. If effect of the time value of money is material, provisions are discounted using an appropriate discount rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liabilities are disclosed in the Notes to the Standalone Financial Statements. Contingent liabilities are disclosed for:
i) possible obligations which will be confirmed only by future events not wholly within the control of the Company, or
ii) present obligations arising from past events where it is not probable that an outflow
of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
Cash and cash equivalents comprises cash on hand, cash at bank and short term deposits with an original maturity of three months or less, that are readily convertible into known amounts of cash and subject to insignificant risk of changes in value.
For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Companyâs cash management.
Borrowing costs are interest and other costs that the Company incurs in connection with the borrowing of funds and is measured with reference to the effective interest rate (EIR) applicable to the respective borrowing. Borrowing costs include interest costs measured at EIR and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs, allocated to qualifying assets, pertaining to the period from commencement of activities relating to construction/development of the qualifying asset up to the date of capitalisation of such asset are added to the cost of the assets. Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted.
All other borrowing costs are recognised as an expense in the period which they are incurred.
Government grants are initially recognised at fair value if there is reasonable assurance that the grant will be received and the Company will comply with the conditions associated with the grant;
- In case of capital grants, they are then recognised in Statement of Profit and Loss as other income on a systematic basis over the useful life of the asset.
- In case of grants that compensate the Company for expenses incurred are recognised in Statement of Profit and Loss on a systematic basis in the periods in which the expenses are recognised.
Export benefits available under prevalent schemes are accrued in the year in which the goods are exported and there is no uncertainty in receiving the same.
Basic earnings per share is computed by dividing the profit/(loss) after tax by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for the events for bonus issue, bonus element in a rights issue to existing shareholders, share split and reverse share split (consolidation of shares). Diluted earnings per share is computed by dividing the profit/(loss) after tax as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could
Mar 31, 2022
IA. OVERVIEW: Lupin Limited, (''the Company'') incorporated in 1983, is an innovation led Transnational Pharmaceutical Company producing, developing and marketing a wide range of branded and generic formulations, biotechnology products and active pharmaceutical ingredients (APIs) globally. The Company has significant presence in the Cardiovascular, Diabetology, Asthama, Pediatrics, Central Nervous System, Gastro-Intestinal, Anti-Infectives and Nonsteroidal Anti Inflammatory Drug therapy segments and is a global leader in the Anti-TB and Cephalosporins segments. The Company along with its subsidiaries has manufacturing locations spread across India, USA, Mexico and Brazil with trading and other incidental and related activities extending to the global markets. The Company is a public limited company incorporated and domiciled in India. The address of its registered office is Kalpataru Inspire, 3rd floor, Western Express Highway, Santacruz (East), Mumbai 400055. IB. SIGNIFICANT ACCOUNTING POLICIES:a) Basis of accounting and preparation ofStandalone Financial Statements:Basis of preparation i) These standalone financial statements of the Company have been prepared in all material aspects in accordance with the recognition and measurement principles laid down in Indian Accounting Standards (hereinafter referred to as the ''Ind AS'') as notified under section 133 of the Companies Act, 2013 (''the Act'') read with Rule 4 of the Companies (Indian Accounting Standards) Rules, 2015 as amended and other relevant provisions of the Act and accounting principles generally accepted in India. These standalone financial statements were authorized for issue by the Company''s Board of Directors on May 18, 2022. Functional and Presentation Currency ii) These standalone financial statements are presented in Indian rupees, which is the functional currency of the Company. All financial information presented in Indian rupees has been rounded to the nearest million, except otherwise indicated. Basis of measurement iii) These standalone financial statements are prepared under the historical cost convention unless otherwise indicated. Use of Estimates and Judgements iv) The preparation of the Standalone Financial Statements in conformity with Ind AS requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the Standalone Financial Statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known/materialised. Estimates and underlying assumptions are reviewed on an ongoing basis. Information about critical judgments made in applying accounting policies, as well as estimates and assumptions that have the most significant effect to the carrying amounts of assets and liabilities within the next financial year, are included in the following accounting policies. - Measurement and likelihood of occurrence of provisions and contingencies (Refer note o) - Impairment of non-financial assets (Refer note f) - Impairment of financial assets (Refer note h) - Provision for Income taxes and uncertain tax positions (refer note i) Freehold land is carried at historical cost. Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses, if any. The cost of an item of property, plant and equipment comprises: - its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates. - any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. - the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which the Company incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period. - income and expenses related to the incidental operations, not necessary to bring the item to the location and condition necessary for it to be capable of operating in the manner intended by management, are recognised in Statement of Profit and Loss. If 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. Any gain or loss on disposal of an item of property, plant and equipment is recognised in Statement of Profit and Loss. Capital work-in-progress in respect of assets which are not ready for their intended use are carried at cost, comprising of direct costs, related incidental expenses and attributable interest. Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company. III. Depreciation Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation on property, plant and equipment of the Company has been provided on the straight-line method as per the useful life prescribed in Schedule II to the Act, except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on independent technical evaluation and management''s assessment thereof, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc. Particulars Estimated Useful Life Leasehold Land Over the period of lease Improvements on Leased Over the period Premises of lease Building 5 to 80 years Plant and Equipment 10 to 15 years Office Equipment (Desktop and Laptop) 4 years Certain assets provided to employees 3 years Depreciation method, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate. Depreciation on additions (disposals) is provided on a pro-rata basis i.e. from (upto) the date on which asset is ready for use (disposed of). Intangible assets are carried at cost less accumulated amortisation and impairment losses, if any. The cost of an intangible asset comprises of its purchase price, including any import duties and other taxes (other than those subsequently recoverable from the taxing authorities), and any directly attributable expenditure on making the asset ready for its intended use. Expenditure on research and development eligible for capitalisation are carried as Intangible assets under development where such assets are not yet ready for their intended use. Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company. Intangible assets are de-recognised either on their disposal or where no future economic benefits are expected from their use. Losses arising on such de-recognition are recorded in the consolidated profit or loss, and are measured as the difference between the net disposal proceeds, if any, and the carrying amount of respective intangible assets as on the date of derecognition. Intangible assets are amortised over their estimated useful life on Straight Line Method as follows: Particulars Estimated Useful Life Computer Software 5 to 6 years Trademark and Licenses 4 to 5 years Dossiers/Marketing Rights 10 years The estimated useful lives of intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation method is revised to reflect the changed pattern, if any. d) Non-current assets held for sale: Assets are classified as held for sale and stated at the lower of carrying amount and fair value less costs to sell if the asset is available for immediate sale and its sale is highly probable. Such assets or group of assets are presented separately in the Balance Sheet as "Assets Classified as Held for Saleâ. Once classified as held for sale, intangible assets and property, plant and equipment are no longer amortised or depreciated. Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss. Development costs of products are also charged to the Statement of Profit and Loss in the year it is incurred, unless a product''s technological feasibility has been established, in which case such expenditure is capitalised. These costs are charged to the respective heads in the Statement of Profit and Loss in the year it is incurred. The amount capitalised comprises of expenditure that can be directly attributed or allocated on a reasonable and consistent basis for creating, producing and making the asset ready for its intended use. Property, Plant and Equipment utilised for research and development are capitalised and depreciated in accordance with the policies stated for Property, Plant and Equipment. Expenditure on in-licensed development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised, if the cost can be reliably measured, the product or process is technically and commercially feasible and the Company has sufficient resources to complete the development and to use and sell the asset. Payments to third parties that generally take the form of up-front payments and milestones for in-licensed products, compounds and intellectual property are capitalised since the probability of expected future economic benefits criterion is always considered to be satisfied for separately acquired intangible assets. f) Impairment of non-financial assets: The carrying values of Property, Plant and Equipment and Intangible assets at each balance sheet date are reviewed for impairment if any indication of impairment exists. The following intangible assets are tested for impairment each financial year even if there is no indication that the asset is impaired: i) an intangible asset that is not yet available for use; and ii) an intangible asset that is having indefinite useful life. If the carrying amount of the Property, Plant and Equipment and Intangible assets exceed the estimated recoverable amount, an impairment is recognised for such excess amount. The impairment loss is recognised as an expense in the Statement of Profit and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for that asset. The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor. When there is indication that an impairment loss recognised for an asset (other than a revalued asset) in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss, to the extent the amount was previously charged to the Statement of Profit and Loss. In case of revalued assets, such reversal is not recognised. g) Foreign Currency Transactions/ Translations: i) Transactions denominated in foreign currency are recorded at exchange rates prevailing at the date of transaction or at rates that closely approximate the rate at the date of the transaction. ii) Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the exchange rate of the reporting date. Non-monetary assets and liabilities that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. iii) Exchange differences arising on the settlement of monetary items or on translating monetary items (except for long term monetary items outstanding as at March 31, 2016) at rates different from those at which they were translated on initial recognition during the period or in previous standalone financial statements are recognized in the Statement of Profit and Loss in the period in which they arise. aiemenis iv) In case of long term monetary items outstanding as at March 31, 2016, exchange differences arising on settlement/restatement thereof are capitalised as part of the depreciable fixed assets to which the monetary item relates and depreciated over the remaining useful life of such assets. If such monetary items do not relate to acquisition of depreciable fixed assets, the exchange difference is amortised over the maturity period/upto the date of settlement of such monetary items, whichever is earlier, and charged to the Statement of Profit and Loss. On initial recognition the Company classifies financial assets as subsequently measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss on the basis of its business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. All financial assets (not measured subsequently at fair value through profit or loss) are recognised initially at fair value plus 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 market place (regular way trades) are recognised on the trade date, i.e. the date that the Company commits to purchase or sell the asset. A ''financial asset'' is measured at the amortised cost if both the following conditions are met: i) the asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and ii) 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. Amortised cost is calculated by taking into account any discount or premium and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance 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. Financial assets included within the fair value through profit and loss (FVTPL) category are measured at fair value with all changes recognized in the Statement of Profit and Loss. All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. For all other equity instruments, the Company decides to classify the same either as at fair value through other comprehensive income (FVTOCI) or FVTPL. The Company makes such election on an instrument-byinstrument basis. The classification is made on initial recognition and is irrevocable. If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in other comprehensive income (OCI). There is no recycling of the amounts from OCI to Statement of Profit and Loss, even on sale of such investments. Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss. Investments in subsidiaries and joint venture 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 subsidiaries and joint venture, the difference between net disposal proceeds and the carrying amounts are recognized in the Statement of Profit and Loss. A financial asset (or, where applicable, a part of a financial asset or part of a Company 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: i) the Company has transferred substantially all the risks and rewards of the asset, or ii) 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. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay. In accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure: i) financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities, deposits, and bank balance. ii) trade receivables. The Company follows ''simplified approach'' for recognition of impairment loss allowance on trade receivables which do not contain a significant financing component. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. The Company classifies all financial liabilities as subsequently measured at amortised cost, except for financial liabilities measured at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, are subsequently measured at fair value with changes in fair value being recognised in the Statement of Profit and Loss. Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, at amortised cost (loans, borrowings and payables) or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Company''s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments. Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the Statement of Profit and Loss. Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in Ind-AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/losses attributable to changes in own credit risk are recognized in OCI. These gains/losses are not subsequently transferred to Statement of Profit and Loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the Statement of Profit and Loss. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are derecognised. 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 as finance costs in the Statement of Profit and Loss. This category generally applies to interest-bearing loans and borrowings. 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. If the hybrid contract contains a host that is a financial asset within the scope Ind-AS 109, the Company does not separate embedded derivatives. Rather, it applies the classification requirements contained in Ind AS 109 to the entire hybrid contract. Derivatives embedded in all other host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in Statement of Profit and Loss, unless designated as effective hedging instruments. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows. Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously. The Company uses derivative financial instruments, such as foreign exchange forward contracts, interest rate swaps and currency options to manage its exposure to interest rate and foreign exchange risks. Such 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. The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to highly probable forecast transactions. The Company designates such forward contracts in a cash flow hedging relationship by applying the hedge accounting principles. These forward contracts are stated at fair value at each reporting date. Changes in the fair value of these forward contracts that are designated and effective as hedges of future cash flows are recognised directly in (OCI) and accumulated in "Cash Flow Hedge Reserve Accountâ under Other Equity, net of applicable deferred income taxes and the ineffective portion is recognised immediately in the Statement of Profit and Loss. Amounts accumulated in the "Cash Flow Hedge Reserve Accountâ are reclassified to the Statement of Profit and Loss in the same period during which the forecasted transaction affects Statement of Profit and Loss. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in "Cash Flow Hedge Reserve Accountâ is retained until the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognised in "Cash Flow Hedge Reserve Accountâ is immediately transferred to the Statement of Profit and Loss. The Company determines the fair value of its financial instruments on the basis of the following hierarchy: (a) Level 1: The fair value of financial instruments quoted in active markets is based on their quoted closing price at the balance sheet date. (b) Level 2: The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques using observable market data. Such valuation techniques include discounted cash flows, standard valuation models based on market parameters for interest rates, yield curves or foreign exchange rates, dealer quotes for similar instruments and use of comparable arm''s length transactions. (c) Level 3: The fair value of financial instruments that are measured on the basis of entity specific valuations using inputs that are not based on observable market data (unobservable inputs). Income tax expense consists of current and deferred tax. Income tax expense is recognised in the Statement of Profit and Loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively. 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. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax assets and liabilities are offset only if, the Company: i) has a legally enforceable right to set off the recognised amounts; and ii) Intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Deferred taxes are 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 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. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves. 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. The Company recognises deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint arrangements, except to the extent that both of the following conditions are satisfied: i) When the Company is able to control the timing of the reversal of the temporary difference; and ii) it is probable that the temporary difference will not reverse in the foreseeable future. Deferred taxes are measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. The measurement of deferred taxes 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: i) The Company has a legally enforceable right to set off current tax assets against current tax liabilities; and ii) The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity. Accruals for uncertain tax positions require management to make judgments of potential exposures. Accruals for uncertain tax positions are measured using either the most likely amount or the expected value amount depending on which method the entity expects to better predict the resolution of the uncertainty. Tax benefits are not recognised unless the management based upon its interpretation of applicable laws and regulations and the expectation of how the tax authority will resolve the matter concludes that such benefits will be accepted by the authorities. Once considered probable of not being accepted, management reviews each material tax benefit and reflects the effect of the uncertainty in determining the related taxable amounts. Inventories of all procured materials, stock-in-trade, finished goods and work-in-progress are valued at the lower of cost (on moving weighted average basis) and the net realisable value after providing for obsolescence and other losses, where considered necessary. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. Cost of raw material, packing materials and stock-intrade includes all charges in bringing the goods to their present location and condition, including non-creditable taxes and other levies, transit insurance and receiving charges. However, these items are considered to be realisable at cost if the finished products, in which they will be used, are expected to be sold at or above cost. Cost of finished goods and work-in-progress includes the cost of raw materials, packing materials, an appropriate share of fixed and variable production overheads, non-creditable duties and taxes as applicable and other costs incurred in bringing the inventories to their present location and condition. Fixed production overheads are allocated on the basis of normal capacity of production facilities. k) Revenue Recognition:Sale of Goods The majority of the Company''s contracts related to product sales include only one performance obligation, which is to deliver products to customers based on purchase orders received. Revenue from sales of products is recognized at a point in time when control of the products is transferred to the customer, generally upon delivery, which the Company has determined is when physical possession, legal title of the products transfer to the customer and the Company is entitled to payment. The timing of the transfer of risks and rewards varies depending on the individual terms of the sales agreements. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable (after including fair value allocations related to multiple deliverable and/or linked arrangements), net of returns, sales tax/GST and applicable trade discounts and allowances. Revenue includes shipping and handling costs billed to the customer. The Company accounts for sales returns accrual by recording an allowance for sales returns concurrent with the recognition of revenue at the time of a product sale. This allowance is based on the Company''s estimate of expected sales returns. The Company considers its historical experience of sales returns, levels of inventory in the distribution channel, estimated shelf life, product discontinuances, price changes of competitive products, and the introduction of competitive new products, to the extent each of these factors impact the Company''s business and markets. The Company disaggregates revenue from contracts with customers by major Products/Service lines, geography and timing of the revenue recognition. Any amount of variable consideration is recognised as revenue only to the extent that it is highly probable that a significant reversal will not occur. The Company estimates the amount of variable consideration using the expected value method. Income from research services Income from research services including sale of technology/know-how (rights, licenses and other intangibles) is recognised in accordance with the terms of the contract with customers when the related performance obligation is completed, or when risks and rewards of ownership are transferred, as applicable. The Company enters into certain dossier sales, licensing and supply arrangements that, in certain instances, include certain performance obligations. Based on an evaluation of whether or not these obligations are inconsequential or perfunctory, the Company recognise or defer the upfront payments received under these arrangements. Interest income Interest income is recognised with reference to the Effective Interest Rate method. Dividend income Dividend from investment is recognised as revenue when right to receive is established. Income from Export Benefits and Other Incentives Export benefits available under prevalent schemes are accrued as revenue in the year in which the goods are exported and/or services are rendered only when there reasonable assurance that the conditions attached to them will be complied with, and the amounts will be received. Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. Obligations for contributions to defined contribution plans are expensed as the related service is provided and the Company will have no legal or constructive obligation to pay further amounts. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. The Company''s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets. The calculation of defined benefit obligations is performed periodically by an independent qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements. Remeasurement of the net defined benefit liability, which comprise actuarial gains and losses and the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income (OCI). Net interest expense (income) on the net defined liability (asset) is computed by applying the discount rate, used to measure the net defined liability (asset). Net interest expense and other expenses related to defined benefit plans are recognised in Statement of Profit and Loss. When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in Statement of Profit and Loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs. The Company''s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is measured on the basis of a periodical independent actuarial valuation using the projected unit credit method. Remeasurement are recognised in Statement of Profit and Loss in the period in which they arise. m) Share-based payment transactions: Employees Stock Options Plans (âESOPsâ): The grant date fair value of options granted to employees is recognized as an employee expense, 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 Other Equity under "Employee Stock Options Outstanding Reserveâ. The amount recognized as an expense is adjusted to reflect the actual number of stock options that vest. Cash-settled Transactions: The cost of cash-settled transactions is measured initially at fair value at the grant date using a Binomial Option Pricing Model. This fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is re-measured to fair value at each reporting date up to, and including the settlement date, with changes in fair value recognised in employee benefits expense. 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 uses the definition of a lease in Ind AS 116. The Company accounts for each lease component within the contract as a lease separately from non-lease components of the contract and allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components. The Company recognises right-of-use asset representing its right to use the underlying asset for the lease term at the lease commencement date. The cost of the right-of-use asset measured at inception shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received, plus any initial direct costs incurred and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset or restoring the underlying asset or site on which it is located. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. The right-of-use assets is depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use asset. The estimated useful lives of right-of- use assets are determined on the same basis as those of property, plant and equipment. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognised in the Statement of Profit and Loss. The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The lease payments are discounted using the interest rate implicit in the lease, If that rate cannot be readily determined, the Company uses incremental borrowing rate, Generally, the Company uses its incremental borrowing rate as the discount rate. 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. For leases with reasonably similar characteristics, the Company, on a lease by lease basis, may adopt either the incremental borrowing rate specific to the lease or the incremental borrowing rate for the portfolio as a whole. The lease payments shall include fixed payments, variable lease payments, residual value guarantees, exercise price of a purchase option where the Company is reasonably certain to exercise that option and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in-substance fixed lease payments. The company recognises the amount of the re-measurement of lease liability due to modification as an adjustment to the right-of-use asset and statement of profit and loss depending upon the nature of modification. Where the carrying amount of the right-of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability, the Company recognises any remaining amount of the re-measurement in Statement of Profit and Loss. The Company has elected not to apply the requirements of Ind AS 116 Leases to short-term leases of all assets that have a lease term of 12 months or less and leases for which the underlying asset is of low value. The lease payments associated with these leases are recognized as an expense on a straight-line basis over the lease term. o) Provisions and Contingent Liabilities: 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. If effect of the time value of money is material, provisions are discounted using an appropriate discount rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. Contingent liabilities are disclosed in the Notes to the Standalone Financial Statements. Contingent liabilities are disclosed for: i) possible obligations which will be confirmed only by future events not wholly within the control of the Company, or ii) present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Cash comprises cash on hand, current accounts and deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), current investments that are convertible into known amounts of cash and which are subject to insignificant risk of changes in value. Borrowing costs are interest and other costs that the Company incurs in connection with the borrowing of funds and is measured with reference to the effective interest rate (EIR) applicable to the respective borrowing. Borrowing costs include interest costs measured at EIR and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Borrowing costs, allocated to qualifying assets, pertaining to the period from commencement of activities relating to construction/development of the qualifying asset up to the date of capitalisation of such asset are added to the cost of the assets. Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted. All other borrowing costs are recognised as an expense in the period which they are incurred. Government grants are initially recognised at fair value if there is reasonable assurance that they will be received and the Company will comply with the conditions associated with the grant; - In case of capital grants, they are then recognised in Statement of Profit and Loss as other income on a systematic basis over the useful life of the asset. - In case of grants that compensate the Company for expenses incurred are recognised in Statement of Profit and Loss on a systematic basis in the periods in which the expenses are recognised. Export benefits available under prevalent schemes are accrued in the year in which the goods are exported and there is no uncertainty in receiving the same. Basic earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for the events for bonus issue, bonus element in a rights issue to existing shareholders, share split and reverse share split (consolidation of shares). Diluted earnings per share is computed by dividing the profit/(loss) after tax as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on conversion of all dilutive potential equity shares. The calculation of diluted earnings per share does not assume conversion, exercise, or other issue of potential ordinary shares that would have an antidilutive effect on earnings per share. Insurance claims are accounted for on the basis of claims admitted/expected to be admitted and to the extent that the amount recoverable can be measured reliably and it is reasonable to expect the ultimate collection. u) Goods and Services tax input credit: Goods and Services tax input credit is accounted for in the books in the period in which the underlying goods/service received is accounted and when there is reasonable certainty in availing/utilising the credits. 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 as set out in Schedule III of the Act. 1C. RECENT ACCOUNTING PRONOUNCEMENTS: Ministry of Corporate Affairs ("MCAâ) 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 1st, 2022, as below: The amendments specify 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. Reference to revised Conceptual Framework. For contingent liabilities/levies, clarification is added on how to apply the principles for recognition of contingent liabilities from Ind AS 37. Recognition of contingent assets is not allowed. The amendments requires an entity to deduct from the cost of property, plant and equipment any proceeds received from selling items produced while the entity is preparing the asset for its intended use. 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 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 amendment removes the requirement in Ind AS 41 for entities to exclude cash flows for taxation when measuring fair value. This aligns the fair value measurement in Ind AS 41 with the requirements of Ind AS 113 Fair Value Measurement. First time Adoption of Ind AS - Measurement of Foreign Currency Translation Difference in case of subsidiary/associate/JV''s date of transition to Ind AS is subsequent to that of Parent -FCTR in the books of subsidiary/associate/JV can be measured based Consolidated Financial Statements. The amendments are extensive and the Group will evaluate the same to give effect to them as required by law.
b) Property, Plant and Equipment & Depreciation:I. Recognition and Measurement:
II. Subsequent Expenditure
I. Recognition and Measurement:
II. Subsequent Expenditure
III. Derecognition of Intangible Assets
IV. Amortisation
I. Financial Assets Classification
Initial recognition and measurement
Financial assets at amortised cost
Equity investments
Investments in subsidiaries and joint venture
Derecognition
Impairment of financial assets
II. Financial Liabilities Classification
Initial recognition and measurement
Financial liabilities at fair value through profit or loss
Loans and borrowings
Derecognition
Embedded derivatives
Offsetting of financial instruments
Derivative financial instruments
Hedge Accounting
III. Measurement
Current tax
Deferred tax
Short term employee benefits
Defined contribution plans
Defined benefit plans
Other long-term employee benefits
Company as a lessee
Ind AS 103 - Reference to Conceptual Framework
Ind AS 103 - Business Combination
Ind AS 16 - Proceeds before intended use
Ind AS 37 - Onerous Contracts - Costs of Fulfilling a Contract
Ind AS 109 - Annual Improvements to Ind AS (2021)
Ind AS 41 - Taxation in fair value measurements
Ind AS 101 - Subsidiary as a first time adopter
Mar 31, 2021
IA. OVERVIEW:
Lupin Limited, (âthe Companyâ) incorporated in 1983, is an innovation led Transnational Pharmaceutical Company producing, developing and marketing a wide range of branded and generic formulations, biotechnology products and active pharmaceutical ingredients (APIs) globally. The Company has significant presence in the Cardiovascular, Diabetology, Asthama, Pediatrics, Central Nervous System, Gastro-Intestinal, Anti-Infectives and Nonsteroidal Anti Inflammatory Drug therapy segments and is a global leader in the Anti-TB and Cephalosporins segments.
The Company along with its subsidiaries has manufacturing locations spread across India, USA, Mexico and Brazil with trading and other incidental and related activities extending to the global markets.
The Company is a public limited company incorporated and domiciled in India. The address of its registered office is Kalpataru Inspire, 3rd floor, Western Express Highway, Santacruz (East), Mumbai 400055.
IB. SIGNIFICANT ACCOUNTING POLICIES:a) Basis of accounting and preparation ofStandalone Financial Statements:Basis of preparation
i) These standalone financial statements of the Company have been prepared in all material aspects in accordance with the recognition and measurement principles laid down in Indian Accounting Standards (hereinafter referred to as the âInd ASâ) as notified under section 133 of the Companies Act, 2013 (âthe Actâ) read with Rule 4 of the Companies (Indian Accounting Standards) Rules, 2015 as amended and other relevant provisions of the Act and accounting principles generally accepted in India.
These standalone financial statements were authorized for issue by the Companyâs Board of Directors on May 12, 2021.
Functional and Presentation Currency
ii) These standalone financial statements are presented in Indian rupees, which is the functional currency of the Company.
All financial information presented in Indian rupees has been rounded to the nearest million, except otherwise indicated.
iii) These standalone financial statements are prepared under the historical cost convention unless otherwise indicated.
Use of Estimates and Judgements
iv) The preparation of the Standalone Financial Statements in conformity with Ind AS requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the Standalone Financial Statements
are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known/materialised. Estimates and underlying assumptions are reviewed on an ongoing basis.
Information about critical judgments in applying accounting policies, as well as estimates and assumptions that have the most significant effect to the carrying amounts of assets and liabilities within the next financial year, are included in the accounting policies.
- Measurement of defined benefit obligations (Refer note l)
- Measurement and likelihood of occurrence of provisions and contingencies (Refer note o)
- Recognition of deferred tax assets (Refer note i)
- Useful lives of property, plant and equipment and intangibles (Refer note b & c)
- Impairment of assets (Refer note f)
- Impairment of financial assets (Refer note h)
- Provision for Income taxes and uncertain tax positions (refer note i)
- Accrual of Sales return and other applicable trade discounts and allowances (refer note k)
- Share-based payment transactions (Refer note m)
b) Property, Plant and Equipment & Depreciation:
I. Recognition and Measurement:
Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses, if any. The cost of an item of property, plant and equipment comprises:
- its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates.
- any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
- the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which the Company incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.
- income and expenses related to the incidental operations, not necessary to bring the item to the location and condition necessary for it to be capable of operating in the manner intended by management, are recognised in Statement of Profit and Loss. If 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.
Any gain or loss on disposal of an item of property, plant and equipment is recognised in Statement of Profit and Loss.
Capital work-in-progress in respect of assets which are not ready for their intended use are carried at cost, comprising of direct costs, related incidental expenses and attributable interest.
II. Subsequent Expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
III. Depreciation
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.
Depreciation on property, plant and equipment of the Company has been provided on the straight-line method as per the useful life prescribed in Schedule II to the Act, except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on independent technical evaluation and management''s assessment thereof, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.
Particulars |
Estimated Useful Life |
Leasehold Land |
Over the period of lease |
Improvements on Leased |
Over the period of |
Premises |
lease |
Building |
5 to 80 years |
Plant and Equipment |
10 to 15 years |
Office Equipment (Desktop and Laptop) |
4 years |
Certain assets provided to |
3 years |
employees_
Depreciation method, useful live and residual values are reviewed at each financial year end and adjusted if appropriate.
Depreciation on additions (disposals) is provided on a pro-rata basis i.e. from (upto) the date on which asset is ready for use (disposed of).
I. Recognition and Measurement:
Intangible assets are carried at cost less accumulated amortisation and impairment losses, if any. The cost of an intangible asset comprises of its purchase price, including any import duties and other taxes (other than those subsequently recoverable from the taxing authorities), and any directly attributable expenditure on making the asset ready for its intended use.
Expenditure on research and development eligible for capitalisation are carried as Intangible assets under development where such assets are not yet ready for their intended use.
II. Subsequent Expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
III. Amortisation
Intangible assets are amortised over their estimated useful life on Straight Line Method as follows:
Particulars |
Estimated Useful Life |
Computer Software |
5 to 6 years |
Trademark and Licenses |
4 to 5 years |
The estimated useful lives of intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation method is revised to reflect the changed pattern, if any.
d) Non-current assets held for sale:
Assets are classified as held for sale and stated at the lower of carrying amount and fair value less costs to sell if the asset is available for immediate sale and its sale is highly probable. Such assets or group of assets are presented separately in the Balance Sheet as "Assets Classified as Held for Saleâ. Once classified as held for sale, intangible assets and property, plant and equipment are no longer amortised or depreciated.
Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss. Development costs of products are also charged to the Statement of Profit and Loss in the year it is incurred, unless a productâs technological feasibility has been established, in which case such expenditure is capitalised. These costs are charged to the respective heads in the Statement of Profit and Loss in the year it is incurred. The amount capitalised comprises of expenditure that can be directly attributed or allocated on a reasonable and consistent basis for creating, producing and making the asset ready for its intended use. Property, Plant and Equipment utilised for research and development are capitalised and depreciated in accordance with the policies stated for Property, Plant and Equipment.
Expenditure on in-licensed development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised,
if the cost can be reliably measured, the product or process is technically and commercially feasible and the Company has sufficient resources to complete the development and to use and sell the asset.
Payments to third parties that generally take the form of up-front payments and milestones for in-licensed products, compounds and intellectual property are capitalised since the probability of expected future economic benefits criterion is always considered to be satisfied for separately acquired intangible assets.
The carrying values of assets/cash generating units at each balance sheet date are reviewed for impairment if any indication of impairment exists. The following intangible assets are tested for impairment each financial year even if there is no indication that the asset is impaired:
i) an intangible asset that is not yet available for use; and
ii) an intangible asset that is having indefinite useful life.
If the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognised for such excess amount. The impairment loss is recognised as an expense in the Statement of Profit and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for that asset.
The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor.
When there is indication that an impairment loss recognised for an asset (other than a revalued asset) in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss, to the extent the amount was previously charged to the Statement of Profit and Loss. In case of revalued assets, such reversal is not recognised.
g) Foreign Currency Transactions/ Translations:
i) Transactions denominated in foreign currency are recorded at exchange rates prevailing
at the date of transaction or at rates that closely approximate the rate at the date of the transaction.
ii) Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the exchange rate of the reporting date. Non-monetary assets and liabilities that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.
iii) Exchange differences arising on the settlement of monetary items or on translating monetary items (except for long term monetary items outstanding as at March 31, 2016) at rates different from those at which they were translated on initial recognition during the period or in previous standalone financial statements are recognized in the Statement of Profit and Loss in the period in which they arise.
iv) In case of long term monetary items outstanding as at March 31, 2016, exchange differences arising on settlement/restatement thereof are capitalised as part of the depreciable fixed assets to which the monetary item relates and depreciated over the remaining useful life of such assets. If such monetary items do not relate to acquisition of depreciable fixed assets, the exchange difference is amortised over the maturity period/upto the date of settlement of such monetary items, whichever
is earlier, and charged to the Statement of Profit and Loss.
I. Financial Assets
Classification
On initial recognition the Company classifies financial assets as subsequently measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss on the basis of its business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.
All financial assets (not measured subsequently at fair value through profit or loss) are recognised initially at fair value plus 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 market place (regular way trades) are recognised on the trade date, i.e. the date that the Company commits to purchase or sell the asset.
A âfinancial assetâ is measured at the amortised cost if both the following conditions are met:
i) the asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
ii) 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. Amortised cost is calculated by taking into account any discount or premium and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance 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.
Financial assets included within the fair value through profit and loss (FVTPL) category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. For all other equity instruments, the Company decides to classify the same either as at fair value through other comprehensive income (FVTOCI) or FVTPL. The Company makes such election on an instrument-byinstrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in other comprehensive income (OCI).
There is no recycling of the amounts from OCI to Statement of Profit and Loss, even on sale of such investments.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Investments in subsidiaries and joint venture 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 subsidiaries and joint venture, the difference between net disposal proceeds and the carrying amounts are recognized in the statement of profit and loss.
A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is primarily derecognised (i.e. removed from the Companyâs 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 âpass-throughâ arrangement; and either:
i) the Company has transferred substantially all the risks and rewards of the asset, or
ii) 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 Companyâs 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.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
In accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
i) financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities, deposits, and bank balance.
ii) trade receivables.
The Company follows âsimplified approachâ for recognition of impairment loss allowance on trade receivables which do not contain a significant financing component.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
Classification
The Company classifies all financial liabilities as subsequently measured at amortised cost, except for financial liabilities measured at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, are subsequently measured at fair value with changes in fair value being recognised in the Statement of Profit and Loss.
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, at amortised cost (loans, borrowings and payables) or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments.
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the Statement of Profit and Loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in Ind-AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/losses attributable to changes in own credit risk are recognized in OCI. These gains/losses are not subsequently transferred to Statement of Profit and Loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the Statement of Profit and Loss.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at
amortised cost using the EIR method. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are derecognised.
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 as finance costs in the Statement of Profit and Loss.
This category generally applies to interest-bearing loans and borrowings.
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.
If the hybrid contract contains a host that is a financial asset within the scope Ind-AS 109, the Company does not separate of embedded derivatives. Rather, it applies the classification requirements contained in Ind AS 109 to the entire hybrid contract. Derivatives embedded in all other host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in Statement of Profit and Loss, unless designated as effective hedging instruments. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows.
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis,
to realise the assets and settle the liabilities simultaneously.
The Company uses derivative financial instruments, such as foreign exchange forward contracts, interest rate swaps and currency options to manage its exposure to interest rate and foreign exchange risks. Such 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.
The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to highly probable forecast transactions. The Company designates such forward contracts in a cash flow hedging relationship by applying the hedge accounting principles. These forward contracts are stated at fair value at each reporting date. Changes in the fair value of these forward contracts that are designated and effective as hedges of future cash flows are recognised directly in (OCI) and accumulated in "Cash Flow Hedge Reserve Accountâ under Other Equity, net of applicable deferred income taxes and the ineffective portion is recognised immediately in the Statement of Profit and Loss. Amounts accumulated in the "Cash Flow Hedge Reserve Accountâ are reclassified to the Statement of Profit and Loss in the same period during which the forecasted transaction affects Statement of Profit and Loss. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in "Cash Flow Hedge Reserve Accountâ is retained until the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognised in "Cash Flow Hedge Reserve Accountâ is immediately transferred to the Statement of Profit and Loss.
The Company determines the fair value of its financial instruments on the basis of the following hierarchy:
(a) Level 1: The fair value of financial instruments quoted in active markets is based on their quoted closing price at the balance sheet date.
(b) Level 2: The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques using observable market data. Such valuation techniques include discounted cash flows, standard valuation models based on market parameters for interest rates, yield curves or foreign exchange rates, dealer quotes for similar instruments and use of comparable armâs length transactions.
(c) Level 3: The fair value of financial instruments that are measured on the basis of entity specific valuations using inputs that are not based on observable market data (unobservable inputs).
Income tax expense consists of current and deferred tax. Income tax expense is recognised in the Statement of Profit and Loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
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. It is measured using tax rates enacted or substantively enacted at the reporting date.
Current tax assets and liabilities are offset only if, the Company:
i) has a legally enforceable right to set off the recognised amounts; and
ii) Intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred taxes are 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 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. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.
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.
The Company recognises deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint arrangements, except to the extent that both of the following conditions are satisfied:
i) When the Company is able to control the timing of the reversal of the temporary difference; and
ii) it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred taxes are measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
The measurement of deferred taxes 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:
i) the Company has a legally enforceable right to set off current tax assets against current tax liabilities; and
ii) The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
Accruals for uncertain tax positions require management to make judgments of potential exposures. Accruals for uncertain tax positions are measured using either the most likely amount or the expected value amount depending on which method the entity expects to better predict the resolution of the uncertainty. Tax benefits are not recognised unless the management based upon its interpretation of applicable laws and regulations and the expectation of how the tax authority will resolve the matter concludes that such benefits will be accepted by the authorities. Once considered probable of not being accepted, management reviews each material tax benefit and reflects the effect of the uncertainty in determining the related taxable amounts.
Inventories of all procured materials, Stock-inTrade, finished goods and work-in-progress are valued at the lower of cost (on moving weighted average basis) and the net realisable value after providing for obsolescence and other losses, where considered necessary. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
Cost of raw material, packing materials and Stock-in-Trade includes all charges in bringing the goods to their present location and condition, including non-creditable taxes and other levies, transit insurance and receiving charges. However, these items are considered to be realisable at cost if the finished products, in which they will be used, are expected to be sold at or above cost.
Cost of finished goods and work-in-progress includes the cost of raw materials, packing materials, an appropriate share of fixed and variable production overheads, non-creditable duties and taxes as applicable and other costs incurred in bringing the inventories to their present location and condition. Fixed production overheads are allocated on the basis of normal capacity of production facilities.
k) Revenue Recognition:Sale of Goods
The majority of the Companyâs contracts related to product sales include only one performance obligation, which is to deliver products to customers based on purchase orders received. Revenue from sales of products is recognized at a point in time when control of the products is transferred to the customer, generally upon delivery, which the Company has determined is when physical possession, legal title and risks and rewards of ownership of the products transfer to the customer and the Company is entitled to payment. The timing of the transfer of risks and rewards varies depending on the individual terms of the sales agreements. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable (after including fair value allocations related to multiple deliverable and/or linked arrangements), net of returns, sales tax/GST and applicable trade discounts and allowances. Revenue includes shipping and handling costs billed to the customer.
The Company accounts for sales returns accrual by recording an allowance for sales returns concurrent with the recognition of revenue at the time of a product sale. This allowance is based on the Companyâs estimate of expected sales returns.
The Company considers its historical experience of sales returns, levels of inventory in the distribution channel, estimated shelf life, product discontinuances, price changes of competitive products, and the introduction of competitive new products, to the extent each of these factors impact the Companyâs business and markets.
Income from research services including sale of technology/know-how (rights, licenses and other intangibles) is recognised in accordance with the terms of the contract with customers when the related performance obligation is completed, or when risks and rewards of ownership are transferred, as applicable.
The Company enters into certain dossier sales, licensing and supply arrangements that, in certain instances, include certain performance obligations. Based on an evaluation of whether or not these obligations are inconsequential or perfunctory, the Company recognise or defer the upfront payments received under these arrangements.
Interest income is recognised with reference to the Effective Interest Rate method.
Dividend from investment is recognised as revenue when right to receive is established.
Export benefits available under prevalent schemes are accrued as revenue in the year in which the goods are exported and/or services are rendered only when there reasonable assurance that the conditions attached to them will be complied with, and the amounts will be received.
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Obligations for contributions to defined contribution plans are expensed as the related service is provided and the Company will have no legal or constructive obligation to pay further amounts. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
The Companyâs net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed periodically by an independent qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan.
To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.
Remeasurement of the net defined benefit liability, which comprise actuarial gains and losses and the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income (OCI). Net interest expense (income) on the net defined liability (asset) is computed by applying the discount rate, used to measure the net defined liability (asset). Net interest expense and other expenses related to defined benefit plans are recognised in Statement of Profit and Loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in Statement of Profit and Loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
The Companyâs net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods.
The obligation is measured on the basis of a periodical independent actuarial valuation using the projected unit credit method. Remeasurement are recognised in Statement of Profit and Loss in the period in which they arise.
m) Share-based payment transactions:
Employees Stock Options Plans ("ESOPsâ):
The grant date fair value of options granted to employees is recognized as an employee expense, 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 Other Equity under "Employee Stock Options Outstanding Reserveâ.
The amount recognized as an expense is adjusted to reflect the actual number of stock options that vest.
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 uses the definition of a lease in Ind AS 116.
The Company accounts for each lease component within the contract as a lease separately from non-lease components of the contract and allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.
The Company recognises right-of-use asset representing its right to use the underlying asset for the lease term at the lease commencement date. The cost of the right-of-use asset measured at inception shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received, plus any initial direct costs incurred and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset or restoring the underlying asset or site on which it is located. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. The right-of-use assets is depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use asset. The estimated useful lives of right-of- use assets are determined on the same basis as those of property, plant and equipment. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss if any, is recognised in the statement of profit and loss.
The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The lease payments are discounted using the interest rate implicit in the lease, If that rate cannot be readily determined, the Company uses incremental borrowing rate, Generally, the Company uses its incremental borrowing rate as the discount rate. 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. For leases with reasonably similar characteristics, the Company, on a lease by lease basis, may adopt either the incremental borrowing rate specific to the lease or the incremental borrowing rate for the portfolio as a whole. The lease payments shall include fixed payments, variable lease payments, residual value guarantees, exercise price of a purchase option where the Company is reasonably certain to exercise that option and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in-substance fixed lease payments. The company recognises the amount of the re-measurement of lease liability due to modification as an adjustment to the right-of-use asset and statement of profit and loss depending upon the nature of modification. Where the carrying amount of the right-of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability, the Company recognises any remaining amount of the re-measurement in statement of profit and loss.
The Company has elected not to apply the requirements of Ind AS 116 Leases to short-term leases of all assets that have a lease term of 12 months or less and leases for which the underlying asset is of low value. The lease payments associated with these leases are recognized as an expense on a straight-line basis over the lease term.
Ministry of Corporate Affairs ("MCAâ) through Companies (Indian Accounting Standards) Amendment Rules, 2019 and Companies (Indian Accounting Standards) Second Amendment Rules, had notified Ind AS 116 Leases which replaced the erstwhile lease standard, Ind AS 17 leases, and other interpretations. Ind AS 116 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors.
It introduced a single, on-balance sheet lease accounting model for lessees.
The Company had adopted Ind AS 116, effective annual reporting period beginning April 1, 2019 and applied the standard to its leases, retrospectively, with the cumulative effect of initially applying
the Standard, recognised on the date of initial application (April 1, 2019). Accordingly, the Company had not restated comparative information, instead, the cumulative effect of initially applying this standard had been recognised as an adjustment to the opening balance of retained earnings as on April 1, 2019.
o) Provisions and Contingent Liabilities:
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. If effect of the time value of money is material, provisions are discounted using an appropriate discount rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liabilities are disclosed in the Notes to the Standalone Financial Statements. Contingent liabilities are disclosed for:
i) possible obligations which will be confirmed only by future events not wholly within the control of the Company, or
ii) present obligations arising from past events where it is not probable that an outflow
of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
Cash comprises cash on hand, current accounts and deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), current investments that are convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
Borrowing costs are interest and other costs that the Company incurs in connection with the borrowing of funds and is measured with reference to the effective interest rate (EIR) applicable to the respective borrowing. Borrowing costs include interest costs measured at EIR and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs, allocated to qualifying assets, pertaining to the period from commencement of activities relating to construction/development of the qualifying asset up to the date of capitalisation of such asset are added to the cost of the assets. Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted.
All other borrowing costs are recognised as an expense in the period in which they are incurred.
Government grants are initially recognised at fair value if there is reasonable assurance that they will be received and the Company will comply with the conditions associated with the grant;
- In case of capital grants, they are then recognised in Statement of Profit and Loss as other income on a systematic basis over the useful life of the asset.
- In case of grants that compensate the Company for expenses incurred are recognised in Statement of Profit and Loss on a systematic basis in the periods in which the expenses are recognised.
Export benefits available under prevalent schemes are accrued in the year in which the goods are exported and there is no uncertainty in receiving the same.
Basic earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for the events for bonus issue, bonus element in a rights issue to existing shareholders, share split and reverse share split (consolidation of shares). Diluted earnings per share is computed by dividing the profit/(loss) after tax as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on conversion of all dilutive potential equity shares. The calculation of diluted earnings per share does not assume conversion, exercise, or other issue
of potential ordinary shares that would have an antidilutive effect on earnings per share.
Insurance claims are accounted for on the basis of claims admitted/expected to be admitted and to the extent that the amount recoverable can be measured reliably and it is reasonable to expect the ultimate collection.
u) Goods and Services tax input credit:
Goods and Services tax input credit is accounted for in the books in the period in which the underlying goods/service received is accounted and when there is reasonable certainty in availing/utilising the credits.
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 as set out in Schedule III of the Act.
1C. RECENT ACCOUNTING PRONOUNCEMENTS:
Other Amendments:
On March 24, 2021, the Ministry of Corporate Affairs ("MCAâ) 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 âfinancial liabilitiesâ, duly distinguished as current or non-current.
⢠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 âadditional regulatory requirementâ 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.
⢠Additional disclosures relating to Corporate Social Responsibility (CSR), undisclosed income and crypto or virtual currency specified under the head âadditional informationâ 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
a) Basis of accounting and preparation of Standalone Financial Statements:
Basis of preparation
i) These standalone financial statements of the Company have been prepared in all material aspects in accordance with the recognition and measurement principles laid down in Indian Accounting Standards (hereinafter referred to as the âInd ASâ) as notified under section 133 of the Companies Act, 2013 (âthe Actâ) read with Rule 4 of the Companies (Indian Accounting Standards) Rules, 2015 as amended and other relevant provisions of the Act and accounting principles generally accepted in India. These standalone financial statements were authorized for issue by the Companyâs Board of Directors on May 15, 2018.
Functional and Presentation Currency
ii) These standalone financial statements are presented in Indian rupees, which is the functional currency of the Company. All financial information presented in Indian rupees has been rounded to the nearest million, except otherwise indicated.
Basis of measurement
iii)These standalone financial statements are prepared under the historical cost convention unless otherwise indicated.
Use of Estimates and Judgements
iv)The preparation of the Standalone Financial Statements in conformity with Ind AS requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the Standalone Financial Statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known/materialised. Estimates and underlying assumptions are reviewed on an ongoing basis.
Information about critical judgments in applying accounting policies, as well as estimates and assumptions that have the most significant effect to the carrying amounts of assets and liabilities within the next financial year, are included in the accounting policies.
- Measurement of defined benefit obligations (Refer note l)
- Measurement and likelihood of occurrence of provisions and contingencies (Refer note o)
- Recognition of deferred tax assets (Refer note i)
- Useful lives of property, plant and equipment and intangibles (Refer note b & c)
- Impairment of assets (Refer note f)
- Impairment of financial assets (Refer note h)
- Share-based payment transactions (Refer note m)
b) Property, Plant and Equipment & Depreciation:
I. Recognition and Measurement:
Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses, if any. The cost of an item of property, plant and equipment comprises:
- its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates.
- any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
- the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which the Company incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.
- income and expenses related to the incidental operations, not necessary to bring the item to the location and condition necessary for it to be capable of operating in the manner intended by management, are recognised in Statement of Profit and Loss. If 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.
A ny gain or loss on disposal of an item of property, plant and equipment is recognised in Statement of Profit and Loss.
Capital work-in-progress in respect of assets which are not ready for their intended use are carried at cost, comprising of direct costs, related incidental expenses and attributable interest.
II. Subsequent Expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
III. Depreciation
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.
Depreciation on property, plant and equipment of the Company has been provided on the straight-line method as per the useful life prescribed in Schedule II to the Act, except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on independent technical evaluation and managementâs assessment thereof, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.
Depreciation method, useful live and residual values are reviewed at each financial year end and adjusted if appropriate.
Depreciation on additions (disposals) is provided on a pro-rata basis i.e. from (upto) the date on which asset is ready for use (disposed of).
c) Intangible assets:
I. Recognition and Measurement:
Intangible assets are carried at cost less accumulated amortisation and impairment losses, if any. The cost of an intangible asset comprises of its purchase price, including any import duties and other taxes (other than those subsequently recoverable from the taxing authorities), and any directly attributable expenditure on making the asset ready for its intended use.
Expenditure on research and development eligible for capitalisation are carried as Intangible assets under development where such assets are not yet ready for their intended use.
II. Subsequent Expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
III. Amortisation
Intangible assets are amortised over their estimated useful life on Straight Line Method as follows:
T he estimated useful lives of intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation method is revised to reflect the changed pattern, if any.
d) Non-current assets held for sale:
Assets are classified as held for sale and stated at the lower of carrying amount and fair value less costs to sell if the asset is available for immediate sale and its sale is highly probable. Such assets or group of assets are presented separately in the Balance Sheet as âAssets Classified as Held for Saleâ. Once classified as held for sale, intangible assets and property, plant and equipment are no longer amortised or depreciated.
e) Research and Development:
Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss. Development costs of products are also charged to the Statement of Profit and Loss in the year it is incurred, unless a productâs technological feasibility has been established, in which case such expenditure is capitalised. These costs are charged to the respective heads in the Statement of Profit and Loss in the year it is incurred. The amount capitalised comprises of expenditure that can be directly attributed or allocated on a reasonable and consistent basis for creating, producing and making the asset ready for its intended use. Property, Plant and Equipment utilised for research and development are capitalised and depreciated in accordance with the policies stated for Property, Plant and Equipment and Intangible Assets.
Expenditure on in-licensed development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised, if the cost can be reliably measured, the product or process is technically and commercially feasible and the Company has sufficient resources to complete the development and to use and sell the asset.
f) Impairment of assets:
The carrying values of assets/cash generating units at each balance sheet date are reviewed for impairment if any indication of impairment exists. The following intangible assets are tested for impairment each financial year even if there is no indication that the asset is impaired:
i) an intangible asset that is not yet available for use; and
ii) an intangible asset that is having indefinite useful life.
If the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognised for such excess amount. The impairment loss is recognised as an expense in the Statement of Profit and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for that asset.
The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor.
When there is indication that an impairment loss recognised for an asset (other than a revalued asset) in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss, to the extent the amount was previously charged to the Statement of Profit and Loss. In case of revalued assets, such reversal is not recognised.
g) Foreign Currency Transactions/Translations:
i) Transactions denominated in foreign currency are recorded at exchange rates prevailing at the date of transaction or at rates that closely approximate the rate at the date of the transaction.
ii) Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the exchange rate of the reporting date. Non-monetary assets and liabilities that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.
ii) Exchange differences arising on the settlement of monetary items or on translating monetary items (except for long term monetary items outstanding as at March 31, 2016) at rates different from those at which they were translated on initial recognition during the period or in previous standalone financial statements are recognized in the Statement of Profit and Loss in the period in which they arise.
iv) In case of long term monetary items outstanding as at March 31, 2016, exchange differences arising on settlement/ restatement thereof are capitalised as part of the depreciable fixed assets to which the monetary item relates and depreciated over the remaining useful life of such assets. If such monetary items do not relate to acquisition of depreciable fixed assets, the exchange difference is amortised over the maturity period/upto the date of settlement of such monetary items, whichever is earlier, and charged to the Statement of Profit and Loss.
h) Financial Instruments:
I. Financial Assets Classification
On initial recognition the Company classifies financial assets as subsequently measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss on the basis of its business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.
Initial recognition and measurement
All financial assets (not measured subsequently at fair value through profit or loss) are recognised initially at fair value plus 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 market place (regular way trades) are recognised on the trade date, i.e. the date that the Company commits to purchase or sell the asset.
Financial assets at amortised cost
A âfinancial assetâ is measured at the amortised cost if both the following conditions are met:
i) the asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
ii) 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. Amortised cost is calculated by taking into account any discount or premium and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance 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.
Financial assets included within the fair value through profit and loss (FVTPL) category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Equity investments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. For all other equity instruments, the Company decides to classify the same either as at fair value through other comprehensive income (FVTOCI) or FVTPL. 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 FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in other comprehensive income (OCI). There is no recycling of the amounts from OCI to Statement of Profit and Loss, even on sale of such investments.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Investments in subsidiaries and joint venture
Investments in subsidiaries and joint venture 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 subsidiaries and joint venture, the difference between net disposal proceeds and the carrying amounts are recognized in the statement of profit and loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is primarily derecognised (i.e. removed from the Companyâs balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- A he 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 âpass-throughâ arrangement; and either:
i) the Company has transferred substantially all the risks and rewards of the asset, or
ii) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
W hen 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 Companyâs 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.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
i) financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities, deposits, and bank balance.
ii) trade receivables.
A he Company follows âsimplified approachâ for recognition of impairment loss allowance on trade receivables which do not contain a significant financing component.
A he application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
II. Financial Liabilities
Classification
A he Company classifies all financial liabilities as subsequently measured at amortised cost, except for financial liabilities measured at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, are subsequently measured at fair value with changes in fair value being recognised in the Statement of Profit and Loss.
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, at amortised cost (loans, borrowings and payables) or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the Statement of Profit and Loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in Ind-AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/losses attributable to changes in own credit risk are recognized in OCI. These gains/losses are not subsequently transferred to Statement of Profit and Loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the Statement of Profit and Loss.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are derecognised.
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 as finance costs in the Statement of Profit and Loss.
This category generally applies to interest-bearing loans and borrowings.
Derecognition
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.
Embedded derivatives
If the hybrid contract contains a host that is a financial asset within the scope Ind-AS 109, the Company does not separate embedded derivatives. Rather, it applies the classification requirements contained in Ind AS 109 to the entire hybrid contract. Derivatives embedded in all other host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in Statement of Profit and Loss, unless designated as effective hedging instruments. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Derivative financial instruments
The Company uses derivative financial instruments, such as foreign exchange forward contracts, interest rate swaps and currency options to manage its exposure to interest rate and foreign exchange risks. Such 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.
Hedge Accounting
The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to highly probable forecast transactions. The Company designates such forward contracts in a cash flow hedging relationship by applying the hedge accounting principles. These forward contracts are stated at fair value at each reporting date. Changes in the fair value of these forward contracts that are designated and effective as hedges of future cash flows are recognised directly in (OCI) and accumulated in âCash Flow Hedge Reserve Accountâ under Reserves and Surplus, net of applicable deferred income taxes and the ineffective portion is recognised immediately in the Statement of Profit and Loss. Amounts accumulated in the âCash Flow Hedge Reserve Accountâ are reclassified to the Statement of Profit and Loss in the same period during which the forecasted transaction affects Statement of Profit and Loss. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in âCash Flow Hedge Reserve Accountâ is retained until the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognised in âCash Flow Hedge Reserve Accountâ is immediately transferred to the Statement of Profit and Loss.
III. Measurement
The Company determines the fair value of its financial instruments on the basis of the following hierarchy:
(a) L evel 1: The fair value of financial instruments quoted in active markets is based on their quoted closing price at the balance sheet date.
(b) L evel 2: The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques using observable market data. Such valuation techniques include discounted cash flows, standard valuation models based on market parameters for interest rates, yield curves or foreign exchange rates, dealer quotes for similar instruments and use of comparable armâs length transactions.
(c) Level 3: The fair value of financial instruments that are measured on the basis of entity specific valuations using inputs that are not based on observable market data (unobservable inputs).
i) Income tax:
Income tax expense comprises current and deferred tax. It is recognised in Statement of Profit and Loss except to the extent that it relates items recognised directly in equity or in OCI.
Current tax
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. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.
Current tax assets and liabilities are offset only if, the Company:
i) has a legally enforceable right to set off the recognised amounts; and
ii) Intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax
Deferred taxes are 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 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. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.
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.
The Company recognises deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint arrangements, except to the extent that both of the following conditions are satisfied:
i) When the Company is able to control the timing of the reversal of the temporary difference; and
ii) it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred taxes are measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
L he measurement of deferred taxes 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:
i) the Company has a legally enforceable right to set off current tax assets against current tax liabilities; and
ii) The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
j) Inventories:
Inventories of all procured materials and Stock-in-Trade are valued at the lower of cost (on moving weighted average basis) and the net realisable value after providing for obsolescence and other losses, where considered necessary. Cost includes all charges in bringing the goods to their present location and condition, including non-creditable taxes and other levies, transit insurance and receiving charges. Work-in-process and finished goods include appropriate proportion of overheads and, where applicable, excise duty.
k) Revenue Recognition:
Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured reliably.
Revenue from the sale of goods includes excise duty upto June 30, 2017 which is now subsumed in Goods and Service Tax (GST) and is measured at the fair value of the consideration received or receivable (after including fair value allocations related to multiple deliverable and/or linked arrangements), net of returns, sales tax/GST and applicable trade discounts and allowances. Revenue includes shipping and handling costs billed to the customer. The timing of the transfer of risks and rewards varies depending on the individual terms of the sales agreements.
Income from research services including sale of technology/know-how (rights, licenses and other intangibles) is recognised in accordance with the terms of the contract with customers when the related performance obligation is completed, or when risks and rewards of ownership are transferred, as applicable.
Interest income is recognised with reference to the Effective Interest Rate method.
Dividend from investments is recognised as revenue when right to receive is established.
l) Employee Benefits:
Short term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Defined contribution plans
Obligations for contributions to defined contribution plans are expensed as the related service is provided and the Company will have no legal or constructive obligation to pay further amounts. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
Defined benefit plans
The Companyâs net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed periodically by an independent qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.
Remeasurement of the net defined benefit liability, which comprise actuarial gains and losses and the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income (OCI). Net interest expense (income) on the net defined liability (asset) is computed by applying the discount rate, used to measure the net defined liability (asset). Net interest expense and other expenses related to defined benefit plans are recognised in Statement of Profit and Loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in Statement of Profit and Loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
Other long-term employee benefits
The Companyâs net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is measured on the basis of a periodical independent actuarial valuation using the projected unit credit method. Remeasurement are recognised in Statement of Profit and Loss in the period in which they arise.
m) Share-based payment transactions:
Employees Stock Options Plans (âESOPsâ): The grant date fair value of options granted to employees is recognized as an employee expense, 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 âEmployee Stock Options Outstanding Reserveâ. The amount recognized as an expense is adjusted to reflect the actual number of stock options that vest.
n) Leases:
Determining whether an arrangement contains a lease
An arrangement, which is not in the legal form of a lease, should be accounted for as a lease, if:
i) fulfilment of the arrangement is dependent on the use of a specific asset or assets (the asset); and
ii) the arrangement conveys a right to use the asset.
At inception of an arrangement, the Company determines whether the arrangement is or contains a lease.
At inception or on reassessment of an arrangement that contains a lease, the Company separates payments and other consideration required by the arrangement into those for the lease and those for other elements on the basis of their relative fair values. If it is impracticable to separate the payments reliably, then a finance lease receivable is recognised at an amount equal to the fair value of the underlying asset; subsequently, the receivable is reduced as payments are made and a finance income is recognised using the interest rate implicit in the lease.
Operating Lease
Agreements which are not classified as finance leases are considered as operating lease. Payments made under operating leases are recognised in Statement of Profit and Loss. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
o) Provisions and Contingent Liabilities:
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. If effect of the time value of money is material, provisions are discounted using an appropriate discount rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liabilities are disclosed in the Notes to the Standalone Financial Statements. Contingent liabilities are disclosed for:
i) possible obligations which will be confirmed only by future events not wholly within the control of the Company, or
ii) present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
p) Borrowing costs:
Borrowing costs are interest and other costs that the Company incurs in connection with the borrowing of funds and is measured with reference to the effective interest rate (EIR) applicable to the respective borrowing. Borrowing costs include interest costs measured at EIR and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs, allocated to qualifying assets, pertaining to the period from commencement of activities relating to construction/development of the qualifying asset up to the date of capitalisation of such asset are added to the cost of the assets. Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted.
All other borrowing costs are recognised as an expense in the period which they are incurred.
q) Government Grants:
Government grants are initially recognised at fair value if there is reasonable assurance that they will be received and the Company will comply with the conditions associated with the grant;
- In case of capital grants, they are then recognised in Statement of Profit and Loss as other income on a systematic basis over the useful life of the asset.
- In case of grants that compensate the Company for expenses incurred are recognised in Statement of Profit and Loss on a systematic basis in the periods in which the expenses are recognised.
Export benefits available under prevalent schemes are accrued in the year in which the goods are exported and there is no uncertainty in receiving the same.
r) Earnings per share:
Basic earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for the events for bonus issue, bonus element in a rights issue to existing shareholders, share split and reverse share split (consolidation of shares). Diluted earnings per share is computed by dividing the profit/(loss) after tax as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on conversion of all dilutive potential equity shares.
s) Insurance claims:
Insurance claims are accounted for on the basis of claims admitted/expected to be admitted and to the extent that the amount recoverable can be measured reliably and it is reasonable to expect the ultimate collection.
t) Goods and Services tax input credit:
Goods and Services tax input credit is accounted for in the books in the period in which the underlying service received is accounted and when there is reasonable certainty in availing/utilising the credits.
u) Segment reporting:
The Company operates in one reportable business segment i.e. âPharmaceuticalsâ.
v) 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 as set out in Schedule III of the Act.
1C. RECENT ACCOUNTING PRONOUNCEMENTS: Ind AS 115 Revenue from Contract with Customers:
In March 2018, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) Amendment Rules, 2018, notifying Ind AS 115 âRevenue from Contracts with Customersâ (New Revenue Standard), which replaces Ind AS 11 âConstruction Contractsâ and Ind AS 18 âRevenueâ. The core principle of the New Revenue 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. Some of the key changes introduced by the New Revenue Standard include additional guidance for multiple-element arrangements, measurement approaches for variable consideration, specific guidance for licensing of intellectual property. Significant additional disclosures in relation to revenue are also prescribed. The New Revenue Standard also provides two broad alternative transition options - Retrospective Method and Cumulative Effect Method - with certain practical expedients available under the Retrospective Method. The Company is in the process of evaluating the impact of the New Revenue Standard on the present and future arrangements and shall determine the appropriate transition option once the said evaluation has been completed.
Also Appendix B to Ind AS 21, foreign currency transactions and advance consideration was notified along with the same notification 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. The Company has evaluated the effect of these on the financial statements and the impact is not expected to be material.
The amendments will come into force from April 1, 2018.
Mar 31, 2017
a) Basis of accounting and preparation of Standalone Financial Statements:
Basis of accounting
i) These standalone financial statements of the Company have been prepared in accordance with the recognition and measurement principles laid down in Indian Accounting Standards (hereinafter referred to as the âInd ASâ) as notified under section 133 of the Companies Act, 2013 (âthe Actâ) read with Rule 4 of the Companies (Indian Accounting Standards) Rules, 2015 as amended and other relevant provisions of the Act and accounting principles generally accepted in India. These standalone financial statements were authorized for issue by the Companyâs Board of Directors on May 24, 2017.
ii) These standalone financial statements are the first standalone financial statements prepared in accordance with Indian Accounting Standards (Ind AS). For all periods upto and including the year ended March 31, 2016, the Company reported its Financial statements in accordance with the accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (hereinafter referred to as âIGAAPâ). The Financial statements for the year ended March 31, 2016 and the opening Balance Sheet as at April 1, 2015 have been restated in accordance with Ind AS for comparative information. Reconciliations and explanations of the effect of the transition from IGAAP to Ind AS on the Companyâs Balance Sheet, Statement of Profit and Loss and Statement of Cash Flows are provided in note 56.
Functional and Presentation Currency
iii) These standalone financial statements are presented in Indian rupees, which is the functional currency of the Company. All financial information presented in Indian rupees has been rounded to the nearest million, except otherwise indicated.
Basis of measurement
iv) These standalone financial statements are prepared under the historical cost convention unless otherwise indicated.
Use of Estimates and Judgements
v) The preparation of the Standalone Financial Statements in conformity with Ind AS requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the Standalone Financial Statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known/ materialize. Estimates and underlying assumptions are reviewed on an ongoing basis.
Information about critical judgments in applying accounting policies, as well as estimates and assumptions that have the most significant effect to the carrying amounts of assets and liabilities within the next financial year, are included in the accounting policies.
- Measurement of defined benefit obligations (Refer note k)
- Measurement and likelihood of occurrence of provisions and contingencies (Refer note n)
- Recognition of deferred tax assets (Refer note h)
- Useful lives of property, plant, equipment and Intangibles (Refer note b & c)
- Impairment of Intangibles (Refer note e)
- Impairment of financial assets (Refer note g)
b) Property, Plant and Equipment & Depreciation:
I. Recognition and Measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses, if any. The cost of an item of property, plant and equipment comprises:
- its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates.
- any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
- the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which the Company incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.
- income and expenses related to the incidental operations, not necessary to bring the item to the location and condition necessary for it to be capable of operating in the manner intended by management, are recognised in Statement of Profit and Loss. If 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.
The Company has elected to continue with the carrying value of all its property, plant and equipment as recognized in the standalone financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as the deemed cost as at the transition date pursuant to the exemption under Ind AS 101.
Any gain or loss on disposal of an item of property, plant and equipment is recognised in Statement of Profit and Loss.
Capital work-in-progress in respect of assets which are not ready for their intended use are carried at cost, comprising of direct costs, related incidental expenses and attributable interest.
II. Subsequent Expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Group.
III. Depreciation
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.
Depreciation on property, plant and equipment of the Company has been provided on the straight-line method as per the useful life prescribed in Schedule II to the Act, except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on independent technical evaluation and managementâs assessment thereof, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.:
Depreciation method, useful live and residual values are reviewed at each financial year end and adjusted if appropriate.
Depreciation on additions (disposals) is provided on a pro-rata basis i.e from (upto) the date on which asset is ready for use (disposed of).
c) Intangible Assets:
I. Recognition and Measurement
Intangible assets are carried at cost less accumulated amortisation and impairment losses, if any. The cost of an intangible asset comprises of its purchase price, including any import duties and other taxes (other than those subsequently recoverable from the taxing authorities), and any directly attributable expenditure on making the asset ready for its intended use.
Expenditure on research and development eligible for capitalisation are carried as Intangible assets under development where such assets are not yet ready for their intended use.
The Company has elected to continue with the carrying value of all its intangible assets as recognized in the standalone financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as the deemed cost as at the transition date pursuant to the exemption under Ind AS 101.
II. Subsequent Expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
III. Amortisation
Intangible assets are amortised over their estimated useful life on Straight Line Method as follows:
The estimated useful lives of intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation method is revised to reflect the changed pattern, if any.
d) Research and Development:
Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss. Development costs of products are also charged to the Statement of Profit and Loss in the year it is incurred, unless a productâs technological feasibility has been established, in which case such expenditure is capitalised. These costs are charged to the respective heads in the Statement of Profit and Loss in the year it is incurred. The amount capitalised comprises of expenditure that can be directly attributed or allocated on a reasonable and consistent basis for creating, producing and making the asset ready for its intended use. Fixed assets utilised for research and development are capitalised and depreciated in accordance with the policies stated for Tangible Fixed Assets and Intangible Assets.
Expenditure on in-licensed development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised, if the cost can be reliably measured, the product or process is technically and commercially feasible and the Company has sufficient resources to complete the development and to use and sell the asset.
e) Impairment of Assets:
The carrying values of assets / cash generating units at each balance sheet date are reviewed for impairment if any indication of impairment exists. The following intangible assets are tested for impairment each financial year even if there is no indication that the asset is impaired:
i) an intangible asset that is not yet available for use; and
ii) an intangible asset that is amortised over a period exceeding ten years from the date when the asset is available for use.
If the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognised for such excess amount. The impairment loss is recognised as an expense in the Statement of Profit and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for that asset.
The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor.
When there is indication that an impairment loss recognised for an asset (other than a revalued asset) in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss, to the extent the amount was previously charged to the Statement of Profit and Loss. In case of revalued assets, such reversal is not recognised.
f) Foreign Currency Transactions / Translations:
i) Transactions denominated in foreign currency are recorded at exchange rates prevailing at the date of transaction or at rates that closely approximate the rate at the date of the transaction.
ii) Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.
iii) Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous standalone financial statements are recognized in the Statement of Profit and Loss in the period in which they arise.
iv) In case of long term monetary items outstanding as at March 31, 2016, exchange differences arising on settlement / restatement thereof are capitalised as part of the depreciable fixed assets to which the monetary item relates and depreciated over the remaining useful life of such assets. If such monetary items do not relate to acquisition of depreciable fixed assets, the exchange difference is amortised over the maturity period / upto the date of settlement of such monetary items, whichever is earlier, and charged to the Statement of Profit and Loss .
g) Financial Instruments:
I. Financial Assets Classification
On initial recognition the Company classifies financial assets as subsequently measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss on the basis of its business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.
Initial recognition and measurement
All financial assets (not measured subsequently at fair value through profit or loss) are recognised initially at fair value plus 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 market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Financial assets at amortised cost
A âfinancial assetâ is measured at the amortised cost if both the following conditions are met:
i) the asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
ii) 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. Amortised cost is calculated by taking into account any discount or premium and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance 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.
Financial assets included within the fair value through profit and loss (FVTPL) category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Equity investments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. For all other equity instruments, the Company decides to classify the same either as at fair value through other comprehensive income (FVTOCI) or FVTPL. 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 FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in other comprehensive income (OCI). There is no recycling of the amounts from OCI to Statement of Profit and Loss, even on sale of such investments.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
The Company has elected to continue with the carrying value of all its equity investments as recognized in the standalone financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as the deemed cost as at the transition date pursuant to the exemption under Ind AS 101.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is primarily derecognised (i.e. removed from the Companyâs 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 âpass-throughâ arrangement; and either:
i) the Company has transferred substantially all the risks and rewards of the asset, or
ii) 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 Companyâs 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.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
i) financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities, deposits, and bank balance.
ii) trade receivables.
The Company follows âsimplified approachâ for recognition of impairment loss allowance on trade receivables which do not contain a significant financing component.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
II. Financial Liabilities Classification
The Company classifies all financial liabilities as subsequently measured at amortised cost, except for financial liabilities measured at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, are subsequently measured at fair value with changes in fair value being recognised in the Statement of Profit and Loss.
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, at amortised cost (loans, borrowings and payables) or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the Statement of Profit and Loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/loss are not subsequently transferred to Statement of Profit and Loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the Statement of Profit and Loss.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are derecognised.
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 as finance costs in the Statement of Profit and Loss.
This category generally applies to interest-bearing loans and borrowings.
Derecognition
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.
Embedded derivatives
If the hybrid contract contains a host that is a financial asset within the scope Ind AS 109, the Company does not separate embedded derivatives. Rather, it applies the classification requirements contained in Ind AS 109 to the entire hybrid contract. Derivatives embedded in all other host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in Statement of Profit and Loss, unless designated as effective hedging instruments. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Derivative financial instruments
The Company uses derivative financial instruments, such as foreign exchange forward contracts, interest rate swaps and currency options to manage its exposure to interest rate and foreign exchange risks. Such 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.
Hedge Accounting
The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to highly probable forecast transactions. The Company designates such forward contracts in a cash flow hedging relationship by applying the hedge accounting principles. These forward contracts are stated at fair value at each reporting date. Changes in the fair value of these forward contracts that are designated and effective as hedges of future cash flows are recognised directly in Other Comprehensive Income (OCI) and accumulated in âCash Flow Hedge Reserve Accountâ under Reserves and Surplus, net of applicable deferred income taxes and the ineffective portion is recognised immediately in the Statement of Profit and Loss. Amounts accumulated in the âCash Flow Hedge Reserve Accountâ are reclassified to the Statement of Profit and Loss in the same period during which the forecasted transaction affects Statement of Profit and Loss. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in âCash Flow Hedge Reserve Accountâ is retained until the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognised in âCash Flow Hedge Reserve Accountâ is immediately transferred to the Statement of Profit and Loss.
h) Income tax:
Income tax expense comprises current and deferred tax. It is recognised in Statement of Profit and Loss except to the extent that it relates items recognised directly in equity or in OCI.
Current tax
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. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.
Current tax assets and liabilities are offset only if, the Company:
i) has a legally enforceable right to set off the recognised amounts; and
ii) intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax
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 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. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.
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 temporary differences when they reverse, using tax rates enacted or substantively enacted at 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:
i) the Company has a legally enforceable right to set off current tax assets against current tax liabilities; and
ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
i) Inventories:
Inventories of all procured materials and Stock-in-Trade are valued at the lower of cost (on moving weighted average basis) and the net realisable value after providing for obsolescence and other losses, where considered necessary. Cost includes all charges in bringing the goods to their present location and condition, including octroi and other levies, transit insurance and receiving charges. Work-in-process and finished goods include appropriate proportion of overheads and, where applicable, excise duty.
j) Revenue Recognition:
Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured reliably.
Revenue from the sale of goods includes excise duty and is measured at the fair value of the consideration received or receivable (after including fair value allocations related to multiple deliverable and/or linked arrangements), net of returns, sales tax and applicable trade discounts and allowances. Revenue includes shipping and handling costs billed to the customer. The timing of the transfer of risks and rewards varies depending on the individual terms of the sales agreements.
Income from research services including sale of technology / know-how (rights, licenses and other intangibles) is recognised in accordance with the terms of the contract with customers when the related performance obligation is completed, or when risks and rewards of ownership are transferred, as applicable.
Interest income is recognised with reference to the Effective Interest Rate method.
Dividend from investments is recognised as revenue when right to receive is established.
k) Employee Benefits:
Short term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Defined contribution plans
Obligations for contributions to defined contribution plans are expensed as the related service is provided and the Company will have no legal or constructive obligation to pay further amounts. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
Defined benefit plans
The Companyâs net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed periodically by an independent qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company , the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.
Remeasurement of the net defined benefit liability, which comprise actuarial gains and losses and the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income (OCI). Net interest expense (income) on the net defined liability (assets) is computed by applying the discount rate, used to measure the net defined liability (asset). Net interest expense and other expenses related to defined benefit plans are recognised in Statement of Profit and Loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in Statement of Profit and Loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
Other long-term employee benefits
The Companyâs s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is measured on the basis of a periodical independent actuarial valuation using the projected unit credit method. Remeasurement are recognised in Statement of Profit and Loss in the period in which they arise.
l) Share-based payment transactions:
Employees Stock Options Plans (âESOPsâ): The grant date fair value of options granted to employees is recognized as an employee expense, 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 âEmployee Stock Options Outstanding Reserveâ. The amount recognized as an expense is adjusted to reflect the actual number of stock options that vest.
Stock Appreciation Rights (âSARsâ): The compensation cost of SARs granted to employees is measured at the fair value of the liability. Until the liability is settled, the Company shall remeasure the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognised in Statement of Profit and Loss for the period.
The Company has elected to apply Ind AS 102 Share based payment to equity instruments that vested after the date of transition to Ind AS pursuant to the exemption under Ind AS 101.
m) Leases:
Determining whether an arrangement contains a lease
An arrangement, which is not in the legal form of a lease, should be accounted for as a lease, if:
i) fulfilment of the arrangement is dependent on the use of a specific asset or assets (the asset); and
ii) the arrangement conveys a right to use the asset.
At inception of an arrangement, the Company determines whether the arrangement is or contains a lease.
At inception or on reassessment of an arrangement that contains a lease, the Company separates payments and other consideration required by the arrangement into those for the lease and those for other elements on the basis of their relative fair values. If it is impracticable to separate the payments reliably, then a finance lease receivable is recognised at an amount equal to the fair value of the underlying asset; subsequently, the receivable is reduced as payments are made and a finance income is recognised using the interest rate implicit in the lease.
Operating Lease
Agreements which are not classified as finance leases are considered as operating lease.
Payments made under operating leases are recognised in Statement of Profit and Loss. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
n) Provisions and Contingent Liabilities:
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. If effect of the time value of money is material, provisions are discounted using an appropriate discount rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liabilities are disclosed in the Notes to the Standalone Financial Statements. Contingent liabilities are disclosed for:
i) possible obligations which will be confirmed only by future events not wholly within the control of the Company, or
ii) present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
o) Borrowing costs:
Borrowing costs are interest and other costs that the Company incurs in connection with the borrowing of funds and is measured with reference to the effective interest rate (EIR) applicable to the respective borrowing. Borrowing costs include interest costs measured at EIR and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs, allocated to qualifying assets, pertaining to the period from commencement of activities relating to construction / development of the qualifying asset up to the date of capitalisation of such asset are added to the cost of the assets. Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted.
All other borrowing costs are recognised as an expense in the period which they are incurred.
p) Government Grants:
Government grants are initially recognised as deferred income at fair value if there is reasonable assurance that they will be received and the Company will comply with the conditions associated with the grant;
- In case of capital grants, they are then recognised in Statement of Profit and Loss as other income on a systematic basis over the useful life of the asset.
- In case of grants that compensate the Company for expenses incurred are recognised in Statement of Profit and Loss on a systematic basis in the periods in which the expenses are recognised.
- Pursuant to Ind AS 101 âFirst-time Adoption of Indian Accounting Standardsâ, the Company has opted the exemption to use the carrying amount of the Government Loan at a rate below market rate of interest at the date of transition to Ind AS, as the carrying amount of the Loan in the standalone financial statements.
Export benefits available under prevalent schemes are accrued in the year in which the goods are exported and there is no uncertainty in receiving the same.
q) Earnings per share:
Basic earnings per share is computed by dividing the profit / (loss) after tax by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for the events for bonus issue, bonus element in a rights issue to existing shareholders, share split and reverse share split (consolidation of shares). Diluted earnings per share is computed by dividing the profit / (loss) after tax as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on conversion of all dilutive potential equity shares.
r) Insurance claims:
Insurance claims are accounted for on the basis of claims admitted / expected to be admitted and to the extent that the amount recoverable can be measured reliably and it is reasonable to expect the ultimate collection.
s) Service tax input credit:
Service tax input credit is accounted for in the books in the period in which the underlying service received is accounted and when there is reasonable certainty in availing / utilising the credits.
t) Segment reporting:
The Company operates in one reportable business segment i.e. âPharmaceuticalsâ.
u) 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, 2016
1A. OVERVIEW:
Lupin Limited, (''the Company'') incorporated in 1983, is an innovation
led Transnational Pharmaceutical Company producing, developing and
marketing a wide range of branded and generic formulations,
biotechnology products and active pharmaceutical ingredients (APIs)
globally. The Company has significant presence in the Cardiovascular,
Diabetology, Asthma, Pediatrics, Central Nervous System,
Gastro-intestinal, Anti-Infectives and Nonsteroidal Anti-Inflammatory
Drug therapy segments and is a global leader in the Anti-TB and
Cephalosporins segments. The Company along with its subsidiaries has
manufacturing locations spread across India, Japan, USA, Mexico and
Brazil with trading and other incidental and related activities
extending to the global markets.
a) Basis of accounting and preparation of Financial Statements:
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards specified under
Section 133 of the Companies Act, 2013 ("the 2013 Act") and the
relevant provisions of the 2013 Act / Companies Act, 1956 ("the 1956
Act"), as applicable. The financial statements have been prepared on
accrual basis under the historical cost convention. The accounting
policies adopted in the preparation of the financial statements are
consistent with those followed in the previous year.
b) Use of Estimates:
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
c) Tangible Fixed Assets:
Fixed Assets are carried at cost less accumulated depreciation and
impairment losses, if any. The cost of fixed assets includes interest
on borrowings attributable to acquisition of qualifying fixed assets up
to the date the asset is ready for its intended use and other
incidental expenses incurred up to that date. The Company has adopted
the provisions of paragraph 46A of AS-11 "The Effects of Changes in
Foreign Exchange Rates", accordingly, exchange differences arising on
restatement / settlement of long-term foreign currency borrowings
relating to acquisition of depreciable fixed assets are adjusted to the
cost of the respective assets and depreciated over the remaining useful
life of such assets. Subsequent expenditure relating to fixed assets is
capitalised only if such expenditure results in an increase in the
future benefits from such asset beyond its previously assessed standard
of performance.
Capital work-in-progress in respect of assets which are not ready for
their intended use are carried at cost, comprising of direct costs,
related incidental expenses and attributable interest.
d) Intangible Assets:
Intangible assets are carried at cost less accumulated amortisation and
impairment losses, if any. The cost of an intangible asset comprises
its purchase price, including any import duties and other taxes (other
than those subsequently recoverable from the taxing authorities), and
any directly attributable expenditure on making the asset ready for its
intended use.
Expenditure on research and development eligible for capitalisation are
carried as Intangible assets under development where such assets are
not yet ready for their intended use.
e) Foreign Currency Transactions / Translations:
i) Transactions denominated in foreign currency are recorded at
exchange rates prevailing at the date of transaction or at rates that
closely approximate the rate at the date of the transaction.
ii) Foreign currency monetary items (other than derivative contracts)
of the Company, outstanding at the Balance Sheet date are restated at
the year-end rates. Non-monetary items of the Company are carried at
historical cost.
iii) Exchange differences arising on settlement / restatement of
short-term foreign currency monetary assets and liabilities of the
Company and its integral foreign operations are recognised as income or
expense in the Statement of Profit and Loss.
The exchange differences arising on settlement / restatement of
long-term foreign currency monetary items are capitalised as part of
the depreciable fixed assets to which the monetary item relates and
depreciated over the remaining useful life of such assets. If such
monetary items do not relate to acquisition of depreciable fixed
assets, the exchange difference is amortised over the maturity period /
upto the date of settlement of such monetary items, whichever is
earlier, and charged to the Statement of Profit and Loss except in case
of exchange differences arising on net investment in non-integral
foreign operations, where such amortisation is taken to "Foreign
currency translation reserve" until disposal / recovery of the net
investment. The unamortised exchange difference is carried under
Reserves and Surplus as "Foreign currency monetary item translation
difference account" net of the tax effect thereon, where applicable.
iv) Premium / discount on forward exchange contracts, which are not
intended for trading or speculation purposes, are amortised over the
period of the contracts if such contracts relate to monetary items as
at the Balance Sheet date. Any profit or loss arising on cancellation
or renewal of such a forward exchange contract is recognised as income
or as expense in the period in which such cancellation or renewal is
made.
v) In respect of foreign offices, which are integral foreign
operations, all revenues and expenses during the year are reported at
average rates. Outstanding balances in respect of monetary assets and
liabilities are restated at the year end exchange rates. Outstanding
balances in respect of non-monetary assets and liabilities are stated
at the rates prevailing on the date of the transaction. Net gain / loss
on foreign currency translation is recognised in the Statement of
Profit and Loss.
f) Hedge Accounting:
The Company uses foreign currency forward contracts to hedge its risks
associated with foreign currency fluctuations relating to highly
probable forecast transactions. The Company designates such forward
contracts in a cash flow hedging relationship by applying the hedge
accounting principles set out in Accounting Standard 30 (AS-30)
"Financial Instruments: Recognition and Measurement". These forward
contracts are stated at fair value at each reporting date. Changes in
the fair value of these forward contracts that are designated and
effective as hedges of future cash flows are recognised directly in
"Cash Flow Hedge Reserve Account" under Reserves and Surplus, net of
applicable deferred income taxes and the ineffective portion is
recognised immediately in the Statement of Profit and Loss. Amounts
accumulated in the "Cash Flow Hedge Reserve Account" are reclassified
to the Statement of Profit and Loss in the same period during which the
forecasted transaction affects profit and loss. Hedge accounting is
discontinued when the hedging instrument expires or is sold,
terminated, or exercised, or no longer qualifies for hedge accounting.
For forecasted transactions, any cumulative gain or loss on the hedging
instrument recognised in "Cash Flow Hedge Reserve Account" is retained
until the forecasted transaction occurs. If the forecasted transaction
is no longer expected to occur, the net cumulative gain or loss
recognised in "Cash Flow Hedge Reserve Account" is immediately
transferred to the Statement of Profit and Loss.
g) Derivative Contracts:
The Company enters into derivative contracts in the nature of currency
options, forward contracts and currency futures with an intention to
hedge its existing assets and liabilities and highly probable forecast
transactions in foreign currency. Derivative contracts which are
closely linked to the existing assets and liabilities are accounted as
per the policy stated for Foreign Currency Transactions / Translations.
Derivative contracts designated as a hedging instrument for highly
probable forecast transactions are accounted as per the policy stated
for Hedge Accounting.
The gain or loss in respect of currency futures contracts, the pricing
period of which has expired or squared off during the year are
recognised in the Statement of Profit and Loss. In respect of contracts
outstanding as at the year end, losses, if any, are recognised in the
Statement of Profit and Loss. Gains arising on the same are not
recognised, until realised, on grounds of prudence.
All other derivative contracts are marked-to-market on a portfolio
basis and losses, if any, are recognised in the Statement of Profit and
Loss. Gains arising on the same are not recognised, until realised, on
grounds of prudence.
h) Investments:
Long-term investments are carried individually at cost, less provision
for diminution, other than temporary, in the value of such investments.
Current investments are carried individually at lower of cost and fair
value.
Cost of investments includes expenses directly incurred on acquisition
of such investments.
i) Inventories:
Inventories of all procured materials and Stock-in-Trade are valued at
the lower of cost (on moving weighted average basis) and the net
realisable value after providing for obsolescence and other losses,
where considered necessary. Cost includes all charges in bringing the
goods to their present location and condition, including octroi and
other levies, transit insurance and receiving charges. Work-in-process
and finished goods include appropriate proportion of overheads and,
where applicable, excise duty.
j) Revenue Recognition:
Revenue from sale of goods is recognised net of returns, product expiry
claims and trade discounts, on transfer of significant risks and
rewards in respect of ownership to the buyer. Sales include excise duty
but exclude sales tax and value added tax. Sales are also netted off
for probable non-saleable return of goods from the customers, estimated
on the basis of historical data of such returns.
Income from research services including sale of technology / know-how
(rights, licenses, dossiers and other intangibles) is recognised in
accordance with the terms of the contract with customers when the
related performance obligation is completed, or when risks and rewards
of ownership are transferred, as applicable.
Revenue is recognised when it is reasonable to expect that the ultimate
collection will be made.
Interest income is accounted on accrual basis. Dividend from
investments is recognised as revenue when right to receive is
established.
k) Depreciation and Amortisation:
Depreciable amount for assets is the cost of an asset, or other amount
substituted for cost, less its estimated residual value.
Depreciation on tangible fixed assets of the Company has been provided
on the straight-line method as per the useful life prescribed in
Schedule II to the Companies Act, 2013 except in respect of the
following categories of assets, in whose case the life of the assets
has been assessed as under based on independent technical evaluation
and management''s assessment thereof, taking into account the nature of
the asset, the estimated usage of the asset, the operating conditions
of the asset, past history of replacement, anticipated technological
changes, manufacturers warranties and maintenance support, etc.:
l) Employee Benefits:
Employee benefits include provident fund, superannuation fund, gratuity
fund and compensated absences.
i) Defined Contribution Plans:
The Company''s contribution to provident fund and superannuation fund
for certain eligible employees are considered as defined contribution
plans as the Company does not carry any further obligations, apart from
the contributions made on a monthly basis. Such contributions are
charged as an expense to the Statement of Profit and Loss based on the
amount of contribution required to be made and when services are
rendered by the employees.
ii) Defined Benefit Plans:
For defined benefit plan in the form of gratuity fund, 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 plan 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 scheme.
Provident Fund for certain employees is administered through the "Lupin
Limited Employees Provident Fund Trust". Periodic contributions to the
Fund are charged to the Statement of Profit and Loss. The Company has
an obligation to make good the shortfall, if any, between the return
from the investment of the trust and interest rate notified by the
Government of India.
iii) 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 performance incentive 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.
The cost of short-term compensated absences is accounted as under:
a. in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
absences; and
b. in case of non-accumulating compensated absences, when the absences
occur.
iv) Long-Term Employee Benefit:
The cost of compensated absences which are not expected to occur within
twelve months after the end of the period in which the employee renders
the related service 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.
m) Taxes on Income:
Tax expense comprises both Current Tax and Deferred Tax. Current tax is
the amount of tax payable on taxable income for the year as determined
in accordance with the applicable tax rates and the provisions of the
Income-tax Act, 1961 and other applicable tax laws.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is highly
probable that future economic benefit associated with it will flow to
the Company.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantively enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets for timing differences in respect of unabsorbed depreciation,
carry forward of losses and items relating to capital losses are
recognised only if there is virtual certainty supported by convincing
evidence that there will be sufficient future taxable income available
to realise such assets. Deferred tax assets are recognised for timing
differences of other items only to the extent that reasonable certainty
exists that sufficient future taxable income will be available against
which these can be realised. Deferred tax assets and liabilities are
offset if such items relate to taxes on income levied by the same
governing tax laws and the Company has a legally enforceable right for
such set off. Deferred tax assets are reviewed at each Balance Sheet
date for their realisability.
Current and deferred tax relating to items directly recognised in
reserves are recognised in reserves and not in the Statement of Profit
and Loss.
n) Operating Leases:
Assets taken on lease under which all risks and rewards of ownership
are effectively retained by the lessor are classified as operating
lease. Lease rentals under operating leases are recognised in the
Statement of Profit and Loss on a straight line basis over the lease
term in accordance with the respective lease agreement terms.
o) Provisions, Contingent Liabilities and Contingent Assets:
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 liabilities are disclosed for
(1) possible obligations which will be confirmed only by future events
not wholly within the control of the Company or (2) present obligations
arising from past events where it is not probable that an outflow of
resources will be required to settle the obligation or a reliable
estimate of the amount of the obligation cannot be made. Contingent
assets are not recognised in the financial statements.
p) Borrowing Costs:
Borrowing costs include interest, amortisation of ancillary costs
incurred and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost. Costs in connection with the borrowing of funds to the
extent not directly related to the acquisition of qualifying assets are
charged to the Statement of Profit and Loss over the tenure of the
loan. Borrowing costs, allocated to and utilised for qualifying assets,
pertaining to the period from commencement of activities relating to
construction / development of the qualifying asset upto the date of
capitalisation of such asset is added to the cost of the assets.
Capitalisation of borrowing costs is suspended and charged to the
Statement of Profit and Loss during extended periods when active
development activity on the qualifying assets is interrupted.
q) Stock based Compensation:
i) Employees Stock Option Plans ("ESOPs"):
The compensation cost of stock options granted to employees is measured
by the intrinsic value method, i.e. the difference between the market
price of the Company''s shares on the date of the grant of options and
the exercise price to be paid by the option holders. The compensation
cost, if any, is amortised on a straight-line basis over the vesting
period of the options.
ii) Stock Appreciation Rights ("SARs"):
The compensation cost of SARs granted to employees is measured by the
intrinsic value method, i.e. the excess of the market price of the
Company''s shares as at the period end and the acquisition price as on
the date of grant. The compensation cost is amortised on a straight
line basis over the vesting period of the SARs.
r) Government Grants, subsidies and export incentives:
Government grants and subsidies are accounted when there is reasonable
assurance that the Company will comply with the conditions attached to
them and it is reasonably certain that the ultimate collection will be
made. Capital grants relating to specific fixed assets are reduced
from the gross value of the respective fixed assets. Revenue grants
are recognised in the Statement of Profit and Loss.
Export benefits available under prevalent schemes are accrued in the
year in which the goods are exported and there is no uncertainty in
receiving the same.
s) Research and Development:
Revenue expenditure pertaining to research is charged to the Statement
of Profit and Loss. Development costs of products are also charged to
the Statement of Profit and Loss in the year it is incurred, unless a
product''s technological feasibility has been established, in which case
such expenditure is capitalised. These costs are charged to the
respective heads in the Statement of Profit and Loss in the year it is
incurred. The amount capitalised comprises of expenditure that can be
directly attributed or allocated on a reasonable and consistent basis
for creating, producing and making the asset ready for its intended
use. Fixed assets utilised for research and development are capitalised
and depreciated in accordance with the policies stated for Tangible
Fixed Assets and Intangible Assets.
t) Impairment of Assets:
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment if any indication of impairment
exists. The following intangible assets are tested for impairment each
financial year even if there is no indication that the asset is
impaired:
(a) an intangible asset that is not yet available for use; and
(b) an intangible asset that is amortised over a period exceeding ten
years from the date when the asset is available for use.
If the carrying amount of the assets exceed the estimated recoverable
amount, an impairment is recognised for such excess amount. The
impairment loss is recognised as an expense in the Statement of Profit
and Loss, unless the asset is carried at revalued amount, in which case
any impairment loss of the revalued asset is treated as a revaluation
decrease to the extent a revaluation reserve is available for that
asset.
The recoverable amount is the greater of the net selling price and
their value in use. Value in use is arrived at by discounting the
future cash flows to their present value based on an appropriate
discount factor.
When there is indication that an impairment loss recognised for an
asset (other than a revalued asset) in earlier accounting periods no
longer exists or may have decreased, such reversal of impairment loss
is recognised in the Statement of Profit and Loss, to the extent the
amount was previously charged to the Statement of Profit and Loss. In
case of revalued assets, such reversal is not recognised.
u) Earnings per share:
Basic earnings per share is computed by dividing the profit / (loss)
after tax (including the post tax effect of extraordinary items, if
any) by the weighted average number of equity shares outstanding during
the year. Diluted earnings per share is computed by dividing the profit
/ (loss) after tax (including the post tax effect of extraordinary
items, if any) by the weighted average number of equity shares
outstanding during the year adjusted for the effects of all dilutive
potential equity shares.
v) Insurance claims:
Insurance claims are accounted for on the basis of claims admitted /
expected to be admitted and to the extent that the amount recoverable
can be measured reliably and it is reasonable to expect the ultimate
collection.
w) Service tax input credit:
Service tax input credit is accounted for in the books in the period in
which the underlying service received is accounted and when there is
reasonable certainty in availing / utilising the credits.
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) Basis of accounting and preparation of Financial Statements:
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards specified under
Section 133 of the Companies Act, 2013 ("the 2013 Act"), read with Rule
7 of the Companies (Accounts) Rules, 2014 and the relevant provisions
of the 2013 Act / Companies Act, 1956 ("the 1956 Act"), as applicable.
The financial statements have been prepared on accrual basis under the
historical cost convention. The accounting policies adopted in the
preparation of the financial statements are consistent with those
followed in the previous year.
b) Use of Estimates:
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the Financial Statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
c) Tangible Fixed Assets:
Fixed Assets are carried at cost less accumulated depreciation and
impairment losses, if any. The cost of fixed assets includes interest
on borrowings attributable to acquisition of qualifying fixed assets up
to the date the asset is ready for its intended use and other
incidental expenses incurred up to that date. The Company has adopted
the provisions of paragraph 46A of AS-11 "The Effects of Changes in
Foreign Exchange Rates", accordingly, exchange differences arising on
restatement / settlement of long-term foreign currency borrowings
relating to acquisition of depreciable fixed assets are adjusted to the
cost of the respective assets and depreciated over the remaining useful
life of such assets. Subsequent expenditure relating to fixed assets is
capitalised only if such expenditure results in an increase in the
future benefits from such asset beyond its previously assessed standard
of performance.
Capital work-in-progress in respect of assets which are not ready for
their intended use are carried at cost, comprising of direct costs,
related incidental expenses and attributable interest.
d) Intangible Assets:
Intangible assets are carried at cost less accumulated amortisation and
impairment losses, if any. The cost of an intangible asset comprises
its purchase price, including any import duties and other taxes (other
than those subsequently recoverable from the taxing authorities), and
any directly attributable expenditure on making the asset ready for its
intended use.
Expenditure on Research and development eligible for capitalisation are
carried as Intangible assets under development where such assets are
not yet ready for their intended use.
e) Foreign Currency Transactions / Translations:
i) Transactions denominated in foreign currency are recorded at
exchange rates prevailing at the date of transaction or at rates that
closely approximate the rate at the date of the transaction.
ii) Foreign currency monetary items (other than derivative contracts)
of the Company, outstanding at the balance sheet date are restated at
the year-end rates. Non-monetary items of the Company are carried at
historical cost.
iii) Exchange differences arising on settlement / restatement of
short-term foreign currency monetary assets and liabilities of the
Company and its integral foreign operations are recognised as income or
expense in the Statement of Profit and Loss.
The exchange differences arising on restatement / settlement of
long-term foreign currency monetary items are capitalised as part of
the depreciable fixed assets to which the monetary item relates and
depreciated over the remaining useful life of such assets or amortised
on settlement over the maturity period of such items if such items do
not relate to acquisition of depreciable fixed assets. The unamortised
exchange difference is carried under Reserves and Surplus as "Foreign
currency monetary item translation difference account" net of the tax
effect thereon, where applicable.
iv) Premium / discount on forward exchange contracts, which are not
intended for trading or speculation purposes, are amortised over the
period of the contracts if such contracts relate to monetary items as
at the Balance Sheet date. Any profit or loss arising on cancellation
or renewal of such a forward exchange contract is recognised as income
or as expense in the period in which such cancellation or renewal is
made.
v) In respect of foreign offices, which are integral foreign
operations, all revenues and expenses during the year are reported at
average rates. Outstanding balances in respect of monetary assets and
liabilities are restated at the year end exchange rates. Outstanding
balances in respect of non-monetary assets and liabilities are stated
at the rates prevailing on the date of the transaction. Net gain / loss
on foreign currency translation is recognised in the Statement of
Profit and Loss.
f) Hedge Accounting:
The Company uses foreign currency forward contracts to hedge its risks
associated with foreign currency fluctuations relating to highly
probable forecast transactions. The Company designates such forward
contracts in a cash flow hedging relationship by applying the hedge
accounting principles set out in Accounting Standard 30 (AS-30)
"Financial Instruments: Recognition and Measurement". These forward
contracts are stated at fair value at each reporting date. Changes in
the fair value of these forward contracts that are designated and
effective as hedges of future cash flows are recognised directly in
"Cash Flow Hedge Reserve Account" under Reserves and Surplus, net of
applicable deferred income taxes and the ineffective portion is
recognised immediately in the Statement of Profit and Loss. Amounts
accumulated in the "Cash Flow Hedge Reserve Account" are reclassified
to the Statement of Profit and Loss in the same period during which the
forecasted transaction affects profit and loss. Hedge accounting is
discontinued when the hedging instrument expires or is sold,
terminated, or exercised, or no longer qualifies for hedge accounting.
For forecasted transactions, any cumulative gain or loss on the hedging
instrument recognised in "Cash Flow Hedge Reserve Account" is retained
until the forecasted transaction occurs. If the forecasted transaction
is no longer expected to occur, the net cumulative gain or loss
recognised in "Cash Flow Hedge Reserve Account" is immediately
transferred to the Statement of Profit and Loss.
g) Derivative Contracts:
The Company enters into derivative contracts in the nature of currency
options, forward contracts and currency futures with an intention to
hedge its existing assets and liabilities and highly probable forecast
transactions in foreign currency. Derivative contracts which are
closely linked to the existing assets and liabilities are accounted as
per the policy stated for Foreign Currency Transactions / Translations.
Derivative contracts designated as a hedging instrument for highly
probable forecast transactions are accounted as per the policy stated
for Hedge Accounting.
The gain or loss in respect of currency futures contract the pricing
period of which has expired or squared off during the year are
recognised in the Statement of Profit and Loss. In respect of contract
as at the year end, losses, if any, are recognised in the Statement of
Profit and Loss. Gains arising on the same are not recognised, until
realised, on grounds of prudence.
All other derivative contracts are marked-to-market on a portfolio
basis and losses, if any, are recognised in the Statement of Profit and
Loss. Gains arising on the same are not recognised, until realised, on
grounds of prudence.
h) Investments:
Long-term investments are carried individually at cost, less provision
for diminution, other than temporary, in the value of such investments.
Current investments are carried individually at lower of cost and fair
value. Cost of investments includes expenses directly incurred on
acquisition of investments.
i) Inventories:
Inventories of all procured materials and Stock-in-Trade are valued at
the lower of cost (on moving weighted average basis) and the net
realisable value after providing for obsolescence and other losses,
where considered necessary. Cost includes all charges in bringing the
goods to their present location and condition, including octroi and
other levies, transit insurance and receiving charges. Work-in-process
and finished goods include appropriate proportion of overheads and,
where applicable, excise duty.
j) Revenue recognition:
Revenue from sale of goods is recognised net of returns, product expiry
claims and trade discounts, on transfer of significant risks and
rewards in respect of ownership to the buyer. Sales include excise duty
but exclude sales tax and value added tax. Sales are also netted off
for probable non - saleable return of goods from the customers,
estimated on the basis of historical data of such returns.
Income from Research Services including sale of technology / know-how
(rights, licenses, dossiers and other intangibles) is recognised in
accordance with the terms of the contract with customers when the
related performance obligation is completed, or when risks and rewards
of ownership are transferred, as applicable.
Revenue is recognised when it is reasonable to expect that the ultimate
collection will be made.
Interest income is accounted on accrual basis. Dividend from investment
is recognised as revenue when right to receive is established.
k) Depreciation and Amortisation:
Depreciable amount for assets is the cost of an asset, or other amount
substituted for cost, less its estimated residual value. Depreciation
on tangible fixed assets of the Company has been provided on the
straight-line method as per the useful life prescribed in Schedule II
to the Companies Act, 2013 except in respect of the following
categories of assets, in whose case the life of the assets has been
assessed as under based on independent technical evaluation and
management''s assessment thereof, taking into account the nature of the
asset, the estimated usage of the asset, the operating conditions of
the asset, past history of replacement, anticipated technological
changes, manufacturers warranties and maintenance support, etc.:
The estimated useful lives of intangible assets and the amortisation
period are reviewed at the end of each financial year and the
amortisation method is revised to reflect the changed pattern, if any.
l) Employee Benefits:
Employee benefits include provident fund, superannuation fund, gratuity
fund, and compensated absences.
i) Defined Contribution Plans:
The Company''s contribution to provident fund and superannuation fund
for certain eligible employees are considered as defined contribution
plans as the Company does not carry any further obligations, apart from
the contributions made on a monthly basis. Such contributions are
charged as an expense to the Statement of Profit and Loss based on the
amount of contribution required to be made and when services are
rendered by the employees.
ii) Defined Benefit Plans:
For defined benefit plan in the form of gratuity fund, 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 plan 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 scheme.
Provident Fund for certain employees is administered through the "Lupin
Limited Employees Provident Fund Trust". Periodic contributions to the
Fund are charged to the Statement of Profit and Loss. The Company has
an obligation to make good the shortfall, if any, between the return
from the investment of the trust and interest rate notified by the
Government of India.
iii) 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 performance incentive 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.
The cost of short-term compensated absences is accounted as under:
a. in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
absences; and
b. in case of non-accumulating compensated absences, when the absences
occur.
iv) Long-Term Employee Benefit:
The cost of compensated absences which are not expected to occur within
twelve months after the end of the period
in which the employee renders the related service 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.
m) Taxes on Income:
Tax expense comprises both Current Tax and Deferred Tax. Current tax is
the amount of tax payable on taxable income for the year as determined
in accordance with the applicable tax rates and the provisions of the
Income-tax Act, 1961 and other applicable tax laws.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is highly
probable that future economic benefit associated with it will flow to
the Company.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantively enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets for timing differences in respect of unabsorbed depreciation,
carry forward of losses and items relating to capital losses are
recognised only if there is virtual certainty supported by convincing
evidence that there will be sufficient future taxable income available
to realise such assets. Deferred tax assets are recognised for timing
differences of other items only to the extent that reasonable certainty
exists that sufficient future taxable income will be available against
which these can be realised. Deferred tax assets and liabilities are
offset if such items relate to taxes on income levied by the same
governing tax laws and the Company has a legally enforceable right for
such set off. Deferred tax assets are reviewed at each Balance Sheet
date for their realisability.
Current and deferred tax relating to items directly recognised in
reserves are recognised in reserves and not in the Statement of Profit
and Loss.
n) Operating Leases:
Assets taken on lease under which all risks and rewards of ownership
are effectively retained by the lessor are classified as operating
lease. Lease rentals under operating leases are recognised in the
Statement of Profit and Loss on a straight line basis over the lease
term in accordance with the respective lease agreement terms.
o) Provisions, Contingent Liabilities and Contingent Assets:
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 liabilities are disclosed for
(1) possible obligations which will be confirmed only by future events
not wholly within the control of the Company or (2) present obligations
arising from past events where it is not probable that an outflow of
resources will be required to settle the obligation or a reliable
estimate of the amount of the obligation cannot be made. Contingent
assets are not recognised in the financial statements.
p) Borrowing Costs:
Borrowing costs include interest, amortisation of ancillary costs
incurred and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost. Costs in connection with the borrowing of funds to the
extent not directly related to the acquisition of qualifying assets are
charged to the Statement of Profit and Loss over the tenure of the
loan. Borrowing costs, allocated to and utilised for qualifying assets,
pertaining to the period from commencement of activities relating to
construction / development of the qualifying asset upto the date of
capitalisation of such asset is added to the cost of the assets.
Capitalisation of borrowing costs is suspended and charged to the
Statement of Profit and Loss during extended periods when active
development activity on the qualifying assets is interrupted.
q) Stock based Compensation:
i) Employees Stock Option Plans ("ESOPs"):
The compensation cost of stock options granted to employees is measured
by the intrinsic value method, i.e. the difference between the market
price of the Company''s shares on the date of the grant of options and
the exercise price to be paid by the option holders. The compensation
cost, if any, is amortised on a straight-line basis over the vesting
period of the options.
ii) Stock Appreciation Rights ("SARs"):
The compensation cost of SARs granted to employees is measured by the
intrinsic value method, i.e. the excess of the market price of the
Company''s shares as at the period end and the acquisition price as on
the date of grant. The compensation cost is amortised on a straight
line basis over the vesting period of the SARs.
r) Government Grants, subsidies and export incentives:
Government grants and subsidies are accounted when there is reasonable
assurance that the Company will comply with the conditions attached to
them and it is reasonably certain that the ultimate collection will be
made. Capital grants relating to specific fixed assets are reduced from
the gross value of the respective fixed assets. Revenue grants are
recognised in the Statement of Profit and Loss.
Export benefits available under prevalent schemes are accrued in the
year in which the goods are exported and there is no uncertainty in
receiving the same.
s) Research and Development:
Revenue expenditure pertaining to research is charged to the Statement
of Profit and Loss. Development costs of products are also charged to
the Statement of Profit and Loss in the year it is incurred, unless a
product''s technological feasibility has been established, in which case
such expenditure is capitalised. These costs are charged to the
respective heads in the Statement of Profit and Loss in the year it is
incurred. The amount capitalised comprises of expenditure that can be
directly attributed or allocated on a reasonable and consistent basis
for creating, producing and making the asset ready for its intended
use. Fixed assets utilised for research and development are capitalised
and depreciated in accordance with the policies stated for Tangible
Fixed Assets and Intangible Assets.
t) Impairment of Assets:
The carrying values of assets / cash generating units at each balance
sheet date are reviewed for impairment if any indication of impairment
exists. The following intangible assets are tested for impairment each
financial year even if there is no indication that the asset is
impaired:
(a) an intangible asset that is not yet available for use; and
(b) an intangible asset that is amortised over a period exceeding ten
years from the date when the asset is available for use.
If the carrying amount of the assets exceed the estimated recoverable
amount, an impairment is recognised for such excess amount. The
impairment loss is recognised as an expense in the Statement of Profit
and Loss, unless the asset is carried at revalued amount, in which case
any impairment loss of the revalued asset is treated as a revaluation
decrease to the extent a revaluation reserve is available for that
asset.
The recoverable amount is the greater of the net selling price and
their value in use. Value in use is arrived at by discounting the
future cash flows to their present value based on an appropriate
discount factor.
When there is indication that an impairment loss recognised for an
asset (other than a revalued asset) in earlier accounting periods no
longer exists or may have decreased, such reversal of impairment loss
is recognised in the Statement of Profit and Loss, to the extent the
amount was previously charged to the Statement of Profit and Loss. In
case of revalued assets, such reversal is not recognised.
u) Earnings per share:
Basic earnings per share is computed by dividing the profit / (loss)
after tax (including the post tax effect of extraordinary items, if
any) by the weighted average number of equity shares outstanding during
the year. Diluted earnings per share is computed by dividing the profit
/ (loss) after tax (including the post tax effect of extraordinary
items, if any) by the weighted average number of equity shares
outstanding during the year adjusted for the effects of all dilutive
potential equity shares.
v) Insurance claims:
Insurance claims are accounted for on the basis of claims admitted /
expected to be admitted and to the extent that the amount recoverable
can be measured reliably and it is reasonable to expect the ultimate
collection.
w) Service tax input credit:
Service tax input credit is accounted for in the books in the period in
which the underlying service received is accounted and when there is
reasonable certainty in availing / utilising the credits.
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, 2014
A) Basis of accounting and preparation of Financial Statements:
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
Section 211(3C) of the Companies Act, 1956 ("the 1956 Act") (which
continue to be applicable in respect of Section 133 of the Companies
Act, 2013 ("the 2013 Act") in terms of General Circular 15/2013 dated
September 13, 2013 of the Ministry of Corporate Affairs) and the
relevant provisions of the 1956 Act/2013 Act, as applicable. The
financial statements have been prepared on accrual basis under the
historical cost convention. The accounting policies adopted in the
preparation of the financial statements are consistent with those
followed in the previous year.
b) Use of Estimates:
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. Future results could differ due to these estimates and the
differences between the actual results and the estimates are recognised
in the periods in which the results are known / materialise.
c) Tangible Fixed Assets:
Fixed Assets are carried at cost less accumulated depreciation and
impairment losses, if any. The cost of fixed assets includes interest
on borrowings attributable to acquisition of qualifying fixed assets up
to the date the asset is ready for its intended use and other
incidental expenses incurred up to that date. The Company has adopted
the provisions of paragraph 46A of AS-11 "The Effects of Changes in
Foreign Exchange Rates", accordingly, exchange differences arising on
restatement/ settlement of long-term foreign currency borrowings
relating to acquisition of depreciable fixed assets are adjusted to the
cost of the respective assets and depreciated over the remaining useful
life of such assets. Subsequent expenditure relating to fixed assets is
capitalised only if such expenditure results in an increase in the
future benefits from such asset beyond its previously assessed standard
of performance.
Capital work-in-progress in respect of assets which are not ready for
their intended use are carried at cost, comprising of direct costs,
related incidental expenses and attributable interest.
d) Intangible Assets:
Intangible assets are carried at cost less accumulated amortisation and
impairment losses, if any. The cost of an intangible asset comprises
its purchase price, including any import duties and other taxes (other
than those subsequently recoverable from the taxing authorities), and
any directly attributable expenditure on making the asset ready for its
intended use.
Expenditure on Research and development eligible for capitalisation are
carried as Intangible assets under development where such assets are
not yet ready for their intended use.
e) Foreign Currency Transactions/Translations:
i) Transactions denominated in foreign currency are recorded at
exchange rates prevailing at the date of transaction or at rates that
closely approximate the rate at the date of the transaction.
ii) Foreign currency monetary items (other than derivative contracts)
of the Company, outstanding at the balance sheet date are restated at
the year-end rates. Non-monetary items of the Company are carried at
historical cost.
iii) Exchange differences arising on settlement/ restatement of
short-term foreign currency monetary assets and liabilities of the
Company and its integral foreign operations are recognised as income or
expense in the Statement of Profit and Loss.
The exchange differences arising on restatement / settlement of
long-term foreign currency monetary items are capitalised as part of
the depreciable fixed assets to which the monetary item relates and
depreciated over the remaining useful life of such assets or amortised
on settlement over the maturity period of such items if such items do
not relate to acquisition of depreciable fixed assets. The unamortised
exchange difference is carried under Reserves and Surplus as "Foreign
currency monetary item translation difference account" net of the tax
effect thereon, where applicable.
iv) Premium / discount on forward exchange contracts, which are not
intended for trading or speculation purposes, are amortised over the
period of the contracts if such contracts relate to monetary items as
at the Balance Sheet date.
v) In respect of the foreign offices / branches, which are integral
foreign operations, all revenues and expenses during the year are
reported at average rates. Outstanding balances in respect of monetary
assets and liabilities are restated at the year end exchange rates.
Outstanding balances in respect of non-monetary assets and liabilities
are stated at the rates prevailing on the date of the transaction. Net
gain / loss on foreign currency translation is recognised in the
Statement of Profit and Loss.
f) Hedge Accounting:
The Company uses foreign currency forward contracts and currency
options to hedge its risks associated with foreign currency
fluctuations relating to highly probable forecast transactions. The
Company designates such forward / option contracts in a cash flow
hedging relationship by applying the hedge accounting principles set
out in Accounting Standard 30 (AS-30) "Financial Instruments:
Recognition and Measurement". These forward / option contracts are
stated at fair value at each reporting date. Changes in the fair value
of these forward / option contracts that are designated and effective
as hedges of future cash flows are recognised directly in "Cash Flow
Hedge Reserve Account" under Reserves and Surplus, net of applicable
deferred income taxes and the ineffective portion is recognised
immediately in the Statement of Profit and Loss. Amounts accumulated in
the "Cash Flow Hedge Reserve Account" are reclassified to the Statement
of Profit and Loss in the same period during which the forecasted
transaction affects profit and loss. Hedge accounting is discontinued
when the hedging instrument expires or is sold, terminated, or
exercised, or no longer qualifies for hedge accounting. For forecasted
transactions, any cumulative gain or loss on the hedging instrument
recognised in "Cash Flow Hedge Reserve Account" is retained until the
forecasted transaction occurs. If the forecasted transaction is no
longer expected to occur, the net cumulative gain or loss recognised in
"Cash Flow Hedge Reserve Account" is immediately transferred to the
Statement of Profit and Loss.
g) Derivative Contracts:
The Company enters into derivative contracts in the nature of currency
options and forward contracts with an intention to hedge its existing
assets and liabilities and highly probable forecast transactions in
foreign currency. Derivative contracts which are closely linked to the
existing assets and liabilities are accounted as per the policy stated
for Foreign Currency Transactions / Translations.
Derivative contracts designated as a hedging instrument for highly
probable forecast transactions are accounted as per the policy stated
for Hedge Accounting.
All other derivative contracts are marked-to-market on a portfolio
basis and losses, if any, are recognised in the Statement of Profit and
Loss. Gains arising on the same are not recognised, until realised, on
grounds of prudence.
h) Investments:
Long-Term investments are carried individually at cost, less provision
for diminution, other than temporary, in the value of such investments.
Cost of investments includes expenses directly incurred on acquisition
of investments. Current investments are carried individually at lower
of cost and fair value.
i) Inventories:
Inventories of all procured materials and Stock-in-Trade are valued at
the lower of cost (on moving weighted average basis) and the net
realisable value after providing for obsolescence and other losses,
where considered necessary. Cost includes all charges in bringing the
goods to their present location and condition, including octroi and
other levies, transit insurance and receiving charges. Work-in-process
and finished goods include appropriate proportion of overheads and,
where applicable, excise duty.
j) Revenue recognition:
Revenue from sale of goods is recognised net of returns, product expiry
claims and trade discounts, on transfer of significant risks and
rewards in respect of ownership to the buyer. Sales include excise duty
but exclude sales tax and value added tax. Sales are also netted off
for probable non-saleable return of goods from the customers, estimated
on the basis of historical data of such returns.
Income from Research Services including sale of technology / know-how
(rights, licenses, dossiers and other intangibles) is recognised in
accordance with the terms of the contract with customers when the
related performance obligation is completed, or when risks and rewards
of ownership are transferred, as applicable.
Revenue is recognised when it is reasonable to expect that the ultimate
collection will be made.
Interest income is accounted on accrual basis. Dividend from investment
is recognised as revenue when right to receive is established.
k) Depreciation and Amortisation:
Depreciation on fixed assets is provided on straight line basis in the
manner and at the rates prescribed in Schedule XIV to the Companies
Act, 1956, except in respect of the following category of assets, in
whose case life of assets is assessed as under:
Assets Estimated Useful Life
Captive Power Plant at Tarapur 15 years
Certain assets provided to employees 3 years
Leasehold Land Over the period of lease
Intangible Assets (Computer Software) 3 to 6 years
Intangible Assets (Goodwill - Acquired) 5 years
Intangible Assets (Trademark and Licences) 5 years
The estimated useful lives of intangible assets and the amortisation
period are reviewed at the end of each financial year and the
amortisation method is revised to reflect the changed pattern. Assets
costing H 5000/- or less are depreciated at 100% rate on prorata basis
in the year of purchase.
l) Employee Benefits:
Employee benefits include provident fund, gratuity fund, compensated
absences and post employment and other long- term benefits.
a) Post Employment Benefits and Other Long-Term Benefits:
i) Defined Contribution Plan:
The Company''s contribution towards provident fund and superannuation
fund for certain eligible employees are considered to be defined
contribution plans as the Company does not carry any further
obligations, apart from the contributions made on a monthly basis. Such
contributions are charged as an expense to the Statement of Profit and
Loss when services are rendered by the employees.
ii) Defined Benefit and Other Long-Term Benefit Plans:
Company''s liabilities towards defined benefit plans and other long-term
benefits viz. gratuity and compensated absences not expected to occur
within twelve months, after the end of the period in which employee
renders service, are determined using the Projected Unit Credit Method.
Actuarial valuations under the Projected Unit Credit Method are carried
out at the Balance Sheet date. Actuarial gains and losses are
recognised in the Statement of Profit and Loss in the period of
occurrence of such gains and losses. Past service cost is recognised
immediately to the extent benefits are vested, otherwise it is
amortised on straight-line basis over the remaining 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, and as reduced by the fair
value of plan 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 scheme.
Provident Fund for certain employees is administered through the "Lupin
Limited Employees Provident Fund Trust". Periodic contributions to the
Fund are charged to the Statement of Profit and Loss. The Company has
an obligation to make good the shortfall, if any, between the return
from the investment of the trust and interest rate notified by the
Government.
b) Short-Term Employee Benefits:
Short-Term employee benefits expected to be paid in exchange for the
services rendered by employees are recognised at their undiscounted
amounts during the period employee renders services. Short-Term
compensated absences are provided for based on estimates in accordance
with Company rules.
m) Taxes on Income:
Income taxes are accounted for in accordance with Accounting Standard
22 (AS-22) "Accounting for Taxes on Income". Tax expense comprises
both Current Tax and Deferred Tax. Current tax is the amount of tax
payable on taxable income for the year as determined in accordance with
the provisions of the Income-tax Act, 1961.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is highly
probable that future economic benefit associated with it will flow to
the Company.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantively enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets in respect of unabsorbed depreciation and carry forward of
losses are recognised only if there is virtual certainty that there
will be sufficient future taxable income available to realise such
assets. Deferred tax assets are recognised for timing differences of
other items only to the extent that reasonable certainty exists that
sufficient future taxable income will be available against which these
can be realised. Deferred tax assets and liabilities are offset if such
items relate to taxes on income levied by the same governing tax laws
and the Company has a legally enforceable right for such set off.
Deferred tax assets are reviewed at each Balance Sheet date for their
realisability.
n) Operating Leases:
Assets taken on lease under which all risks and rewards of ownership
are effectively retained by the lessor are classified as operating
lease. Lease payments under operating leases are recognised in the
Statement of Profit and Loss on a straight line basis in accordance
with the respective lease agreements.
o) Provisions, Contingent Liabilities and Contingent Assets:
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 liabilities are disclosed for
(1) possible obligations which will be confirmed only by future events
not wholly within the control of the Company or (2) present obligations
arising from past events where it is not probable that an outflow of
resources will be required to settle the obligation or a reliable
estimate of the amount of the obligation cannot be made. Contingent
assets are not recognised in the financial statements.
p) Borrowing Costs:
Borrowing costs include interest, amortisation of ancillary costs
incurred and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost. Costs in connection with the borrowing of funds to the
extent not directly related to the acquisition of qualifying assets are
charged to the Statement of Profit and Loss over the tenure of the
loan. Borrowing costs, allocated to and utilised for qualifying assets,
pertaining to the period from commencement of activities relating to
construction / development of the qualifying asset upto the date of
capitalisation of such asset is added to the cost of the assets.
Capitalisation of borrowing costs is suspended and charged to the
Statement of Profit and Loss during extended periods when active
development activity on the qualifying assets is interrupted.
q) Stock based Compensation:
i) Employees Stock Option Plans ("ESOPs"):
The compensation cost of stock options granted to employees is measured
by the intrinsic value method, i.e. the difference between the market
price of the Company''s shares on the date of the grant of options and
the exercise price to be paid by the option holders. The compensation
cost, if any, is amortised uniformly over the vesting period of the
options.
ii) Stock Appreciation Rights ("SARs"):
The compensation cost of SARs granted to employees is measured by the
intrinsic value method, i.e. the excess of the market price of the
Company''s shares as at the period end and the acquisition price as on
the date of grant. The compensation cost is amortised uniformly over
the vesting period of the SARs. r) Government Grants, subsidies and
export incentives:
Government grants and subsidies are accounted when there is reasonable
assurance that the Company will comply with the conditions attached to
them and it is reasonably certain that the ultimate collection will be
made. Capital grants relating to specific fixed assets are reduced from
the gross value of the respective fixed assets. Revenue grants are
recognised in the Statement of Profit and Loss.
Export benefits available under prevalent schemes are accrued in the
year in which the goods are exported and there is no uncertainty in
receiving the same.
s) Research and Development:
Revenue expenditure pertaining to research is charged to the Statement
of Profit and Loss. Development costs of products are also charged to
the Statement of Profit and Loss in the year it is incurred, unless a
product''s technological feasibility has been established, in which case
such expenditure is capitalised. These costs are charged to the
respective heads in the Statement of Profit and Loss in the year it is
incurred. The amount capitalised comprises of expenditure that can be
directly attributed or allocated on a reasonable and consistent basis
for creating, producing and making the asset ready for its intended
use. Fixed assets utilised for research and development are capitalised
and depreciated in accordance with the policies stated for Tangible
Fixed Assets and Intangible Assets.
t) Impairment of Assets:
The carrying values of assets / cash generating units at each Balance
Sheet date, are reviewed for impairment. If any indication of
impairment exists, the recoverable amount of such assets is estimated
and impairment is recognised, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater
of the net selling price and their value in use. Value in use is
arrived at by discounting the future cash flows to their present value
based on an appropriate discount factor. When there is indication that
an impairment loss recognised for an asset in earlier accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised in the Statement of Profit and Loss,
except in case of revalued assets.
u) Earnings per share:
Basic earnings per share is computed by dividing the profit / (loss)
after tax (including the post tax effect of extraordinary items, if
any) by the weighted average number of equity shares outstanding during
the year. Diluted earnings per share is computed by dividing the profit
/ (loss) after tax (including the post tax effect of extraordinary
items, if any) by the weighted average number of equity shares
outstanding during the year adjusted for the effects of all dilutive
potential equity shares.
v) Insurance claims:
Insurance claims are accounted for on the basis of claims admitted /
expected to be admitted and to the extent that the amount recoverable
can be measured reliably and it is reasonable to expect the ultimate
collection.
w) Service tax input credit:
Service tax input credit is accounted for in the books in the period in
which the underlying service received is accounted and when there is
reasonable certainty in availing / utilising the credits.
Mar 31, 2013
A) Basis of accounting and preparation of Financial Statements:
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
the Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on accrual basis under the historical
cost convention. The accounting policies adopted in the preparation of
the financial statements are consistent with those followed in the
previous year.
b) Use of Estimates:
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. Future results could differ due to these estimates and the
differences between the actual results and the estimates are recognised
in the periods in which the results are known / materialise.
c) Tangible Fixed Assets:
Fixed Assets are carried at cost less accumulated depreciation and
impairment losses, if any. The cost of fixed assets includes interest
on borrowings attributable to acquisition of qualifying fixed assets up
to the date the asset is ready for its intended use and other
incidental expenses incurred up to that date. Exchange differences
arising on restatement / settlement of long-term foreign currency
borrowings relating to acquisition of depreciable fixed assets are
adjusted to the cost of the respective assets and depreciated over the
remaining useful life of such assets. Subsequent expenditure relating
to fixed assets is capitalised only if such expenditure results in an
increase in the future benefits from such asset beyond its previously
assessed standard of performance.
Capital work-in-progress in respect of assets which are not ready for
their intended use are carried at cost, comprising of direct costs,
related incidental expenses and attributable interest.
d) Intangible Assets:
Intangible assets are carried at cost less accumulated amortisation and
impairment losses, if any. The cost of an intangible asset comprises
its purchase price, including any import duties and other taxes (other
than those subsequently recoverable from the taxing authorities), and
any directly attributable expenditure on making the asset ready for its
intended use.
e) Foreign Currency Transactions / Translations:
i) Transactions denominated in foreign currency are recorded at
exchange rates prevailing at the date of transaction or at rates that
closely approximate the rate at the date of the transaction.
ii) Foreign currency monetary items (other than derivative contracts)
of the Company, outstanding at the balance sheet date are restated at
the year-end rates. Non-monetary items of the Company are carried at
historical cost.
iii) Exchange differences arising on settlement / restatement of
short-term foreign currency monetary assets and liabilities of the
Company and its integral foreign operations are recognised as income or
expense in the Statement of Profit and Loss.
The exchange differences arising on restatement / settlement of
long-term foreign currency monetary items are capitalised as part of
the depreciable fixed assets to which the monetary item relates and
depreciated over the remaining useful life of such assets or amortised
on settlement over the maturity period of such items if such items do
not relate to acquisition of depreciable fixed assets. The unamortised
balance is carried in the Balance Sheet as "Foreign currency monetary
item translation difference account" net of the tax effect thereon,
where applicable.
iv) Premium / discount on forward exchange contracts, which are not
intended for trading or speculation purposes, are amortised over the
period of the contracts if such contracts relate to monetary items as
at the Balance Sheet date.
v) In respect of the foreign offices / branches, which are integral
foreign operations, all revenues and expenses during the year are
reported at average rates. Outstanding balances in respect of monetary
assets and liabilities are restated at the year end exchange rates.
Outstanding balances in respect of non-monetary assets and liabilities
are stated at the rates prevailing on the date of the transaction. Net
gain / loss on foreign currency translation is recognised in the
Statement of Profit and Loss.
f) Hedge Accounting:
The Company uses foreign currency forward contracts and currency
options to hedge its risks associated with foreign currency
fluctuations relating to highly probable forecast transactions. The
Company designates such forward / option contracts in a cash flow
hedging relationship by applying the hedge accounting principles set
out in Accounting Standard 30 (AS-30) "Financial Instruments:
Recognition and Measurement". These forward / option contracts are
stated at fair value at each reporting date. Changes in the fair value
of these forward / option contracts that are designated and effective
as hedges of future cash flows are recognised directly in "Cash Flow
Hedge Reserve Account" under Reserves and Surplus, net of applicable
deferred income taxes and the ineffective portion is recognised
immediately in the Statement of Profit and Loss. Amounts accumulated in
the "Cash Flow Hedge Reserve Account" are reclassified to the Statement
of Profit and Loss in the same period during which the forecasted
transaction affects profit and loss. Hedge accounting is discontinued
when the hedging instrument expires or is sold, terminated, or
exercised, or no longer qualifies for hedge accounting. For forecasted
transactions, any cumulative gain or loss on the hedging instrument
recognised in "Cash Flow Hedge Reserve Account" is retained until the
forecasted transaction occurs. If the forecasted transaction is no
longer expected to occur, the net cumulative gain or loss recognised in
"Cash Flow Hedge Reserve Account" is immediately transferred to the
Statement of Profit and Loss.
g) Derivative Contracts:
The Company enters into derivative contracts in the nature of currency
options and forward contracts with an intention to hedge its existing
assets and liabilities and highly probable forecast transactions in
foreign currency. Derivative contracts which are closely linked to the
existing assets and liabilities are accounted as per the policy stated
for Foreign Currency Transactions / Translations.
Derivative contracts designated as a hedging instrument for highly
probable forecast transactions are accounted as per the policy stated
for Hedge Accounting.
All other derivative contracts are marked-to-market on a portfolio
basis and losses, if any, are recognised in the Statement of Profit and
Loss. Gains arising on the same are not recognised, until realised, on
grounds of prudence.
h) Investments:
Long-term investments are carried individually at cost, less provision
for diminution, other than temporary, in the value of such investments.
Cost of investments includes expenses directly incurred on acquisition
of investments. Current investments are carried individually at lower
of cost and fair value.
i) Inventories:
Inventories of all procured materials and Stock-in-Trade are valued at
the lower of cost (on moving weighted average basis) and the net
realisable value after providing for obsolescence and other losses,
where considered necessary. Cost includes all charges in bringing the
goods to their present location and condition, including octroi and
other levies, transit insurance and receiving charges. Work-in-process
and finished goods include appropriate proportion of overheads and,
where applicable, excise duty.
j) Revenue recognition:
Revenue from sale of goods is recognised net of returns, product expiry
claims and trade discounts, on transfer of significant risks and
rewards in respect of ownership to the buyer. Sales include excise duty
but exclude sales tax and value added tax. Sales are also netted off
for probable non - saleable return of goods from the customers,
estimated on the basis of historical data of such returns.
Income from Research Services including sale of technology / know-how
(rights, licenses, dossiers and other intangibles) is recognised in
accordance with the terms of the contract with customers when the
related performance obligation is completed, or when risks and rewards
of ownership are transferred, as applicable.
Revenue (including in respect of insurance or other claims etc.) is
recognised when it is reasonable to expect that the ultimate collection
will be made.
Interest income is accounted on accrual basis. Dividend from investment
is recognised as revenue when right to receive is established.
k) Depreciation and Amortisation:
Depreciation on fixed assets is provided on straight line basis in the
manner and at the rates prescribed in Schedule XIV to the Companies
Act, 1956, except in respect of the following category of assets, in
whose case life of assets is assessed as under:
The estimated useful lives of intangible assets and the amortisation
period are reviewed at the end of each financial year and the
amortisation method is revised to reflect the changed pattern. Assets
costing H 5000/- or less are depreciated at 100% rate on prorata basis
in the year of purchase.
l) Employee Benefits:
Employee benefits include provident fund, gratuity fund, compensated
absences and post employment and other long term benefits.
a) Post Employment Benefits and Other Long Term Benefits:
i) Defined Contribution Plan:
The Company''s contribution towards provident fund and superannuation
fund for certain eligible employees are considered to be defined
contribution plans as the Company does not carry any further
obligations, apart from the contributions made on a monthly basis. Such
contributions are charged as an expense to the Statement of Profit and
Loss.
ii) Defined Benefit and Other Long Term Benefit Plans:
Company''s liabilities towards defined benefit plans and other long-term
benefits viz. gratuity and compensated absences not expected to occur
within twelve months, after the end of the period in which employee
renders service, are determined using the Projected Unit Credit Method.
Actuarial valuations under the Projected Unit Credit Method are carried
out at the Balance Sheet date. Actuarial gains and losses are
recognised in the Statement of Profit and Loss in the period of
occurrence of such gains and losses. Past service cost is recognised
immediately to the extent benefits are vested, otherwise it is
amortised on straight-line basis over the remaining 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, and as reduced by the fair
value of plan 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 scheme.
Provident Fund for certain employees is administered through the "Lupin
Limited Employees Provident Fund Trust". Periodic contributions to the
Fund are charged to the Statement of Profit and Loss. The Company has
an obligation to make good the shortfall, if any, between the return
from the investment of the trust and interest rate notified by the
Government.
b) Short Term Employee Benefits:
Short term employee benefits expected to be paid in exchange for the
services rendered by employees are recognised undiscounted during the
period employee renders services. Short term compensated absences are
provided for based on estimates in accordance with Company rules.
m) Taxes on Income:
Income taxes are accounted for in accordance with Accounting Standard
22 (AS-22) "Accounting for Taxes on Income". Tax expense comprises both
Current Tax and Deferred Tax. Current tax is the amount of tax payable
on taxable income for the year as determined in accordance with the
provisions of the Income Tax Act, 1961.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantively enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets in respect of unabsorbed depreciation and carry forward of
losses are recognised only if there is virtual certainty that there
will be sufficient future taxable income available to realise such
assets. Deferred tax assets are recognised for timing differences of
other items only to the extent that reasonable certainty exists that
sufficient future taxable income will be available against which these
can be realised. Deferred tax assets and liabilities are offset if such
items relate to taxes on income levied by the same governing tax laws
and the Company has a legally enforceable right for such set off.
Deferred tax assets are reviewed at each Balance Sheet date for their
realisability.
n) Operating Leases:
Assets taken on lease under which all risks and rewards of ownership
are effectively retained by the lessor are classified as operating
lease. Lease payments under operating leases are recognised in the
Statement of Profit and Loss on a straight line basis in accordance
with the respective lease agreements.
o) Provisions, Contingent Liabilities and Contingent Assets:
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 liabilities are disclosed for
(1) possible obligations which will be confirmed only by future events
not wholly within the control of the Company or (2) present obligations
arising from past events where it is not probable that an outflow of
resources will be required to settle the obligation or a reliable
estimate of the amount of the obligation cannot be made. Contingent
assets are not recognised in the financial statements.
p) Borrowing Costs:
Borrowing costs include interest, amortisation of ancillary costs
incurred and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost. Costs in connection with the borrowing of funds to the
extent not directly related to the acquisition of qualifying assets are
charged to the Statement of Profit and Loss over the tenure of the
loan. Borrowing costs, allocated to and utilised for qualifying assets,
pertaining to the period from commencement of activities relating to
construction / development of the qualifying asset upto the date of
capitalisation of such asset is added to the cost of the assets.
Capitalisation of borrowing costs is suspended and charged to the
Statement of Profit and Loss during extended periods when active
development activity on the qualifying assets is interrupted.
q) Stock based Compensation:
i) Employees Stock Option Plans ("ESOPs"):
The compensation cost of stock options granted to employees is measured
by the intrinsic value method, i.e. the difference between the market
price of the Company''s shares on the date of the grant of options and
the exercise price to be paid by the option holders. The compensation
cost, if any, is amortised uniformly over the vesting period of the
options.
ii) Stock Appreciation Rights ("SARs"):
The compensation cost of SARs granted to employees is measured by the
intrinsic value method, i.e. the excess of the market price of the
Company''s shares as at the period end and the acquisition price as on
the date of grant. The compensation cost is amortised uniformly over
the vesting period of the SARs.
r) Government Grants, subsidies and export incentives:
Government grants and subsidies are accounted when there is reasonable
assurance that the Company will comply with the conditions attached to
them and it is reasonably certain that the ultimate collection will be
made. Capital grants relating to specific fixed assets are reduced from
the gross value of the respective fixed assets. Revenue grants are
recognised in the Statement of Profit and Loss.
Export benefits available under prevalent schemes are accrued in the
year in which the goods are exported and there is no uncertainty in
receiving the same.
s) Research and Development:
Revenue expenditure incurred on research and development is charged to
the respective heads in the Statement of Profit and Loss in the year it
is incurred, unless a product''s technological feasibility has been
established, in which case such expenditure is capitalised. The amount
capitalised comprises of expenditure that can be directly attributed or
allocated on a reasonable and consistent basis for creating, producing
and making the asset ready for its intended use. Fixed assets utilised
for research and development are capitalised and depreciated in
accordance with the policies stated for Tangible Fixed Assets and
Intangible Assets.
t) Impairment of Assets:
The carrying values of assets / cash generating units at each Balance
Sheet date, are reviewed for impairment. If any indication of
impairment exists, the recoverable amount of such assets is estimated
and impairment is recognised, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater
of the net selling price and their value in use. Value in use is
arrived at by discounting the future cash flows to their present value
based on an appropriate discount factor. When there is indication that
an impairment loss recognised for an asset in earlier accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised in the Statement of Profit and Loss,
except in case of revalued assets.
u) Earnings per share:
Basic earnings per share is computed by dividing the profit / (loss)
after tax (including the post tax effect of extraordinary items, if
any) by the weighted average number of equity shares outstanding during
the year. Diluted earnings per share is computed by dividing the profit
/ (loss) after tax (including the post tax effect of extraordinary
items, if any) by the weighted average number of equity shares
outstanding during the year adjusted for the effects of all dilutive
potential equity shares.
Mar 31, 2012
A) Basis of accounting and preparation of Financial Statements:
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
the Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on accrual basis under the historical
cost convention. The accounting policies adopted in the preparation of
the financial statements are consistent with those followed in the
previous year.
b) Use of Estimates:
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. Future results could differ due to these estimates and the
differences between the actual results and the estimates are recognised
in the periods in which the results are known / materialise.
c) Tangible Fixed Assets:
Fixed Assets are carried at cost less accumulated depreciation and
impairment losses, if any. The cost of fixed assets includes interest
on borrowings attributable to acquisition of qualifying fixed assets up
to the date the asset is ready for its intended use and other
incidental expenses incurred up to that date. Exchange differences
arising on restatement / settlement of long-term foreign currency
borrowings relating to acquisition of depreciable fixed assets are
adjusted to the cost of the respective assets and depreciated over the
remaining useful life of such assets. Subsequent expenditure relating
to fixed assets is capitalised only if such expenditure results in an
increase in the future benefits from such asset beyond its previously
assessed standard of performance.
Capital work-in-progress in respect of assets which are not ready for
their intended use are carried at cost, comprising of direct costs,
related incidental expenses and attributable interest.
d) Intangible Assets:
Intangible assets are carried at cost less accumulated amortisation and
impairment losses, if any. The cost of an intangible asset comprises
its purchase price, including any import duties and other taxes (other
than those subsequently recoverable from the taxing authorities), and
any directly attributable expenditure on making the asset ready for its
intended use.
e) Foreign Currency Transactions / Translation:
i) Transactions denominated in foreign currency are recorded at
exchange rates prevailing at the date of transaction or at rates that
closely approximate the rate at the date of the transaction.
ii) Exchange differences arising on settlement / restatement of
short-term foreign currency monetary assets and liabilities of the
Company and its integral foreign operations are recognised as income or
expense in the Statement of Profit and Loss.
The exchange differences arising on restatement / settlement of
long-term foreign currency monetary items are capitalised as part of
the depreciable fixed assets to which the monetary item relates and
depreciated over the remaining useful life of such assets or amortised
on settlement over the maturity period of such items if such items do
not relate to acquisition of depreciable fixed assets. The unamortised
balance is carried in the Balance Sheet as "Foreign currency monetary
item translation difference account" net of the tax effect thereon.
iii) Premium / discount on forward exchange contracts, which are not
intended for trading or speculation purposes, are amortised over the
period of the contracts if such contracts relate to monetary items as
at the Balance Sheet date.
iv) In respect of the foreign offices / branches, which are integral
foreign operations, all revenues and expenses during the year are
reported at average rates. Outstanding balances in respect of monetary
assets and liabilities are restated at the year end exchange rates.
Outstanding balances in respect of non monetary assets and liabilities
are stated at the rates prevailing on the date of the transaction. Net
gain / loss on foreign currency translation is recognised in the
Statement of Profit and Loss.
f) Hedge Accounting:
The Company uses foreign currency forward contracts and currency
options to hedge its risks associated with foreign currency
fluctuations relating to highly probable forecast transactions. The
Company designates such forward / option contracts in a cash flow
hedging relationship by applying the hedge accounting principles set
out in Accounting Standard 30 (AS-30) "Financial Instruments:
Recognition and Measurement". These forward/ option contracts are
stated at fair value at each reporting date. Changes in the fair value
of these forward / option contracts that are designated and effective
as hedges of future cash flows are recognised directly in "Cash Flow
Hedge reserve account" under Reserves and Surplus, net of applicable
deferred income taxes and the ineffective portion is recognised
immediately in the Statement of Profit and Loss. Amounts accumulated in
the "Cash Flow Hedge reserve account" are reclassified to the
Statement of Profit and Loss in the same period during which the
forecasted transaction affects profit and loss. Hedge accounting is
discontinued when the hedging instrument expires or is sold,
terminated, or exercised, or no longer qualifies for hedge accounting.
For forecasted transactions, any cumulative gain or loss on the hedging
instrument recognised in "Cash Flow Hedge reserve account" is
retained until the forecasted transaction occurs. If the forecasted
transaction is no longer expected to occur, the net cumulative gain or
loss recognised in "Cash Flow Hedge reserve account" is immediately
transferred to the Statement of Profit and Loss.
g) Derivative Contracts:
The Company enters into derivative contracts in the nature of currency
options and forward contracts with an intention to hedge its existing
assets and liabilities and highly probable forecast transactions.
Derivative contracts which are closely linked to the existing assets
and liabilities are accounted as per the policy stated for Foreign
Currency Transactions / Translations.
Derivative contracts designated as a hedging instrument for highly
probable forecast transactions are accounted as per the policy stated
for Hedge Accounting.
All other derivative contracts are marked-to-market on a portfolio
basis and losses, if any, are recognised in the Statement of Profit and
Loss. Gains arising on the same are not recognised, until realised, on
grounds of prudence.
h) Investments:
Long-term investments are carried at cost, less provision for
diminution, other than temporary, in the value of such investments.
Cost of investments includes expenses directly incurred on acquisition
of investments. Current investments are carried at lower of cost and
fair value.
i) Inventories:
Inventories of all procured materials and Stock-in-Trade are valued at
the lower of cost (on moving weighted average basis) and the net
realisable value after providing for obsolescence and other losses,
where considered necessary. Cost includes all charges in bringing the
goods to their present location and condition, including octroi and
other levies, transit insurance and receiving charges. Work-in-process
and finished goods include appropriate proportion of overheads and,
where applicable, excise duty.
j) Revenue recognition:
Revenue from sale of goods is recognised net of returns, product expiry
claims and trade discounts, on transfer of significant risks and
rewards in respect of ownership to the buyer. Sales include excise duty
but exclude sales tax and value added tax. Sales are also netted off
for non - saleable return of goods from the customers, estimated on the
basis of historical data of such returns.
Sale of Technology / know-how (rights, licenses, dossiers and other
intangibles) is recognised when performance obligation is completed and
risk and reward of ownership of the product is transferred to the
customer.
Revenue (including in respect of insurance or other claims etc.) is
recognised when it is reasonable to expect that the ultimate collection
will be made.
Interest income is accounted on accrual basis. Dividend from investment
is recognised as revenue when right to receive the payments is
established.
The estimated useful lives of intangible assets and the amortisation
period are reviewed at the end of each financial year and the
amortisation method is revised to reflect the changed pattern. Assets
costing Rs 5000/- or less are depreciated at 100% rate on prorata basis
in the year of purchase.
l) Employee Benefits:
Employee benefits include provident fund, gratuity fund, compensated
absences and post employment and other long-term benefits.
a) Post Employment Benefits and Other Long-Term Benefits:
i) Defined Contribution Plan:
The Company's contribution towards provident fund and superannuation
fund for certain eligible employees are considered to be defined
contribution plans as the Company does not carry any further
obligations, apart from the contributions made on a monthly basis
ii) Defined Benefit and Other Long-Term Benefit Plans:
Company's liabilities towards defined benefit plans and other
long-term benefits viz. gratuity and compensated absences expected to
occur after twelve months, are determined using the Projected Unit
Credit Method. Actuarial valuations under the Projected Unit Credit
Method are carried out at the Balance Sheet date. Actuarial gains and
losses are recognised in the Statement of Profit and Loss in the period
of occurrence of such gains and losses. Past service cost is
recognised immediately to the extent benefits are vested, otherwise it
is amortised on straight-line basis over the remaining 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, and as reduced by the fair
value of plan 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 scheme.
Provident Fund for certain employees is administered through the
"Lupin Limited Employees Provident Fund Trust". Periodic
contributions to the Fund are charged to the Statement of Profit and
Loss. The Company has an obligation to make good the shortfall, if any,
between the return from the investment of the trust and interest rate
notified by the Government.
b) Short-Term Employee Benefits:
Short-term employee benefits expected to be paid in exchange for the
services rendered by employees are recognised undiscounted during the
period employee renders services. Short-term compensated absences are
provided for based on estimates in accordance with Company rules.
m) Taxes on Income:
Income taxes are accounted for in accordance with Accounting Standard
22 (AS 22) "Accounting for Taxes on Income". Tax expense comprises
both Current Tax and Deferred Tax. Current tax is the amount of tax
payable on taxable income for the year as determined in accordance with
the provisions of the Income Tax Act, 1961.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantially enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets in respect of unabsorbed depreciation and carry forward of
losses are recognised only if there is virtual certainty that there
will be sufficient future taxable income available to realise such
assets. Deferred tax assets are recognised for timing differences of
other items only to the extent that reasonable certainty exists that
sufficient future taxable income will be available against which these
can be realised. Deferred tax assets and liabilities are offset if such
items relate to taxes on income levied by the same governing tax laws
and the Company has a legally enforceable right for such set off.
Deferred tax assets are reviewed at each Balance Sheet date for their
readability.
n) Operating Leases:
Assets taken on lease under which all risks and rewards of ownership
are effectively retained by the lessor are classified as operating
lease. Lease payments under operating leases are recognised in the
Statement of Profit and Loss on a straight line basis in accordance
with the respective lease agreements.
o) Provisions, Contingent Liabilities and Contingent Assets:
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 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 liabilities are disclosed for (1)
possible obligations which will be confirmed only by future events not
wholly within the control of the Company or (2) present obligations
arising from past events where it is not probable that an outflow of
resources will be required to settle the obligation or a reliable
estimate of the amount of the obligation cannot be made. Contingent
assets are not recognised in the financial statements as this may
result in the recognition of income that may never be realised.
p) Borrowing Costs:
Borrowing costs include interest, amortisation of ancillary costs
incurred and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost. Costs in connection with the borrowing of funds to the
extent not directly related to the acquisition of qualifying assets are
charged to the Statement of Profit and Loss over the tenure of the
loan. Borrowing costs, allocated to and utilised for qualifying assets,
pertaining to the period from commencement of activities relating to
construction / development of the qualifying asset upto the date of
capitalisation of such asset is added to the cost of the assets.
Capitalisation of borrowing costs is suspended and charged to the
Statement of Profit and Loss during extended periods when active
development activity on the qualifying assets is interrupted.
q) Stock based Compensation:
i) Employee Stock Option Plans ("ESOPs"):
The compensation cost of stock options granted to employees is measured
by the intrinsic value method, i.e. the difference between the market
price of the Company's shares on the date of the grant of options and
the exercise price to be paid by the option holders. The compensation
cost, if any, is amortised uniformly over the vesting period of the
options.
ii) Stock Appreciation Rights ("SARs"):
The compensation cost of SARs granted to employees is measured by the
intrinsic value method, i.e. the excess of the market price of the
Company's shares as at the period end and the acquisition price as on
the date of grant. The compensation cost is amortised uniformly over
the vesting period of the SARs.
r) Government Grants, subsidies and incentives:
Government grants and subsidies are accounted when there is reasonable
assurance that the Company will comply with the conditions attached to
them and it is reasonably certain that the ultimate collection will be
made. Capital grants relating to specific fixed assets are reduced from
the gross value of the respective fixed assets. Revenue grants are
recognised in the Statement of Profit and Loss.
Export benefits available under prevalent schemes are accrued in the
year in which the goods are exported and there is no uncertainty in
receiving the same.
s) Research and Development:
Revenue expenditure incurred on research and development is charged to
the respective heads in the Statement of Profit and Loss in the year it
is incurred, unless a product's technological feasibility has been
established, in which case such expenditure is capitalised. The amount
capitalised comprises of expenditure that can be directly attributed or
allocated on a reasonable and consistent basis for creating, producing
and making the asset ready for its intended use. Fixed assets utilised
for research and development are capitalised and depreciated in
accordance with the policies stated for Tangible Fixed Assets and
Intangible Assets.
t) Impairment of Assets:
The carrying values of assets / cash generating units at each Balance
Sheet date, are reviewed for impairment. If any indication of
impairment exists, the recoverable amount of such assets is estimated
and impairment is recognised, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the
greater of the net selling price and their value in use. Value in use
is arrived at by discounting the future cash flows to their present
value based on an appropriate discount factor. When there is indication
that an impairment loss recognised for an asset in earlier accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised in the Statement of Profit and Loss,
except in case of revalued assets.
Mar 31, 2011
A) Basis of Preparation of Financial Statements:
i) The financial statements of the subsidiaries and associates used in
the consolidation are drawn upto the same reporting date as that of the
Company, namely March 31, 2011.
ii) The financial statements are prepared under the historical cost
convention in accordance with the generally accepted accounting
principles in India and Accounting Standards (AS) as notifed by the
Companies (Accounting Standards) Rules, 2006.
b) Principles of Consolidation:
i) The financial statements of the Company and its subsidiaries have
been consolidated in accordance with the Accounting Standard 21 (AS 21)
"Consolidated Financial Statements", on line-by-line basis by adding
together the book value of like items of assets, liabilities, income
and expenses, after fully eliminating intra-group balances, intraÃgroup
transactions and the unrealised profits / losses. Reference in these
notes to Company, Holding Company, Companies or Group shall mean to
include Lupin Limited, or any of its subsidiaries, unless otherwise
stated.
ii) The financial statements of the Company and its subsidiaries have
been consolidated using uniform accounting policies for like
transactions and other events in similar circumstances.
iii) The excess of cost to the Company of its investment in the
subsidiaries, on the acquisition dates over and above the Companys
share of equity in the subsidiaries, is recognised in the financial
statements as Goodwill on Consolidation and carried forward in the
accounts [Refer note no.15 of Schedule 19(B)]. The said Goodwill is not
amortised, however, it is tested for impairment at each Balance Sheet
date and the impairment loss, if any is provided for.
iv) Minority Interest in the net assets of the consolidated
subsidiaries consist of:
a) The amount of equity attributable to minorities as at the date on
which the investment in a subsidiary is made and,
b) The Minorities share of movements in equity since the date the
parent-subsidiaries relationship came in existence. The losses
applicable to the minority in excess of the minority interest in the
equity of the subsidiary and further losses applicable to the minority,
are adjusted against the majority interest except to the extent that
the minority has a binding obligation to and is able to make good the
losses. If the subsidiaries subsequently reports proft, all such profits
are allocated to the majority interest until the minoritys share of
losses previously absorbed by the majority has been recovered.
c) Minority Interest is presented separately from the liabilities or
assets and the equity of the shareholders in the consolidated Balance
Sheet. Minority Interest in the income or loss of the Company is
separately presented.
v) In case of associates, where the Company directly or indirectly
through subsidiaries holds more than 20% of equity, investments in
associates are accounted for using equity method in accordance with
Accounting Standard 23 (AS 23) ÃAccounting for Investment in Associates
in Consolidated Financial StatementsÃ.
vi) The Company accounts for its share in the change in the net assets
of the associates, post acquisition, after eliminating unrealised proft
and losses resulting from transactions between the Company and its
associates, through its Proft and Loss Account to the extent such
change is attributable to the associates Proft and Loss Account and
through its reserves for the balance.
vii) The difference between the cost of investment in the associates
and the share of net assets at the time of acquisition of share in the
associates is identifed as Goodwill or Capital Reserve, as the case may
be, and included in the carrying amount of investment in the
associates, and so disclosed. [Refer note no. 15 (b) of Schedule
19(B)].
viii) The difference between the proceeds from sale / disposal of
investment in a subsidiary and the carrying amount of assets less
liabilities as of the date of sale / disposal is recognised in the
Consolidated Proft and Loss Account as the proft or loss on sale /
disposal of investment in subsidiary.
c) Use of Estimates:
The preparation of financial statements in conformity with the generally
accepted accounting principles requires estimates and assumptions to be
made that affect the reported amounts of Assets and Liabilities on the
date of the financial statements and the reported amounts of Revenues
and Expenses during the reporting period. Differences between the
actual results and estimates are recognised in the period in which the
same are known / materialised.
d) Fixed Assets:
Fixed Assets are stated at cost net of cenvat, less accumulated
depreciation and accumulated impairment losses, if any. Cost includes
directly attributable cost of bringing the assets to their working
conditions for their intended use.
e) Intangible Assets:
Intangible Assets are recognised only if it is probable that the future
economic benefts that are attributable to the assets will flow to the
enterprise and the cost of the assets can be measured reliably. The
Intangible Assets are recorded at cost and are carried at cost less
accumulated amortisation and accumulated impairment losses, if any.
f) Foreign Currency Transactions / Translation:
i) Transactions denominated in foreign currency are recorded at the
exchange rates prevailing at the date of transaction.
ii) Exchange differences arising on settlements during the year in
respect of short term monetary items denominated in foreign currency
are recognised in the Proft and Loss Account. Exchange differences
arising on translation of short term monetary items denominated in
foreign currency which are outstanding as at the balance sheet date are
translated using the exchange rates prevailing as at the balance sheet
date and are recognised in the Proft and Loss Account.
iii) In terms of Notifcation relating to AS 11 issued by the Ministry
of Corporate Affairs in March 2009:
The exchange differences arising on translation of the ÃLong Term
Foreign Currency Monetary Itemsà at the rates different from those at
which they were initially recorded during the period or reported in the
previous financial statements and the exchange difference on settlement
of such items, in so far as such items relate to the acquisition of a
depreciable capital asset, are added or deducted as the case may be,
from the cost of the respective asset and depreciated over the balance
life of those assets.
iv) In case of forward exchange contracts entered into to hedge the
foreign currency exposure in respect of short term monetary items, the
difference between the exchange rate on the date of such contracts and
the year end rate is recognised in the Proft and Loss Account. Any
proft / loss arising on cancellation of forward exchange contract is
recognised as income or expense of the year. Premium / discount arising
on such forward exchange contracts is amortised as income / expense
over the life of contract.
v) Foreign offces / branches:
In respect of the foreign offces / branches of the Company, which are
integral foreign operations, all revenues and expenses during the year
are reported at average rate. Outstanding balances in respect of
monetary assets and liabilities are restated at the year-end exchange
rates. Outstanding balances in respect of non monetary assets and
liabilities are stated at the rates prevailing on the date of the
transaction. Net gain / loss on foreign currency translation is
recognised in the Proft and Loss Account.
vi) Foreign Subsidiaries:
In case of foreign subsidiaries, the local accounts are maintained in
their local currency except the subsidiary company at Switzerland whose
accounts are maintained in USD [Refer note no. 22 of Schedule 19 (B)].
The financial statements of the subsidiaries, whose operations are
integral foreign operations for the Company, have been translated to
Indian Rupees on the following basis:
i) All income and expenses are translated at the average rate of
exchange prevailing during the year.
ii) Monetary assets and liabilities are translated at the closing rate
on the Balance Sheet date.
iii) Non monetary assets and liabilities are translated at historical
rates.
iv) The resulting exchange difference is accounted in ÃExchange Rate
Difference on Translation Account and is charged / credited to the
Proft and Loss Account.
The financial statements of subsidiaries, whose operations are non
integral foreign operations for the Company, have been translated to
Indian Rupees on the following basis:
i) All income and expenses are translated at the average rate of
exchange prevailing during the year.
ii) Monetary and non monetary assets and liabilities are translated at
the closing rate on the Balance Sheet date.
iii) The resulting exchange difference is accounted in ÃForeign
Currency Translation Reserve and carried in the Balance Sheet.
g) Derivative Instruments and Hedge Accounting:
Forward and Option Contracts in the nature of highly probable forecast
transactions and contracts for interest rate swaps entered into for
hedging the risk of foreign currency exposures and interest related
risk in respect of variable rate debts respectively are accounted based
on recognition and measurement principles stated in Accounting Standard
30 (AS 30) ÃFinancial Instruments: Recognition and Measurementsà as
issued by The Institute of Chartered Accountants of India. The amount
adjusted from the Cash Flow Hedge Reserve, on the occurrence of the
hedged transaction, is included in the Proft and Loss Account, against
the related hedged item.
h) Investments:
Long-term investments are carried at cost which includes expenses
directly incurred on acquisition of investments. Investments in equity
/ ordinary shares in foreign currency are stated at cost by converting
at exchange rate prevailing at the time of acquisition. Provision for
diminution in the value of long term investments is made only if such
decline is other than temporary. Current investments are carried at
lower of cost and fair value.
i) Inventories:
Stock-in-trade and Stock of consumable stores, spares and furnace oil
are valued at lower of cost and net realisable value. Cost is computed
based on moving weighted average in respect of all procured materials
and traded fnished goods and includes appropriate share of utilities
and other overheads in respect of work-in-process and fnished goods.
Cost also includes all charges incurred for bringing the inventories to
their present location and condition. In case of subsidiaries at USA
and Philippines, cost of fnished goods including traded goods, raw
materials, supplies and others are computed by using the frst in frst
out method. Cost also includes all charges incurred for bringing the
inventories to their present location and condition.
j) Revenue Recognition:
i) Revenue from sale of goods is recognised when the signifcant risks
and rewards in respect of ownership of products are transferred by the
Company.
ii) Revenue (including in respect of insurance or other claims,
interest etc.) is recognised when it is reasonable to expect that the
ultimate collection will be made.
iii) Revenue from product sales is stated net of returns, sales tax /
VAT and applicable trade discounts and allowances.
iv) Sale of Technology / Know-how (rights, licenses, dossiers and other
intangibles) are recognised when performance obligation is completed
and risk and rewards of ownership of the products are passed on to the
customers.
v) Dividend from investment is recognised as revenue when right to
receive the payments is established.
vi) Interest income is recognised on time proportionate basis.
vii) Revenue from service charges is recognised on rendering of the
related services in accordance with the terms of the agreement.
k) Export Benefts:
Export benefts available under prevalent schemes are accrued in the
year in which the goods are exported and are accounted to the extent
considered receivable.
l) Excise Duty:
Excise duty is accounted on the basis of payments made in respect of
goods cleared and provision is made for goods lying in bonded
warehouses.
m) Depreciation and Amortisation:
Depreciation on fxed assets is provided on straight line basis in the
manner and at the rates prescribed in Schedule XIV to the Companies
Act, 1956, except for the following Fixed Assets and Intangible Assets
which are depreciated / amortised over their useful life (being lower
than the life considering the rates prescribed in Schedule XIV to the
Companies Act, 1956) as determined by the Management on the basis of
technical evaluation, etc.
n) Employee Benefts:
a) Post Employment Benefts and Other Long Term Benefts:
i) Defned Contribution Plan:
Contribution for the year paid / payable to defned contribution
retirement beneft schemes are charged to Proft and Loss Account.
ii) Defned Beneft and Other Long Term Beneft Plans:
Liabilities towards defned beneft plans and other long term benefts
viz. gratuity and compensated absences expected to occur after twelve
months, are determined using the Projected Unit Credit Method.
Actuarial valuations under the Projected Unit Credit Method are carried
out at the balance sheet date. Actuarial gains and losses are
recognised in the Proft and Loss Account in the period of occurrence of
such gains and losses. Past service cost is recognised immediately to
the extent benefts are vested, otherwise it is amortised on
straight-line basis over the remaining average period until the benefts
become vested.
The retirement beneft obligation recognised in the Balance Sheet
represents the present value of the defned beneft obligation as
adjusted for unrecognised past service cost, and 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 scheme.
b) Short-Term Employee Benefts:
Short-term employee benefts expected to be paid in exchange for the
services rendered by employees are recognised undiscounted during the
period employee renders services. Short term compensated absences are
provided for based on estimates in accordance with Company rules.
o) Taxes on Income:
Income Taxes are accounted for in accordance with Accounting Standard
22 (AS 22) ÃAccounting for Taxes on IncomeÃ. Tax expense comprises both
Current Tax and Deferred Tax. Current Tax is measured at the amount
expected to be paid or recovered from the tax authorities using the
applicable tax rates.
Minimum Alternate Tax (MAT) credit entitlement is recognised as an
asset by crediting the Proft and Loss Account to the extent there is
convincing evidence that the same will be utilised and disclosing an
equivalent amount as an asset under ÃLoans and Advances in accordance
with Guidance Note on ÃAccounting for Credit Available in respect of
Minimum Alternate Tax under the Income Tax Act, 1961Ã issued by the
Institute of Chartered Accountants of India.
Deferred Tax assets and liabilities are recognised for future tax
consequence attributable to timing differences between taxable income
and accounting income that are measured at relevant enacted or current
/ substantively enacted tax rates, as applicable. At each Balance Sheet
date the Company reassesses unrecognised deferred tax assets, to the
extent they become reasonably certain or virtually certain of
realisation, as the case may be.
The deferred tax assets and deferred tax liabilities are off set if Ã
i) there exists a legally enforceable right to set off the assets
against liabilities representing
current tax and; ii) the deferred tax assets and the deferred tax
liabilities relate to taxes on income levied
by the same governing taxation laws.
p) Operating Leases:
Assets taken on lease under which all risks and rewards of ownership
are effectively retained by the lessor are classifed as operating
lease. Lease payments under operating leases are recognised as expenses
on accrual basis in accordance with the respective lease agreements.
q) Finance Leases:
Assets acquired under lease where the Company has substantially all the
risks and rewards of ownership are classifed as fnance leases. Such
assets are capitalised at the inception of the lease at the lower of
the fair value or the present value of minimum lease payments and a
liability is created for an equivalent amount. The rent obligations net
of interest charges are refected as secured loans.
r) Provisions, Contingent Liabilities and Contingent Assets:
Provisions involving substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognised but are disclosed in the
Notes to Accounts. Contingent Assets are neither recognised nor
disclosed in the financial statements.
s) Borrowing Costs:
Borrowing costs attributable to the acquisition or construction of
qualifying assets are capitalised as part of the cost of such assets. A
qualifying asset is one that necessarily takes a substantial period of
time to get ready for its intended use. All other borrowing costs are
charged to revenue.
t) Stock based Compensation:
The compensation cost of stock options granted to employees is measured
by the intrinsic value method, i.e. the difference between the market
price of the Companys shares on the date of the grant of options and
the exercise price to be paid by the option holders. The compensation
cost if any, is amortised uniformly over the vesting period of the
options.
u) Government Grants:
Government grants are accounted when there is reasonable assurance that
the enterprise will comply with the conditions attached to them and it
is reasonably certain that the ultimate collection will be made.
Capital grants relating to specifc fxed assets are reduced from the
gross value of the respective fxed assets. Revenue grants are
recognised in the Proft and Loss Account.
v) Research and Development:
Revenue Expenditure incurred on research and development is charged to
the respective heads in the Proft and Loss Account in the year it is
incurred and Capital Expenditure thereon is included in the respective
heads under Fixed Assets.
Expenditure on in-licensed development activities, whereby research
fndings are applied to a plan or design for the production of new or
substantially improved products and processes, is capitalised, if the
cost can be reliably measured, the product or process is technically
and commercially feasible and the Company has suffcient resources to
complete the development and to use and sell the asset.
w) Impairment of Assets:
An asset is treated as impaired when the carrying cost of the asset
exceeds its recoverable value. An impairment loss is charged to Proft
and Loss Account in the year in which an asset is identifed as
impaired. The impairment loss recognised in prior accounting periods is
reversed if there has been a change in the estimate of recoverable
amount.
Mar 31, 2010
A) Basisof Preparation of Financial Statements:
The financial statements are prepared
underthehistoricalcostconventioninaccordance with thegenerally accepted
accounting principles in India, the provisions of the Companies Act,
1956 and the applicable accounting standards.
b) Use of Estimates:
The preparation of financial statements requires estimates and
assumptions that affect the reported amount of Assets and Liabilities
on the date of the financial statements and the reported amount of
Revenues and Expenses during the reporting period. Differences between
the actual results and the estimates are recognised in the period in
which the same are known/materialised.
c) Fixed Assets:
Fixed Assets are recorded and stated at cost, net of cenvat, less
accumulated depreciation and accumulated impairment losses, if any.
Cost includes directly attributable cost of bringing the assets to
their working conditionsfortheirintendeduse.
d) IntangibleAssets:
IntangibleAssetsare recognised only ifit is probable that the future
economic benefits that are attributable to the assets will flow to the
enterprise and the cost of the assets can be measured reliably. The
Intangible Assets are recorded at cost and are carried at cost less
accumulated amortisation and accumulated impairmentlosses,ifany.
e) Foreign Currency Transactions/Translation:
i) Transactions in foreign currency are recorded at the original rate
of exchange in force at the time transactionsare effected.
ii) Exchange difference arising on settlements during the year of short
term monetary items denominated in foreign currency; and exchange
difference arising on the reporting of short term monetary items
denominated in foreign currency which are outstanding at the year end
using the exchange rates prevailing at the balance sheet date,are
recognized in the Profit and Loss Account.
iii) In terms of the Notification relating to AS 11 issued by the
Ministry of Corporate Affairs in March 2009:
a) The exchange difference arising on reporting of the "Long Term
Foreign Currency Monetary Items" at the rates different from those at
which they were initially recorded during the period or reported in the
previous financial statements and the exchange difference on settlement
of such items, in so far as such items relate to the acquisition of a
depreciable capital asset, are added or deducted as the case may be,
from the cost of the respective asset and depreciated over the balance
life of those assets and
b) In other cases, these are accumulated in a "Foreign Currency
Monetary Item Translation Difference Account" and amortised over the
balance period of such long term asset/liability but not beyond 31 st
March, 2011.
iv) I n case of forward exchange contracts entered into to hedge the
foreign currency exposure in respect of short term monetary items, the
difference between the exchange rate on the date of such contracts and
the year end rate is recognized in the Profit and Loss Account. Any
profit/loss arising on cancellation of forward exchange contract is
recognized as income or expense of the year. Premium/discount arising
on such forward exchange contracts is amortised as income/expense over
the life of contract.
v) Foreign offices/branches:
In respect of the foreign offices/branches, which are integral foreign
operations, all revenues and expenses during the year are reported at
average rate. Monetary assets and liabilities are restated at the year
end exchange rate. Non monetary assets and liabilities are stated at
the rate prevailing on the date of the transaction. Net gain/loss on
foreign currency translation is recognised in the Profit and Loss
Account.
f> Derivative instruments and hedge accounting:
Forward and Option Contracts, in the nature of highly probable forecast
transactions, entered into by the Company for hedging the risks of
foreign currency exposure are accounted based on recognition and
measurement principles stated in Accounting Standard 30 (AS 30)
"Financial Instruments: Recognition and Measurements".The amount
removed from the Cash Flow Hedge Reserve, on the occurrence of the
hedged transaction, is included in the Profit and Loss
Account,againstthe related hedged item.
g) Investments:
Long term investments are stated at cost which includes expenses
directly incurred on acquisition of investments. Investments in
equity/ordinary shares in foreign currency are stated at cost by
converting at exchange rate prevailing at the time of acquisition.
Provision for diminution in the value of long term investments is made
only if such decline is other than temporary. Current investments are
carried at cost or fairvalue,whicheveris lower.
h) Inventories:
Stock-in-trade and stock of consumable stores, spares and furnace oil
are valued at lower of cost and net realisable value. Cost is computed
based on moving weighted average in respect of all procured materials
and traded finished goods and includes appropriate share of utilities
and other overheads in respect of Work-in-Process and finished goods.
Cost also includes all charges incurred for bringing the inventories to
their present location and condition.
i) Revenue recognition:
i) Revenue from sale of goods is recognised when the significant risks
and rewards in respect of ownership of products are transferred by the
Company.
ii) Revenue (including in respect of insurance or other claims,
interest, etc.) is recognised when it is reasonableto expect thatthe
ultimate collection will be made.
iii) Revenue from product sales is stated net of returns, sales tax/VAT
and applicable trade discounts andallowances.
iv) Income from research and product registration (dossiers) services
and sale of patent rights is recognised as revenue when earned in
accordance with the terms of therelevant agreements.
v) Dividend from investment is recognised as revenue when right to
receive the payments is established.
vi) Interest income is recognised on time proportionate basis.
j) Export Benefits:
Export benefits available under prevalent schemes are accrued in the
year in which the goods are exported and are accounted to the extent
considered receivable.
k) Excise Duty:
Excise duty is accounted on the basis of payments made in respect of
goods cleared and provision is made forgoods lying in bonded
warehouses.
m) Employee Benefits:
a) Post Employment Benefitsand Other Long Term Benefits: i) Defined
Contribution Plan:
Companys contribution for the year paid/payable to defined
contribution retirement benefit schemesare charged to Profitand Loss
Account.
ii) Defined Benefit and Other Long Term Benefit Plans:
Companys liabilities towards defined benefit plans and other long term
benefits viz. gratuity and compensated absences expected to occur after
twelve months, are determined using the Projected Unit Credit Method.
Actuarial valuations under the Projected Unit Credit Method are carried
out at the Balance Sheet date. Actuarial gains and losses are
recognised in the Profit and Loss Account in the period of occurrence
of such gains and losses. Past service cost is recognised immediately
to the extent benefits are vested, otherwise it is amortised on
straight-line basis over the remaining 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, and 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 infuture contributions tot he scheme.
b) Short Term Employee Benefits:
Short term employee benefits expected to be paid in exchange for the
services rendered by employees are recognised undiscounted during the
period employee renders services. These benefits include performance
incentives.
c) EmployeeTermination Benefits Costs:
Compensation to employees who have opted for retirement under the
Voluntary Retirement Scheme of the Company is charged to the Profit and
Loss Account in theyear of exercise of option by the employees.
n) Taxes on Income:
Income taxes are accounted for in accordance with Accounting Standard
22 (AS 22) "Accounting for Taxes on Income". Tax expense comprises both
Current Tax and Deferred Tax. Current tax is measured at the amount
expected to be paid or recovered from the taxauthorities using the
applicable tax rates.
Minimum Alternate Tax (MAT) credit entitlement is recognized as an
asset by crediting the Profit and Loss Account and disclosing an
equivalent amount as an asset under loans and Advances in accordance
with guidance note on "Accounting for Credit Available in respect of
Minimum Alternate Tax under the Income Tax Act, 1961" issued by the
Institute of Chartered Accountants of India.
Deferred tax assets and liabilities are recognised for future tax
consequence attributable to timing differences between taxable income
and accounting income that are measured at relevant enacted tax rates.
At each balance sheet date the company reassesses unrecognised deferred
tax assets, to the extent they become reasonably certain or virtually
certain of realisation, as the case may be.
o) Fringe Benefit Tax:
Fringe benefit tax was recognised in accordance with the relevant
provisions of the Income Tax Act, 1961 andtheGuidancenoteon Fringe
BenefitTaxissuedbythelnstituteofCharteredAccountantsoflndia.
p) Operating Leases:
Assets taken on lease under which all risks and rewards of ownership
are effectively retained by the lessor are classified as operating
lease. Lease payments under operating leases are recognised as expenses
on accrual basis in accordance with the respective lease agreements.
q) Provisions, Contingent Liabilities and Contingent Assets:
Provisions involving substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognised but are disclosed in the
Notes to Accounts. Contingent Assets are neither recognised nor
disclosed in the financial statements.
r) Borrowing Costs:
Borrowing costs attributable to the acquisition or construction of
qualifying assets are capitalised as part of the cost of such assets. A
qualifying asset is one that necessarily takes a substantial period of
time to get ready for its intended use. All other borrowing costsare
charged to revenue.
s) Stock based Compensation:
The compensation cost of stock options granted to employees is measured
by the intrinsic value method, i.e. the difference between the market
price of the Companys shares on the date of the grant of options and
the exercise price to be paid by the option holders. The compensation
cost, if any is amortised uniformly overthevesting period oftheoptions.
t) GovemmentGrants:
Government grants are accounted when there is reasonable assurance that
the enterprise will comply with the conditions attached to them and it
is reasonably certain that the ultimate collection will be made.
Capital grants relating to specific fixed assets are reduced from the
gross value of the respective fixed assets. Revenue grants are
recognised in the Profit and Loss Account.
u) Research and Development:
Revenue expenditure incurred on research and development is charged to
the respective heads in the Profit and Loss Account, in the year it is
incurred and capital expenditure there on is included in the respective
heads under Fixed Assets.
v) Impairment of Assets:
An asset is treated as impaired when the carrying cost of the asset
exceeds its recoverable value. An impairment loss is charged to Profit
and Loss Account in the year in which an asset is identified as
impaired. The impairment loss recognised in prior accounting periods
is reversed if there has been a change in the estimate of recoverable
amount.