Mar 31, 2023
Note 1. Corporate information
Jubilant Pharmova Limited ("the Company") is a public limited company domiciled in India and incorporated under the provisions of Companies Act, 1956. Its shares are listed on BSE Limited and National Stock Exchange of India Limited. The registered office of the Company is situated at Bhartiagram, Gajraula, District Amroha, Uttar Pradesh - 244223.
The Company along with its subsidiaries is an integrated global pharmaceutical company engaged in radiopharma, allergy immunotherapy, contract development and manufacturing of sterile injectable, generics, contract research development and manufacturing (CRDMO) and proprietary novel drugs businesses. With a network of 46 radiopharmacies in the USA, the radiopharma business is engaged in manufacturing and supply of radiopharmaceutical products and services. Allergy immunotherapy, contract development and manufacturing of sterile injectables and non-sterile products and generics businesses cater to major regulated markets (USA, EU and other geographies) through 5 manufacturing facilities. CRDMO business provides collaborative research and partnership for drug discovery through 2 research centers in India. The Company is also engaged in the manufacturing of active pharmaceutical products through a USFDA approved facility in Nanjangud, Karnataka. Proprietary novel drugs is an innovative biopharmaceutical business developing breakthrough therapies in the area of oncology and auto-immune disorders. The Company is well recognized as a ''Partner of Choice'' by leading pharmaceuticals companies globally.
The Scheme of Arrangement ("the Scheme") for demerger of the Active Pharmaceuticals Ingredients ("API") business undertaking of Jubilant Generics Limited ("JGL"), an indirect wholly owned subsidiary of the Company, and vesting of the same with the Company, on a going concern basis, with an Appointed Date of 1 April 2022 was approved by Hon''ble National Company Law Tribunal, Allahabad Bench ("NCLT") vide its order dated 13 June 2022. Also refer note 31.
Note 2. Significant accounting policies
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements. The accounting policies adopted are consistent with those of the previous financial year.
(i) Statement of compliance
These Standalone Financial Statements ("financial statements") have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under Section 133 of the Companies Act, 2013, ("the Act"), relevant provisions of the Act and other accounting principles generally accepted in India.
All the amounts included in the financial statements are reported in millions of Indian Rupees (''Rupees'' or ''C'') and are rounded to the nearest million, except per share data and unless stated otherwise.
The financial statements have been authorised for issue by the Company''s Board of Directors on 29 May 2023.
(ii) Historical cost convention
These standalone financial statements have been prepared under historical cost convention on accrual basis, unless otherwise stated.
(b) Current versus non-current classification
The Company presents assets and liabilities in the Balance Sheet based on current/ non-current classification.
An asset is treated as current when:
⢠It is expected to be realised or intended to be sold or consumed in normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠It is expected to be realised within twelve months after the reporting period; or
⢠It is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
The Company classifies all other assets as non-current.
A liability is current when:
⢠It is expected to be settled in normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠It is due to be settled within twelve months after the reporting period; or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle for the purpose of current-non-current classification of assets and liabilities.
(c) Business combinations
Business combinations (other than business combinations between common control entities) are accounted for using the purchase (acquisition) method. The cost of an acquisition is measured as the fair value of the consideration transferred, equity instruments issued and liabilities incurred or assumed at the date of exchange. The consideration transferred does not include amounts related to the settlement of pre-existing relationships; such amounts are generally recognised in the Statement of Profit and Loss and Other Comprehensive Income. The cost of acquisition also includes the fair value
of any contingent consideration. Identifiable assets acquired and liabilities & contingent liabilities assumed in a business combination are measured initially at fair value at the date of acquisition. Transaction costs incurred in connection with a business combination are expensed as incurred. The excess of the consideration transferred over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised in other comprehensive income and accumulated in equity as capital reserve as a gain on bargain purchase, unless there is no clear evidence for the underlying reason for classification of the business combination as a bargain purchase, in which case, it shall be recognised directly in equity as capital reserve.
Business combinations between entities under common control are accounted at historical cost. The difference between the consideration paid/received and the carrying amount of assets and liabilities transferred is recorded in the capital reserve, a component of other equity.
Business combinations arising from transfers of interests in entities that are under the common control are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established; for this purpose, comparatives are revised.
(i) Property, plant and equipment
Freehold land is carried at cost. All other items of property, plant and equipment are stated at cost, which includes capitalised finance costs, less accumulated depreciation and any accumulated impairment loss. Cost includes expenditure that is directly attributable to the acquisition of the items. The cost of an item of a PPE comprises its purchase price including import duty, and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition of its intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
Expenditure incurred on startup and commissioning of the project and/or substantial expansion, including the expenditure incurred on trial runs (net of trial run receipts, if any) up to the date of commencement of commercial production are capitalised. Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Advances paid towards acquisition of property, plant and equipment outstanding at each Balance Sheet date, are shown under other non-current assets and cost of assets not ready for intended use before the year end, are shown as capital work-in-progress.
(ii) Intangible assets
⢠Goodwill arising on business combinations is disclosed separately in the balance sheet and is carried at cost less accumulated impairment losses.
⢠Internally generated goodwill is not recognised as an asset. With regard to other internally generated intangible assets:
- Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the Statement of Profit and Loss as incurred.
- Development expenditure including regulatory cost and legal expenses leading to product registration/ market authorisation relating to the new and/or improved product and/or process development is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use the asset. The expenditure capitalised includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and directly attributable finance costs (in the same manner as in the case of tangible fixed assets). Other development expenditure is recognised in the Statement of Profit and Loss as incurred.
⢠Intangible assets that are acquired and implementation of software system are measured initially at cost.
⢠After initial recognition, an intangible asset is carried at its cost less accumulated amortisation and any accumulated impairment loss. Subsequent expenditure is capitalised only when it increases the future economic benefits from the specific asset to which it relates.
(iii) Depreciation and amortisation methods, estimated useful lives and residual value
Depreciation is provided on straight line basis on the original cost/ acquisition cost of assets or other amounts substituted for cost of fixed assets as per the useful life specified in Part ''C of Schedule II of the Act, read with notification dated 29 August 2014 of the Ministry of Corporate Affairs, except for the
Software systems are being amortised over a period of five years being their useful life.
Depreciation and amortisation on property, plant and equipment and intangible assets added/disposed off during the year has been provided on pro-rata basis with reference to the date/month of addition/disposal.
Depreciation and amortisation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if appropriate.
(iv) Derecognition
Property, plant and equipment and intangible assets are derecognised on disposal or when no future economic benefits are expected from its use and disposal. Losses arising from retirement and gains or losses arising from disposal of a property, plant and equipment and intangible assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss.
(e) Non-current assets held for sale
Non-current assets are classified as held for sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use. Such assets are generally measured at the lower of their carrying amount and fair value less cost to sell. Losses on initial classification as held for sale and subsequent gains and losses on re-measurement are recognised in the Statement of Profit and Loss.
Once classified as held-for sale, property, plant and equipment and intangible assets are no longer amortised or depreciated.
(f) Impairment of non-financial assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. The Company''s other non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment.
following classes of fixed assets which are depreciated based on the internal technical assessment of the management as under:
Category of assets |
Management |
Useful life |
estimate of |
as per |
|
useful life |
Schedule II |
|
Vehicles - owned |
5 years |
8 years |
Computer servers and networks (included in office equipment) |
5 years |
6 years |
Employee perquisite |
5 years, being |
10 years |
related assets (except |
the period |
|
end user computers) |
of perquisite |
|
(included in furniture and fixtures) |
scheme |
If any such indication exists, then the asset''s recoverable amount is estimated.
For impairment testing, assets that do not generate independent cash inflows (i.e. corporate assets) are grouped together into cash-generating units (CGUs). Each CGU represents the smallest group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or CGUs. Goodwill is allocated to cashgenerating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes.
The recoverable amount of an asset or CGU is the higher of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Impairment loss recognised in respect of a CGU is allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amount of the other assets of the CGU (or group of CGUs) on a pro rata basis.
An impairment loss in respect of goodwill is not subsequently reversed. In respect of other assets for which impairment loss has been recognised in prior periods, the Company reviews at reporting date whether there is any indication that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. Such a reversal is made only to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(g) Financial instrument
A Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
(i) Financial assets
initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the 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.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
⢠Debt instruments at amortised cost
⢠Debt instruments at fair value through other comprehensive income (FVOCI)
⢠Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVPL)
⢠Equity instruments measured at fair value through other comprehensive income (FVOCI)
Debt instruments at amortised cost
A ''debt instrument'' is measured at the amortised cost if the asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the gross carrying amount of the financial asset or the amortised cost of the financial liability. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in other income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss.
Debt instrument at FVOCI
A ''debt instrument'' is classified as at the FVOCI if the objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and the asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognised in the other comprehensive income (OCI). On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified to the Statement of Profit and Loss. Interest earned whilst holding FVOCI debt instrument is reported as interest income using the EIR method.
Debt instrument at FVPL
FVPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorisation as at amortised cost or as FVOCI, is classified as at FVPL. In addition, at initial recognition, the Company may irrevocably elect to designate a debt instrument, which otherwise meets amortised cost or FVOCI criteria, as at FVPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch'').
Debt instruments included within the FVPL category are measured at fair value with all changes recognised 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 and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to the Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss to retained earnings.
Equity instruments included within the FVPL category are measured at fair value with all changes recognised in the Statement of Profit and Loss.
Investments in subsidiaries
Equity investments in subsidiaries 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, the difference between net disposal proceeds and the carrying amounts are recognised in the Statement of Profit and Loss.
Impairment of financial assets
The Company recognises loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all financial assets with contractual cash flows other than trade receivable, ECLs are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of ECL (or reversal) that is required to adjust the loss allowance at the reporting date is recognised as an impairment gain or loss in the Statement of Profit and Loss.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Company''s balance sheet) when:
⢠The rights to receive cash flows from the asset have expired, or
⢠The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
(ii) Financial liabilities
Financial liabilities are classified as measured at amortised cost or FVPL. A financial liability is classified as at FVPL if it is classified as held-for-trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVPL are measured at fair value and net gains and losses, including any interest expense, are recognised in Statement of Profit and Loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in Statement of Profit and Loss. Any gain or loss on derecognition is also recognised in Statement of Profit and Loss.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
(iii) Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the Balance Sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
(iv) Share capital
Equity shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity. Income tax relating to transaction costs of an equity transaction is accounted for in accordance with Ind AS 12.
Inventories are valued at lower of cost or net realisable value except scrap, which is valued at net estimated realisable value.
The methods of determining cost of various categories of inventories are as follows:
Raw materials Weighted average method
Stores and spares Weighted average method
Work-in-progress Direct materials, direct
and finished goods labour and an appropriate
(manufactured) proportion of variable and
fixed production overheads, the latter being allocated on the basis of normal operating capacity
Fuel, consumables, packing Weighted average method material etc.
Finished goods (traded) Weighted average method
Goods in transit Cost of purchase
Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
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. The net realisable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials and other supplies held for use in the production of finished products are not written down below cost, except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realisable value. The comparison of cost and net realisable value is made on an item-by-item basis.
Cash and cash equivalent comprise cash at banks and on hand (including imprest) and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle
the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. When some or all ofthe economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Contingent liability
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
(k) Revenue recognition
Revenue from sale of products is recognised when the Company satisfies a performance obligation upon transfer of control of products to customers at the time of shipment to or receipt of goods by the customers. Service income is recognized when the Company satisfies a performance obligation as and when the underlying services are performed.
The Company exercises judgment in determining whether the performance obligation is satisfied at a point in time or over a period of time. The Company considers indicators such as how customer consumes benefits as services are rendered or who controls the asset as it is being created or existence of enforceable right to payment for performance to date and alternate use of such product or service, transfer of significant risks and rewards to the customer, acceptance of delivery by the customer, etc. Invoices are issued as per the general business terms and are payable in accordance with the contractually agreed credit period.
Revenues are measured based on the transaction price allocated to the performance obligation, which is the consideration, net of taxes or duties collected on behalf of the government and applicable discounts and allowances including expected sales return etc. The computation of these estimates using expected value method involves significant judgment based on various factors including contractual terms, historical experience, estimated inventory levels and expected sell-through levels in supply chain. The transaction price is allocated to each performance obligation in the contract on the basis of the relative standalone selling prices of the promised goods or services. The transaction price may be fixed or variable and is adjusted for time value of money if the contract includes significant financing component.
Contract assets are recognised when there is excess of revenue earned over billings on contracts, excluding amounts classified as unbilled receivables (only act of invoicing is pending) when there is unconditional right to receive cash and only passage of time is required as per contractual terms. Contract liabilities are recognised when there are billings in excess of revenues. Contract liabilities relate to the advance received from customers and deferred revenue against which revenue is recognised when or as the performance obligation is satisfied.
Income in respect of entitlement towards export incentives is recognised in accordance with the relevant scheme on recognition of the related export sales. Such export incentives are recorded as part of other operating revenue.
(i) Short-term employee benefits: All employee benefits falling due within twelve months from the end of the period in which the employees render the related services are classified as short-term employee benefits, which include benefits like salaries, wages, short term compensated absences, performance incentives, etc. and are recognised as expenses in the period in which the employee renders the related service and measured accordingly.
(ii) Post-employment benefits: Post employment benefit plans are classified into defined benefits plans and defined contribution plans as under:
a) Gratuity
The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount based on the respective employee''s salary and the tenure of employment. The liability in respect of gratuity is recognised in the books of account based on actuarial valuation by an independent actuary. The gratuity liability for certain employees of the Company is funded with Life Insurance Corporation of India.
b) Superannuation
Certain employees of the Company are also participants in the superannuation plan, a defined contribution plan. Contribution made by the Company to the superannuation plan during the year is charged to Statement of Profit and Loss.
c) Provident fund
The Company''s contribution to the provident fund is deposited with Regional Provident Fund Commissioner for its employees in India. The Company''s contribution to the provident fund is charged to Statement of Profit and Loss. This is treated as defined contribution plan. Also refer note 32(A).
(iii) Other long-term employee benefits:
Compensated absences:
As per the Company''s policy, eligible leaves can be accumulated by the employees and carried forward to future periods to either be utilised during the service, or encashed. Encashment can be made during service, on early retirement, on withdrawal of scheme, at resignation and upon death of the employee. Accumulated compensated absences are treated as other long-term employee benefits.
(iv) Termination benefits:
Termination benefits are recognised as an expense when, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
(v) Actuarial valuation
The liability in respect of all defined benefit plans and other long term benefits is accrued in the books of account on the basis of actuarial valuation carried out by an independent actuary using the Projected Unit Credit Method. The obligation is measured at the present value of estimated future cash flows. The discount rates used for determining the present value of obligation under defined benefit plans, is based on the market yields on Government securities as at the Balance Sheet date, having maturity periods approximating to the terms of related obligations.
Remeasurement gains and losses on other long term benefits are recognised in the Statement of Profit and Loss in the year in which they arise. Remeasurement gains and losses in respect of all defined benefit plans arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in other equity in the Statement of Changes in Equity and in the Balance Sheet. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service cost. Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs. Any differential between the plan assets (for a funded defined benefit plan) and the defined benefit obligation as per actuarial valuation is recognised as a liability if it is a deficit or as an asset if it is a surplus (to the extent of the lower of present value of any economic benefits available in the form of refunds from the plan or reduction in future contribution to the plan).
Past service cost is recognised as an expense in the Statement of Profit and Loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits are already vested immediately following the introduction of, or changes to, a defined benefit plan, the past service cost is recognised immediately in the Statement of Profit and Loss. Past service cost may be either positive (where benefits are introduced or improved) or negative (where existing benefits are reduced).
The Company has adopted the policy to account for Employees Welfare Trust as a legal entity separate from the Company but as a subsidiary of the Company. Any loan from the Company to the trust is accounted for as a loan in accordance with its term.
The grant date fair value of options granted (net of estimated forfeiture) to employees of the Company is recognised as an employee expense, and those granted to employees of subsidiaries is recharged to subsidiaries or considered as the Company''s equity contribution and is added to the carrying value of investment in the respective subsidiaries, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options. The expense is recorded for each separately vesting portion of the award as if the award was, in substance, multiple awards. The increase in equity recognised in connection with share based payment transaction is presented as a separate component in equity under "share based payment reserve". The amount recognised as an expense is adjusted to reflect the actual number of stock options that vest. For the option awards, grant date fair value is determined under the option-pricing model (Black-Scholes-Merton). Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures materially differ from those estimates.
Finance costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Finance cost also includes exchange differences to the extent regarded as an adjustment to the finance costs. Finance costs that are directly attributable to the construction or production or development of a qualifying asset are capitalised as part of the cost of that asset. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. All other finance costs are expensed in the period in which they occur.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the finance costs eligible for capitalisation. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the Statement of Profit and Loss over the period of the borrowings using the effective interest method. Ancillary costs incurred in connection with the arrangement of borrowings are amortised over the period of such borrowings.
Finance income consists of interest income. Interest income or expense is recognised using the effective interest method. The ''effective interest rate'' is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the gross carrying amount of the financial asset or the amortised cost of the financial liability. In calculating interest income or expense, the effective interest rate is applied to the gross carrying
Deferred tax assets (DTA) include Minimum Alternate Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability. MAT is a tax liability of a company computed at specified rate on adjusted book profits as per applicable provisions of the Income Tax Act. A company is liable to pay MAT, if the income tax payable under normal provisions of the Income Tax Act is less than tax payable under MAT.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to the period when the asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
Deferred income tax is not provided on the undistributed earnings of the subsidiaries where it is expected that the earnings of the subsidiary will not be distributed in the foreseeable future.
(q) Leases - Company as a lessee
The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (1) the contact involves the use of an identified asset; (2) the Company has substantially all of the economic benefits from use of the asset through the period of the lease; and (3) the Company has the right to direct the use of the asset.
The Company''s lease asset classes primarily consist of leases for land, buildings and vehicles which typically run for a period of 2 to 6 years, with an option to renew the lease after that date. At the date of commencement of the lease, the Company recognises a right-of-use asset and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases). For these short-term leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease.
amount of the asset (when the asset is not credit-impaired) or to the amortised cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.
Exceptional items refer to items of income or expense within the Statement of Profit and Loss from ordinary activities which are non-recurring and are of such size, nature or incidence that their separate disclosure is considered necessary to explain the performance of the Company.
Income tax expense comprises current and deferred tax. It is recognised in Statement of Profit and Loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI.
⢠Current 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. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received after considering uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.
Current tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
⢠Deferred tax:
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
- temporary differences arising on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction;
- temporary differences related to freehold land and investments in subsidiaries, to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
- taxable temporary differences arising on the initial recognition of goodwill.
Right-of-use assets and lease liabilities includes the options to extend or terminate the lease when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognised at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses, if any.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. 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 lease liability is initially measured at amortised cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates based on information available as at the date of commencement of the lease. Lease liabilities are remeasured with a corresponding adjustment to the related right-of-use asset if the Company changes its assessment of whether it will exercise an extension or a termination option. Lease liability and right-of-use asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Company makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to Company''s operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances.
(r) Foreign currency translation
(i) Functional and presentation currency
The functional currency of the Company is the Indian rupee. These financial statements are presented in Indian rupees.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in
foreign currencies at balance sheet date exchange rates are generally recognised in Statement of Profit and Loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets such as equity investments classified as FVOCI are recognised in other comprehensive income (OCI).
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions.
Government grants relating to income are deferred and recognised in the Statement of Profit and Loss over the period necessary to match them with the costs that they are intended to compensate and presented within other operating revenue.
Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to Statement of Profit and Loss on a straight-line basis over the expected lives of the related assets and presented within other income.
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
⢠the profit attributable to owners of the Company
⢠by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
⢠the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
⢠the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
(u) Measurement of fair values
A number of the accounting policies and disclosures require measurement of fair values, for both financial and nonfinancial assets and liabilities.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Company has an established control framework with respect to the measurement of fair values. This includes a finance team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values.
The finance team regularly reviews significant unobservable inputs and valuation adjustments. If third party information is used to measure fair values, then the finance team assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which the valuations should be classified.
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Further information about the assumptions made in measuring fair values used in preparing these financial statements is included in the respective notes.
(v) Critical estimates and judgments
The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes.
⢠Assessment of useful life of property, plant and equipment and intangible asset - Note 2(d)
⢠Valuation of inventories - Note 2(h)
⢠Recognition of revenue and related accruals- Note 2(k)
⢠Impairment of financial assets and non-financial assets - Note 2(f), 2(g) and 4(a)
⢠Lease term: whether the Company is reasonably certain to exercise extension options - Note 2(q) and 40
⢠Recognition and estimation of tax expense including deferred tax - Note 8 and 29
⢠Fair value measurement - Note 2(u) and 33
⢠Estimation of assets and obligations relating to employee benefits - Note 2(l) and 32
⢠Recognition and measurement of contingency: Key assumption about the likelihood and magnitude of an outflow of resources - Note 38
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On 31 March 2023, MCA amended the Companies (Indian Accounting Standards) Rules, 2015 by issuing the Companies (Indian Accounting Standards) Amendment Rules, 2023, applicable from 1 April 2023, as below:
The amendments require companies to disclose their material accounting policies rather than their significant accounting policies. Accounting policy information, together with other information, is material when it can reasonably be expected to influence decisions of primary users of general purpose financial statements. The Company is in the process of evaluating the impact of the amendment.
The amendments clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations. The amendments narrowed the scope of the recognition exemption in paragraphs 15 and 24 of Ind AS 12 (recognition exemption) so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. The Company is in the process of evaluating the impact of the amendment.
The amendments will help entities to distinguish between accounting policies and accounting estimates. The definition of a change in accounting estimates has been replaced with a definition of accounting estimates. Under the new definition, accounting estimates are "monetary amounts in financial statements that are subject to measurement uncertainty". Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty. The Company is in the process of evaluating the impact of the amendment.
Mar 31, 2022
Note 1. Corporate information
Jubilant Pharmova Limited ("the Company") is a public limited company domiciled in India and incorporated under the provisions of Companies Act, 1956. Its shares are listed on BSE Limited and National Stock Exchange of India Limited. The registered office of the Company is situated at Bhartiagram, Gajraula, District Amroha, Uttar Pradesh - 244223.
The Company is an integrated global pharmaceutical company engaged in pharmaceuticals, contract research and development services and proprietary novel drugs. The pharmaceuticals segment, through wholly owned subsidiary Jubilant Pharma Limited, is engaged in manufacture and supply of APIs, solid dosage formulations, radiopharmaceuticals, allergy therapy products and contract manufacturing of sterile injectables and non-sterile products through 6 manufacturing facilities in India, USA and Canada and a network of 48 radiopharmacies in the USA. The contract research and development segment provides drug discovery and development services as well as clinical data software and service solutions. Proprietary novel drugs segment is a patient-focused biopharmaceutical business working to address unmet medical needs in oncology and autoimmune diseases The Company is well recognised as a ''Partner of Choice'' by leading pharmaceuticals companies globally.
The Company was also engaged in the Life Science Ingredients business till 1 February 2021. The Composite Scheme of Arrangement ("Composite Scheme") for amalgamation of certain promoter controlled entities into the Company and demerger of the Life Science Ingredients business into Jubilant Ingrevia Limited, the Resulting entity, was approved by Honourable National Company Law Tribunal ("NCLT"), Allahabad Bench vide its order dated 23 December 2020, formal order received on 6 January 2021. The said NCLT order was filed with the Registrar of Companies by the Company and the Resulting entity on 1 February 2021, thereby making the Composite Scheme effective. Accordingly, all assets and liabilities of the Life Science Ingredients business stand transferred and vested into Jubilant Ingrevia Limited on 1 February 2021, being the Appointed date as per the Composite Scheme for the demerger of Life Sciences Ingredients business. Effective that date, the name of the Company has changed to Jubilant Pharmova Limited from Jubilant Life Sciences Limited (refer note 31).
Note 2. Significant accounting policies
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements. The accounting policies adopted are consistent with those of the previous financial year.
(i) Statement of compliance
These Standalone Financial Statements ("financial
statements") have been prepared in accordance
with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under Section 133 of the Companies Act, 2013, ("the Act"), relevant provisions of the Act and other accounting principles generally accepted in India.
All the amounts included in the financial statements are reported in millions of Indian Rupees (''Rupees'' or ''H'') and are rounded to the nearest million, except per share data and unless stated otherwise.
The financial statements have been authorised for issue by the Company''s Board of Directors on 27 May 2022.
(ii) Historical cost convention
These standalone financial statements have been prepared under historical cost convention on accrual basis, unless otherwise stated.
The Company presents assets and liabilities in the Balance Sheet based on current/ non-current classification.
An asset is treated as current when:
⢠It is expected to be realised or intended to be sold or consumed in normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠It is expected to be realised within twelve months after the reporting period; or
⢠It is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
The Company classifies all other assets as non-current.
A liability is current when:
⢠It is expected to be settled in normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠It is due to be settled within twelve months after the reporting period; or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as noncurrent assets and liabilities respectively.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle for the purpose of current-noncurrent classification of assets and liabilities.
costs (in the same manner as in the case of tangible fixed assets). Other development expenditure is recognised in the Statement of Profit and Loss as incurred.
⢠Intangible assets that are acquired and implementation of software system are measured initially at cost.
⢠After initial recognition, an intangible asset is carried at its cost less accumulated amortisation and any accumulated impairment loss. Subsequent expenditure is capitalised only when it increases the future economic benefits from the specific asset to which it relates.
(iii) Depreciation and amortisation methods, estimated useful lives and residual value
Depreciation is provided on straight line basis on the original cost/ acquisition cost of assets or other amounts substituted for cost of fixed assets as per the useful life specified in Part ''C of Schedule II of the Act, read with notification dated 29 August 2014 of the Ministry of Corporate Affairs, except for the following classes of fixed assets which are depreciated based on the internal technical assessment of the management as under:
Category of assets |
Management estimate of useful life |
Useful life as per Schedule II |
Vehicles - owned |
5 years |
8 years |
Computer servers and networks (included in office equipment) |
5 years |
6 years |
Employee perquisite related |
5 years, being |
10 years |
assets (except end user |
the period |
|
computers) (included in furniture and fixtures) |
of perquisite scheme |
Freehold land is carried at cost. All other items of property, plant and equipment are stated at cost, which includes capitalised finance costs, less accumulated depreciation and any accumulated impairment loss. Cost includes expenditure that is directly attributable to the acquisition of the items. The cost of an item of a PPE comprises its purchase price including import duty, and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition of its intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
Expenditure incurred on startup and commissioning of the project and/or substantial expansion, including the expenditure incurred on trial runs (net of trial run receipts, if any) up to the date of commencement of commercial production are capitalised. Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Advances paid towards acquisition of property, plant and equipment outstanding at each Balance Sheet date, are shown under other non-current assets and cost of assets not ready for intended use before the year end, are shown as capital work-inprogress.
(ii) Intangible assets
⢠Internally generated goodwill is not recognised as an
asset. With regard to other internally generated intangible
assets:
- Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the Statement of Profit and Loss as incurred.
- Development expenditure including regulatory cost and legal expenses leading to product registration/ market authorisation relating to the new and/or improved product and/or process development is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use the asset. The expenditure capitalised includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and directly attributable finance
Software systems are being amortised over a period of five years being their useful life. Rights are amortised over the useful life.
Depreciation and amortisation on property, plant and equipment and intangible assets added/disposed off during the year has been provided on pro-rata basis with reference to the date/month of addition/disposal.
Depreciation and amortisation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if appropriate.
A property, plant and equipment and intangible assets is derecognised on disposal or when no future economic benefits are expected from its use and disposal. Losses arising from retirement and gains or losses arising from disposal of a tangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss.
Non-current assets are classified as held for sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use. Such assets are generally measured at the lower of their carrying amount and fair value less cost to sell. Losses on initial classification as held for sale and subsequent gains and losses on re-measurement are recognised in the Statement of Profit and Loss.
Once classified as held-for sale, property, plant and equipment and intangible assets are no longer amortised or depreciated.
The Company''s non-financial assets other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset''s recoverable amount is estimated.
For impairment testing, assets that do not generate independent cash inflows (i.e. corporate assets) are grouped together into cash-generating units (CGUs). Each CGU represents the smallest group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or CGUs.
The recoverable amount of an asset or CGU is the higher of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Impairment loss recognised in respect of a CGU is allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amount of the other assets of the CGU (or group of CGUs) on a pro rata basis.
An impairment loss in respect of goodwill is not subsequently reversed. In respect of other assets for which impairment loss has been recognised in prior periods, the Company reviews at reporting date whether there is any indication that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. Such a reversal is made only to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(f) Financial instrument
A Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the 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.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
⢠Debt instruments at amortised cost
⢠Debt instruments at fair value through other comprehensive income (FVOCI)
⢠Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVPL)
⢠Equity instruments measured at fair value through other comprehensive income (FVOCI)
Debt instruments at amortised cost
A ''debt instrument'' is measured at the amortised cost if the asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the gross carrying amount of the financial asset or the amortised cost of the financial liability. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in other income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss. This category generally applies to trade and other receivables.
Debt instrument at FVOCi
A ''debt instrument'' is classified as at the FVOCI if the objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and the asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVOCI category are measured initially as well as at each reporting date at fair
value. Fair value movements are recognised in the other comprehensive income (OCI). On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified to the Statement of Profit and Loss. Interest earned whilst holding FVOCI debt instrument is reported as interest income using the EIR method.
Debt instrument at FVPL
FVPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorisation as at amortised cost or as FVOCI, is classified as at FVPL. In addition, at initial recognition, the Company may irrevocably elect to designate a debt instrument, which otherwise meets amortised cost or FVOCI criteria, as at FVPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch'').
Debt instruments included within the FVPL category are measured at fair value with all changes recognised 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 and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to the Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss to retained earnings.
Equity instruments included within the FVPL category are measured at fair value with all changes recognised in the Statement of Profit and Loss.
Investments in subsidiaries
Equity investments in subsidiaries 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, the difference between net disposal proceeds and the carrying amounts are recognised in the Statement of Profit and Loss.
Impairment of financial assets
The Company recognises loss allowance using the expected credit loss (ECL) model for the financial assets which are not
fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all financial assets with contractual cash flows other than trade receivable, ECLs are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of ECL (or reversal) that is required to adjust the loss allowance at the reporting date is recognised as an impairment gain or loss in the Statement of Profit and Loss.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Company''s balance sheet) when:
⢠The rights to receive cash flows from the asset have expired, or
⢠The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
(ii) Financial liabilities
Financial liabilities are classified as measured at amortised cost or FVPL. A financial liability is classified as at FVPL if it is classified as held-for-trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVPL are measured at fair value and net gains and losses, including any interest expense, are recognised in Statement of Profit and Loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in Statement of Profit and Loss. Any gain or loss on derecognition is also recognised in Statement of Profit and Loss.
A financial liability is 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.
(iii) Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the Balance Sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
(iv) Share capital
Equity shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity. Income tax relating to transaction costs of an equity transaction is accounted for in accordance with Ind AS 12.
Cash and cash equivalent comprise cash at banks and on hand (including imprest) and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Contingent liability
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but
probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Service income is recognized when the Company satisfies a performance obligation as and when the underlying services are performed. Revenue from sale of products is recognised when the Company satisfies a performance obligation upon transfer of control of products to customers at the time of shipment to or receipt of goods by the customers.
The Company considers indicators such as how customer consumes benefits as services are rendered or who controls the asset as it is being created or existence of enforceable right to payment for performance to date and alternate use of such product or service, transfer of significant risks and rewards to the customer, acceptance of delivery by the customer, etc. Invoices are issued as per the general business terms and are payable in accordance with the contractually agreed credit period.
Revenues are measured based on the transaction price allocated to the performance obligation, which is the consideration, net of taxes or duties collected on behalf of the government and applicable discounts and allowances including expected sales return etc. The transaction price is allocated to each performance obligation in the contract on the basis of the relative standalone selling prices of the promised goods or services. The transaction price may be fixed or variable and is adjusted for time value of money if the contract includes significant financing component.
Contract assets are recognised when there is excess of revenue earned over billings on contracts, excluding amounts classified as unbilled receivables (only act of invoicing is pending) when there is unconditional right to receive cash and only passage of time is required as per contractual terms. Contract liabilities are recognised when there are billings in excess of revenues. Contract liabilities relate to the advance received from customers and deferred revenue against which revenue is recognised when or as the performance obligation is satisfied.
Income in respect of entitlement towards export incentives is recognised in accordance with the relevant scheme on recognition of the related export sales. Such export incentives are recorded as part of other operating revenue.
(i) Short-term employee benefits: All employee benefits falling due within twelve months from the end of the period in which the employees render the related services are classified as shortterm employee benefits, which include benefits like salaries, wages, short term compensated absences, performance incentives, etc. and are recognised as expenses in the period in which the employee renders the related service and measured accordingly.
(ii) Post-employment benefits: Post employment benefit plans are classified into defined benefits plans and defined contribution plans as under:
a) Gratuity
The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount based on the respective employee''s salary and the tenure of employment. The liability in respect of gratuity is recognised in the books of account based on actuarial valuation by an independent actuary. The gratuity liability for certain employees of the Company is funded with Life Insurance Corporation of India upto 1 February 2021. Also refer note 31.
b) Superannuation
Certain employees of the Company are also participants in the superannuation plan, a defined contribution plan. Contribution made by the Company to the superannuation plan during the year is charged to Statement of Profit and Loss.
c) Provident fund
⢠The Company makes contribution to the recognised provident fund - "VAM Employees Provident Fund Trust" ("the Trust") (a multiemployer trust) for most of its employees in India.
For other employees in India, provident fund is deposited with Regional Provident Fund Commissioner. This is treated as defined contribution plan.
Also refer note 32(A).
⢠Company''s contribution to the provident fund is charged to Statement of Profit and Loss.
(iii) Other long-term employee benefits:
Compensated absences:
As per the Company''s policy, eligible leaves can be accumulated by the employees and carried forward to future periods to either be utilised during the service, or encashed. Encashment can be made during service, on early retirement, on withdrawal of scheme, at resignation and upon death of the employee. Accumulated compensated absences are treated as other long-term employee benefits.
(iv) Termination benefits:
Termination benefits are recognised as an expense when, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
(v) Actuarial valuation
The liability in respect of all defined benefit plans and other long term benefits is accrued in the books of account on the basis of actuarial valuation carried out by an independent actuary using the Projected Unit Credit Method. The obligation is measured at the present value of estimated future cash flows. The discount rates used for determining the present value of obligation under defined benefit plans, is based on the market yields on Government securities as at the Balance Sheet date, having maturity periods approximating to the terms of related obligations.
Remeasurement gains and losses on other long term benefits are recognised in the Statement of Profit and Loss in the year in which they arise. Remeasurement gains and losses in respect of all defined benefit plans arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in other equity in the Statement of Changes in Equity and in the Balance Sheet. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service cost. Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs. Any differential between the plan assets (for a funded defined benefit plan) and the defined benefit obligation as per actuarial valuation is recognised as a liability if it is a deficit or as an asset if it is a surplus (to the extent of the lower of present value of any economic benefits available in the form of refunds from the plan or reduction in future contribution to the plan).
Past service cost is recognised as an expense in the Statement of Profit and Loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits are already vested immediately following the introduction of, or changes to, a defined benefit plan, the past service cost is recognised immediately in the Statement of Profit and Loss. Past service cost may be either positive (where benefits are introduced or improved) or negative (where existing benefits are reduced).
The Company has adopted the policy to account for Employees Welfare Trust as a legal entity separate from the Company but as a subsidiary of the Company. Any loan from the Company to the trust is accounted for as a loan in accordance with its term.
The grant date fair value of options granted (net of estimated forfeiture) to employees of the Company is recognised as an employee expense, and those granted to employees of subsidiaries is considered as the Company''s equity contribution and is added to the carrying value of investment in the respective subsidiaries, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options. The expense is recorded for each separately vesting portion of the award as if the award was, in substance, multiple awards. The increase in equity recognised in connection with share based payment transaction is presented as a separate component in equity under "share based payment reserve". The amount recognised as an expense is adjusted to reflect the actual number of stock options that vest. For the option awards, grant date fair value is determined under the option-pricing model (Black-Scholes-Merton). Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures materially differ from those estimates.
Finance costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Finance cost also includes exchange differences to the extent regarded as an adjustment to the finance costs. Finance costs that are directly attributable to the construction or production or development of a qualifying asset are capitalised as part of the cost of that asset. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. All other finance costs are expensed in the period in which they occur.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the finance costs eligible for capitalisation. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the Statement of Profit and Loss over the period of the borrowings using the effective interest method. Ancillary costs incurred in connection with the arrangement of borrowings are amortised over the period of such borrowings.
Finance income consists of interest income. Interest income or expense is recognised using the effective interest method. The ''effective interest rate'' is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the gross carrying amount of the financial asset or the amortised cost of the financial liability. In calculating interest income or expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortised cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.
Exceptional items refer to items of income or expense within the Statement of Profit and Loss from ordinary activities which are non-recurring and are of such size, nature or incidence that their separate disclosure is considered necessary to explain the performance of the Company.
Income tax expense comprises current and deferred tax. It is recognised in Statement of Profit and Loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI.
⢠Current 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. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received after considering uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.
Current tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
⢠Deferred tax:
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
- temporary differences arising on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction;
- temporary differences related to freehold land and investments in subsidiaries, to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets (DTA) include Minimum Alternate Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability. MAT is a tax liability of a company computed at specified rate on adjusted book profits as per applicable provisions of the Income Tax Act. A company is liable to pay MAT, if the income tax payable under normal provisions of the Income Tax Act is less than tax payable under MAT.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to the period when the asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
Deferred income tax is not provided on the undistributed earnings of the subsidiaries where it is expected that the earnings of the subsidiary will not be distributed in the foreseeable future.
For operations carried out in SEZs, deferred tax assets or liabilities, if any, have been established for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
(o) Leases - Company as a lessee
The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (1) the contact involves the use of an identified asset; (2) the Company has substantially all of the economic benefits from use of the asset through the period of the lease; and (3) the Company has the right to direct the use of the asset.
The Company''s lease asset classes primarily consist of leases for land, buildings, plant and machinery and vehicles which typically run for a period of 3 to 10 years, with an option to renew the lease after that date. For certain leases, the Company is restricted from entering into any sub-lease arrangements. At the date of commencement of the lease, the Company recognises a right-of-use asset and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases). For these short-term leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease.
Right-of-use assets and lease liabilities includes the options to extend or terminate the lease when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognised at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease
incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses, if any.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. 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 lease liability is initially measured at amortised cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates based on information available as at the date of commencement of the lease. Lease liabilities are remeasured with a corresponding adjustment to the related right-of-use asset if the Company changes its assessment of whether it will exercise an extension or a termination option. Lease liability and right-of-use asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Company makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to Company''s operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances.
(p) Foreign currency translation
(i) Functional and presentation currency
The functional currency of the Company is the Indian rupee. These financial statements are presented in Indian rupees.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at balance sheet date exchange rates are generally recognised in Statement of Profit and Loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on
assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets such as equity investments classified as FVOCI are recognised in other comprehensive income (OCI).
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions.
Government grants relating to income are deferred and recognised in the Statement of Profit and Loss over the period necessary to match them with the costs that they are intended to compensate and presented within other operating revenue.
Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to Statement of Profit and Loss on a straight-line basis over the expected lives of the related assets and presented within other income.
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
⢠the profit attributable to owners of the Company
⢠by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
⢠the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
⢠the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares
A number of the accounting policies and disclosures require measurement of fair values, for both financial and non-financial assets and liabilities.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Company has an established control framework with respect to the measurement of fair values. This includes a finance team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values.
The finance team regularly reviews significant unobservable inputs and valuation adjustments. If third party information is used to measure fair values, then the finance team assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which the valuations should be classified.
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Further information about the assumptions made in measuring fair values used in preparing these financial statements is included in the respective notes.
The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes.
⢠Assessment of useful life of property, plant and equipment and intangible asset - Note 2(c)
⢠Impairment of financial assets and non-financial assets -Note 2(f) and 2(e)
⢠Lease term: whether the Company is reasonably certain to exercise extension options - Note 2(o) and 40
⢠Recognition and estimation of tax expense including deferred tax - Note 8 and 28
⢠Fair value measurement - Note 2(s) and 33
⢠Estimation of assets and obligations relating to employee benefits - Note 2(j) and 32
⢠Recognition and measurement of contingency: Key assumption about the likelihood and magnitude of an outflow of resources - Note 38
The Company has considered the possible effects that may result from the pandemic relating to COVID-19 on the carrying amounts of receivables, property, plant and equipment and intangible assets. In developing the assumptions relating to the possible future uncertainties in the global economic conditions, the Company, as at the date of approval of these financial statements, has used internal and external sources of information, including economic forecasts and estimates from market sources, on the expected future performance of the Company. On the basis of evaluation and current indicators of future economic conditions, the Company expects to recover the carrying amounts of these assets and does not anticipate any impairment to these financial and non-financial assets. However, the impact assessment of COVID-19 is a continuing process, given the uncertainties associated with its nature and duration. The Company will continue to monitor any material changes to future economic conditions.
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On 23 March 2022, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2022, applicable from 1 April 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. These changes do not significantly change the requirements of Ind AS 103. The Company does not expect the amendment to have any significant impact in its financial statements.
The amendments mainly prohibit an entity from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, an entity will recognise such sales proceeds and related cost in profit or loss. The Company does not expect the amendments to have any impact in its recognition of its property, plant and equipment in its financial statements.
The amendments specify that that the ''cost of fulfilling'' a contract comprises the ''costs that relate directly to the contract. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts. The amendment is essentially a clarification and the Company does not expect the amendment to have any significant impact in its financial statements.
The amendment clarifies which fees an entity includes when it applies the ''10 percent'' test of Ind AS 109 in assessing whether to derecognise a financial liability. The Company does not expect the amendment to have any significant impact in its financial statements.
The amendments remove the illustration of the reimbursement of leasehold improvements by the lessor in order to resolve any potential confusion regarding the treatment of lease incentives that might arise because of how lease incentives were described in that illustration. The Company does not expect the amendment to have any significant impact in its financial statements.
Mar 31, 2018
1. Corporate Information
Jubilant Life Sciences Limited ("the Company") is a public limited company domiciled in India and incorporated under the provisions of Companies Act, 1956. Its shares are listed on BSE Limited and National Stock Exchange of India Limited. The registered office of the Company is situated at Bhartiagram, Gajraula, District Amroha, Uttar Pradesh - 244223.
The Company is an integrated global pharmaceutical and life sciences company engaged in pharmaceuticals, life science ingredients and drug discovery solutions. The pharmaceuticals segment, through its wholly owned subsidiary Jubilant Pharma Limited, is engaged in manufacture and supply of APIs, solid dosage formulations, radiopharmaceuticals, allergy therapy products and contract manufacturing of sterile and non-sterile products through 6 USFDA approved manufacturing facilities in India, USA and Canada and a network of over 50 radio-pharmacies in the US. The life science ingredients segment is engaged in specialty intermediates, nutritional products and life science chemicals through 5 manufacturing facilities in India. The drug discovery solutions segment provides proprietary in-house innovation & collaborative research and partnership for out-licensing through 3 world class research centres in India and USA. The Company is well recognized as a ''Partner of Choice'' by leading pharmaceuticals and life sciences companies globally.
2. Significant accounting policies
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements. The accounting policies adopted are consistent with those of the previous financial year except for adoption of the following amendment in the Ind AS 7 effective from the current year. The said amendment requires the Company to provide disclosures which will enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. The adoption of the above amendment to the Standard does not have any significant impact on the financial position or performance of the Company.
(a) Basis of preparation
(i) Statement of compliance
These Standalone Ind AS Financial Statements ("financial statements") have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under Section 133 of Companies Act, 2013, ("the Act") and other relevant provisions of the Act. All the amounts included in the financial statements are reported in millions of Indian Rupees (''Rupees'' or '''''') and are rounded to the nearest million, except per share data and unless stated otherwise.
The financial statements have been authorized for issue by the Company''s Board of Directors on 9 May 2018.
(ii) Historical cost convention
The financial statements have been prepared under historical cost convention on accrual basis, unless otherwise stated.
(iii) Effective 1 April 2015, the Company had transitioned to Ind AS while the financial statements were being prepared in accordance with the Companies (Accounting Standards) Rules, 2006 (previous GAAP) till 31 March 2016 and the transition was carried out in accordance of Ind AS 101 "First time adoption of Indian Accounting Standards". While carrying out transition, in addition to the mandatory exemptions, the Company had elected to certain exemption which are listed as below:
a) The Company had opted to continue with the carrying value for all of its property, plant and equipment and intangible assets as recognized in the financial statements prepared under previous GAAP and use the same as deemed cost in the financial statement as at the transition date.
b) The Company had elected to exercise the option under Ind AS 21 for accounting of Exchange differences pertaining to long term foreign currency monetary items that are related to acquisition of depreciable/ amortizable assets to adjust in the carrying amount of the related property, plant and equipment and intangible assets in the financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period as per the previous GAAP. Accordingly, amortization and depreciation on exchange fluctuation capitalized is charged over the remaining useful life of the respective assets. Further, exchange differences arising on other long-term foreign currency monetary items are accumulated in ''Foreign Currency Monetary Item Translation Difference Account'' (FCMITDA), and are amortized over the balance period of the relevant foreign currency item.
(b) Current versus non-current classification
The Company presents assets and liabilities in the Balance Sheet based on current/ non-current classification.
An asset is treated as current when:
- It is expected to be realized or intended to be sold or consumed in normal operating cycle;
- It is held primarily for the purpose of trading;
- It is expected to be realized within twelve months after the reporting period; or
- It is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
The Company classifies all other assets as noncurrent.
A liability is current when:
- It is expected to be settled in normal operating cycle;
- It is held primarily for the purpose of trading;
- It is due to be settled within twelve months after the reporting period; or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as noncurrent.
Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle for the purpose of current-non-current classification of assets and liabilities.
(c) Property, plant and equipment (PPE) and intangible assets
(i) Property, plant and equipment
Freehold land is carried at cost. All other items of property, plant and equipment are stated at cost, which includes capitalized finance costs, less accumulated depreciation and any accumulated impairment loss. Cost includes expenditure that is directly attributable to the acquisition of the items. The cost of an item of a PPE comprises its purchase price including import duty, and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition of its intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
Expenditure incurred on startup and commissioning of the project and/or substantial expansion, including the expenditure incurred on trial runs (net of trial run receipts, if any) up to the date of commencement of commercial production are capitalized. Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Advances paid towards acquisition of property, plant and equipment outstanding at each Balance Sheet date, are shown under other non-current assets and cost of assets not ready for intended use before the year end, are shown as capital work-in-progress.
(ii) Intangible assets
- Internally generated goodwill is not recognized as an asset. With regard to other internally generated intangible assets:
- Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in the Statement of Profit and Loss as incurred.
- Development expenditure including regulatory cost and legal expenses leading to product registration/ market authorization relating to the new and/ or improved product and/or process development capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use the asset. The expenditure capitalized includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and directly attributable finance costs (in the same manner as in the case of tangible fixed assets). Other development expenditure is recognized in the Statement of Profit and Loss as incurred.
- Intangible assets that are acquired and implementation of software system are measured initially at cost.
- After initial recognition, an intangible asset is carried at its cost less accumulated amortization and any accumulated impairment loss. Subsequent expenditure is capitalized only when it increases the future economic benefits from the specific asset to which it relates.
(iii) Depreciation and amortization methods, estimated useful lives and residual value
Depreciation is provided on straight line basis
Leasehold land which qualifies as finance lease is amortized over the lease period on straight line basis.
Software systems are being amortized over a period of five years being their useful life. Rights are amortized over the useful life.
Depreciation and amortization on property, plant and equipment and intangible assets added/disposed off during the year has been provided on pro-rata basis with reference to the date/month of addition/disposal.
Depreciation and amortization methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if appropriate.
(iv) Derecognition
A property, plant and equipment and intangible assets is derecognized on disposal or when no future economic benefits are expected from its use and disposal. Losses arising from retirement and gains or losses arising from disposal of a tangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss.
(d) Non-current assets held for sale
Non-current assets are classified as held for sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use. Such assets are generally measured at the lower of their carrying amount and fair value less cost to sell. Losses on initial classification as held for sale and subsequent gains and losses on re-measurement are recognized in the Statement of Profit and Loss.
Once classified as held-for sale, property, plant and equipment and intangible assets are no longer amortized or depreciated.
(e) Impairment of non-financial assets
The Company''s non-financial assets other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset''s recoverable amount is estimated.
For impairment testing, assets that do not generate independent cash inflows (i.e. corporate assets) are grouped together into cash-generating units (CGUs). Each CGU represents the smallest group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or CGUs.
The recoverable amount of a CGU is the higher of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the CGU.
An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Impairment loss recognized in respect of a CGU is allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amount of the other assets of the CGU (or group of CGUs) on a pro rata basis.
An impairment loss in respect of goodwill is not subsequently reversed. In respect of other assets for which impairment loss has been recognized in prior periods, the Company reviews at reporting date whether there is any indication that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. Such a reversal is made only to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
(f) Financial instrument
A Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement
All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
- Debt instruments at amortized cost
- Debt instruments at fair value through other comprehensive income (FVOCI)
- Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVPL)
- Equity instruments measured at fair value through other comprehensive income (FVOCI)
Debt instruments at amortized cost
A ''debt instrument'' is measured at the amortized cost if the asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (EIR) method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the gross carrying amount of the financial asset or the amortized cost of the financial liability. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in other income in
the Statement of Profit and Loss. The losses arising from impairment are recognized in the Statement of Profit and Loss.
Debt instrument at FVOCI
A ''debt instrument'' is classified as at the FVOCI if the objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and the asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). On derecognition of the asset, cumulative gain or loss previously recognized in OCI is reclassified to the Statement of Profit and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
Debt instrument at FVPL
FVPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVOCI, is classified as at FVPL. In addition, at initial recognition, the Company may irrevocably elect to designate a debt instrument, which otherwise meets amortized cost or FVOCI criteria, as at FVPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatch'').
Debt instruments included within the FVPL 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 and contingent consideration recognized by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to the Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss to retained earnings.
Equity instruments included within the FVPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss. Investments in subsidiaries
Equity investments in subsidiaries 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, the difference between net disposal proceeds and the carrying amounts are recognized in the Statement of Profit and Loss.
Impairment of financial assets
The Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all financial assets with contractual cash flows other than trade receivable, ECLs are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of ECL (or reversal) that is required to adjust the loss allowance at the reporting date is recognized as an impairment gain or loss in the Statement of Profit and Loss.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e., removed from the Company''s balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either
(a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognizes 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.
Financial liabilities
Financial liabilities are classified as measured at amortized cost or FVPL. A financial liability is classified as at FVPL if it is classified as held-for-trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVPL are measured at fair value and net gains and losses, including any interest expense, are recognized in Statement of Profit and Loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in Statement of Profit and Loss. Any gain or loss on derecognition is also recognized in Statement of Profit and Loss.
Derecognition of financial liabilities
A financial liability is derecognized 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 recognized in the Statement of Profit and Loss.
Derivative financial instruments
The Company uses various types of derivative financial instruments to hedge its currency and interest risk etc. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the Balance Sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.
(g) Inventories
Inventories are valued at lower of cost or net realizable value except scrap, which is valued at net estimated realizable value.
The Company uses weighted average method to determine cost for all categories of inventories except for goods in transit which is valued at specifically identified purchase cost. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition inclusive of non-refundable (adjustable) taxes wherever applicable. The cost of work-in-progress and manufactured finished goods include an appropriate share of variable and fixed production overheads. Fixed production overheads are included based on normal capacity of production facilities.
Net realizable 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. The net realizable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials and other supplies held for use in the production of finished products are not written down below cost, except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realizable value. The comparison of cost and net realizable value is made on an item-by-item basis.
(h) Cash and cash equivalents
Cash and cash equivalent comprise cash at banks and on hand (including imprest) and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
(i) Provisions
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
(j) Revenue recognition
Revenue from sale of products is recognized when the property in the goods, or all significant risks and rewards of ownership of the products have been transferred to the buyer, and no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of products as well as regarding its collection. Revenues include excise duty till 30 June 2017 and are shown net of goods and service tax (GST) (w.e.f. 1 July 2017), sales tax & value added tax (effective till 30 June 2017) and applicable discounts and allowances, if any.
Revenue includes only those sales for which the Company has acted as a principal in the transaction, takes title to the products, and has the risks and rewards of ownership, including the risk of loss for collection, delivery and returns. Any sales for which the Company has acted as an agent or broker without assuming the risks and rewards of ownership have been reported on a net basis.
Goods sold on consignment are recorded as inventory until goods are sold by the consignee to the end customer.
Sale of utility is recognized on delivery of the same to the consumers and no significant uncertainty exists as to its realization.
Export incentive entitlements are recognized as income when the right to receive credit as per the terms of the scheme is established in respect of the exports made, and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds. These are presented as other operating income in the Statement of Profit and Loss.
(k) Employee benefits
(i) Short-term employee benefits: All employee benefits falling due within twelve months of the end of the period in which the employees render the related services are classified as short-term employee benefits, which include benefits like salaries, wages, short term compensated absences, performance incentives, etc. and are recognized as expenses in the period in which the employee renders the related service and measured accordingly.
(ii) Post-employment benefits: Post employment benefit plans are classified into defined benefits plans and defined contribution plans as under:
a) Gratuity
The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount based on the respective employee''s salary and the tenure of employment. The liability in respect of gratuity is recognized in the books of account based on actuarial valuation by an independent actuary. The gratuity liability for certain employees of the Company is funded with Life Insurance Corporation of India.
b) Superannuation
Certain employees of the Company are also participants in the superannuation plan (''the Plan''), a defined contribution plan. Contribution made by the Company to the plan during the year is charged to Statement of Profit and Loss.
c) Provident fund
(i) The Company makes contribution to the recognized provident fund - "VAM EMPLOYEES PROVIDENT FUND TRUST" (a multiemployer trust) for most of its employees in India, which is a defined benefit plan to the extent that the Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate. The Company''s obligation in this regard is determined by an independent actuary and provided for if the circumstances indicate that the Trust may not be able to generate adequate returns to cover the interest rates notified by the Government.
For other employees in India, provident fund is deposited with Regional Provident Fund Commissioner. This is treated as defined contribution plan.
(ii) Company''s contribution to the provident fund is charged to Statement of Profit and Loss.
(iii) Other long-term employee benefits: Compensated absences:
As per the Company''s policy, eligible leaves can be accumulated by the employees and carried forward to future periods to either be utilized during the service, or encased. Encashment can be made during service, on early retirement, on withdrawal of scheme, at resignation and upon death of the employee. Accumulated compensated absences are treated as other long-term employee benefits.
(iv) Termination benefits:
Termination benefits are recognized as an expense when, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
(v) Actuarial valuation:
The liability in respect of all defined benefit plans and other long term benefits is accrued in the books of account on the basis of actuarial valuation carried out by an independent actuary using the Projected Unit Credit Method. The obligation is measured at the present value of estimated future cash flows. The discount rates used for determining the present value of obligation under defined benefit plans, is based on the market yields on Government securities as at the Balance Sheet date, having maturity periods approximating to the terms of related obligations.
Remeasurement gains and losses on other long term benefits are recognized in the Statement of Profit and Loss in the year in which they arise. Remeasurement gains and losses in respect of all defined benefit plans arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in other equity in the Statement of Changes in Equity and in the Balance Sheet. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in profit or loss as past service cost. Gains or losses on the curtailment or settlement of any defined benefit plan are recognized when the curtailment or settlement occurs. Any differential between the plan assets (for a funded defined benefit plan) and the defined benefit obligation as per actuarial valuation is recognized as a liability if it is a deficit or as an asset if it is a surplus (to the extent of the lower of present value of any economic benefits available in the form of refunds from the plan or reduction in future contribution to the plan).
Past service cost is recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits are already vested immediately following the introduction of, or changes to, a defined benefit plan, the past service cost is recognized immediately in the Statement of Profit and Loss. Past service cost may be either positive (where benefits are introduced or improved) or negative (where existing benefits are reduced).
(l) Share-based payments
The Company has adopted the policy to account
for Employees Welfare Trust as a legal entity separate from the Company but as a subsidiary of the Company. Any loan from the Company to the trust is accounted for as a loan in accordance with its term.
The grant date fair value of options granted (net of estimated forfeiture) to employees of the Company is recognized as an employee expense, and those granted to employees of subsidiaries is considered as the Company''s equity contribution and is added to the carrying value of investment in the respective subsidiaries, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options. The expense is recorded for each separately vesting portion of the award as if the award was, in substance, multiple awards. The increase in equity recognized in connection with share based payment transaction is presented as a separate component in equity under "share based payment reserve". The amount recognized as an expense is adjusted to reflect the actual number of stock options that vest. For the option awards, grant date fair value is determined under the option-pricing model (Black-Scholes-Merton). Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures materially differ from those estimates.
Corresponding balance of a share based payment reserve is transferred to general reserve upon expiry of grants or upon exercise of stock options by an employee, as the Company is operating the Employee Stock Option schemes through Jubilant Employees Welfare Trust, which has purchased share from the secondary market.
(m) Finance costs
Finance costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Finance cost also includes exchange differences to the extent regarded as an adjustment to the finance costs. Finance costs that are directly attributable to the construction or production or development of a qualifying asset are capitalized as part of the cost of that asset. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. All other finance costs are expensed in the period in which they occur.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the finance costs eligible for capitalization. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in the Statement of Profit and Loss over the period of the borrowings using the effective interest method. Ancillary costs incurred in connection with the arrangement of borrowings are amortized over the period of such borrowings.
(n) Income tax
Income tax expense comprises current and deferred tax. It is recognized in Statement of Profit and Loss except to the extent that it relates to a business combination, or items recognized 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. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received after considering uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.
Current tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognized amounts, and it is intended to realize the asset and settle the liability on a net basis or simultaneously.
- Deferred tax:
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:
- temporary differences arising on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction;
- temporary differences related to freehold land and investments in subsidiaries, to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets (DTA) include Minimum Alternate Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability.
Deferred tax assets are recognized 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. Unrecognized deferred tax assets are reassessed at each reporting date and recognized to the extent that it has become probable that future taxable profits will be available against which they can be used. Deferred tax is measured at the tax rates that are expected to be applied to the period when the asset is realized or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognized amounts, and it is intended to realize the asset and settle the liability on a net basis or simultaneously.
For operations carried out in SEZs, deferred tax assets or liabilities, if any, have been established for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
(o) Leases
At inception of an arrangement, it is determined whether the arrangement is or contains a lease. If it is a lease arrangement, it is classified as either a finance lease or an operating lease, based on the substance of the lease arrangement.
Finance leases
Assets leased by the Company in its capacity as lessee where substantially all the risks and rewards of ownership vest in the Company are classified as finance leases. A finance lease is recognized as an asset and a liability at the commencement of the lease, at the lower of the fair value of the asset and the present value of the minimum lease payments. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Operating leases
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the Statement of Profit and Loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases.
(p) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Chairman and Co-Chairman and Managing Director (CCMD) of the Company is responsible for allocating resources and assessing performance of the operating segments and accordingly identified as the chief operating decision maker. Revenues, expenses, assets and liabilities, which are common to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been treated as "unallocated revenues/ expenses/ assets/ liabilities", as the case may be.
(q) Foreign currency translation
(i) Functional and presentation currency
The functional currency of the Company is the Indian rupee. These financial statements are presented in Indian rupees.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at balance sheet date exchange rates are generally recognized in Statement of Profit and Loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example translation differences on nonmonetary assets such as equity investments classified as FVOCI are recognized in other comprehensive income (OCI).
(r) Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions.
Government grants relating to income are deferred and recognized in the Statement of Profit and Loss over the period necessary to match them with the costs that they are intended to compensate and presented within other income.
Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to Statement of Profit and Loss on a straight-line basis over the expected lives of the related assets and presented within other income.
(s) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
- the profit attributable to owners of the Company
- by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
- the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
- the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
(t) Measurement of fair values
A number of the accounting policies and disclosures require measurement of fair values, for both financial and non-financial assets and liabilities.
Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Company has an established control framework with respect to the measurement of fair values. This includes a finance team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values.
The finance team regularly reviews significant unobservable inputs and valuation adjustments. If third party information is used to measure fair values, then the finance team assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which the valuations should be classified.
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Further information about the assumptions made in measuring fair values used in preparing these financial statements is included in the respective notes.
(u) Critical estimates and judgments
The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements is included in the following notes.
- Assessment of useful life of property, plant and equipment and intangible asset - Note 2(c)
- Valuation of inventories - Note 2(g)
- Fair value measurement - Note 2(t)
- Estimation of assets and obligations relating to employee benefits - Note 32
- Recognition and estimation of tax expense including deferred tax- Note 8 & 30
- Share-based payments - Note 47
- Estimated impairment of financial assets and non-financial assets - Note 2(e), 2(f)
- Recognition and measurement of contingency: Key assumption about the likelihood and magnitude of an outflow of resources - Note 38
- Lease classification - Note 39(b)
(v) Recent accounting pronouncements
Applicable standards issued but not yet effective
The Company has not early adopted the following new standards or amendments to standards in preparing these financial statements.
Ind AS 115, Revenue from contracts with customers
MCA vide its notification dated 28 March 2018, notified Ind AS 115, "Revenue from Contracts with Customers". Ind AS 115 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Ind AS 115 will supersede the current revenue recognition standard Ind AS 18 "Revenue", Ind AS 11 "Construction Contracts", when it becomes effective.
The core principle of Ind AS 115 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. Specifically, the standard introduces a 5-step approach to revenue recognition:
- Step 1: Identify the contract(s) with a customer
- Step 2: Identify the performance obligation in contract
- Step 3: Determine the transaction price
- Step 4: Allocate the transaction price to the performance obligations in the contract
- Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
Under Ind AS 115, an entity recognizes revenue when (or as) a performance obligation is satisfied, i.e. when âcontrol'' of the goods or services underlying the particular performance obligation is transferred to the customer.
The new revenue recognition standard is effective from 1 April 2018. The Company has completed its evaluation of the possible impact of Ind AS 115 and does not expect the impact of the adoption of the new standard to be material.
Appendix B, Foreign currency transactions and advance consideration to Ind AS 21, the effects of changes in foreign exchange rates
MCA vide its notification dated 28 March 2018, notified Appendix B, Foreign currency transactions and advance consideration to Ind AS
21. The amendment clarifies on the accounting of transactions that include the receipt or payment of advance consideration in a foreign currency. The appendix explains that the date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt. Appendix B is effective from 1 April 2018. The Company is currently evaluating the impact of this amendment.
Mar 31, 2017
1. Corporate Information
Jubilant Life Sciences Limited (âthe Companyâ) is a public limited company domiciled in India and incorporated under the provisions of Companies Act, 1956. Its shares are listed on BSE Limited and National Stock Exchange of India Limited. The Company is a global Pharmaceutical and Life Sciences player engaged in manufacture and supply of generics (including active pharmaceutical ingredients (APls) and solid dosage formulations), specialty pharmaceuticals (sterile products) (including radiopharmaceuticals, allergy therapy products and contract manufacturing operations (CMO) of sterile injectable), and Life Science Ingredients (specialty intermediates, nutritional products and life science chemicals). It also provides Drug Discovery Solutions. The Company''s strength lies in its unique offerings of pharmaceuticals and life sciences products and services across the value chain. It is well recognized as a ''Partner of Choice'' by leading pharmaceuticals and life sciences companies globally.
2. Significant accounting policies
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
(a) Basis of preparation
(i) Statement of compliance
These Standalone Ind AS Financial Statements (âfinancial statementsâ) have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under Section 133 of Companies Act, 2013, (âthe Actâ) and other relevant provisions of the Act.
The financial statements up to and for the year ended 31 March 2016 were prepared in accordance with the Companies (Accounting Standards) Rules, 2006 (previous GAAP), notified under Section 133 of the Act and other relevant provisions of the Act.
As these are the Companyâs first financial statements prepared in accordance with Ind AS. Ind AS 101, First-time Adoption of Indian Accounting Standards has been applied. An explanation of how the transition to Ind AS has affected the previously reported financial position, financial performance and cash flows of the Company is provided in Note 55.
(ii) Historical cost convention
The financial statements have been prepared under historical cost convention on accrual basis, unless otherwise stated.
(b) Current versus non-current classification
The Company presents assets and liabilities in the Balance Sheet based on current/ non-current classification. An asset is treated as current when:
- It is expected to be realized or intended to be sold or consumed in normal operating cycle;
- It is held primarily for the purpose of trading;
- It is expected to be realized within twelve months after the reporting period; or
- It is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
The Company classifies all other assets as noncurrent.
A liability is current when:
- It is expected to be settled in normal operating cycle;
- It is held primarily for the purpose of trading;
- It is due to be settled within twelve months after the reporting period; or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as noncurrent.
Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle for the purpose of current-noncurrent classification of assets and liabilities.
(c) Property, plant and equipment (PPE) and intangible assets
(i) Property, plant and equipment
Freehold land is carried at cost. All other items of property, plant and equipment are stated at cost, which includes capitalized finance costs, less accumulated depreciation and any accumulated impairment loss. Cost includes expenditure that is directly attributable to the acquisition of the items. The cost of an item of a PPE comprises its purchase price including import duty, and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition of its intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
Expenditure incurred on startup and commissioning of the project and/or substantial expansion, including the expenditure incurred on trial runs (net of trial run receipts, if any) up to the date of commencement of commercial production are capitalized. Subsequent costs are included in the assetâs carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Advances paid towards acquisition of property, plant and equipment outstanding at each Balance Sheet date, are shown under other noncurrent assets and cost of assets not ready for intended use before the year end, are shown as capital work-in- progress.
(ii) Intangible assets
- Internally generated goodwill is not recognized as an asset. With regard to other internally generated intangible assets:
- Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in the Statement of Profit and Loss as incurred.
- Development activities involve a plan or design for the production of new or substantially improved products or processes. Development expenditure including regulatory cost and legal expenses leading to product registration/ market authorization relating to the new and/or improved product and/or process development capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use the asset. The expenditure capitalized includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and directly attributable finance costs (in the same manner as in the case of tangible fixed assets). Other development expenditure is recognized in the Statement of Profit and Loss as incurred.
- Intangible assets that are acquired (including implementation of software system) are measured initially at cost.
- After initial recognition, an intangible asset is carried at its cost less accumulated amortization and any accumulated impairment loss. Subsequent expenditure is capitalized only when it increases the future economic benefits from the specific asset to which it relates.
(iii) Depreciation and amortization methods, estimated useful lives and residual value
Depreciation is provided on straight line basis on the original cost/ acquisition cost of assets or other amounts substituted for cost of fixed assets as per the useful life specified in Part ''C'' of Schedule II of the Act, read with notification dated 29 August 2014 of the Ministry of Corporate Affairs, except for the following classes of fixed assets which are depreciated based on the internal technical assessment of the management as under:
Software systems are being amortized over a period of five years being their useful life. Rights are amortized over the useful life
The assetsâ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
Depreciation and amortization on property, plant and equipment and intangible assets added/ disposed off during the year has been provided on pro-rata basis with reference to the date of addition/disposal.
Depreciation and amortization methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if appropriate.
(iv) Derecognition
A property, plant and equipment and intangible assets is derecognized on disposal or when no future economic benefits are expected from its use and disposal. Losses arising from retirement and gains or losses arising from disposal of a tangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss.
(v) Transition to Ind AS
On transition to Ind AS, the Company has elected to measure all its property, plant and equipment and intangible assets at the previous GAAP carrying amount as its deemed cost on the date of transition of Ind AS i.e, 1 April 2015.
On transition to Ind AS, the Company has elected to exercise the option under Ind AS 21 for accounting of Exchange differences pertaining to long term foreign currency monetary items that are related to acquisition of depreciable/ amortizable assets to adjust in the carrying amount of the related property, plant and equipment amd intangible assets in the financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period as per the previous GAAP Accordingly amortization and depreciation on exchange fluctuation capitalized is charged over the remaining useful life of the respective assets.
(d) Non-current assets held for sale
Non-current assets, are classified as held for sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use.
Such assets, are generally measured at the lower of their carrying amount and fair value less cost to sell. Losses on initial classification as held for sale and subsequent gains and losses on re-measurement are recognized in the Statement of Profit and Loss.
Once classified as held-for sale, property, plant and equipment and intangible assets are no longer amortized or depreciated.
(e) Impairment of non-financial assets
The Companyâs non-financial assets other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the assetâs recoverable amount is estimated.
For impairment testing, assets that do not generate independent cash inflows are grouped together into cash-generating units (CGUs). Each CGU represents the smallest group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or CGUs.
The recoverable amount of a CGU is the higher of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the CGU.
An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Impairment loss recognized in respect of a CGU is allocated first to reduce the carrying amounts of the other assets of the CGU (or group of CGUs) on a pro rata basis.
An impairment loss in respect of assets for which impairment loss has been recognized in prior periods, the Company reviews at reporting date whether there is any indication that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. Such a reversal is made only to the extent that the assetâs carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
(f) Financial instrument
A Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement
All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are
attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
- Debt instruments at amortized cost
- Debt instruments at fair value through other comprehensive income (FVOCI)
- Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVPL)
- Equity instruments measured at fair value through other comprehensive income (FVOCI)
Debt instruments at amortized cost
A âdebt instrumentâ is measured at the amortized cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) 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 amortized cost using the effective interest rate (EIR) method. Amortized 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 amortization is included in other income in the Statement of Profit and Loss. The losses arising from impairment are recognized in the Statement of Profit and Loss. This category generally applies to trade and other receivables.
Debt instrument at FVOCI
A âdebt instrumentâ is classified as at the FVOCI if both of the following criteria are met:
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
b) The assetâs contractual cash flows represent
SPPI.
Debt instruments included within the FVOCI category are measured initially as well as at each reporting date at fair value. Fair value movements
are recognized in the other comprehensive income (OCI). On derecognition of the asset, cumulative gain or loss previously recognized in OCI is reclassified to the Statement of Profit and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
Debt instrument at FVPL
FVPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVOCI, is classified as at FVPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortized cost or FVOCI criteria, as at FVPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatchâ).
Debt instruments included within the FVPL 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 and contingent consideration recognized by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to the Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Investments in subsidiaries
Investments in subsidiaries 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, the difference between net disposal proceeds and the carrying amounts are recognized in the Statement of Profit and Loss.
Upon first-time adoption of Ind AS, the Company has elected to measure its investments in subsidiaries at the previous GAAP carrying amount as its deemed cost on the date of transition to Ind AS i.e., 1 April 2015.
Impairment of financial assets
The Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all financial assets with contractual cash flows other than trade receivable, ECLs are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of ECLs (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized as an impairment gain or loss in the Statement of Profit and Loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e., removed from the 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 (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the 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.
Transition to Ind AS
Under previous GAAP the Company has derecognized any assets or liabilities for accounting purposes as and when the asset was written off or liability written back. On transition to Ind AS, the Company has elected to apply the de-recognition provision of Ind AS 109 prospectively from the date of transition to Ind AS.
Financial liabilities
Financial liabilities are classified as measured at amortized cost or FVPL. A financial liability is classified as at FVPL if it is classified as held-for-trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVPL are measured at fair value and net gains and losses, including any interest expense, are recognized in Statement of Profit and Loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in Statement of Profit and Loss. Any gain or loss on derecognition is also recognized in Statement of Profit and Loss.
Derecognition
A financial liability is derecognized 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 recognized in the Statement of Profit and Loss.
Derivative financial instruments
The Company uses various types of derivative financial instruments to hedge its currency and interest risk etc. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured
at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the Balance Sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.
(g) Inventories
Inventories are valued at lower of cost or net realizable value except scrap, which is valued at net estimated realizable value.
Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition inclusive of excise duty wherever applicable. Excise duty liability is included in the valuation of closing inventory of finished goods.
Net realizable 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.
The net realizable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials and other supplies held for use in the production of finished products are not written down below cost, except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realizable value.
The comparison of cost and net realizable value is made on an item-by-item basis.
(h) Cash and cash equivalents
Cash and cash equivalent comprise cash at banks and on hand (including imprest) and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
(i) Provisions
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
(j) Revenue recognition
Revenue from sale of products is recognized when the property in the goods, or all significant risks and rewards of ownership of the products have been transferred to the buyer, and no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of products as well as regarding its collection. Revenues include excise duty and are shown net of sales tax, value added tax, and applicable discounts and allowances if any.
Revenue includes only those sales for which the Company has acted as a principal in the transaction, takes title to the products, and has the risks and rewards of ownership, including the risk of loss for collection, delivery and returns. Any sales for which the Company has acted as an agent or broker without assuming the risks and rewards of ownership have been reported on a net basis.
Goods sold on consignment are recorded as inventory until goods are sold by the consignee to the end customer.
Sale of utility is recognized on delivery of the same to the consumers and no significant uncertainty exists as to its realization.
Export incentive entitlements are recognized as income when the right to receive credit as per the terms of the scheme is established in respect of the exports made, and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds. These are presented as other operating income in the Statement of Profit and Loss.
(k) Employee benefits
(i) Short-term employee benefits: All employee benefits falling due within twelve months of the end of the period in which the employees render the related services are classified as short-term employee benefits, which include benefits like salaries, wages, short term compensated absences, performance incentives, etc. and are recognized as expenses in the period in which the employee renders the related service and measured accordingly.
(ii) Post-employment benefits: Post employment benefit plans are classified into defined benefits plans and defined contribution plans as under:
a) Gratuity
The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount based on the respective employee''s salary and the tenure of employment. The liability in respect of Gratuity, is recognized in the books of accounts based on actuarial valuation by an independent actuary. The gratuity liability for certain employees of the Company is funded with Life Insurance Corporation of India.
b) Superannuation
Certain employees of the Company are also participants in the superannuation plan (''the Plan''), a defined contribution plan. Contribution made by the Company to the plan during the year is charged to Statement of Profit and Loss.
c) Provident fund
(i) The Company makes contribution to the recognized provident fund - "VAM EMPLOYEES PROVIDENT FUND TRUST" (a multiemployer trust) for most of its employees in India, which is a defined benefit plan to the extent that the Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate. The Company''s obligation in this regard is determined by an independent actuary and provided for if the circumstances indicate that the Trust may not be able to generate adequate returns to cover the interest rates notified by the Government.
For other employees in India, provident fund is deposited with Regional Provident Fund Commissioner. This is treated as defined contribution plan.
(ii) Company''s contribution to the provident fund is charged to Statement of Profit and Loss.
(iii) Other long-term employee benefits: Compensated absences:
As per the Company''s policy, eligible leaves can be accumulated by the employees and carried forward to future periods to either be utilized during the service, or encashed. Encashment can be made during service, on early retirement, on withdrawal of scheme, at resignation and upon death of the employee. Accumulated compensated absences are treated as other long-term employee benefits .The Company''s liability in respect of other long-term employee benefits is recognized in the books of account based on actuarial valuation using projected unit credit method as at Balance Sheet date by an independent actuary. Actuarial losses/gains are recognized in the Statement of Profit and Loss in the year in which they arise
(iv) Termination benefits:
Termination benefits are recognized as an expense when, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Actuarial valuation
The liability in respect of all defined benefit plans is accrued in the books of account on the basis of actuarial valuation carried out by an independent actuary using the Projected Unit Credit Method, which recognizes each year of service as giving rise to additional unit of employee benefit entitlement and measure each unit separately to build up the final obligation. The obligation is measured at the present value of estimated future cash flows. The discount rates used for determining the present value of obligation under defined benefit plans, is based on the market yields on Government securities as at the Balance Sheet date, having maturity periods approximating to the terms of related obligations.
Remeasurement gains and losses in respect of all defined benefit plans arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the Statement of Changes in Equity and in the Balance Sheet. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in profit or loss as past service cost. Gains or losses on the curtailment or settlement of any defined benefit plan are recognized when the curtailment or settlement occurs. Any differential between the plan assets (for a funded defined benefit plan) and the defined benefit obligation as per actuarial valuation is recognized as a liability if it is a deficit or as an asset if it is a surplus (to the extent of the lower of present value of any economic benefits available in the form of refunds from the plan or reduction in future contribution to the plan).
Past service cost is recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits are already vested immediately following the introduction of, or changes to, a defined benefit plan, the past service cost is recognized immediately in the Statement of Profit and Loss. Past service cost may be either positive (where benefits are introduced or improved) or negative (where existing benefits are reduced)
(l) Share-based payments
The Company has adopted the policy to account for Employees Welfare Trust as a legal entity separate from the company but as a subsidiary of the company. Any loan from the company to the trust is accounted for as a loan in accordance with its term.
The grant date fair value of options granted (net of estimated forfeiture) to employees of the Company is recognized as an employee expense, and those granted to employees of subsidiaries is considered as the Companyâs equity contribution and is added to the carrying value of investment in the respective subsidiaries, with a corresponding increase in share option outstanding account, 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 âshare based payment reserveâ. The amount recognized as an expense is adjusted to reflect the actual number of stock options that vest. For the option awards, grant date fair value is determined under the option-pricing model (Black-Scholes Merton). Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures materially differ from those estimates.
Corresponding balance of a share based payment reserve is transferred to general reserve upon expiry of grants or upon exercise of stock options by an employee, as the Company is operating the Employee Stock Option schemes through Jubilant Employees Welfare Trust, which has purchased share from the secondary market.
(m) Finance costs
Finance costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Finance cost also includes exchange differences to the extent regarded as an adjustment to the finance costs. Finance costs that are directly attributable to the construction or production or development of a qualifying asset are capitalized as part of the cost of that asset. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. All other finance costs are expensed in the period in which they occur.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the finance costs eligible for capitalization. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in the Statement of Profit and Loss over the period of the borrowings using the effective interest method Ancillary costs incurred in connection with the arrangement of borrowings are amortized over the period of such borrowings.
(n) Income tax
Income tax expense comprises current and deferred tax. It is recognized in Statement of Profit and Loss except to the extent that it relates to a business combination, or items recognized 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. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received after considering uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.
Current tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognized amounts, and it is intended to realize the asset and settle the liability on a net basis or simultaneously.
- Deferred tax:
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:
- temporary differences arising on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction;
- temporary differences related to freehold land and investments in subsidiaries, to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets (DTA) include Minimum Alternate Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability
Deferred tax assets are recognized 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. Unrecognized deferred tax assets are reassessed at each reporting date and recognized 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 apply to the period when the asset is realized or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognized amounts, and it is intended to realize the asset and settle the liability on a net basis or simultaneously.
For operations carried out in SEZs, deferred tax assets or liabilities, if any, have been established for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
(o) Leases
At the inception of each lease, the lease arrangement is classified as either a finance lease or an operating lease, based on the substance of the lease arrangement.
Finance leases
Assets leased by the Company in its capacity as lessee where substantially all the risks and rewards of ownership vest in the Company are classified as finance leases. A finance lease is recognized as an asset and a liability at the commencement of the lease, at the lower of the fair value of the asset and the present value of the minimum lease payments. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability
Operating leases
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lesser) are charged to the Statement of Profit and Loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the less orâs expected inflationary cost increases.
(p) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Chairman and Co-Chairman and Managing Director (CCMD) of the Company is responsible for allocating resources and assessing performance of the operating segments and accordingly identified as the chief operating decision maker. Revenues, expenses, assets and liabilities, which are common to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been treated as "unallocated revenues/ expenses/ assets/ liabilities", as the case may be.
(q) Foreign currency translation
(i) Functional and presentation currency
The functional currency of the Company in the Indian rupee. These financial statements are presented in Indian rupees.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at Balance Sheet date exchange rates are generally recognized in Statement of Profit and Loss.
On transition to Ind AS, the Company has elected to exercise the option for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognized in the financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period as per the previous GAAP.
The Company had adopted following policy for long-term foreign currency monetary items accounted in previous GAAP:
(a) Exchange differences pertaining to long term foreign currency monetary items that are related to acquisition of depreciable assets are adjusted in the carrying amount of the related fixed assets; and
(b) Exchange differences arising on other long-term foreign currency monetary items are accumulated in ''Foreign Currency Monetary Item Translation Difference Account'' (FCMITDA), and are amortized over the balance period of the relevant foreign currency item.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example translation differences on non-monetary assets such as equity investments classified as FVOCI are recognized in other comprehensive income (OCI).
(r) Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions.
Government grants relating to income are deferred and recognized in the Statement of Profit and Loss over the period necessary to match them with the costs that they are intended to compensate and presented within other income.
Government grants relating to the purchase of property, plant and equipment are included in noncurrent liabilities as deferred income and are credited to Statement of Profit and Loss on a straight-line basis over the expected lives of the related assets and presented within other income.
(s) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
- the profit attributable to owners of the Company
- by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year and excluding treasury shares
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
- the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
- the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares
(t) Measurement of fair values
A number of the accounting policies and disclosures require measurement of fair values, for both financial and non-financial assets and liabilities.
Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Company has an established control framework with respect to the measurement of fair values. This includes a finance team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values.
The finance team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, is used to measure fair values, then the finance team assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which the valuations should be classified.
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Further information about the assumptions made in measuring fair values used in preparing these financial statements is included in the respective notes.
(u) Critical estimates and judgments
The preparation of Financial Statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements is included in the following notes.
- Recognition and estimation of tax expense including deferred tax- Note 30
- Estimated impairment of financial assets and non-financial assets - Note 2(e), 2(f)
- Assessment of useful life of property, plant and equipment and intangible asset - Note 2(c)
- Estimation of assets and obligations relating to employee benefits - Note 32
- Share-based payments - Note 51
- Valuation of Inventories - Note 2(g)
- Recognition and measurement of contingency: Key assumption about the likelihood and magnitude of an outflow of resources - Note 38
- Lease classification - Note 39(b)
- Fair value measurement - Note 2(t)
(v) Recent accounting pronouncements
Applicable standards issued but not yet effective
The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.
The Company is evaluating the requirements of the amendment and the effect on the financial statements.
^Including MAT credit entitlement of Rs, 18.36 million forming part of current tax for the year ended 31 March 2016.
DTA has not been recognized on temporary differences in relation to indexation benefit of investment in subsidiaries and freehold land amounting toRs, 3,747.98 million (31 March 2016:Rs, 3,449.57; 1 April 2015:Rs, 3,152.82 million) andRs, 81.05 million (31 March 2016:Rs, 75.90 million; 1 April 2015:Rs, 69.22 million) respectively, as the Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary differences will not reverse in foreseeable future. Further, DTA on temporary differences of capital nature amounting toRs, 430.56 million (31 March 2016:Rs, 430.56; 1 April 2015:Rs, 422.88) has not been recognized as the management believes it is probable that the temporary differences will not reverse in foreseeable future.
Terms and rights attached to equity shares:
The Company has only one class of shares referred to as equity shares having par value of Rs, 1 each. Holder of each equity share is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
Aggregate number of shares issued for consideration other than cash:
Paid up capital includes, 501,364 (31 March 2016: 501,364; 1 April 2015: 501,364) equity shares of Rs, 1 each allotted and issued pursuant to the Scheme of Amalgamation and Demerger, to the shareholders of erstwhile Pace Marketing Specialties Limited for consideration other than cash during the year ended 31 March 2011.
Others:
a) 114,835 (31 March 2016: 114,835; 1 April 2015: 114,835) equity shares of Rs, 1 each allotted on exercise of the vested stock options in accordance with the terms of exercise under the "Jubilant Employees Stock Option Plan, 2005". (Refer note 51)
b) Under the Jubilant Employees Stock Option 2005 Plan as at 31 March 2017- 2,867 (31 March 2016: 8,467; 1 April 2015: 105,495) outstanding options are convertible into 14,335 (31 March 2016: 42,335; 1 April 2015: 527,475) shares. (Refer note 51).
c) Under the Jubilant Employees Stock Option 2011 Plan as at 31 March 2017- 71,185 (31 March 2016: 431,256;
1 April 2015: 1,112,306) outstanding options are convertible into 71,185 (31 March 2016: 431,256; 1 April 2015: 1,112,306) shares. (Refer note 51).
Mar 31, 2016
A. Basis of preparation and presentation of financial statements
The accounts of the Company are prepared under the historical cost
convention on the accrual basis of accounting in accordance with the
accounting principles generally accepted in India ("GAAP") and comply
with the Accounting Standards specified under section 133 of the
Companies Act, 2013, read with Rule 7 of the Companies (Accounts)
Rules, 2014, the other relevant provisions of the Companies Act, 2013
(including provision of Companies Act, 1956 which continue to remain in
force, to the extent applicable), pronouncements of the Institute of
Chartered Accountants of India, guidelines issued by the Securities and
Exchange Board of India ("SEBI"), to the extent applicable. The
financial statements are presented as per Schedule III to the Companies
Act, 2013 and in Indian rupees rounded off to the nearest million.
Previous year''s figures have been regrouped/rearranged wherever
considered necessary to conform to current year''s classification.
Further, the figures for the current year are not comparable to the
previous year due to transfer of certain businesses in the previous
year as explained in note 37.
B. use of estimates
The preparation of financial statements in conformity with GAAP
requires management to make judgments, estimates and assumptions that
affect the application of accounting policies and reported amounts of
assets, liabilities, income and expenses and the disclosure of
contingent liabilities at the date of financial statements and the
results of operations during the reporting periods. Examples of such
estimate include future obligations under employee benefit plans,
income taxes, useful lives of tangible assets and intangible assets,
impairment of assets, valuation of derivatives, provision for doubtful
debts etc. Management believes that the estimates used in the
preparation of the financial statements are prudent and reasonable.
Actual results could vary from these estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis. Appropriate
changes in estimates are made as the management becomes aware of the
changes in circumstances surrounding the estimates. Any revision to
accounting estimates is recognised prospectively in current and future
periods. Effect of material changes is disclosed in the notes to the
financial statements.
C. CurrentÂnon-current classification
All assets and liabilities have been classified as current or
non-current as per the Company''s normal operating cycle and other
criteria in accordance with Schedule III to the Companies Act, 2013 set
out below:
Assets
An asset is classified as current when it satisfies any of the
following criteria:
a. it is expected to be realised in, or is intended for sale or
consumption in, the Company''s normal operating cycle;
b. it is held primarily for the purpose of being traded;
c. it is expected to be realised within 12 months after the reporting
date; or
d. it is cash or cash equivalent unless it is restricted from being
exchanged or used to settle a liability for at least 12 months after
the reporting date.
Current assets include the current portion of non-current financial
assets.
All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any of the
following criteria:
a. it is expected to be settled in the company''s normal operating
cycle;
b. it is held primarily for the purpose of being traded;
c. it is due to be settled within 12 months after the reporting date;
or
d. the company does not have an unconditional right to defer
settlement of the liability for at least 12 months after the reporting
date. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the issue of equity
instruments do not affect its classification.
Current liabilities include current portion of non-current financial
liabilities.
All other liabilities are classified as non-current.
Operating cycle
Operating cycle is the time between the acquisition of assets for
processing and their realisation in cash or cash equivalents. Based on
the nature of products and the time between the acquisition of assets
for processing and their realisation in cash and cash equivalents, the
Company has ascertained its operating cycle as 12 months for the
purpose of current  non-current classification of assets and
liabilities.
D. tangible and intangible fixed assets
Tangible fixed assets
Tangible fixed assets are stated at cost net of tax/duty credits
availed, if any, less accumulated depreciation/ amortisation/impairment
losses. The cost of an item of tangible fixed asset comprises its
purchase price, including import duties and other non-refundable taxes
or levies and any directly attributable cost of bringing the asset to
its working condition for its intended use. Any trade discounts and
rebates are deducted in arriving at the purchase price. Advances paid
towards acquisition of tangible fixed assets outstanding at each
Balance Sheet date are shown under long-term loans and advances and
cost of assets not ready for intended use before the year end are shown
as capital work-in-progress.
Exchange differences (favorable as well as unfavorable) arising in
respect of translation/settlement of long term foreign currency
borrowings attributable to the acquisition of a depreciable asset are
also included in the cost of the asset.
In case of fixed assets acquired at the time of amalgamation of certain
entities with Company, the same are recognised at book value in case of
amalgamation in the nature of merger and at book value/ fair value in
case of amalgamation in the nature of purchase in line with Accounting
Standard (AS) 14 -"Accounting for Amalgamations".
Expenditure incurred on start up and commissioning of the project
and/or substantial expansion, including the expenditure incurred on
trial runs (net of trial run receipts, if any) up to the date of
commencement of commercial production are capitalised. Subsequent
expenditures related to an item of fixed asset are capitalised to its
book value only if they increase the future benefits from the existing
asset beyond its previously assessed standard of performance. Losses
arising from the retirement of, and gains or losses arising from
disposal of fixed assets are recognised in the Statement of Profit and
Loss.
Tangible fixed assets under construction are disclosed as capital
work-in-progress.
Insurance spares/standby equipments are capitalised as part of the
mother asset and are depreciated at applicable rates, over the
remaining useful life of the mother assets.
Intangible fixed assets
Acquired intangible assets
Intangible assets that are acquired by the Company are measured
initially at cost. After initial recognition, an intangible asset is
carried at its cost less any accumulated amortisation and any
accumulated impairment loss.
Subsequent expenditure is capitalised only when it increases the future
economic benefits from the specific asset to which it relates.
Expenditure for acquisition and implementation of software systems is
recognised as part of the intangible assets.
Internally generated intangible assets
Internally generated goodwill is not recognised as an asset. With
regard to other internally generated intangible assets:
- Expenditure on research activities, undertaken with the prospect of
gaining new scientific or technical knowledge and understanding, is
recognised in the Statement of Profit and Loss as incurred.
- Development activities involve a plan or design for the production of
new or substantially improved products or processes. Development
expenditure including regulatory cost and legal expenses leading to
product registration/ market authorisation relating to the new and/or
improved product and/or process development capitalised only if
development costs can be measured reliably, the product or process is
technically and commercially feasible, future economic benefits are
probable, and the Company intends to and has sufficient resources to
complete development and to use the asset. The expenditure capitalised
includes the cost of materials, direct labour, overhead costs that are
directly attributable to preparing the asset for its intended use, and
directly attributable borrowing costs (in the same manner as in the
case of tangible fixed assets). Other development expenditure is
recognised in the Statement of Profit and Loss as incurred.
A tangible/intangible asset is derecognised on disposal or when no
future economic benefits are expected from its use and disposal. Losses
arising from retirement and gains or losses arising from disposal of a
tangible/ intangible asset are measured as the difference between the
net disposal proceeds and the carrying amount of the asset and are
recognised in the Statement of Profit and Loss. Assets retired from
active use and held for disposal are stated at the lower of their net
book value and net realisable value and are shown under ''Other current
assets''.
e. Depreciation and amortisation
Depreciation is provided on straight line basis on the original cost/
acquisition cost of assets or other amounts substituted for cost of
fixed assets as per the useful life specified in Part ''C'' of Schedule
II of the Act, read with notification dated 29 August 2014 of the
Ministry of Corporate Affairs, except for the following classes of
fixed assets which are depreciated based on the internal technical
assessment of the management as under:
Depreciation on assets added/disposed off during the year has been
provided on pro-rata basis with reference to the date of
addition/disposal.
Depreciation on exchange fluctuation capitalised, in view of the option
exercised by the Company for accounting the exchange differences
arising on reporting of long term foreign currency monetary items in
line with Para 46 and 46A of Accounting Standard (AS) 11 on "The
Effects of Changes in Foreign Exchange Rates", is charged over the
remaining useful life of assets.
Leasehold land is amortised over the lease period on straight line
basis.
Intangible assets in the nature of Product registrations/ Market
authorisations (Products) are amortised on a straight line basis over a
period of five years in case of internally developed products
(intangibles) and 10 years in case of bought out product (intangibles),
from the date of regulatory approval or the date of product going off-
patent, whichever is later. Software systems are being amortised over a
period of five years being their useful life. Rights are amortised over
the useful life.
Also refer note 38.
f. impairment of fixed assets
Fixed assets are reviewed at each reporting date to determine if there
is any indication of impairment. For assets in respect of which any
such indication exists and for intangible assets mandatorily tested
annually for impairment, the asset''s recoverable amount is estimated.
For assets that are not yet available for use, the recoverable amount
is estimated at each reporting date. An impairment loss is recognised
if the carrying amount of an asset exceeds its recoverable amount.
For the purpose of impairment testing, assets are grouped together into
the smallest group of assets (Cash Generating Unit or CGU) that
generates cash inflows from continuing use that are largely independent
of the cash inflows of other assets or CGUs.
The recoverable amount of an asset or CGU is the greater of its value
in use and its net selling price. In assessing value in use, the
estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset or CGU.
Impairment losses are recognised in the Statement of Profit and Loss.
If at the Balance Sheet date there is an indication that a previously
assessed impairment loss no longer exists or has decreased, the asset''s
or CGU''s recoverable amount is estimated. The impairment loss is
reversed to the extent that the asset''s carrying amount does not exceed
the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been
recognised. Such a reversal is recognised in the Statement of Profit
and Loss.
G. leases
Finance leases
Assets leased by the Company in its capacity as lessee where
substantially all the risks and rewards of ownership vest in the
Company are classified as finance leases. Such leases are capitalised
at the inception of the lease at the lower of the fair value and the
present value of the minimum lease payments and a liability is created
for an equivalent amount. Lease payment is allocated between the
liability and finance charges so as to obtain a constant periodic rate
of interest on the outstanding liability for each year.
Operating leases
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Lease payments under operating leases are recognised
in the Statement of Profit and Loss on a straight line basis over the
lease term unless another systematic basis is more representative of
the time pattern of the benefit.
H. valuation of inventories
Inventories are valued at lower of cost or net realisable value except
scrap, which is valued at net estimated realisable value.
Cost includes all costs of purchase, costs of conversion and other
costs incurred in bringing the inventories to their present location
and condition inclusive of excise duty wherever applicable. Excise duty
liability is included in the valuation of closing inventory of finished
goods.
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.
The net realisable value of work-in-progress is determined with
reference to the selling prices of related finished products. Raw
materials and other supplies held for use in the production of finished
products are not written down below cost except in cases where material
prices have declined and it is estimated that the cost of the finished
products will exceed their net realisable value.
The comparison of cost and net realisable value is made on an
item-by-item basis.
i. investments
Investments that are readily realisable and are intended to be held for
not more than one year from the date, on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments. However, that part of long term
investments which is expected to be realised within 12 months after the
reporting date is also presented under ''current assets'' as "current
portion of long term investments" in consonance with the
current/non-current classification scheme of Schedule III.
Current investments are carried at cost or fair value, whichever is
lower. Long-term investments (including current portion thereof) are
carried at cost. However, provision for diminution is made to recognise
a decline, other than temporary, in the value of the investments, such
reduction being determined and made for each investment individually.
Investments in foreign subsidiary companies are expressed in Indian
currency at the rates prevailing on the date when the remittance for
the purpose was made/ foreign currency balance lying abroad was used,
as the case may be.
Any reductions in the carrying amount and any reversals of such
reductions are charged or credited to the Statement of Profit and Loss.
Profit or loss on sale of investments is determined on the basis of
weighted average carrying amount of investments disposed off.
J. income taxes
Tax expense for the year, comprising current tax and deferred tax, are
included in the determination of the net profit or loss for the year.
Current tax
Current tax is measured at the amount expected to be paid to (recovered
from) the taxation authorities, using the applicable tax rates and tax
laws.
Deferred tax
Deferred tax charge or credit reflects the tax effects of timing
differences between accounting income and taxable income for the
current year and reversal of timing differences for earlier years. The
deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the Balance Sheet date. Deferred
tax assets are recognised only to the extent there is reasonable
certainty that the assets can be realised in future; however, where
there is unabsorbed depreciation or carry forward of losses, deferred
tax assets are recognised only if there is a virtual certainty of
realisation of such assets. Deferred tax assets are reviewed at each
Balance Sheet date and are written-down or written-up to reflect the
amount that is reasonably/virtually certain (as the case may be) to be
realised. Deferred tax consequences of timing differences that
originate in the tax holiday period and reverse after the tax holiday
period are recognised in the period in which the timing differences
originate. Timing differences that originate and reverse within the tax
holiday period are not considered for deferred tax purposes.
Minimum Alternate Tax (MAT)
MAT under the provisions of the Income-tax Act, 1961 is recognised as
current tax in the Statement of Profit and Loss. MAT credit is
recognised as an asset only when and to the extent there is convincing
evidence that the Company will pay normal income tax during the period
for which the MAT credit can be carried forward for set- off against
the normal tax liability. In the year in which MAT credit becomes
eligible to be recognised as an asset in accordance with the
recommendation contained in the Guidance Note on "Accounting for Credit
Available in respect of Minimum Alternative Tax under The Income Tax
Act, 1961" issued by the Institute of Chartered Accountants of India,
the said asset is created by way of a credit to the Statement of Profit
and Loss and shown as MAT Credit Entitlement. The Company reviews the
same at each Balance Sheet date and writes down the carrying amount of
MAT Credit Entitlement to the extent there is no longer convincing
evidence to the effect that Company will pay normal income tax during
the specified period.
K. foreign Currency transactions, derivatives and hedging
Foreign currency transactions are recorded into Indian rupees by
applying to the foreign currency amount the exchange rate between
Indian rupees and the foreign currency on/or closely approximating to
the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies as at
the Balance Sheet date are translated into Indian rupees at the closing
exchange rates on that date. The resultant exchange differences are
recognised in the Statement of Profit and Loss except that:
(a) Exchange differences pertaining to long-term foreign currency
monetary items that are related to acquisition of depreciable assets
are adjusted in the carrying amount of the related fixed assets; and
(b) Exchange differences arising on other long-term foreign currency
monetary items are accumulated in ''Foreign Currency Monetary Item
Translation Difference Account'' (FCMITDA), and are amortised over the
balance period of the relevant foreign currency item.
Non-monetary assets are recorded at the rates prevailing on the date of
transaction.
A monetary asset or liability is termed as a long-term foreign currency
monetary item, if the asset or liability is expressed in a foreign
currency and has a term of 12 months or more at the date of origination
of the asset or liability.
Foreign Exchange Forward Contracts: The premium or discount arising at
the inception of foreign exchange forward contracts entered into to
hedge an existing monetary item, is amortised as expense or income over
the life of the contract. Any profit or loss arising on cancellation or
renewal of such a foreign exchange forward contracts is recognised as
income or as an expense for the period. Such foreign exchange forward
contracts are translated at the closing exchange rates and resultant
exchange differences are recognised in the same manner as those on the
underlying foreign currency asset or liability.
Apart from the above mentioned foreign exchange forward contracts, the
Company also enters into derivative contracts in the nature of foreign
currency swaps, foreign exchange forward contracts, and interest rate
swaps etc. with an intention to hedge its existing assets and
liabilities, firm commitments and highly probable forecasted
transactions. All these derivative contracts are marked-to-market and
the resultant loss, if any, from these contracts are recognised in the
Statement of Profit and Loss however the gain on mark to market of such
contracts is ignored. The contracts are aggregated category-wise, to
determine the net gain/loss.
Also refer note 49(iv).
l. provisions, contingent liabilities and contingent assets
The Company recognises a provision when there is a present obligation
as a result of a past event that probably requires an outflow of
resources and a reliable estimate can be made of the amount of the
obligation. Provisions are recognised at the best estimate of the
expenditure required to settle the present obligation at the Balance
Sheet date. Provisions, other than long-term employee benefits, are
measured on an undiscounted basis. Contingent liabilities are disclosed
in respect of possible obligations that may arise from past events but
their existence is confirmed by the occurrence or non- occurrence of
one or more uncertain future events not wholly within the control of
the Company. Contingent assets are neither recognised nor disclosed in
the financial statements. However, contingent assets are assessed
continually and if it is virtually certain that an inflow of economic
benefits will arise, the asset and related income are recognised in the
period in which the change occurs.
m. employee benefits
(i) Short-term employee benefits: All employee benefits falling due
within twelve months of the end of the period in which the employees
render the related services are classified as short-term employee
benefits, which include benefits like salaries, wages, short term
compensated absences, performance incentives, etc. and are recognised
as expenses in the period in which the employee renders the related
service and measured accordingly.
(ii) Post-employment benefits: Post employment benefit plans are
classified into defined contribution plans and defined benefit plans in
line with the requirements of AS 15 on "Employee Benefits".
a. Gratuity
The Company has an obligation towards gratuity, a defined benefit
retirement plan covering eligible employees. The plan provides for a
lump sum payment to vested employees at retirement, death while in
employment or on termination of employment of an amount based on the
respective employee''s salary and the tenure of employment. The
liability in respect of Gratuity is recognised in the books of account
based on actuarial valuation by an independent actuary. The gratuity
liability for certain employees of the Company is funded with Life
Insurance Corporation of India.
b. Superannuation
Certain employees of the Company are also participants in the
superannuation plan (''the Plan''), a defined contribution plan.
Contribution made by the Company to the plan during the year is charged
to Statement of Profit and Loss.
c. Provident fund
i) The Company makes contribution to the recognised provident fund -
"VAM EMPLOYEES PROVIDENT FUND TRUST" (a multiemployer trust) for most
of its employees in India, which is a defined benefit plan to the
extent that the Company has an obligation to make good the shortfall,
if any, between the return from the investments of the trust and the
notified interest rate. The Company''s obligation in this regard is
determined by an independent actuary and provided for if the
circumstances indicate that the Trust may not be able to generate
adequate returns to cover the interest rates notified by the
Government.
For other employees, provident fund is deposited with Regional
Provident Fund Commissioner. This is treated as defined contribution
plan.
ii) Company''s contribution to the provident fund is charged to
Statement of Profit and Loss.
(iii) Other long-term employee benefits
Compensated absences
As per the Company''s policy, eligible leaves can be accumulated by the
employees and carried forward to future periods to either be utilised
during the service, or encashed. Encashment can be made during service,
on early retirement, on withdrawal of scheme, at resignation and upon
death of the employee. Accumulated compensated absences are treated as
other long-term employee benefits. The Company''s liability in respect
of other long- term employee benefits is recognised in the books of
account based on actuarial valuation using projected unit credit method
as at Balance Sheet date by an independent actuary. Actuarial losses/
gains are recognised in the Statement of Profit and Loss in the year in
which they arise.
(iv) Termination benefits
Termination benefits are recognised as expense when, as a result of a
past event, the Company has a present obligation that can be estimated
reliably, and it is probable that an outflow of economic benefits will
be required to settle the obligation.
Actuarial valuation
The liability in respect of all defined benefit plans is accrued in the
books of account on the basis of actuarial valuation carried out by an
independent actuary using the Projected Unit Credit Method, which
recognizes each year of service as giving rise to additional unit of
employee benefit entitlement and measure each unit separately to build
up the final obligation. The obligation is measured at the present
value of estimated future cash flows. The discount rates used for
determining the present value of obligation under defined benefit
plans, is based on the market yields on Government securities as at the
Balance Sheet date, having maturity periods approximating to the terms
of related obligations.
Actuarial gains and losses are recognised immediately in the Statement
of Profit and Loss. Gains or losses on the curtailment or settlement of
any defined benefit plan are recognised when the curtailment or
settlement occurs. Any differential between the plan assets (for a
funded defined benefit plan) and the defined benefit obligation as per
actuarial valuation is recognised as a liability if it is a deficit or
as an asset if it is a surplus (to the extent of the lower of present
value of any economic benefits available in the form of refunds from
the plan or reduction in future contribution to the plan).
Past service cost
Past service cost is recognised as an expense in the Statement of
Profit and Loss on a straight-line basis over the average period until
the benefits become vested. To the extent that the benefits are already
vested immediately following the introduction of, or changes to, a
defined benefit plan, the past service cost is recognised immediately
in the Statement of Profit and Loss. Past service cost may be either
positive (where benefits are introduced or improved) or negative (where
existing benefits are reduced).
n. Borrowing costs
Borrowing costs are interest, ancillary cost and exchange differences
arising from foreign currency borrowings to the extent that they are
regarded as an adjustment to interest costs incurred by the Company in
connection with the borrowing of funds.
Borrowing costs are recognised in the Statement of Profit and Loss in
the period in which it is incurred, except where the cost is incurred
for acquisition, construction, production or development of an asset
that takes a substantial period of time to get ready for its intended
use in which case it is capitalised up to the date the assets are ready
for their intended use. Ancillary costs incurred in connection with the
arrangement of borrowings are amortised over the period of such
borrowings.
O. Cash and cash equivalents
Cash and cash equivalents comprise cash balances on hand, cash balance
with bank, and highly liquid investments with original maturities, at
the date of purchase/ investment, of three months or less.
p. Revenue recognition
Revenue from sale of products is recognised when the property in the
goods, or all significant risks and rewards of ownership of the
products have been transferred to the buyer, and no significant
uncertainty exists regarding the amount of the consideration that will
be derived from the sale of the goods as well as regarding its
collection. Revenues include excise duty and are shown net of sales
tax, value added tax, and applicable discounts and allowances if any.
Revenue includes only those sales for which the Company has acted as a
principal in the transaction, takes title to the products, and has the
risks and rewards of ownership, including the risk of loss for
collection, delivery and returns. Any sales for which the Company has
acted as an agent or broker without assuming the risks and rewards of
ownership have been reported on a net basis.
Goods sold on consignment are recorded as inventory until goods are
sold by the consignee to the end customer.
Revenue from fixed-price contracts are recorded on a proportional
completion method.
Revenue related to contract manufacturing arrangements, development
contracts and licensing and regulatory services is recognised when
performance obligations are fulfilled.
Sale of utility is recognised on delivery of the same to the consumers
and no significant uncertainty exists as to its realisation.
Export incentive entitlements are recognised as income when the right
to receive credit as per the terms of the scheme is established in
respect of the exports made, and where there is no significant
uncertainty regarding the ultimate collection of the relevant export
proceeds.
Upfront non-refundable receipts are recorded as deferred revenue. These
amounts are recognised as revenues as obligations are fulfilled under
contractual arrangement and/or as milestones are achieved as the case
may be.
Profit on disposal/ sale of investments is recognised as income in the
period in which the investment is sold/ disposed off.
Dividend income is recognised when the unconditional right to receive
the income is established. Income from interest on deposits, loans and
interest bearing securities is recognised on time proportionate method
taking into account the amount outstanding and the interest rate
applicable.
Q. segment reporting
The accounting policies adopted for segment reporting are in line with
accounting policies of the Company. Revenues, expenses, assets and
liabilities have been identified to segments on the basis of their
relationship to operating activities of the segments (taking into
account the nature of products and services and, risks and rewards
associated with them) and internal management information systems and
the same is reviewed from time to time to realign the same to conform
to the business units of the Company. Revenues, expenses, assets and
liabilities, which are common to the enterprise as a whole and are not
allocable to segments on a reasonable basis, have been treated as
"Common Revenues/ Expenses/ Assets/ Liabilities", as the case may be.
R. earnings per share
The basic earnings per share is calculated by dividing the net profit
after tax for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.
The weighted average number of equity shares outstanding during the
period is adjusted for events of bonus issue and share split. For the
purpose of calculating diluted earnings per share, net profit after tax
during the year and the weighted average number of shares outstanding
during the year are adjusted for the effect of all dilutive potential
equity shares. The dilutive potential equity shares are deemed
converted as of the beginning of the year unless they have been issued
at a later date. The dilutive potential equity shares are adjusted for
the proceeds receivable had the shares been actually issued at fair
value (i.e. average market value of the outstanding shares). Anti
dilutive effect of any potential equity shares is ignored in the
calculation of earnings per share.
s. employee stock option schemes
The Company follows Securities and Exchange Board of India (Share Based
Employee Benefits) Regulations, 2014 (''guidelines'') for accounting of
employee stock options. According to the guidelines, any company
implementing any of the share based schemes shall follow the
requirements of the ''Guidance Note on Accounting for Employee
Share-based Payments'' (Guidance Note) or Accounting Standards as may be
prescribed by the ICAI from time to time, including the disclosure
requirements prescribed therein. The cost is calculated based on the
intrinsic value method i.e. the excess of market price of underlying
equity shares as of the date of the grant of options over the exercise
price of such options is regarded as employee compensation and in
respect of the number of options that are expected to ultimately vest,
such cost is recognised on a straight line basis over the period over
which the employees would become unconditionally entitled to apply for
the shares. The cost recognised at any date at least equals the
intrinsic value of the vested portion of the option at that date.
Adjustment, if any, for difference in initial estimate for number of
options that are expected to ultimately vest and related actual
experience is recognised in the Statement of Profit and Loss of that
period. In respect of vested options expire unexercised, the related
cumulative cost is credited to the General Reserve.
Also refer note 40.
t. Corporate social responsibility
CSR expenditure incurred by the Company is charged to the Statement of
Profit and Loss
Mar 31, 2015
A. Basis of preparation and presentation of financial statements
The accounts of the Company are prepared under the historical cost
convention on the accrual basis of accounting in accordance with the
accounting principles generally accepted in India ("GAAP") and comply
with the Accounting Standards specified under section 133 of the
Companies Act, 2013, read with Rule 7 of the Companies (Accounts)
Rules, 2014, the other relevant provisions of the Companies Act, 2013
(including provisions of Companies Act, 1956 which continue to remain
in force, to the extent applicable), pronouncements of the Institute of
Chartered Accountants of India, guidelines issued by the Securities and
Exchange Board of India ("SEBI"), to the extent applicable. The
financial statements are presented as per Schedule III to the Companies
Act, 2013 and in Indian rupees rounded off to the nearest million.
Previous year's figures have been regrouped/ rearranged wherever
considered necessary to conform to current year's classification.
Further, the figures for the current year are not comparable to the
previous year due to transfer of certain businesses as explained in
note 38.
B. Use of estimates
The preparation of financial statements in conformity with GAAP
requires management to make judgments, estimates and assumptions that
affect the application of accounting policies and reported amounts of
assets and liabilities, the disclosure of contingent liabilities at the
date of financial statements and the results of operations during the
reporting periods. Examples of such estimate include future obligations
under employee benefit plans, income taxes, useful lives of tangible
assets and intangible assets, impairment of assets, valuation of
derivatives, provision for doubtful debts etc. Management believes that
the estimates used in the preparation of the financial statements are
prudent and reasonable. Actual results could vary from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Appropriate changes in estimates are made as the management becomes
aware of the changes in circumstances surrounding the estimates. Any
revision to accounting estimates is recognised prospectively in current
and future periods. Effect of material changes is disclosed in the
notes to the financial statements.
C. Current-non-current classification
All assets and liabilities have been classified as current or
non-current as per the Company's normal operating cycle and other
criteria in accordance with Schedule III to the Companies Act, 2013 set
out below:
Assets
An asset is classified as current when it satisfies any of the
following criteria:
a. it is expected to be realised in, or is intended for sale or
consumption in, the Company's normal operating cycle;
b. it is held primarily for the purpose of being traded;
c. it is expected to be realised within 12 months after the reporting
date; or
d. it is cash or cash equivalent unless it is restricted from being
exchanged or used to settle a liability for at least 12 months after
the reporting date.
Current assets include the current portion of non-current financial
assets.
All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any of the
following criteria:
a. it is expected to be settled in the company's normal operating
cycle;
b. it is held primarily for the purpose of being traded;
c. it is due to be settled within 12 months after the reporting date;
or
d. the company does not have an unconditional right to defer
settlement of the liability for at least 12 months after the reporting
date. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the issue of equity
instruments do not affect its classification.
Current liabilities include current portion of non-current financial
liabilities.
All other liabilities are classified as non-current. Operating cycle
Operating cycle is the time between the acquisition of assets for
processing and their realisation in cash or cash equivalents. Based on
the nature of products and the time between the acquisition of assets
for processing and their realisation in cash and cash equivalents, the
Company has ascertained its operating cycle as 12 months for the
purpose of current-non-current classification of assets and
liabilities.
D. Tangible and Intangible fixed assets
Tangible fixed assets
Tangible fixed Assets are stated at cost net of tax/ duty credits
availed, if any, less accumulated depreciation/ amortisation/
impairment losses. The cost of an item of tangible fixed asset
comprises its purchase price, including import duties and other
non-refundable taxes or levies and any directly attributable cost of
bringing the asset to its working condition for its intended use. Any
trade discounts and rebates are deducted in arriving at the purchase
price.
Exchange differences (favorable as well as unfavorable) arising in
respect of translation/ settlement of long term foreign currency
borrowings attributable to the acquisition of a depreciable asset are
also included in the cost of the asset.
In case of fixed assets acquired at the time of amalgamation of certain
entities with Company, the same are recognised at book value in case of
amalgamation in the nature of merger and at book value/ fair value in
case of amalgamation in the nature of purchase in line with Accounting
Standard (AS) 14 -"Accounting for Amalgamations".
Expenditure incurred on start up and commissioning of the project and/
or substantial expansion, including the expenditure incurred on trial
runs (net of trial run receipts, if any) up to the date of commencement
of commercial production are capitalised. Subsequent expenditures
related to an item of fixed asset are capitalised to its book value
only if they increase the future benefits from the existing asset
beyond its previously assessed standard of performance. Losses arising
from the retirement of, and gains or losses arising from disposal of
fixed assets are recognised in the Statement of Profit and Loss.
Tangible fixed assets under construction are disclosed as capital
work-in-progress.
Insurance spares/ standby equipments are capitalised as part of the
mother asset and are depreciated at applicable rates, over the
remaining useful life of the mother assets.
Intangible fixed assets Acquired intangible assets
Intangible assets that are acquired by the Company are measured
initially at cost. After initial recognition, an intangible asset is
carried at its cost less any accumulated amortisation and any
accumulated impairment loss.
Subsequent expenditure is capitalised only when it increases the future
economic benefits from the specific asset to which it relates.
Expenditure for acquisition and implementation of software systems is
recognised as part of the intangible assets.
Internally generated intangible assets
Internally generated goodwill is not recognised as an asset. With
regard to other internally generated intangible assets:
* Expenditure on research activities, undertaken with the prospect of
gaining new scientific or technical knowledge and understanding, is
recognised in the Statement of Profit and Loss as incurred.
* Development activities involve a plan or design for the production of
new or substantially improved products or processes. Development
expenditure including regulatory cost and legal expenses leading to
product registration/ market authorisation relating to the new and/ or
improved product and/ or process development capitalised only if
development costs can be measured reliably, the product or process is
technically and commercially feasible, future economic benefits are
probable, and the Company intends to and has sufficient resources to
complete development and to use the asset. The expenditure capitalised
includes the cost of materials, direct labour, overhead costs that are
directly attributable to preparing the asset for its intended use, and
directly attributable borrowing costs (in the same manner as in the
case of tangible fixed assets). Other development expenditure is
recognised in the Statement of Profit and Loss as incurred.
E. Depreciation and amortisation
Upto 31 March 2014, depreciation was provided on straight line method
on the original cost/ acquisition cost of assets or other amounts
substituted for cost (i) in respect of assets added/ installed up to
December 15, 1993, at the rates applicable at the time of additions/
installations of the assets, as per the Companies Act, 1956; and (ii)
in respect of assets added/ installed during the subsequent period, at
the rates mentioned in Schedule XIV to the Companies Act, 1956 read
with Notification dated 16 December 1993 issued by Department of
Company Affairs, Government of India, except for the following classes
of fixed assets which are depreciated as under:
a. Research and development related equipments and machineries: ten
years.
b. Dies and punches for manufacture of dosage formulations: one to two
years.
c. Motor vehicles: five years.
d. Motor vehicles under finance lease: tenure of lease or five years
whichever is shorter.
e. Computer and information technology related assets: three to five
years.
f. Certain employee perquisite related assets: five years, being the
period of the perquisite scheme.
Assets costing individually Rs. 5,000 (in absolute amount) or less were
fully depreciated in the year of purchase.
During the current year, pursuant to the Companies Act, 2013 ('the
Act') being effective from 1 April 2014, the Company has revised
depreciation rates on the original cost/ acquisition cost of assets or
other amounts substituted for cost of fixed assets as per the useful
life specified in Part 'C' of Schedule II of the Act, read with
notification dated 29 August 2014 of the Ministry of Corporate Affairs,
except for the following classes of fixed assets which are depreciated
based on the internal technical assessment of the management as under:
a. Motor vehicles: five years.
b. Motor vehicles under finance lease: tenure of lease or five years
whichever is shorter.
c. Computer servers and networks: five years.
d. Dies and punches for manufacture of dosage formulations: one to two
years.
e. Employee perquisite related assets (except end user computers):
five years, being the period of the perquisite scheme.
Depreciation on assets added/ disposed off during the year has been
provided on pro-rata basis with reference to the date of addition/
disposal.
Depreciation on exchange fluctuation capitalised, in view of the option
exercised by the Company for accounting the exchange differences
arising on reporting of long term foreign currency monetary items in
line with Para 46 and 46A of Accounting Standard (AS) 11 on "The
Effects of Changes in Foreign Exchange Rates", is charged over the
remaining useful life of assets.
Leasehold land is amortised over the lease period on straight line
basis.
Intangible assets in the nature of Product registrations/ Market
authorisations (Products) are amortised on a straight line basis over a
period of five years in case of internally developed products
(intangibles) and 10 years in case of bought out product (intangibles),
from the date of regulatory approval or the date of product going off-
patent, whichever is later. Software systems are being amortised over a
period of five years being their useful life. Rights are amortised over
the useful life.
Also refer note 40.
F. Impairment of fixed assets
Fixed assets are reviewed at each reporting date to determine if there
is any indication of impairment. For assets in respect of which any
such indication exists and for intangible assets mandatorily tested
annually for impairment, the asset's recoverable amount is estimated.
For assets that are not yet available for use, the recoverable amount
is estimated at each reporting date. An impairment loss is recognised
if the carrying amount of an asset exceeds its recoverable amount.
For the purpose of impairment testing, assets are grouped together into
the smallest group of assets (Cash Generating Unit or CGU) that
generates cash inflows from continuing use that are largely independent
of the cash inflows of other assets or CGUs.
The recoverable amount of an asset or CGU is the greater of its value
in use and its net selling price. In assessing value in use, the
estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset or CGU.
Impairment losses are recognised in the Statement of Profit and Loss.
If at the Balance Sheet date there is an indication that a previously
assessed impairment loss no longer exists or has decreased, the asset's
or CGU's recoverable amount is estimated. The impairment loss is
reversed to the extent that the asset's carrying amount does not exceed
the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been
recognised. Such a reversal is recognised in the Statement of Profit
and Loss.
G. Leases
Finance leases
Assets leased by the Company in its capacity as lessee where
substantially all the risks and rewards of ownership vest in the
Company are classified as finance leases. Such leases are capitalised
at the inception of the lease at the lower of the fair value and the
present value of the minimum lease payments and a liability is created
for an equivalent amount. Lease payment is allocated between the
liability and finance charges so as to obtain a constant periodic rate
of interest on the outstanding liability for each year.
Operating leases
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Lease payments under operating leases are recognised
in the Statement of Profit and Loss on a straight line basis over the
lease term unless another systematic basis is more representative of
the time pattern of the benefit.
H. Valuation of Inventories
Inventories are valued at lower of cost or net realisable value except
scrap, which is valued at net estimated realisable value.
The methods of determining cost of various categories of inventories
are as follows:
Raw materials Weighted average method
Stores and spares Weighted average method
Work-in-process Variable cost at weighted
and finished goods average including an
(manufactured) appropriate share of variable
and fixed production
overheads. Fixed production
overheads are included
based on normal capacity of
production facilities
Fuel, consumables, Weighted average method
packing material
etc.
Finished goods Weighted average method
(traded)
Goods in transit Cost of purchase
Cost includes all costs of purchase, costs of conversion and other
costs incurred in bringing the inventories to their present location
and condition inclusive of excise duty wherever applicable.
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.
The net realisable value of work-in-progress is determined with
reference to the selling prices of related finished products. Raw
materials and other supplies held for use in the production of finished
products are not written down below cost except in cases where material
prices have declined and it is estimated that the cost of the finished
products will exceed their net realisable value.
The comparison of cost and net realisable value is made on an
item-by-item basis.
I. Investments
Investments that are readily realisable and are intended to be held for
not more than one year from the date, on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments. However, that part of long term
investments which is expected to be realised within 12 months after the
reporting date is also presented under 'current assets' as "current
portion of long term investments" in consonance with the current/ non-
current classification scheme of Schedule III.
Current investments are carried at cost or fair value, whichever is
lower. Long-term investments are carried at cost. However, provision
for diminution is made to recognise a decline, other than temporary, in
the value of the investments, such reduction being determined and made
for each investment individually.
Investments in foreign subsidiary companies are expressed in Indian
currency at the rates prevailing on the date when the remittance for
the purpose was made/ foreign currency balance lying abroad was used,
as the case may be.
J. Income taxes
Tax expense for the period, comprising current tax and deferred tax,
are included in the determination of the net profit or loss for the
period.
Current tax
Current tax is measured at the amount expected to be paid to (recovered
from) the taxation authorities, using the applicable tax rates and tax
laws.
Deferred tax
Deferred tax charge or credit reflects the tax effects of timing
differences between accounting income and taxable income for the
current year and reversal of timing differences for earlier years. The
deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the Balance Sheet date. Deferred
tax assets are recognised only to the extent there is reasonable
certainty that the assets can be realised in future; however, where
there is unabsorbed depreciation or carry forward of losses, deferred
tax assets are recognised only if there is a virtual certainty of
realisation of such assets. Deferred tax assets are reviewed at each
Balance Sheet date and are written-down or written-up to reflect the
amount that is reasonably/ virtually certain (as the case may be) to be
realised. Deferred tax consequences of timing differences that
originate in the tax holiday period and reverse after the tax holiday
period are recognised in the period in which the timing differences
originate. Timing differences that originate and reverse within the
tax holiday period are not considered for deferred tax purposes.
Minimum Alternate Tax (MAT)
MAT credit is recognised as an asset only when and to the extent there
is convincing evidence that the Company will pay normal income tax
during the period for which the MAT credit can be carried forward for
set-off against the normal tax liability. In the year in which MAT
credit becomes eligible to be recognised as an asset in accordance with
the recommendation contained in the Guidance Note on "Accounting for
Credit Available in respect of Minimum Alternative Tax under The Income
Tax Act, 1961" issued by the Institute of Chartered Accountants of
India, the said asset is created by way of a credit to the Statement of
Profit and Loss and shown as MAT Credit Entitlement. The Company
reviews the same at each Balance Sheet date and writes down the
carrying amount of MAT Credit Entitlement to the extent there is no
longer convincing evidence to the effect that Company will pay normal
income tax during the specified period.
K. Foreign Currency transactions, derivatives and hedging
Foreign currency transactions are recorded into Indian rupees by
applying to the foreign currency amount the exchange rate between
Indian rupees and the foreign currency on/ or closely approximating to
the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies as at
the Balance Sheet date are translated into Indian rupees at the closing
exchange rates on that date. The resultant exchange differences are
recognised in the Statement of Profit and Loss except that:
(a) Exchange differences pertaining to long-term foreign currency
monetary items that are related to acquisition of depreciable assets
are adjusted in the carrying amount of the related fixed assets; and
(b) Exchange differences arising on other long-term foreign currency
monetary items are accumulated in 'Foreign Currency Monetary Item
Translation Difference Account' (FCMITDA), and are amortised over the
balance period of the relevant foreign currency item.
A monetary asset or liability is termed as a long-term foreign currency
monetary item, if the asset or liability is expressed in a foreign
currency and has a term of 12 months or more at the date of origination
of the asset or liability.
Foreign Exchange Forward Contracts: The premium or discount arising at
the inception of foreign exchange forward contracts entered into to
hedge an existing monetary item, is amortised as expense or income over
the life of the contract. Any profit or loss arising on cancellation or
renewal of such a foreign exchange forward contracts is recognised as
income or as an expense for the period. Such foreign exchange forward
contracts are translated at the closing exchange rates and resultant
exchange differences are recognised in the same manner as those on the
underlying foreign currency asset or liability.
Apart from the above mentioned foreign exchange forward contracts, the
Company also enters into derivative contracts in the nature of foreign
currency swaps, foreign exchange forward contracts, interest rate swaps
etc. with an intention to hedge its existing assets and liabilities,
firm commitments and highly probable forecasted transactions. All these
derivative contracts are marked-to-market and the resultant loss, if
any, from these contracts are recognised in the Statement of Profit and
Loss however the gain on mark-to-market of such contracts is ignored.
The contracts are aggregated category-wise, to determine the net gain/
loss.
Also refer note 50(iv).
L. Provisions, contingent liabilities and contingent assets
The Company recognises a provision when there is a present obligation
as a result of a past event that probably requires an outflow of
resources and a reliable estimate can be made of the amount of the
obligation. Contingent liabilities are disclosed in respect of possible
obligations that may arise from past events but their existence is
confirmed by the occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the Company. Contingent
assets are neither recognised nor disclosed in the financial
statements. However, contingent assets are assessed continually and if
it is virtually certain that an inflow of economic benefits will arise,
the asset and related income are recognised in the period in which the
change occurs.
M. Employee benefits
(i) Short-term employee benefits: All employee benefits falling due
within twelve months of the end of the period in which the employees
render the related services are classified as short-term employee
benefits, which include benefits like salaries, wages, short term
compensated absences, performance incentives, etc. and are recognised
as expenses in the period in which the employee renders the related
service and measured accordingly.
(ii) Post-employment benefits: Post employment
benefit plans are classified into defined contribution plans and
defined benefit plans in line with the requirements of AS 15 on
"Employee Benefits".
a. Gratuity
The liability in respect of Gratuity, a defined benefit plan, is
recognised in the books of account based on actuarial valuation using
projected unit credit method as at Balance Sheet date by an independent
actuary. Actuarial gains and losses arising from the experience
adjustment and change in actuarial assumption are immediately
recognised in the Statement of Profit and Loss as an income or expense.
The gratuity liability for certain employees of the Company is funded
with Life Insurance Corporation of India.
b. Superannuation
Certain employees of the Company are also participants in the
superannuation plan ('the Plan'), a defined contribution plan.
Contribution made by the Company to the plan during the year is charged
to Statement of Profit and Loss.
c. Provident fund
i) The Company makes contribution to the recognised provident fund -
"VAM EMPLOYEES PROVIDENT FUND TRUST" (a multiemployer trust) for most
of its employees in India, which is a defined benefit plan to the
extent that the Company has an obligation to make good the shortfall,
if any, between the return from the investments of the trust and the
notified interest rate. The Company's obligation in this regard is
determined by an independent actuary and provided for if the
circumstances indicate that the Trust may not be able to generate
adequate returns to cover the interest rates notified by the
Government.
ii) For other employees, provident fund is deposited with Regional
Provident Fund Commissioner. This is treated as defined contribution
plan.
Company's contribution to the provident fund is charged to Statement of
Profit and Loss.
(iii) Other long-term employee benefits
Accumulated compensated absences are treated as other long-term
employee benefits. The Company's liability in respect of other long-
term employee benefits is recognised in the books of account based on
actuarial valuation using projected unit credit method as at Balance
Sheet date by an independent actuary. Actuarial losses/ gains are
recognised in the Statement of Profit and Loss in the year in which
they arise.
(iv) Termination benefits
Termination benefits are recognised as expense when, as a result of a
past event, the Company has a present obligation that can be estimated
reliably, and it is probable that an outflow of economic benefits will
be required to settle the obligation.
N. Borrowing costs
Borrowing costs are interest, ancillary cost and exchange differences
arising from foreign currency borrowings to the extent that they are
regarded as an adjustment to interest costs incurred by the Company in
connection with the borrowing of funds.
Borrowing costs are recognised in the Statement of Profit and Loss in
the period in which it is incurred, except where the cost is incurred
for acquisition, construction, production or development of an asset
that takes a substantial period of time to get ready for its intended
use in which case it is capitalised up to the date the assets are ready
for their intended use. Ancillary costs incurred in connection with the
arrangement of borrowings are amortised over the period of such
borrowings.
O. Revenue recognition
Revenue from sale of products is recognised when the significant risks
and rewards of ownership of the products have been transferred to the
buyer, recovery of the consideration is probable and the amount of
revenue can be measured reliably. Revenues include excise duty and are
shown net of sales tax and value added tax, if any.
Revenue includes only those sales for which the Company has acted as a
principal in the transaction, takes title to the products, and has the
risks and rewards of ownership, including the risk of loss for
collection, delivery and returns. Any sales for which the Company has
acted as an agent or broker without assuming the risks and rewards of
ownership have been reported on a net basis.
Goods sold on consignment are recorded as inventory until goods are
sold by the consignee to the end customer.
Revenue from fixed-price contracts are recorded on a proportional
completion method.
Revenue related to contract manufacturing arrangements, development
contracts and licensing and regulatory services is recognised when
performance obligations are fulfilled.
Sale of utility is recognised on delivery of the same to the consumers
and no significant uncertainty exists as to its realisation.
Export incentives/ benefits are accounted for on accrual basis in the
year in which exports are made and where recovery is probable.
Upfront non-refundable payments are recorded as deferred revenue. These
amounts are recognised as revenues as obligations are fulfilled under
contractual arrangement and/ or as milestones are achieved as the case
may be.
Dividend income is recognised when the unconditional right to receive
the income is established. Income from interest on deposits, loans and
interest bearing securities is recognised on time proportionate method.
P. Segment reporting
The accounting policies adopted for segment reporting are in line with
accounting policies of the Company. Revenues, expenses, assets and
liabilities have been identified to segments on the basis of their
relationship to operating activities of the segments (taking into
account the nature of products and services and, risks and rewards
associated with them) and internal management information systems and
the same is reviewed from time to time to realign the same to conform
to the business units of the Company. Revenues, expenses, assets and
liabilities, which are common to the enterprise as a whole and are not
allocable to segments on a reasonable basis, have been treated as
"Common Revenues/ Expenses/ Assets/ Liabilities", as the case may be.
Q. Earnings per share
The basic earnings per share is calculated by dividing the net profit
after tax for the year by the weighted average number of equity shares
outstanding during the year. For the purpose of calculating diluted
earnings per share, net profit after tax during the year and the
weighted average number of shares outstanding during the year are
adjusted for the effect of all dilutive potential equity shares. The
dilutive potential equity shares are deemed converted as of the
beginning of the year unless they have been issued at a later date. The
dilutive potential equity shares are adjusted for the proceeds
receivable had the shares been actually issued at fair value (i.e.
average market value of the outstanding shares). Anti dilutive effect
of any potential equity shares is ignored in the calculation of
earnings per share.
R. Employee stock option schemes
Hitherto, the Company was following Securities and Exchange Board of
India (SEBI) guidelines for accounting of employee stock options
wherein the cost was calculated based on the intrinsic value method
i.e. the excess of market price of underlying equity shares as of the
date of the grant of options over the exercise price of such options is
regarded as employee compensation and in respect of the number of
options that are expected to ultimately vest. Such cost was recognised
on a straight line basis over the period over which the employees would
become unconditionally entitled to apply for the shares. The cost
recognised at any date at least equals the intrinsic value of the
vested portion of the option at that date. Adjustment, if any, for
difference in initial estimate for number of options that are expected
to ultimately vest and related actual experience was recognised in the
Statement of Profit and Loss of that period. In respect of vested
options expire unexercised, the cost was reversed in the Statement of
Profit and Loss of that period.
Further, during the previous year, the Company had changed its policy
with respect to treatment of shares issued to Jubilant Employee Welfare
trust ('Trust'). As per an opinion of the Expert Advisory Committee
('EAC') of The Institute of Chartered Accountants of India (ICAI), as
on the reporting date, the shares held by the trust but yet to be
allotted to employees were presented as a deduction, from the Share
Capital to the extent of face value of the shares and Securities
Premium to the extent of amount exceeding face value of shares, with a
corresponding adjustment to the, loan receivable from Trust, Capital
Reserve (for the amount of profit on sale of shares) and Surplus (to
the extent of dividend received net of operating expenses).
During the current year, SEBI on 28 October 2014, issued Securities and
Exchange Board of India (Share Based Employee Benefits) Regulations,
2014 ('new guidelines') repealing Securities and Exchange Board of
India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999. According to the new guidelines, any company
implementing any of the share based schemes shall follow the
requirements of the 'Guidance Note on Accounting for employee
share-based Payments' (Guidance Note) or Accounting Standards as may be
prescribed by the ICAI from time to time, including the disclosure
requirements prescribed therein. The consequential accounting/
presentation impact, vis-a-vis SEBI guidelines followed earlier, w.e.f.
28 October 2014 is summarized below:
* In respect of vested options expire unexercised, the reversal of
related cumulative cost which was accounted as credit in the Statement
of Profit and Loss of that period will now be accounted as credit to
general reserve.
* Since, shares held by the Trust are purchased from market instead of
direct issuance by the Company, the consolidation thereof as prescribed
above, in these financial statements, has been discontinued.
Mar 31, 2014
The accounting policies set out below have been applied consistently to
the periods presented in these financial statements.
A. Basis of preparation and presentation of financial statements
The accounts of the Company are prepared under the historical cost
convention on the accrual basis of accounting in accordance with the
accounting principles generally accepted in India ("GAAP") and comply
with the Accounting Standards prescribed in the Companies (Accounting
Standards) Rules, 2006 issued by the Central Government, which as per a
clarifcation issued by the Ministry of Corporate Affairs continue to
apply under section 133 of the Companies Act, 2013 (which has
superseded section 211(3C) of the Companies Act, 1956 w.e.f. 12
September 2013), the other relevant provisions of the Companies Act,
1956 (including the new notifed sections under Companies Act, 2013, to
the extent applicable), pronouncements of the Institute of Chartered
Accountants of India, guidelines issued by the Securities and Exchange
Board of India ("SEBI"), to the extent applicable. The financial
statements are presented in Indian rupees rounded off to the nearest
million.
The financial statements are presented as per revised Schedule VI to the
Companies Act, 1956. All assets and liabilities have been classifed as
current or non-current as per the Company''s normal operating cycle and
other criteria set out in the revised Schedule VI to the Companies Act,
1956.
Previous year''s figures have been regrouped/rearranged wherever
considered necessary to conform to current year''s classifcation.
B. Use of estimates
The preparation of financial statements in conformity with GAAP requires
management to make judgments,
estimates and assumptions that affect the application of accounting
policies and reported amounts of assets and liabilities, the disclosure
of contingent liabilities at the date of financial statements and the
results of operations during the reporting periods. Examples of such
estimate include future obligations under employee benefit plans, income
taxes, useful lives of tangible assets and intangible assets,
impairment of assets, valuation of derivatives, provision for doubtful
debts etc. Management believes that the estimates used in the
preparation of the financial statements are prudent and reasonable.
Actual results could vary from these estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis. Appropriate
changes in estimates are made as the management becomes aware of the
changes in circumstances surrounding the estimates. Any revision to
accounting estimates is recognised prospectively in current and future
periods. Effect of material changes is disclosed in the notes to the
financial statements.
C. CurrentÂnon-current classifcation
All assets and liabilities are classifed into current and non-current.
Assets
An asset is classifed as current when it satisfes any of the following
criteria:
a. it is expected to be realised in, or is intended for sale or
consumption in, the Company''s normal operating cycle;
b. it is held primarily for the purpose of being traded;
c. it is expected to be realised within 12 months after the reporting
date; or
d. it is cash or cash equivalent unless it is restricted from being
exchanged or used to settle a liability for at least 12 months after
the reporting date.
Current assets include the current portion of non- current financial
assets.
All other assets are classifed as non-current.
Liabilities
A liability is classifed as current when it satisfes any of the
following criteria:
a. it is expected to be settled in the company''s normal operating
cycle;
b. it is held primarily for the purpose of being traded;
c. it is due to be settled within 12 months after the reporting date;
or
d. the company does not have an unconditional right to defer
settlement of the liability for at least 12 months after the reporting
date. Terms of a liability that could,
at the option of the counterparty, result in its settlement by the
issue of equity instruments do not affect its classifcation.
Current liabilities include current portion of non-current financial
liabilities.
All other liabilities are classifed as non-current.
Operating cycle
Operating cycle is the time between the acquisition of assets for
processing and their realisation in cash or cash equivalents.
Based on the nature of products and the time between the acquisition of
assets for processing and their realisation in cash and cash
equivalents, the Company has ascertained its operating cycle as 12
months for the purpose of current  non current classifcation of assets
and liabilities.
D. Tangible and Intangible fixed assets
Tangible fixed assets
Tangible fixed Assets are stated at cost net of tax/duty credits
availed, if any, less accumulated depreciation/ amortisation/impairment
losses. The cost of an item of tangible fixed asset comprises its
purchase price, including import duties and other non-refundable taxes
or levies and any directly attributable cost of bringing the asset to
its working condition for its intended use; any trade discounts and
rebates are deducted in arriving at the purchase price.
Exchange differences (favorable as well as unfavorable) arising in
respect of translation/settlement of long term foreign currency
borrowings attributable to the acquisition of a depreciable asset are
also included in the cost of the asset.
In case of fixed assets acquired at the time of amalgamation of certain
entities with Company, the same are recognised at book value in case of
amalgamation in the nature of merger and at book value/fair value in
case of amalgamation in the nature of purchase in line with Accounting
Standard (AS) 14 -"Accounting for Amalgamations".
Expenditure incurred on start up and commissioning of the project
and/or substantial expansion, including the expenditure incurred on
trial runs (net of trial run receipts, if any) up to the date of
commencement of commercial production are capitalised. Subsequent
expenditures related to an item of fixed asset are capitalised to its
book value only if they increase the future benefits from the existing
asset beyond its previously assessed standard of performance. Losses
arising from the retirement of, and gains or losses arising from
disposal of fixed assets are recognised in the Statement of Profit and
Loss.
Tangible fixed assets under construction are disclosed as capital
work-in-progress.
Insurance spares/standby equipments are capitalised as part of the
mother asset and are depreciated at applicable rates, over the
remaining useful life of the mother assets.
Intangible fixed assets
Acquired intangible assets
Intangible assets that are acquired by the Company are measured
initially at cost. After initial recognition, an intangible asset is
carried at its cost less any accumulated amortisation and any
accumulated impairment loss.
Subsequent expenditure is capitalised only when it increases the future
economic benefits from the Specific asset to which it relates.
Expenditure for acquisition and implementation of software systems is
recognised as part of the intangible assets.
Internally generated intangible assets
Internally generated goodwill is not recognised as an asset. With
regard to other internally generated intangible assets:
- Expenditure on research activities, undertaken with the prospect of
gaining new scientifc or technical knowledge and understanding, is
recognised in the Statement of Profit and Loss as incurred.
- Development activities involve a plan or design for the production of
new or substantially improved products or processes. Development
expenditure including regulatory cost and legal expenses leading to
product registration/market authorisation relating to the new and/or
improved product and/or process development capitalised only if
development costs can be measured reliably, the product or process is
technically and commercially feasible, future economic benefits are
probable, and the Company intends to and has suffcient resources to
complete development and to use the asset. The expenditure capitalised
includes the cost of materials, direct labour, overhead costs that are
directly attributable to preparing the asset for its intended use, and
directly attributable borrowing costs (in the same manner as in the
case of tangible fixed assets). Other development expenditure is
recognised in the Statement of Profit and Loss as incurred.
E. Depreciation and amortisation
Depreciation is provided on straight line method at rates mentioned and
in the manner specified in Schedule XIV to the Companies Act, 1956 (as
amended), and read with statement as mentioned hereunder, on the
original cost/ acquisition cost of assets or other amounts substituted
for cost.
Depreciation, in respect of assets added/installed up to December 15,
1993, is provided at the rates applicable at the time of
additions/installations of the assets, as per
the Companies Act, 1956 and depreciation, in respect of assets
added/installed during the subsequent period, is provided at the rates,
mentioned in Schedule XIV to the Companies Act, 1956 read with
Notifcation dated 16th December, 1993 issued by Department of Company
Affairs, Government of India except for the following classes of fixed
assets which are depreciated as under;
a. Research and development related equipments and machineries: ten
years.
b. Dies and punches for manufacture of dosage formulations: one to two
years.
c. Motor vehicles: five years.
d. Motor vehicles under finance lease: tenure of lease or five years
whichever is shorter.
e. Computer and information technology related assets: three to five
years.
f. Certain employee perquisite related assets: five years, being the
period of the perquisite scheme.
Depreciation rates so arrived at are currently refective of the
estimated useful life of the fixed assets and are not lower than the
rates prescribed in Schedule XIV to the Companies Act, 1956.
Depreciation on assets added/disposed off during the year has been
provided on pro-rata basis with reference to the date of
addition/disposal.
Depreciation on exchange fuctuation capitalised, in view of the option
exercised by the Company for accounting the exchange differences
arising on reporting of long term foreign currency monetary items in
line with Para 46 and 46A of Accounting Standard (AS) 11 on "The
Effects of Changes in Foreign Exchange Rates", is charged over the
remaining useful life of assets.
Leased assets including leasehold land are amortised over the lease
period on straight line basis subject to minimum rates Defined under
Schedule XIV to the Companies Act 1956.
Intangible assets in the nature of Product registrations/ Market
authorisations (Products) are amortised on a straight-line basis over a
period of five years in case of internally developed products
(intangibles) and 10 years in case of bought out product (intangibles),
from the date of regulatory approval or the date of product going
off-patent whichever is later. Software systems are being amortised
over a period of five years being their useful life. Rights are
amortised over the useful life.
Assets costing individually Rs. 5,000 (in absolute amount) or less are
fully depreciated in the year of purchase.
F. Impairment of fixed assets
Fixed assets are reviewed at each reporting date to determine if there
is any indication of impairment. For assets in respect of which any
such indication exists and for intangible assets mandatorily tested
annually for impairment, the asset''s recoverable amount is estimated.
For assets that are not yet available for use, the recoverable amount
is estimated at each reporting date. An impairment loss is recognised
if the carrying amount of an asset exceeds its recoverable amount.
For the purpose of impairment testing, assets are grouped together into
the smallest group of assets (Cash Generating Unit or CGU) that
generates cash inflows from continuing use that are largely independent
of the cash inflows of other assets or CGUs.
The recoverable amount of an asset or CGU is the greater of its value
in use and its net selling price. In assessing value in use, the
estimated future cash flows are discounted to their present value using
a pre-tax discount rate that refects current market assessments of the
time value of money and the risks Specific to the asset or CGU.
Impairment losses are recognised in the Statement of Profit and Loss.
If at the Balance Sheet date there is an indication that a previously
assessed impairment loss no longer exists or has decreased, the assets
or CGU''s recoverable amount is estimated. The impairment loss is
reversed to the extent that the asset''s carrying amount does not exceed
the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been
recognised. Such a reversal is recognised in the Statement of Profit and
Loss.
G. Leases
Finance leases
Assets leased by the Company in its capacity as lessee where
substantially all the risks and rewards of ownership vest in the
Company are classifed as finance leases. Such leases are capitalised at
the inception of the lease at the lower of the fair value and the
present value of the minimum lease payments and a liability is created
for an equivalent amount. Lease payment is allocated between the
liability and finance charges so as to obtain a constant periodic rate
of interest on the outstanding liability for each year.
Operating leases
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Lease payments under operating leases are recognised
in the Statement of Profit and Loss on a straight-line basis over the
lease term unless another systematic basis is more representative of
the time pattern of the benefit.
H. Valuation of Inventories
Inventories are valued at lower of cost or net realisable value except
scrap, which is valued at net estimated realisable value.
The methods of determining cost of various categories of inventories
are as follows:
Raw materials Weighted average method
Stores and spares Weighted average method Work-in-process Variable cost
at weighted average and fnished goods including an appropriate share
(manufactured) of variable and fixed production overheads. Fixed
production overheads are included based on normal capacity of
production facilities Fuel, consumables, Weighted average method
packing material etc. Finished goods Cost of purchase (traded) Goods
in transit Cost of purchase
Cost includes all costs of purchase, costs of conversion and other
costs incurred in bringing the inventories to their present location
and condition inclusive of excise duty wherever applicable.
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.
The net realisable value of work-in-progress is determined with
reference to the selling prices of related fnished products. Raw
materials and other supplies held for use in the production of fnished
products are not written down below cost except in cases where material
prices have declined and it is estimated that the cost of the fnished
products will exceed their net realisable value.
The comparison of cost and net realisable value is made on an
item-by-item basis.
I. Investments
Investments that are readily realisable and are intended to be held for
not more than one year from the date, on which such investments are
made, are classifed as current investments. All other investments are
classifed as long-term investments. However, that part of long term
investments which is expected to be realised within 12 months after the
reporting date is also presented under ''current assets'' as "current
portion of long term investments" in consonance with the
current/non-current classifcation scheme of revised Schedule VI.
Current investments are carried at cost or fair value, whichever is
lower. Long-term investments are carried at cost. However, provision
for diminution is made to recognise a decline, other than temporary, in
the value of the investments, such reduction being determined and made
for each investment individually.
Investments in foreign subsidiary companies are expressed in Indian
currency at the rates prevailing on the date when the remittance for
the purpose was made/ foreign currency balance lying abroad was used,
as the case may be.
J. Income taxes
Tax expense for the period, comprising current tax and deferred tax,
are included in the determination of the net Profit or loss for the
period.
Current tax
Current tax is measured at the amount expected to be paid to (recovered
from) the taxation authorities, using the applicable tax rates and tax
laws.
Deferred tax
Deferred tax charge or credit refects the tax effects of timing
differences between accounting income and taxable income for the
current year and reversal of timing differences for earlier years. The
deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the Balance Sheet date. Deferred
tax assets are recognised only to the extent there is reasonable
certainty that the assets can be realised in future; however, where
there is unabsorbed depreciation or carry forward of losses, deferred
tax assets are recognised only if there is a virtual certainty of
realisation of such assets. Deferred tax assets are reviewed at each
Balance Sheet date and are written-down or written-up to refect the
amount that is reasonably/virtually certain (as the case may be) to be
realised. Deferred tax consequences of timing differences that
originate in the tax holiday period and reverse after the tax holiday
period are recognised in the period in which the timing differences
originate. Timing differences that originate and reverse within the tax
holiday period are not considered for deferred tax purposes.
Minimum Alternate Tax (MAT)
MAT credit is recognised as an asset only when and to the extent there
is convincing evidence that the Company will pay normal income tax
during the period for which the MAT credit can be carried forward for
set-off against the normal tax liability. In the year in which MAT
credit becomes eligible to be recognised as an asset in accordance with
the recommendation contained in the Guidance Note on "Accounting for
Credit Available in respect of Minimum Alternative Tax under The Income
Tax Act, 1961" issued by the Institute of Chartered Accountants of
India, the said asset is created by way of a credit to the Statement of
Profit and Loss and shown as MAT Credit Entitlement. The Company
reviews the same at each Balance Sheet date and writes down the
carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the
effect that Company will pay normal income tax during the specified
period.
K. Foreign Currency transactions, derivatives and hedging
Foreign currency transactions are recorded into Indian rupees by
applying to the foreign currency amount the exchange rate between
Indian rupees and the foreign currency on/or closely approximating to
the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies as at
the Balance Sheet date are translated into Indian rupees at the closing
exchange rates on that date. The resultant exchange differences are
recognised in the Statement of Profit and Loss except that:
(a) Exchange differences pertaining to long term foreign currency
monetary items that are related to acquisition of depreciable assets
are adjusted in the carrying amount of the related fixed assets; and
(b) Exchange differences arising on other long-term foreign currency
monetary items are accumulated in ''Foreign Currency Monetary Item
Translation Difference Account'' (FCMITDA), and are amortised over the
balance period of the relevant foreign currency item.
A monetary asset or liability is termed as a long-term foreign currency
monetary item, if the asset or liability is expressed in a foreign
currency and has a term of 12 months or more at the date of origination
of the asset or liability.
Foreign Exchange Forward Contracts: The premium or discount arising at
the inception of forward exchange contracts entered into to hedge an
existing monetary item, is amortised as expense or income over the life
of the contract. Any Profit or loss arising on cancellation or renewal
of such a forward exchange contract is recognised as income or as an
expense for the period.
The forward exchange contracts taken to hedge existing assets or
liabilities are translated at the closing exchange rates and resultant
exchange differences are recognised in the same manner as those on the
underlying foreign currency asset or liability.
In conformity with ICAI announcement on early application of Accounting
Standard 30 (AS 30) on "Financial Instruments :Recognition and
Measurement", the Company has adopted AS 30 issued by ICAI so far as
the adoption does not confict with existing mandatory accounting
standards and other authoritative pronouncements, Company Law and other
regulatory requirements.
Apart from forward exchange contracts taken to hedge existing assets or
liabilities, the Company also enters
into derivative contracts in the nature of foreign currency swaps,
forward contracts, interest rate swaps etc. with an intention to hedge
its existing assets and liabilities, firm commitments and highly
probable forecasted transactions.
All other derivative contracts (except those derivative contracts which
are designated as a hedging instrument for highly probable forecasted
transactions) are marked- to-market and the resultant gain/loss from
these contracts are recognised in the Statement of Profit and Loss.
The Company has a comprehensive risk management system, based on which
hedging instruments and hedged items are identified and designated in
accordance with requirements of AS 30. Hedges are classifed as cash fow
hedge when they meet the conditions specified in AS 30. The hedged item
and the hedging instrument are assessed for its effectiveness as per
the criteria specified in AS 30.
In respect of cash fow hedge, that is determined to be an effective
hedge, the effective portion of the gain or loss on the hedging
instrument is recognised directly in hedging reserve account and the
ineffective portion of the gain or loss on the hedging instrument is
recognised in the Statement of Profit and Loss. If the hedging
instrument no longer meets the hedging criteria for hedge accounting,
expires or sold, terminated or exercised, then hedge accounting is
discontinued prospectively. The cumulative gain or loss previously
recognised in hedging reserve remains there until the forecasted
transaction occurs. If the forecast transaction is no longer expected
to occur, then the balance in hedging reserve is recognised immediately
in Statement of Profit and Loss. In other cases, the amount recognised
in the hedging reserve is transferred to Statement of Profit and Loss in
the same period during which the hedged item affects the Statement of
Profit and Loss.
L. Provisions, contingent liabilities and contingent assets
The Company recognises a provision when there is a present obligation
as a result of a past event that probably requires an outflow of
resources and a reliable estimate can be made of the amount of the
obligation. Contingent liabilities are disclosed in respect of possible
obligations that may arise from past events but their existence is
confirmed by the occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the Company. Contingent
assets are neither recognised nor disclosed in the financial statements.
However, contingent assets are assessed continually and if it is
virtually certain that an infow of economic benefits will arise, the
asset and related income are recognised in the period in which the
change occurs.
M. Employee benefits
(i) Short-term employee benefits: All employee benefits
falling due within twelve months of the end of the period in which the
employees render the related services are classifed as short-term
employee benefits, which include benefits like salaries, wages, short
term compensated absences, performance incentives, etc. and are
recognised as expenses in the period in which the employee renders the
related service and measured accordingly.
(ii) Post-employment benefits: Post employment benefit plans are
classifed into Defined contribution plans and Defined benefit plans in
line with the requirements of AS 15 on "Employee benefits".
a. Gratuity
The liability in respect of Gratuity, a Defined benefit plan, is
recognised in the books of accounts based on actuarial valuation using
projected unit credit method as at Balance Sheet date by an independent
actuary. Actuarial gains and losses arising from the experience
adjustment and change in actuarial assumption are immediately
recognised in the Statement of Profit and Loss as an income or expense.
The gratuity liability for certain employees of two of the units of the
Company is funded with Life Insurance Corporation of India.
b. Superannuation
Certain employees of the Company are also participants in the
superannuation plan (''the Plan''), a Defined contribution plan.
Contribution made by the Company to the plan during the year is charged
to Statement of Profit and Loss.
c. Provident fund
i) The Company makes contribution to the recognised provident fund -
"VAM EMPLOYEES PROVIDENT FUND TRUST" (a multiemployer trust) for most
of its employees in India, which is a Defined benefit plan to the extent
that the Company has an obligation to make good the shortfall, if any,
between the return from the investments of the trust and the notifed
interest rate. The Company''s obligation in this regard is determined by
an independent actuary and provided for if the circumstances indicate
that the Trust may not be able to generate adequate returns to cover
the interest rates notifed by the Government. The Company''s
contribution towards provident fund is charged to Statement of Profit
and Loss.
ii) For other employees, provident fund is deposited with Regional
Provident Fund Commissioner. This is treated as Defined contribution
plan. Company''s contribution to the provident fund is charged to
Statement of Profit and Loss.
(iii) Other long-term employee benefits
All employee benefits (other than post-employment benefits and
termination benefits) which do not fall due within twelve months after
the end of the period in which the employees render the related
services are determined based on actuarial valuation carried out at
each Balance Sheet date. Accumulated compensated absences, which are
expected to be availed or encashed beyond 12 months from the end of the
year end are treated as other long term employee benefits.
The Company''s liability in respect of other long term employee benefits
is actuarially determined (using the projected unit credit method) at
the end of each year. Actuarial losses/gains are recognised in the
Statement of Profit and Loss in the year in which they arise.
(iv) Termination benefits
Termination benefits are recognised as an expense when, as a result of a
past event, the Company has a present obligation that can be estimated
reliably, and it is probable that an outflow of economic benefits will be
required to settle the obligation.
N. Borrowing costs
Borrowing costs are interest and other costs (including exchange
differences arising from foreign currency borrowings to the extent that
they are regarded as an adjustment to interest costs) incurred by the
Company in connection with the borrowing of funds.
Borrowing costs are recognised in the Statement of Profit and Loss in
the period in which it is incurred, except where the cost is incurred
for acquisition, construction, production or development of an asset
that takes a substantial period of time to get ready for its intended
use in which case it is capitalised up to the date the assets are ready
for their intended use. Ancillary costs incurred in connection with the
arrangement of borrowings are amortised over the period of such
borrowings.
O. Revenue recognition
Revenue from sale of products is recognised when the significant risks
and rewards of ownership of the products have been transferred to the
buyer, recovery of the consideration is probable and the amount of
revenue can be measured reliably. Revenues include excise duty and are
shown net of sales tax and value added tax, if any.
Revenue includes only those sales for which the Company has acted as a
principal in the transaction, takes title to the products, and has the
risks and rewards of ownership, including the risk of loss for
collection, delivery and returns. Any sales for which the Company has
acted as an agent or broker without assuming the risks and rewards of
ownership have been reported on a net basis.
Goods sold on consignment are recorded as inventory until goods are
sold by the consignee to the end customer.
Revenue from time and material contracts is recognised as hours are
incurred, multiplied by contractual billing rates. Revenue from
unit-based contracts is recognised as units are completed.
Revenue from fixed-price contracts are recorded on a proportional
completion method.
Revenue related to contract manufacturing arrangements, development
contracts and licensing and regulatory services is recognised when
performance obligations are fulfilled.
Sale of utility is recognised on delivery of the same to the consumers
and no significant uncertainty exists as to its realisation.
Royalty revenue is recognised on an accrual basis in accordance with
contractual agreements when all significant contractual obligations have
been fulfilled, the amounts are determinable and collection is
reasonably assured.
Export incentives/benefits are accounted for on accrual basis in the
year in which exports are made and where recovery is probable.
Upfront non-refundable payments are recorded as deferred revenue. These
amounts are recognised as revenues as obligations are fulfilled under
contractual arrangement and/or as milestones are achieved as the case
may be.
Dividend income is recognised when the unconditional right to receive
the income is established. Income from interest on deposits, loans and
interest bearing securities is recognised on time proportionate method.
P. Segment reporting
The accounting policies adopted for segment reporting are in line with
accounting policies of the Company. Revenues, expenses, assets and
liabilities have been identified to segments on the basis of their
relationship to operating activities of the segments (taking into
account the nature of products and services and, risks and rewards
associated with them) and internal management information systems and
the same is reviewed from time to time to realign the same to conform
to the business units of the Company. Revenues, expenses, assets and
liabilities, which are common to the enterprise as a whole and are not
allocable to segments on a reasonable basis, have been treated as
"Common Revenues/Expenses/ Assets/ Liabilities", as the case may be.
Q. Earnings per share
The basic earnings per share is calculated by dividing the net Profit
after tax for the year by the weighted average number of equity shares
outstanding during the year. For the purpose of calculating diluted
earnings per share, net Profit after tax during the year and the
weighted average number of shares outstanding during the year are
adjusted for the effect of all dilutive potential equity shares. The
dilutive potential equity shares are deemed converted as of the
beginning of the year unless they have been issued at a later date. The
dilutive potential equity shares are adjusted for the proceeds
receivable had the shares been actually issued at fair value (i.e.
average market value of the outstanding shares). Anti dilutive effect
of any potential equity shares is ignored in the calculation of
earnings per share.
R. Employee stock option schemes
The Company follows Securities and Exchange Board of India (SEBI)
guidelines for accounting of employee stock options. The cost is
calculated based on the intrinsic value method i.e. the excess of
market price of underlying equity shares as of the date of the grant of
options over the exercise price of such options is regarded as employee
compensation and in respect of the number of options that are expected
to ultimately vest, such cost is recognised on a straight line basis
over the period over which the employees would become unconditionally
entitled to apply for the shares. The cost recognised at any date at
least equals the intrinsic value of the vested portion of the option at
that date. Adjustment, if any, for difference in initial estimate for
number of options that are expected to ultimately vest and related
actual experience is recognised in the Statement of Profit and Loss of
that period. In respect of vested options expire unexercised, the cost
is reversed in the Statement of Profit and Loss of that period.
During the current period, the Company has changed its policy with
respect to treatment of shares issued to Jubilant Employee Welfare
trust (''Trust''). As per a recent opinion of the Expert Advisory
Committee (''EAC'') of The Institute of Chartered Accountants of India,
as on the reporting date, the shares issued to a trust but yet to be
allotted to employees be shown as a deduction, from the Share Capital
to the extent of face value of the shares and Securities Premium to the
extent of amount exceeding face value of shares, with a corresponding
adjustment to the, loan receivable from Trust, Capital Reserve (for the
amount of Profit on sale of shares) and Surplus (to the extent of
dividend received net of operating expenses). (Refer to note 43)
Mar 31, 2013
A. Basis of preparation and presentation of financial statements
The accounts of the Company are prepared under the historical cost
convention on the accrual basis of accounting in accordance with the
accounting principles generally accepted in India ("GAAP") and
comply with the mandatory accounting standards notified under the
Companies (Accounting Standards) Rules, 2006, as amended, and the
relevant provisions of the Companies Act, 1956. The financial
statements are presented in Indian rupees rounded off to the nearest
million.
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
liabilities at the date of financial statements and the results of
operations during the reporting periods. Examples of such estimate
include future obligations under employee benefit plans, income taxes,
useful lives of tangible assets and intangible assets, impairment of
assets, provision for doubtful debts etc. Management believes that the
estimates used in the preparation of the financial statements are
prudent and reasonable. Actual results could vary from these estimates.
Appropriate changes in estimates are made as the management becomes
aware of the changes in circumstances surrounding the estimates. Any
revision to accounting estimates is recognised in the period in which
such results are known/materialised. Effect of material changes is
disclosed in the notes to the financial statements.
The financial statements are presented as per Schedule VI to the
Companies Act, 1956. All assets and liabilities have been classified as
current or non-current as per the Company''s normal operating cycle
and other criteria set out in the revised Schedule VI to the Companies
Act, 1956. Based on the nature of products and the time between the
acquisition of assets for processing and their realisation in cash and
cash equivalents, the Company has ascertained its operating cycle as 12
months for the purpose of current - non current classification of
assets and liabilities.
B. Tangible and Intangible Fixed Assets
Fixed Assets are stated at cost net of tax/duty credits availed, if
any, less accumulated depreciation/amortisation/impairment losses. The
cost of fixed assets includes effect of exchange differences on long
term foreign currency borrowings, other incidental expenses related to
the acquisition and installation of the respective assets and borrowing
costs directly attributable to fixed assets which necessarily take a
substantial period of time to get ready for their intended use. In
case of fixed assets acquired at the time of amalgamation of certain
entities with Company, the same are recognised at book value in case of
amalgamation in the nature of merger and at book value / fair value in
case of amalgamation in the nature of purchase in line with Accounting
Standard 14 (AS 14)-"Accounting for Amalgamations". Insurance
spares/ standby equipments are capitalised as part of the mother asset
and are depreciated at applicable rates, over the remaining useful life
of the mother assets.
Cost incurred for product development leading to Product
Registrations/Market Authorisation is recognised as intangible asset
when it is probable that the future economic benefits that are
attributable to the asset will flow to the enterprise and the cost of
the asset can be measured reliably. Expenditure for acquisition and
implementation of software systems is recognised as part of the
intangible assets.
Expenditure incurred on start up and commissioning of the project and
/or substantial expansion, including the expenditure incurred on trial
runs (Net of trial run receipts, if any) up to the date of commencement
of commercial production are capitalised. Subsequent expenditures
related to an item of fixed asset are capitalised to its book value
only if they increase the future benefits from the existing asset
beyond its previously assessed standard of performance. Losses arising
from the retirement of, and gains or losses arising from disposal of
fixed assets are recognised in the Statement of Profit and Loss.
C. Depreciation and Amortisation
Depreciation is provided on straight line method at rates mentioned and
in the manner specified in Schedule XIV to the Companies Act, 1956 (as
amended), and read with statement as mentioned hereunder, on the
original cost/ acquisition cost of assets or other amounts substituted
for cost. Certain plants were classified as continuous process plants
from the financial year ended 31st March, 2000 on technical assessment,
(relied upon by the auditor being a technical matter) and depreciation
on such assets has been provided accordingly.
Depreciation, in respect of assets added/installed up to December 15,
1993, is provided at the rates applicable at the time of
additions/installations of the assets, as per the Companies Act, 1956
and depreciation, in respect of assets added/installed during the
subsequent period, is provided at the rates, mentioned in Schedule XIV
to the Companies Act, 1956 read with Notification dated 16th December,
1993 issued by Department of Company Affairs, Government of India
except for the following classes of fixed assets which are depreciated
over the useful life estimated as under;
a. R&D related equipments & machineries: ten years.
b. Dies and punches for manufacture of dosage formulations: one to two
years.
c. Motor vehicles: five years.
d. Motor vehicles under finance lease: tenure of lease or five years
whichever is shorter.
e. Computer & information technology related assets: three to five
years.
f. Certain employee perquisite related assets: five years, being the
period of the perquisite scheme.
Depreciation rates so arrived at are not lower than the rates
prescribed in Schedule XIV to the Companies Act, 1956.
Depreciation on assets added/disposed off during the year has been
provided on pro-rata basis with reference to the date of
addition/disposal.
Depreciation on exchange fluctuation capitalised is charged over the
remaining useful life of assets in view of the option exercised by the
Company for accounting the exchange differences arising on reporting of
long term foreign currency monetary items in line with Para 46 and 46A
of Accounting Standard 11 (AS-11) - "The Effects of Changes in
Foreign Exchange Rates". Also refer Note 50.
Leasehold land is amortised over the lease period on straight line
method.
Intangible assets in the nature of Product registrations / Market
authorisations (Products) are amortised on a straight-line basis over a
period of five years in case of internally developed products
(intangibles) and 10 years in case of bought out product (intangibles),
from the date of regulatory approval or the date of product going off-
patent whichever is later. Software systems are being amortised over a
period of five years being their useful life. Rights are amortised over
the useful life.
D. Leases
Assets leased by the Company in its capacity as lessee where
substantially all the risks and rewards of ownership vest in the
Company are classified as finance leases. Such leases are capitalised
at the inception of the lease at the lower of the fair value and the
present value of the minimum lease payments and a liability is created
for an equivalent amount. Lease payment is allocated between the
liability and finance charges so as to obtain a constant periodic rate
of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Lease payments under operating leases are recognised
in the Statement of Profit and Loss on a straight-line basis.
E. Valuation of Inventories
Inventories are valued at lower of cost or net realisable value except
scrap, which is valued at net estimated realisable value.
The methods of determining cost of various categories of inventories
are as follows:
Raw materials Weighted average method
Stores and spares Weighted average method
Work-in-process and finished goods (manufactured)
Variable cost at weighted average including an appropriate share of
variable and fixed production overheads. Fixed production overheads
are included based on normal capacity of production facilities.
Fuel, consumables, packing material etc.
Weighted average method
Finished goods (traded)
Cost of purchase
Goods in transit Cost of purchase
Cost includes all direct costs, cost of conversion and appropriate
portion of variable and fixed production overheads and such other costs
incurred as to bring the inventory to its present location and
condition inclusive of excise duty wherever applicable.
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.
F. Investments
Investments that are readily realisable and are intended to be held for
not more than one year from the date, on which such investments are
made, are classified as current investments. All other investments are
classified as non current investments. Current investments are carried
at cost or fair value, whichever is lower. Non current investments are
carried at cost. However, provision for diminution is made to recognise
a decline, other than temporary, in the value of the investments, such
reduction being determined and made for each investment individually.
Investments in foreign subsidiary companies are expressed in Indian
currency at the rates prevailing on the date when the remittance for
the purpose was made/ foreign currency balance lying abroad was used,
as the case may be.
G. Income Tax
Tax expense for the period, comprising current tax and deferred tax,
are included in the determination of the net profit or loss for the
period.
Current Tax
Current tax expense is based on the provisions of Income Tax Act, 1961
and judicial interpretations thereof as at the Balance Sheet date and
takes into consideration various deductions and exemptions to which the
Company is entitled to as well as the reliance placed by the Company on
the legal advices received by it. Current tax assets and current tax
liabilities are offset when there is a legally enforceable right to set
off the recognised amounts and there is an intention to settle the
asset and the liability on a net basis.
Deferred Tax
Deferred tax charge or credit reflects the tax effects of timing
differences between accounting income and taxable income for the
current year and reversal of timing differences for earlier years. The
deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the Balance Sheet date. Deferred
tax assets are recognised only to the extent there is reasonable
certainty that the assets can be realised in future; however, where
there is unabsorbed depreciation or carry forward of losses, deferred
tax assets are recognised only if there is a virtual certainty of
realisation of such assets. Deferred tax assets are reviewed at each
Balance Sheet date and are written- down or written-up to reflect the
amount that is reasonably/ virtually certain (as the case may be) to be
realised. Deferred tax assets and deferred tax liabilities are offset
when there is a legally enforceable right to set off assets against
liabilities representing current tax and where the deferred tax assets
and the deferred tax liabilities relate to taxes on income levied by
the same governing taxation laws.
Minimum Alternate Tax
Minimum Alternate Tax (MAT) credit is recognised as an asset only when
and to the extent there is convincing evidence that the Company will
pay normal income tax during the specified period. In the year in which
MAT credit becomes eligible to be recognised as an asset in accordance
with the recommendation contained in the Guidance Note on "Accounting
for Credit Available in respect of Minimum Alternative Tax under The
Income Tax Act, 1961" issued by the Institute of Chartered
Accountants of India, the said asset is created by way of a credit to
the Statement of Profit and Loss and shown as MAT Credit Entitlement.
The Company reviews the same at each Balance Sheet date and writes down
the carrying amount of MAT Credit Entitlement to the extent there is no
longer convincing evidence to the effect that Company will pay normal
income tax during the specified period.
H. Foreign Currency Conversions/ Translations
i) Initial Recognition: Foreign currency transactions are recorded in
the reporting currency, by applying to the foreign currency amount the
exchange rate between the reporting currency and the foreign currency
on/or closely approximating to the date of the transaction.
ii) Conversion: Foreign currency monetary items are reported using the
closing rate or at the spot rate at the inception of forward contract
where forward cover for the specific monetary item has been taken. Non-
monetary items which are carried in terms of historical cost
denominated in a foreign currency, are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
iii) Exchange Differences: All monetary assets and liabilities in
foreign currency are restated at the period end exchange rate. The
Company has opted Para 46A of Accounting Standard 11 (AS-11) - "The
Effects of Changes in Foreign Exchange Rates" for accounting of
exchange differences arising on reporting of long term foreign currency
monetary items. Accordingly, foreign exchange difference attributable
to depreciable asset is adjusted in the cost of the depreciable asset,
which would be depreciated over the balance life of the asset. In other
cases, the foreign exchange difference is accumulated in a Foreign
Currency Monetary Item Translation Difference Account (FCMITDA), and
amortised over the balance period of such long term asset/ liability. A
monetary asset or liability is termed as a long-term foreign currency
monetary item, if the asset or liability is expressed in a foreign
currency and has a term of 12 months or more at the date of origination
of the asset or liability.
Exchange differences arising on the settlement of monetary items not
covered above, or on reporting of such monetary items of the Company at
rates different from those at which they were initially recorded during
the year, or reported in previous financial statements, are recognised
as income or expenses in the year in which they arise.
iv) Foreign Exchange Forward Contracts: The premium or discount arising
at the inception of forward exchange contracts entered into to hedge an
existing monetary item, is amortised as expense or income over the life
of the contract. Any profit or loss arising on cancellation or renewal
of such a forward exchange contract is recognised as income or as an
expense for the period.
I. Derivative contracts
The Company enters into derivative contracts in the nature of foreign
currency swaps, forward contracts, interest rate swaps etc. with an
intention to hedge its existing assets and liabilities, firm
commitments 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 conversions/translations.
All other derivative contracts (except those derivative contracts which
are designated as a hedging instrument for highly probable forecast
transactions) are marked- to-market and losses are recognised in the
Statement of Profit and Loss. Gains arising on the same are not
recognised until realised as a matter of prudence.
J. Hedge Accounting
In conformity with ICAI announcement on early application of Accounting
Standard 30 on "Financial Instruments : Recognition and
Measurement", the Company has adopted AS 30 issued by ICAI so far as
it relates to hedge accounting as the adoption does not conflict with
existing mandatory accounting standards and other authoritative
pronouncements, Company Law and other regulatory requirements.
The Company has a comprehensive risk management system, based on which
hedging instruments and hedged items are identified and designated in
accordance with requirements of AS 30. Hedges are classified as cash
flow hedge when they meet the conditions specified in AS 30. The
hedged item and the hedging instrument are assessed for its
effectiveness as per the criteria specified in AS 30.
In respect of cash flow hedge, that is determined to be an effective
hedge, the effective portion of the gain or loss on the hedging
instrument is recognised directly in hedging reserve account and the
ineffective portion of the gain or loss on the hedging instrument is
recognised in the Statement of Profit and Loss. If the hedging
instrument no longer meets the hedging criteria for hedge accounting,
expires or sold, terminated or exercised, then hedge accounting is
discontinued prospectively. The cumulative gain or loss previously
recognised in hedging reserve remains there until the forecasted
transaction occurs. If the forecast transaction is no longer expected
to occur, then the balance in hedging reserve is recognised immediately
in Statement of Profit and Loss. In other cases, the amount recognised
in the hedging reserve is transferred to Statement of Profit and Loss
in the same period during which the hedged item affects the Statement
of Profit and Loss.
K. Provisions, Contingent Liabilities and Contingent Assets
The Company recognises a provision when there is a present obligation
as a result of a past event that probably requires an outflow of
resources and a reliable estimate can be made of the amount of the
obligation. Contingent liabilities are disclosed in respect of possible
obligations that may arise from past events but their existence is
confirmed by the occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the Company. Contingent
assets are not recognised/ disclosed. Provisions, contingent
liabilities and contingent assets are reviewed at each Balance Sheet
Date.
L. Research & Development
Research costs are expensed as incurred and presented under the natural
heads of expenditure.
Development cost including regulatory cost and legal expenses leading
to Product Registration/ Market Authorisation relating to the new
and/or improved product and/or process development is recognised as an
intangible asset to the extent that it is expected, that such asset
will generate future economic benefits, adequate technical, financial
and other resources required to complete the development and to use or
sell the asset are available and the expenditure attributable to the
asset during its development can be measured reliably.
M. Employee Benefits
(i) Short-term employee benefits: All employee benefits falling due
within twelve months of the end of the period in which the employees
render the related services are classified as short-term employee
benefits, which include benefits like salaries, wages, short term
compensated absences, performance incentives, etc. and are recognised
as expenses in the period in which the employee renders the related
service and measured accordingly.
(ii) Post-employment benefits: Post employment benefit plans are
classified into defined contribution plans and defined benefit plans in
line with the requirements of AS 15 on "Employee Benefits".
a. Gratuity and Leave encashment
Gratuity and leave encashment which are defined benefits are recognised
in the Statement of Profit and Loss based on actuarial valuation using
projected unit credit method as at Balance Sheet date by an independent
actuary. Actuarial gains and losses arising from the experience
adjustment and change in actuarial assumption are immediately
recognised in the Statement of Profit and Loss as income or expense.
The gratuity liability for certain employees of two of the units of the
Company is funded with Life Insurance Corporation of India.
b. Superannuation
Certain employees of Company are also participants in the
superannuation plan (''the Plan''), a defined contribution plan.
Contribution made by the Company to the plan during the year is charged
to Statement of Profit and Loss.
c. Provident Fund
i) The Company makes contribution to the recognised provident fund -
"VAM EMPLOYEES PROVIDENT FUND TRUST" for most of its employees in
India, which is a defined benefit plan to the extent that the Company
has an obligation to make good the shortfall, if any, between the
return from the investments of the trust and the notified interest
rate. The Company''s obligation in this regard is determined by an
independent actuary and provided for if the circumstances indicate that
the Trust may not be able to generate adequate returns to cover the
interest rates notified by the Government. The Company''s
contribution towards provident fund is charged to Statement of Profit
and Loss.
ii) For other employees, provident fund is deposited with Regional
Provident Fund Commissioner. This is treated as defined contribution
plan. Company''s contribution to the provident fund is charged to
Statement of Profit and Loss.
d. Other Long Term Employee Benefits:
All employee benefits (other than post- employment benefits and
termination benefits) which do not fall due within twelve months after
the end of the period in which the employees render the related
services are determined based on actuarial valuation carried out at
each Balance Sheet date. Accumulated compensated absences, which are
expected to be availed or encashed beyond 12 months from the end of the
year end are treated as other long term employee benefits.
The Company''s liability in respect of other long term employee
benefits is actuarially determined (using the projected unit credit
method) at the end of each year. Actuarial losses/ gains are recognised
in the Statement of Profit and Loss in the year in which they arise.
N. Borrowing Costs
Borrowing costs are recognised in the Statement of Profit and Loss in
the period in which it is incurred, except where the cost is incurred
for acquisition, construction, production or development of an asset
that takes a substantial period of time to get ready for its intended
use in which case it is capitalised up to the date the assets are ready
for their intended use. Ancillary costs incurred in connection with the
arrangement of borrowings are amortised over the period of such
borrowings.
O. Revenue Recognition
Revenue from sale of products is recognised when the significant risks
and rewards of ownership of the products have been transferred to the
buyer, recovery of the consideration is probable and the amount of
revenue can be measured reliably. Revenues include excise duty and are
shown net of sales tax and value added tax, if any.
Goods sold on consignment are recorded as inventory until goods are
sold by the consignee to the end customer.
Revenue from time and material contracts is recognised as hours are
incurred, multiplied by contractual billing rates. Revenue from
unit-based contracts is recognised as units are completed.
Revenue from fixed-price contracts are recorded on a proportional
completion basis.
Revenue related to contract manufacturing arrangements and development
contracts is recognised when performance obligations are substantially
fulfilled.
Sale of utility is recognised on delivery of the same to the consumers
and no significant uncertainty exists as to its realisation.
Export incentives/ benefits are accounted for on accrual basis in the
year in which exports are made and where recovery is probable.
Revenue from licensing & regulatory services is recognised when
performance obligations are fulfilled.
Refundable fees are deferred and recognised as revenue in the period in
which all contractual obligations are met and the contingency is
resolved.
Royalty revenue is recognised on an accrual basis in accordance with
contractual agreements when all significant contractual obligations
have been fulfilled, the amounts are determinable and collection is
reasonably assured.
Dividend income is recognised when the unconditional right to receive
the income is established. Income from interest on deposits, loans and
interest bearing securities is recognised on time proportionate method.
P. Segment Reporting
The accounting policies adopted for segment reporting are in line with
accounting policies of the Company. Revenues, expenses, assets and
liabilities have been identified to segments on the basis of their
relationship to operating activities of the segments (taking into
account the nature of products and services and risks & rewards
associated with them) and internal management information systems and
the same is reviewed from time to time to realign the same to conform
to the business units of the Company. Revenues, expenses, assets and
liabilities, which are common to the enterprise as a whole and are not
allocable to segments on a reasonable basis, have been treated as
"Common Revenues/Expenses/ Assets/Liabilities", as the case may be.
Q. Earnings Per share
The basic earnings per share is calculated by dividing the net profit
after tax for the year by the weighted average number of equity shares
outstanding during the year. For the purpose of calculating diluted
earnings per share, net profit after tax during the year and the
weighted average number of shares outstanding during the year are
adjusted for the effect of all dilutive potential equity shares. The
dilutive potential equity shares are deemed converted as of the
beginning of the year unless they have been issued at a later date. The
dilutive potential equity shares are adjusted for the proceeds
receivable had the shares been actually issued at fair value (i.e.
average market value of the outstanding shares).Anti dilutive effect of
any potential equity shares is ignored in the calculation of earnings
per share.
R. Impairment of Fixed Assets
The Company assesses at each Balance Sheet date whether there is any
indication that an asset/cash generating unit may be impaired. If any
such indication exists, the Company estimates the recoverable amount of
the asset/cash generating unit. If such recoverable amount of the asset
or the recoverable amount of the cash generating unit is less than the
carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is
recognised in the Statement of Profit and Loss.
An assessment is also done at each Balance Sheet date whether there is
any indication that an impairment loss recognised for an asset/cash
generating unit in prior accounting periods may no longer exist or may
have decreased. If any such indication exist, the asset''s/cash
generating unit''s recoverable amount is estimated. The carrying
amount of the fixed asset/cash generating unit is increased to the
revised estimate of its recoverable amount but only to the extent that
the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised for
the asset in previous periods. A reversal of impairment loss is
recognised in the Statement of Profit and Loss.
S. Employee Stock Option Schemes
Equity settled stock options granted to the employees are accounted for
as per the accounting treatment prescribed by Employee Stock Option
Scheme and Employee Stock Purchase Guidelines, 1999, issued by
Securities and Exchange Board of India and the Guidance Note on
Accounting for Employee Share- based Payments issued by the Institute
of Chartered Accountants of India. The intrinsic value of the option
being excess of market value of the underlying share immediately prior
to date of grant over its exercise prices recognised as deferred
employee compensation with a credit to employee stock option
outstanding account. The deferred employee compensation is charged to
Statement of Profit and Loss on straight line basis over the vesting
period of the option. The options that lapse are reversed by a credit
to employee compensation expense, equal to the amortised portion of
value of lapsed portion and credit to deferred employee compensation
expense equal to the unamortised portion.
Mar 31, 2012
A. Basis of preparation and presentation of financial statements
The accounts of the Company are prepared under the historical cost
convention on the accrual basis of accounting in accordance with the
accounting principles generally accepted in India ("GAAP") and
comply with the mandatory accounting standards notified under the
Companies (Accounting Standards) Rules, 2006, as amended, and with the
relevant provisions of the Companies Act, 1956. The financial
statements are presented in Indian rupees rounded off to the nearest
million.
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
liabilities at the date of financial statements and the results of
operations during the reporting periods. Examples of such estimate
include future obligations under employee benefit plans, income taxes,
useful lives of fixed assets and intangible assets, impairment of
assets, provision for doubtful debts etc. Management believes that the
estimates used in the preparation of the financial statements is
prudent and reasonable. Actual results could vary from these estimates.
Appropriate changes in estimates are made as the management becomes
aware of the changes in circumstances surrounding the estimates. Any
revision to accounting estimates is recognised in the period in which
such results are known/materialised. Effect of material changes is
disclosed in the notes to the financial statements.
During the year ended March 2012, the revised Schedule VI notified
under the Companies Act, 1956 has become applicable to the Company for
presentation of its financial statements. The adoption of revised
Schedule VI does not impact recognition and measurement principles
followed for preparation of financial statement. However, the revised
Schedule VI has a significant impact on the presentation and
disclosures made in the financial statements. The Company has also
reclassified the previous year figures in accordance with the
requirements applicable in the current year.
All assets and liabilities have been classified as current or
non-current as per the Company's normal operating cycle and other
criteria set out in the revised Schedule VI to the Companies Act, 1956.
Based on the nature of products and the time between the acquisitions
of assets for processing and their realisation in cash and cash
equivalents, the Company has ascertained its operating cycle as 12
months for the purpose of current-non current classification of assets
and liabilities.
B. Tangible and Intangible Fixed Assets
Fixed assets are stated at cost net of tax/duty credits availed, if
any, less accumulated depreciation/amortization/ impairment losses. The
cost of fixed assets includes effect of exchange differences on long
term foreign currency borrowings, freight, other incidental expenses
related to the acquisition and installation of the respective assets
and borrowing costs directly attributable to fixed assets which
necessarily take a substantial period of time to get ready for their
intended use. In case of fixed assets acquired at the time of
amalgamation of certain entities with Company, the same are recognised
at book value in case of amalgamation in the nature of merger and at
book value / fair value in case of amalgamation in the nature of
purchase in line with Accounting Standard 14 (AS 14)-"Accounting for
Amalgamations". Insurance spares/ standby equipments are capitalised
as part of the mother asset and are depreciated at applicable rates,
over the remaining useful life of the mother asset.
Cost incurred for product development leading to Product
Registrations/Market Authorization is recognised as intangible asset
when it is probable that the future economic benefits that is
attributable to the asset will flow to the enterprise and the cost of
the asset can be measured reliably. Expenditure for acquisition and
implementation of software systems is recognised as part of the
intangible assets.
Expenditure incurred on start up and commissioning of the project and
/or substantial expansion, including the expenditure incurred on trial
runs (Net of trial run receipts, if any) up to the date of commencement
of commercial production are capitalised. Subsequent expenditures
related to an item of fixed asset are capitalised to its book value
only if they increase the future benefits from the existing asset
beyond its previously assessed standard of performance. Losses arising
from the retirement of, and gains or losses arising from disposal of
fixed assets are recognised in the Statement of Profit and Loss.
C. Depreciation and Amortisation
Depreciation is provided on straight line method at rates mentioned and
in the manner specified in Schedule XIV to the Companies Act, 1956 (as
amended), and read with statement as mentioned hereunder, on the
original cost/ acquisition cost of assets or other amounts substituted
for cost. Certain plants were classified as continuous process plants
from the financial year ended 31st March, 2000 on technical assessment,
(relied upon by the auditor being a technical matter) and depreciation
on such assets has been provided accordingly.
Depreciation, in respect of assets added/installed up to December 15,
1993, is provided at the rates applicable at the time of
additions/installations of the assets, as per the Companies Act, 1956
and depreciation, in respect of assets added/installed during the
subsequent period, is provided at the rates, mentioned in Schedule XIV
to the Companies Act, 1956 read with Notification dated 16th December,
1993 issued by Department of Company Affairs, Government of India
except for the following classes of fixed assets which are depreciated
over the useful life estimated as under;
a. R&D related equipment & machineries: ten years.
b. Moulds, dies and punches for manufacture of dosage formulations:
five years
c. Motor vehicles: five years.
d. Motor vehicles under finance lease: Tenure of lease or five years
whichever is shorter.
e. Computer & Information Technology related assets: three to five
years.
f. Certain employee perquisite related assets: five years, being the
period of the perquisite scheme.
However, the depreciation rates so arrived at are not lower than the
rates prescribed in Schedule XIV to the Companies Act, 1956.
Depreciation on assets added/disposed off during the year has been
provided on pro-rata basis with reference to the date of
addition/disposal.
Depreciation on exchange fluctuation capitalised is charged over the
remaining useful life of assets in view of the option exercised by the
Company for accounting the exchange differences arising on reporting of
long term foreign currency monetary items in line with Para 46 and 46A
of Accounting Standard 11 (AS-11) - "The Effects of Changes in
Foreign Exchange Rates" . Also refer Note 50.
Leasehold land is amortised over period of the lease.
Intangible assets in the nature of Product Registrations/ Market
Authorization are amortised on a straight-line basis over a period of
five years from the date of regulatory approval or the product going
off-patent whichever is later. Software systems are being amortised
over a period of five years being their useful life. Rights are
amortised over the useful life.
D. Leases
Assets leased by the Company in its capacity as lessee where
substantially all the risks and rewards of ownership vest in the
Company are classified as finance leases. Such leases are capitalised
at the inception of the lease at the lower of the fair value and the
present value of the minimum lease payments and a liability is created
for an equivalent amount. Lease payment is allocated between the
liability and finance charges so as to obtain a constant periodic rate
of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Lease payments under operating leases are recognised
in the Statement of Profit and Loss on a straight-line basis.
E. Valuation of Inventories
Inventories are valued at lower of cost or net realizable value except
scrap, which is valued at net estimated realizable value.
Cost includes all direct costs, cost of conversion and appropriate
portion of variable and fixed production overheads and such other costs
incurred as to bring the inventory to its present location and
condition inclusive of excise duty wherever applicable.
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.
F. Investments
Investments that are readily realisable and are intended to be held for
not more than one year from the date, on which such investments are
made, are classified as current investments. All other investments are
classified as noncurrent investments. Current investments are carried
at cost or fair value, whichever is lower. Non current investments are
carried at cost. However, provision for diminution is made to recognise
a decline, other than temporary, in the value of the investments, such
reduction being determined and made for each investment individually.
Investment in foreign subsidiary companies are expressed in Indian
currency at the rates prevailing on the date when the remittance for
the purpose was made/ foreign currency balance lying abroad was used,
as the case may be.
G. Income Tax
Tax expense for the period, comprising current tax and deferred tax,
are included in the determination of the net profit or loss for the
period.
Current Tax
Current tax expense is based on the provisions of Income Tax Act, 1961
and judicial interpretations thereof as at the Balance Sheet date and
takes into consideration various deductions and exemptions to which the
Company is entitled to as well as the reliance placed by the Company on
the legal advices received by it. Current tax assets and current tax
liabilities are offset when there is a legally enforceable right to set
off the recognised amounts and there is an intention to settle the
asset and the liability on a net basis.
Deferred Tax
Deferred tax charge or credit reflects the tax effects of timing
differences between accounting income and taxable income for the
current year and reversal of timing differences for earlier years. The
deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the Balance Sheet date. Deferred
tax assets are recognised only to the extent there is reasonable
certainty that the assets can be realised in future; however, where
there is unabsorbed depreciation or carry forward of losses, deferred
tax assets are recognised only if there is a virtual certainty of
realisation of such assets. Deferred tax assets are reviewed at each
Balance Sheet date and are written-down or written-up to reflect the
amount that is reasonably/virtually certain (as the case may be) to be
realised. Deferred tax assets and deferred tax liabilities are offset
when there is a legally enforceable right to set off assets against
liabilities representing current tax and where the deferred tax assets
and the deferred tax liabilities relate to taxes on income levied by
the same governing taxation laws.
Minimum Alternate Tax
Minimum Alternate Tax (MAT) credit is recognised as an asset only when
and to the extent there is convincing evidence that the Company will
pay normal income tax during the specified period. In the year in which
MAT credit becomes eligible to be recognised as an asset in accordance
with the recommendation contained in the Guidance Note on "Accounting
for Credit Available in respect of Minimum Alternative Tax under The
Income Tax Act, 1961" issued by the Institute of Chartered
Accountants of India, the said asset is created by way of a credit to
the Statement of Profit and Loss and shown as MAT credit entitlement.
The Company reviews the same at each Balance Sheet date and writes down
the carrying amount of MAT credit entitlement to the extent there is no
longer convincing evidence to the effect that Company will pay normal
income tax during the specified period.
H Foreign Currency Conversions/ Translations
i) Initial Recognition: Foreign currency transactions are recorded in
the reporting currency, by applying to the foreign currency amount the
exchange rate between the reporting currency and the foreign currency
on/or closely approximating to the date of the transaction.
ii) Conversion: Foreign currency monetary items are reported using the
closing rate or at the spot rate at the inception of forward contract
where forward cover for the specific monetary item has been taken.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency, are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when such values were determined.
iii) Exchange Differences: All monetary assets and liabilities in
foreign currency are restated at the period end exchange rate. The
Company has opted for accounting of exchange differences arising on
reporting of long term foreign currency monetary items under clause 46A
of Accounting Standard 11 (AS-11) - "The Effects of Changes in
Foreign Exchange Rates". Accordingly, foreign exchange difference
attributable to depreciable asset is adjusted in the cost of the
depreciable asset, which would be depreciated over the balance life of
the asset. In other cases, the foreign exchange difference is
accumulated in a Foreign Currency Monetary Item Translation Difference
Account (FCMITDA), and amortised over the balance period of such long
term asset/ liability. A monetary asset or liability is termed as a
long-term foreign currency monetary item, if the asset or liability is
expressed in a foreign currency and has a term of 12 months or more at
the date of origination of the asset or liability.
Exchange differences arising on the settlement of monetary items not
covered above, or on reporting of such monetary items of the Company at
rates different from those at which they were initially recorded during
the year, or reported in previous financial statements, are recognised
as income or expenses in the year in which they arise.
iv) Foreign Exchange Forward Contracts: The premium or discount arising
at the inception of forward exchange contracts entered into to hedge an
existing monetary item, is amortised as expense or income over the life
of the contract. Any profit or loss arising on cancellation or renewal
of such a forward exchange contract are recognised as an income or as
an expense for the period.
I. Hedge Accounting
In conformity with ICAI announcement on early application of Accounting
Standard 30 on "Financial Instruments : Recognition and
Measurement", the Company has adopted AS 30 issued by ICAI so far as
it relates to hedge accounting as the adoption does not conflict with
existing mandatory accounting standards and other authoritative
pronouncements, Company Law and other regulatory requirements.
The Company has a comprehensive risk management system, based on which
hedging instruments and hedged items are identified and designated in
accordance with requirements AS 30. Hedges are classified as cash flow
hedge when they meet the conditions specified in AS 30. The hedged item
and the hedging instrument are assessed for its effectiveness as per
the criteria specified in AS 30.
In respect of cash flow hedge, that is determined to be an effective
hedge, the effective portion of the gain or loss on the hedging
instrument is recognised directly in hedging reserve account and the
ineffective portion of the gain or loss on the hedging instrument is
recognised in the Statement of Profit and Loss. If the hedging
instrument no longer meets the hedging criteria for hedge accounting,
expires or sold, terminated or exercised, then hedge accounting is
discontinued prospectively. The cumulative gain or loss previously
recognised in hedging reserve remains there until the forecasted
transaction occurs. If the forecast transaction is no longer expected
to occur, then the balance in hedging reserve is recognised immediately
in Statement of Profit and Loss. In other cases, the amount recognised
in the hedging reserve is transferred to Statement of Profit and Loss
in the same period during which the hedged item affects the Statement
of Profit and Loss.
J. Derivative Contracts
The Company enters into derivative contracts in the nature of foreign
currency swaps, forward contracts etc. with an intention to hedge its
existing assets and liabilities, firm commitments and highly probable
transactions. Derivative contracts which are closely linked to the
existing assets and liabilities are accounted as per the policy stated
for foreign currency conversions/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 and losses are recognised in the Statement of Profit
and Loss. Gains arising on the same are not recognised until realised
as a matter of prudence.
K. Provisions, Contingent Liabilities and Contingent Assets
The Company recognises a provision when there is a present obligation
as a result of a past event that probably requires an outflow of
resources and a reliable estimate can be made of the amount of the
obligation. Contingent liabilities are disclosed in respect of possible
obligations that may arise from past events but their existence is
confirmed by the occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the Company. Contingent
assets are not recognised/ disclosed. Provisions, contingent
liabilities and contingent assets are reviewed at each Balance Sheet
date.
L. Research and Development
Research costs are expensed as incurred and presented under the natural
heads of expenditure.
Development cost including regulatory cost and legal expenses leading
to Product Registration/ Market Authorisation relating to the new
and/or improved product and/or process development is recognised as an
intangible asset to the extent it is expected, that such asset will
generate future economic benefits, adequate technical, financial and
other resources required to complete the development and to use or sell
the asset are available and the expenditure attributable to the asset
during its development can be measured reliably.
M. Employee Benefits
(i) Short-term employee benefits: All employees benefits falling due
within twelve months of the end of the period in which the employees
render the related services are classified as short-term employee
benefits, which include benefits like salaries, wages, short term
compensated absences, performance incentives, etc. and are recognised
as expenses in the period in which the employee renders the related
service and measured accordingly.
(ii) Post-employment benefits: Post employment benefit plans are
classified into defined contribution plans and defined benefit plans in
line with the requirements of AS 15 on "Employee Benefits".
a. Gratuity and Leave encashment
Gratuity and leave encashment which are defined benefits are recognised
in the Statement of Profit and Loss based on actuarial valuation using
projected unit credit method as at Balance Sheet date by an independent
actuary. Actuarial gains and losses arising from the experience
adjustment and change in actuarial assumption are immediately
recognised in the Statement of Profit and Loss as income or expense.
The gratuity liability for certain employees of some of the units of
the Company is funded with Life insurance Corporation of India.
b. Superannuation
Certain employees of Company are also participants in the
superannuation plan ('the Plan'), a defined contribution plan.
Contribution made by the Company to the plan during the year is charged
to Statement of Profit and Loss.
c. Provident Fund
i) The Company makes contribution to the recognised provident fund -
"VAM EMPLOYEES PROVIDENT FUND TRUST" for most of its employees in
India, which is a defined benefit plan to the extent that the Company
has an obligation to make good the shortfall, if any, between the
return from the investments of the trust and the notified interest
rate. The Company's obligation in this regard is determined by an
independent actuary and provided for if the circumstances indicate that
the Trust may not be able to generate adequate returns to cover the
interest rates notified by the Government. The Company's
contribution towards provident fund is charged to Statement of Profit
and Loss.
ii) For other employees, Provident fund is deposited with Regional
Provident Fund Commissioner. This is treated as defined contribution
plan. Company's contribution to the provident fund is charged to
Statement of Profit and Loss.
d. Other Long Term Employee Benefits:
All employee benefits (other than post- employment benefits and
termination benefits) which do not fall due within twelve months after
the end of the period in which the employees render the related
services are determined based on actuarial valuation using the
projected unit credit method carried out at each Balance Sheet date.
Actuarial losses/ gains are recognised in the Statement of Profit and
Loss in the year in which they arise. Accumulated compensated
absences, which are expected to be availed or encashed beyond 12 months
from the end of the year end are treated as other long term employee
benefits.
N. Borrowing Costs
Borrowing costs are recognised in the Statement of Profit and Loss in
the period in which it is incurred, except where the cost is incurred
for acquisition, construction, production or development of an asset
that takes a substantial period of time to get ready for its intended
use in which case it is capitalised upto the date the assets are ready
for their intended use. Ancillary costs incurred in connection with the
arrangement of borrowings are amortised over the period of such
borrowings.
O. Revenue Recognition
Revenue from sale of products is recognised when the significant risks
and rewards of ownership of the products have been transferred to the
buyer, recovery of the consideration is reasonably assured and the
amount of revenue can be measured reliably. Revenues include excise
duty and are shown net of sales tax and value added tax, if any.
Goods sold on consignment are recorded as Inventory until goods are
sold by the consignee to the end customer.
Revenue from time and material contracts is recognised as hours are
incurred, multiplied by contractual billing rates. Revenue from
unit-based contracts is recognised as units are completed. Revenue from
fixed-price contracts are recorded on a proportional completion basis.
Refundable fees are deferred and recognised as revenue in the period in
which all contractual obligations are met and the contingency is
resolved.
Revenue related to contract manufacturing arrangements and development
contracts is recognised when performance obligations are substantially
fulfilled.
Revenue from licensing & regulatory services is recognised when
performance obligations are fulfilled.
Sale of utility is recognised on delivery of the same to the consumers
and collection is reasonably assured.
Export incentives/ benefits are accounted for on accrual basis in the
year in which exports are made and where recovery is reasonably
assured.
Royalty revenue is recognised on an accrual basis in accordance with
contractual agreements when all significant contractual obligations
have been fulfilled, the amounts are determinable and collection is
reasonably assured.
Dividend income is recognised when the right to receive the income is
established. Income from interest on deposits, loans and interest
bearing securities is recognised on time proportionate method.
P. Premium on Foreign Currency Convertible Bonds (FCCBs)
Premium payable on redemption of foreign currency convertible bonds
(FCCBs) is charged against securities premium account over the tenure
of FCCBs.
Q. Segment Reporting
The accounting policies adopted for segment reporting are in line with
accounting policies of the Company. Revenues, expenses, assets and
liabilities have been identified to segments on the basis of their
relationship to operating activities of the segments (taking into
account the nature of products and services and risks & rewards
associated with them) and internal management information systems and
the same is reviewed from time to time to realign the same to conform
to the business units of the Company. Revenues, expenses, assets and
liabilities, which are common to the enterprise as a whole and are not
allocable to segments on a reasonable basis, have been treated as
"Common Revenues/Expenses/ Assets/Liabilities", as the case may be.
R. Earnings per share
The basic earnings per share are calculated by dividing the net profit
after tax for the year by the weighted average number of equity shares
outstanding during the year. For the purpose of calculating diluted
earnings per share, net profit after tax during the year and the
weighted average number of shares outstanding during the year are
adjusted for the effect of all dilutive potential equity shares. The
dilutive potential equity shares are deemed converted as of the
beginning of the year unless they have been issued at a later date. The
dilutive potential equity shares are adjusted for the proceeds
receivable had the shares been actually issued at fair value (i.e.
average market value of the outstanding shares). Anti dilutive effect
of any potential equity shares is ignored in the calculation of
earnings per share.
S. Impairment of Fixed Assets
The Company assesses at each Balance Sheet date whether there is any
indication that an asset/cash generating unit may be impaired. If any
such indication exists, the Company estimates the recoverable amount of
the asset/cash generating unit. If such recoverable amount of the asset
or the recoverable amount of the cash generating unit is less than the
carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is
recognised in the Statement of Profit and Loss.
An assessment is also done at each Balance Sheet date whether there is
any indication that an impairment loss recognised for an asset/cash
generating unit in prior accounting periods may no longer exist or may
have decreased. If any such indication exist, the asset's/cash
generating unit's recoverable amount is estimated. The carrying
amount of the fixed asset/cash generating unit is increased to the
revised estimate of its recoverable amount but only to the extent that
the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised for
the asset in previous periods. A reversal of impairment loss is
recognised in the Statement of Profit and Loss.
T. Employee Stock Option Schemes
Equity settled stock options granted are accounted for as per the
accounting treatment prescribed by Employee Stock Option Scheme and
Employee Stock Purchase Guidelines, 1999, issued by Securities and
Exchange Board of India and the Guidance Note on "Accounting for
Employee Share-based Payment" issued by the Institute of Chartered
Accountants of India. The intrinsic value of the option being excess of
market value of the underlying share immediately prior to date of grant
over its exercise price is recognised as deferred employee compensation
with a credit to employee stock option outstanding account. The
deferred employee compensation is charged to Statement of Profit and
Loss on straight line basis over the vesting period of the option. The
options that lapse are reversed by a credit to employee compensation
expense, equal to the amortised portion of value of lapsed portion and
credit to deferred employee compensation expense equal to the
unamortised portion.
Mar 31, 2011
A. Basis of preparation of financial statements
The accounts of the Company are prepared and presented under the
historical cost convention on the accrual basis of accounting in
accordance with the accounting principles generally accepted in India
("GAAP") and comply with the mandatory accounting standards notifed
under the Companies (Accounting Standards) Rules, 2006 and with the
relevant provisions of the Companies Act, 1956. The financial
statements are presented in Indian rupees rounded off to the nearest
million.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
liabilities at the date of financial statements and the results of
operations during the reporting periods. Examples of such estimate
include future obligations under employee retirement beneft plans,
income taxes, useful lives of fixed assets and intangible assets,
provision for doubtful debts, etc. Management believes that the
estimates used in the preparation of the financial statements are
prudent and reasonable. Actual results could vary from these estimates.
Appropriate changes in estimates are made as the management becomes
aware of the changes in circumstances surrounding the estimates. Any
revision to accounting estimates is recognised in the period in which
such results are known/materalised. Effect of material changes is
disclosed in the notes to the financial statements.
B. a. Fixed Assets and Depreciation
(i) Fixed Assets are stated at original cost net of tax/duty credits
availed, if any, less accumulated depreciation/
amortisation/impairment. The cost of fixed assets includes effect of
exchange differences on long term foreign currency borrowings, freight
and other incidental expenses related to the acquisition and
installation of the respective assets. Borrowing costs directly
attributable to fixed assets which necessarily take a substantial period
of time to get ready for their intended use are capitalized. In case of
fixed assets acquired at the time of amalgamation of certain entities
with Company, the same are recognised at book value in case of
amalgamation in the nature of merger and at book value / fair value in
case of amalgamation in the nature of purchase in line with Accounting
Standard 14 (AS 14) - "Accounting of Amalgamations".
Insurance spares / standby equipment are capitalised as part of the
mother assets and are depreciated at the applicable rates, over the
remaining useful life of the mother assets.
Interest on loans and other financial charges in respect of qualifying
assets and expenditure incurred on start up and commissioning of the
project and / or substantial expansion, including the expenditure
incurred on test runs and Trial Runs (Net of trial run receipts, if
any) up to the date of commencement of commercial production are
capitalised.
(ii) Depreciation is provided on Straight Line Method at rates
mentioned and in the manner specifed in Schedule XIV to the Companies
Act, 1956 (as amended), on the original cost/ acquisition cost of
assets and read with the statement as mentioned herein under. Certain
plants were classifed as continuous process plants from the financial
year ended 31st March,2000 and such classification has been done on
technical assessment, (relied upon by the auditor being a technical
matter) and depreciation on such assets has been provided accordingly.
Depreciation, in respect of assets added/installed up to December 15,
1993, is provided at the rates applicable at the time of
additions/installations of the assets, as per the Companies Act, 1956
and depreciation, in respect of assets added/installed during the
subsequent period, is provided at the rates, mentioned in Schedule XIV
to the Companies Act, 1956 read with Notifcation dated 16th December,
1993 issued by Department of Company Affairs, Government of India
except for the following classes of fixed assets which are depreciated
over the useful life estimated as under;
a. R&D related Equipment & Machineries: ten years.
b. Motor Vehicles: fve years.
c. Motor Vehicles under Finance Lease: Tenure of Lease or fve years
whichever is shorter.
d. Computer & Information Technology related assets: three to fve
years.
e. Certain employee perquisite à related assets: fve years, being the
period of the perquisite scheme.
The depreciation rates so arrived at are not lower than the rates
prescribed in Schedule XIV to the Companies Act,1956.
Depreciation on assets added/disposed off during the year has been
provided on pro-rata basis with reference to the date of
addition/disposal.
Depreciation on exchange fuctuation capitalised is charged over the
remaining useful life of assets in view of the option exercised by the
Company for accounting the exchange differences arising on reporting of
long term foreign currency monetary items in line with Companies
(Accounting Standards) Amendment Rules 2009 on Accounting Standard 11
(AS-11) Ã "The Effects of Changes in Foreign Exchange Rates". Also
refer Note 1.(F). of Schedule "N").
b. Intangible, Market Authorisation and Amortisation
Intangible assets are recorded at the consideration paid for
acquisition. Intangible assets are amortised over their estimated
useful lives subject to a maximum period of ten years on straight-line
basis, commencing from the date the asset is available to the Company
for its use.
Cost incurred for product development leading to Market Authorisations
are recognised as intangible assets when it is probable that the future
economic Benefits that are attributable to the asset will flow to the
enterprise and the cost of the asset can be measured reliably. Such
intangible assets are amortised on a straight-line basis over a period
of fve years from the date of regulatory approval and the product going
off-patent. Subsequent expenditures on development of such products are
added to the cost of intangibles when it is probable that the
expenditure will enable the asset to generate future economic Benefits
in excess of its originally assessed standard of performance and the
expenditure can be measured and attributed to the asset reliably.
Expenditure for acquisition and implementation of Software systems is
recognised as part of the intangible assets and amortised on
straight-line basis over a period of fve years being the useful life of
the software systems.
c. Leased Assets
(i) Long term leasehold land is capitalised and is not amortised in
view of the long term tenure of the un-expired lease period/option of
conversion to freehold at the expiry of the lease tenure.
(ii) Other leased assets:
a) Assets acquired under fnance lease are capitalized at the inception
of the lease at lower of their fair value and the present value of the
minimum lease payment in line with the Accounting Standard
19(AS-19)-"Leases" .
b) In respect of operating leases, lease rentals are charged to Profit
and Loss Account.
C. Valuation of Inventories
Inventories are valued at lower of cost or net realisable value except
scrap, which is valued at net estimated realisable value.
The methods of determining cost of various categories of inventories
are as follows:
Raw materials Weighted average method
Stores and spares Weighted average method
Work-in-process Variable Cost at weighted average and fnished goods
including an appropriate share (manufactured) of variable and fixed
production overheads. Fixed production overheads are included based on
normal capacity of production facilities.
Finished goods Actual cost of purchase (traded)
Goods in transit Actual cost of purchase
Cost includes all direct costs, cost of conversion and appropriate
portion of variable and fixed production overheads and such other costs
incurred as to bring the inventory to its present location and
condition inclusive of excise duty wherever applicable. Cost formula
used is based upon weighted average cost.
D. Investments
Long Term quoted investments (non-trade) if any, are valued at cost
unless there is a decline other than temporary in their value as at the
date of Balance Sheet.
Unquoted investments in subsidiaries being of long term and of
strategic in nature are valued at cost and no loss is recognised for
the fall, if any, in their net worth, unless the diminution in value is
other than temporary. Investment in Foreign Subsidiary Companies are
expressed in Indian currency at the rates prevailing on the date when
the remittance for the purpose was made/ foreign currency balance lying
abroad was used, as the case may be.
Current Investments are valued at Lower of cost and fair value.
E. Income Tax
Current Tax
Current tax expense is based on the provisions of Income Tax Act, 1961
and judicial interpretations thereof as at the Balance Sheet date and
takes into consideration various deductions and exemptions to which the
Company is entitled to as well as the reliance placed by the Company on
the legal advices received by it.
Provision for current income taxes and advance taxes arising in the
same jurisdiction are presented in the Balance Sheet after offsetting
on an assessment year basis.
Deferred Tax
Deferred tax charge or credit refects the tax effects of timing
differences between accounting income and taxable income for the
period. The deferred tax charge or credit and the corresponding
deferred tax liabilities or assets are recognised using the tax rates
that have been enacted or substantively enacted by the Balance Sheet
date. Deferred tax assets are recognised only to the extent there is
reasonable certainty that the assets can be realised in future;
however, where there is unabsorbed depreciation or carry forward of
losses, deferred tax assets are recognised only if there is a virtual
certainty of realisation of such assets. Deferred tax assets are
reviewed at each Balance Sheet date and are written-down or written-up
to refect the amount that is reasonably/virtually certain (as the case
may be) to be realised. The Company offsets deferred tax assets and
deferred tax liabilities relating to taxes on income levied by the same
governing tax authorities.
Minimum Alternate Tax
Minimum Alternate Tax (MAT) credit is recognised as an asset only when
and to the extent there is convincing evidence that the Company will
pay normal income tax during the specifed period. In the year in which
MAT credit becomes eligible to be recognized as an asset in accordance
with the recommendation contained in the Guidance Note on "Accounting
for Credit Available in respect of Minimum Alternative Tax under The
Income Tax Act, 1961" issued by the Institute of Chartered Accountants
of India, the said asset is created by way of a credit to the Profit and
Loss Account and shown as MAT Credit Entitlement. The Company reviews
the same at each Balance Sheet date and writes down the carrying amount
of MAT Credit Entitlement to the extent there is no longer convincing
evidence to the effect that Company pay normal income tax during the
specifed period.
F. Foreign Currency Conversions/ Translation
i) Initial Recognition: Foreign currency transactions are recorded in
the reporting currency, by applying to the foreign currency amount the
exchange rate between the reporting currency and the foreign currency
on/or closely approximating to the date of the transaction.
ii) Conversion: Foreign currency monetary items are reported using the
closing rate. Non-monetary items which are carried in terms of
historical cost denominated in a foreign currency, are reported using
the exchange rate at the date of the transaction; and non-monetary
items which are carried at fair value or other similar valuation
denominated in a foreign currency are reported using the exchange rates
that existed when the values were determined.
iii) Exchange Differences: The Company has opted for accounting the
exchange differences arising on reporting of long term foreign currency
monetary items in line with Companies (Accounting Standards) Amendment
Rules 2009 on Accounting Standard 11 (AS-11) Ã "The Effects of Changes
in Foreign Exchange Rates" notifed by the Ministry of Corporate Affairs
on 31st March, 2009. Accordingly the effect of exchange differences as
updated on reporting date, on foreign currency borrowings of the
Company is adjusted to cost of fixed assets to the extent it relates to
utilisation of funds for acquisition of depreciable capital assets and
the balance is accumulated in Foreign Currency Monetary Item
Translation Difference Account (FCMITDA) and amortised during the
balance period of such long term liability but not later than 31st
March, 2011.
Exchange differences arising on the settlement of monetary items not
covered above, or on reporting such monetary items of the Company at
rates different from those at which they were initially recorded during
the year, or reported in previous financial statements, are recognized
as income or as expenses in the year in which they arise.
iv) Forward Exchange Contracts: Monetary Assets and Liabilities are
restated at the rate prevailing at the period end or at the spot rate
at the inception of forward contract where forward cover for specifc
asset/liability has been taken and in respect of such forward contracts
the difference between the contract rate and the spot rate at the
inception of the forward contract is recognised as income or expense in
Profit & Loss Account over the life of the contract. All other
outstanding forward contracts on the closing date are mark to market
and resultant loss is recognised as expense in the Profit and loss
Account. Mark to market gains, if any, are ignored.
G. Provisions, Contingent Liabilities and Contingent Assets
The Company recognises a provision when there is a present obligation
as a result of a past event that probably requires an outflow of
resources and a reliable estimate can be made of the amount of the
obligation. Contingent
Liabilities are disclosed in respect of possible obligations that may
arise from past events but their existence is confrmed by the
occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of the Company. Contingent Assets are not
recognised/ disclosed. Provisions, Contingent Liabilities and
Contingent Assets are reviewed at each Balance Sheet Date.
H. Research & Development
Research costs are expensed as incurred and presented under the natural
heads of expenditure.
Development cost including regulatory cost and legal expenses leading
to Market Authorisation relating to the new and improved product and/or
process development is recognised as an intangible asset to the extent
that it is expected that such asset will generate future economic
Benefits, adequate technical, financial and other resources required to
complete the development and to use or sell the asset are available and
the expenditure attributable to the asset during its development can be
measured reliably.
I. Employee Benefits
(i) Short-term employee Benefits: All employee Benefits falling due
wholly within twelve months of rendering the services are classifed as
short-term employee Benefits, which include Benefits like salaries,
wages, short-term compensated absences, performance incentives, etc.
and are recognised as expenses in the period in which the employee
renders the related service.
(ii) Post-employment Benefits: Post employment beneft plans are
classifed into defned contribution plans and defned Benefits plans in
line with the requirements of AS 15 on "Employee Benefits".
a. Gratuity and Leave encashment
Gratuity and leave encashment which are defned Benefits are recognised
in the Profit and Loss Account based on actuarial valuation using
projected unit credit method as at Balance Sheet date by an independent
actuary. Actuarial gains and losses arising from the experience
adjustment and change in actuarial assumption are immediately
recognized in the Profit and Loss account as income or expense. The
gratuity liability for certain employees of some of the units of the
Company is funded with Life insurance Corporation of India.
b. Superannuation
Certain employees of Company are also participants in the
superannuation plan ('the Plan'), a defned contribution plan.
Contribution made by the Company to the Plan during the year is charged
to Profit and Loss Account.
c. Provident Fund
i) The Company makes contribution to the "VAM EMPLOYEES' PROVIDENT FUND
TRUST" for most of its employees in India, which is a defned beneft
plan to the extent that the Company has an obligation to make good the
shortfall, if any, between the return from the investments of the trust
and the notifed interest rate. The Company's obligation in this regard
is determined by an independent actuary and provided for if the
circumstances indicate that the Trust may not be able to generate
adequate returns to cover the interest rates notifed by the Government.
The Company's contribution towards Provident Fund is charged to Profit
and Loss Account.
ii) For other employees, Provident Fund is deposited with Regional
Provident Fund Commissioner. This is treated as defned contribution
plan. Company's contribution to the Provident Fund is charged to Profit
& Loss Account.
d) Other Long Term Employee Benefits: All employee Benefits (other than
post-employment Benefits and termination Benefits) which do not fall due
wholly within twelve months after the end of the period in which the
employees render the related services are determined based on actuarial
valuation carried out at each Balance Sheet date.
J. Borrowing Costs
Borrowing costs are recognized in the Profit & Loss Account in the
period in which it is incurred, except where the cost is incurred for
acquisition, construction or production of an asset that takes a
substantial period of time to get ready for its intended use in which
case it is capitalized upto the date the assets are ready for their
intended use. Ancillary costs incurred in connection with the
arrangement of borrowings are amortized over the period of such
borrowings.
K. Revenue Recognition
Revenue from sale of products is recognised when the significant risks
and rewards of ownership of the products have been transferred to the
buyer, recovery of the consideration is probable and the amount of
revenue can be measured reliably. Revenues include excise duty and are
shown net of sales tax and value added tax, if any.
Revenue from contract manufacturing is recognized on a proportionate
completion basis.
Refundable fees received in respect of fixed-price contracts are
deferred and recognized as revenue in the period in which all
contractual obligations are met and the contingency is resolved.
Dividend income is recognized when the right to receive the income is
established. Income from interest on deposits, loans and interest
bearing securities is recognized on time proportionate method.
Any sales for which the Company has acted as an agent without assuming
the risks and rewards of ownership have been reported on a net basis.
Sale of utility is recognised on delivery of the same to the consumers
and no significant uncertainty exists as to its realisation.
Export incentives/ Benefits are accounted for on accrual basis and where
recovery is probable.
L. Premium on Foreign Currency Convertible Bonds (FCCBs)
Premium payable on redemption of Foreign Currency Convertible Bonds
(FCCBs) is charged against securities premium account over the tenure
of FCCBs.
M. Segment Reporting
The accounting policies adopted for segment reporting are in line with
accounting policies of the Company. Revenues, Expenses, Assets and
Liabilities have been identifed to segments on the basis of their
relationship to operating activities of the segments (taking in account
the nature of products and services and risks & rewards associated with
them) and internal management information systems and the same is
reviewed from time to time to realign the same to conform to the
Business Units of the Company. Revenues, Expenses, Assets and
Liabilities, which are common to the enterprise as a whole and are not
allocable to segments on a reasonable basis, have been treated as
"Common Revenues/Expenses/Assets/Liabilities", as the case may be.
N. Earnings Per share
The basic earnings per share is calculated by dividing the net Profit
after tax for the year by the weighted average number of equity shares
outstanding during the year. For the purpose of calculating diluted
earnings per share, net Profit after tax during the year and the
weighted average number of shares outstanding during the year are
adjusted for the effect of all dilutive potential equity shares. The
dilutive potential equity shares are deemed converted as of the
beginning of the year unless they have been issued at a later date. The
dilutive potential equity shares are adjusted for the proceeds
receivable had the shares been actually issued at fair value (i.e.
average market value of the outstanding shares). Anti dilutive effect
of any potential equity shares is ignored.
O. Impairment of Fixed Assets
The Company assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the assets belongs is less than the
carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is
recognised in the Profit and Loss Account.
An assessment is also done at each Balance Sheet date whether there is
any indication that an impairment loss recognized for an asset in prior
accounting periods may no longer exist or may have decreased. If any
such indications exist, the asset's recoverable amount is estimated.
The carrying amount of the fixed asset is increased to the revised
estimate of its recoverable amount but only to the extent that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognized for
the asset in previous periods. A reversal of impairment loss is
recognized in the Profit & Loss Account.
P. Employee Stock Option Schemes
In accordance with the Securities and Exchange Board of India
Guidelines, in respect of the stock options granted pursuant to the
Company's Stock Option Scheme, the intrinsic value, if any, of the
option being the excess of the market price, of share over the exercise
price of the option, at the date of grant of option, is treated as
discount and accounted for as employee compensation cost and amortised
on a straight-line basis over the vesting period.
Mar 31, 2010
A. Basis of Accounting / Preparation
The financial statements of Jubilant Organosys Ltd. (the Company) have
been prepared and presented under the historical cost convention on the
accrual basis of accounting in accordance with the accounting
principles generally accepted in India ("GAAP") and comply with the
mandatory accounting standards notified by the Central Government of
India and with the relevant provisions of the Companies Act, 1956. The
Financial Statements are presented in Indian rupees rounded off to the
nearest million
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
liabilities at the date of financial statements and the results of
operations during the reporting periods. Management believes that the
estimates used in the preparation of the financial statements are
prudent and reasonable. Actual results could vary from these estimates.
Any revision to accounting estimates is recognised in the period in
which such results are known/materialised.
B. a. Fixed Assets and Depreciation
(i) Fixed Assets are stated at original cost net of tax/duty credits
availed, if any, less accumulated depreciation/ amortisation. The cost
of fixed assets includes effect of exchange differences on long term
foreign currency borrowings, freight and other incidental expenses
related to the acquisition and installation of the respective assets.
Borrowing costs directly attributable to fixed assets which necessarily
take a substantial period of time to get ready for their intended use
are capitalised. In case of fixed assets acquired at the time of
amalgamation of certain entities with Company, the same are recognised
at book value/fair value ascertained by the valuers.
Insurance spares / standby equipments are capitalised as part of the
mother assets and are depreciated at the applicable rates, over the
remaining useful life of the mother assets. Such spares are charged
off, on issue for Consumption.
Interest on loans and other financial charges in respect of qualifying
assets and preoperative expenses including Trial Run Expenses (Net of
trial run receipts, if any) for projects and/or substantial expansion
up to the date of commencement of commercial production/ stabilisation
of the project are capitalised.
(ii) Depreciation is provided on Straight Line Method at rates
mentioned and in the manner specified in Schedule XIV to the Companies
Act, 1956 (as amended), on the original cost/ acquisition cost of
assets and read with the statement as mentioned herein under. Certain
plants were classified as continuous process plants from the financial
year ended 31st March, 2000 and such classification has been done on
technical assessment, (relied upon by the auditor being a technical
matter) and depreciation on such assets has been provided accordingly.
Depreciation, in respect of assets added/installed up to December 15,
1993, is provided at the rates applicable at the time of
additions/installations of the assets as per Schedule XIV to the
Companies Act, 1956 and depreciation, in respect of assets
added/installed during the subsequent period, is provided at the rates,
mentioned in Schedule XIV to the Companies Act, 1956 read with
Notification dated 16th December, 1993 issued by Department of Company
Affairs, Government of India except for the following classes of fixed
assets which are depreciated over the useful life estimated as under;
a. R&D related Equipments & Machineries: ten years.
b. Motor Vehicles: five years.
c. Computer & Information Technology related assets: three to five
years.
d. Certain employee perquisite - related assets: five years, being the
period of the perquisite scheme.
Depreciation on assets added/disposed off during the year has been
provided on pro-rata basis with reference to the month of
addition/disposal.
Depreciation on exchange fluctuation capitalised is charged over the
remaining useful life of assets in line with accounting policy (Refer
Note 1 (F) of Schedule "O").
b. Intangible, Market Authorisation and Amortisation
Intangible assets are recorded at the consideration paid for
acquisition. Intangible assets are amortised over their estimated
useful lives subject to a maximum period of ten years on straight-line
basis, commencing from the date the asset is available to the Company
for its use.
Cost incurred for product development leading to Market Authorisations
are recognised as intangible assets and amortised on a straight-line
basis over a period of five to ten years from the date of regulatory
approval. Subsequent expenditures on development of such products are
also added to the cost of intangibles.
Expenditure for acquisition and implementation of Software systems is
recognised as intangible assets and amortised on straight-line basis
over a period of five year.
c. Leased Assets: Amortisation/charging off
(i) Leasehold Land value is not amortised in view of the long tenure of
the un-expired lease period/option of conversion to freehold at the
expiry of lease tenure.
(ii) Other leased assets: Assets, if any, acquired under finance lease
are capitalised at the lower of their fair value and the present value
of the minimum lease payment in line with the Accounting Standard 19
(AS-19)- "Leases", notified by the Central Government of India. In
respect of other leases, lease rentals are charged to Profit and Loss
Account.
C. Valuation of Inventories
Inventories are valued at lower of cost or net realisable value except
scrap, which is at net estimated realisable value. The methods of
determining cost of various categories of inventories are as follows:
Raw materials Weighted average method
Stores and spares Weighted average method
Work-in-process and finished
goods (manufactured) Variable Cost at
weighted average including
an appropriate share of
production overheads
Finished goods (traded) Actual cost of purchase
Goods in transit Actual cost of purchase
Cost includes all direct costs, cost of conversion and appropriate
portion of overheads and such other costs incurred as to bring the
inventory to its present location and condition inclusive of excise
duty wherever applicable. Cost formula used is based upon weighted
average cost.
D. Investments
Long Term quoted investments (non-trade) if any, are valued at cost
unless there is a permanent fall in their value as at the date of
Balance Sheet.
Unquoted investments in subsidiaries being of long term and of
strategic in nature are valued at cost and no loss is recognised for
the fall, if any, in their net worth, unless the diminution in value is
other than temporary. Investment in Foreign Subsidiary Companies are
expressed in Indian currency at the rates prevailing on the date when
the remittance for the purpose was made/ foreign currency balance
abroad was used, as the case may be.
Current Investments are valued at Lower of cost or fair value.
E. Income Tax
Current Tax
Current tax expense is based on the provisions of Income Tax Act, 1961
and judicial interpretations thereof as at the Balance Sheet date and
takes into consideration various deductions and exemptions to which the
Company is entitled to as well as the reliance placed by the Company on
the legal advices received by it.
Deferred Tax
Deferred tax charge or credit reflects the tax effects of timing
differences between accounting income and taxable income for the
period. The deferred tax charge or credit and the corresponding
deferred tax liabilities or assets are recognised using the tax rates
that have been enacted or substantially enacted by the Balance Sheet
date. Deferred tax assets are recognised only to the extent there is
reasonable certainty that the assets can be realised in future;
however, where there is unabsorbed depreciation or carry forward of
losses, deferred tax assets are recognised only if there is a virtual
certainty of realisation of such assets. Deferred tax assets are
reviewed at each Balance Sheet date and is written-down or written-up
to reflect the amount that is reasonably/virtually certain (as the case
may be) to be realised.
Minimum Alternate Tax
Minimum Alternate Tax (MAT) credit is recognised as an asset only when
and to the extent there is a convincing evidence that the Company will
pay normal income tax during the specified period. In the year in which
MAT credit becomes eligible to be recognised as an asset in accordance
with the recommendation contained in the Guidance Note issued by the
Institute of Chartered Accountants of India, the said asset is created
by way of a credit to the Profit and Loss Account and shown as MAT
Credit Entitlement. The Company reviews the same at each Balance Sheet
date and writes down the carrying amount of MAT Credit Entitlement to
the extent there is no longer convincing evidence to the effect that
Company pay normal income tax during the specified period.
F. Foreign Currency Conversions/ Translations
Transactions in foreign currency are recorded at the exchange rate
prevailing on/or closely approximating to the date of transactions.
Monetary Assets and Liabilities are restated at the rate prevailing at
the period end or at the spot rate at the inception of forward contract
where forward cover for specific asset/liability has been taken and in
respect of such forward contracts the difference between the contract
rate and the spot rate at the inception of the forward contract is
recognised as income or expense in Profit & Loss Account over the life
of the contract. All other outstanding forward contracts on the closing
date are marked to market and resultant gain or loss is recognised as
income or expense in the Profit and loss Account.
The Company has opted for accounting the exchange differences arising
on reporting of long term foreign currency monetary items in line with
Companies (Accounting Standards) Amendment Rules, 2009 on Accounting
Standard 11 (AS-11) - "The Effects of Changes in Foreign Exchange
Rates" notified by the Ministry of Corporate Affairs on 31st March,
2009. Accordingly the effect of exchange differences as updated on
reporting date, on foreign currency borrowings including FCCBs of the
Company is adjusted to cost of fixed assets to the extent it relates to
utilisation of funds for acquisition of depreciable capital assets and
the balance is accumulated in Foreign Currency Monetary Item
Translation Difference Account (FCMITDA) and amortised during the
balance period of such long term liability but not later than 31st
March, 2011.
G. Provisions, Contingent Liabilities and Contingent Assets
The Company recognises a provision when there is a present obligation
as a result of a past event that probably requires an outflow of
resources and a reliable estimate can be made of the amount of the
obligation. A disclosure for a contingent liability is made when there
is a possible obligation or a present obligation that may, but probably
will not require an outflow of resource. Contingent Assets are not
recognised/disclosed. Provisions, Contingent Liabilities and Contingent
Assets are reviewed at each Balance Sheet Date.
H. Research & Development
Revenue expenditure on Research and Development is included under the
natural heads of expenditure.
Capital expenditure on Research and Development (R&D) is capitalised as
fixed assets. Development cost including regulatory cost and legal
expenses leading to Market Authorisation relating to the new and
improved product and/or process development is recognised as an
intangible asset to the extent that it is expected that such asset will
generate future economic benefits. Other Research & Development cost is
expensed as incurred.
I. Employee Benefits
Short term employee benefit and contribution to defined contribution
plans e.g. recognised provident fund, employee state insurance and
superannuation scheme are recognised as expense on accrual at the
undiscounted amount in the Profit & Loss Account.
Gratuity and leave encashment which are defined benefits are recognised
in the Profit and Loss Account based on actuarial valuation using
projected unit credit method as at Balance Sheet date by an independent
actuary. Actuarial gains and losses arising from the experience
adjustment and change in actuarial assumption are immediately
recognised in the Profit and Loss account as income or expense. The
gratuity liability for certain employees of one of the units of the
Company is funded with Life insurance Corporation of India.
J. Borrowing Cost
Borrowing cost includes ancillary cost. Borrowing cost attributable to
acquisitions and construction of qualifying assets are capitalised as a
part of the cost of such assets up-to the date as mentioned in Note No.
B (a) (i) above. Other borrowing costs are charged as expenses in the
year in which they arise.
K. Revenue Recognition
Revenue from sale of products is recognised when the significant risks
and rewards of ownership of the products have been transferred to the
buyer, recovery of the consideration is probable and the amount of
revenue can be measured reliably. Revenues include excise duty and are
shown net of sales tax and value added tax (except excise duty) if any.
Revenue from fixed-price contracts are recorded on a proportional
completion basis. Refundable fees are deferred and recognised as
revenue in the period in which all contractual obligations are met and
the contingency is resolved.
Royalty revenue is recognised on an accrual basis in accordance with
contractual agreements when all significant contractual obligations
have been satisfied, the amounts are determinable and collection is
reasonably assured.
Dividend income is recognised when the unconditional right to receive
the income is established. Income from interest on deposits, loans and
interest bearing securities is recognised on time proportionate method.
Any sales for which the Company has acted as an agent without assuming
the risks and rewards of ownership have been reported on a net basis.
Export incentives/ benefits are accounted for on accrual basis and as
per the principles given under Accounting Standard 9 (AS-9) on "Revenue
Recognition", notified by the Central Government of India.
L. Miscellaneous Expenditure / Amortisation
(i) Payments under Voluntary Retirement Scheme are amortised over a
period of thirty six months commencing from the month in which payment
/ liability arise.
(ii) FCCB and share issue expenses/premium payable on redemption of
FCCBs are adjusted against securities premium account.
M. Segment Reporting
The accounting policies adopted for segment reporting are in line with
accounting policies of the Company. Revenues, Expenses, Assets and
Liabilities have been identified to segments on the basis of their
relationship to operating activities of the segments (taking in account
the nature of products and services and risks & rewards associated with
them) and internal management information systems and the same is
reviewed from time to time to realign the same to conform to the
Business Units of the Company. Revenues, Expenses, Assets and
Liabilities, which are common to the enterprise as a whole and are not
allocable to segments on a reasonable basis, have been treated as
"Common Revenues/Expenses/Assets/Liabilities", as the case may be.
N. Earning per share
The basic earnings per share is calculated by dividing the net profit
after tax for the year by the weighted average number of equity shares
outstanding during the year. For the purpose of calculating diluted
earnings per share, net profit after tax during the year and the
weighted average number of shares outstanding during the year are
adjusted for the effect of all dilutive potential equity shares. The
dilutive potential equity shares are deemed converted as of the
beginning of the year unless they have been issued at a later date. The
dilutive potential equity shares are adjusted for the proceeds
receivable had the shares been actually issued at fair value (i.e.
average market value of the outstanding shares).
O. Impairment of Fixed Assets
The Company assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the assets belongs is less than the
carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is
recognised in the Profit and Loss Account. If at the Balance Sheet date
there is an indication that previously assessed impairment loss no
longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount.
P. Employee Stock Option Schemes
In accordance with the Securities and Exchange Board of India
Guidelines, in respect of the stock options granted pursuant to the
Companys Stock Option Scheme, the intrinsic value, if any, of the
option being the excess of the market price, of share over the exercise
price of the option, at the date of grant of option, is treated as
discount and accounted as employee compensation cost and amortised on a
straight-line basis over the vesting period.
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