Accounting Policies of Sun Pharma Advanced Research Company Ltd. Company
Mar 31, 2023
1. Corporate Information
Sun Pharma Advanced Research Company Limited ("the Company") is a public limited company incorporated and domiciled in India and has its listing on the BSE Limited and National Stock Exchange of India Limited. The registered office is located at Plot No. 5 & 6/1, Savli, G. I. D. C. Estate, Manjusar, Vadodara - 391 775. The Company is in the business of research and development (R&D) of pharmaceutical products.
The financial statements were approved for issue in accordance with the resolution of the Board of Directors on May 22, 2023.
2. Significant accounting policies
2.1 Basis of preparation and presentation
The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and presentation requirement of Division II of Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III), as applicable to the financial statements.
The financial statements have been prepared on the historical cost basis, except for : (i) certain financial instruments that are measured at fair values at the end of each reporting period (ii) non-current assets classified as held for sale which are measured at the lower of their carrying amount and fair value less costs to sell and (iii) defined benefit plans - plan assets that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
The Company has prepared the financial statement on the basis that it will continue to operate as a going concern.
The financial statements are prepared in INR and all values are rounded to the nearest lakhs upto two decimal, except when otherwise stated. The Company has consistently applied the following accounting policies to all periods presented in these financial statements.
For the purpose of these financial statements, previous year means the financial year ended March 31, 2022.
a) 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
⢠Held primarily for the purpose of trading
⢠Expected to be realised within twelve months after the reporting period, or
⢠Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified 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 terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
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.
b) Foreign currencies
The Company''s financial statements are presented in INR, which is also the Company''s functional currency.
Transactions and balances
On initial recognition, transactions in currencies other than the Company''s functional currency (foreign currencies) are translated at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the exchange rate at that date. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous period are recognised in statement of profit and loss in the period in which they arise.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
c) Fair value measurement
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either :
⢠In the principal market for the asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole :
⢠Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
⢠Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
⢠Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
d) Segment reporting
Based on the "Management Approach" as defined in Ind AS 108 - Operating Segment, the Chief Operating Decision Maker (CODM) of the Company is responsible for allocating resources and assessing performance of the operating segments and accordingly is identified as the CODM. Operating segments are reported in a manner consistent with the internal reporting provided to the CODM.
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.
e) Property, plant and equipment
Items of property, plant and equipment and other intangible assets are stated in balance sheet at cost net of accumulated depreciation and accumulated impairment losses, if any. Cost directly attributable to acquisition are capitalised until the property, plant and equipment are ready for use, as intended by the management. Subsequent expenditures are capitalised only when they increase the future economic benefits embodied in the specific asset to which they relate.
Capital work in progress is stated at cost, net of accumulated impairment loss, if any.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. All other repairs and maintenance cost are recognised in the statement of profit and loss account as incurred.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of property, plant and equipment and is recognised in statement of profit and loss.
Depreciation is calculated on a straight line basis over the estimated useful life of the assets as follows:
|
Asset category |
No. of years |
|
Buildings |
60 |
|
Plant and equipment |
3-25 |
|
Vehicles |
5 |
|
Office equipment |
2-5 |
|
Furniture and fixtures |
10 |
The Company, based on technical assessment made by technical experts and management estimate, depreciates certain items plant and equipment, office equipment, vehicle over estimated useful lives which are different from the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflects fair approximation of the period over which the assets are likely to be used. Depreciation methods, useful lives and residual values are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
f) Intangible assets
Intangible assets that are acquired by the Company and that have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses, if any. Subsequent expenditures are capitalised only when they increase the future economic benefits embodied in the specific asset to which they relate.
Software for internal use, which is primarily acquired from third-party vendors, including consultancy charges for implementing the software, is capitalised. Subsequent costs are charged to the statement of profit and loss as incurred. The capitalised costs are amortised over the estimated useful life of the software i.e. 5 years.
Derecognition of intangible assets
Intangible assets are de-recognised either on their disposal or where no future economic benefits are expected from their use. Any, gain or loss arising on such de-recognition is recognised in statement of profit and loss and are measured as the difference between the net disposal proceeds, if any, and the carrying amount of respective intangible assets as on the date of de-recognition.
g) Research and development cost
Expenditure on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding are recognised as an expense when incurred. Development expenditures on an individual project are recognised as an intangible asset when the Company can demonstrate:
⢠The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
⢠Its intention to complete and its ability and intention to use or sell the asset
⢠How the asset will generate future economic benefits
⢠The availability of resources to complete the asset
⢠The ability to measure reliably the expenditure during development
The expenditure to be capitalised include the cost of materials and other costs directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in statement of profit and loss as incurred.
Procurement of research and development materials are issued directly for consumption to the user department and disclosed under cost of materials consumed.
Acquired research and development intangible assets which are under development, are recognised as In-Process Research and Development assets ("IPR&D"). IPR&D assets are not amortised, but evaluated for potential impairment on an annual basis or when there are indications that the carrying value may not be recoverable. Any impairment charge on such IPR&D assets is recognised in profit and loss. Intangible assets relating to products under development, other intangible assets not available for use and intangible assets having indefinite useful life are tested for impairment annually, or more frequently when there is an indication that the assets may be impaired.
h) Impairment of non-financial assets
The carrying amounts of the Company''s tangible and intangible 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 in order to determine the extent of the impairment loss, if any.
The recoverable amount of an asset or cash-generating unit (as defined below) is the greater of its value in use and its fair value less costs to sell. 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 the cash-generating unit for which the estimates of future cash flows have not been adjusted. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash-generating unit").
An impairment loss is recognised in the statement of profit and loss if the estimated recoverable amount of an asset or its cash generating unit is lower than its carrying amount. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the other assets in the unit on a pro-rata basis.
In respect of other asset, impairment losses recognised in prior periods are assessed at each reporting date for any indications 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. An impairment loss is reversed 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.
i) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement-
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date.
Subsequent measurement-
For purposes of subsequent measurement, financial assets are classified in three categories:
i. Debt instruments measured at amortised cost
ii. Debt instruments measured at fair value through other comprehensive income (FVTOCI)
iii. Debt instruments measured at fair value through profit or loss (FVTPL)
iv. Equity instruments are measured at fair value through other comprehensive income (FVTOCI)
A. Debt instruments
i. Debt instruments measured at amortised cost - A ''debt instrument'' is measured at the amortised cost if both the following conditions are met:
⢠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. 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 or loss. The losses arising from impairment are recognised in the profit or loss.
ii. Debt instruments measured at FVTOCI - A ''debt instrument'' is measured as at FVTOCI if both of the following criteria are met:
⢠The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
⢠The contractual terms of the instrument give rise on specified dates to cash flows that are SPPI on the principal amount outstanding.
Debt instruments included within the FVTOCI 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). However, the Company recognises interest income, impairment losses and reversals and foreign exchange gain or loss in the statement of profit or loss. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to statement of profit or loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
iii. Debt instruments measured at FVTPL - FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorisation as at amortised cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortised cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch'').
B. Equity instruments
All equity instruments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present subsequent changes in the fair value in OCI. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, including foreign exchange gain or loss and excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to profit or loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the statement of profit or 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 derecognised (i.e. removed from the Company''s balance sheet) when:
⢠The contractual rights to receive cash flows from the asset have expired.
⢠The Company has transferred its rights to receive contractual 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.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
a) Financial assets that are debt instruments, and are measured at amortised cost
b) Trade receivables or any contractual right to receive cash or another financial asset
c) Loan commitments which are not measured as at FVTPL
The Company follows ''simplified approach'' for recognition of impairment loss allowance on trade receivables or any contractual right to receive cash or another financial asset.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
ECL impairment loss allowance (or reversal) recognized during the year is recognized as income/ expense in the statement of profit and loss (P&L). This amount is reflected under the head ''other expenses'' in the statement of profit or loss. The balance sheet presentation for various financial instruments is described below:
Financial assets measured as at amortised cost, contractual revenue receivables :
ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
Financial liabilities and equity instruments-
Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments-
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
Repurchase of the Company''s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in statement of profit or loss on the purchase, sale, issue or cancellation of the Company''s own equity instruments.
Initial recognition and measurement-
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
Subsequent measurement-
All financial liabilities are subsequently measured at amortised cost using the effective interest rate method or at FVTPL. Financial liabilities at fair value through profit or loss-
Financial liabilities are classified as at FVTPL when the financial liability is held for trading or is designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred principally for the purpose of repurchasing in the near term or on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking. This category also includes derivative entered into by the Company that are not designated and effective as hedging instruments in hedge relationships as defined by Ind AS 109. Gains or losses on liabilities held for trading are recognised in the statement of profit or loss.
Financial liabilities subsequently measured at amortised cost-
Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost in subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest rate (EIR) method. Interest expense that is not capitalised as part of costs of an asset is included in the finance costs line item in the statement of profit or loss.
After initial recognition, such financial liabilities are subsequently measured at amortised cost using the EIR method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss.
Derecognition-
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in statement of profit or loss.
Reclassification of financial assets-
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
j) Leases
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, 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: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
i) Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:
⢠Building 3-5 years
The right-of-use assets are also subject to impairment. Refer to the accounting policies in section (h) Impairment of nonfinancial assets.
ii) Lease liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
iii) Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases that are considered to be low value. Lease payments on shortterm leases and leases of low-value assets are recognised as expense on a straightline basis over the lease term.
k) Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of 3 months or less which are subject to an insignificant risk of change in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and fixed deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Company''s cash management.
l) Provisions, contingent liabilities and contingent assets
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of past event, it is probable that an overflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flow as 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.
Contingent liabilities and contingent assets-
Contingent liability is disclosed for,
i. Possible obligations which will be confirmed only by future events not wholly within the control of the Company, or
ii. Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
Contingent assets are not recognised in the financial statements unless it becomes virtually certain that an inflow of economic benefits will arise. When an inflow of benefits is probable, contingent assets are disclosed in financial statements.
m) Revenue from operations
Revenue from contracts with customers Milestone payments and out licensing arrangements
Revenues include amounts derived from product out-licensing agreements. These arrangements typically consist of an initial up-front payment on inception of the license and subsequent payments dependent on achieving certain milestones in accordance with the terms prescribed in the agreement. Non-refundable up-front license fees received in connection with product out-licensing agreements are deferred and recognised over the period in which the Company has continuing performance obligations. Milestone payments which are contingent on achieving certain clinical milestones are recognised as revenues either on achievement of such milestones, if the milestones are considered substantive, or over the period the Company has continuing performance obligations, if the milestones are not considered substantive. If milestone payments are creditable against future royalty payments, the milestones are deferred and released over the period in which the royalties are anticipated to be received.
Research and development services
Revenue from services rendered, which primarily relate to research and development, is recognised in the statement of profit and loss as the underlying services are performed.
Royalties
Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement (provided that it is probable that economic benefits will flow to the Company and the amount of revenue can be measured reliably). Royalty arrangements that are based on sales and other measures are recognised by reference to the underlying arrangement.
Dividend
Dividend income is recognised when the Company''s right to receive the payment is established, which is generally when shareholders approve the dividend.
Interest income
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset''s net carrying amount on initial recognition.
Contract balances Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
Trade receivables
A receivable represents the Company''s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs under the contract.
n) Employee benefits Defined benefit plans
The Company operates a defined benefit gratuity plan which requires contribution to be made to a separately administered fund.
The liability in respect of defined benefit plans is calculated using the projected unit credit method with actuarial valuations being carried out at the end of each annual reporting period. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds. The currency and term of the government bonds shall be consistent with the currency and estimated term of the post-employment benefit obligations. The current service cost of the defined benefit plan, recognised in the statement of profit and loss as employee benefits expense, reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes, curtailments and settlements. Past service costs are recognised in statement of profit and loss in the period of a plan amendment. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in statement of profit and loss. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to OCI in the period in which they arise and is reflected immediately in retained earnings and is not reclassified to statement of profit and loss.
Termination benefits
Termination benefits are recognised as an expense at the earlier of the date when the Company can no longer withdraw the offer of those benefits and when the entity recognises costs for a restructuring that is within the scope of Ind AS 37 and involves the payment of termination benefits.
Short-term and other long-term employee benefits
Accumulated leave, which is expected to be utilised within the next 12 months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred.
The Company''s net obligation in respect of other long term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and previous periods. That benefit is discounted to determine its present value.
Defined contribution plans
The Company''s contributions to defined contribution plans are recognised as an expense as and when the services are received from the employees entitling them to the contributions. The Company does not have any obligation other than the contribution made.
o) Borrowing cost
Borrowing costs that are directly attributable to the construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of that asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
p) Income tax
Income tax expense consists of current and deferred tax. Income tax expense is recognised in statement of profit and loss except to the extent that it relates to items recognised in OCI or directly in equity, in which case it is recognised in OCI or directly in equity respectively. Current tax is the expected tax payable on the taxable profit for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous years. Current tax assets and tax liabilities are offset where the Company has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities are offset if there is a legally enforceable right to set off corresponding current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority on the Company.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Withholding tax arising out of payment of dividends to shareholders under the Indian Income Tax regulations is not considered as tax expense for the Company and all such taxes are recognised in the statement of changes in equity as part of the associated dividend payment.
Minimum Alternate Tax (''MAT'') credit is recognised as deferred tax 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. MAT credit recognised as an asset is reviewed at each balance sheet date and written down to the extent the aforesaid convincing evidence no longer exists.
Accruals for uncertain tax positions require management to make judgments of potential exposures. Accruals for uncertain tax positions are measured using either the most likely amount or the expected value amount depending on which method the entity expects to better predict the resolution of the uncertainty. Tax benefits are not recognised unless the management, based upon its interpretation of applicable laws and regulations and the expectation of how the tax authority will resolve the matter, concludes that such benefits will be accepted by the authorities. Once considered probable of not being accepted, management reviews each material tax benefit and reflects the effect of the uncertainty in determining the related taxable amounts.
q) Earnings/(loss) per share
The Company presents basic and diluted earnings/(loss) per share ("EPS") data for its equity shares. Basic EPS is calculated by dividing the profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to equity shareholders and the weighted average number of equity shares outstanding for the effects of all dilutive potential ordinary shares, which includes all stock options granted to employees.
The number of equity shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of the financial statements by the board of directors.
r) Share issue expenses
The Company incurs various costs in issuing or acquiring its own equity instruments. The transaction costs of an equity transaction are accounted for as a deduction from equity to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided. The costs of an equity transaction that is abandoned are recognised as an expense in the statement of profit and loss.
s) Recent accounting pronouncements
Standards issued but not yet effective and not early adopted by the Company
Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time. The Company has not early adopted any new standards or amendments to the existing standards that has been issued but is not yet effective.
t) Changes in accounting policies and disclosures New and amended standards
Several amendments and interpretations apply for the first time in March 2023, but do not have an impact on the financial statements of the Company. The Company has not early adopted any standards or amendments that have been issued but are not yet effective.
Mar 31, 2022
1. Corporate Information
Sun Pharma Advanced Research Company Limited ("the Company") is a public limited company incorporated and domiciled in India and has its listing on the BSE Limited and National Stock Exchange of India Limited. The registered office is located at Plot No. 5 & 6/1, Savli, G. I. D. C. Estate, Manjusar, Vadodara - 391 775. The Company is in the business of research and development (R&D) of pharmaceutical products.
The financial statements were approved for issue in accordance with the resolution of the Board of Directors on May 17, 2022.
2. Significant accounting policies
2.1 Basis of preparation and presentation
The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and presentation requirement of Division II of Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III), as applicable to the financial statements.
The financial statements have been prepared on the historical cost basis, except for : (i) certain financial instruments that are measured at fair values at the end of each reporting period (ii) non-current assets classified as held for sale which are measured at the lower of their carrying amount and fair value less costs to sell and (iii) defined benefit plans - plan assets that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
The Company has prepared the financial statement on the basis that it will continue to operate as a going concern.
The financial statements are prepared in INR and all values are rounded to the nearest lakhs upto two decimal, except when otherwise stated. The Company has consistently applied the following accounting policies to all periods presented in these financial statements.
For the purpose of these financial statements, previous year means the financial year ended March 31, 2021.
a) 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
⢠Held primarily for the purpose of trading
⢠Expected to be realised within twelve months after the reporting period, or
⢠Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified 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 terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
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.
b) Foreign currencies
The Company''s financial statements are presented in INR, which is also the Company''s functional currency. Transactions and balances
On initial recognition, transactions in currencies other than the Company''s functional currency (foreign currencies) are translated at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the exchange rate at that date. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous period are recognised in statement of profit and loss in the period in which they arise.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
c) Fair value measurement
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either :
⢠In the principal market for the asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole :
⢠Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
⢠Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
⢠Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
d) Segment reporting
Based on the "Management Approach" as defined in Ind AS 108 - Operating Segment, the Chief Operating Decision Maker (CODM) of the Company is responsible for allocating resources and assessing performance of the operating segments and accordingly is identified as the CODM. Operating segments are reported in a manner consistent with the internal reporting provided to the CODM.
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.
e) Property, plant and equipment
Items of property, plant and equipment and other intangible assets are stated in balance sheet at cost net of accumulated depreciation and accumulated impairment losses, if any. Cost directly attributable to acquisition are capitalised until the property, plant and equipment are ready for use, as intended by the management. Subsequent expenditures are capitalised only when they increase the future economic benefits embodied in the specific asset to which they relate.
Capital work in progress is stated at cost, net of accumulated impairment loss, if any.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. All other repairs and maintenance cost are recognised in the statement of profit and loss account as incurred.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of property, plant and equipment and is recognised in statement of profit and loss.
|
Depreciation is calculated on a straight line basis over the estimated useful life of the assets as follows: |
|
|
Asset category |
No. of years |
|
Buildings |
60 |
|
Plant and equipment |
3-25 |
|
Vehicles |
5 |
|
Office equipment |
2-5 |
|
Furniture and fixtures |
10 |
The Company, based on technical assessment made by technical experts and management estimate, depreciates certain items plant and equipment, vehicle over estimated useful lives which are different from the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflects fair approximation of the period over which the assets are likely to be used. Depreciation methods, useful lives and residual values are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
f) Intangible assets
Intangible assets that are acquired by the Company and that have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses, if any. Subsequent expenditures are capitalised only when they increase the future economic benefits embodied in the specific asset to which they relate.
Software for internal use, which is primarily acquired from third-party vendors, including consultancy charges for implementing the software, is capitalised. Subsequent costs are charged to the statement of profit and loss as incurred. The capitalised costs are amortised over the estimated useful life of the software i.e. 5 years.
Derecognition of intangible assets
Intangible assets are de-recognised either on their disposal or where no future economic benefits are expected from their use. Any, Gain or loss arising on such de-recognition is recognised in statement of profit and loss and are measured as the difference between the net disposal proceeds, if any, and the carrying amount of respective intangible assets as on the date of de-recognition.
g) Research and development cost
Expenditure on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding are recognised as an expense when incurred. Development expenditures on an individual project are recognised as an intangible asset when the Company can demonstrate:
⢠The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
⢠Its intention to complete and its ability and intention to use or sell the asset
⢠How the asset will generate future economic benefits
⢠The availability of resources to complete the asset
⢠The ability to measure reliably the expenditure during development
The expenditure to be capitalised include the cost of materials and other costs directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in statement of profit and loss as incurred.
Procurement of research and development materials are issued directly for consumption to the user department and disclosed under cost of materials consumed.
Acquired research and development intangible assets which are under development, are recognised as InProcess Research and Development assets ("IPR&D"). IPR&D assets are not amortised, but evaluated for potential impairment on an annual basis or when there are indications that the carrying value may not be recoverable. Any impairment charge on such IPR&D assets is recognised in profit and loss. Intangible assets relating to products under development, other intangible assets not available for use and intangible assets having indefinite useful life are tested for impairment annually, or more frequently when there is an indication that the assets may be impaired.
h) Impairment of non-financial assets
The carrying amounts of the Company''s tangible and intangible 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 in order to determine the extent of the impairment loss, if any.
The recoverable amount of an asset or cash-generating unit (as defined below) is the greater of its value in use and its fair value less costs to sell. 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 the cash-generating unit for which the estimates of future cash flows have not been adjusted. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash-generating unit").
An impairment loss is recognised in the statement of profit and loss if the estimated recoverable amount of an asset or its cash generating unit is lower than its carrying amount. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the other assets in the unit on a pro-rata basis.
In respect of other asset, impairment losses recognised in prior periods are assessed at each reporting date for any indications 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. An impairment loss is reversed 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.
i) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement-
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date.
For purposes of subsequent measurement, financial assets are classified in three categories:
i. Debt instruments measured at amortised cost
ii. Debt instruments measured at fair value through other comprehensive income (FVTOCI)
iii. Debt instruments measured at fair value through profit or loss (FVTPL)
iv. Equity instruments are measured at fair value through other comprehensive income (FVTOCI)
A. Debt instruments
i. Debt instruments measured at amortised cost - A ''debt instrument'' is measured at the amortised cost if both the following conditions are met:
⢠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. 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 or loss. The losses arising from impairment are recognised in the profit or loss.
ii. Debt instruments measured at FVTOCI - A ''debt instrument'' is measured as at FVTOCI if both of the following criteria are met:
⢠The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
⢠The contractual terms of the instrument give rise on specified dates to cash flows that are SPPI on the principal amount outstanding.
Debt instruments included within the FVTOCI 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). However, the Company recognises interest income, impairment losses and reversals and foreign exchange gain or loss in the statement of profit or loss. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to statement of profit or loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
iii. Debt instruments measured at FVTPL - FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorisation as at amortised cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortised cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch'').
B. Equity instruments
All equity instruments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present subsequent changes in the fair value in OCI. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, including foreign exchange gain or loss and excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to profit or loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the statement of profit or 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 derecognised (i.e. removed from the Company''s balance sheet) when:
⢠The contractual rights to receive cash flows from the asset have expired.
⢠The Company has transferred its rights to receive contractual 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.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
a) Financial assets that are debt instruments, and are measured at amortised cost
b) Trade receivables or any contractual right to receive cash or another financial asset
c) Loan commitments which are not measured as at FVTPL
The Company follows ''simplified approach'' for recognition of impairment loss allowance on trade receivables or any contractual right to receive cash or another financial asset.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forwardlooking estimates are analysed.
ECL impairment loss allowance (or reversal) recognized during the year is recognized as income/ expense in the statement of profit and loss (P&L). This amount is reflected under the head ''other expenses'' in the statement of profit or loss. The balance sheet presentation for various financial instruments is described below:
Financial assets measured as at amortised cost, contractual revenue receivables :
ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
Financial liabilities and equity instruments-
Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments-
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
Repurchase of the Company''s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in statement of profit or loss on the purchase, sale, issue or cancellation of the Company''s own equity instruments.
Initial recognition and measurement-
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
Subsequent measurement-
All financial liabilities are subsequently measured at amortised cost using the effective interest rate method or at FVTPL.
Financial liabilities at fair value through profit or loss-
Financial liabilities are classified as at FVTPL when the financial liability is held for trading or is designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred principally for the purpose of repurchasing in the near term or on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking. This category also includes derivative entered into by the Company that are not designated and effective as hedging instruments in hedge relationships as defined by Ind AS 109. Gains or losses on liabilities held for trading are recognised in the statement of profit or loss.
Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost in subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest rate (EIR) method. Interest expense that is not capitalised as part of costs of an asset is included in the finance costs line item in the statement of profit or loss.
After initial recognition, such financial liabilities are subsequently measured at amortised cost using the EIR method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss.
Derecognition-
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in statement of profit or loss.
Reclassification of financial assets-
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
j) Leases
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, 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: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
i) Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:
⢠Building 3-5 years
The right-of-use assets are also subject to impairment. Refer to the accounting policies in section (h) Impairment of non-financial assets.
ii) Lease liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
iii) Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straightline basis over the lease term.
k) Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of 3 months or less which are subject to an insignificant risk of change in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and fixed deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Company''s cash management.
l) Provisions, contingent liabilities and contingent assets
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of past event, it is probable that an overflow of resources embodying economic benefits will be required
to settle the obligation and a reliable estimate can be made of the amount of obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flow as 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.
Contingent liabilities and contingent assets-
Contingent liability is disclosed for,
i. Possible obligations which will be confirmed only by future events not wholly within the control of the Company, or
ii. Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
Contingent assets are not recognised in the financial statements unless it becomes virtually certain that an inflow of economic benefits will arise. When an inflow of benefits is probable, contingent assets are disclosed in financial statements.
m) Revenue from operations
Revenue from contracts with customers
Milestone payments and out licensing arrangements
Revenues include amounts derived from product out-licensing agreements. These arrangements typically consist of an initial up-front payment on inception of the license and subsequent payments dependent on achieving certain milestones in accordance with the terms prescribed in the agreement. Non-refundable upfront license fees received in connection with product out-licensing agreements are deferred and recognised over the period in which the Company has continuing performance obligations. Milestone payments which are contingent on achieving certain clinical milestones are recognised as revenues either on achievement of such milestones, if the milestones are considered substantive, or over the period the Company has continuing performance obligations, if the milestones are not considered substantive. If milestone payments are creditable against future royalty payments, the milestones are deferred and released over the period in which the royalties are anticipated to be received.
Research and development services
Revenue from services rendered, which primarily relate to research and development, is recognised in the statement of profit and loss as the underlying services are performed.
Royalties
Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement (provided that it is probable that economic benefits will flow to the Company and the amount of revenue can be measured reliably). Royalty arrangements that are based on sales and other measures are recognised by reference to the underlying arrangement.
Dividend
Dividend income is recognised when the Company''s right to receive the payment is established, which is generally when shareholders approve the dividend.
Interest income
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset''s net carrying amount on initial recognition.
Contract balances
Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
Trade receivables
A receivable represents the Company''s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs under the contract.
n) Employee benefits
Defined benefit plans
The Company operates a defined benefit gratuity plan which requires contribution to be made to a separately administered fund.
The liability in respect of defined benefit plans is calculated using the projected unit credit method with actuarial valuations being carried out at the end of each annual reporting period. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds. The currency and term of the government bonds shall be consistent with the currency and estimated term of the post-employment benefit obligations. The current service cost of the defined benefit plan, recognised in the statement of profit and loss as employee benefits expense, reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes, curtailments and settlements. Past service costs are recognised in statement of profit and loss in the period of a plan amendment. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in statement of profit and loss. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to OCI in the period in which they arise and is reflected immediately in retained earnings and is not reclassified to statement of profit and loss.
Termination benefits
Termination benefits are recognised as an expense at the earlier of the date when the Company can no longer withdraw the offer of those benefits and when the entity recognises costs for a restructuring that is within the scope of Ind AS 37 and involves the payment of termination benefits.
Short-term and other long-term employee benefits
Accumulated leave, which is expected to be utilised within the next 12 months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred.
The Company''s net obligation in respect of other long term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and previous periods. That benefit is discounted to determine its present value.
Defined contribution plans
The Company''s contributions to defined contribution plans are recognised as an expense as and when the services are received from the employees entitling them to the contributions. The Company does not have any obligation other than the contribution made.
o) Borrowing cost
Borrowing costs that are directly attributable to the construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of that asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
p) Income tax
Income tax expense consists of current and deferred tax. Income tax expense is recognised in statement of profit and loss except to the extent that it relates to items recognised in OCI or directly in equity, in which case it is recognised in OCI or directly in equity respectively. Current tax is the expected tax payable on the taxable profit for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous years. Current tax assets and tax liabilities are offset where the Company has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities are offset if there is a legally enforceable right to set off corresponding current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority on the Company.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Withholding tax arising out of payment of dividends to shareholders under the Indian Income Tax regulations is not considered as tax expense for the Company and all such taxes are recognised in the statement of changes in equity as part of the associated dividend payment.
Minimum Alternate Tax (''MAT'') credit is recognised as deferred tax 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. MAT credit recognised as an asset is reviewed at each balance sheet date and written down to the extent the aforesaid convincing evidence no longer exists.
Accruals for uncertain tax positions require management to make judgments of potential exposures. Accruals for uncertain tax positions are measured using either the most likely amount or the expected value amount depending on which method the entity expects to better predict the resolution of the uncertainty. Tax benefits are not recognised unless the management, based upon its interpretation of applicable laws and regulations and the expectation of how the tax authority will resolve the matter, concludes that such benefits will be accepted by the authorities. Once considered probable of not being accepted, management reviews each material tax benefit and reflects the effect of the uncertainty in determining the related taxable amounts.
q) Earnings/(loss) per share
The Company presents basic and diluted earnings/(loss) per share ("EPS") data for its equity shares. Basic EPS is calculated by dividing the profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to equity shareholders and the weighted average number of equity shares outstanding for the effects of all dilutive potential ordinary shares, which includes all stock options granted to employees.
The number of equity shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of the financial statements by the board of directors.
r) Share issue expenses
The Company incurs various costs in issuing or acquiring its own equity instruments. The transaction costs of an equity transaction are accounted for as a deduction from equity to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided. The costs of an equity transaction that is abandoned are recognised as an expense in the statement of profit and loss.
s) Recent accounting pronouncements
Standards issued but not yet effective and not early adopted by the Company
Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time. The Company has not early adopted any new standards or amendments to the existing standards that has been issued but is not yet effective.
t) Changes in accounting policies and disclosures New and amended standards
Several amendments and interpretations apply for the first time in March 2022, but do not have an impact on the financial statements of the Company. The Company has not early adopted any standards or amendments that have been issued but are not yet effective.
u) Non-current assets, held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset (or disposal group) and its sale is highly probable. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets held for sale are not depreciated or amortised.
Mar 31, 2021
1. Corporate Information
Sun Pharma Advanced Research Company Limited (âthe Companyâ) is a public limited company incorporated and domiciled in India and has its listing on the Bombay Stock Exchange Limited and National Stock Exchange of India Limited. The registered office is located at G. I. D. C. Estate, Savli - Vadodara. The Company is in the business of research and development (R&D) of pharmaceutical products.
The financial statements were authorised for issue in accordance with the resolution of the Board of Directors on May 17, 2021.
2. Significant accounting policies2.1 Basis of preparation and presentation
The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and presentation requirement of Division II of Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III), as applicable to the financial statements.
The financial statements have been prepared on the historical cost basis, except for: (i) certain financial instruments that are measured at fair values at the end of each reporting period (ii) non-current assets classified as held for sale which are measured at the lower of their carrying amount and fair value less costs to sell and (iii) defined benefit plans - plan assets that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
The financial statements are prepared in INR and all values are rounded to the nearest lakhs upto two decimal, except when otherwise stated. The Company has consistently applied the following accounting policies to all periods presented in these financial statements.
For the purpose of these financial statements, previous year means the financial year ended March 31, 2020.
a) 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
⢠Held primarily for the purpose of trading
⢠Expected to be realised within twelve months after the reporting period, or
⢠Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified 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.
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.
b) Foreign currencies
The Companyâs financial statements are presented in INR, which is also the Companyâs functional currency.
Transactions and balances
On initial recognition, transactions in currencies other than the Companyâs functional currency (foreign currencies) are translated at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the exchange rate at that date. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous period are recognised in statement of profit and loss in the period in which they arise.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
c) Fair value measurement
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for the asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
⢠Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
⢠Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
⢠Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
d) Segment reporting
Based on the âManagement Approachâ as defined in Ind AS 108 - Operating Segment, the Chief Operating Decision Maker (CODM) of the Company is responsible for allocating resources and assessing performance of the operating segments and accordingly is identified as the CODM. Operating segments are reported in a manner consistent with the internal reporting provided to the CODM.
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.
e) Property, plant and equipment
Items of property, plant and equipment and other intangible assets are stated in balance sheet at cost less accumulated depreciation and accumulated impairment losses, if any. Cost directly attributable to acquisition are capitalised until the property, plant and equipment are ready for use, as intended by the management. Subsequent expenditures are capitalised only when they increase the future economic benefits embodied in the specific asset to which they relate.
Capital work in progress is stated at cost, net of accumulated impairment loss, if any.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. All other repairs and maintenance cost are recognised in the statement of profit and loss account as incurred.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of property, plant and equipment and is recognised in statement of profit and loss.
Depreciation is calculated on a straight line basis over the estimated useful life of the assets as follows:
|
Asset category |
No. of years |
|
Buildings |
60 |
|
Plant and equipment |
3-25 |
|
Vehicles |
5 |
|
Office equipment |
2-5 |
|
Furniture and fixtures |
10 |
The Company, based on technical assessment made by technical experts and management estimate, depreciates certain items plant and equipment, vehicle over estimated useful lives which are different from the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflects fair approximation of the period over which the assets are likely to be used. Depreciation methods, useful lives and residual values are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
f) Intangible assets
Intangible assets that are acquired by the Company and that have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses, if any. Subsequent expenditures are capitalised only when they increase the future economic benefits embodied in the specific asset to which they relate.
Software for internal use, which is primarily acquired from third-party vendors, including consultancy charges for implementing the software, is capitalised. Subsequent costs are charged to the statement of profit and loss as incurred. The capitalised costs are amortised over the estimated useful life of the software i.e. 5 years.
Intangible assets are de-recognised either on their disposal or where no future economic benefits are expected from their use. Gain or loss arising on such de-recognition is recognised in statement of profit and loss and are measured as the difference between the net disposal proceeds, if any, and the carrying amount of respective intangible assets as on the date of de-recognition.
g) Research and development cost
Expenditure on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding are recognised as an expense when incurred. Development expenditures on an individual project are recognised as an intangible asset when the Company can demonstrate:
⢠The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
⢠Its intention to complete and its ability and intention to use or sell the asset
⢠How the asset will generate future economic benefits
⢠The availability of resources to complete the asset
⢠The ability to measure reliably the expenditure during development
The expenditure to be capitalised include the cost of materials and other costs directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in statement of profit and loss as incurred.
Procurement of research and development materials are issued directly for consumption to the user department and disclosed under cost of materials consumed.
Acquired research and development intangible assets which are under development, are recognised as In-Process Research and Development assets (âIPR&Dâ). IPR&D assets are not amortised, but evaluated for potential impairment on an annual basis or when there are indications that the carrying value may not be recoverable. Any impairment charge on such IPR&D assets is recognised in profit and loss. Intangible assets relating to products under development, other intangible assets not available for use and intangible assets having indefinite useful life are tested for impairment annually, or more frequently when there is an indication that the assets may be impaired.
h) Impairment of non-financial assets
The carrying amounts of the Companyâs tangible and intangible 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 in order to determine the extent of the impairment loss, if any.
The recoverable amount of an asset or cash-generating unit (as defined below) is the greater of its value in use and its fair value less costs to sell. 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 the cash-generating unit for which the estimates of future cash flows have not been adjusted. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the âcash-generating unitâ).
An impairment loss is recognised in the statement of profit and loss if the estimated recoverable amount of an asset or its cash generating unit is lower than its carrying amount. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the other assets in the unit on a pro-rata basis.
In respect of other asset, impairment losses recognised in prior periods are assessed at each reporting date for any indications 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. An impairment loss is reversed only to the extent that the assetâs 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.
i) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement-
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date.
Subsequent measurement-
For purposes of subsequent measurement, financial assets are classified in three categories:
i. Debt instruments measured at amortised cost
ii. Debt instruments measured at fair value through other comprehensive income (FVTOCI)
iii. Debt instruments measured at fair value through profit or loss (FVTPL)
iv. Equity instruments are measured at fair value through other comprehensive income (FVTOCI)
A. Debt instruments
i. Debt instruments measured at amortised cost - A âdebt instrumentâ is measured at the amortised cost if both the following conditions are met:
⢠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. 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 or loss. The losses arising from impairment are recognised in the profit or loss.
ii. Debt instruments measured at FVTOCI - A âdebt instrumentâ is measured as at FVTOCI if both of the following criteria are met:
⢠The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
⢠The contractual terms of the instrument give rise on specified dates to cash flows that are SPPI on the principal amount outstanding.
Debt instruments included within the FVTOCI 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). However, the Company recognises interest income, impairment losses and reversals and foreign exchange gain or loss in the statement of profit or loss. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to statement of profit or loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
iii. Debt instruments measured at FVTPL - FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorisation as at amortised cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortised cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatchâ).
B. Equity instruments
All equity instruments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present subsequent changes in the fair value in OCI. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, including foreign exchange gain or loss and excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to profit or loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the statement of profit or 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 derecognised (i.e. removed from the Companyâs balance sheet) when:
⢠The contractual rights to receive cash flows from the asset have expired.
⢠The Company has transferred its rights to receive contractual 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 arrangements and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a 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.
Impairment of financial assets-
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
a) Financial assets that are debt instruments, and are measured at amortised cost
b) Trade receivables or any contractual right to receive cash or another financial asset
c) Loan commitments which are not measured as at FVTPL
The Company follows âsimplified approachâ for recognition of impairment loss allowance on trade receivables or any contractual right to receive cash or another financial asset.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade
receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
ECL impairment loss allowance (or reversal) recognized during the year is recognized as income/ expense in the statement of profit and loss (P&L). This amount is reflected under the head âother expensesâ in the statement of profit or loss. The balance sheet presentation for various financial instruments is described below:
Financial assets measured as at amortised cost, contractual revenue receivables:
ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
Financial liabilities and equity instruments-
Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments-
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
Repurchase of the Companyâs own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in statement of profit or loss on the purchase, sale, issue or cancellation of the Companyâs own equity instruments.
Initial recognition and measurement-
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
Subsequent measurement-
All financial liabilities are subsequently measured at amortised cost using the effective interest rate method or at FVTPL. Financial liabilities at fair value through profit or loss-
Financial liabilities are classified as at FVTPL when the financial liability is held for trading or is designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred principally for the purpose of repurchasing in the near term or on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking. This category also includes derivative entered into by the Company that are not designated and effective as hedging instruments in hedge relationships as defined by Ind AS 109. Gains or losses on liabilities held for trading are recognised in the statement of profit or loss.
Financial liabilities subsequently measured at amortised cost-
Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost in subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest rate (EIR) method. Interest expense that is not capitalised as part of costs of an asset is included in the finance costs line item in the statement of profit or loss.
After initial recognition, such financial liabilities are subsequently measured at amortised cost using the EIR method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or 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 de-recognition of the original liability and the recognition of a new liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in statement of profit or loss.
Reclassification of financial assets-
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Companyâs senior management determines change in the business model as a result of external or internal changes which are significant to the Companyâs operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
j) Leases
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, 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: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
i) Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:
⢠Building 3-5 years
The right-of-use assets are also subject to impairment. Refer to the accounting policies in section (h) Impairment of nonfinancial assets.
ii) Lease liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including insubstance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
iii) Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straightline basis over the lease term.
k) Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of 3 months or less which are subject to an insignificant risk of change in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and fixed deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Companyâs cash management.
l) Provisions, contingent liabilities and contingent assets
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of past event, it is probable that an overflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flow as 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.
Contingent liabilities and contingent assets-
Contingent liability is disclosed for,
i. Possible obligations which will be confirmed only by future events not wholly within the control of the Company, or
ii. Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
Contingent assets are not recognised in the financial statements unless it becomes virtually certain that an inflow of economic benefits will arise. When an inflow of benefits is probable, contingent assets are disclosed in financial statements.
m) Revenue from operations
Revenue from contracts with customers Milestone payments and out licensing arrangements
Revenues include amounts derived from product out-licensing agreements. These arrangements typically consist of an initial up-front payment on inception of the license and subsequent payments dependent on achieving certain milestones in accordance with the terms prescribed in the agreement. Non-refundable up-front license fees received in connection with product out-licensing agreements are deferred and recognised over the period in which the Company has continuing performance obligations. Milestone payments which are contingent on achieving certain clinical milestones are recognised as revenues either on achievement of such milestones, if the milestones are considered substantive, or over the period the Company has continuing performance obligations, if the milestones are not considered substantive. If milestone payments are creditable against future royalty payments, the milestones are deferred and released over the period in which the royalties are anticipated to be received.
Research and development services
Revenue from services rendered, which primarily relate to research and development, is recognised in the statement of profit and loss as the underlying services are performed.
Royalties
Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement (provided that it is probable that economic benefits will flow to the Company and the amount of revenue can be measured reliably). Royalty arrangements that are based on sales and other measures are recognised by reference to the underlying arrangement.
Dividend
Dividend income is recognised when the Companyâs right to receive the payment is established, which is generally when shareholders approve the dividend.
Interest income
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that assetâs net carrying amount on initial recognition.
Contract balances Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
Trade receivables
A receivable represents the Companyâs right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs under the contract.
n) Employee benefits Defined benefit plans
The Company operates a defined benefit gratuity plan which requires contribution to be made to a separately administered fund.
The liability in respect of defined benefit plans is calculated using the projected unit credit method with actuarial valuations being carried out at the end of each annual reporting period. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds. The currency and term of the government bonds shall be consistent with the currency and estimated term of the postemployment benefit obligations. The current service cost of the defined benefit plan, recognised in the statement of profit and loss as employee benefits expense, reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes, curtailments and settlements. Past service costs are recognised in statement of profit and loss in the period of a plan amendment. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in statement of profit and loss. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited
to OCI in the period in which they arise and is reflected immediately in retained earnings and is not reclassified to statement of profit and loss.
Termination benefits
Termination benefits are recognised as an expense at the earlier of the date when the Company can no longer withdraw the offer of those benefits and when the entity recognises costs for a restructuring that is within the scope of Ind AS 37 and involves the payment of termination benefits.
Short-term and other long-term employee benefits
Accumulated leave, which is expected to be utilised within the next 12 months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred.
The Companyâs net obligation in respect of other long term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and previous periods. That benefit is discounted to determine its present value.
Defined contribution plans
The Companyâs contributions to defined contribution plans are recognised as an expense as and when the services are received from the employees entitling them to the contributions. The Company does not have any obligation other than the contribution made.
o) Borrworing cost
Borrowing costs that are directly attributable to the construction or production of a qualifying asset are capitalised as part of the cost of that asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
p) Income tax
Income tax expense consists of current and deferred tax. Income tax expense is recognised in statement of profit and loss except to the extent that it relates to items recognised in OCI or directly in equity, in which case it is recognised in OCI or directly in equity respectively. Current tax is the expected tax payable on the taxable profit for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous years. Current tax assets and tax liabilities are offset where the Company has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities are offset if there is a legally enforceable right to set off corresponding current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority on the Company.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Withholding tax arising out of payment of dividends to shareholders under the Indian Income Tax regulations is not considered as tax expense for the Company and all such taxes are recognised in the statement of changes in equity as part of the associated dividend payment.
Minimum Alternate Tax (âMATâ) credit is recognised as deferred tax 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. MAT credit recognised as an asset is reviewed at each balance sheet date and written down to the extent the aforesaid convincing evidence no longer exists.
Accruals for uncertain tax positions require management to make judgments of potential exposures. Accruals for uncertain tax positions are measured using either the most likely amount or the expected value amount depending on which method the entity expects to better predict the resolution of the uncertainty. Tax benefits are not recognised unless the management, based upon its interpretation of applicable laws and regulations and the expectation of how the tax authority will resolve the matter, concludes that such benefits will be accepted by the authorities. Once considered probable of not being accepted, management reviews each material tax benefit and reflects the effect of the uncertainty in determining the related taxable amounts.
q) Earnings per share
The Company presents basic and diluted earnings per share (âEPSâ) data for its equity shares. Basic EPS is calculated by dividing the profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to equity shareholders and the weighted average number of equity shares outstanding for the effects of all dilutive potential ordinary shares, which includes all stock options granted to employees.
The number of equity shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of the financial statements by the board of directors.
r) Share issue expenses
The Company incurs various costs in issuing or acquiring its own equity instruments. The transaction costs of an equity transaction are accounted for as a deduction from equity to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided. The costs of an equity transaction that is abandoned are recognised as an expense in the statement of profit and loss.
s) Recent accounting pronouncements
Standards issued but not yet effective and not early adopted by the Company
The Ministry of Corporate Affairs (âMCAâ) notifies new standard or amendments to the existing standards. There is no such notification which would have been applicable from April 1, 2021.
t) Changes in accounting policies and disclosures New and amended standards
Several amendments and interpretations apply for the first time in March 2021, but do not have an impact on the financial statements of the Company. The Company has not early adopted any standards or amendments that have been issued but are not yet effective.
u) Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset (or disposal group) and its sale is highly probable. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets held for sale are not depreciated or amortised.
Mar 31, 2018
1.1 Statement of compliance
The Company has prepared financial statements for the year ended March 31, 2018 in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended) together with the comparative period data as at and for the year ended March 31, 2017. Further, the Company has prepared the opening balance sheet as at April 01, 2016 (the transition date) in accordance with Ind AS.
For all the periods up to the year ended March 31, 2017, the Company had prepared its financial statements in accordance with accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).
These are the Companyâs first Ind AS financial statements. Refer Note 43 for the details of first-time adoption exemptions availed by the Company.
1.2 Basis of preparation and presentation
The financial statements have been prepared on the historical cost basis, except for: (i) certain financial instruments that are measured at fair values at the end of each reporting period; and (ii) defined benefit plans - plan assets that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
The financial statements are prepared in INR and all values are rounded to the nearest Lakhs, except when otherwise stated. The Company has consistently applied the following accounting policies to all periods presented in these financial statements.
a) 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
- Held primarily for the purpose of trading
- Expected to be realised within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified 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.
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.
b) Foreign currency
The Companyâs financial statements are presented in INR, which is also the companyâs functional currency.
On initial recognition, transactions in currencies other than the Companyâs functional currency (foreign currencies) are translated at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the exchange rate at that date Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous period are recognised in profit or loss in the period in which they arise.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
c) Fair Value Measurement
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
- Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
- Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
d) Segment Reporting
Based on the âManagement Approachâ as defined in Ind AS 108 - Operating Segment, the chief operating decision maker of the Company is responsible for allocating resources and assessing performance of the operating segments and accordingly is identified as the chief operating decision maker. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.
e) Property, Plant and Equipment
Items of property, plant and equipment including capital work-in-progress are stated in balance sheet at cost less accumulated depreciation and accumulated impairment losses, if any. Cost directly attributable to acquisition are capitalised until the property, plant and equipment are ready for use, as intended by the management.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. All other repairs and maintenance cost are recognised in the statement of profit and loss account as incurred.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of property, plant and equipment and is recognised in profit or loss.
Depreciation is calculated on a straight line basis over the estimated useful life of the assets as follows:
The Company, based on technical assessment made by technical experts and management estimate, depreciates certain items plant and equipment, vehicle over estimated useful lives which are different from the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflects fair approximation of the period over which the assets are likely to be used. Depreciation methods, useful lives and residual values are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
A leased assets is depreciated over the useful life of the assets. However, if there is no reasonable certainty that the company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
The company has elected to measure all its PPE at the previous GAAP carrying amount at the date of transition to Ind AS. (Refer Note 43)
f) Intangible assets
Intangible assets that are acquired by the Company and that have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses, if any. Subsequent expenditures are capitalised only when they increase the future economic benefits embodied in the specific asset to which they relate.
Software for internal use, which is primarily acquired from third-party vendors, including consultancy charges for implementing the software, is capitalised. Subsequent costs are charged to the statement of profit and loss as incurred. The capitalised costs are amortised over the estimated useful life of the software i.e. 5 years.
Derecognition of intangible assets
Intangible assets are de-recognised either on their disposal or where no future economic benefits are expected from their use. Gain or loss arising on such de-recognition is recognised in profit or loss and are measured as the difference between the net disposal proceeds, if any, and the carrying amount of respective intangible assets as on the date of derecognition.
g) Research and development cost
Expenditure on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding are recognised as an expense when incurred. Development activities involve a plan or design for the production of new or substantially improved products and processes. An internally-generated intangible asset arising from development is recognised if and only if all of the following have been demonstrated:
- The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
- Its intention to complete and its ability and intention to use or sell the asset
- How the asset will generate future economic benefits
- The availability of resources to complete the asset
- The ability to measure reliably the expenditure during development
The expenditure to be capitalised include the cost of materials and other costs directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in profit or loss as incurred.
Procurement of research and development materials are issued directly for consumption to the user department and disclosed under R & D materials consumed.
h) Impairment of non-financial assets
The carrying amounts of the Companyâs tangible and intangible 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 in order to determine the extent of the impairment loss, if any.
The recoverable amount of an asset or cash-generating unit (as defined below) is the greater of its value in use and its fair value less costs to sell. 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 the cash-generating unit for which the estimates of future cash flows have not been adjusted. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the âcash-generating unitâ).
An impairment loss is recognised in the profit or loss if the estimated recoverable amount of an asset or its cash generating unit is lower than its carrying amount. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the other assets in the unit on a pro-rata basis.
In respect of other asset, impairment losses recognised in prior periods are assessed at each reporting date for any indications 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. An impairment loss is reversed only to the extent that the assetâs 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.
i) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement-
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date.
Subsequent measurement-
For purposes of subsequent measurement, financial assets are classified in three categories:
i. Financial assets measured at amortised cost
ii. Financial assets measured at fair value through other comprehensive income (FVTOCI)
iii. Financial assets measured at fair value through profit or loss (FVTPL)
A. Debt instruments
i. Debt instruments measured at amortised cost - A âdebt instrumentâ is measured at the amortised cost if both the following conditions are met:
- 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. 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 profit or loss. The losses arising from impairment are recognised in the profit or loss.
ii. Debt instruments measured at FVTOCI - A âdebt instrumentâ is measured as at FVTOCI if both of the following criteria are met:
- The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
- The contractual terms of the instrument give rise on specified dates to cash flows that are SPPI on the principal amount outstanding.
Debt instruments included within the FVTOCI 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). However, the Company recognises interest income, impairment losses & reversals and foreign exchange gain or loss in the profit or loss. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to profit or loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
iii. Debt instruments measured at FVTPL - FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorisation as at amortised cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortised cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatchâ).
B. Equity instruments
All equity instruments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present subsequent changes in the fair value in OCI. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, including foreign exchange gain or loss and excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to profit or loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the profit or 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 derecognised (i.e. removed from the Companyâs balance sheet) when:
- The contractual rights to receive cash flows from the asset have expired, or The Company has transferred its rights to receive contractual 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 passthrough arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the 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.
On Derecognition of a financial asset in its entirety, the difference between the assetâs carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in OCI and accumulated in equity is recognised in profit or loss if such gain or loss would have otherwise been recognised in profit or loss on disposal of that financial asset.
Impairment of financial assets-
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
a) Financial assets that are debt instruments, and are measured at amortised cost
b) Lease receivables under Ind AS 17
c) Trade receivables or any contractual right to receive cash or another financial asset
d) Loan commitments which are not measured as at FVTPL
The Company follows âsimplified approachâ for recognition of impairment loss allowance on trade receivables or any contractual right to receive cash or another financial asset.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on 12-month ECL.
As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the statement of profit and loss (P&L). This amount is reflected under the head âother expensesâ in the P&L. The balance sheet presentation for various financial instruments is described below:
- Financial assets measured as at amortised cost, contractual revenue receivables and lease receivables:
ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the group does not reduce impairment allowance from the gross carrying amount.
Financial liabilities and equity instruments-
Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments-
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
Repurchase of the Companyâs own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Companyâs own equity instruments.
Initial recognition and measurement-
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
Subsequent measurement-
All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL. Financial liabilities at fair value through profit or loss-
Financial liabilities are classified as at FVTPL when the financial liability is held for trading or is designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred principally for the purpose of repurchasing in the near term or on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking. This category also includes derivative entered into by the Company that are not designated and effective as hedging instruments in hedge relationships as defined by Ind AS 109. Gains or losses on liabilities held for trading are recognised in the profit or loss.
Financial liabilities subsequently measured at amortised cost-
Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost in subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest rate (EIR) method. Interest expense that is not capitalised as part of costs of an asset is included in the âFinance costsâ line item in the profit or loss.
After initial recognition, such financial liabilities are subsequently measured at amortised cost using the EIR method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the profit or loss.
Derecognition-
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
Reclassification of financial assets-
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Companyâs senior management determines change in the business model as a result of external or internal changes which are significant to the Companyâs operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
j) Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Company as a lessee-
A lease that transfers substantially all the risks and rewards incidental to ownership to the lessee is classified as a finance lease. All other leases are classified as operating leases. Operating lease payments are generally recognised as an expense in the profit or loss on a straight-line basis over the lease term. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases, such increases are recognised in the year in which such benefits accrue. Contingent rentals arising under operating leases are also recognised as expenses in the periods in which they are incurred.
k) Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of 3 months or less which are subject to an insignificant risk of change in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and fixed deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Companyâs cash management.
l) Provisions, contingent liabilities and contingent assets
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of 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.
Contingent liabilities and contingent assets-
Contingent liability is disclosed for,
i. Possible obligations which will be confirmed only by future events not wholly within the control of the Company, or
ii. Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
Contingent Assets are not recognised in the financial statements unless it becomes virtually certain that an inflow of economic benefits will arise. When an inflow of benefits is probable, contingent assets are disclosed in financial statements.
m) Revenue
Revenue is net of returns, sales tax, service tax, goods and service tax, chargebacks, rebates and other similar allowances.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made.
Revenue from services rendered i.e. Sale of Technology / Know-how (rights, licenses and other intangibles) is recognised in the profit or loss as the underlying services are performed or when risk and rewards of ownership of the products are passed on to the customers, which is generally as per agreement. Upfront non-refundable payments received are deferred and recognised as revenue over the expected period over which the related services are expected to be performed.
Royalties
Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement (provided that it is probable that economic benefits will flow to the Company and the amount of revenue can be measured reliably). Royalty arrangements that are based on sales and other measures are recognised by reference to the underlying arrangement.
Dividend
Dividend income is recognised when the Companyâs right to receive the payment is established, which is generally when shareholders approve the dividend.
Interest income
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that assetâs net carrying amount on initial recognition.
n) Employee benefits
Defined benefit plans
The liability in respect of defined benefit plans is calculated using the projected unit credit method with actuarial valuations being carried out at the end of each annual reporting period. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds. The currency and term of the government bonds shall be consistent with the currency and estimated term of the post-employment benefit obligations. The current service cost of the defined benefit plan, recognised in the profit or loss as employee benefits expense, reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes, curtailments and settlements. Past service costs are recognised in profit or loss in the period of a plan amendment. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in profit or loss. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to OCI in the period in which they arise and is reflected immediately in retained earnings and is not reclassified to profit or loss.
Termination benefits
Termination benefits are recognised as an expense at the earlier of the date when the Company can no longer withdraw the offer of those benefits and when the entity recognises costs for a restructuring that is within the scope of Ind AS 37 and involves the payment of termination benefits.
Short-term and Other long-term employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, and casual leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service. The liability in respect of leave encashment is provided for on the basis of an actuarial valuation on projected unit credit method at the end of financial year.
The Companyâs net obligation in respect of other long term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and previous periods. That benefit is discounted to determine its present value.
Defined contribution plans
The Companyâs contributions to defined contribution plans are recognised as an expense as and when the services are received from the employees entitling them to the contributions.
o) Income tax
Income tax expense consists of current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised in OCI or directly in equity, in which case it is recognised in OCI or directly in equity respectively. Current tax is the expected tax payable on the taxable profit for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous years. Current tax assets and tax liabilities are offset where the Company has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities are offset if there is a legally enforceable right to set off corresponding current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority on the Company.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Withholding tax arising out of payment of dividends to shareholders under the Indian Income tax regulations is not considered as tax expense for the Company and all such taxes are recognised in the statement of changes in equity as part of the associated dividend payment.
Minimum Alternate Tax (âMATâ) credit is recognised as deferred tax 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. MAT credit recognised as an asset is reviewed at each Balance Sheet date and written down to the extent the aforesaid convincing evidence no longer exists.
p) Earnings per share
The Company presents basic and diluted earnings per share (âEPSâ) data for its equity shares. Basic EPS is calculated by dividing the profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to equity shareholders and the weighted average number of equity shares outstanding for the effects of all dilutive potential ordinary shares, which includes all stock options granted to employees.
The number of equity shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of the financial statements by the Board of Directors.
q) Share Issue Expenses
The Company incurs various costs in issuing or acquiring its own equity instruments. The transaction costs of an equity transaction are accounted for as a deduction from equity to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided. The costs of an equity transaction that is abandoned are recognised as an expense.
Mar 31, 2017
ii Use of Estimates
The preparation of financial statements in conformity with the Generally Accepted Accounting Principles in India requires estimates and assumptions to be made that affect the reported amount of assets and liabilities and disclosure of contingent liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual result and estimates are recognized in the period in which the results are known / materialized.
iii Fixed Assets and Depreciation (Tangible Assets)
Fixed Assets are stated at historical cost less accumulated depreciation thereon and impairment losses, if any. Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation on fixed assets has been provided on the Straight Line Method as per the useful life prescribed in Schedule II to the Companies Act, 2013. Assets costing '' 5,000 or less are charged off as expense in the year of purchase. The cost of fixed assets comprises its purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use, other incidental expenses and interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use.
iv Leases
Lease arrangements where risk and rewards incidental to ownership of the asset substantially vest with less or are recognized as operating lease. Lease rental for assets taken on operating lease are recognized in the Statement of Profit and Loss on a straight line basis over the period of lease.
v Research and Development Cost
The research and development cost is accounted in accordance with Accounting Standard - 26 âIntangible Assets''. All related revenue expenditure incurred on original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding up to the time when it is possible to demonstrate probable future economic benefits, is recognized as research expenses and charged off to the Statement of Profit and Loss, as incurred. All subsequent expenditure incurred for product development on the application of research findings or other knowledge upon demonstration of probability of future economic benefits, prior to the commencement of production, to the extent identifiable and possible to segregate are accumulated and carried forward as development expenditure under Intangible assets under development, to be capitalized as an intangible asset on completion of the project. In case a project does not proceed as per expectations / plans, the same is abandoned and the amount classified as development expenditure under Intangible assets under development is charged off to the Statement of Profit and Loss.
vi Revenue Recognition
Sale of Technology / Know-how (rights, licenses and other intangibles) are recognized when performance obligation is completed or when risk and rewards of ownership of the products are passed on to the customers, which is generally as per agreement. License Fees / Royalty Income is recognized on accrual basis as per relevant agreement. Sales are stated net of returns, VAT/ Sales Tax, Service tax if any.
vii Investments
Investments are classified into Current and Long-term Investments. Current Investments are valued at lower of cost and fair value. Long-term Investments are stated at cost less provision, if any, for other than temporary diminution in the value of such investments.
viii Foreign Currency Transactions and Translations Initial recognition
Transactions in foreign currencies entered into by the Company are accounted at the exchange rate prevailing on the date of the transaction or at rate that closely approximate the rate at the date of the transaction.
Measurement at the balance sheet date
Foreign currency monetary items (other than derivative contracts) of the Company, outstanding at the balance sheet date are restated at the year-end rates. Non-monetary items of the Company are carried at historical cost.
Accounting for forward contracts
Premium / discount on forward exchange contracts, which are not intended for trading or speculation purposes, are amortized over the period of the contracts if such contracts relate to monetary items as at the balance sheet date. Any profit or loss arising on cancellation or renewal of such a forward exchange contract is recognized as income or as expense in the period in which such cancellation or renewal is made.
ix Derivative Contracts
Derivative contracts in the nature of currency forward contracts with an intention to hedge existing assets and liabilities are accounted as per the policy stated for Foreign currency transactions and translations.
All other derivative contracts entered into for hedging the future foreign currency fluctuation risk are accounted for on the principles of prudence as enunciated in Accounting Standard 1. Pursuant to this, losses if any on mark to market basis are recognized in Statement of Profit and Loss.
x Government Grants / Subsidies
Government grants are accounted when there is reasonable assurance that the Company will comply with the conditions attached to them and it is reasonably certain that the ultimate collection will be made. Capital subsidy in nature of Government Grants related to specific fixed assets is accounted for where collection is reasonably certain and the same is shown as a deduction from the gross value of the asset concerned in arriving at its book value and accordingly the depreciation is provided on the reduced book value.
xi Taxes on Income
Tax expenses comprises of Current tax and Deferred tax. Current Tax provision, if any, has been made on the basis of reliefs and deductions available under the Income Tax Act,1961. Minimum Alternate Tax (MAT) credit entitlement available under the Income Tax Act, 1961 is recognized to the extent that there is convincing evidence that the Company will pay normal income tax during the specified future period. The Company reviews the carrying amount of MAT credit entitlement at each balance sheet date and writes down the carrying amount to the extent there is no longer convincing evidence that Company will pay normal income tax during the specified future period. Deferred tax resulting from "timing differences" between taxable and accounting income that originate in one period and are capable of being reversed in one or more subsequent period is accounted for using the tax rates and laws that are enacted or substantively enacted as on the Balance Sheet date. The deferred tax asset is recognized and carried forward only to the extent that there is a reasonable certainty that the assets can be realized in future. However, where there is unabsorbed capital expenditure or carry forward losses under taxation laws, deferred tax assets are recognized only if there is virtual certainty of realization of such assets. Deferred tax assets are reviewed as at each Balance Sheet date.
xii Employee Benefits
Employee benefits include provident fund, employee state insurance scheme, gratuity and compensated absences. Defined contribution plans
The Company''s contribution to provident fund and employee state insurance scheme are considered as defined contribution plans and are charged as an expense based on the amount of contribution required to be made and when services are rendered by the employees
Long-term employee benefits
Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related service are recognized as a liability at the present value of the defined benefit obligation as at the balance sheet date ascertained on actuarial basis by an independent valuer and provided as per Company''s rules.
Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognized during the year when the employees render the service. These benefits include performance incentive and compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related service.
Gratuity
With respect to gratuity liability, Company contributes to LIC under Employee Group Gratuity Scheme. The cost of providing benefits is determined using the Projected Unit Credit method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognized in the Statement of Profit and Loss in the period in which they occur. Past service cost is recognized immediately to the extent that the benefits are already vested and otherwise is amortized on a straight-line basis over the average period until the benefits become vested.
xiii Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognized only when there is a present obligation as a result of past events and when a reliable estimate of the amount of the obligation can be made. Contingent liability is disclosed for (i) Possible obligations which will be confirmed only by uncertain future events not wholly within the control of the Company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent Assets are not recognized in the financial statements.
xiv Impairment of 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 asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized 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, the recoverable amount is reassessed and the asset is reflected at the lower of recoverable amount and the carrying amount that would have been determined had no impairment loss been recognized.
xv Share Issue Expenses
Expenses incurred in connection with issue of shares is accumulated and amortized over a period of 5 years from the year of issue of shares.
xvi Operating Cycle
Based on the nature of products / activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as twelve months for the purpose of classification of its assets and liabilities as current and non-current.
Future cash outflows in respect of the above matters are determinable only on receipt of judgments/decisions pending at various forums/authorities. The Company does not expect the outcome of the matters stated above to have material adverse impact on the Company''s financial condition, results of operation or cash flows. The Company doesn''t envisage any likely reimbursement in respect of the above.
* Revised from âExpenditure related to any Pharmaceutical research and development'' pursuant to a Special Resolution passed by shareholders by way of Postal Ballot, whose results were declared on 20th September, 2016.
26 Disclosures relating to Share Capital
i Rights, Preferences and Restrictions attached to Equity Shares
The Company has only one class of share referred to as equity shares having a par value of Rs, 1 per share. Each holder of equity shares is entitled to one vote per share however voting rights in respect of 1584 shares which have been transferred by the Company to âSPARC Unclaimed Suspense Account'' during the year in compliance with the requirements of SEBI (LODR) Regulations, 2015 is under suspension.
iv During the financial year 2015-16, the Company had forfeited 17,093 Equity Shares of Rs, 1 each (paid up amount Rs, 0.60 per share) due to non-payment of call money which is included in Share Capital in Note 1 above. These shares were originally allotted on 3rd October, 2012 and the final call money of Rs, 27 per share was outstanding at the time of forfeiture (consisting of Rs, 0.40 per share and Rs, 26.60 per share towards Share Capital and Share Premium respectively). During the current financial year, the Board of Directors of the Company have anulled the forfeiture on 4,542 shares on receipt of application from the original shareholders along with application money towards balance unpaid amount.
v On 27th April, 2016 the Company has allotted 102,04,081 (one crore two lakhs four thousand eighty one) equity shares of Rs, 1 at a price of Rs, 245 (including premium of Rs, 244) per equity share aggregating to Rs, 25,000 lakhs to its existing equity shareholders on rights basis.
Mar 31, 2013
I Basis of Preparation of Financial Statements
These financial statements are prepared under historical cost
convention on an accrual basis in accordance with the Generally
Accepted Accounting Principles in India and the Accounting Standards
(AS) as notified under the Companies (Accounting Standards) Rules,
2006.
ii Use of Estimates
The presentation of financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities and disclosure of contingent liabilities on the date of the
financial statements and the reported amount of revenues and expenses
during the reporting period. Difference between the actual result and
estimates are recognised in the period in which the results are known /
materialised.
iii Fixed Assets and Depreciation
Fixed Assets are stated at historical cost less accumulated
depreciation thereon and impairment losses, if any. Depreciation is
provided on Straight Line Method at the rates specified in Schedule XIV
to the Companies Act, 1956. Assets costing Rs. 5,000/- or less are
depreciated at hundred percent rate on prorata basis in the year of
purchase.
iv Leases
Lease rental for assets taken on operating lease are charged to the
Statement of Profit and Loss in accordance with Accounting Standard 19
on leases.
v Research and Development Cost
The research and development cost is accounted in accordance with
Accounting Standard - 26 ''Intangible Assets''. All related revenue
expenditure incurred on original and planned investigation undertaken
with the prospect of gaining new scientific or technical knowledge and
understanding up to the time when it is possible to demonstrate
probable future economic benefits, is recognised as research expenses
and charged off to the Statement of Profit and Loss, as incurred. All
subsequent expenditure incurred for product development on the
application of research findings or other knowledge upon demonstration
of probability of future economic benefits, prior to the commencement
of production, to the extent identifiable and possible to segregate are
accumulated and carried forward as development expenditure under
Capital Work-in-Progress, to be capitalised as an intangible asset on
completion of the project. In case a project does not proceed as per
expectations / plans, the same is abandoned and the amount classified
as development expenditure under Capital Work-in-Progress is charged
off to the Statement of Profit and Loss.
vi Revenue Recognition
Sale of Technology / know-how (rights, licenses and other intangibles)
are recognised when performance obligation is completed and risk and
rewards of ownership of the products are passed on to the customers,
which is generally as per agreement. License Fees / Royalty income is
recognised on accrual basis as per relevant agreement. Sales are stated
net of returns, VAT/ Sales Tax, if any.
vii Investments
Investments are classified into Current and Long-term Investments.
Current Investments are valued at lower of cost and fair value.
Long-term Investments are stated at cost less provision, if any, for
other than temporary diminution in their value.
viii Foreign Currency Transactions
Transactions denominated in foreign currencies are recorded at the
exchange rate that approximates the actual rate prevailing at the date
of the transaction. Monetary items denominated in foreign currency at
the year end are translated at year end rate. In respect of monetary
items, which are covered by forward exchange contracts, the difference
between the year end rate and the rate on the date of the contract is
recognised as exchange difference and the premium on such forward
contracts is recognised over the life of the forward contract. The
exchange differences arising on settlement / translation are recognised
in the Statement of Profit and Loss.
ix Derivative Accounting
Forward Contracts in the nature of highly probable forecasted
transactions / firm commitments entered into for hedging the risk of
foreign currency exposure are accounted for on the principles of
prudence as enunciated in Accounting Standard 1 (AS-1) "Disclosure of
Accounting Policies". Pursuant to this, losses, if any, on Mark to
Market basis, are recognised in the Statement of Profit and Loss and
gains are not recognised on prudent basis.
x Government Grants
Government grants are accounted when there is reasonable assurance that
the enterprise will comply with the conditions attached to them and it
is reasonably certain that the ultimate collection will be made.
Capital subsidy in nature of Government Grants related to specific
fixed assets is accounted for where collection is reasonably certain
and the same is shown as a deduction from the gross value of the asset
concerned in arriving at its book value and accordingly the
depreciation is provided on the reduced book value.
xi Taxes on Income
Tax expenses comprises of Current tax and Deferred tax. Current Tax
provision, if any, has been made on the basis of reliefs and deductions
available under the Income Tax Act, 1961. Deferred tax resulting from
"timing differences" between taxable and accounting income is accounted
for using the tax rates and laws that are enacted or substantively
enacted as on the Balance Sheet date. The deferred tax asset is
recognised and carried forward only to the extent that there is a
reasonable certainty that the assets can be realised in future.
However, where there is unabsorbed depreciation or carry forward losses
under taxation laws, deferred tax assets are recognized only if there
is virtual certainty of realisation of such assets. Deferred tax assets
are reviewed as at each Balance Sheet date.
xii Employee Benefits
(a) The Company''s contribution in respect of provident fund is charged
to Statement of Profit and Loss each year.
(b) With respect to gratuity liability, the Company contributes to Life
Insurance Corporation of India (LIC) under LIC''s Group Gratuity policy.
Gratuity liability as determined on actuarial basis by an independent
valuer is charged to Statement of Profit and Loss.
(c) Liability for accumulated compensated absences of employees is
ascertained on actuarial basis by an independent valuer and provided
for as per Company''s rules.
xiii Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised only when there is a present obligation as a
result of past events and when a reliable estimate of the amount of the
obligation can be made. Contingent liability is disclosed for (i)
Possible obligations which will be confirmed only by future events not
wholly within the control of the Company or (ii) Present obligations
arising from past events where it is not probable that an outflow of
resources will be required to settle the obligation or a reliable
estimate of the amount of the obligation cannot be made. Contingent
Assets are not recognised in the financial statements since this may
result in the recognition of the income that may never be realised.
xiv Impairment of 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 asset belongs is less than its
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. If at the Balance Sheet
date there is an indication that a previously assessed impairment loss
no longer exists, the recoverable amount is reassessed and the asset is
reflected at the lower of recoverable amount and the carrying amount
that would have been determined had no impairment loss been recognised.
xv Share Issue Expenses
Expenses incurred in connection with issue of shares is accumulated and
amortised over a period of 5 years from the year of issue of shares.
xvi Operating Cycle
Based on the nature of products / activities of the Company and the
normal time between acquisition of assets and their realisation in cash
or cash equivalents, the Company has determined its operating cycle as
twelve months for the purpose of classification of its assets and
liabilities as current and non-current.
Mar 31, 2012
I Basis of Preparation of Financial Statements
These financial statements are prepared under historical cost
convention on an accrual basis in accordance with the Generally
Accepted Accounting Principles in India and the Accounting Standards
(AS) as notified under the Companies (Accounting Standards) Rules,
2006.
ii Use of Estimates
The presentation of financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities and disclosure of contingent liabilities on the date of the
financial statements and the reported amount of revenues and expenses
during the reporting period. Difference between the actual result and
estimates are recognised in the period in which the results are known /
materialised.
iii Fixed Assets and Depreciation
Fixed Assets are stated at historical cost less accumulated
depreciation thereon and impairment losses, if any. Depreciation is
provided on Straight Line Method at the rates specified in Schedule XIV
to the Companies Act, 1956. Assets costingRs 5,000/- or less are
depreciated at hundred percent rate on prorata basis in the year of
purchase.
iv Leases
Lease rental for assets taken on operating lease are charged to the
Statement of Profit and Loss in accordance with Accounting Standard 19
on leases.
v Research and Development Cost
The research and development cost is accounted in accordance with
Accounting Standard - 26 'Intangible Assets'. All related revenue
expenditure incurred on original and planned investigation undertaken
with the prospect of gaining new scientific or technical knowledge and
understanding up to the time when it is possible to demonstrate
probable future economic benefits, is recognised as research expenses
and charged offto the Statement of Profit and Loss, as incurred. All
subsequent expenditure incurred for product development on the
application of research findings or other knowledge upon demonstration
of probability of future economic benefits, prior to the commencement
of production, to the extent identifiable and possible to segregate are
accumulated and carried forward as development expenditure under
Capital Work-in-Progress, to be capitalised as an intangible asset on
completion of the project. In case a project does not proceed as per
expectations / plans, the same is abandoned and the amount classified
as development expenditure under Capital Work-in-Progress is charged
off to the Statement of Profit and Loss.
vi Revenue Recognition
Sale of Technology / know-how (rights, licenses and other intangibles)
are recognised when performance obligation is completed and risk and
rewards of ownership of the products are passed on to the customers,
which is generally as per agreement. License Fees / Royalty income is
recognised on accrual basis as per relevant agreement. Sales are stated
net of returns, VAT/ Sales Tax, if any.
vii Investments
Investments are classified into Current and Long-term Investments.
Current Investments are valued at lower of cost and fair value.
Long-term Investments are stated at cost less provision, if any, for
other than temporary diminution in their value.
viii Foreign Currency Transactions
Transactions denominated in foreign currencies are recorded at the
exchange rate that approximates the actual rate prevailing at the date
of the transaction. Monetary items denominated in foreign currency at
the year end are translated at year end rate. In respect of monetary
items, which are covered by forward exchange contracts, the difference
between the year end rate and the rate on the date of the contract is
recognised as exchange difference and the premium on such forward
contracts is recognised over the life of the forward contract. The
exchange differences arising on settlement / translation are recognised
in the Statement of Profit and Loss.
ix Derivative Accounting
Forward Contracts in the nature of highly probable forecasted
transactions / firm commitments entered into for hedging the risk of
foreign currency exposure are accounted for on the principles of
prudence as enunciated in Accounting Standard 1 (AS-1) "Disclosure of
Accounting Policies". Pursuant to this, losses, if any, on Mark to
Market basis, are recognised in the Statement of Profit and Loss and
gains are not recognised on prudent basis.
x Government Grants
Government grants are accounted when there is reasonable assurance that
the enterprise will comply with the conditions attached to them and it
is reasonably certain that the ultimate collection will be made.
Capital subsidy in nature of Government Grants related to specific
fixed assets is accounted for where collection is reasonably certain
and the same is shown as a deduction from the gross value of the asset
concerned in arriving at its book value and accordingly the
depreciation is provided on the reduced book value.
xi Taxes on Income
Tax expenses comprises of Current tax and Deferred tax. Current Tax
provision, if any, has been made on the basis of reliefs and deductions
available under the Income Tax Act, 1961. Deferred tax resulting from
"timing differences" between taxable and accounting income is
accounted for using the tax rates and laws that are enacted or
substantively enacted as on the Balance Sheet date. The deferred tax
asset is recognised and carried forward only to the extent that there
is a reasonable certainty that the assets can be realised in future.
However, where there is unabsorbed depreciation or carry forward losses
under taxation laws, deferred tax assets are recognized only if there
is virtual certainty of realisation of such assets. Deferred tax assets
are reviewed as at each Balance Sheet date.
xii Employee Benefits
(a) The Company's contribution in respect of provident fund is charged
to Statement of Profit and Loss each year.
(b) With respect to gratuity liability, the Company contributes to Life
Insurance Corporation of India (LIC) under LIC's Group Gratuity policy.
Gratuity liability as determined on actuarial basis by an independent
valuer is charged to Statement of Profit and Loss.
(c) Liability for accumulated compensated absences of employees is
ascertained on actuarial basis by an independent valuer and provided
for as per Company's rules.
xiii Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised only when there is a present obligation as a
result of past events and when a reliable estimate of the amount ofthe
obligation can be made. Contingent liability is disclosed for (i)
Possible obligations which will be confirmed only by future events not
wholly within the control of the Company or (ii) Present obligations
arising from past events where it is not probable that an outflow of
resources will be required to settle the obligation or a reliable
estimate ofthe amount of the obligation cannot be made. Contingent
Assets are not recognised in the financial statements since this may
result in the recognition of the income that may never be realised.
xiv Impairment of 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 asset belongs is less than its
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. If at the Balance Sheet
date there is an indication that a previously assessed impairment loss
no longer exists, the recoverable amount is reassessed and the asset is
reflected at the lower of recoverable amount and the carrying amount
that would have been determined had no impairment loss been recognised.
xv Share Issue Expenses
Expenses incurred in connection with issue of shares is accumulated and
amortised over a period of 5 years from the year of issue of shares.
Mar 31, 2011
I Basis of Preparation of Financial Statements
These financial statements are prepared under historical cost
convention on an accrual basis in accordance with the Generally
Accepted Accounting Principles in India and the Accounting Standards
(AS) as notified under Companies (Accounting Standards) Rules, 2006.
II Use of Estimates
The presentation of financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Difference
between the actual result and estimates are recognised in the period in
which the results are known / materalised.
III Fixed Assets and Depreciation
Fixed Assets are stated at historical cost less accumulated
depreciation / amortisation thereon and impairment losses, if any.
Depreciation is provided on Straight Line Method at the rates specified
in Schedule XIV to The Companies Act, 1956. Assets costing Rs. 5,000/- or
less are depreciated at hundred percent rate on prorata basis in the
year of purchase.
IV Leases
Lease rental for assets taken on operating lease are charged to the
Profit and Loss Account in accordance with Accounting Standard 19 on
leases.
V Research and Development Cost
The research and development cost is accounted in accordance with
Accounting Standard - 26 ÃIntangible Assets. All related revenue
expenditure incurred on original and planned investigation undertaken
with the prospect of gaining new scientific or technical knowledge and
understanding up to the time when it is possible to demonstrate
probable future economic benefits, is recognised as research expenses
and charged off to the Profit and Loss Account, as incurred. All
subsequent expenditure incurred for product development on the
application of research findings or other knowledge upon demonstration
of probability of future economic benefits, prior to the commencement
of production, to the extent identifiable and possible to segregate are
accumulated and carried forward as development expenditure under
Capital Work in Progress, to be capitalised as an intangible asset on
completion of the project. In case a project does not proceed as per
expectations / plans, the same is abandoned and the amount classified
as development expenditure under Capital Work in Progress is charged
off to the Profit and Loss Account.
VI Revenue Recognition
Sale of Technology / know-how (rights, licenses and other intangibles)
are recognised when performance obligation is completed and risk and
rewards of ownership of the products are passed on to the customers,
which is generally as per agreement. License Fees / Royalty income is
recognised on accrual basis as per relevant agreement. Sales are stated
net of returns, VAT/ Sales Tax, if any.
VII Investments
Investments are classifed into Current and Long Term Investments.
Current Investments are valued at lower of cost and fair value. Long
Term Investments are stated at cost less provision, if any, for other
than temporary diminution in their value.
VIII Foreign Currency Transactions
Transactions denominated in foreign currencies are recorded at the
exchange rate that approximates the actual rate prevailing at the date
of the transaction. Monetary items denominated in foreign currency at
the year end are translated at year end rate. In respect of monetary
items, which are covered by forward exchange contracts, the difference
between the year end rate and the rate on the date of the contract is
recognised as exchange difference and the premium on such forward
contracts is recognised over the life of the forward contract. The
exchange differences arising on settlement / translation are recognised
in the Profit and Loss Account.
IX Government Grants
Government grants are accounted when there is reasonable assurance that
the enterprise will comply with the conditions attached to them and it
is reasonably certain that the ultimate collection will be made.
Capital subsidy in nature of Government Grants related to specific
fixed assets is accounted for where collection is reasonably certain
and the same is shown as a deduction from the gross value of the asset
concerned in arriving at its book value and accordingly the
depreciation is provided on the reduced book value.
X Taxes on Income
Provision for taxation comprises of Current Tax, Deferred Tax and
Fringe Benefit Tax. Current Tax provision has been made on the basis of
reliefs and deductions available under the Income Tax Act, 1961.
Deferred tax resulting from "timing differences" between taxable and
accounting income is accounted for using the tax rates and laws that
are enacted or substantively enacted as on the Balance Sheet date. The
deferred tax asset is recognised and carried forward only to the extent
that there is a reasonable certainty that the assets can be realised in
future. However, where there is unabsorbed depreciation or carry
forward losses under taxation laws, deferred tax assets are recognized
only if there is virtual certainty of realisation of such assets.
Deferred tax assets are reviewed as at each Balance Sheet date.
XI Employee Benefits
(a) The Companys contribution in respect of provident fund is charged
to Profit and Loss Account each year.
(b) With respect to gratuity liability, the Company contributes to Life
Insurance Corporation of India (LIC) under LICs Group Gratuity policy.
Gratuity liability as determined on actuarial basis by an independent
valuer is charged to Profit and Loss Account.
(c) Liability for accumulated compensated absences of employees is
ascertained on actuarial basis by an independent valuer and provided
for as per Companys rules.
XII Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised only when there is a present obligation as a
result of past events and when a reliable estimate of the amount of the
obligation can be made. Contingent liability is disclosed for (i)
Possible obligations which will be confirmed only by future events not
wholly within the control of the Company or (ii) Present obligations
arising from past events where it is not probable that an outflow of
resources will be required to settle the obligation or a reliable
estimates of the amount of the obligation can not be made. Contingent
Assets are not recognised in the financial statements since this may
result in the recognition of the income that may never be realised.
XIII Impairment of 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 asset belongs is less than its
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 a previously assessed impairment loss no
longer exists, the recoverable amount is reassessed and the asset is
reflected at the lower of recoverable amount and the carrying amount
that would have been determined had no impairment loss been recognised.
Mar 31, 2010
I Basis of Preparation of Financial Statements
These financial statements are prepared under historical cost
convention on an accrual basis in accordance with the Generally
Accepted Accounting Principles in India and the Accounting Standards
(AS) as notified under Companies (Accounting Standards) Rules, 2006.
II Use of Estimates
The presentation of financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Difference
between the actual result and estimates are recognised in the period in
which the results are known / materalised.
III Fixed Assets and Depreciation
Fixed Assets are stated at historical cost less accumulated
depreciation / amortisation thereon and impairment losses, if any.
Depreciation is provided on Straight Line Method at the rates specified
in Schedule XIV to The Companies Act, 1956. Assets costing Rs.5,000/-
or less are depreciated at hundred percent rate on prorata basis in the
year of purchase.
IV Leases
Lease rental for assets taken on operating lease are charged to the
Profit and Loss Account in accordance with Accounting Standard 19 on
Leases.
V Research and Development Cost
The research and development cost is accounted in accordance with
Accounting Standard à 26 ÃIntangible AssetÃ. All related revenue
expenditure incurred on original and planned investigation undertaken
with the prospect of gaining new scientific or technical knowledge and
understanding up to the time when it is possible to demonstrate
probable future economic benefits, is recognised as research expenses
and charged off to the Profit and Loss Account, as incurred. All
subsequent expenditure incurred for product development on the
application of research findings or other knowledge upon demonstration
of probability of future economic benefits, prior to the commencement
of production, to the extent identifiable and possible to segregate are
accumulated and carried forward as development expenditure under
Capital Work in Progress, to be capitalised as an intangible asset on
completion of the project. In case a project does not proceed as per
expectations / plans, the same is abandoned and the amount classified
as development expenditure under Capital Work in Progress is charged
off to the Profit and Loss Account.
VI Revenue Recognition
Sale of Technology / know-how (rights, licenses and other intangibles)
are recognised when performance obligation is completed and risk and
rewards of ownership of the products are passed on to the customers,
which is generally as per agreement. Royalty income is recognised on
accrual basis as per relevant agreement. Sales includes Sales Tax /
VAT, excluding Service Tax and are stated net of returns, if any.
VII Foreign Currency Transactions
Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing at the date of transaction. Monetary items
denominated in foreign currency at the year end are translated at year
end rate. The exchange differences arising on settlement / translation
are recognised in the Profit and Loss Account.
VIII Government Grant
Government grants are accounted when there is reasonable assurance that
the enterprise will comply with the conditions attached to them and it
is reasonably certain that the ultimate collection will be made.
Capital subsidy in nature of Government Grants related to specific
fixed assets is accounted for where collection is reasonably certain
and the same is shown as a deduction from the gross value of the asset
concerned in arriving at its book value and accordingly the
depreciation is provided on the reduced book value.
IX Taxes on Income
Provision for taxation comprises of Current Tax, Deferred Tax and
Fringe Benefit Tax. Current Tax provision has been made on the basis of
reliefs and deductions available under the Income Tax Act, 1961.
Deferred tax resulting from
Ãtiming differencesà between taxable and accounting income is accounted
for using the tax rates and laws that are enacted or substantively
enacted as on the balance sheet date. The deferred tax asset is
recognised and carried forward only to the extent that there is a
reasonable certainty that the assets can be realised in future.
However, where there is unabsorbed depreciation or carry forward losses
under taxation laws, deferred tax assets are recognized only if there
is virtual certainty of realisation of such assets. Deferred tax assets
are reviewed as at each Balance Sheet date. Fringe Benefits tax has
been calculated and accounted for in accordance with the provisions of
the Income Tax Act, 1961 and the Guidance note on Fringe Benefit Tax by
the Institute of Chartered Accountants of India. Pursuant to the
enactment of the Finance Act, 2009, Fringe Benefit tax stands abolished
w.e.f. April 01, 2009.
X Employee Benefits
(a) The CompanyÃs contribution in respect of provident fund is charged
to Profit and Loss Account each year.
(b) With respect to gratuity liability, Company contributes to Life
Insurance Corporation of India (LIC) under LICÃs Group Gratuity policy.
Gratuity liability as determined on actuarial basis by an independent
valuer is charged to Profit and Loss Account.
(c) Liability for accumulated compensated absences of employees is
ascertained on actuarial basis by an independent valuer and provided
for as per CompanyÃs rules.
XI Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised only when there is a present obligation as a
result of past events and when a reliable estimate of the amount of the
obligation can be made. Contingent liability is disclosed for (i)
Possible obligations which will be confirmed only by future events not
wholly within the control of the Company or (ii) Present obligations
arising from past events where it is not probable that an outflow of
resources will be required to settle the obligation or a reliable
estimates of the amount of the obligation can not be made. Contingent
Assets are not recognised in the financial statements since this may
result in the recognition of the income that may never be realised.
XII Impairment of 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 asset belongs is less than its
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 if a previously assessed impairment loss no
longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount.
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