Mar 31, 2023
1 Corporate Information
Torrent Pharmaceuticals Limited (âthe Companyâ) is a public limited company incorporated and domiciled in India. The address of its registered office is Torrent House, Off Ashram Road, Ahmedabad - 380 009, Gujarat, India. The Company is one of the leading Indian Pharmaceutical Company engaged in research, development, manufacturing and marketing of generic pharmaceutical formulations. The Companyâs research and development facility is located in the state of Gujarat, India and its manufacturing facilities are located in the states of Gujarat, Himachal Pradesh, Madhya Pradesh, Andhra Pradesh and Sikkim.
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules as amended from time to time and other relevant provisions of the Act.
3 Basis of Preparation of Financial Statements
The financial statements have been prepared and presented under the historical cost convention on an accrual basis of accounting except for the following material items which have been measured at fair value.
⢠Derivative financial instruments
⢠Investments in mutual funds, equity instruments and LLP
⢠Defined benefit plan - plan assets measured at fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if the market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value measurement and/or disclosure purposes in the financial statements is determined on such a basis except for leasing transactions that are within the scope of Ind AS 116 Leases, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 Inventories or value in use in Ind AS 36 Impairment of asset.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
⢠Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
⢠Level 2 inputs are inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly; and
⢠Level 3 inputs are unobservable inputs for the asset or liability.
All assets and liabilities have been classified as current or non-current as set out in the Schedule III (Division II) to the Companies Act, 2013.
The financial statements are presented in Indian Rupees, the currency of the primary economic environment in which the Company operates. All the amounts are stated in the nearest rupee crores.
The preparation of financial statements are in conformity with the recognition and measurement principles of Ind AS which requires management to make critical judgements, estimates and assumptions that affect the reporting of assets, liabilities, income and expenditure. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis and any revisions to the estimates are recognised in the period in which the estimates are revised and future periods are affected.
Key source of estimation of uncertainty at the date of financial statements, which may cause material adjustment to the carrying amount of assets and liabilities within the next financial year, is in respect of:
⢠Useful lives of property, plant and equipment (refer note 4.1)
⢠Valuation of assets acquired as part of business combination (refer note no. 4.2.1)
⢠Useful lives of intangible assets (refer note 4.3)
⢠Impairment of investments in subsidiaries (refer note no. 4.5.1)
⢠Valuation of inventories (refer note 4.7)
⢠Impairment of intangible assets and goodwill (refer note 4.8.2)
⢠Employee benefits (refer note no. 4.9)
⢠Provisions & contingent liabilities (refer note 4.11)
⢠Sales returns (refer note 4.12)
⢠Valuation of deferred tax assets (refer note 4.13)
4 Significant Accounting Policies
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation and any accumulated impairment losses. The cost of fixed assets comprises of its purchase price, non-refundable taxes & levies, freight and other incidental expenses related to the acquisition and installation of the respective assets. Borrowing cost attributable to financing of acquisition or construction of the qualifying fixed assets is capitalised to respective assets when the time taken to put the assets to use is substantial.
When major items of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. The cost of replacement of any property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefit associated with the item will flow to the Company and its cost can be measured reliably.
Capital work in progress are those which are not ready for intended use are carried at cost less impairment loss, if any.
Pre-operative expenditure comprising of revenue expenses incurred in connection with project implementation during the period upto commencement of commercial production are treated as part of the project costs and are capitalised. Such expenses are capitalised only if the project to which they relate, involve substantial expansion of capacity or upgradation.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from its use. Difference between the sales proceeds and the carrying amount of the asset is recognised in the statement of profit and loss.
Freehold land is carried at historical cost and not depreciated. Depreciation on property, plant and equipment is provided using straight-line method based on useful life of the assets estimated by the management. The estimated useful lives, residual values and depreciation method are reviewed at each financial year-end and changes in estimates, if any are accounted for on a prospective basis.
The estimated useful lives of property, plant and equipments are as under:
Type of property, plant and equipment |
Useful life |
Office buildings* |
58 years |
Factory buildings* |
28 years |
Plant and equipments* |
10 to 20 years |
Laboratory equipments* |
5 to 20 years |
Electrical equipments* |
10 to 20 years |
Furniture & Fixtures |
10 years |
Office equipments* |
10 years |
Wind power plant* |
25 years |
Solar power plant* |
30 years |
Computer equipments |
3 years |
Vehicles |
10 years |
* For these classes of assets, the useful life of assets is different than the prescribed life as per Part C of Schedule II of the Companies Act, 2013. The different useful life is based on internal technical evaluation by the Company and historical usage of assets. |
Business Combinations are accounted for using the acquisition method of accounting. Transaction costs incurred in connection with business combination are expensed in the statement of profit and loss. The identifiable assets and liabilities that meet the condition for recognition are recognised at their fair values at the acquisition date.
In case of bargain purchase where the fair value of identifiable assets and liabilities exceed the cost of acquisition, the excess is recognised in other comprehensive income on the acquisition date and accumulate the same in equity as capital reserve after reassessing the fair values of the net identifiable assets and contingent liabilities.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted through goodwill during the measurement period, or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date. These adjustments are called as measurement period adjustments. The measurement period does not exceed one year from the acquisition date.
Business combinations arising from transfers of interests in entities that are under the common control are accounted for using the pooling of interests method. The assets and liabilities of the combining entities are reflected at their carrying amounts and no adjustments are made to reflect their fair values or recognise any new assets or liabilities. The difference between any consideration given and the aggregate historical carrying amounts of assets and liabilities of the acquired entity are recorded in capital reserve and presented separately from other capital reserves with disclosure of its nature and purpose. The financial statement of prior period is restated as if the business combination had occurred from the beginning of the preceding period, irrespective of the actual date of combination.
Goodwill represents the excess of the consideration paid to acquire a business over underlying fair value of the identified assets acquired. Goodwill is carried at cost less accumulated impairment losses, if any. Goodwill is deemed to have an indefinite useful life and is tested for impairment annually or when events or circumstances indicate that the implied fair value of goodwill is less than its carrying amount.
For the purposes of impairment testing, goodwill is allocated to each of the Companyâs cash-generating units (CGUs) that is expected to benefit from the synergies of the combination. Where goodwill has been allocated to a cashgenerating unit and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.
Intangible assets acquired separately are measured at cost of acquisition. Intangible assets acquired under business combination are measured at fair value as of the date of business combination. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and impairment losses, if any.
Acquired research and development intangible assets that are under development are recognised as intangible assets under development. These 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 is recognised as an expense in the statement of profit and loss.
Intangible assets are amortised over their respective estimated useful life using straight-line method. The estimated useful life of amortisable intangibles is reviewed at the end of each reporting period and change in estimates if any are accounted for on a prospective basis.
The estimated useful lives of intangible assets are as mentioned below:
Type of intangible asset |
Useful life |
Softwares |
3 to 5 years |
Product licenses |
Upto 15 years |
Brands |
Upto 15 years |
Non-compete fees |
Upto 5 years |
Drug master files |
10 years |
Foreign currency transactions are recorded at exchange rates prevailing on the date of the transaction. The net gain or loss on account of exchange differences arising on settlement of foreign currency transactions are recognised as income or expense of the period in which they arise. Monetary assets and liabilities denominated in foreign currency as at the balance sheet date are translated at the closing rate. The resultant exchange rate differences are recognised in the statement of profit and loss. Non-monetary assets and liabilities are carried at the rates prevailing on the date of transaction.
The Company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss) and
⢠those measured at amortised cost.
The classification depends on the Companyâs business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
Financial assets are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets (other than financial assets at fair value through profit or loss) are added to or deducted from the fair value of the financial assets, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial assets at fair value through profit or loss are recognised immediately in profit or loss.
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assetsâ cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains / (losses). Interest income from these financial assets is included in other income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains and losses and impairment expenses in other expenses.
Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented net in the statement of profit and loss within other gains / (losses) in the period in which it arises. Interest income from these financial assets is included in other income.
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 rights to receive cash flows from the asset have expired, or
⢠The Company has transferred its rights to receive cash flows from the asset
When the Company has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the Company has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the Company has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of financial asset, the financial asset is derecognised if the Company has not retained control over the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
Dividend is accounted when the right to receive payment is established. Interest income from financial assets is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.
Cash and cash equivalents consists of cash on hand, short demand deposits and highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value. Short term means investments with original maturities / holding period of three months or less from the date of investments. Bank overdrafts that are repayable on demand and form an integral part of the Companyâs cash management are included as a component of cash and cash equivalent for the purpose of statement of cash flow.
Investments in mutual funds are primarily held for the Companyâs temporary cash requirements and can be readily convertible in cash. These investments are initially recorded at fair value and classified as fair value through profit or loss.
The Company measures investment in subsidiaries at cost less provision for impairment, if any.
The Company has made an irrevocable election to present subsequent changes in the fair value of equity investments, not held for trading, in other comprehensive income.
Trade receivables are amounts due from customers for sale of goods or services performed in the ordinary course of business. Trade receivables are initially recognised at its transaction price which is considered to be its fair value and are classified as current assets as it is expected to be received within the normal operating cycle of the business.
The Companyâs financial liabilities include trade payables, loans and borrowing and derivative financial instruments.
All the Companyâs financial liabilities, except for financial liabilities at fair value through profit or loss, are measured at amortised cost.
Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial liabilities (other than financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial liabilities, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
Financial liabilities are subsequently measured at amortised cost using the Effective Interest Rate Method. The Effective Interest Rate Method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or waived off or have expired. An exchange between the Company and the lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
Borrowings are initially recorded at fair value and subsequently measured at amortised costs using effective interest rate method. Transaction costs are charged to statement of profit and loss as financial expenses over the term of borrowing.
Trade payables are amounts due to vendors for purchase of goods or services acquired in the ordinary course of business and are classified as current liabilities to the extent it is expected to be paid within the normal operating cycle of the business.
The Company enters into derivative financial instruments to manage its foreign exchange rate risk. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in the statement of profit and loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in statement of profit and loss depends on the nature of the hedging relationship and nature of hedged items.
Derivative financial instruments that hedges foreign currency risk associated with highly probable forecasted transactions are designated as cash flow hedges and measured at fair value. The effective portion of such hedges is recorded in cash flow hedge reserve, as a component of equity, and re-classified to the statement of profit and loss in the period corresponding to the occurrence of the forecasted transactions. The ineffective portion of such hedges is recorded in the statement of profit and loss immediately.
Hedge effectiveness is tested both at the inception of the hedge relationship as well as on an ongoing basis. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised or no longer qualifies for hedge accounting.
At inception of a contract, the Company assesses whether a contract is or contains a lease. A contract is or contains a lease if the contract conveys the right to control the use of an identified assets 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 contract involves the use of an identified asset, the Company has a right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use and the Company has the right to direct the use of the asset.
At the inception date, right-of-use asset is recognised at cost which includes present value of lease payments adjusted for any payments made on or before the commencement of lease and initial direct cost, if any. It is subsequently measured at cost less accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. Right-of-use asset is depreciated using the straight-line method from the commencement date over the earlier of useful life of the asset or the lease term. When the Company has purchase option available under lease and cost of right-of-use assets reflects that purchase option will be exercised, right-of-use asset is depreciated over the useful life of underlying asset. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.
At the inception date, lease liability is recognised at present value of lease payments that are not made at the commencement of lease. Lease liability is subsequently measured by adjusting carrying amount to reflect interest, lease payments and remeasurement, if any.
Lease payments are discounted using the incremental borrowing rate or interest rate implicit in the lease, if the rate can be determined.
The Company has elected not to apply requirements of Ind AS 116 to leases that has a term of 12 months or less and leases for which the underlying asset is of low value. Lease payments of such lease are recognised as an expense on straight line basis over the lease term.
Inventories are carried at the lower of cost and net realisable value.
The cost incurred in bringing the inventory to their existing location and conditions are determined as follows:
a. Raw material and packing material - Purchase cost of materials on a moving average basis.
b. Finished goods (manufactured) and work in progress - Cost of purchase, conversion cost and other costs on a weighted average cost method.
c. Finished Goods (traded) - Purchase cost on a moving average basis.
The cost of purchase of inventories comprise the purchase price, import duties and other taxes (other than those subsequently recovered by the Company from tax authorities), and transport, handling and other costs directly attributable to bringing the inventory to their existing location and conditions. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sales.
The Company considers various factors like shelf life, ageing of inventory, product discontinuation, price changes and any other factor which impact the Companyâs business in determining the allowance for obsolete, non-saleable and slow moving inventories. The Company considers the above factors and adjusts the inventory provision to reflect its actual experience on a periodic basis.
At each balance sheet date, the Company assesses whether a financial asset is to be impaired. Ind AS 109 requires the Company to apply expected credit loss model for recognition and measurement of impairment loss. The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and is adjusted for forward looking information. The impairment loss is based on the ageing of the receivables that are due and allowance rates used in the provision matrix. For all other financial assets, expected credit losses are measured at an amount equal to the 12-months expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
Property, plant and equipment and intangible assets with finite life are evaluated for recoverability whenever there is any indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis
unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised in the statement of profit and loss to such extent. When an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, such that the increase in the carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised immediately in statement of profit and loss.
CGUs to which goodwill has been allocated are tested for impairment annually or more frequently when there is indication for impairment. If the recoverable amount of a CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
Determination of recoverable amount of CGU requires the management to estimate the future cash flows expected to arise and a suitable discount rate in order to calculate the present value. An impairment loss recognised for goodwill is not reversed in subsequent periods.
Short term benefits payable before twelve months after the end of the reporting period in which the employees have rendered service are accounted as expense in statement of profit and loss.
Contributions to defined contribution plans (provident fund, superannuation and other social security schemes) are recognised as expense when employees have rendered services entitling them to such benefits.
The Companyâs net obligation in respect of an approved gratuity plan, which is defined benefit plan, is calculated using the projected unit credit method and the same is carried out by qualified actuary. The current service cost and interest on the net defined benefit liability / (asset) is recognised in the statement of profit and loss. Past service cost are immediately recognised in the statement of profit and loss. Actuarial gains and losses net of deferred taxes arising from experience adjustment and changes in actuarial assumptions are recognised in other comprehensive income in the period in which they arise.
Termination benefits are recognised as an expense when the Company is committed without any possibility of withdrawal of an offer made to either terminate employment before the normal retirement date or as a result of an offer made to encourage voluntary retirement.
The Companyâs current policy permits eligible employees to accumulate compensated absences up to a prescribed limit and receive cash in lieu thereof in accordance with the terms of the policy. The Company measures the expected cost of accumulating compensated absences as the additional amount that the Company expects to pay as a result of unused entitlement that has accumulated as at the reporting date. The expected cost of these benefits is calculated using the projected unit credit method by qualified actuary every year. Actuarial gains and losses arising from experience adjustment and changes in actuarial assumptions are recognised in the statement of profit and loss in the period in
which they arise. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
Government grants are recognised when there is reasonable assurance that the grant will be received and all attached conditions for receiving such grant have been and will be fulfilled.
Government grants related to asset are recognised as deferred income and charged to statement of profit and loss on a systematic basis over expected useful life of the related asset.
Government grants are recognised in statement of profit and loss on a systematic basis over the period in which Company recognises as expenses the related costs for which the grants are intended to compensate. Government grants that are receivable as compensation for expenses already incurred are recognised in statement of profit and loss in the period in which they become receivable.
When loans received from the government or related institutions with below-market interest rate, the benefit of below-market interest rate is treated as government grant measured as the difference between the proceeds received and the fair value of loan based on prevailing market interest rate.
A possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or; present obligation that arises from past events where it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or the amount of the obligation cannot be measured with sufficient reliability are disclosed as contingent liability and not provided for.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. Contingent assets are not recognised and disclosed only when an inflow of economic benefits is probable.
A provision is recognised when as a result of a past event, the Company has a present obligation whether legal or constructive that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. If the obligation is expected to be settled more than 12 months after the end of reporting date or has no definite settlement date, the provision is recorded as non-current liabilities after giving effect for time value of money, if material. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Revenue is measured based on the transaction price adjusted for discounts and rebates, which is specified in a contract with customer. Revenue are net of estimated returns and taxes collected from customers.
Revenue from sale of goods is recognised at point in time when control is transferred to the customer and it is probable that consideration will be collected. Control of goods is transferred upon the shipment of the goods to the customer or when goods is made available to the customer.
The transaction price is documented on the sales invoice and payment is generally due as per agreed credit terms with customer.
The consideration can be fixed or variable. Variable consideration is only recognised when it is highly probable that a significant reversal will not occur.
Sales return is variable consideration that is recognised and recorded based on historical experience, market conditions and provided for in the year of sale as reduction from revenue. The methodology and assumptions used to estimate returns are monitored and adjusted regularly in line with trade practices, historical trends, past experience and projected market conditions.
Export entitlements are recognised as income when right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
Income tax expense comprises current and deferred tax expense. Income tax expenses are recognised in statement of profit and loss, except when they relate to items recognised in other comprehensive income or directly in equity, in which case, income tax expenses are also recognised in other comprehensive income or directly in equity respectively.
Current tax is the tax payable on the taxable profit for the year, using tax rates enacted or substantively enacted by the end of reporting period by the governing taxation laws, and any adjustment to tax payable in respect of previous periods. Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred taxes arising from deductible and taxable temporary differences between the tax base of assets and liabilities and their carrying amount in the financial statements are recognised using substantively enacted tax rates and laws expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled. The deferred tax arising from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction are not recognised.
Deferred tax asset are recognised only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax assets to be utilised.
Deferred tax assets and liabilities are offset when the Company has a legally enforceable right to do the same.
For units which enjoy tax holiday benefit, deferred tax assets and liabilities have been provided for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
Deferred tax assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which gives rise to future economic benefits in the form of adjustment of future income tax liability. Accordingly, MAT is recognised as deferred tax asset in the balance sheet when the assets can be measured reliably and it is probable that the future economic benefit associated with the asset will be realised.
Basic earnings per share is computed by dividing profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
Revenue expenditure on research and development activities is recognised as expense in the separate heads of the statement of profit and loss in the period in which it is incurred.
Expenditure on in-licensed development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised, if the cost can be reliably measured, the product or process is technically and commercially feasible and the Group has sufficient resources to complete the development and to use and sell the asset. Payments to third parties that generally take the form of up-front payments and milestones for in-licensed products, compounds and intellectual property are capitalised when the probability of expected future economic benefits criterion is considered to be satisfied.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of these assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in statement of profit and loss in the period in which they are incurred.
Goods and service tax (GST) input credit is accounted on an accrual basis on purchase of eligible inputs, capital goods and services. The balance of GST input credit is reviewed at the end of each year and amount estimated to be un-utilisable is charged to the statement of profit and loss for the year.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker of the Company is responsible for allocating resources and assessing performance of the operating segments.
Based on the nature of products/activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current as set out in Schedule III of the Act.
Non-current assets and disposal groups are classified as held for sale if their carrying amount is intended to be recovered principally through a sale (rather than through continuing use) 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 sale of such asset (or disposal group) and the sale is highly probable and is 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 lower of their carrying amount and fair value less costs to sell.
5 Recent Accounting Pronouncements
Recent pronouncements Ministry of Corporate Affairs (âMCAâ) notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On 31st March, 2023, MCA amended the Companies (Indian Accounting Standards) Rules, 2015 by issuing the Companies (Indian Accounting Standards) Amendment Rules, 2023, applicable from 1st April, 2023, as below:
The amendments require companies to disclose their material accounting policies rather than their significant accounting policies. Accounting policy information, together with other information, is material when it can reasonably be expected to influence decisions of primary users of general-purpose financial statements. The Company does not expect this amendment to have any significant impact in its standalone financial statements.
The amendments clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations. The amendments narrowed the scope of the recognition exemption in paragraphs 15 and 24 of Ind AS 12 (recognition exemption) so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. The Company does not expect this amendment to have any significant impact in its standalone financial statements.
The amendments will help entities to distinguish between accounting policies and accounting estimates. The definition of a change in accounting estimates has been replaced with a definition of accounting estimates. Under the new definition, accounting estimates are âmonetary amounts in financial statements that are subject to measurement uncertaintyâ. Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty. The Company does not expect this amendment to have any significant impact in its standalone financial statements.
Mar 31, 2022
Torrent Pharmaceuticals Limited (âthe Companyâ) is a public limited company incorporated and domiciled in India. The address of its registered office is Torrent House, Off Ashram Road, Ahmedabad - 380 009, Gujarat, India. The Company is one of the leading Indian Pharmaceutical Company engaged in research, development, manufacturing and marketing of generic pharmaceutical formulations. The Companyâs research and development facility is located in the state of Gujarat, India and its manufacturing facilities are located in the states of Gujarat, Himachal Pradesh, Madhya Pradesh, Andhra Pradesh and Sikkim.
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules as amended from time to time and other relevant provisions of the Act.
The financial statements have been prepared and presented under the historical cost convention on an accrual basis of accounting except for the following material items which have been measured at fair value.
⢠Derivative financial instruments
⢠Investments in mutual funds, equity instruments and LLP
⢠Defined benefit plan - plan assets measured at fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if the market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value measurement and/or disclosure purposes in the financial statements is determined on such a basis except for leasing transactions that are within the scope of Ind AS 116 Leases, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 Inventories or value in use in Ind AS 36 Impairment of asset.
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
⢠Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
⢠Level 2 inputs are inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly; and
⢠Level 3 inputs are unobservable inputs for the asset or liability.
All assets and liabilities have been classified as current or non-current as set out in the Schedule III (Division II) to the Companies Act, 2013.
The financial statements are presented in Indian Rupees, the currency of the primary economic environment in which the Company operates. All the amounts are stated in the nearest rupee crores.
The preparation of financial statements are in conformity with the recognition and measurement principles of Ind AS which
requires management to make critical judgements, estimates and assumptions that affect the reporting of assets, liabilities, income and expenditure. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis and any revisions to the estimates are recognised in the period in which the estimates are revised and future periods are affected.
Key source of estimation of uncertainty at the date of financial statements, which may cause material adjustment to the carrying amount of assets and liabilities within the next financial year, is in respect of :
⢠Useful lives of property, plant and equipment (refer note 4.1)
⢠Valuation of assets acquired as part of business combination (refer note no. 4.2.1)
⢠Useful lives of intangible assets (refer note 4.3)
⢠Impairment of investments in subsidiaries (refer note no. 4.5.1)
⢠Valuation of inventories (refer note 4.7)
⢠Impairment of intangible assets and goodwill (refer note 4.8.2)
⢠Employee benefits (refer note no. 4.9)
⢠Provisions & contingent liabilities (refer note 4.11)
⢠Sales returns (refer note 4.12)
⢠Valuation of deferred tax assets (refer note 4.13)
4. SIGNIFICANT ACCOUNTING POLICIES
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation and any accumulated impairment losses. The cost of fixed assets comprises of its purchase price, non-refundable taxes & levies, freight and other incidental expenses related to the acquisition and installation of the respective assets. Borrowing cost attributable to financing of acquisition or construction of the qualifying fixed assets is capitalized to respective assets when the time taken to put the assets to use is substantial.
When major items of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. The cost of replacement of any property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefit associated with the item will flow to the Company and its cost can be measured reliably.
Capital work in progress are those which are not ready for intended use are carried at cost less impairment loss, if any.
Pre-operative expenditure comprising of revenue expenses incurred in connection with project implementation during the period upto commencement of commercial production are treated as part of the project costs and are capitalized. Such expenses are capitalized only if the project to which they relate, involve substantial expansion of capacity or upgradation.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from its use. Difference between the sales proceeds and the carrying amount of the asset is recognized in the statement of profit and loss.
Freehold land is carried at historical cost and not depreciated. Depreciation on property, plant and equipment is provided using straight-line method based on useful life of the assets estimated by the management. The estimated useful lives, residual values and depreciation method are reviewed at each financial year-end and changes in estimates, if any are accounted for on a prospective basis.
The estimated useful lives of property, plant and equipments are as under:
Type of property, plant and equipment |
Useful life |
Office buildings* |
58 years |
Factory buildings* |
28 years |
Plant and equipments* |
10 to 20 years |
Laboratory equipments* |
5 to 20 years |
Electrical equipments* |
10 to 20 years |
Furniture & Fixtures |
10 years |
Office equipments* |
10 years |
Computer equipments |
3 years |
Vehicles |
10 years |
* For these classes of assets, the useful life of assets is different than the prescribed life as per Part C of Schedule II of the Companies Act, 2013. The different useful life is based on internal technical evaluation by the Company and historical usage of assets.
Business Combinations are accounted for using the acquisition method of accounting. Transaction costs incurred in connection with business combination are expensed in the statement of profit and loss. The identifiable assets and liabilities that meet the condition for recognition are recognized at their fair values at the acquisition date.
In case of bargain purchase where the fair value of identifiable assets and liabilities exceed the cost of acquisition, the excess is recognised in other comprehensive income on the acquisition date and accumulate the same in equity as capital reserve after reassessing the fair values of the net identifiable assets and contingent liabilities.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted through goodwill during the measurement period, or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date. These adjustments are called as measurement period adjustments. The measurement period does not exceed one year from the acquisition date.
Business combinations arising from transfers of interests in entities that are under the common control are accounted for using the pooling of interests method. The assets and liabilities of the combining entities are reflected at their carrying amounts and no adjustments are made to reflect their fair values or recognise any new assets or liabilities. The difference between any consideration given and the aggregate historical carrying amounts of assets and liabilities of the acquired entity are recorded in capital reserve and presented separately from other capital reserves with disclosure of its nature and purpose. The financial statement of prior period is restated as if the business combination had occurred from the beginning of the preceding period, irrespective of the actual date of combination.
Goodwill represents the excess of the consideration paid to acquire a business over underlying fair value of the identified assets acquired. Goodwill is carried at cost less accumulated impairment losses, if any. Goodwill is deemed to have an indefinite useful life and is tested for impairment annually or when events or circumstances indicate that the implied fair value of goodwill is less than its carrying amount.
For the purposes of impairment testing, goodwill is allocated to each of the Companyâs cash-generating units (CGUs) that is expected to benefit from the synergies of the combination. Where goodwill has been allocated to a cashgenerating unit and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.
Intangible assets acquired separately are measured at cost of acquisition. Intangible assets acquired under business combination are measured at fair value as of the date of business combination. Following initial recognition, intangible assets are carried at cost less accumulated amortization and impairment losses, if any.
Acquired research and development intangible assets that are under development are recognised as intangible assets under development. These 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 is recognised as an expense in the statement of profit and loss.
Intangible assets are amortized over their respective estimated useful life using straight-line method. The estimated useful life of amortizable intangibles is reviewed at the end of each reporting period and change in estimates if any are accounted for on a prospective basis.
The estimated useful lives of intangible assets are as mentioned below:
Type of intangible asset |
Useful life |
Softwares |
3 to 5 years |
Product licenses |
Upto 15 years |
Brands |
Upto 15 years |
Non-compete fees |
Upto 5 years |
Drug master files |
10 years |
Foreign currency transactions are recorded at exchange rates prevailing on the date of the transaction. The net gain or loss on account of exchange differences arising on settlement of foreign currency transactions are recognized as income or expense of the period in which they arise. Monetary assets and liabilities denominated in foreign currency as at the balance sheet date are translated at the closing rate. The resultant exchange rate differences are recognized in the statement of profit and loss. Non-monetary assets and liabilities are carried at the rates prevailing on the date of transaction.
The Company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss) and
⢠those measured at amortised cost.
The classification depends on the Companyâs business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
Financial assets are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets (other than financial assets at fair value through profit or loss) are added to or deducted from the fair value of the financial assets, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial assets at fair value through profit or loss are recognised immediately in profit or loss.
(c) Subsequent measurement :
⢠Amortised Cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
⢠Fair value through other comprehensive income (FVOCI)
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assetsâ cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains / (losses). Interest income from these financial assets is included in other income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains and losses and impairment expenses in other expenses.
Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented net in the statement of profit and loss within other gains / (losses) in the period in which it arises. Interest income from these financial assets is included in other income.
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 rights to receive cash flows from the asset have expired, or
⢠The Company has transferred its rights to receive cash flows from the asset
When the Company has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the Company has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the Company has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of financial asset, the financial asset is derecognised if the Company has not retained control over the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
Dividend is accounted when the right to receive payment is established. Interest income from financial assets is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.
Cash and cash equivalents consists of cash on hand, short demand deposits and highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value. Short term means investments with original maturities / holding period of three months or less from the date of investments. Bank overdrafts that are repayable on demand and form an integral part of the Companyâs cash management are included as a component of cash and cash equivalent for the purpose of statement of cash flow.
Investments in mutual funds are primarily held for the Companyâs temporary cash requirements and can be readily convertible in cash. These investments are initially recorded at fair value and classified as fair value through profit or loss.
The Company measures investment in subsidiaries at cost less provision for impairment, if any.
The Company has made an irrevocable election to present subsequent changes in the fair value of equity investments, not held for trading, in other comprehensive income.
(h) Trade receivables :
Trade receivables are amounts due from customers for sale of goods or services performed in the ordinary course of business. Trade receivables are initially recognized at its transaction price which is considered to be its fair value and are classified as current assets as it is expected to be received within the normal operating cycle of the business.
The Companyâs financial liabilities include trade payables, loans and borrowing and derivative financial instruments.
(a) Classification :
All the Companyâs financial liabilities, except for financial liabilities at fair value through profit or loss, are measured at amortized cost.
Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial liabilities (other than financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial liabilities, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
(c) Subsequent measurement :
Financial liabilities are subsequently measured at amortised cost using the Effective Interest Rate Method. The Effective Interest Rate Method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or waived off or have expired. An exchange between the Company and the lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and
the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
Borrowings are initially recorded at fair value and subsequently measured at amortized costs using effective interest rate method. Transaction costs are charged to statement of profit and loss as financial expenses over the term of borrowing.
(f) Trade payables :
Trade payables are amounts due to vendors for purchase of goods or services acquired in the ordinary course of business and are classified as current liabilities to the extent it is expected to be paid within the normal operating cycle of the business.
The Company enters into derivative financial instruments to manage its foreign exchange rate risk. Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in the statement of profit and loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in statement of profit and loss depends on the nature of the hedging relationship and nature of hedged items.
Derivative financial instruments that hedges foreign currency risk associated with highly probable forecasted transactions are designated as cash flow hedges and measured at fair value. The effective portion of such hedges is recorded in cash flow hedge reserve, as a component of equity, and re-classified to the statement of profit and loss in the period corresponding to the occurrence of the forecasted transactions. The ineffective portion of such hedges is recorded in the statement of profit and loss immediately.
Hedge effectiveness is tested both at the inception of the hedge relationship as well as on an ongoing basis. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised or no longer qualifies for hedge accounting.
At inception of a contract, the Company assesses whether a contract is or contains a lease. A contract is or contains a lease if the contract conveys the right to control the use of an identified assets 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 contract involves the use of an identified asset, the Company has a right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use and the Company has the right to direct the use of the asset.
At the inception date, right-of-use asset is recognised at cost which includes present value of lease payments adjusted for any payments made on or before the commencement of lease and initial direct cost, if any. It is subsequently measured at cost less accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. Right-of-use asset is depreciated using the straight-line method from the commencement date over the earlier of useful life of the asset or the lease term. When the Company has purchase option available under lease and cost of right-of-use assets reflects that purchase option will be exercised, right-of-use asset is depreciated over the useful life of underlying asset. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.
At the inception date, lease liability is recognised at present value of lease payments that are not made at the commencement of lease. Lease liability is subsequently measured by adjusting carrying amount to reflect interest, lease payments and remeasurement, if any.
Lease payments are discounted using the incremental borrowing rate or interest rate implicit in the lease, if the rate can be determined.
The Company has elected not to apply requirements of Ind AS 116 to leases that has a term of 12 months or less and leases for which the underlying asset is of low value. Lease payments of such lease are recognised as an expense on straight line basis over the lease term.
Inventories are carried at the lower of cost and net realizable value.
The cost incurred in bringing the inventory to their existing location and conditions are determined as follows:
a. Raw material and packing material - Purchase cost of materials on a moving average basis.
b. Finished goods (manufactured) and work in progress - Cost of purchase, conversion cost and other costs on a weighted average cost method.
c. Finished Goods (traded) - Purchase cost on a moving average basis.
The cost of purchase of inventories comprise the purchase price, import duties and other taxes (other than those subsequently recovered by the Company from tax authorities), and transport, handling and other costs directly attributable to bringing the inventory to their existing location and conditions. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase.
Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sales.
The Company considers various factors like shelf life, ageing of inventory, product discontinuation, price changes and any other factor which impact the Companyâs business in determining the allowance for obsolete, non-saleable and slow moving inventories. The Company considers the above factors and adjusts the inventory provision to reflect its actual experience on a periodic basis.
At each balance sheet date, the Company assesses whether a financial asset is to be impaired. Ind AS 109 requires the Company to apply expected credit loss model for recognition and measurement of impairment loss. The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and is adjusted for forward looking information. The impairment loss is based on the ageing of the receivables that are due and allowance rates used in the provision matrix. For all other financial assets, expected credit losses are measured at an amount equal to the 12-months expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
Property, plant and equipment and intangible assets with finite life are evaluated for recoverability whenever there is any indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognized in the statement of profit and loss to such extent. When an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, such that the increase in the carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised immediately in statement of profit and loss.
CGUs to which goodwill has been allocated are tested for impairment annually or more frequently when there is indication for impairment. If the recoverable amount of a CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
Determination of recoverable amount of CGU requires the management to estimate the future cash flows expected to arise and a suitable discount rate in order to calculate the present value. An impairment loss recognised for goodwill is not reversed in subsequent periods.
Short term benefits payable before twelve months after the end of the reporting period in which the employees have rendered service are accounted as expense in statement of profit and loss.
Contributions to defined contribution plans (provident fund, superannuation and other social security schemes) are recognized as expense when employees have rendered services entitling them to such benefits.
The Companyâs net obligation in respect of an approved gratuity plan, which is defined benefit plan, is calculated using the projected unit credit method and the same is carried out by qualified actuary. The current service cost and interest on the net defined benefit liability / (asset) is recognized in the statement of profit and loss. Past service cost are immediately recognized in the statement of profit and loss. Actuarial gains and losses net of deferred taxes arising from experience adjustment and changes in actuarial assumptions are recognized in other comprehensive income in the period in which they arise.
Termination benefits are recognized as an expense when the Company is committed without any possibility of withdrawal of an offer made to either terminate employment before the normal retirement date or as a result of an offer made to encourage voluntary retirement.
The Companyâs current policy permits eligible employees to accumulate compensated absences up to a prescribed limit and receive cash in lieu thereof in accordance with the terms of the policy. The Company measures the expected cost of accumulating compensated absences as the additional amount that the Company expects to pay as a result of unused entitlement that has accumulated as at the reporting date. The expected cost of these benefits is calculated using the projected unit credit method by qualified actuary every year. Actuarial gains and losses arising from experience adjustment and changes in actuarial assumptions are recognized in the statement of profit and loss in the period in which they arise. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
Government grants are recognized when there is reasonable assurance that the grant will be received and all attached conditions for receiving such grant have been and will be fulfilled.
Government grants related to asset are recognized as deferred income and charged to statement of profit and loss on a systematic basis over expected useful life of the related asset.
Government grants are recognized in statement of profit and loss on a systematic basis over the period in which Company recognizes as expenses the related costs for which the grants are intended to compensate. Government grants that are receivable as compensation for expenses already incurred are recognised in statement of profit and loss in the period in which they become receivable.
When loans received from the government or related institutions with below-market interest rate, the benefit of below-market interest rate is treated as government grant measured as the difference between the proceeds received and the fair value of loan based on prevailing market interest rate.
A possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Company or; present obligation that arises from past events where it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or the amount of the obligation cannot be measured with sufficient reliability are disclosed as contingent liability and not provided for.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. Contingent assets are not recognised and disclosed only when an inflow of economic benefits is probable.
A provision is recognized when as a result of a past event, the Company has a present obligation whether legal or constructive that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. If the obligation is expected to be settled more than 12 months after the end of reporting date or has no definite settlement date, the provision is recorded as non-current liabilities after giving effect for time value of money, if material. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
Revenue is measured based on the transaction price adjusted for discounts and rebates, which is specified in a contract with customer. Revenue are net of estimated returns and taxes collected from customers.
Revenue from sale of goods is recognized at point in time when control is transferred to the customer and it is probable that consideration will be collected. Control of goods is transferred upon the shipment of the goods to the customer or when goods is made available to the customer.
The transaction price is documented on the sales invoice and payment is generally due as per agreed credit terms with customer.
The consideration can be fixed or variable. Variable consideration is only recognised when it is highly probable that a significant reversal will not occur.
Sales return is variable consideration that is recognised and recorded based on historical experience, market conditions and provided for in the year of sale as reduction from revenue. The methodology and assumptions used to estimate returns are monitored and adjusted regularly in line with trade practices, historical trends, past experience and projected market conditions.
Export entitlements are recognised as income when right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
Income from out-licensing agreements typically arises from the receipt of upfront, milestone and/or other similar payments from third parties for granting a license for product or technology-related intellectual property (IP). Milestone payments which are contingent on achieving certain clinical milestones are recognised as revenues either on achievement of such milestones.
Income tax expense comprises current and deferred tax expense. Income tax expenses are recognized in statement of profit and loss, except when they relate to items recognized in other comprehensive income or directly in equity, in which case, income tax expenses are also recognized in other comprehensive income or directly in equity respectively.
Current tax is the tax payable on the taxable profit for the year, using tax rates enacted or substantively enacted by the end of reporting period by the governing taxation laws, and any adjustment to tax payable in respect of previous periods. Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred taxes arising from deductible and taxable temporary differences between the tax base of assets and liabilities and their carrying amount in the financial statements are recognized using substantively enacted tax rates and laws expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled. The deferred tax arising from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction are not recognized.
Deferred tax asset are recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax assets to be utilized.
Deferred tax assets and liabilities are offset when the Company has a legally enforceable right to do the same.
For units which enjoy tax holiday benefit, deferred tax assets and liabilities have been provided for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
Deferred tax assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which gives rise to future economic benefits in the form of adjustment of future income tax liability. Accordingly, MAT is recognized as deferred tax asset in the balance sheet when the assets can be measured reliably and it is probable that the future economic benefit associated with the asset will be realized.
Basic earnings per share is computed by dividing profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
Revenue expenditure on research and development activities is recognised as expense in the separate heads of the statement of profit and loss in the period in which it is incurred.
Expenditure on in-licensed development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised, if the cost can be reliably measured, the product or process is technically and commercially feasible and the Group has sufficient resources to complete the development and to use and sell the asset. Payments to third parties that generally take the form of up-front payments and milestones for in-licensed products, compounds and intellectual property are capitalised when the probability of expected future economic benefits criterion is considered to be satisfied.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of these assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in statement of profit and loss in the period in which they are incurred.
Goods and service tax (GST) input credit is accounted on an accrual basis on purchase of eligible inputs, capital goods and services. The balance of GST input credit is reviewed at the end of each year and amount estimated to be un-utilizable is charged to the statement of profit and loss for the year.
Non-current assets and disposal groups are classified as held for sale if their carrying amount is intended to be recovered principally through a sale (rather than through continuing use) 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 sale of such asset (or disposal group) and the sale is highly probable and is 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 lower of their carrying amount and fair value less costs to sell.
Ministry of Corporate Affairs (âMCAâ) notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On 23rd March, 2022 MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2022, applicable from 1st April 2022, as below:
The amendments clarifies that excess of net sale proceeds of items produced over the cost of testing, if any, shall not be recognized in the profit or loss but deducted from the directly attributable costs considered as a part of cost of an item of property, plant and equipment. The effective date for adoption of this amendment is annual periods beginning on or after 1st April 2022. The company has evaluated the amendment and there is no impact on its financial statements.
The amendments specifiy that to qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must meet the definitions of assets and liabilities in the Conceptual Framework for Financial Reporting under Indian Accounting Standards (Conceptual Framework) issued by the Institute of Chartered Accountants of India at the acquisition date. These changes do not significantly change the requirements of Ind AS 103. The company does not expect the amendment to have any significant impact in its financial statements.
The amendments specify that the âcost of fulfillingâ a contract comprises the âcosts that relate directly to the contractâ. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts. The amendment is essentially a clarification and the Company does not expect the amendment to have any significant impact in its financial statements.
Mar 31, 2021
1. Corporate information
Torrent Pharmaceuticals Limited (âthe Companyâ) is a public limited company incorporated and domiciled in India. The address of its registered office is Torrent House, Off Ashram Road, Ahmedabad - 380 009, Gujarat, India. The Company is one of the leading Indian Pharmaceutical Company engaged in research, development, manufacturing and marketing of generic pharmaceutical formulations. The Companyâs research and development facility is located in the state of Gujarat, India and its manufacturing facilities are located in the states of Gujarat, Himachal Pradesh, Madhya Pradesh, Andhra Pradesh and Sikkim.
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules as amended from time to time and other relevant provisions of the Act.
3. Basis of preparation of financial statements
The financial statements have been prepared and presented under the historical cost convention on an accrual basis of accounting except for the following material items which have been measured at fair value.
⢠Derivative financial instruments
⢠Investments in mutual funds, equity instruments and LLP
⢠Defined benefit plan - plan assets measured at fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if the market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value measurement and / or disclosure purposes in the financial statements is determined on such a basis except for leasing transactions that are within the scope of Ind AS 116 Leases, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 Inventories or value in use in Ind AS 36 Impairment of asset.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
⢠Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
⢠Level 2 inputs are inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly; and
⢠Level 3 inputs are unobservable inputs for the asset or liability.
All assets and liabilities have been classified as current or non-current as set out in the Schedule III (Division II) to the Companies Act, 2013.
The financial statements are presented in Indian Rupees, the currency of the primary economic environment in which the Company operates. All the amounts are stated in the nearest rupee crores.
The preparation of financial statements are in conformity with the recognition and measurement principles of Ind AS which requires management to make critical judgements, estimates and assumptions that affect the reporting of assets, liabilities, income and expenditure. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis and any revisions to the estimates are recognised in the period in which the estimates are revised and future periods are affected.
Key source of estimation of uncertainty at the date of financial statements, which may cause material adjustment to the carrying amount of assets and liabilities within the next financial year, is in respect of:
⢠Useful lives of property, plant and equipment (refer note 4.1)
⢠Valuation of assets acquired as part of business combination (refer note no. 4.2.1)
⢠Useful lives of intangible assets (refer note 4.3)
⢠Impairment of investments in subsidiaries (refer note no. 4.5.1)
⢠Valuation of inventories (refer note 4.7)
⢠Impairment of intangible assets and goodwill (refer note 4.8.2)
⢠Employee benefits (refer note no. 4.9)
⢠Provisions & contingent liabilities (refer note 4.11)
⢠Sales returns (refer note 4.12)
⢠Valuation of deferred tax assets (refer note 4.13)
4. Significant accounting policies
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation and any accumulated impairment losses. The cost of fixed assets comprises of its purchase price, non-refundable taxes and levies, freight and other incidental expenses related to the acquisition and installation of the respective assets. Borrowing cost attributable to financing of acquisition or construction of the qualifying fixed assets is capitalised to respective assets when the time taken to put the assets to use is substantial.
When major items of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. The cost of replacement of any property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefit associated with the item will flow to the Company and its cost can be measured reliably.
Capital work-in-progress are those which are not ready for intended use are carried at cost less impairment loss, if any.
Preoperative expenditure comprising of revenue expenses incurred in connection with project implementation during the period up to commencement of commercial production are treated as part of the project costs and are capitalised. Such expenses are capitalised only if the project to which they relate, involve substantial expansion of capacity or upgradation.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from its use. Difference between the sales proceeds and the carrying amount of the asset is recognised in the statement of profit and loss.
Freehold land is carried at historical cost and not depreciated. Depreciation on property, plant and equipment is provided using straight-line method based on useful life of the assets estimated by the management. The estimated useful lives, residual values and depreciation method are reviewed at each financial year-end and changes in estimates, if any are accounted for on a prospective basis.
The estimated useful lives of property, plant and equipments are as under:
Type of property, plant and equipment |
Useful life |
Office buildings* |
58 years |
Factory buildings* |
28 years |
Plant and equipments* |
10 to 20 years |
Laboratory equipments* |
5 to 20 years |
Electrical equipments* |
10 to 20 years |
Furniture & Fixtures |
10 years |
Office equipments* |
10 years |
Computer equipments |
3 years |
Vehicles |
10 years |
* For these classes of assets, the useful life of assets is different than the prescribed life as per Part C of Schedule II of the Companies Act, 2013. The different useful life is based on internal technical evaluation by the Company and historical usage of assets.
Business Combinations are accounted for using the acquisition method of accounting. Transaction costs incurred in connection with business combination are expensed in the statement of profit and loss. The identifiable assets and liabilities that meet the condition for recognition are recognised at their fair values at the acquisition date.
In case of bargain purchase where the fair value of identifiable assets and liabilities exceed the cost of acquisition, the excess is recognised in other comprehensive income on the acquisition date and accumulate the same in equity as capital reserve after reassessing the fair values of the net identifiable assets and contingent liabilities.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted through goodwill during the measurement period, or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date. These adjustments are called as measurement period adjustments. The measurement period does not exceed one year from the acquisition date.
Business combinations arising from transfers of interests in entities that are under the common control are accounted for using the pooling of interests method. The assets and liabilities of the combining entities are reflected at their carrying amounts and no adjustments are made to reflect their fair values or recognise any new assets or liabilities. The difference between any consideration given and the aggregate historical carrying amounts of assets and liabilities of the acquired entity are recorded in capital reserve and presented separately from other capital reserves with disclosure of its nature and purpose. The financial statement of prior period is restated as if the business combination had occurred from the beginning of the preceding period, irrespective of the actual date of combination.
Goodwill represents the excess of the consideration paid to acquire a business over underlying fair value of the identified assets acquired. Goodwill is carried at cost less accumulated impairment losses, if any. Goodwill is deemed to have an indefinite useful life and is tested for impairment annually or when events or circumstances indicate that the implied fair value of goodwill is less than its carrying amount.
For the purposes of impairment testing, goodwill is allocated to each of the Companyâs cash-generating units (CGUs) that is expected to benefit from the synergies of the combination. Where goodwill has been allocated to a cashgenerating unit and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.
Intangible assets acquired separately are measured at cost of acquisition. Intangible assets acquired under business combination are measured at fair value as of the date of business combination. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and impairment losses, if any.
Acquired research and development intangible assets that are under development are recognised as intangible assets under development. These 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 is recognised as an expense in the statement of profit and loss.
Intangible assets are amortised over their respective estimated useful life using straight-line method. The estimated useful life of amortisable intangibles is reviewed at the end of each reporting period and change in estimates if any are accounted for on a prospective basis.
The estimated useful lives of intangible assets are as mentioned below:
Type of intangible asset |
Useful life |
Softwares |
3 to 5 years |
Product licenses |
Up to 15 years |
Brands |
Up to 15 years |
Non-compete fees |
Up to 5 years |
Drug master files |
10 years |
Foreign currency transactions are recorded at exchange rates prevailing on the date of the transaction. The net gain or loss on account of exchange differences arising on settlement of foreign currency transactions are recognised as income or expense of the period in which they arise. Monetary assets and liabilities denominated in foreign currency as at the balance sheet date are translated at the closing rate. The resultant exchange rate differences are recognised in the statement of profit and loss. Non-monetary assets and liabilities are carried at the rates prevailing on the date of transaction.
(a) Classification of financial assets
The Company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss) and
⢠those measured at amortised cost.
The classification depends on the Companyâs business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
Financial assets are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets (other than financial assets at fair value through profit or loss) are added to or deducted from the fair value of the financial assets, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial assets at fair value through profit or loss are recognised immediately in profit or loss.
⢠Amortised Cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assetsâ cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains / (losses). Interest income from these financial assets is included in other income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains and losses and impairment expenses in other expenses.
Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented net in the statement of profit and loss within other gains / (losses) in the period in which it arises. Interest income from these financial assets is included in other income.
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 rights to receive cash flows from the asset have expired, or
⢠The Company has transferred its rights to receive cash flows from the asset
When the Company has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the Company has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the Company has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of financial asset, the financial asset is derecognised if the Company has not retained control over the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
Dividend is accounted when the right to receive payment is established. Interest income from financial assets is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.
Cash and cash equivalents consists of cash on hand, short demand deposits and highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value. Shortterm means investments with original maturities / holding period of three months or less from the date of investments. Bank overdrafts that are repayable on demand and form an integral part of the Companyâs cash management are included as a component of cash and cash equivalent for the purpose of statement of cash flow.
Investments in mutual funds are primarily held for the Companyâs temporary cash requirements and can be readily convertible in cash. These investments are initially recorded at fair value and classified as fair value through profit or loss.
The Company measures investment in subsidiaries at cost less provision for impairment, if any.
The Company has made an irrevocable election to present subsequent changes in the fair value of equity investments, not held for trading, in other comprehensive income.
Trade receivables are amounts due from customers for sale of goods or services performed in the ordinary course of business. Trade receivables are initially recognised at its transaction price which is considered to be its fair value and are classified as current assets as it is expected to be received within the normal operating cycle of the business.
The Companyâs financial liabilities include trade payables, loans and borrowing and derivative financial instruments.
All the Companyâs financial liabilities, except for financial liabilities at fair value through profit or loss, are measured at amortised cost.
(b) Initial measurement
Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial liabilities (other than financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial liabilities, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
Financial liabilities are subsequently measured at amortised cost using the Effective Interest Rate Method. The Effective Interest Rate Method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or waived off or have expired. An exchange between the Company and the lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
Borrowings are initially recorded at fair value and subsequently measured at amortised costs using effective interest rate method. Transaction costs are charged to statement of profit and loss as financial expenses over the term of borrowing.
(f) Trade payables
Trade payables are amounts due to vendors for purchase of goods or services acquired in the ordinary course of business and are classified as current liabilities to the extent it is expected to be paid within the normal operating cycle of the business.
The Company enters into derivative financial instruments to manage its foreign exchange rate risk. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in the statement of profit and loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in statement of profit and loss depends on the nature of the hedging relationship and nature of hedged items.
Derivative financial instruments that hedges foreign currency risk associated with highly probable forecasted transactions are designated as cash flow hedges and measured at fair value. The effective portion of such hedges is recorded in cash flow hedge reserve, as a component of equity, and reclassified to the statement of profit and loss in the period corresponding to the occurrence of the forecasted transactions. The ineffective portion of such hedges is recorded in the statement of profit and loss immediately.
Hedge effectiveness is tested both at the inception of the hedge relationship as well as on an ongoing basis. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised or no longer qualifies for hedge accounting.
At inception of a contract, the Company assesses whether a contract is or contains a lease. A contract is or contains a lease if the contract conveys the right to control the use of an identified assets 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 contract involves the use of an identified asset, the Company has a right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use and the Company has the right to direct the use of the asset.
At the inception date, right-of-use asset is recognised at cost which includes present value of lease payments adjusted for any payments made on or before the commencement of lease and initial direct cost, if any. It is subsequently measured at cost less accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. Right-of-use asset is depreciated using the straight-line method from the commencement date over the earlier of useful life of the asset or the lease term. When the Company has purchase option available under lease and cost of right-of-use assets reflects that purchase option will be exercised, right-of-use asset is depreciated over the useful life of underlying asset. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.
At the inception date, lease liability is recognised at present value of lease payments that are not made at the commencement of lease. Lease liability is subsequently measured by adjusting carrying amount to reflect interest, lease payments and remeasurement, if any.
Lease payments are discounted using the incremental borrowing rate or interest rate implicit in the lease, if the rate can be determined.
The Company has elected not to apply requirements of Ind AS 116 to leases that has a term of 12 months or less and leases for which the underlying asset is of low value. Lease payments of such lease are recognised as an expense on straight line basis over the lease term.
Inventories are carried at the lower of cost and net realisable value.
The cost incurred in bringing the inventory to their existing location and conditions are determined as follows:
a) Raw material and packing material - Purchase cost of materials on a moving average basis.
b) Finished goods (manufactured) and work-in-progress - Cost of purchase, conversion cost and other costs on a weighted average cost method.
c) Finished Goods (traded) - Purchase cost on a moving average basis.
The cost of purchase of inventories comprise the purchase price, import duties and other taxes (other than those subsequently recovered by the Company from tax authorities), and transport, handling and other costs directly attributable to bringing the inventory to their existing location and conditions. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sales.
The Company considers various factors like shelf life, ageing of inventory, product discontinuation, price changes and any other factor which impact the Companyâs business in determining the allowance for obsolete, non-saleable and slow moving inventories. The Company considers the above factors and adjusts the inventory provision to reflect its actual experience on a periodic basis.
At each balance sheet date, the Company assesses whether a financial asset is to be impaired. Ind AS 109 requires the Company to apply expected credit loss model for recognition and measurement of impairment loss. The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and is adjusted for forwardlooking information. The impairment loss is based on the ageing of the receivables that are due and allowance rates used in the provision matrix. For all other financial assets, expected credit losses are measured at an amount equal to the 12 months expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
Property, plant and equipment and intangible assets with finite life are evaluated for recoverability whenever there is any indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised in the statement of profit and loss to such extent. When an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, such that the increase in the carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised immediately in statement of profit and loss.
CGUs to which goodwill has been allocated are tested for impairment annually or more frequently when there is indication for impairment. If the recoverable amount of a CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
Determination of recoverable amount of CGU requires the management to estimate the future cash flows expected to arise and a suitable discount rate in order to calculate the present value. An impairment loss recognised for goodwill is not reversed in subsequent periods.
Short-term benefits payable before twelve months after the end of the reporting period in which the employees have rendered service are accounted as expense in statement of profit and loss.
Contributions to defined contribution plans (provident fund, superannuation and other social security schemes) are recognised as expense when employees have rendered services entitling them to such benefits.
The Companyâs net obligation in respect of an approved gratuity plan, which is defined benefit plan, is calculated using the projected unit credit method and the same is carried out by qualified actuary. The current service cost and interest on the net defined benefit liability / (asset) is recognised in the statement of profit and loss. Past service cost are immediately recognised in the statement of profit and loss. Actuarial gains and losses net of deferred taxes arising from experience adjustment and changes in actuarial assumptions are recognised in other comprehensive income in the period in which they arise.
Termination benefits are recognised as an expense when the Company is committed without any possibility of withdrawal of an offer made to either terminate employment before the normal retirement date or as a result of an offer made to encourage voluntary retirement.
The Companyâs current policy permits eligible employees to accumulate compensated absences up to a prescribed limit and receive cash in lieu thereof in accordance with the terms of the policy. The Company measures the expected cost of accumulating compensated absences as the additional amount that the Company expects to pay as a result of unused entitlement that has accumulated as at the reporting date. The expected cost of these benefits is calculated using the projected unit credit method by qualified actuary every year. Actuarial gains and losses arising from experience adjustment and changes in actuarial assumptions are recognised in the statement of profit and loss in the period in which they arise. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
Government grants are recognised when there is reasonable assurance that the grant will be received and all attached conditions for receiving such grant have been and will be fulfilled.
Government grants related to asset are recognised as deferred income and charged to statement of profit and loss on a systematic basis over expected useful life of the related asset.
Government grants are recognised in statement of profit and loss on a systematic basis over the period in which Company recognises as expenses the related costs for which the grants are intended to compensate. Government grants that are receivable as compensation for expenses already incurred are recognised in statement of profit and loss in the period in which they become receivable.
When loans received from the government or related institutions with below-market interest rate, the benefit of below-market interest rate is treated as government grant measured as the difference between the proceeds received and the fair value of loan based on prevailing market interest rate.
A possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Company or; present obligation that arises from past events where it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or the amount of the obligation cannot be measured with sufficient reliability are disclosed as contingent liability and not provided for.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. Contingent assets are not recognised and disclosed only when an inflow of economic benefits is probable.
A provision is recognised when as a result of a past event, the Company has a present obligation whether legal or constructive that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. If the obligation is expected to be settled more than 12 months after the end of reporting date or has no definite settlement date, the provision is recorded as non-current liabilities after giving effect for time value of money, if material. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Revenue is measured based on the transaction price adjusted for discounts and rebates, which is specified in a contract with customer. Revenue are net of estimated returns and taxes collected from customers.
Revenue from sale of goods is recognised at point in time when control is transferred to the customer and it is probable that consideration will be collected. Control of goods is transferred upon the shipment of the goods to the customer or when goods is made available to the customer.
The transaction price is documented on the sales invoice and payment is generally due as per agreed credit terms with customer.
The consideration can be fixed or variable. Variable consideration is only recognised when it is highly probable that a significant reversal will not occur.
Sales return is variable consideration that is recognised and recorded based on historical experience, market conditions and provided for in the year of sale as reduction from revenue. The methodology and assumptions used to estimate returns are monitored and adjusted regularly in line with trade practices, historical trends, past experience and projected market conditions.
Export entitlements are recognised as income when right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
Income tax expense comprises current and deferred tax expense. Income tax expenses are recognised in statement of profit and loss, except when they relate to items recognised in other comprehensive income or directly in equity, in which case, income tax expenses are also recognised in other comprehensive income or directly in equity respectively.
Current tax is the tax payable on the taxable profit for the year, using tax rates enacted or substantively enacted by the end of reporting period by the governing taxation laws, and any adjustment to tax payable in respect of previous periods. Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred taxes arising from deductible and taxable temporary differences between the tax base of assets and liabilities and their carrying amount in the financial statements are recognised using substantively enacted tax rates and laws expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled. The deferred tax arising from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction are not recognised.
Deferred tax asset are recognised only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax assets to be utilised.
Deferred tax assets and liabilities are offset when the Company has a legally enforceable right to do the same.
For units which enjoy tax holiday benefit, deferred tax assets and liabilities have been provided for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
Deferred tax assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which gives rise to future economic benefits in the form of adjustment of future income tax liability. Accordingly, MAT is recognised as deferred tax asset in the balance sheet when the assets can be measured reliably and it is probable that the future economic benefit associated with the asset will be realised.
Dividend distribution tax arising out of payment of dividends to shareholders under the Indian Income Tax Act regulation are recognised in statement of changes in equity as part of associated dividend payment. As per amendment in Indian Income Tax Act (with effect from 1st April, 2020) dividend is taxable in the hands of shareholders.
Basic earnings per share is computed by dividing profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
Revenue expenditure on research and development activities is recognised as expense in the separate heads of the statement of profit and loss in the period in which it is incurred.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of these assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in statement of profit and loss in the period in which they are incurred.
Goods and service tax (GST) input credit is accounted on an accrual basis on purchase of eligible inputs, capital goods and services. The balance of GST input credit is reviewed at the end of each year and amount estimated to be un-utilisable is charged to the statement of profit and loss for the year.
5. Recent accounting pronouncements
On 24th March, 2021, the Ministry of Corporate Affairs ("MCA") through a notification, amended Division I, II and III of Schedule III of the Companies Act, 2013 and are applicable from 1st April, 2021. The amendments primarily relate to :
a) Change in existing presentation requirements for certain items in Balance sheet, for e.g. lease liabilities, security deposits, current maturities of long-term borrowings, effect of prior period errors on equity share capital.
b) Additional disclosure requirements in specified formats, for e.g. ageing of trade receivables, trade payables, capital work-in-progress, intangible assets under development, shareholding of promoters, etc.
c) Disclosure if funds have been used other than for the specific purpose for which it was borrowed from banks and financial institutions.
d) Additional Regulatory Information, for e.g. compliance with layers of companies, title deeds of immovable properties, financial ratios, loans and advances to key managerial personnel, etc.
e) Disclosures relating to Corporate Social Responsibility (CSR), undisclosed income and crypto or virtual currency.
The amendments are extensive and the Company is evaluating the same.
Mar 31, 2019
1. SIGNIFICANT ACCOUNTING POLICIES
1.1. Property, plant and equipment
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation and any accumulated impairment losses. The cost of fixed assets comprises of its purchase price, non-refundable taxes & levies, freight and other incidental expenses related to the acquisition and installation of the respective assets. Borrowing cost attributable to financing of acquisition or construction of the qualifying fixed assets is capitalized to respective assets when the time taken to put the assets to use is substantial.
When major items of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. The cost of replacement of any property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefit associated with the item will flow to the Company and its cost can be measured reliably.
Capital work in progress are those which are not ready for intended use are carried at cost less impairment loss, if any.
Pre-operative expenditure comprising of revenue expenses incurred in connection with project implementation during the period upto commencement of commercial production are treated as part of the project costs and are capitalized. Such expenses are capitalized only if the project to which they relate, involve substantial expansion of capacity or upgradation.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from its use. Difference between the sales proceeds and the carrying amount of the asset is recognized in the statement of profit and loss.
Freehold land is carried at historical cost and not depreciated. Depreciation on property, plant and equipment is provided using straight-line method based on useful life of the assets estimated by the management. The estimated useful lives, residual values and depreciation method are reviewed at each financial year-end and changes in estimates, if any are accounted for on a prospective basis.
The estimated useful lives of property, plant and equipments are as under:
* For these classes of assets, the useful life of assets is different than the prescribed life as per Part C of Schedule II of the Companies Act, 2013. The different useful life is based on internal technical evaluation by the Company and historical usage of assets.
2.2. Business combinations and goodwill
2.1.1. Business combinations
Business Combinations are accounted for using the acquisition method of accounting. Transaction costs incurred in connection with business combination are expensed in the statement of profit and loss. The identifiable assets and liabilities that meet the condition for recognition are recognized at their fair values at the acquisition date.
I n case of bargain purchase where the fair value of identifiable assets and liabilities exceed the cost of acquisition, the excess is recognised in other comprehensive income on the acquisition date and accumulate the same in equity as capital reserve after reassessing the fair values of the net identifiable assets and contingent liabilities.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted through goodwill during the measurement period, or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date. These adjustments are called as measurement period adjustments. The measurement period does not exceed one year from the acquisition date.
Business combinations arising from transfers of interests in entities that are under the common control are accounted for using the pooling of interests method. The assets and liabilities of the combining entities are reflected at their carrying amounts and no adjustments are made to reflect their fair values or recognise any new assets or liabilities. The difference between any consideration given and the aggregate historical carrying amounts of assets and liabilities of the acquired entity are recorded in capital reserve and presented separately from other capital reserves with disclosure of its nature and purpose. The financial statement of prior period is restated as if the business combination had occurred from the beginning of the preceding period, irrespective of the actual date of combination.
2.2.2. Goodwill
Goodwill represents the excess of the consideration paid to acquire a business over underlying fair value of the identified assets acquired. Goodwill is carried at cost less accumulated impairment losses, if any. Goodwill is deemed to have an indefinite useful life and is tested for impairment annually or when events or circumstances indicate that the implied fair value of goodwill is less than its carrying amount.
For the purposes of impairment testing, goodwill is allocated to each of the Companyâs cash-generating units (CGUs) that is expected to benefit from the synergies of the combination. Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.
3.3. intangible assets
Intangible assets acquired separately are measured at cost of acquisition. Intangible assets acquired under business combination are measured at fair value as of the date of business combination. Following initial recognition, intangible assets are carried at cost less accumulated amortization and impairment losses, if any.
Intangible assets are amortized over their respective estimated useful life using straight-line method. The estimated useful life of amortizable intangibles is reviewed at the end of each reporting period and change in estimates if any are accounted for on a prospective basis.
The estimated useful lives of intangible assets are as mentioned below:
4.4. Foreign currency transaction and translation
Foreign currency transactions are recorded at exchange rates prevailing on the date of the transaction. The net gain or loss on account of exchange differences arising on settlement of foreign currency transactions are recognized as income or expense of the period in which they arise. Monetary assets and liabilities denominated in foreign currency as at the balance sheet date are translated at the closing rate. The resultant exchange rate differences are recognized in the statement of profit and loss. Non-monetary assets and liabilities are carried at the rates prevailing on the date of transaction.
4.5. Financial instruments
4.5.1. Derivative financial instruments and hedge accounting
The Company enters into derivative financial instruments to manage its foreign exchange rate risk. Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in the statement of profit and loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in statement of profit and loss depends on the nature of the hedging relationship and nature of hedged items.
Derivative financial instruments that hedges foreign currency risk associated with highly probable forecasted transactions are designated as cash flow hedges and measured at fair value. The effective portion of such hedges is recorded in cash flow hedge reserve, as a component of equity, and re-classified to the statement of profit and loss in the period corresponding to the occurrence of the forecasted transactions. The ineffective portion of such hedges is recorded in the statement of profit and loss immediately.
Hedge effectiveness is tested both at the inception of the hedge relationship as well as on an ongoing basis. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised or no longer qualifies for hedge accounting.
4.5.2. Cash and cash equivalents
Cash and cash equivalents consists of cash on hand, short demand deposits and highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value. Short term means investments with original maturities / holding period of three months or less from the date of investments. Bank overdrafts that are repayable on demand and form an integral part of the Companyâs cash management are included as a component of cash and cash equivalent for the purpose of statement of cash flow.
4.5.3. investments
Investments in mutual funds are primarily held for the Companyâs temporary cash requirements and can be readily convertible in cash. These investments are initially recorded at fair value and classified as fair value through profit or loss.
The Company measures investment in subsidiaries at cost less provision for impairment, if any.
The Company has made an irrevocable election to present subsequent changes in the fair value of equity investments, not held for trading, in other comprehensive income.
4.5.4. Trade receivables
Trade receivables are amounts due from customers for sale of goods or services performed in the ordinary course of business. Trade receivables are initially recognized at its transaction price which is considered to be its fair value and are classified as current assets as it is expected to be received within the normal operating cycle of the business.
4.5.5. Borrowings
Borrowings are initially recorded at fair value and subsequently measured at amortized costs using effective interest rate method. Transaction costs are charged to statement of profit and loss as financial expenses over the term of borrowing.
4.5.6. Trade payables
Trade payables are amounts due to vendors for purchase of goods or services acquired in the ordinary course of business and are classified as current liabilities to the extent it is expected to be paid within the normal operating cycle of the business.
4.5.7 Other financial assets and liabilities
Other non-derivative financial instruments are initially recognized at fair value and subsequently measured at amortized costs using the effective interest rate method.
4.5.8. De-recognition of financial assets and liabilities
The Company derecognizes a financial asset when the contractual right to the cash flows from the asset expires or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction which substantially all the risk and rewards of ownership of the financial asset are transferred. If the Company retains substantially all the risk and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.
The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired; the difference between the carrying amount of derecognized financial liability and the consideration paid is recognized as profit or loss.
4.6. Leases - Company as lessee Finance lease
Leases where the Company assumes substantially all the risks and rewards of ownership are classified as finance lease. Such leases are capitalized at the inception of the lease at lower of the fair value or the present value of the minimum lease payments and a liability is recognized for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each year.
Land acquired on long-term leases
The Company classifies leasehold land as finance lease where:
- Initial amount paid is substantially equal to the fair value of land
- The Company has option to purchase the land at a price that is sufficiently lower than fair value at the date option is exercisable
- Lessor has agreed to renew lease on expiry of lease term.
Leasehold land is recognized as an asset at the value of the upfront premium / charges paid to acquire lease.
Operating lease
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor, are recognized as operating lease. Operating lease payments are recognized as an expense on a straight line basis over the lease term unless the payments are structured to increase in line with the expected general inflation so as to compensate for the Lessorâs expected inflationary cost increases.
4.7. inventories
Inventories are carried at the lower of cost and net realizable value.
The cost incurred in bringing the inventory to their existing location and conditions are determined as follows:
a. Raw material and packing material - Purchase cost of materials on a moving average basis.
b. Finished goods (manufactured) and work in progress - Cost of purchase, conversion cost and other costs on a weighted average cost method.
c. Finished Goods (traded) - Purchase cost on a moving average basis.
The cost of purchase of inventories comprise the purchase price, import duties and other taxes (other than those subsequently recovered by the Company from tax authorities), and transport, handling and other costs directly attributable to bringing the inventory to their existing location and conditions. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase.
Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sales.
The Company considers various factors like shelf life, ageing of inventory, product discontinuation, price changes and any other factor which impact the Companyâs business in determining the allowance for obsolete, non-saleable and slow moving inventories. The Company considers the above factors and adjusts the inventory provision to reflect its actual experience on a periodic basis.
4.8. impairment of assets Financial assets
At each balance sheet date, the Company assesses whether a financial asset is to be impaired. Ind AS 109 requires the Company to apply expected credit loss model for recognition and measurement of impairment loss. In determining the allowances for doubtful trade receivables, the Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and is adjusted for forward looking information. The impairment loss is based on the ageing of the receivables that are due and allowance rates used in the provision matrix. For all other financial assets, expected credit losses are measured at an amount equal to the 12-months expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
Non-financial assets Tangible and intangible assets
Property, plant and equipment and intangible assets with finite life are evaluated for recoverability whenever there is any indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognized in the statement of profit and loss to such extent. When an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, such that the increase in the carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised immediately in statement of profit and loss.
Goodwill
CGUs to which goodwill has been allocated are tested for impairment annually or more frequently when there is indication for impairment. If the recoverable amount of a CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
Determination of recoverable amount of CGU requires the management to estimate the future cash flows expected to arise and a suitable discount rate in order to calculate the present value. An impairment loss recognised for goodwill is not reversed in subsequent periods.
4.9. Employee benefits
4.9.1. Short term employee benefits
Short term benefits payable before twelve months after the end of the reporting period in which the employees have rendered service are accounted as expense in statement of profit and loss.
4.9.2. Long term employment benefits Defined contribution plans :
Contributions to defined contribution plans (provident fund, superannuation and other social security schemes) are recognized as expense when employees have rendered services entitling them to such benefits.
Defined benefit plans :
The Companyâs net obligation in respect of an approved gratuity plan, which is defined benefit plan, is calculated using the projected unit credit method and the same is carried out by qualified actuary. The current service cost and interest on the net defined benefit liability / (asset) is recognized in the statement of profit and loss. Past service cost are immediately recognized in the statement of profit and loss. Actuarial gains and losses net of deferred taxes arising from experience adjustment and changes in actuarial assumptions are recognized in other comprehensive income in the period in which they arise.
Termination benefits :
Termination benefits are recognized as an expense when the Company is committed without any possibility of withdrawal of an offer made to either terminate employment before the normal retirement date or as a result of an offer made to encourage voluntary retirement.
Compensated absences and earned leaves :
The Companyâs current policy permits eligible employees to accumulate compensated absences up to a prescribed limit and receive cash in lieu thereof in accordance with the terms of the policy. The Company measures the expected cost of accumulating compensated absences as the additional amount that the Company expects to pay as a result of unused entitlement that has accumulated as at the reporting date. The expected cost of these benefits is calculated using the projected unit credit method by qualified actuary every year. Actuarial gains and losses arising from experience adjustment and changes in actuarial assumptions are recognized in the statement of profit and loss in the period in which they arise. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
4.10. Government grants
Government grants are recognized when there is reasonable assurance that the grant will be received and all attached conditions for receiving such grant have been and will be fulfilled.
Government grants related to asset are recognized as deferred income and charged to statement of profit and loss on a systematic basis over expected useful life of the related asset.
Government grants are recognized in statement of profit and loss on a systematic basis over the period in which Company recognizes as expenses the related costs for which the grants are intended to compensate. Government grants that are receivable as compensation for expenses already incurred are recognised in statement of profit and loss in the period in which they become receivable.
When loans received from the government or related institutions with below-market interest rate, the benefit of below-market interest rate is treated as government grant measured as the difference between the proceeds received and the fair value of loan based on prevailing market interest rate.
4.11. Provisions, contingent liabilities and contingent assets Contingent liability :
A possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or; present obligation that arises from past events where it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or the amount of the obligation cannot be measured with sufficient reliability are disclosed as contingent liability and not provided for.
Contingent assets :
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. Contingent assets are not recognised and disclosed only when an inflow of economic benefits is probable.
Provisions :
A provision is recognized when as a result of a past event, the Company has a present obligation whether legal or constructive that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. If the obligation is expected to be settled more than 12 months after the end of reporting date or has no definite settlement date, the provision is recorded as non-current liabilities after giving effect for time value of money, if material. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
4.12. Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue from sale of goods includes excise duty and are net of discounts, applicable taxes, rebates and estimated returns.
Provision for sales returns are estimated on the basis of historical experience, market conditions and specific contractual terms and provided for in the year of sale as reduction from revenue. The methodology and assumptions used to estimate returns are monitored and adjusted regularly in line with contractual and legal obligations, trade practices, historical trends, past experience and projected market conditions.
The revenue is recognized when the significant risks and rewards of ownership of goods are transferred to the buyer, recoverability of consideration is probable, the amount of revenue and cost incurred or to be incurred in respect of the transaction can be measured reliably and there is no continuing managerial involvement over the goods sold.
Effective April 1, 2018, the Company has applied Ind AS 115 Revenue from Contracts with Customers, which outlines single comprehensive model for accounting of revenue arising from contracts with customers and supersedes Ind AS 18 Revenue and Ind AS 11 Construction contracts. The Company applied Ind AS 115 using the modified retrospective approach.
Revenue is measured based on the transaction price adjusted for discounts and rebates, which is specified in a contract with customer. Revenue are net of estimated returns and taxes collected from customers.
Revenue from sale of goods is recognized at point in time when control is transferred to the customer and it is probable that consideration will be collected. Control of goods is transferred upon the shipment of the goods to the customer or when goods is made available to the customer.
The transaction price is documented on the sales invoice and payment is generally due as per agreed credit terms with customer.
The consideration can be fixed or variable. Variable consideration is only recognised when it is highly probable that a significant reversal will not occur.
Sales return is variable consideration that is recognised and recorded based on historical experience, market conditions and provided for in the year of sale as reduction from revenue. The methodology and assumptions used to estimate returns are monitored and adjusted regularly in line with trade practices, historical trends, past experience and projected market conditions.
4.13. Other 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.
Export entitlements are recognised as income when right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
Dividend income is recognized when the Companyâs right to receive the payment is established, it is probable that the economic benefits associated with the dividend will flow to the Company and the amount of dividend can be measured reliably.
4.14. income taxes
Income tax expense comprises current and deferred tax expense. Income tax expenses are recognized in statement of profit and loss, except when they relate to items recognized in other comprehensive income or directly in equity, in which case, income tax expenses are also recognized in other comprehensive income or directly in equity respectively.
Current tax is the tax payable on the taxable profit for the year, using tax rates enacted or substantively enacted by the end of reporting period by the governing taxation laws, and any adjustment to tax payable in respect of previous periods. Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred taxes arising from deductible and taxable temporary differences between the tax base of assets and liabilities and their carrying amount in the financial statements are recognized using substantively enacted tax rates and laws expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled. The deferred tax arising from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction are not recognized.
Deferred tax asset are recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax assets to be utilized.
Deferred tax assets and liabilities are offset when the Company has a legally enforceable right to do the same.
For units which enjoy tax holiday benefit, deferred tax assets and liabilities have been provided for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
Deferred tax assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which gives rise to future economic benefits in the form of adjustment of future income tax liability. Accordingly, MAT is recognized as deferred tax asset in the balance sheet when the assets can be measured reliably and it is probable that the future economic benefit associated with the asset will be realized.
Dividend distribution tax arising out of payment of dividends to shareholders under the Indian Income Tax Act regulation are recognized in statement of changes in equity as part of associated dividend payment.
4.15. Earnings per share
Basic earnings per share is computed by dividing profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
4.16. Research and development
Revenue expenditure on research and development activities is recognized as expense in the separate heads of the statement of profit and loss in the period in which it is incurred.
4.17. Borrowing cost
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of these assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in statement of profit and loss in the period in which they are incurred.
4.18. GST input credit
Goods and service tax (GST) input credit is accounted on an accrual basis on purchase of eligible inputs, capital goods and services. The balance of GST input credit is reviewed at the end of each year and amount estimated to be un-utilizable is charged to the statement of profit and loss for the year.
Mar 31, 2018
1.1. Property, plant and equipment
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation and any accumulated impairment losses. The cost of fixed assets comprises of its purchase price, non-refundable taxes & levies, freight and other incidental expenses related to the acquisition and installation of the respective assets. Borrowing cost attributable to financing of acquisition or construction of the qualifying fixed assets is capitalized to respective assets when the time taken to put the assets to use is substantial.
When major items of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. The cost of replacement of any property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefit associated with the item will flow to the Company and its cost can be measured reliably.
Pre-operative expenditure comprising of revenue expenses incurred in connection with project implementation during the period upto commencement of commercial production are treated as part of the project costs and are capitalized. Such expenses are capitalized only if the project to which they relate, involve substantial expansion of capacity or upgradation.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from its use. Difference between the sales proceeds and the carrying amount of the asset is recognized in statement of profit and loss.
Freehold land is carried at historical cost and not depreciated. Depreciation on property, plant and equipment is provided using straight-line method based on useful life of the assets estimated by the management. The estimated useful lives, residual values and depreciation method are reviewed at each financial year-end and changes in estimates, if any are accounted for on a prospective basis.
*For these classes of assets, the useful life of assets is different than the prescribed life as per Part C of Schedule II of the Companies Act, 2013. The different useful life is based on internal technical evaluation by the Company and historical usage of assets.
1.2. Business combinations and goodwill
1.2.1. Business combinations
Business Combinations are accounted for using the acquisition method of accounting. Transaction costs incurred in connection with business combination are expensed out in statement of profit and loss. The identifiable assets and liabilities that meet the condition for recognition is recognized at their fair values at the acquisition date.
In case of bargain purchase where the fair value of identifiable assets and liabilities exceed the cost of acquisition, the excess is recognised in other comprehensive income on the acquisition date and accumulate the same in equity as capital reserve after reassessing the fair values of the net assets and contingent liabilities.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted through goodwill during the measurement period, or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date. These adjustments are called as measurement period adjustments. The measurement period does not exceed one year from the acquisition date.
Business combinations arising from transfers of interests in entities that are under the common control are accounted for using the pooling of interests method. The assets and liabilities of the combining entities are reflected at their carrying amounts and no adjustments are made to reflect their fair values or recognise any new assets or liabilities. The difference between any consideration given and the aggregate historical carrying amounts of assets and liabilities of the acquired entity are recorded in capital reserve and presented separately from other capital reserves with disclosure of its nature and purpose.
1.2.2. Goodwill
Goodwill represents the excess of the consideration paid to acquire a business over underlying fair value of the identified assets acquired. Goodwill is carried at cost less accumulated impairment losses, if any. Goodwill is deemed to have an indefinite useful life and is tested for impairment annually or when events or circumstances indicate that the implied fair value of goodwill is less than its carrying amount.
For the purposes of impairment testing, goodwill is allocated to each of the Companyâs cash-generating units (CGUs) that is expected to benefit from the synergies of the combination. Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.
1.3. Intangible assets
Intangible assets acquired separately are measured at cost of acquisition. Intangible assets acquired under business combination are measured at fair value as of the date of business combination. Following initial recognition, intangible assets are carried at cost less accumulated amortization and impairment losses, if any.
Intangible assets are amortized over their respective estimated useful life using straight-line method. The estimated useful life of amortizable intangibles is reviewed at the end of each reporting period and change in estimates if any are accounted for on a prospective basis.
1.4. Foreign currency transaction and translation
Foreign currency transactions are recorded at exchange rates prevailing on the date of the transaction. The net gain or loss on account of exchange differences arising on settlement of foreign currency transactions are recognized as income or expense of the period in which they arise. Monetary assets and liabilities denominated in foreign currency as at the balance sheet date are translated at the closing rate. The resultant exchange rate differences are recognized in the statement of profit and loss. Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the statement of profit and loss, within finance costs. Non-monetary assets and liabilities are carried at the rates prevailing on the date of transaction.
1.5. Financial instruments
1.5.1. Derivative financial instruments and hedge accounting
The Company enters into derivative financial instruments to manage its foreign exchange rate risk. Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in statement of profit and loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in statement of profit and loss depends on the nature of the hedging relationship and nature of hedged items.
Derivative financial instruments that hedges foreign currency risk associated with highly probable forecasted transactions are designated as cash flow hedges and valued at fair value. The effective portion of such hedges is recorded in cash flow hedge reserve, as a component of equity, and re-classified to the statement of profit and loss as in the period corresponding to the occurrence of the forecasted transactions. The ineffective portion of such hedges is recorded in statement of profit and loss immediately.
Hedge effectiveness testing is assessed both at the inception of the hedge relationship as well as on an ongoing basis. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised or no longer qualifies for hedge accounting.
1.5.2. Cash and cash equivalents
Cash and cash equivalents consists of cash on hand, short demand deposits and highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value. Short term means investments with original maturities / holding period of three months or less from the date of investments. Bank overdrafts that are repayable on demand and form an integral part of the Companyâs cash management are included as a component of cash and cash equivalent for the purpose of statement of cash flow.
1.5.3. Investments
Investments in mutual funds are primarily held for the Companyâs temporary cash requirements and can be readily convertible in cash. These investments are initially recorded at fair value and classified as fair value through profit or loss.
The Company measures investment in subsidiaries at cost less provision for impairment, if any.
The Company has made an irrevocable election to present subsequent changes in the fair value of equity investments, not held for trading, in other comprehensive income.
1.5.4. Trade receivables
Trade receivables are amounts due from customers for sale of goods or services performed in the ordinary course of business. Trade receivables are initially recognized at its transaction price which is considered to be its fair value and are classified as current assets as it is expected to be received within the normal operating cycle of the business.
1.5.5. Borrowings
Borrowings are initially recorded at fair value and subsequently measured at amortized costs using effective interest method. Transaction costs are charged to statement of profit and loss as financial expenses over the term of borrowing.
1.5.6. Trade payables
Trade payables are amounts due to vendors for purchase of goods or services acquired in the ordinary course of business and are classified as current liabilities to the extent it is expected to be paid within the normal operating cycle of the business.
1.5.7. Other financial assets and liabilities
Other non-derivative financial instruments are initially recognized at fair value and subsequently measured at amortized costs using the effective interest method.
1.5.8. De-recognition of financial assets and liabilities
The Company derecognizes a financial asset when the contractual right to the cash flows from the asset expires or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction which substantially all the risk and rewards of ownership of the financial asset are transferred. If the Company retains substantially all the risk and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.
The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired; the difference between the carrying amount of derecognized financial liability and the consideration paid is recognized as profit or loss.
1.6. Leases - Company as lessee Finance lease
Leases where the Company assumes substantially all the risks and rewards of ownership are classified as finance lease. Such leases are capitalized at the inception of the lease at lower of the fair value or the present value of the minimum lease payments and a liability is recognized for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each year.
Land acquired on long-term leases
The Company classifies leasehold land as finance lease where:
- Initial amount paid is substantially all of the fair value of land
- The company has option to purchase the land at a price that is sufficiently lower than fair value at the date option is exercisable
- Lessor has agreed to renew lease on expiry of lease term.
Leasehold land is recognized as an asset at the value of the upfront premium / charges paid to acquire lease.
Operating lease
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor, are recognized as operating lease. Operating lease payments are recognized as an expense on a straight line basis over the lease term unless the payments are structured to increase in line with the expected general inflation so as to compensate for the Lessorâs expected inflationary cost increases.
1.7. Inventories
Inventories are carried at the lower of cost and net realizable value.
The cost incurred in bringing the inventory to their existing location and conditions are determined as follows:
a. Raw material and packing material - Purchase cost of materials on a moving average basis.
b. Finished goods (manufactured) and work in progress - Cost of purchase, conversion cost and other costs on a weighted average cost method.
c. Finished Goods (traded) - Purchase cost on a moving average basis.
The cost of purchase of inventories comprise the purchase price, import duties and other taxes (other than those subsequently recovered by the Company from taxing authorities), and transport, handling and other costs directly attributable to bringing the inventory to their existing location and conditions. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase.
Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sales.
The Company considers various factors like shelf life, ageing of inventory, product discontinuation, price changes and any other factor which impact the Companyâs business in determining the allowance for obsolete, non-saleable and slow moving inventories. The Company considers the above factors and adjusts the inventory provision to reflect its actual experience on a periodic basis.
1.8. Impairment of assets Financial assets
At each balance sheet date, the Company assesses whether a financial asset is to be impaired. Ind AS 109 requires expected credit losses to be measured through loss allowance. The Company measures the loss allowance for financial assets at an amount equal to lifetime expected credit losses if the credit risk on that financial asset has increased significantly since initial recognition. If the credit risk on a financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for financial assets at an amount equal to 12-month expected credit losses. The Company uses both forward-looking and historical information to determine whether a significant increase in credit risk has occurred.
Non-financial assets Tangible and intangible assets
Property, plant and equipment and intangible assets with finite life are evaluated for recoverability whenever there is any indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognized in the statement of profit and loss to such extent. When an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, such that the increase in the carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised immediately in statement of profit and loss.
Goodwill
CGUs to which goodwill has been allocated are tested for impairment annually or more frequently when there is indication for impairment. If the recoverable amount of a CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
Determination of recoverable amount of CGU requires the management to estimate the future cash flows expected to arise and a suitable discount rate in order to calculate the present value. An impairment loss recognised for goodwill is not reversed in subsequent periods.
1.9. Employee benefits
1.9.1. Short term employee benefits
Short term benefits payable before twelve months after the end of the reporting period in which the employees have rendered service are accounted as expense in statement of profit and loss.
1.9.2. Long term employment benefits Defined contribution plans :
Contributions to defined contribution plans (provident fund, superannuation and other social security schemes) are recognized as expense when employees have rendered services entitling them to such benefits.
Defined benefit plans :
The Companyâs net obligation in respect of an approved gratuity plan, which is defined benefit plan, is calculated using the projected unit credit method and the same is carried out by qualified actuary. The current service cost and interest on the net defined benefit liability / (asset) is recognized in the statement of profit and loss. Past service cost are immediately recognized in the statement of profit and loss. Actuarial gains and losses net of deferred taxes arising from experience adjustment and changes in actuarial assumptions are recognized in other comprehensive income in the period in which they arise.
Termination benefits :
Termination benefits are recognized as an expense when the Company is committed without any possibility of withdrawal of an offer made to either terminate employment before the normal retirement date or as a result of an offer made to encourage voluntary retirement.
Compensated absences and earned leaves :
The Companyâs current policy permits eligible employees to accumulate compensated absences up to a prescribed limit and receive cash in lieu thereof in accordance with the terms of the policy. The Company measures the expected cost of accumulating compensated absences as the additional amount that the Company expects to pay as a result of unused entitlement that has accumulated as at the reporting date. The expected cost of these benefits is calculated using the projected unit credit method by qualified actuary every year. Actuarial gains and losses arising from experience adjustment and changes in actuarial assumptions are recognized in the statement of profit and loss in the period in which they arise. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
1.10. Government grants
Government grants are recognized when there is reasonable assurance that the grant will be received and all attached conditions for receiving such grant have been and will be fulfilled.
Government grants related to asset are recognized as deferred income and charged to statement of profit and loss on a systematic basis over expected useful life of the related asset.
Government grants are recognized in statement of profit and loss on a systematic basis over the period in which Company recognizes as expenses the related costs for which the grants are intended to compensate. Government grants that are receivable as compensation for expenses already incurred are recognised in statement of profit and loss in the period in which they become receivable.
When loans received from the government or related institutions with below-market interest rate, the benefit of below-market interest rate is treated as government grant measured as the difference between the proceeds received and the fair value of loan based on prevailing market interest rate.
1.11. Provisions, contingent liabilities and contingent assets Contingent liability :
A possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or; present obligation that arises from past events where it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or the amount of the obligation cannot be measured with sufficient reliability are disclosed as contingent liability and not provided for.
Contingent assets :
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. Contingent assets are not recognised and disclosed only when an inflow of economic benefits is probable.
Provisions :
A provision is recognized when as a result of a past event, the Company has a present obligation whether legal or constructive that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. If the obligation is expected to be settled more than 12 months after the end of reporting date or has no definite settlement date, the provision is recorded as non-current liabilities after giving effect for time value of money, if material. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
1.12. Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue from sale of goods includes excise duty and are net of discounts, applicable taxes, rebates and estimated returns.
Provision for sales returns are estimated on the basis of historical experience, market conditions and specific contractual terms and provided for in the year of sale as reduction from revenue. The methodology and assumptions used to estimate returns are monitored and adjusted regularly in line with contractual and legal obligations, trade practices, historical trends, past experience and projected market conditions.
The revenue is recognized when the significant risks and rewards of ownership of goods are transferred to the buyer, recoverability of consideration is probable, the amount of revenue and cost incurred or to be incurred in respect of the transaction can be measured reliably and there is no continuing managerial involvement over the goods sold.
Income from services is recognized when the services are rendered or when contracted milestones have been achieved.
Revenue from arrangements which includes performance of obligations is recognized in the period in which the Company completes all its performance obligations.
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.
Export entitlements are recognised as income when right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
Dividend income is recognized when the Companyâs right to receive the payment is established, it is probable that the economic benefits associated with the dividend will flow to the Company and the amount of dividend can be measured reliably.
1.13. Income taxes
Income tax expense comprises current and deferred tax expense. Income tax expenses are recognized in statement of profit and loss, except when they relate to items recognized in other comprehensive income or directly in equity, in which case, income tax expenses are also recognized in other comprehensive income or directly in equity respectively.
Current tax is the tax payable on the taxable profit for the year, using tax rates enacted or substantively enacted by the end of reporting period by the governing taxation laws, and any adjustment to tax payable in respect of previous periods. Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred taxes arising from deductible and taxable temporary differences between the tax base of assets and liabilities and their carrying amount in the financial statements are recognized using substantively enacted tax rates and laws expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled. The deferred tax arising from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction are not recognized.
Deferred tax asset are recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax assets to be utilized.
Deferred tax assets and liabilities are offset when the Company has a legally enforceable right to do the same.
For units which enjoy tax holiday benefit, deferred tax assets and liabilities have been provided for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
Deferred tax assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which gives rise to future economic benefits in the form of adjustment of future income tax liability. Accordingly, MAT is recognized as deferred tax asset in the balance sheet when the assets can be measured reliably and it is probable that the future economic benefit associated with the asset will be realized.
Dividend distribution tax arising out of payment of dividends to shareholders under the Indian Income Tax Act regulation are recognized in statement of changes in equity as part of associated dividend payment.
1.14. Earnings per share
Basic earnings per share is computed by dividing profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
1.15. Research and development
Revenue expenditure on research and development activities is recognized as expense in the period in which it is incurred.
1.16. Borrowing cost
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of these assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in statement of profit and loss in the period in which they are incurred.
1.17. GST input credit
Goods and service tax (GST) input credit is accounted on an accrual basis on purchase of eligible inputs, capital goods and services. The balance of GST input credit is reviewed at the end of each year and amount estimated to be un-utilizable is charged to the statement of profit and loss for the year.
Mar 31, 2017
1. SIGNIFICANT ACCOUNTING POLICIES
1.1. Property, plant and equipment
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation and any accumulated impairment losses. The cost of fixed assets comprises of its purchase price, non-refundable taxes & levies, freight and other incidental expenses related to the acquisition and installation of the respective assets. Borrowing cost attributable to financing of acquisition or construction of the qualifying fixed assets is capitalized to respective assets when the time taken to put the assets to use is substantial.
When major items of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. The cost of replacement of any property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefit associated with the item will flow to the Company and its cost can be measured reliably.
Pre-operative expenditure comprising of revenue expenses incurred in connection with project implementation during the period upto commencement of commercial production are treated as part of the project costs and are capitalized. Such expenses are capitalized only if the project to which they relate, involve substantial expansion of capacity or upgradation.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from its use. Difference between the sales proceeds and the carrying amount of the asset is recognized in statement of profit and loss.
Freehold land is carried at historical cost and not depreciated. Depreciation on fixed assets is provided using straight line method based on useful life of the assets estimated by the management. The estimated useful lives, residual values and depreciation method are reviewed at each financial year-end and changes in estimates, if any are accounted for on a prospective basis.
*For these classes of assets, the useful life of assets is different than the prescribed life as per Part C of Schedule II of the Companies Act, 2013. The different useful life is based on internal technical evaluation by the Company and historical usage of assets.
1.2. Business combination and goodwill
1.2.1. Business combinations
Business Combinations are accounted for using the acquisition method of accounting. Transaction costs incurred in connection with business combination are expensed out in statement of profit and loss. The identifiable assets and liabilities that meet the condition for recognition is recognized at their fair values at the acquisition date.
In case of bargain purchase where the fair value of identifiable assets and liabilities exceed the cost of acquisition, the excess is recognised in other comprehensive income on the acquisition date and accumulate the same in equity as capital reserve after reassessing the fair values of the net assets and contingent liabilities.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted through goodwill during the measurement period, or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date. These adjustments are called as measurement period adjustments. The measurement period does not exceed one year from the acquisition date.
Business combinations arising from transfers of interests in entities that are under the common control are accounted for using the pooling of interests method. The assets and liabilities of the combining entities are reflected at their carrying amounts and no adjustments are made to reflect their fair values or recognise any new assets or liabilities. The difference between any consideration given and the aggregate historical carrying amounts of assets and liabilities of the acquired entity are recorded in capital reserve and presented separately from other capital reserves with disclosure of its nature and purpose.
1.2.2. Goodwill
Goodwill represents the excess of the consideration paid to acquire a business over underlying fair value of the identified assets acquired. Goodwill is carried at cost less accumulated impairment losses, if any. Goodwill is deemed to have an indefinite useful life and is tested for impairment annually or when events or circumstances indicate that the implied fair value of goodwill is less than its carrying amount.
For the purposes of impairment testing, goodwill is allocated to each of the Companyâs cash-generating units (CGUs) that is expected to benefit from the synergies of the combination. Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.
1.3. Intangible assets
Intangible assets acquired separately are measured at cost of acquisition. Intangible assets acquired under business combination are measured at fair value as of the date of business combination. Following initial recognition, intangible assets are carried at cost less accumulated amortization and impairment losses, if any.
Intangible assets are amortized over their respective estimated useful life which reflects the manner in which the economic benefit is expected to be generated. The estimated useful life of amortizable intangibles is reviewed at the end of each reporting period and change in estimates if any are accounted for on a prospective basis.
1.4. Foreign currency transaction and translation
Foreign currency transactions are recorded at exchange rates prevailing on the date of the transaction. The net gain or loss on account of exchange differences arising on settlement of foreign currency transactions are recognized as income or expense of the period in which they arise. Monetary assets and liabilities denominated in foreign currency as at the balance sheet date are translated at the closing rate. The resultant exchange rate differences are recognized in the statement of profit and loss. Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the statement of profit and loss, within finance costs. Non-monetary assets and liabilities are carried at the rates prevailing on the date of transaction.
1.5. Financial instruments
1.5.1. Derivative financial instruments and hedge accounting
The Company enters into derivative financial instruments to manage its foreign exchange rate risk. Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in statement of profit and loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in statement of profit and loss depends on the nature of the hedging relationship and nature of hedged items.
Derivative financial instruments that hedges foreign currency risk associated with highly probable forecasted transactions are designated as cash flow hedges and valued at fair value. The effective portion of such hedges is recorded in cash flow hedge reserve, as a component of equity, and re-classified to the statement of profit and loss as in the period corresponding to the occurrence of the forecasted transactions. The ineffective portion of such hedges is recorded in statement of profit and loss immediately.
Hedge effectiveness testing is assessed both at the inception of the hedge relationship as well as on an ongoing basis. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised or no longer qualifies for hedge accounting.
1.5.2. Cash and cash equivalents
Cash and cash equivalents consists of cash on hand, short demand deposits and highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value. Short term means investments with original maturities / holding period of three months or less from the date of investments. Bank overdrafts that are repayable on demand and form an integral part of the Companyâs cash management are included as a component of cash and cash equivalent for the purpose of statement of cash flow.
1.5.3. Investments
Investments in mutual funds are primarily held for the Companyâs temporary cash requirements and can be readily convertible in cash. These investments are initially recorded at fair value and classified as fair value through profit or loss.
The Company measures investment in subsidiaries at cost less provision for impairment, if any.
The Company has made an irrevocable election to present subsequent changes in the fair value of equity investments, not held for trading, in other comprehensive income.
1.5.4. Trade receivables
Trade receivables are amounts due from customers for sale of goods or services performed in the ordinary course of business. Trade receivables are initially recognized at its transaction price which is considered to be its fair value and are classified as current assets as it is expected to be received within the normal operating cycle of the business.
1.5.5. Borrowings
Borrowings are initially recorded at fair value and subsequently measured at amortized costs using effective interest method. Transaction costs are charged to statement of profit and loss as financial expenses over the term of borrowing.
1.5.6. Trade payables
Trade payables are amounts due to vendors for purchase of goods or services acquired in the ordinary course of business and are classified as current liabilities to the extent it is expected to be paid within the normal operating cycle of the business.
1.5.7. Other financial assets and liabilities
Other non-derivative financial instruments are initially recognized at fair value and subsequently measured at amortized costs using the effective interest method.
1.5.8. De-recognition of financial assets and liabilities
The Company derecognizes a financial asset when the contractual right to the cash flows from the asset expires or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction which substantially all the risk and rewards of ownership of the financial asset are transferred. If the Company retains substantially all the risk and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.
The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired; the difference between the carrying amount of derecognized financial liability and the consideration paid is recognized as profit or loss.
1.6. Leases - Company as lessee Finance lease
Leases where the Company assumes substantially all the risks and rewards of ownership are classified as finance lease. Such leases are capitalized at the inception of the lease at lower of the fair value or the present value of the minimum lease payments and a liability is recognized for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each year.
Land acquired on long-term leases
The Company classifies leasehold land as finance lease where:
- Initial amount paid is substantially all of the fair value of land
- The company has option to purchase the land at a price that is sufficiently lower than fair value at the date option is exercisable
- Lessor has agreed to renew lease on expiry of lease term.
Leasehold land is recognized as an asset at the value of the upfront premium / charges paid to acquire lease.
Operating lease
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognized as operating lease. Operating lease payments are recognized as an expense on a straight line basis over the lease term unless the payments are structured to increase in line with the expected general inflation so as to compensate for the lessorâs expected inflationary cost increases.
1.7. Inventories
Inventories are carried at the lower of cost and net realizable value.
The cost incurred in bringing the inventory to their existing location and conditions are determined as follows:
a. Raw material and packing material - Purchase cost of materials on a moving average basis.
b. Finished goods (manufactured) and work in progress - Cost of purchase, conversion cost and other costs on a weighted average cost method.
c. Finished Goods (traded) - Purchase cost on a moving average basis.
The cost of purchase of inventories comprise the purchase price, import duties and other taxes (other than those subsequently recovered by the Company from taxing authorities) and transport, handling and other costs directly attributable to bringing the inventory to their existing location and conditions. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase.
Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sales.
The Company considers various factors like shelf life, ageing of inventory, product discontinuation, price changes and any other factor which impact the Companyâs business in determining the allowance for obsolete, non-saleable and slow moving inventories. The Company considers the above factors and adjusts the inventory provision to reflect its actual experience on a periodic basis.
1.8. Impairment of assets Financial assets
At each balance sheet date, the Company assesses whether a financial asset is to be impaired. Ind AS 109 requires expected credit losses to be measured through loss allowance. The Company measures the loss allowance for financial assets at an amount equal to lifetime expected credit losses if the credit risk on that financial asset has increased significantly since initial recognition. If the credit risk on a financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for financial assets at an amount equal to 12-month expected credit losses. The Company uses both forward-looking and historical information to determine whether a significant increase in credit risk has occurred.
Non-financial assets Tangible and intangible assets
Property, plant and equipment and intangible assets with finite life are evaluated for recoverability whenever there is any indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognized in the statement of profit and loss to such extent. When an impairment loss subsequently reverses, the carrying amount of the asset (or a CGU) is increased to the revised estimate of its recoverable amount, such that the increase in the carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised immediately in statement of profit and loss.
Goodwill
CGUs to which goodwill has been allocated are tested for impairment annually or more frequently when there is indication for impairment. If the recoverable amount of a CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
Determination of recoverable amount of CGU requires the management to estimate the future cash flows expected to arise and a suitable discount rate in order to calculate the present value. An impairment loss recognised for goodwill is not reversed in subsequent periods.
1.9. Employee benefits
1.9.1. Short term employee benefits
Short term benefits payable before twelve months after the end of the reporting period in which the employees have rendered service are accounted as expense in statement of profit and loss.
1.9.2. Long term employment benefits Defined contribution plans
Contributions to defined contribution plans (provident fund, superannuation and other social security schemes) are recognized as expense when employees have rendered services entitling them to such benefits.
Defined benefit plans
The Companyâs net obligation in respect of an approved gratuity plan, which is defined benefit plan, is calculated using the projected unit credit method and the same is carried out by qualified actuary. The current service cost and interest on the net defined benefit liability / (asset) is recognized in the statement of profit and loss. Past service cost are immediately recognized in the statement of profit and loss. Actuarial gains and losses net of deferred taxes arising from experience adjustment and changes in actuarial assumptions are recognized in other comprehensive income in the period in which they arise.
Termination benefits
Termination benefits are recognized as an expense when the Company is committed without any possibility of withdrawal of an offer made to either terminate employment before the normal retirement date or as a result of an offer made to encourage voluntary retirement.
Compensated absences and earned leaves
The Companyâs current policy permits eligible employees to accumulate compensated absences up to a prescribed limit and receive cash in lieu thereof in accordance with the terms of the policy. The Company measures the expected cost of accumulating compensated absences as the additional amount that the Company expects to pay as a result of unused entitlement that has accumulated as at the reporting date. The expected cost of these benefits is calculated using the projected unit credit method by qualified actuary every year. Actuarial gains and losses arising from experience adjustment and changes in actuarial assumptions are recognized in the statement of profit and loss in the period in which they arise. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
1.10. Government grants
Government grants are recognized when there is reasonable assurance that the grant will be received and all attached conditions for receiving such grant have been and will be fulfilled.
Government grants related to asset are recognized as deferred income and charged to statement of profit and loss on a systematic basis over expected useful life of the related asset.
Government grants are recognized in statement of profit and loss on a systematic basis over the period in which Company recognizes as expenses the related costs for which the grants are intended to compensate. Government grants that are receivable as compensation for expenses already incurred are recognised in statement of profit and loss in the period in which they become receivable.
When loans received from the government or related institutions with below-market interest rate, the benefit of below-market interest rate is treated as government grant measured as the difference between the proceeds received and the fair value of loan based on prevailing market interest rate.
1.11. Provisions, contingent liabilities and contingent assets Contingent liability :
A possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company are disclosed as contingent liability and not provided for. Such liability is not disclosed if the possibility of outflow of resources is remote.
Contingent assets :
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. Contingent assets are not recognised and disclosed only when an inflow of economic benefits is probable.
Provisions :
A provision is recognized when as a result of a past event, the Company has a present obligation whether legal or constructive that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. If the obligation is expected to be settled more than 12 months after the end of reporting date or has no definite settlement date, the provision is recorded as non-current liabilities after giving effect for time value of money, if material. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
1.12. Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue from sale of goods includes excise duty and are net of discounts, applicable taxes, rebates and estimated returns.
Provision for sales returns are estimated on the basis of historical experience, market conditions and specific contractual terms and provided for in the year of sale as reduction from revenue. The methodology and assumptions used to estimate returns are monitored and adjusted regularly in line with contractual and legal obligations, trade practices, historical trends, past experience and projected market conditions.
The revenue is recognized when the significant risks and rewards of ownership of goods are transferred to the buyer, recoverability of consideration is probable, the amount of revenue and cost incurred or to be incurred in respect of the transaction can be measured reliably and there is no continuing managerial involvement over the goods sold.
Income from services is recognized when the services are rendered or when contracted milestones have been achieved.
Revenue from arrangements which includes performance of obligations is recognized in the period in which the Company completes all its performance obligations.
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.
Export entitlements are recognised as income when right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
Dividend income is recognized when the Companyâs right to receive the payment is established, it is probable that the economic benefits associated with the dividend will flow to the Company and the amount of dividend can be measured reliably.
1.13. Income taxes
Income tax expense comprises current and deferred tax expense. Income tax expenses are recognized in statement of profit and loss, except when they relate to items recognized in other comprehensive income or directly in equity, in which case, income tax expenses are also recognized in other comprehensive income or directly in equity respectively.
Current tax is the tax payable on the taxable profit for the year, using tax rates enacted or substantively enacted by the end of reporting period by the governing taxation laws, and any adjustment to tax payable in respect of previous periods. Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred taxes arising from deductible and taxable temporary differences between the tax base of assets and liabilities and their carrying amount in the financial statements are recognized using substantively enacted tax rates and laws expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled. The deferred tax arising from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction are not recognized.
Deferred tax asset are recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax assets to be utilized.
Deferred tax assets and liabilities are offset when the Company has a legally enforceable right to do the same.
For units which enjoy tax holiday benefit, deferred tax assets and liabilities have been provided for the tax consequences of those temporary differences between the carrying values of assets and liabilities and their respective tax bases that reverse after the tax holiday ends.
Deferred tax assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which gives rise to future economic benefits in the form of adjustment of future income tax liability. Accordingly, MAT is recognized as deferred tax asset in the balance sheet when the assets can be measured reliably and it is probable that the future economic benefit associated with the asset will be realized.
Dividend distribution tax arising out of payment of dividends to shareholders under the Indian Income Tax Act regulation are recognized in statement of changes in equity as part of associated dividend payment.
1.14. Earnings per share
Basic earnings per share is computed by dividing profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
1.15. Research and development
Revenue expenditure on research and development activities is recognized as expense in the period in which it is incurred.
1.16. Borrowing cost
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of these assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in statement of profit and loss in the period in which they are incurred.
1.17. Cenvat credit
Central value added tax (Cenvat) credit in respect of excise, custom and service tax is accounted on an accrual basis on purchase of eligible inputs, capital goods and services. The balance of cenvat credit is reviewed at the end of each year and amount estimated to be un-utilizable is charged to the statement of profit and loss for the year.
Mar 31, 2014
1.1 Basis for preparation of financial statements
The financial statements have been prepared and presented under the
historical cost convention on an accrual basis of accounting and in
accordance with the Generally Accepted Accounting Principles (GAAP) in
India. GAAP includes Accounting Standards (AS) notifed by the Central
Government of India under Section 211 (3C) of The Companies Act, 1956,
(which continue to be applicable in respect of Section 133 of the
Companies Act, 2013 in terms of General Circular 15/2013 dated 13
September, 2013 of the Ministry of Corporate Affairs) provisions of The
Companies Act,1956, pronouncements of Institute of Chartered
Accountants of India and guidelines issued by Securities and Exchange
Board of India (SEBI). The Company has presented financial statements
as per format prescribed by Revised Schedule VI, notifed under The
Companies Act,1956, issued by Ministry of Corporate Affairs. Except
where otherwise stated, the accounting policies are consistently
applied.
All the assets and liabilities have been classified as current or non
current as per the Company''s normal operating cycle and other criteria
set out in the Revised Schedule VI to the Companies Act, 1956.
Current assets / liabilities include the current portion of non current
financial assets / liabilities respectively. All other assets /
liabilities are classified as non current.
1.2 Use of estimates
The preparation of financial statements in conformity with GAAP requires
management to make assumptions, critical judgements and estimates,
which it believes are reasonable under the circumstances, that affect
the reported amounts of assets, liabilities and contingent liabilities
on the date of financial statements and the reported amounts of revenue
and expenses during the period. Actual results could differ from those
estimates. Difference between the actual results and estimates are
recognized in the period in which the results are known or materialize.
1.3 Fixed assets, depreciation and amortization Tangible assets
(a) Tangible fixed assets are stated at cost of acquisition or
construction less accumulated depreciation. The cost of fixed asset
comprises of its purchase price, non-refundable taxes & levies, freight
and other incidental expenses related to the acquisition and
installation of the respective assets. Borrowing cost attributable to
acquisition or construction of qualifying fixed assets is capitalized to
respective assets when the time taken to put the assets to use is
substantial.
(b) Pre-operative expenditure comprising of revenue expenses incurred
in connection with project implementation during the period up to
commencement of commercial production are treated as part of project
costs and are capitalized. Such expenses are capitalized only if the
project to which they relate, involve substantial expansion of capacity
or upgradation.
(c) Depreciation on fixed assets is provided using the straight-line
method at the rates prescribed in Schedule XIV of The Companies Act,
1956 or based on useful life of the assets as estimated by the
management, whichever is higher.
The management''s estimate of the useful life for various categories of
fixed assets are given below:
office buildings 58 years
Factory buildings 28 years
Plant and machinery 10 to 20 years
Laboratory equipment 5 to 20 years
Electrical equipment 10 to 20 years
Furniture and fixtures 10 years
office equipment 10 years
Computer equipment 3 years
Vehicles 10 years
(d) Cost of leasehold land (except for lease of long tenure) is
amortized over the period of the lease. Cost of lease hold land where
lease period is of long tenure and substantial rights of ownership are
with lessee, is not amortized.
Intangible assets
(a) Acquired product licenses are capitalized at costs comprising of
direct costs of purchase and expenses directly attributable to the
purchase of product licenses.
(b) Software costs are capitalized and recognized as intangible assets
based on materiality, accounting prudence and significant economic
benefits expected to fow there from for a period longer than one year.
(c) Intangible assets are amortized over their estimated useful lives
on a straight-line basis. The management''s estimate of the useful life
of various categories of intangible assets are given below:
Product licenses Upto 10 years
Software 3 to 5 years
Impairment of assets
(a) Fixed assets are reviewed for impairment losses at each balance
sheet date for events or changes in circumstances indicating that the
carrying amount may not be recoverable. An impairment loss is then
recognized for the amount by which the carrying amount of the assets
exceeds its recoverable amount, which is the higher of an asset''s net
selling price and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are
separately identifable cash flows.
(b) Fixed assets that have been retired from their active use and held
for disposal, are classified as current assets, and are stated at lower
of their cost and net realizable value.
1.4 Investments
(a) Non-current investments are carried at cost. Provision is made to
recognize any diminution in value, other than that of a temporary
nature.
(b) Current investments are carried at lower of cost and fair value.
Diminution in value is charged to the statement of profit and loss.
(c) Current investments readily convertible in known amount of cash and
subject to insignificant risk of changes in value are classified as cash
and cash equivalents for preparation of cash fow statement.
1.5 Cash fow statement
The cash fow statement is prepared as per the "Indirect Method" as set
out in AS - 3 "Cash Flow Statements" issued by the Institute of
Chartered Accountants of India.
1.6 Inventories
Inventories are valued at the lower of cost and net realizable value.
Provision for impairment is made when there is uncertainty in
salability of an item. Costs incurred in bringing inventories to its
existing location and condition are determined on the following basis:
(a) Raw materials and packing materials - Purchase cost of materials on
moving average basis.
(b) Finished goods (manufactured) and work-in-progress - Cost of
purchase, cost of conversion and other costs proportionately allocated
determined on weighted average basis.
(c) Finished goods (traded) - Purchase cost on moving average basis.
1.7 Revenue recognition
(a) Revenue from sale of goods is recognized when the significant risks
and rewards of ownership of goods are transferred to the customers.
Sales are net of discounts, sales tax, value added tax and estimated
returns. Excise duty collected on sales are shown by way of deduction
from sales.
(b) Provision for sales returns are estimated on the basis of
historical experience, market conditions and specific contractual terms
and provided for in the year of sale as reduction from revenue. The
methodology and assumptions used to estimate returns are monitored and
adjusted regularly in line with contractual and legal obligations,
trade practices, historical trends, past experience and projected
market conditions.
(c) Income from services is recognized when the services are rendered
or when contracted milestones have been achieved.
(d) Revenue from arrangements which includes performance of obligations
is recognized in the period in which related performance obligations
are completed.
(e) Export entitlements are recognized as income when right to receive
credit as per the terms of the scheme is established in respect of the
exports made and where there is no significant uncertainty regarding the
ultimate collection of the relevant export proceeds.
(f) Dividend income is recognized when the unconditional right to
receive dividend is established.
(g) Interest income is recognized using the time proportionate method,
based on rates implicit in the transaction. (h) Revenue in respect of
other income is recognized when a reasonable certainty as to its
realization exists.
1.8 Employees retirement and other benefits
Short-term employee benefits :
Short-term employee benefits like salaries, wages, bonus and welfare
expenses payable wholly within twelve months of rendering the service
are accrued in the year in which the associated services are rendered
by the employees.
Long-term employee benefits :
(a) defined contribution plan :
Contribution in case of defined contribution plans (provident fund,
superannuation benefit, social security schemes and other fund/schemes)
is charged to the statement of profit and loss as and when it is
incurred as employee benefits.
(b) defined benefit plan :
The accruing liability on account of gratuity (retirement benefit in the
nature of defined benefits plan) is actuarially valued every year. The
current service cost, interest cost, expected return on plan assets and
the actuarial gain/ loss are debited / credited, as the case may be, to
the statement of profit and loss of the year as employees benefits.
(c) Other long-term benefits :
Long-term compensation plan to employees (being deferred compensation
paid 12 months or more after the end of the period in which it is
earned) are expensed out in the period to which the costs relate at
present value of the benefits under the plan.
The liability for compensated absences and leave encashment is provided
on the basis of actuary valuation, as at balance sheet date.
1.9 Government grants
(a) Government grants are recognized when there is reasonable assurance
that the grant will be received and all relevant conditions are
complied with.
(b) Grants received by way of investment subsidy scheme in relation to
total investment are credited to capital reserve and are treated as
part of owners'' fund.
(c) Grants that compensate expenses are recognized on receipt basis.
1.10 Finance costs
Finance costs consist of interest, amortization of ancilliary costs and
other costs in connection with the borrowing of funds and exchange
differences arising from foreign currency borrowings to the extent that
they are regarded as an adjustment to interest costs.
1.11 Cenvat credit
Cenvat (Central value added tax) credit in respect of excise, custom
and service tax is accounted on accrual basis on purchase of eligible
inputs, capital goods and services. The balance of cenvat credit is
reviewed at the end of each year and amount estimated to be
un-utilisable is charged to the statement of profit and loss for the
year.
1.12 Stores and spares
Stores and spares (other than spares acquired with fixed assets) are
charged to the statement of profit and loss as and when purchased.
1.13 Software costs
Expenditure incurred for procuring, developing, improving and
maintaining software programs are charged to the statement of profit and
loss as and when incurred, except when capitalized in accordance with
Note 1.3 above.
1.14 Research and development
Revenue expenditure on research and development is expensed off under
the respective head of expenses in the year in which it is incurred.
Capital expenditure on research and development is reported as fixed
assets under the relevant head. Depreciation on research and
development fixed assets are not classified as research and development
expenses and instead included under depreciation expenses.
1.15 Leases
Lease rentals in respect of assets taken on operating lease are charged
to the statement of profit and loss on accrual and straightline basis
over the lease term.
1.16 Accounting for taxes
(a) Current tax is accounted on the basis of estimated taxable income
for the current accounting year and in accordance with the provisions
of the Income Tax Act, 1961.
(b) Deferred tax resulting from "timing differences" between accounting
and taxable profit for the period is accounted by using tax rates and
laws that have been enacted or substantively enacted as at the balance
sheet date. Deferred tax assets are recognized only to the extent there
is reasonable certainty that the assets can be realized in future. Net
deferred tax liabilities are arrived at after setting off deferred tax
assets.
1.17 Foreign currency transactions and balances
(a) Foreign currency transactions are recorded at the exchange rates
prevailing on the date of the transaction.
(b) The net gain or loss on account of exchange differences arising on
settlement of foreign currency transactions are recognized as income or
expense of the period in which they arise.
(c) Monetary assets and liabilities denominated in foreign currencies
as at the balance sheet date are translated at the closing rate. The
resultant exchange differences are recognized in the statement of profit
and loss. Non-monetary assets and liabilities are carried at the rates
prevailing on the date of transaction. The Company has not exercised
the option for capitalization or amortization of exchange differences
on long term foreign currency monetary items as provided by notifcation
issued by the Ministry of Corporate Affairs.
(d) Investments in shares of foreign subsidiaries and other entities
are expressed in reporting currency at the rates of exchange prevailing
at the time when the original investments were made.
1.18 Derivative instruments and hedge accounting
(a) In case of forward contracts, to which AS 11, "The Effects of
Changes in Foreign Exchange Rates" applies, the difference between the
forward rate and the exchange rate on the date of the contract is
recognized as income or expense over the life of the contract. Exchange
differences on such a contract are recognized in the statement of profit
and loss in the period in which the exchange rates change.
(b) Foreign currency forward contracts, to which AS 11 does not apply,
hedge accounting principles set out in AS 30 "Financial Instruments:
Recognition and Measurement" are adopted w.e.f. 01st April, 2011 to the
extent they do not confict with existing mandatory accounting standards
and other authoritative pronouncements, Company law and other
regulatory requirements. These transactions comprise of forward
contracts taken to hedge risks associated with foreign currency
fuctuations relating to highly probable forecast transactions and
designated as cash fow hedges and valued at fair value. Changes in the
fair value of these forward contracts that are effective hedges are
recognized directly in cash fow hedge reserve account and the
ineffective portion is recognized in the statement of profit and loss.
Amount accumulated in cash fow hedge reserve account is reclassified to
the statement of profit and loss in the same period during which the
forecasted transaction materialize. Hedge accounting is discontinued
when the hedging instrument expires or is sold, terminated, or
exercised, or no longer qualifes for hedge accounting.
If the forecasted transaction is no longer expected to occur, the net
cumulative gain or loss recognized in cash fow hedge reserve account is
immediately transferred to the statement of profit and loss for the
period.
1.19 Provisions, contingent liabilities and contingent assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outfow of resources for
which reliable estimate can be made. Liabilities which are of a
contingent nature are not provided but are disclosed at their estimated
amount in the notes forming part of the financial statements. Contingent
assets are neither recognized nor disclosed in the financial statements.
Mar 31, 2013
1.1 Basis for preparation of financial statements
The financial statements have been prepared and presented under the
historical cost convention on an accrual basis of accounting and in
accordance with the Generally Accepted Accounting Principles (GAAP) in
India. GAAP includes Accounting Standards (AS) notified by the Central
Government of India under Section 211(3C) of The Companies Act, 1956,
provisions of The Companies Act,1956, pronouncements of Institute of
Chartered Accountants of India and guidelines issued by Securities and
Exchange Board of India (SEBI). The Company has presented financial
statements as per format prescribed by Revised Schedule VI, notified
under The Companies Act,1956, issued by Ministry of Corporate Affairs.
Except where otherwise stated, the accounting policies are consistently
applied.
1.2 Use of estimates
The preparation of financial statements in conformity with GAAP
requires management to make assumptions, critical judgements and
estimates, which it believes are reasonable under the circumstances,
that affect the reported amounts of assets, liabilities and contingent
liabilities on the date of financial statements and the reported
amounts of revenue and expenses during the period. Actual results could
differ from those estimates. Difference between the actual results and
estimates are recognized in the period in which the results are known
or materialize.
1.3 Fixed assets, depreciation and amortization Tangible assets:
(a) Tangible fixed assets are stated at cost of acquisition or
construction less accumulated depreciation. The cost of fixed asset
comprises of its purchase price, non-refundable taxes & levies, freight
and other incidental expenses related to the acquisition and
installation of the respective assets. Borrowing cost attributable to
acquisition or construction of qualifying fixed assets is capitalized
to respective assets when the time taken to put the assets to use is
substantial.
(b) Pre-operative expenditure comprising of revenue expenses incurred
in connection with project implementation during the period up to
commencement of commercial production are treated as part of project
costs and are capitalized. Such expenses are capitalized only if the
project to which they relate, involve substantial expansion of capacity
or upgradation.
(c) Depreciation on fixed assets is provided using the straight-line
method at the rates prescribed in Schedule XIV of The Companies Act,
1956 or based on useful life of the assets as estimated by the
management, whichever is higher.
The management''s estimate of the useful life for various categories of
fixed assets are given below:
(d) Cost of leasehold land (except for lease of long tenure) is
amortized over the period of the lease. Cost of lease hold land where
lease period is of long tenure and substantial rights of ownership are
with lessee, is not amortized.
Intangible assets:
(a) Acquired product licenses are capitalized at costs comprising of
direct costs of purchase and expenses directly attributable to the
purchase of product licenses.
(b) Software costs are capitalized and recognized as intangible assets
based on materiality, accounting prudence and significant economic
benefits expected to flow there from for a period longer than one year.
(c) Intangible assets are amortized over their estimated useful lives
on a straight-line basis. The management''s estimate of the useful life
of various categories of fixed assets are given below:
Impairment of assets:
(a) Fixed assets are reviewed for impairment losses whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is then recognized for the amount by
which the carrying amount of the assets exceeds its recoverable amount,
which is the higher of an asset''s net selling price and value in use.
For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash flows.
(b) Fixed assets that have been retired from their active use and held
for disposal, are classified as current assets, and are stated at lower
of their cost and net realizable value.
1.4 Investments
(a) Long-term investments are carried at cost. Provision is made to
recognize any diminution in value, other than that of a temporary
nature.
(b) Current investments are carried at lower of cost and fair value.
Diminution in value is charged to the statement of profit and loss.
(c) Current investments readily convertible in known amount of cash and
subject to insignificant risk of changes in value are classified as
cash and cash equivalents for preparation of cash flow statement.
1.5 Cash flow statement
The cash flow statement is prepared as per the "Indirect Method" as
set out in AS 3 "Cash Flow Statements" issued by the
Institute of Chartered Accountants of India.
1.6 Inventories
Inventories are valued at the lower of cost and net realizable value.
Provision for impairment is made when there is high uncertainty in
salability of an item. Costs incurred in bringing inventories to its
existing location and condition are determined on the following basis:
(a) Raw materials and packing materials - Purchase cost of materials on
moving average basis.
(b) Finished goods (manufactured) and work-in-progress - Cost of
purchase, cost of conversion and other costs proportionately allocated
determined on weighted average basis.
(c) Finished goods (traded)-Purchase cost on moving average basis.
1.7 Revenue recognition
(a) Revenue from sale of goods is recognized when the significant risks
and rewards of ownership of goods are transferred to the customers.
Sales are net of discounts, sales tax, value added tax and estimated
returns. Excise duty collected on sales are shown by way of deduction
from sales.
(b) Provision for sales returns are estimated primarily on the basis of
historical experience, market conditions and specific contractual terms
and provided for in the year of sale as reduction from revenue. The
methodology and assumptions used to estimate returns are monitored and
adjusted regularly in line with contractual and legal obligations,
trade practices, historical trends, past experience and projected
market conditions.
(c) Income from services is recognized when the services are rendered
or when contracted milestones have been achieved.
(d) Revenue from arrangements which includes performance of obligations
is recognized in the period in which related performance obligations
are completed.
(e) Export entitlements are recognized as income when right to receive
credit as per the terms of the scheme is established in respect of the
exports made and where there is no significant uncertainty regarding
the ultimate collection of the relevant export proceeds.
(f) Dividend income is recognized when the unconditional right to
receive dividend is established.
(g) Interest income is recognized using the time proportionate method,
based on rates implicit in the transaction.
(h) Revenue in respect of other income is recognized when a reasonable
certainty as to its realization exists.
1.8 Employees retirement and other benefits Short-term employee
benefits:
Short-term employee benefits like salaries, wages, bonus and welfare
expenses payable wholly within twelve months of rendering the service
are accrued in the year in which the associated services are rendered
by the employees.
Long-term employee benefits:
(a) Defined contribution plan:
Contribution in case of defined contribution plans (provident fund,
superannuation benefit, social security schemes and other fund/schemes)
is charged to the statement of profit and loss as and when it is
incurred as employee benefits.
(b) Defined benefit plan:
The accruing liability on account of gratuity (retirement benefit in
the nature of defined benefits plan) is actuarially valued every year.
The current service cost, interest cost, expected return on plan assets
and the actuarial gain/loss are debited / credited, as the case may be,
to the statement of profit and loss of the year as employee benefits.
(c) Other long-term benefits :
Long-term compensation plan to employees (being deferred compensation
paid 12 months or more after the end of the period in which it is
earned) are expensed out in the period to which the costs relate at
present value of the benefits under the plan.
The liability for compensated absences and leave encashment is provided
on the basis of actuary valuation, as at balance sheet date.
1.9 Government grants
(a) Government grants are recognized when there is reasonable assurance
that the grant will be received and all relevant conditions are
complied with.
(b) Grants received by way of investment subsidy scheme in relation to
total investment are credited to capital reserve and are treated as
part of owners'' fund.
(c) Grants that compensate expenses are recognized on receipt basis.
1.10 Finance costs
Finance costs consist of interest, amortization of ancilliary costs and
other costs in connection with the borrowing of funds and exchange
differences arising from foreign currency borrowings to the extent that
they are regarded as an adjustment to interest costs.
1.11 Cenvat credit
Cenvat (Central value added tax) credit in respect of excise, custom
and service tax is accounted on accrual basis on purchase of eligible
inputs, capital goods and services. The balance of cenvat credit is
reviewed at the end of each year and amount estimated to be
un-utilisable is charged to the statement of profit and loss for the
year.
1.12 Stores and spares
Stores and spares (other than spares acquired with fixed assets) are
charged to the statement of profit and loss as and when purchased.
1.13 Software costs
Expenditure incurred for procuring, developing, improving and
maintaining software programs are charged to the statement of profit
and loss as and when incurred, except when capitalized in accordance
with Note 1.3 above.
1.14 Research and development
Revenue expenditure on research and development is expensed off under
the respective head of expenses in the year in which it is incurred.
Capital expenditure on research and development is reported as fixed
assets under the relevant head. Depreciation on research and
development fixed assets are not classified as research and development
expenses and instead included under depreciation expenses.
1.15 Leases
Lease rentals in respect of assets taken on operating lease are charged
to the statement of profit and loss on accrual and straight-line basis
over the lease term.
1.16 Accounting for taxes
(a) Current tax is accounted on the basis of estimated taxable income
for the current accounting year and in accordance with the provisions
of The Income Tax Act, 1961.
(b) Deferred Tax resulting from "timing differences" between
accounting and taxable profit for the period is accounted by using tax
rates and laws that have been enacted or substantively enacted as at
the balance sheet date. Deferred tax assets are recognized only to the
extent there is reasonable certainty that the assets can be realized in
future. Net deferred tax liabilities are arrived at after setting off
deferred tax assets.
1.17 Foreign currency transactions and balances
(a) Foreign currency transactions are recorded at the exchange rates
prevailing on the date of the transaction.
(b) The net gain or loss on account of exchange differences arising on
settlement of foreign currency transactions are recognized as income or
expense of the period in which they arise.
(c) Monetary assets and liabilities denominated in foreign currencies
as at the balance sheet date are translated at the closing rate. The
resultant exchange differences are recognized in the statement of
profit and loss. The Company has not exercised the option for
capitalization or amortization of exchange differences on long-term
foreign currency monetary items as provided by notification issued by
the Ministry of Corporate Affairs.
(d) Investments in shares of foreign subsidiaries and other entities
are expressed in reporting currency at the rates of exchange prevailing
at the time when the original investments were made.
1.18 Derivative instruments and hedge accounting
(a) In case of forward contracts, to which AS 11, "The Effects of
Changes in Foreign Exchange Rates" applies, the difference between
the forward rate and the exchange rate on the date of the contract is
recognized as income or expense over the life of the contract. Exchange
differences on such a contract are recognized in the statement of
profit and loss in the period in which the exchange rates change.
(b) Foreign currency forward contracts, to which AS 11 does not apply,
hedge accounting principles set out in AS 30 "Financial Instruments:
Recognition and Measurement" are adopted w.e.f. 01-Apr-2011 to the
extent they do not conflict with existing mandatory accounting
standards and other authoritative pronouncements, Company law and other
regulatory requirements. These transactions comprise of forward
contracts taken to hedge risks associated with foreign currency
fluctuations relating to highly probable forecast transactions and
designated as cash flow hedges and valued at fair value. Changes in
the fair value of these forward contracts that are effective hedges are
recognized directly in cash flow hedge reserve account and the
ineffective portion is recognized in the statement of profit and loss.
Amount accumulated in cash flow hedge reserve account is reclassified
to the statement of profit and loss in the same period during which the
forecasted transaction materialize. Hedge accounting is discontinued
when the hedging instrument expires or is sold, terminated, or
exercised, or no longer qualifies for hedge accounting.
If the forecasted transaction is no longer expected to occur, the net
cumulative gain or loss recognized in cash flow hedge reserve account
is immediately transferred to the statement of profit and loss for the
period.
1.19 Provisions, contingent liabilities and contingent assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources
for which reliable estimate can be made. Liabilities which are of a
contingent nature are not provided but are disclosed at their estimated
amount in the notes forming part of the financial statements.
Contingent assets are neither recognized nor disclosed in the financial
statements.
Mar 31, 2012
1.1 Basis for preparation of financial statements
The financial statements have been prepared and presented under the
historical cost convention on accrual basis of accounting and in
accordance with the Generally Accepted Accounting Principles (GAAP) in
India. GAAP includes Accounting Standards (AS) notifi ed by the
Government of India under Section 211(3C) of the Companies Act, 1956,
provisions of the Companies Act, 1956, pronouncements of Institute of
Chartered Accountants of India and guidelines issued by Securities and
Exchange Board of India (SEBI). The Company has presented financial
statements as per format prescribed by Revised Schedule VI, notifi ed
under the Companies Act, 1956, issued by Ministry of Corporate Affairs.
Except where otherwise stated, the accounting policies are consistently
applied.
1.2 Use of estimates
The preparation of financial statements in conformity with GAAP
requires management to make assumptions, critical judgements and
estimates, which it believes are reasonable under the circumstances
that affect the reported amounts of assets, liabilities and contingent
liabilities on the date of financial statements and the reported
amounts of revenue and expenses during the period. Actual results could
differ from those estimates. Difference between the actual results and
estimates are recognized in the period in which the results are known
or materialize.
1.3 Fixed assets, depreciation and amortization Tangible assets :
(a) Tangible fixed assets are stated at cost of acquisition or
construction less accumulated depreciation. The cost of fixed asset
includes non-refundable taxes & levies, freight and other incidental
expenses related to the acquisition and installation of the respective
assets. Borrowing cost attributable to acquisition or construction of
qualifying fixed assets is capitalized to respective assets when the
time taken to put the assets to use is substantial.
(b) Pre-operative expenditure comprising of revenue expenses incurred
in connection with project implementation during the period upto
commencement of commercial production are treated as part of project
costs and are capitalized. Such expenses are capitalized only if the
project to which they relate, involve substantial expansion of capacity
or upgradation.
(c) Depreciation on fixed assets is provided on straightline method on
the basis of the depreciation rates prescribed in Schedule XIV of the
Companies Act, 1956 or based on useful life of the asset as estimated
by the management, whichever is higher.
(d) Cost of leasehold land (except for lease of long tenure) is
amortized over the period of the lease. Cost of lease hold land where
lease period is of long tenure and substantial rights of ownership are
with lessee, is not amortized.
Intangible assets :
(a) Certain software costs are capitalized and recognized as intangible
assets based on materiality, accounting prudence and signifi cant
economic benefits expected to fl ow there from for a period longer
than one year.
(b) The capitalized software costs are amortized using the straightline
method over estimated useful life of 3 to 5 years, as estimated at the
time of capitalization.
Impairment of assets :
(a) Fixed Assets are reviewed for impairment losses whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is then recognized for the amount by
which the carrying amount of the assets exceeds its recoverable amount,
which is the higher of an asset's net selling price and value in use.
For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifi able cash fl ows.
(b) Fixed Assets that have been retired from their active use and held
for disposal, are classifi ed as current assets, and are stated at
lower of their cost or net realisable value.
1.4 Investments
(a) Long-term investments are stated at cost. Provision is made to
recognize any diminution in value, other than that of a temporary
nature.
(b) Current investments are carried at lower of cost and fair value.
Diminution in value is charged to the statement of Profit and loss.
(c) Current investments readily convertible in known amount of cash and
subject to insignifi cant risk of changes in value are classifi ed as
cash and cash equivalents for preparation of cash fl ow statement.
1.5 Cash fl ow statement
The cash fl ow statement is prepared under the "Indirect Method" as set
out in AS - 3 "Cash Flow Statements" issued by the Institute of
Chartered Accountants of India.
1.6 Inventories
Inventories are valued at the lower of cost and net realizable value.
Provision for impairment is made when there is high uncertainty in
salability of an item. Costs incurred in bringing inventories to its
existing location and condition are determined on the following basis:
(a) Raw materials and packing materials - Purchase cost of materials on
moving average basis.
(b) Finished goods (manufactured) and work-in-progress - Cost of
purchase, cost of conversion and other costs proportionately allocated
determined on weighted average basis.
(c) Finished goods (traded) - Purchase cost on moving average basis.
1.7 Revenue recognition
(a) Revenue from sale of goods is recognized when the signifi cant
risks and rewards of ownership of goods are transferred to the
customer. Sales are net of discounts, sales tax, value added tax and
estimated returns. Excise duty collected on sales are shown by way of
deduction from sales.
(b) Provision for sales returns are estimated primarily on the basis of
historical experience, market conditions and specifi c contractual
terms and provided for in the year of sale as reduction from revenue.
The methodology and assumptions used to estimate returns are monitored
and adjusted regularly in line with contractual and legal obligations,
trade practices, historical trends, past experience and projected
market conditions.
(c) Income from services is recognized when the services are rendered
or when contracted milestones have been achieved.
(d) Revenue from arrangements which includes performance of obligations
is recognized in the period in which related performance obligations
are completed.
(e) Export entitlements are recognized as income when right to receive
credit as per the terms of the scheme is established in respect of the
exports made and where there is no signifi cant uncertainty regarding
the ultimate collection of the relevant export proceeds.
(f) Dividend income is recognized when the right to receive dividend is
established.
(g) Interest income is recognized using the time-proportion method,
based on rates implicit in the transaction. (h) Revenue in respect of
other income is recognized when a reasonable certainty as to its
realization exists.
1.8 Employee retirement and other benefits
Short-term employee benefits :
Short-term employee benefits like salaries, wages, bonus and welfare
expenses payable wholly within twelve months of rendering the services
are accrued in the year in which the associated services are rendered
by the employees.
Long-term employee benefits :
(a) Defi ned contribution plan :
Contribution in case of defi ned contribution plans (provident fund,
superannuation benefit, social security schemes and other
fund/schemes) is charged to the statement of Profit and loss as and
when it is incurred as employees' costs.
(b) Defi ned benefit plan :
The accruing liability on account of gratuity (retirement benefit in
the nature of defi ned benefits plan) is actuarially valued every
year. The current service cost, interest cost, expected return on plan
assets and the actuarial gain / loss are debited / credited, as the
case may be to the statement of Profit and loss of the year as
employees' costs.
(c) Other long-term benefits :
Long-term compensation plan to employees (being deferred compensation
paid 12 months or more after the end of the period in which it is
earned) are expensed out in the period to which the costs relate at
present value of the benefits under the plan.
The liability for compensated absences and leave encashment is provided
on the basis of actuary valuation, as at balance sheet date.
1.9 Government grants
(a) Government grants are recognized when there is reasonable assurance
that the grant will be received and all relevant conditions are
complied with.
(b) Grants received by way of investment subsidy scheme in relation to
total investment are credited to capital reserve and are treated as
part of owners' fund.
(c) Grants that compensate expenses are recognized on receipt basis.
1.10 Finance costs
Finance costs consist of interest and other costs that the Company
incurs in connection with the borrowing of funds and exchange
differences arising from foreign currency borrowings to the extent that
they are regarded as an adjustment to interest costs.
1.11 Cenvat credit
Cenvat (Central value added tax) credit in respect of excise, custom
and service tax is accounted on accrual basis on purchase of eligible
inputs, capital goods and services. The balance of cenvat credit is
reviewed at the end of each year and amount estimated to be
un-utilizable is charged to the statement of Profit and loss for the
year.
1.12 Stores and spares
Stores and spares (other than spares acquired with fixed assets) are
charged to the statement of Profit and loss as and when purchased.
1.13 Software costs
Expenditure incurred for procuring, developing, improving and
maintaining software programs are charged to the statement of Profit
and loss as and when incurred, except when capitalized in accordance
with Note 1.3 above.
1.14 Research and development
Revenue expenditure on research and development is expensed off under
the respective head of expenses in the year in which it is incurred.
Capital expenditure on research and development is reported as fixed
assets under the relevant head. Depreciation on research and
development fixed assets is not classifi ed as research and
development expenses and instead included under depreciation expenses.
1.15 Leases
Lease rentals in respect of assets taken on operating lease are charged
to the statement of Profit and loss on accrual and on straight line
basis over the lease term.
1.16 Accounting for taxes
(a) Current tax is accounted on the basis of estimated taxable income
for the current accounting year and in accordance with the provisions
of the Income Tax Act, 1961.
(b) Deferred tax resulting from "timing differences" between accounting
and taxable Profit for the period is accounted by using tax rates and
laws that have been enacted or substantively enacted as at the balance
sheet date. Deferred tax assets are recognized only to the extent there
is reasonable certainty that the assets can be realized in future. Net
deferred tax liabilities are arrived at after setting off deferred tax
assets.
1.17 Foreign currency transactions and balances
(a) Foreign currency transactions are recorded at the exchange rates
prevailing on the date of the transaction.
(b) The net gain or loss on account of exchange differences arising on
settlement of foreign currency transactions are recognized as income or
expense of the period in which they arise.
(c) Monetary assets and liabilities denominated in foreign currencies
as at the balance sheet date are translated at closing rate. The
resultant exchange differences are recognized in the statement of profi
t and loss. The Company has not exercised the option for capitalization
or amortization of exchange differences on long-term foreign currency
monetary items as provided by notifi cation issued by the Ministry of
Corporate Affairs.
(d) Investments in shares of foreign subsidiaries and other entities
are expressed in reporting currency at the rates of exchange prevailing
at the time when the original investments were made.
(e) In case of forward contracts, to which AS 11, "The Effects of
Changes in Foreign Exchange Rates" applies, the difference between the
forward rate and the exchange rate on the date of the contract is
recognized as income or expense over the life of the contract. Exchange
differences on such a contract are recognized in the statement of profi
t and loss in the period in which the exchange rates change.
(f) Foreign currency forward contracts, to which AS 11 does not apply,
hedge accounting principles set out in AS 30 "Financial Instruments:
Recognition and Measurement" are adopted w.e.f. 1st April, 2011 to the
extent they do not conflict with existing mandatory accounting
standards and other authoritative pronouncements, Company law and other
regulatory requirements. These transactions comprise of forward
contracts taken to hedge risks associated with foreign currency fl
uctuations relating to highly probable forecast transactions and
designated as cash fl ow hedges and valued at fair value. Changes in
the fair value of these forward contracts that are effective hedges are
recognized directly in cash flow hedge reserve account and the
ineffective portion is recognized in the statement of Profit and loss.
Amount accumulated in cash flow hedge reserve account is reclassified
to the statement of Profit and loss in the same period during which
the forecasted transaction materialize. Hedge accounting is
discontinued when the hedging instrument expires or is sold,
terminated, or exercised, or no longer qualifi es for hedge accounting.
If the forecasted transaction is no longer expected to occur, the net
cumulative gain or loss recognized in cash fl ow hedge reserve account
is immediately transferred to the statement of Profit and loss for the
period.
1.18 Provisions, contingent liabilities and contingent assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outfl ow of resources.
Liabilities which are of contingent nature are not provided but are
disclosed at their estimated amount in the notes forming part of the fi
nancial statements. Contingent assets are neither recognized nor
disclosed in the financial statements.
Mar 31, 2011
1. Basis for Preparation of Financial Statements
The financial statements are prepared and presented under the
historical cost convention on accrual basis of accounting and in
accordance with the Generally Accepted Accounting Principles (GAAP) in
India. GAAP includes provisions of the Companies Act, 1956, Accounting
Standards (AS) notifi ed by the Government of India under Section 211
(3C) of the Companies Act, 1956, pronouncements of Institute of
Chartered Accountants of India and guidelines issued by Securities and
Exchange Board of India. Except where otherwise stated, the accounting
principles are consistently applied.
2. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make assumptions
and estimates, which it believes are reasonable under the circumstances
that affect the reported amounts of assets, liabilities and contingent
liabilities on the date of financial statements and the reported
amounts of revenue and expenses during the period. Actual results could
differ from those estimates. Difference between the actual results and
estimates are recognised in the period in which the results are known
or materialise.
3. Fixed Assets
(a) Tangible fixed assets are stated at cost of acquisition or
construction less accumulated depreciation. The cost of fixed asset
includes non-refundable taxes and levies, freight and other incidental
expenses related to the acquisition and installation of the respective
assets. Borrowing cost attributable to acquisition or construction of
qualifying fixed assets are capitalised to respective assets when the
time taken to put the assets to use is substantial.
(b) Pre-operative expenditure comprising of revenue expenses incurred
in connection with project implementation during the period up to
commencement of commercial production are treated as part of project
costs and are capitalised. Such expenses are capitalised only if the
project to which they relate involve substantial expansion of capacity
or upgradation.
(c) Certain software costs are capitalised and recognised as intangible
assets in terms of Accounting Standard 26 on Intangible Assets based on
materiality, accounting prudence and signifi cant economic benefits
expected to flow there from for a period longer than one year.
(d) Fixed Assets are reviewed for impairment losses whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is then recognised for the amount by
which the carrying amount of the assets exceeds its recoverable amount,
which is the higher of an assets net selling price and value in use.
For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifi able cash flows.
(e) Fixed Assets that have been retired from their active use and held
for disposal, are classifi ed as current assets, and are stated at
lower of their cost or net realisable value.
4. Depreciation and Amortisation
(a) Depreciation on fixed assets is provided on straight line method
on the basis of the depreciation rates prescribed in Schedule XIV of
the Companies Act, 1956 or based on useful life of the asset as
estimated by the management, whichever is higher.
(b) Cost of leasehold land (except for lease of long tenure) is
amortised over the period of the lease. Cost of lease hold land where
lease period is of long tenure and substantial rights of ownership are
with lessee, is not amortised.
(c) The Capitalised Software costs are amortised using the
straight-line method over estimated useful life of 3 to 5 years, as
estimated at the time of capitalization.
5. Investments
(a) Long term investments are stated at cost. Provision is made to
recognise any diminution in value, other than that of a temporary
nature.
(b) Current investments are carried at lower of cost and fair value.
Diminution in value is charged to the profit and loss account.
6. Cash Flow Statement
The Cash Flow Statement is prepared under the "Indirect Method" as set
out in AS - 3 Cash Flow Statements issued by the Institute of Chartered
Accountants of India.
7. Inventories
Inventories are valued at the lower of cost and net realisable value.
Provision for impairment is made when there is high uncertainty in
salability of an item. Cost of inventories is determined on the
following basis:
(a) Cost of raw material and packing material is determined on moving
average basis.
(b) Work in process is determined on weighted average basis.
(c) Cost of fi nished goods produced is determined on weighted average
basis.
(d) Cost of fi nished goods (traded) is determined on moving average
basis.
8. Revenue Recognition
(a) Revenue from sale of goods is recognised when the signifi cant
risks and rewards of ownership of goods are transferred to the
customer. Sales are net of discounts, VAT/sales tax and returns; excise
duties collected on sales are shown by way of deduction from sales.
(b) Income from services is recognised when the services are rendered
or when contracted milestones have been achieved.
(c) Revenue from arrangements which includes performance of obligations
is recognised in the period in which related performance obligations
are completed.
(d) Export entitlements are recognised as income when right to receive
credit as per the terms of the scheme is established in respect of the
exports made and where there is no signifi cant uncertainty regarding
the ultimate collection of the relevant export proceeds.
(e) Dividend income is recognised when the right to receive dividend is
established.
(f) Interest income is recognized using the time-proportion method,
based on rates implicit in the transaction.
(g) Revenue in respect of other income is recognised when a reasonable
certainty as to its realisation exists.
9. Employees Retirement and Other Benefits
(a) The accruing liability on account of gratuity (retirement benefit
in the nature of defi ned benefits plan), is actuarially valued every
year. The current service cost, interest cost, expected return on plan
assets and the actuarial gain / loss are expensed to the profit and
loss account of the year as Employees Costs.
(b) The Companys contribution in case of defi ned contribution plans
(Provident Fund, Superannuation benefit and other funds ) is charged
to profit and loss account as and when it is incurred as Employee
Costs.
(c) Long term compensation plan to employees (being deferred
compensation paid 12 months or more after the end of the period in
which it is earned) are expensed out in the period to which the costs
relate at present value of the benefits under the plan.
(d) The liability for compensated absences and leave encashment is
provided on the basis of actuary valuation, as at Balance Sheet date.
10. Government Grants
(a) Government grants are recognised when there is reasonable assurance
that the grant will be received and all relevant conditions are
complied with.
(b) Grants received by way of investment subsidy scheme in relation to
total investment are credited to capital reserve and are treated as
part of owners fund.
(c) Grants that compensate expenses are recognized on receipt basis and
are shown as deduction from the related expenses for which they are
intended to compensate.
11. Borrowing Costs
Borrowing costs consist of interest and other costs that the Company
incurs in connection with the borrowing of funds and exchange
differences arising from foreign currency borrowings to the extent that
they are regarded as an adjustment to interest costs.
12. Cenvat Credit
Cenvat (Central value added tax) credit in respect of Excise, Custom
and Service tax is accounted on accrual basis on purchase of eligible
inputs, capital goods and services. The balance of cenvat credit is
reviewed at the end of each year and amount estimated to be
un-utilisable is charged to the profit and loss account for the year.
13. Stores and Spares
Stores and spares (other than spares acquired with fixed assets) are
charged to the profit and loss account as and when purchased.
14. Software Costs
Expenditure incurred for procuring, developing, improving and
maintaining software programs are charged to the profit and loss
account as and when incurred, except when capitalised in accordance
with Note 3 (c) above.
15. Research and Development
Research and Development expenses are charged to revenue. Capital
expenditure on research and development is reported as fixed assets
under the relevant head. Depreciation on research and development fi
xed assets is included under depreciation expense.
16. Leases
Lease rentals in respect of assets taken on operating lease are charged
to the profit and loss account on accrual and on straight line basis
over the lease term.
17. Accounting for Tax
(a) Current Tax is accounted on the basis of estimated taxable income
for the current accounting year and in accordance with the provisions
of Income Tax Act, 1961.
(b) Deferred Tax resulting from "timing differences" between accounting
and taxable profit for the period is accounted by using tax rates and
laws that have been enacted or substantially enacted as at the balance
sheet date. Deferred tax assets are recognised only to the extent there
is reasonable certainty that the assets can be realized in future. Net
deferred tax liability is arrived at after setting off deferred tax
assets.
18. Foreign Currency Transactions and Balances
(a) Foreign currency transactions are recorded at the exchange rates
prevailing on the date of the transaction.
(b) The net gain or loss on account of exchange differences arising on
settlement of foreign currency transactions are recognised as income or
expense of the period in which they arise.
(c) In case of forward contracts, to which AS 11, The Effects of
Changes in Foreign Exchange Rate applies, the difference between the
forward rate and the exchange rate on the date of the contract is
recognised as income or expense over the life of the contract. Exchange
differences on such a contract are recognised in the profit and loss
account in the period in which the exchange rates change. Derivatives
not covered under AS 11 are marked to market at balance sheet date and
resulting loss, if any, is recognised in the profit and loss account
in view of the principle of prudence as per Announcement on Accounting
of Derivatives by Institute of Chartered Accountants of India dated
29-Mar-2008.
(d) Monetary assets and liabilities denominated in foreign currencies
as at the balance sheet date are reported using the rate prevailing as
on that date. The resultant exchange differences are recognised in the
profit and loss account. The Company has not exercised the option for
capitalisation or amortisation of exchange differences on long term
foreign currency monetary items as provided by notifi cation dated
31-Mar-2009, issued by the Ministry of Corporate Affairs.
(e) Investments in shares of foreign subsidiaries and other entities
are expressed in reporting currency at the rates of exchange prevailing
at the time when the original investments were made.
19. Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Liabilities which are of contingent nature are not provided but are
disclosed at their estimated amount in the notes forming part of the
accounts. Contingent assets are neither recognised nor disclosed in the
financial statements.
Mar 31, 2010
1. Basis for Preparation of Financial Statements
The financial statements are prepared and presented under the
historical cost convention on accrual basis of accounting and in
accordance with the Generally Accepted Accounting Principles (GAAP) in
India. GAAP includes provisions of the Companies Act, 1956, Accounting
Standards notified by the Government of India under Section 211 (3C) of
the Companies Act, 1 956, pronouncements of Institute of Chartered
Accountants of India and guidelines issued by Securities and Exchange
Board of India. Except where otherwise stated, the accounting
principles are consistently applied.
2. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make assumptions
and estimates, which it believes are reasonable under the circumstances
that affect the reported amounts of assets, liabilities and contingent
liabilities on the date of financial statements and the reported
amounts of revenue and expenses during the period. Actual results could
differ from those estimates. Difference between the actual results and
estimates are recognised in the period in which the results are known
or materialise.
3. Fixed Assets
(a) Tangible fixed assets are stated at cost of acquisition or
construction less accumulated depreciation. The cost of fixed asset
includes non-refundable taxes and levies, freight and other incidental
expenses related to the acquisition and installation of the respective
assets. Borrowing cost attributable to acquisition or construction of
qualifying fixed assets are capitalised to respective assets when the
time taken to put the assets to use is substantial.
(b) Pre-operative expenditure comprising of revenue expenses incurred
in connection with project implementation during the period up to
commencement of commercial production are treated as part of project
costs and are capitalised. Such expenses are capitalised only if the
project to which they relate involve substantial expansion of capacity
or upgradation.
(c) Certain software costs are capitalised and recognised as intangible
assets in terms of Accounting Standard 26 on Intangible Assets based on
materiality, accounting prudence and significant economic benefits
expected to flow there from for a period longer than one year.
(d) Fixed Assets are reviewed for impairment losses whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is then recognised for the amount by
which the carrying amount of the assets exceeds its recoverable amount,
which is the higher of an assets net selling price and value in use.
For the purposes of assessing impairment, assets ore grouped at the
lowest levels for which there are separately identifiable cash flows.
(e) Fixed Assets that have been retired from their active use and held
for disposal, are classified as current assets, and are stated at lower
of their cost or net realisable value.
4. Depreciation and Amortisation
(a) Depreciation on fixed assets is provided on straight line method on
the basis of the depreciation rates prescribed in Schedule XIV of the
Companies Act, 1 956 or based on useful life of the asset as estimated
by the management, whichever is higher.
The management estimates of the useful life of various categories of
fixed assets are given below :
Office Buildings 58 years
Factory Buildings 28 years
Plant and Machinery 10 to 20 years
Laboratory Equipments 5 to 20 years
Electrical Equipments 10 to 20 years
Furniture and Fixtures 10 years
Office Equipments 10 years
Computer Equipments 3 years
Vehicles 10 years
(b) Cost of leasehold land (except for lease of long tenure) is
amortised over the period of the lease. Cost of lease hold land where
lease period is of long tenure and substantial rights of ownership are
with lessee, is not amortised.
(c) The capitalised Software costs are amortised using the
straight-line method over estimated useful life of 3 to 5 years, as
estimated at the time of capitalization.
5. Investments
(a) Long term investments are stated at cost. Provision is made to
recognise any diminution in value, other than that of a temporary
nature.
(b) Current investments are carried at lower of cost and fair value.
Diminution in value is charged to the profit and loss account.
6. Cash Flow Statement
The Cash Flow Statement is prepared under the "Indirect Method" as set
out in Accounting Standard 3 Cash Flow Statements issued by the
Institute of Chartered Accountants of India.
7. Inventories
Inventories are valued at the lower of cost and net realisable value.
Provision for impairment is made when there is high uncertainty in
salability of an item. Cost of inventories is determined on the
following basis:
(a) Cost of raw material and packing material is determined on moving
average basis.
(b) Work in process is determined on weighted average basis.
(c) Cost of finished goods produced is determined on weighted average
basis.
(d) Cost of finished goods (traded) is determined on moving average
basis.
8. Revenue Recognition
(a) Revenue from sale of goods is recognised when the significant risks
and rewards of ownership of goods are transferred to the customer.
Sales are net of discounts, VAT / sales tax and returns; excise duties
collected on sales are shown by way of deduction from sales.
(b) Income from services is recognised when the services are rendered
or when contracted milestones have been achieved.
(c) Revenue from arrangements which includes performance of obligations
is recognised in the period in which related performance obligations
are completed.
(d) Export entitlements are recognised as income when right to receive
credit as per the terms of the scheme is established in respect of the
exports made and where there is no significant uncertainty regarding
the ultimate collection of the relevant export proceeds.
(e) Dividend income is recognised when the right to receive dividend is
established.
(f) Interest income is recognised using the time-proportion method,
based on rates implicit in the transaction.
(g) Revenue in respect of other income is recognised when a reasonable
certainty as to its realisation exists.
9. Employees Retirement and Other Benefits
(a) The accruing liability on account of gratuity (retirement benefit
in the nature of defined benefits plan), is actuarially valued every
year. The current service cost, interest cost, expected return on plan
assets and the actuarial gain / loss are expensed to the profit and
loss account of the year as Employees Costs.
(b) The Companys contribution in case of defined contribution plans
(Provident Fund, Superannuation benefit and other funds) is charged to
profit and loss account as and when it is incurred as Employee Costs.
(c) Long term compensation plan to employees (being deferred
compensation paid 12 months or more after the end of the period in
which it is earned) are expensed out in the period to which the costs
relate at present value of the benefits under the plan.
(d) The liability for compensated absences and leave encashment is
provided on the basis of actuary valuation, as at Balance Sheet date.
10. Government Grants
(a) Government grants are recognised when there is reasonable assurance
that the grant will be received and all relevant conditions are
complied with.
(b) Grants received by way of investment subsidy scheme in relation to
total investment are credited to capital reserve and are treated as
part of owners fund.
(c) Grants that compensate expenses are recognized on receipt basis and
are shown as deduction from the related expenses for which they are
intended to compensate.
11. Borrowing Costs
Borrowing costs consist of interest and other costs that the Company
incurs in connection with the borrowing of funds and exchange
differences arising from foreign currency borrowings to the extent that
they are regarded as an adjustment to interest costs.
12. Cenvat Credit
Cenvat (Central value added tax) credit in respect of Excise, Custom
and Service tax is accounted on accrual basis on purchase of eligible
inputs, capital goods and services. The balance of cenvat credit is
reviewed at the end of each year and amount estimated to be
un-utilisable is charged to the profit and loss account for the year.
13. Stores and Spares
Stores and spares (other than spares acquired with fixed assets) are
charged to the profit and loss account as and when purchased.
14. Software Costs
Expenditure incurred for procuring, developing, improving and
maintaining software programs are charged to the profit and loss
account as and when incurred, except when capitalised in accordance
with Note 3 (c) above.
15. Research and Development
Research and Development expenses are charged to revenue. Capital
expenditure on research and development is reported as fixed assets
under the relevant head. Depreciation on research and development fixed
assets is included under depreciation expense.
16. Leases
Lease rentals in respect of assets taken on operating lease are charged
to the profit and loss account on accrual and on straight line basis
over the lease term.
17. Accounting for Tax
(a) Current Tax is accounted on the basis of estimated taxable income
for the current accounting year and in accordance with the provisions
of Income Tax Act, 1 961.
(b) Deferred Tax resulting from "timing differences" between accounting
and taxable profit for the period is accounted by using tax rates and
laws that have been enacted or substantially enacted as at the balance
sheet date. Deferred tax assets are recognised only to the extent
there is reasonable certainty that the assets can be realised in
future. Net deferred tax liability is arrived at after setting off
deferred tax assets.
18. Foreign Currency Transactions and Balances
(a) Foreign currency transactions are recorded at the exchange rates
prevailing on the date of the transaction.
(b) The net gain or loss on account of exchange differences arising on
settlement of foreign currency transactions are recognised as income or
expense of the period in which they arise.
(c) In case of forward contracts, to which AS 11, The Effects of
Changes in Foreign Exchange Rate applies, the difference between the
forward rate and the exchange rate on the date of the contract is
recognised as income or expense over the life of the contract. Exchange
differences on such a contract are recognised in the profit and loss
account in the period in which the exchange rates change. Derivatives
not covered under AS 1 1 are marked to market at balance sheet date and
resulting loss, if any, is recognised in the profit and loss account in
view of the principle of prudence as per Announcement on Accounting of
Derivatives by Institute of Chartered Accountants of India dated
29-Mar-2008.
(d) Monetary assets and liabilities denominated in foreign currencies
as at the balance sheet date are reported using the rate prevailing as
on that date. The resultant exchange differences are recognised in the
profit and loss account. The Company has not exercised the option for
capitalisation or amortisation of exchange differences on long term
foreign currency monetary items as provided by notification dated 31
-Mar-2009, issued by the Ministry of Corporate Affairs.
(e) Investments in shares of foreign subsidiaries and other entities
are expressed in reporting currency at the rates of exchange prevailing
at the time when the original investments were made.
19. Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Liabilities which are of contingent nature are not provided but are
disclosed at their estimated amount in the notes forming part of the
accounts. Contingent assets are neither recognised nor disclosed in the
financial statements.