Asian Paints Limited (the 'Company') is a public limited Company
incorporated under the Indian Companies Act 1913. The Company is
engaged in the business of manufacturing, selling and distribution of
paints, coatings, products related to home decor, bath fittings and
providing of related services.
1.1. Basis of preparation of financial statements
(a) Basis of Accounting:
The financial statements have been prepared and presented under the
historical cost convention, on the accrual basis of accounting in
accordance with the accounting principles generally accepted in India
('Indian GAAP') and comply with the Accounting standards prescribed in
the Companies (Accounting Standards) Rules, 2006 which continue to
apply under Section 133 of the Companies Act, 2013 ('the Act') read
with Rule 7 of the Companies (Accounts) Rules, 2014.
(b) Use of Estimates:
The preparation of financial statements in conformity with Indian GAAP
requires management to make judgements, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosures of contingent liabilities at the end of
(c) Current/Non Current Classification:
Any asset or liability is classified as current if it satisfies any of
the following conditions:
i. it is expected to be realized or settled or is intended for sale or
consumption in the company's normal operating cycle;
ii. it is expected to be realized or settled within twelve months from
the reporting date;
iii. in the case of an asset,
- it is held primarily for the purpose of being traded; or
- it is cash or cash equivalent unless it is restricted from being
exchanged or used to settle a liability for at least twelve months
after the reporting date;
iv. in the case of a liability, the company does not have an
unconditional right to defer settlement of the liability for at least
twelve months from the reporting date.
All other assets and liabilities are classified as non-current.
For the purpose of current / non-current classification of assets and
liabilities, the Company has ascertained its normal operating cycle as
twelve months. This is based on the nature of services and the time
between the acquisition of assets or inventories for processing and
their realization in cash and cash equivalents.
1.2. Tangible and Intangible Assets
(a) Tangible Fixed Assets
Tangible fixed assets are carried at the cost of acquisition or
construction, less accumulated depreciation/accumulated impairment. The
cost of fixed assets comprises of its purchase price, including import
duties and other non-refundable taxes or levies and any directly
attributable cost of bringing the asset to its working condition for
its intended use. Expenses directly attributable to new manufacturing
facility during its construction period are capitalized. Know-how
related to plans, designs and drawings of buildings or plant and
machinery is capitalized under relevant tangible asset heads.
Pursuant to the requirements under Schedule II of the Companies Act,
2013, the Company has identified and determined the cost of each
component of an asset separately when the component has a cost which is
significant to the total cost of the asset and has useful life that is
materially different from that of the remaining asset.
Profit or loss on disposal of tangible assets is recognized in the
Statement of Profit and Loss. Tangible Fixed assets retired from active
use and held for disposal are stated at the lower of their net book
value and net realisable value and are disclosed separately under
'Other Current Assets'. Any expected loss is recognized immediately in
the Statement of Profit and Loss.
(b) Intangible Assets
Intangible assets acquired separately are measured on initial
recognition at cost. Intangible assets arising on acquisition of
business are measured at fair value as at date of acquisition.
Following initial recognition, intangible assets are carried at cost
less accumulated amortization and accumulated impairment loss, if any.
Profit or Loss on disposal of intangible assets is recognised in the
Statement of Profit and Loss.
(c) Capital Work in Progress & Capital Advances
Cost of Assets not ready for intended use, as on the balance sheet
date, is shown as capital work in progress. Advances given towards
acquisition of fixed assets outstanding at each balance sheet date are
disclosed as Long Term Loans & Advances.
(d) Depreciation and Amortisation:
Depreciation on tangible fixed assets is provided using the Straight
Line Method based on the useful lives of the assets as estimated by the
management and is charged to the Statement of Profit and Loss as per
the requirement of Schedule II of the Companies Act, 2013. The estimate
of the useful life of the assets has been assessed based on technical
advice which considered the nature of the asset, the usage of the
asset, expected physical wear and tear, the operating conditions of the
asset, anticipated technological changes, manufacturers warranties and
maintenance support, etc.
Significant components of assets identified separately pursuant to the
requirements under Schedule II of the Companies Act, 2013 are
depreciated separately over their useful life.
The residual value, useful life and method of depreciation of an asset
is reviewed at each financial year end and adjusted prospectively
Depreciation on tinting systems leased to dealers, is provided under
Straight Line Method over the estimated useful life of nine years as
per technical evaluation.
Leasehold land and Leasehold improvements are amortized over the
primary period of lease.
Intangible Assets are amortised on a Straight Line basis over the
estimated useful economic life. Purchase cost, user license fees and
consultancy fees for major software are amortized over a period of four
years. Acquired Trademark is amortised over a period of five years.
Acquired Goodwill is amortised over a period of ten years.
Estimated useful life of each acquired Brand is assessed separately for
the purpose of amortization. Brand acquired pursuant to acquisition of
bath fittings business is amortised over a period of two years.
At Balance Sheet date, an assessment is done to determine whether there
is any indication of impairment in the carrying amount of the Company's
assets. If any such indication exists, the asset's recoverable amount
is estimated. An impairment loss is recognised whenever the carrying
amount of an asset exceeds its recoverable amount.
An assessment is also done at each Balance Sheet date whether there is
any indication that an impairment loss recognised for an asset in prior
accounting periods may no longer exist or may have decreased. If any
such indication exists the asset's recoverable amount is estimated. The
carrying amount of the fixed asset is increased to the revised estimate
of its recoverable amount but so that the increased carrying amount
does not exceed the carrying amount that would have been determined had
no impairment loss been recognised for the asset in prior years. A
reversal of impairment loss is recognised in the Statement of Profit
and Loss for the year.
After recognition of impairment loss or reversal of impairment loss as
applicable, the depreciation charge for the fixed asset is adjusted in
future periods to allocate the asset's revised carrying amount, less
its residual value (if any), on straight line basis over its remaining
1.3. Revenue Recognition
Revenue from sale of goods is recognised on transfer of all significant
risks and rewards of ownership to the buyer. The amount recognised as
sale is exclusive of sales tax/VAT and is net of returns & discounts.
Sales are stated gross of excise duty as well as net of excise duty (on
goods manufactured and outsourced), excise duty being the amount
included in the amount of gross turnover. The excise duty related to
the difference between the closing stock and opening stock is
recognised separately as part of changes in inventories of finished
goods, work in progress and stock in trade.
Revenue from service is recognized as per the completed service
Processing income is recognized on accrual basis as per the contractual
Dividend income is recognised when the right to receive payment is
Interest income is recognised on the time proportion basis.
1.4. Lease Accounting
Assets taken on operating lease:
Lease rentals on assets taken on operating lease are recognised as
expense in the Statement of Profit and Loss on straight line basis.
(a) Raw materials, work in progress, finished goods, packing materials,
stores, spares, components, consumables and stock-in-trade are carried
at the lower of cost and net realisable value. However, materials and
other items held for use in production of inventories are not written
down below cost if the finished goods in which they will be
incorporated are expected to be sold at or above cost. The comparison
of cost and net realisable value is made on an item-by- item basis.
Damaged, unserviceable and inert stocks are valued at net realizable
(b) In determining cost of raw materials, packing materials,
stock-in-trade, stores, spares, components and consumables, weighted
average cost method is used. Cost of inventory comprises all costs of
purchase, duties, taxes (other than those subsequently recoverable from
tax authorities) and all other costs incurred in bringing the inventory
to their present location and condition.
(c) Cost of finished goods and work-in-progress includes the cost of
raw materials, packing materials, an appropriate share of fixed and
variable production overheads, excise duty as applicable and other
costs incurred in bringing the inventories to their present location
and condition. Fixed production overheads are allocated on the basis of
normal capacity of production facilities.
Investments are classified into current and long-term investments.
Investments that are readily realizable and intended to be held for not
more than a year from the date of acquisition are classified as current
investments. All other investments are classified as long-term
investments. However, that part of long term investments which are
expected to be realized within twelve months from Balance Sheet date is
also presented under "Current Investment" under "Current portion of
long term investments" in consonance with the current / non-current
classification of Schedule III of the Act.
Current investments are stated at the lower of cost and fair value. The
comparison of cost and fair value is done separately in respect of each
category of investments.
Long-term investments are stated at cost. A provision for diminution in
the value of long-term investments is made only if such a decline is
other than temporary in the opinion of the management. Reversal of such
provision for diminution is made when there is a rise in the value of
long- term investment, or if the reasons for the decline no longer
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is recognized in the Statement of
Profit and Loss.
1.7. Transactions in Foreign Currency (a) Initial recognition:
Transactions in foreign currencies entered into by the Company are
accounted at the exchange rates prevailing on the date of the
transaction. Exchange differences arising on foreign exchange
transactions settled during the year are recognized in the Statement of
Profit and Loss.
(b) Measurement of foreign currency items at the Balance Sheet date:
Foreign currency monetary items of the Company are restated at the
closing exchange rates. Non-monetary items are recorded at the exchange
rate prevailing on the date of the transaction. Exchange differences
arising out of these translations are recognized in the Statement of
Profit and Loss.
(c) Forward exchange contracts:
The Company enters into forward exchange contracts to hedge against its
foreign currency exposures relating to the underlying transactions and
firm commitments. The Company does not enter into any derivative
instruments for trading or speculative purposes.
The premium or discount arising at the inception of forward exchange
contract is amortized and recognized as an expense/income over the life
of the contract. Exchange differences on such contracts are recognized
in the Statement of Profit and Loss in the period in which the exchange
rates change. Any Profit or Loss arising on cancellation or renewal of
such forward exchange contract is also recognized as income or expense
for the period.
1.8. Trade receivables
Trade receivables are stated after writing off debts considered as bad.
Adequate provision is made for debts considered doubtful. Discounts
due, yet to be quantified at the customer level are included under
Other Current Liabilities.
1.9. Employee Benefits
A. Short Term Employee Benefits:
All employee benefits payable wholly within twelve months of rendering
the service are classified as short term employee benefits and they are
recognized in the period in which the employee renders the related
service. The Company recognizes the undiscounted amount of short term
employee benefits expected to be paid in exchange for services rendered
as a liability (accrued expense) after deducting any amount already
B. Post-employment benefits:
(a) Defined contribution plans
Defined contribution plans are employee state insurance scheme and
Government administered pension fund scheme for all applicable
employees and superannuation scheme for eligible employees. The
Company's contribution to defined contribution plans are recognised in
the Statement of Profit and Loss in the financial year to which they
(b) Defined benefit plans
(i) Provident fund scheme
The Company makes specified monthly contributions towards Employee
Provident Fund scheme to a separate trust administered by the Company.
The minimum interest payable by the trust to the beneficiaries is being
notified by the Government every year. The Company has an obligation
to make good the shortfall, if any, between the return on investments
of the trust and the notified interest rate.
(ii) Gratuity scheme
The Company operates a defined benefit gratuity plan for employees. The
Company contributes to a separate entity (a fund), towards meeting the
(iii) Pension scheme
The Company operates a defined benefit pension plan for certain
specified employees and is payable upon the employee satisfying certain
conditions, as approved by the Board of Directors.
(iv) Post Retirement Medical benefit plan
The Company operates a defined post retirement medical benefit plan for
certain specified employees and payable upon the employee satisfying
The cost of providing defined benefits is determined using the
Projected Unit Credit method with actuarial valuations being carried
out at each Balance Sheet date. Past service cost is recognized
immediately to the extent that the benefits are already vested, else is
amortised on a straight-line basis over the average period until the
amended benefits become vested. Actuarial gains and losses in respect
of the defined benefit plans are recognized in the Statement of Profit
and Loss in the year in which they arise.
The defined benefit obligations recognized in the Balance Sheet
represent the present value of the defined benefit obligations as
reduced by the fair value of plan assets, if applicable. Any defined
benefit asset (negative defined benefit obligations resulting from this
calculation) is recognized representing the present value of available
refunds and reductions in future contributions to the plan.
The Company presents the above liabilities as current and non-current
in the balance sheet as per actuarial valuation by the independent
actuary; however, the entire liability towards gratuity is considered
as current as the Company will contribute this amount to the gratuity
fund within the next 12 months.
(c) Other long term employee benefits
Entitlements to annual leave and sick leave are recognized when they
accrue to employees. Sick leave can only be availed while annual leave
can either be availed or encashed subject to a restriction on the
maximum number of accumulation of leave. The Company determines the
liability for such accumulated leaves using the Projected Accrued
Benefit method with actuarial valuations being carried out at each
Balance Sheet date.
The Company presents this liability as current and non-current in the
balance sheet as per actuarial valuation by the independent actuary
1.10. Research and Development
Research and Development expenditure of a revenue nature is expensed
out under the respective heads of account in the year in which it is
Fixed assets utilized for research and development are capitalized and
depreciated in accordance with the policies stated for Tangible Fixed
Assets and Intangible Assets.
1.11. Provision for Taxation
Tax expense comprises of current tax (i.e. amount of tax for the period
determined in accordance with the Income Tax Act, 1961) and deferred
tax charge or credit (reflecting the tax effects of timing differences
between accounting income and taxable income for the period).
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the Balance Sheet date.
Deferred tax assets are recognised only to the extent there is
reasonable certainty that the assets can be realised in future;
however, where there is unabsorbed depreciation or carry forward loss
under taxation laws, deferred tax assets are recognised only if there
is a virtual certainty of realisation of such assets. Deferred tax
assets are reviewed as at each Balance Sheet date to reassess
1.12. Provisions and Contingencies
The Company creates a provision when there exists a present obligation
as a result of a past event that probably requires an outflow of
resources and a reliable estimate can be made of the amount of the
obligation. A disclosure for a contingent liability is made when there
is a possible obligation or a present obligation that may, but probably
will not require an outflow of resources. When there is a possible
obligation or a present obligation in respect of which likelihood of
outflow of resources is remote, no provision or disclosure is made.
1.13. Earnings Per Share
The Basic and Diluted Earnings Per Share ("EPS") is computed by
dividing the profit after tax for the year by weighted average number
of equity shares outstanding during the year.
1.14. Proposed Dividend
Dividend recommended by the Board of Directors is provided for in the
accounts, pending approval at the Annual General Meeting.
1.15. Borrowing Cost
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs, if any, directly attributable to the acquisition,
construction or production of an asset that necessarily takes a
substantial period of time to get ready for its intended use or sale
are capitalized. All other borrowing costs are expensed in the period
1.16. Cash and Cash Equivalents
Cash and cash equivalents include cash and cheques in hand, bank
balances, demand deposits with banks and other short-term highly liquid
investments where the original maturity is three months or less.
1.17.Government Grants and Subsidies
The Company is entitled to subsidy from government authorities in
respect of manufacturing units located in specified regions:
- Grants in the nature of subsidy which are non- refundable are
credited to the Statement of Profit and Loss, on accrual basis, where
there is reasonable assurance that the Company will comply with all the
necessary conditions attached to them.
- Grants in the nature of subsidy which are refundable are shown as
Liabilities in the Balance Sheet.
1.18. Measurement of EBITDA
The Company has opted to present earnings before interest (finance
cost), tax, depreciation and amortization (EBITDA) as a separate line
item on the face of the Statement of Profit and Loss for the year. The
Company measures EBITDA on the basis of profit/ (loss) from continuing
1.19. Segment Reporting
Segments are identified having regard to the dominant source and nature
of risks and returns and internal organization and management
structure. The Company has considered business segments as the primary
segments for disclosure. The business segments are 'Paints' and 'Home