2. SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Preparation (AS -1 Disclosure of Accounting Policies)
These standalone financial statements have been prepared to comply with the Generally
Accepted Accounting Principles (Indian GAAP), including Accounting Standards notified
under the relevant provisions of the Companies Act, 2013. The standalone financial
statements have been prepared on accrual basis under the historical cost convention.
The accounting policies not specifically referred, are consistently applied from the past
accounting periods.
b) Use of Estimates (AS -1 Disclosure of Accounting Policies)
The preparation of standalone financial statements in conformity with the Generally
Accepted Accounting Policies requires the management to make estimates and
assumptions that affect the reported amount of assets, liabilities, revenues and expenses
and disclosures of contingent assets and liabilities. The estimates and assumptions used
in the accompanying standalone financial statements are based upon management’s
evaluation of the relevant facts and circumstances as on the date of the standalone
financial statements. Actual results may differ from the estimates and assumptions used
in preparing the accompanying financial statements. Any differences of actual results to
such estimates are recognized in the period in which the results are known/materialized.
c) Property, Plant and Equipment (AS -10)
a) Fixed Assets
Fixed Assets are value at cost less depreciation. The depreciation has been calculated
as prescribed in Companies Act, 2013 on single shift and if the Asset is purchased during
the year depreciation is provided on the days of utilisation in that year.
d) Depreciation and amortization (AS-10)
In accordance with the provisions of the Companies Act, 2013, effective from 1 April, 2014,
the Company has revised the depreciation rates on tangible fixed assets based on the
useful lives specified in Part 'C' of Schedule II of the Act.
Depreciation is calculated using the Written Down Value (WDV) Method over the
estimated useful lives of the assets, as prescribed under Schedule II or as estimated by
the management, wherever applicable.
Key Depreciation Policies :
y Component Accounting :
Where the cost of a part of an asset is significant in relation to the total cost of the asset
and the useful life of that part differs from the rest of the asset, such part is depreciated
separately based on its own useful life.
y Pro-Rata Depreciation :
Depreciation is charged pro-rata for assets acquired or disposed of during the year from
the date the asset is available for use or until the date of disposal.
y Measurements Basis :
Tangible fixed assets are stated at cost less accumulated depreciation and impairment
losses, if any. Direct costs attributable to bringing the asset to its working condition for its
intended use are capitalized.
y Depreciation Rates :
Depreciation is provided on the Written Down Value method, at rates derived based on the
useful lives specified in Schedule II to the Companies Act, 2013 or as estimated by the
management in cases where the useful life differs from Schedule II.
e) Impairment of Assets (AS - 28)
At each balance sheet date, the management reviews the carrying amounts of its
assets included in each cash generating unit to determine whether there is any
indication that those assets were impaired. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of impairment.
Recoverable amount is the higher of an asset’s net selling price and value in use. In
assessing value in use, the estimated future cash flows expected from the continuing
use of the asset and from its disposal are discounted to their present value using a pre
tax discount rate that reflects the current market assessments of time value of money
and the risks specific to the asset. Reversal of impairment loss is recognised as income
in the statement of profit and loss.
f) Inventories (AS - 2)
Raw materials are carried at the lower of cost and net realisable value. Cost is determined
on a FIFO (First In First Out) basis. Purchased goods-in-transit are carried at cost. Work-in¬
progress is carried at the lower of cost and net realisable value. Stores and spare parts are
carried at lower of cost and net realisable value. Finished goods produced or purchased
by the Company are carried at lower of cost and net realisable value. Cost includes direct
material and labour cost and a proportion of manufacturing overheads.
g) Cash Flow Statement (AS - 3)
Cash flows are reported using the indirect method, whereby profit before tax is adjusted
for the effects of transactions of a non-cash nature, any deferrals or accruals of past or
future operating cash receipts or payments and item of income or expenses associated
with investing or financing cash flows. The cash flows from operating, investing and
financing activities of the group are segregated.
Cash comprises cash on hand and demand deposits with banks. Cash equivalents
are short term balances (with an original maturity of three months or less from the
date of acquisition) and highly liquid investments that are readily convertible into
known amounts of cash and which are subject to insignificant risk of changes in
value.
For the purposes of the cash flow statement, cash and cash equivalents include cash on
hand, in banks and demand deposits with banks, net of outstanding bank overdrafts that
are repayable on demand, book overdrafts and are considered part of the Company’s
cash management system.
h) The Effect of changes in Foreign Exchange Rates: (AS -11)
An enterprise may carry on activities involving foreign exchange in two ways. It may have
transactions in foreign currencies or it may have foreign operations.
Initial Recognization:
A foreign currency transaction is a transaction which is denominated in or requires
settlement in a foreign currency, including transactions arising when an enterprise either:
a) buys or sells goods or services whose price is denominated in a foreign currency;
b) borrows or lends funds when the amounts payable or receivable are denominated
in a foreign currency;
c) becomes a party to an unperformed forward exchange contract; or
d) otherwise acquires or disposes of assets, or incurs or settles liabilities,
denominated in a foreign currency. A foreign currency transaction should be
recorded, on initial recognition in the reporting currency, by applying to the
foreign currency amount, the exchange rate between the reporting currency
and the foreign currency at the date of the transaction.
At Balancesheet Date
a) foreign currency monetary items should be reported using the closing rate. However,
in certain circumstances, the closing rate may not reflect with reasonable accuracy
the amount in reporting currency that is likely to be realised from, or required to
disburse, a foreign currency monetary item at the balance sheet date, e.g., where
there are restrictions on remittances or where the closing rate is unrealistic and it is
not possible to effect an exchange of currencies at that rate at the balance sheet
date. In such circumstances, the relevant monetary item should be reported in the
reporting currency at the amount which is likely to be realised from, or required to
disburse, such item at the balance sheet date;
b) non-monetary items which are carried in terms of historical cost denominated in a
foreign currency should be reported using the exchange rate at the date of the
transaction; and
c) non-monetary items which are carried at fair value or other similar valuation
denominated in a foreign currency should be reported using the exchange rates
that existed when the values were determined.
i) Revenue Recognition (AS - a)
Revenue from contract with customer is recognised upon transfer of control of promised
products or services to customers on complete satisfaction of performance obligations
for an amount that reflects the consideration which the Company expects to receive in
exchange for those products or services. Revenue is measured based on the transaction
price, which is the consideration, adjusted for discounts and other incentives, if any, as
per contracts with the customers. Revenue also excludes taxes or amounts collected
from customers in its capacity as agent. The specific recognition criteria from various
stream of revenue is described below:
Sale of goods: Revenue from the sale of products is recognized at the point in time when
control is transferred to the customer. Revenue is measured based on the transaction
price, which is the consideration, net of customer incentives, discounts, variable
considerations, payments made to customers, other similar charges, as specified in the
contract with the customer. Additionally, revenue excludes taxes collected from
customers, which are subsequently remitted to governmental authorities.
Interest Income: Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial asset
to that asset's net carrying amount on initial recognition.
Dividend is recorded when the right to receive payment is established. Interest income is
recognised on time proportion basis taking into account the amount outstanding and
the rate applicable.
j) Employee Benefits (AS - 15)
Post -Employment Benefit Plan
Contributions to defined contribution retirement benefit schemes are recognised
as expense when employees have rendered services entitling them to such
benefits.
For defined benefit schemes, the cost of providing benefits is determined using
the Projected Unit Credit Method, with actuarial valuations being carried out at
each balance sheet date. Actuarial gains and losses are recognised in full in the
statement of profit and loss for the period in which they occur. Past service cost
is recognised immediately to the extent that the benefits are already vested, or
amortised on a straight-line basis over the average period until the benefit
become vested.
The retirement benefit obligation recognised in the balance sheet represents the
present value of the defined benefit obligation as adjusted for unrecognised past
service cost, and as reduced by the fair value of scheme assets. Any asset
resulting from this calculation is limited to the present value of available refunds
and reductions in future contributions to the scheme.
Other employee benefits
The undiscounted amount of short-term employee benefits expected to be paid
in exchange for the services rendered by employees is recognised during the
period when the employee renders the service. These benefits include
compensated absences such as paid annual leave, overseas social security
contributions and performance incentives.
Compensated absences which are not expected to occur within twelve months
after the end of the period in which the employee renders the related services
are recognised as an actuarially determined liability at the present value of the
defined benefit obligation at the balance sheet date.
Others
Short term benefits such as salary, bonus, ex-gratia and other benefits as maybe
applicable on the Company are accounted for on accrual basis. The Company
at present does not have any Defined Contribution Plan or Defined Benefit Plan as
contemplated under AS- 15 on ‘Employee Benefits'
k) Taxes On Income
Current income tax expense comprises taxes on income from operations in
India and in foreign jurisdictions. Income taxpayable in India is determined in
accordance with the provisions of the Income Tax Act, 1961. Tax expense relating
to foreign operations is determined in accordance with tax laws applicable in
countries where such operations are domiciled.
Deferred tax expense or benefit is recognised on timing differences being the
difference between taxable income and accounting income that originate in one
period and is likely to reverse in one or more subsequent periods. Deferred tax
assets and liabilities are measured using the tax rates and tax laws that have
been enacted or substantively enacted by the balance sheet date.
The Company offsets deferred tax assets and deferred tax liabilities if it has a
legally enforceable right and these relate to taxes on income levied by the same
governing taxation laws.
l) Segment Accounting
The Company is engaged only in manufacturing and sale of pharmaceutical
products and there are no separate reportable segments as per Accounting
Standard (as) 17 'Segment Reporting'.
m) Earnings Pre Shares (AS - 20)
Basic earning per share is computed by dividing the net profit or loss for the
period attributable to equity shareholders by the weighted average number
of equity shares outstanding during the period. Diluted earning per share is
computed by taking into account the weighted average number of equity
shares outstanding during the period and the weighted average number of
equity shares which would be issued on conversion of all dilutive potential
equity shares into equity shares
n) Contributed Equity
Equity shares are classified as equity.
Earnings per Share: Basic earnings per share is calculated by dividing:
- the profit attributable to the owners group
- by the weighted average number of equity shares outstanding during the year.
|