3 Material accounting policies
A. Operating cycle
Based on the nature of products and the time between
the acquisition of assets for processing and their
realisation in cash and cash equivalent, the Company
has considered 12 months as the operating cycle .
B. Foreign currency transactions
Transactions in foreign currencies are initially recorded
by the Company at their functional currency spot rates
at the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency
at the exchange rate at the reporting date. Exchange
differences that arise on settlement of monetary
items or on reporting at each balance sheet date
are recognised as income or expenses in the period
in which they arise. Non-monetary items which are
carried at historical cost denominated in a foreign
currency are reported using the exchange rates at
the date of transaction. Non-monetary assets and
liabilities that are measured based on historical cost
in a foreign currency are translated at the exchange
rate at the date of the transaction. Foreign currency
exchange differences are generally recognised in profit
or loss.
C. Financial instruments
i) Recognition and initial measurement
Trade receivables are initially recognised when they
are originated. All other financial assets and financial
liabilities are initially recognised when the Company
becomes a party to the contractual provisions of
the instrument.
A financial asset (unless it is a trade receivable without
a significant financing component) or financial liability
is initially measured at fair value plus or minus, for an
item not at fair value through profit and loss (FVTPL),
transaction costs that are directly attributable to its
acquisition or issue. A trade receivable without a
significant financing component is initially measured
at the transaction price.
ii) Classification and subsequent measurement
Financial assets:
On initial recognition, a financial asset is classified as
measured at:
- amortised cost;
- fair value through other comprehensive income
(FVOCI)
- fair value through profit and loss (FVTPL)
Financial assets are not reclassified subsequent to
their initial recognition, except if and in the period
the Company changes its business model for
managing financial assets, in which case all affected
financial assets are reclassified on the first day of
the first reporting period following the change in the
business model.
A financial asset is measured at amortised cost if it
meets both of the following conditions and is not
designated as at FVTPL:
a) the asset is held within a business model whose
objective is to hold assets to collect contractual
cash flows; and
b) the contractual terms of the financial asset give
rise on specified dates to cash flows that are
solely payments of principal and interest on the
principal amount outstanding.
A debt investment is measured at fair value through
other comprehensive income if it meets both the
following conditions and is not designated as FVTPL:
a) the asset is held within a business model
whose objective is achieved by both collecting
contractual cash flows and selling financial
assets; and
b) the contractual terms of the financial asset give
rise on specified dates to cash flows that are
solely payments of principal and interest on the
principal amount outstanding.
On initial recognition of an equity investment that is not
held for trading, the Company may irrevocably elect
to present subsequent changes in the investment's
fair value in OCI (designated as FVOCI - equity
investment). This election is made on an investment
by investment basis.
All financial assets not classified as measured at
amortised cost or FVOCI as described above are
measured at FVTPL. On initial recognition, the
Company may irrevocably designate a financial asset
that otherwise meets the requirements to be measured
at amortised cost or at FVOCI as at FVTPL if doing
so eliminates or significantly reduces an accounting
mismatch that would otherwise arise.
Financial assets: Business model assessment
The Company makes an assessment of the objective of
the business model in which a financial asset is held at
a portfolio level because this best reflects the way the
business is managed and the information is provided
to management. The information considered includes:
- the stated policies and objectives for the portfolio
and the operation of those policies in practice;
- these include whether management strategy
focuses on earning contractual interest, maintaining
a particular interest rate profile, matching the
duration of financial assets to the duration of any
related liabilities or expected cash outflows or
realising cash flows through the sale of assets;
- how the performance of the portfolio is evaluated
and reported to the Company's management;
- the risk that affect the performance of the business
model (and the financial assets held with in the
business model) and how those risks are managed;
- how managers of the business are compensated;
- the frequency, volume and timing of sales of
financial assets in prior period, the reasons for such
sales and expectations about future sales activity.
Financial assets that are held for trading or are
managed and whose performance is evaluated on fair
value basis are measured at FVTPL.
Financial assets: Assessment whether contractual
cash flows are solely payments of principal and
interest
For the purposes of this assessment, 'principal' is
defined as the fair value of the financial asset on
initial recognition. 'Interest' is defined as consideration
for the time value of money and for the credit risk
associated with the principal amount outstanding
during a particular period of time and for other basic
lending risks and costs, as well as a profit margin.
In assessing whether the contractual cash flows
are solely payments of principal and interest, the
Company considers the contractual terms of the
instrument. This includes assessing whether the
financial asset contains a contractual term that could
change the timing or amount of contractual cash flows
such that it would not meet this condition. In making
this assessment, the Company considers:
- contingent events that would change the amount
or timing of cash flows;
- terms that may adjust the contractual coupon rate,
including variable interest rate features;
- prepayment and extension features; and
- terms that limit the Company's claim to cash flows
from specified assets
A prepayment feature is consistent with the solely
payments of principal and interest criterion if the
prepayment amount substantially represents unpaid
amounts of principal and interest on the principal
amount outstanding, which may include reasonable
additional compensation for early termination of
the contract. Additionally, for a financial asset
acquired at a significant discount or premium to its
contractual par amount, a feature that pertains or
requires prepayment at an amount that substantially
represents the contractual par amount plus accrued
(but unpaid) contractual interest (which may also
include reasonable additional compensation for
early termination) is treated as consistent with this
criterion if the fair value of the prepayment feature is
insignificant at initial recognition.
Financial liabilities: Classification, subsequent
measurement and gains and losses
Financial liabilities are classified as measured at
amortised cost or FVTPL. A financial liability is classified
as at FVTPL if it is classified as held for trading, or it
is designated as such on initial recognition. Financial
liabilities at FVTPL are measured at fair value and net
gains and losses, including any interest expense, are
recognised in profit or loss. Other financial liabilities
are subsequently measured at amortised cost using
the effective interest method. Interest expense and
foreign exchange gains and losses are recognised
in statement of profit and loss. Any gain or loss on
derecognition is also recognised in statement of profit
and loss.
iii) Derecognition
Financial assets:
The Company derecognises a financial asset when the
contractual rights to the cash flows from the financial
asset expire, or it transfers the rights to receive the
contractual cash flows in a transaction in which
substantially all of the risks and rewards of ownership
of the financial asset are transferred or in which the
Company neither transfers nor retains substantially
all of the risks and rewards of ownership and does not
retain control of the financial asset.
I f the Company enters into transactions whereby it
transfers assets recognised on its balance sheet, but
retains either all or substantially all of the risks and
rewards of the transferred assets, the transferred
assets are not derecognised.
Financial liabilities:
The Company derecognises a financial liability when
its contractual obligations are discharged or cancelled,
or expired.
The Company also derecognises a financial liability
when its terms are modified and the cash flows under
the modified terms are substantially different. In this
case, a new financial liability based on the modified
terms is recognised at fair value. The difference
between the carrying amount of the financial liability
extinguished and the new financial liability with
modified terms is recognised in profit or loss.
iv) Offsetting
Financial assets and financial liabilities are offset and
the net amount presented in the balance sheet when,
and only when, the Company currently has a legally
enforceable right to set off the amounts and it intends
either to settle them on a net basis or to realise the
asset and settle the liability simultaneously.
D. Property, plant and equipment
i) Recognition and initial measurement
The cost of an item of property, plant and equipment
including capital work-in-progress shall be recognised
as an asset if, and only if it is probable that future
economic benefits associated with the item will flow to
the Company and the cost of the item can be measured
reliably. Items of property, plant and equipment
are measured at cost, (which includes capitalised
borrowing costs, if any) less accumulated depreciation
and accumulated impairment losses, if any.
Cost of an item of property, plant and equipment
comprises its purchase price, including import duties
and non-refundable purchase taxes, after deducting
trade discounts and rebates, any directly attributable
cost of bringing the item to its working condition for
its intended use.
The cost of a self-constructed item of property, plant
and equipment comprises the cost of materials and
direct labour, any other costs directly attributable
to bringing the item to working condition for its
intended use.
If significant parts of an item of property, plant and
equipment have different useful lives, then they are
accounted for as separate items (major components)
of property, plant and equipment.
Any gain or loss on disposal of an item of property,
plant and equipment is recognised in statement of
profit and loss.
ii) Subsequent expenditure
Subsequent expenditure is capitalised only if it is
probable that the future economic benefits associated
with the expenditure will flow to the Company.
iii) Transition to Ind AS
The cost property, plant and equipment at April 01,
2016, the Company's date of transition to Ind AS,
was determined with reference to its carrying value
recognized as per the previous GAAP (deemed cost),
as at the date of transition to Ind AS.
iv) Depreciation
Depreciation is calculated on cost of items of
property, plant and equipment less their estimated
residual values over their estimated useful lives
using the straight-line method, and is recognised
in the statement of profit and loss. Freehold land is
not depreciated. The estimated useful lives of items
of property, plant and equipment for the current and
comparative periods (in years) are as follows:
Leasehold improvements are amortized on a straight
line basis over the useful life of the asset or the lease
period whichever is lower.
Depreciation method, useful lives and residual values
are reviewed at each financial year-end and adjusted
prospectively, if appropriate. Based on technical
evaluation and consequent advice, the management
believes that its estimates of useful lives as given above
best represent the period over which management
expects to use these assets.
Depreciation on additions (disposals) is provided on a
pro-rata basis i.e. from (up to) the date on which asset
is ready for use (disposed of).
E. Intangible assets
i) Intangible assets
Intangible assets (including those acquired by the
Company in a business combination, if any) are
initially measured at cost. Such intangible assets are
subsequently measured at cost less accumulated
amortisation and any accumulated impairment losses.
ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it
increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure,
including expenditure on internally generated goodwill
and brands, is recognised in statement of profit and
loss as incurred.
iii) Transition to Ind AS
The cost Intangible assets at April 01, 2016, the
Company's date of transition to Ind AS, was determined
with reference to its carrying value recognised as per
the previous GAAP (deemed cost), as at the date of
transition to Ind AS.
iv) Amortisation
Amortisation is calculated to write off the cost of
intangible assets less their estimated residual values
over their estimated useful lives using the straight¬
line method, and is included in depreciation and
amortisation in Statement of Profit and Loss.
The estimated useful lives of intangible assets for
the current and comparative periods (in years) are
as follows:
Amortisation method, useful lives and residual values
are reviewed at the end of each financial year and
adjusted if appropriate.
v) Intangible assets under development
Intangible assets under development includes
intangible assets which are in process of being ready
for its intended use and it is probable that the expected
future economic benefits that are attributable to the
asset will flow to the entity and the cost of the asset
can be measured reliably.
F. Inventories
Inventories are measured at the lower of cost and net
realisable value. The cost of inventories is based on the
weighted average cost basis and includes expenditure
incurred in acquiring the inventories, production or
conversion costs and other costs incurred in bringing
them to their present location and condition. Costs
incurred in bringing each product to its present
location and condition are accounted for as follows:
Raw materials and packing materials: Cost includes
cost of purchase and other costs incurred in bringing
the inventories to their present location and condition.
Cost is determined on weighted average cost basis.
Finished goods: Cost includes cost of direct materials
and labour and a proportion of manufacturing
overheads based on the actual operating capacity
for variable overheads and normal capacity for
fixed overheads.
Traded goods: Cost includes cost of purchase and
other costs incurred in bringing the inventories to their
present location and condition. Cost is determined on
weighted average basis.
Net realisable value is the estimated selling price in
the ordinary course of business, less the estimated
costs of completion and selling expenses. The net
realisable value of work-in-progress is determined
with reference to the selling prices of related finished
products. Raw materials, components and other
supplies held for use in the production of finished
products are not written down below cost except in
cases where the material prices have declined and it
is estimated that the cost of the finished products will
exceed their net realisable value. The comparison of
cost and net realisable value is made on an item-by¬
item basis.
G. Impairment
i) Impairment of trade receivables and financial
assets
The Company recognises loss allowances for
expected credit losses on financial assets measured
at amortised cost.
At each reporting date, the Company assesses whether
financial assets carried at amortised cost are credit
impaired. A financial asset is ‘credit impaired' when
one or more events that have a detrimental impact on
the estimated future cash flows of the financial asset
have occurred.
Evidence that a financial asset is credit impaired
includes the following observable data:
- significant financial difficulty of the borrower or
issuer;
- a breach of contract such as a default or past dues;
- the restructuring of a Loan or advance by the
Company on terms that the Company would not
consider otherwise;
- it is probable that the borrower will enter bankruptcy
or other financial reorganisation; or
- the disappearance of an active market for a security
because of financial difficulties.
Loss aLLowances for trade receivabLes are aLways
measured at an amount equal to lifetime expected
credit Losses.
Lifetime expected credit losses are the expected credit
losses that result from aLL possible default events over
the expected life of a financial instrument.
12-month expected credit losses are the portion of
expected credit losses that result from default events
that are possible within 12 months after the reporting
date (or a shorter period if the expected life of the
instrument is less than 12 months).
In all cases, the maximum period considered when
estimating expected credit losses is the maximum
contractual period over which the Company is exposed
to credit risk.
When determining whether the credit risk of a
financial asset has increased significantly since initial
recognition and when estimating expected credit
Losses, the Company considers reasonabLe and
supportable information that is relevant and available
without undue cost or effort. This includes both
quantitative and qualitative information and analysis,
based on the Company's historical experience and
informed credit assessment and incLuding forward
looking information.
The Company assumes that the credit risk on a financial
asset has increased significantly if it is more than 90
days past due.
The Company considers a financial asset to be in
defauLt when:
- the borrower is unlikely to pay its credit obligations
to the Company in full, without recourse by the
Company to actions such as realising security (if
any is heLd); or
- the financial asset is more than 90 days past due.
ii) Measurement of expected credit losses
Expected credit losses are a probability weighted
estimate of credit Losses. Credit Losses are measured
as the present value of all cash shortfalls (i.e. the
difference between the cash flows due to the Company
in accordance with the contract and the cash flows
that the Company expects to receive).
Presentation of allowance for expected credit
losses in the balance sheet
Loss allowances for financial assets measured at
amortised cost are deducted from the gross carrying
amount of the assets.
Write-off
The gross carrying amount of a financial asset is
written off (either partially or in full) to the extent
that there is no reaListic prospect of recovery. This is
generaLLy the case when the Company determines that
the debtor does not have assets or sources of income
that could generate sufficient cash flows to repay the
amounts subject to the write off. However, financial
assets that are written off could still be subject to
enforcement activities in order to comply with the
Company's procedures for recovery of amounts due.
iii) Impairment of non-financial assets
At each reporting date, the Company reviews its
non-financial assets(other than inventories, contract
assets, and deferred tax assets) to determine whether
there is any indication of impairment. If any such
indication exists, then the asset's recoverable amount
is estimated.
For impairment testing, assets are grouped together
into the smaLLest group of assets that generates
cash inflows from continuing use that are largely
independent of the cash inflows of other assets or
Cash Generating Units ("CGUs").
The recoverabLe amount of an individuaL asset or
CGU is the greater of its vaLue in use and its fair
vaLue Less costs of disposaL. VaLue in use is based
on the estimated future cash flows, discounted to
their present value using a pre-tax discount rate that
reflects current market assessments of the time value
of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount
of an asset or CGU exceeds its recoverable amount.
Impairment losses are recognised in profit or loss. They
are allocated first to reduce the carrying amount of any
goodwill allocated to the CGU, and then to reduce the
carrying amounts of the other assets in the CGU on a
pro rata basis.
I n respect of other assets for which impairment Loss
has been recognised in prior periods, the Company
reviews at each reporting date whether there is any
indication that the Loss has decreased or no Longer
exists. An impairment loss is reversed if there has
been a change in the estimates used to determine the
recoverable amount. Such a reversal is made only to
the extent that the asset's carrying amount does not
exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no
impairment Loss had been recognised.
H. Employee benefits
i) Short-term employee benefits
LiabiLities for wages and saLaries, incLuding non¬
monetary benefits that are expected to be settled
whoLLy within 12 months after the end of the period
in which the empLoyees render the reLated service are
recognised in respect of employees' services up to the
end of the reporting and are measured at the amounts
expected to be paid when the liabilities are settled.
The LiabiLities are presented as current empLoyee
benefit obligations in the balance sheet.
ii) Defined contribution plans
A defined contribution plan is a post-employment
benefit plan under which an entity pays fixed
contributions into a separate entity and wiLL have
no LegaL or constructive obLigation to pay further
amounts. The Company makes specified monthly
contributions towards Government administered
provident fund scheme. ObLigations for contributions
to defined contribution plans are recognised as an
employee benefit expense in statement of profit and
Loss in the periods during which the reLated services
are rendered by empLoyees.
iii) Defined benefit plans
A defined benefits pLan is a post-empLoyment
benefit plan other than a defined contribution plan.
The Company's net obligation in respect of defined
benefit plans is calculated separately for each plan
by estimating the amount of future benefit that
empLoyees have earned in the current and prior
periods, discounting that amount and deducting the
fair vaLue of any pLan assets.
The caLcuLation of defined benefit obLigation is
performed annually by a qualified actuary using the
projected unit credit method. When the caLcuLation
resuLts in a potentiaL asset for the Company, the
recognised asset is Limited to the present vaLue
of economic benefits available in the form of any
future refunds from the pLan or reductions in future
contributions to the plan (‘the asset ceiling'). In
order to caLcuLate the present vaLue of economic
benefits, consideration is given to any minimum
funding requirements.
Remeasurement of the net defined benefit liability,
which comprise actuariaL gains and Losses, the return
on plan assets (excluding interest) and the effect
of the asset ceiling (if any, excluding interest), are
recognised in OCI. The Company determines the net
interest expense / (income) on the net defined benefit
LiabiLity / (asset) for the period by appLying the discount
rate used to measure the defined benefit obligation
at the beginning of the annuaL period to the then-net
defined benefit liability / (asset), taking into account
any changes in the net defined benefit liability /
(asset) during the period as a resuLt of contributions
and benefit payments. Net interest expense and
other expenses related to defined benefit plans are
recognised in statement of profit and loss.
When the benefits of a plan are changed or when a
plan is curtailed, the resulting change in benefit that
relates to past service (‘past service cost' or ‘past
service gain') or the gain or loss on curtailment is
recognised immediately in statement of profit and
Loss. The Company recognises gains and Losses on
the settlement of a defined benefit plan when the
settLement occurs.
Gratuity
The Company provides for gratuity, a defined benefit
retirement pLan (the "gratuity pLan") covering eLigibLe
empLoyees. The pLan provides payment to vested
empLoyees at retirement, death or termination of
empLoyment, of an amount based on the respective
empLoyee's saLary and the tenure of empLoyment
with the Company. The Company provides the
gratuity benefit through annual contribution to a fund
managed by the Life Insurance corporation of India
('LIC") and PNB MetLife India Insurance Co Ltd. Under
this scheme the settLement obLigation remains with
the Company although the LIC administers the scheme
and determines the contribution premium required
to be paid by the Company. LiabiLities reLated to the
gratuity plan are determined and accrued by actuarial
valuation using projected unit credit method by an
independent actuary as at the balance sheet.
iv) Other long-term employee benefits -
compensated absences
Accumulated absences expected to be carried
forward beyond twelve months is treated as long¬
term employee benefit for measurement purposes.
The Company's net obligation in respect of other
long-term employee benefit of accumulating
compensated absences is the amount of future
benefit that employees have accumulated at the end
of the year. That benefit is discounted to determine
its present value The obligation is measured annually
by a qualified actuary using the projected unit credit
method. Remeasurements are recognised in profit or
loss in the period in which they arise.
The obligations are presented as current liabilities in
the balance sheet if the Company does not have an
unconditional right to defer the settlement for at least
twelve months after the reporting date.
v) Share-based compensation
The grant date fair value of equity settled share-based
payment awards granted to employees is recognised
as an employee expense, with a corresponding
increase in equity, over the period that the employees
unconditionally become entitled to the awards. The
amount recognised as expense is based on the estimate
of the number of awards for which the related service
and non-market vesting conditions are expected to be
met, such that the amount ultimately recognised as
an expense is based on the number of awards that
do meet the related service and non-market vesting
conditions at the vesting date.
vi) Treasury shares
The Company has created a Trust, Amrutanjan Health
Care Limited ESOP trust (herein after known as "ESOP
Trust"), for administration of share-based payment
to its employees. Own equity instruments that are
reacquired (treasury shares) are recognised at cost
and deducted from equity. When the treasury shares
are issued to the employees by the trust, the amount
received is recognised as an increase in equity and the
resultant gain / (loss) is transferred to / from reserves.
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