2.B Material Accounting Policies:
2.B.1 Property, Plant and Equipment
(i) Recognition and Measurement
Property, Plant and Equipment are stated at cost of acquisition including attributable interest and finance costs, if
any, till the date of acquisition/ installation of the assets less accumulated depreciation and accumulated impairment
losses, if any. Subsequent expenditure relating to Property, Plant and Equipment is capitalised only when 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. All other repairs and maintenance costs are charged to the Statement of Profit and Loss
as incurred. The cost and related accumulated depreciation are eliminated from the financial statements, either on
disposal or when retired from active use and the resultant gain or loss are recognised in the Statement of Profit and
Loss.
Capital work-in-progress, representing expenditure incurred in respect of assets under development and not ready
for their intended use, are carried at cost. Cost includes related acquisition expenses, construction cost, related
borrowing cost and other direct expenditure.
(ii) Depreciation/ Amortisation
a) Depreciation on Property, Plant and Equipment has been provided on a pro-rata basis on the straight-line
method over the estimated useful lives of the assets which are in agreement with the rates prescribed under
schedule II to the Companies Act 2013,except for the category of assets mentioned in Table B in order to
reflect the actual usage of the asset.
b) Intangible assets consisting of softwares, licenses and Dossier/ Marketing Rights are amortised over their
useful life.
The Company, based on technical assessment made by technical expert and management estimate,
depreciates certain items of property plant and equipment (as mentioned above) over estimated useful lives
which are different from the useful lives prescribed under Schedule II to the Companies Act, 2013. The
management believes that these estimated useful lives are realistic and reflect fair approximation of the
period over which the assets are likely to be used.
(iii) 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 and the cost of the item can be measured reliably.
2.B.2 Investment Property
Investment properties are held to earn rentals or for capital appreciation, or both. Investment properties are measured
initially at their cost of acquisition. The cost comprises purchase price, borrowing cost if capitalization criteria are met and
directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discount and rebates
are deducted in arriving at the purchase price.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Company. All other repair and maintenance
costs are recognised in statement of profit and loss as incurred.
Though the Company measures investment property using cost based measurement, the fair value of investment property
is disclosed in the notes.
Investment Property is initially measured at cost including transaction costs. Subsequent to initial recognition, investment
properties are stated at cost less accumulated depreciation and accumulated impairment loss, if any.
Any gain or loss on disposal of investment property calculated as the difference between the net proceeds from disposal and
the carrying amount of the item is recognised in Statement of Profit & Loss.
2.B.3 Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
(i) Investment in subsidiaries, associate and joint venture :
Investment in subsidiaries, associates and joint ventures are shown at cost in accordance with the option available in
Ind AS 27, 'Separate Financial Statements'. Where the carrying amount of an investment in greater than its estimated
recoverable amount, it is written down immediately to its recoverable amount and the difference is transferred to the
Statement of Profit and Loss. On disposal of investment, the difference between the net disposal proceeds and the
carrying amount is charged or credited to the Statement of Profit and Loss.
(ii) Financial Assets
a. Initial Recognition
In the case of financial assets, not recorded at fair value through profit or loss (FVTPL), financial assets are
recognised initially at fair value plus transaction costs that are directly attributable to the acquisition of
the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame
established by regulation or convention in the market place (regular way trades) are recognised on the trade
date, i.e., the date that the Company commits to purchase or sell the asset.
b. Subsequent Measurement
For purposes of subsequent measurement, financial assets are classified in following categories:
Financial Assets at Amortised Cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a
business model with an objective to hold these assets in order to collect contractual cash flows and 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. Interest income from these financial assets is
included in finance income using the effective interest rate ("EIR”) method. Impairment gains or losses arising
on these assets are recognised in the Statement of Profit and Loss.
Financial assets are measured at fair value through OCI if these financial assets are held within a business
model with an objective to hold these assets in order to collect contractual cash flows or to sell these financial
assets and 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. 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 the Statement of Profit and Loss
Financial asset not measured at amortised cost or at fair value through OCI is carried at FVPL.
c. Impairment of Financial Assets
In accordance with Ind AS 109, the Company applies the expected credit loss ("ECL”) model for measurement
and recognition of impairment loss on financial assets and credit risk exposures.
The Company follows 'simplified approach' for recognition of impairment loss allowance on trade receivables.
Simplified approach does not require the Company to track changes in credit risk. Rather, it recognises
impairment loss allowance based on lifetime ECL at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines
that whether there has been a significant increase in the credit risk since initial recognition. If credit risk
has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk
has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument
improves such that there is no longer a significant increase in credit risk since initial recognition, then the
entity reverts to recognising impairment loss allowance based on 12-month ECL.
ECL is the difference between all contractual cash flows that are due to the group in accordance with the
contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the
original EIR. Lifetime ECL are the expected credit losses resulting from all possible default events over the
expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from
default events that are possible within 12 months after the reporting date.
ECL impairment loss allowance (or reversal) recognised during the period is recognised as income/ expense in
the Statement of Profit and Loss.
d. De-recognition of Financial Assets
The Company de-recognises a financial asset only when the contractual rights to the cash flows from the
asset expire, or it transfers the financial asset and substantially all risks and rewards of ownership of the asset
to another entity.
If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues
to control the transferred asset, the Company recognizes its retained interest in the assets and an associated
liability for amounts it may have to pay.
If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset,
the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the
proceeds received.
(iii) Equity Instruments and Financial Liabilities
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the
contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
a. Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after
deducting all of its liabilities. Equity instruments which are issued for cash are recorded at the proceeds
received, net of direct issue costs. Equity instruments which are issued for consideration other than cash are
recorded at fair value of the equity instrument.
1) Initial Recognition
Financial liabilities are classified, at initial recognition, as financial liabilities at FVPL, loans and
borrowings and payables as appropriate. All financial liabilities are recognised initially at fair value and,
in the case of loans and borrowings and payables, net of directly attributable transaction costs.
2) Subsequent Measurement
The measurement of financial liabilities depends on their classification, as described below
Financial liabilities at FVPL
Financial liabilities at FVPL include financial liabilities held for trading and financial liabilities designated
upon initial recognition as at FVPL. Financial liabilities are classified as held for trading if they are
incurred for the purpose of repurchasing in the near term. Gains or losses on liabilities held for trading
are recognised in the Statement of Profit and Loss.
Financial guarantee contracts issued by the Company are those contracts that require a payment to be
made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment
when due in accordance with the terms of a debt instrument. Financial guarantee contracts are
recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable
to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of
loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised
less cumulative amortisation. Amortisation is recognised as finance income in the Statement of Profit
and Loss.
Financial liabilities at amortised cost
After initial recognition, interest-bearing loans and borrowings are subsequently measured at
amortised cost using the EIR method. Any difference between the proceeds (net of transaction costs)
and the settlement or redemption of borrowings is recognised over the term of the borrowings in the
Statement of Profit and Loss.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees
or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the
Statement of Profit and Loss.
3) De-recognition of Financial Liabilities
Financial liabilities are de-recognised when the obligation specified in the contract is discharged,
cancelled or expired. When an existing financial liability is replaced by another from the same lender
on substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as de-recognition of the original liability and recognition of a new
liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and
Loss.
(iv) Offsetting Financial Instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet if there is a
currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis to
realise the assets and settle the liabilities simultaneously.
2.B.4 Employee Benefits
(i) Long-term employee benefit
a. Defined Contribution Plan
Contributions to defined contribution schemes such as provident fund, employees' state insurance, labour
welfare are charged as an expense based on the amount of contribution required to be made as and when
services are rendered by the employees. The above benefits are classified as Defined Contribution Schemes
as the Company has no further obligations beyond the monthly contributions.
b. Defined Benefit Plan
The Company also provides for gratuity which is a defined benefit plan, the liabilities of which is determined
based on valuations, as at the balance sheet date, made by an independent actuary using the projected unit
credit method. Re-measurement, comprising of actuarial gains and losses, in respect of gratuity are recognised
in the OCI, in the period in which they occur. Re-measurement recognised in OCI are not reclassified to the
Statement of Profit and Loss in subsequent periods. Past service cost is recognised in the Statement of Profit
and Loss in the year of plan amendment or curtailment. The classification of the Company's obligation into
current and non-current is as per the actuarial valuation report.
The cost and present value of the gratuity obligation and compensated absences are determined using
actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual
developments in the future. These include the determination of the discount rate, future salary increases,
attrition rate and mortality rates. Due to the complexities involved in the valuation and its long-term nature,
a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed
at each reporting date.
c. Leave entitlement and compensated absences
Accumulated leave which is expected to be utilised within next twelve months, is treated as short-term
employee benefit. Leave entitlement, other than short term compensated absences, are provided based on
a actuarial valuation, similar to that of gratuity benefit. Re-measurement, comprising of actuarial gains and
losses, in respect of leave entitlement are recognised in the Statement of Profit and Loss in the period in
which they occur.
(ii) Short-term Benefits
Short-term employee benefits such as salaries, wages, performance incentives etc. are recognised as expenses at
the undiscounted amounts in the Statement of Profit and Loss of the period in which the related service is rendered.
Expenses on non-accumulating compensated absences is recognised in the period in which the absences occur.
(iii) ) Termination benefits
Termination benefits are recognised as an expense as and when incurred.
2.B.5 Cash and Cash Equivalents
Cash and cash equivalents include cash at bank, cash, cheque and draft on hand. The Company considers all highly liquid
investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to
known amounts of cash to be cash equivalents.
2.B.6 Borrowing Costs
Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds.
Also, the EIR amortisation is included in finance costs.
Borrowing costs relating to acquisition, construction or production of a qualifying asset which takes substantial period of
time to get ready for its intended use are added to the cost of such asset to the extent they relate to the period till such
assets are ready to be put to use. All other borrowing costs are expensed in the Statement of Profit and Loss in the period
in which they occur.
2.B.7 Foreign Exchange Translation and Accounting of Foreign Exchange Transaction
(i) Initial Recognition
Foreign currency transactions are initially recorded 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.
However, for practical reasons, the Company uses a monthly average rate if the average rate approximate the actual
rate at the date of the transactions.
(ii) Conversion
Monetary assets and liabilities denominated in foreign currencies are reported using the closing rate at the reporting
date. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported
using the exchange rate at the date of the transaction.
(iii) Treatment of Exchange Difference
Exchange differences arising on settlement/ restatement of short-term foreign currency monetary assets and
liabilities of the Company are recognised as income or expense in the Statement of Profit and Loss except those
arising from investment in Non Integral operations.
2.B.8 Revenue Recognition
Revenue from contracts with customers is recognized on transfer of control of promised goods or services to a customer at an
amount thatreflects theconsideration towhich theCompany is expected to beentitled toin exchangeforthosegoods orservices.
Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable
consideration) allocated to that performance obligation. The transaction price of goods sold and services rendered is net
of variable consideration on account of various discounts and schemes offered by the Company as part of the contract.
This variable consideration is estimated based on the expected value of outflow. Revenue (net of variable consideration)
is recognized only to the extent that it is highly probable that the amount will not be subject to significant reversal when
uncertainty relating to its recognition is resolved.
Revenue from sales of goods is recognized net of rebates and discounts on transfer of significant risks and rewards of
ownership to the buyer. Sales of goods are recognized gross of excise duty but net of Sales Tax and Value Added Tax. From
July '17 onwards, Sales are considered net of Goods and Services Tax.
Interest income is recognized on a time proportion basis considering the amount outstanding and the applicable interest
rate. Interest income is included under the head "other income” in the Statement of Profit and Loss.
Dividend is recognized when the right to receive the payment is established, it is probable that the economic benefits
associated with the dividend will flow to the entity and the amount of dividend can be measured reasonably.
2.B.9 Income Tax
Income tax comprises of current and deferred income tax. Income tax is recognised as an expense or income in the Statement
of Profit and Loss, except to the extent it relates to items directly recognised in equity or in OCI.
(i) Current Tax
Current income tax is recognised based on the estimated tax liability computed after taking credit for allowances
and exemptions in accordance with the Income Tax Act, 1961. Current income tax assets and liabilities are measured
at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively enacted, at the reporting date.
(ii) Deferred Tax
Deferred tax is determined by applying the Balance Sheet approach. Deferred tax assets and liabilities are recognised
for all deductible temporary differences between the financial statements' carrying amount of existing assets and
liabilities and their respective tax base. Deferred tax assets and liabilities are measured using the enacted tax rates
or tax rates that are substantively enacted at the Balance Sheet date. The effect on deferred tax assets and liabilities
of a change in tax rates is recognised in the period that includes the enactment date. Deferred tax assets are only
recognised to the extent that it is probable that future taxable profits will be available against which the temporary
differences can be utilised. Such assets are reviewed at each Balance Sheet date to reassess realisation.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset. Current tax assets and
tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net
basis, or to realise the asset and settle the liability simultaneously.
In assessing the realisability of deferred income tax assets, management considers whether some portion or all
of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is
dependent upon the generation of future taxable income during the periods in which the temporary differences
become deductible. Management considers the scheduled reversals of deferred income tax liabilities, projected
future taxable income, and tax planning strategies in making this assessment. Based on the level of historical taxable
income and projections for future taxable income over the periods in which the deferred income tax assets are
deductible, management believes that the Company will realize the benefits of those deductible differences. The
amount of the deferred income tax assets considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carry forward period are reduced.
2.B.10 Impairment of Non-Financial Assets
As at each Balance Sheet date, the Company assesses whether there is an indication that a non-financial asset may be
impaired and also whether there is an indication of reversal of impairment loss recognised in the previous periods. If any
indication exists, or when annual impairment testing for an asset is required, the Company determines the recoverable
amount and impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount.
Recoverable amount is determined:
- In case of an individual asset, at the higher of the assets' fair value less cost to sell and value in use; and
- In case of cash generating unit (a group of assets that generates identified, independent cash flows), at the higher of
cash generating unit's fair value less cost to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate
that reflects current market assessments of the time value of money and risk specified to the asset. In determining fair value
less cost to sell, recent market transaction are taken into account. If no such transaction can be identified, an appropriate
valuation model is used.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the Statement of Profit
and Loss, except for properties previously revalued with the revaluation taken to OCI. For such properties, the impairment
is recognised in OCI up to the amount of any previous revaluation.
When the Company considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written
off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, then the previously recognised impairment loss is reversed through the
Statement of Profit and Loss.
2.B.11 Trade receivables
A receivable is classified as a 'trade receivable' if it is in respect of the amount due on account of goods sold or services
rendered in the normal course of business. Trade receivables are recognised initially at fair value and subsequently measured
at amortised cost using the EIR method, less provision for impairment.
2.B.12 Trade payables
A payable is classified as a 'trade payable' if it is in respect of the amount due on account of goods purchased or services
received in the normal course of business. These amounts represent liabilities for goods and services provided to the
Company prior to the end of the financial year which are unpaid. These amounts are unsecured and are usually settled as
per the payment terms stated in the contract. Trade and other payables are presented as current liabilities unless payment
is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently
measured at amortised cost using the EIR method.
2.B.13 Inventories
Inventories are valued as follows:
- Finished Goods are valued at lower of cost or net realisable value.
- Raw Material are valued at lower of cost or net realisable value.
- Packing Materials are valued at cost or net realisable value.
- Work in process is valued at lower of cost or net realisable value.
- Stock in trade is valued at a lower of cost or net realizable value.
Cost is arrived at on weighted average cost method.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and
estimated costs necessary to make the sale.
2.B.14 Leases
Company as a lessee
The Company's lease asset classes primarily consist of leases for land and buildings. The Company assesses whether a
contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right
to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract
conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use
of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period
of the lease and (iii) the Company has the right to direct the use of the asset.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments
are discounted using the interest rate implicit in the lease or, if not readily eterminable, using the incremental borrowing
rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the
related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination
option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified
as financing cash flows.
Company as a lessor
Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All
other leases are classified as operating leases.
When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. The
sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
For operating leases, rental income is recognized on a straight line basis over the term of the relevant lease.
2.B.15 Earnings Per Share
Basic earnings per share is computed by dividing the net profit or loss for the period attributable to the equity shareholders
of the Company by the weighted average number of equity shares outstanding during the period. The weighted average
number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus
shares, other than the conversion of potential equity shares, that have changed the number of equity shares outstanding,
without a corresponding change in resources.
Diluted earnings per share is computed by dividing the net profit or loss for the period attributable to the equity shareholders
of the Company and weighted average number of equity shares considered for deriving basic earnings per equity share and
also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential
equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been
actually issued at fair value (i.e. the average market value of the outstanding equity shares).
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