MATERIAL ACCOUNTING POLICIES
2.2 Fair value measurement
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.
The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the
liability takes place either in the principal market for the
asset or liability, or in the absence of a principal market,
in the most advantageous market for the asset or
liability. The principal or the most advantageous market
must be accessible to the Company.
The fair value of an asset or a liability is measured
using the assumptions that market participants would
use when pricing the asset or liability, assuming that
market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes
into account a market participant's ability to generate
economic benefits by using the asset in its highest and
best use or by selling it to another market participant
that would use the asset in its highest and best use.
The Company uses valuation techniques that are
appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the
use of relevant observable inputs and minimising the
use of unobservable inputs. All assets and liabilities for
which fair value is measured or disclosed in the financial
statements are categorized within the fair value hierarchy,
described as follows, based on the lowest level input that
is significant to the fair value measurement as a whole:
• Level 1 — Quoted (unadjusted) market prices in
active markets for identical assets or liabilities
• Level 2 — Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is directly or indirectly observable
• Level 3 — Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is unobservable
For assets and liabilities that are recognised in the
financial statements on a recurring basis, the Company
determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant to the
fair value measurement as a whole) at the end of each
reporting period.
2.3 Foreign currency transactions
Functional currency is the currency of the primary economic
environment in which the Company operates whereas
presentation currency is the currency in which the financial
statements are presented. Indian Rupee is the functional
as well as presentation currency for the Company.
Foreign currency transactions are recorded at the
exchange rates prevailing at the date of such transactions.
Monetary assets and liabilities as at the balance sheet
date are translated at the rates of exchange prevailing
at the date of the balance sheet. Gain/loss arising on
account of differences in foreign exchange rates on
settlement/translation of monetary assets and liabilities
are recognised in the statement of profit and loss, unless
they are considered as an adjustment to borrowing
costs, in which case they are capitalised along with the
borrowing cost attributable to qualifying assets.
2.4 Revenue recognition
The Company applies principles provided under Ind AS 115
'Revenue from contracts with customers' which provides
a single, principles-based approach to the recognition of
revenue from all contracts with customers. It focuses on
the identification of performance obligations in a contract
and requires revenue to be recognised when or as those
performance obligations are satisfied.
Company receives revenue for supply of goods to
external customers against orders received. The majority
of contracts that Company enters into relate to sales
orders containing single performance obligations for
the delivery of pharmaceutical and consumer healthcare
products. The average duration of a sales order is less
than 12 months.
Revenue from sale of goods is recognised when control
of the goods is transferred to the customer, there are no
unfulfilled obligations, the amount of revenue can be
reliably measured, and it is probable that future economic
benefits associated with the transaction will flow to the
Company. The point at which control gets transferred
is determined by each customer arrangement, but
generally occur on delivery to the customer.
Revenue represents net invoice value including fixed and
variable consideration. Variable consideration arises on
the sale of goods as a result of discounts and allowances
given and accruals for estimated future returns and
rebates. Revenue is not recognised in full until it is highly
probable that a significant reversal in the amount of
cumulative revenue recognised will not occur.
The methodology and assumptions used to estimate
rebates and returns are monitored and adjusted regularly
in the light of contractual and legal obligations, historical
trends, past experience and projected market conditions.
Once the uncertainty associated with the returns and
rebates is resolved, revenue is adjusted accordingly.
Company enters into development and marketing
collaborations and out-licences of the Company's
compounds or products to other parties. These contracts
give rise to fixed and variable consideration from upfront
payments, development milestones, sales-based
milestones and royalties. Income dependent on the
achievement of a development milestone is recognised
when it is highly probable that a significant reversal in
the amount of cumulative revenue recognised will not
occur, which is usually when the related event occurs.
Sales-based milestone income is recognised when it is
highly probable that the sales threshold will be reached.
Sales-based royalties on a licence of intellectual property
are not recognised until the relevant product sale occurs. If
the time between the recognition of revenue and payment
from the customer is expected to be more than one year
and the impact is material, the amount of consideration is
discounted using appropriate discount rates.
Goods and Service Tax and other value added taxes are
excluded from revenue.
2.5 Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured
at cost less accumulated depreciation and accumulated
impairment losses, if any. Cost comprises of purchase
price (after deducting trade discount/rebate) / cost
of construction, non-refundable duties and taxes,
borrowing costs, other expenditure that are directly
attributable to the acquisition of the asset. The cost of
self-constructed assets includes the cost of materials
and other costs directly attributable to bringing the
asset to a working condition for its intended use.
When parts of an item of property, plant and equipment
have significant cost in relation to total cost and different
useful lives, they are accounted for as separate items
(major components) of property, plant and equipment.
Profits and losses upon disposal of an item of property,
plant and equipment are determined by comparing
the proceeds from disposal with the carrying amount
of property, plant and equipment and are recognised
within "other income/expense" in the statement of profit
and loss.
The cost of replacing part of an item of property, plant
and equipment is recognised in the carrying amount of
the item if it is probable that the future economic benefits
embodied within the part will flow to the Company, its
cost can be measured reliably and it has a useful life of
at least twelve months. The costs of other repairs and
maintenance are recognised in the statement of profit
and loss as incurred.
Freehold land has an unlimited useful life and therefore
is not depreciated.
Property, plant and equipment which are not ready
for intended use as on the date of Balance Sheet are
disclosed as 'Capital work-in-progress'. Advances paid
towards the acquisition of property, plant and equipment
outstanding at each balance sheet date is classified as
capital advances under 'Other Non-Current Assets'.
Capital work-in-progress included in non-current assets
comprises of direct costs, related incidental expenses
and attributable interest. Capital work-in-progress
are not depreciated as these assets are not yet available
for use.
Depreciation
Depreciation is recognised in the statement of profit and
loss on a straight-line basis over the estimated useful
lives of property, plant and equipment. Leased assets
are depreciated over the shorter of the lease term or
their useful lives, unless it is reasonably certain that the
Company will obtain ownership by the end of the lease
term.
The below given useful lives best represent the useful
lives of these assets based on internal assessment and
supported by technical advice where necessary which is
different from the useful lives as prescribed under Part C
of Schedule II of the Companies Act, 2013.
The estimated useful lives are as follows:
Factory and other buildings upto 61 years
Plant and machinery upto 30 years
Furniture, fixtures and office equipment upto 25 years
Vehicles upto 8 years
Leasehold land is amortised over the period of respective
leases.
Depreciation methods, useful lives and residual values
are reviewed at each reporting date.
2.6 Borrowing costs
Borrowing costs primarily comprise interest on the
Company's borrowings. Borrowing costs directly
attributable to the acquisition, construction or
production of a qualifying asset are capitalised during
the period that is necessary to complete and prepare the
asset for its intended use or sale. Other borrowing costs
are expensed in the period in which they are incurred
and reported under 'finance costs'. Borrowing costs are
recognised using the effective interest rate method.
2.7 Intangible assets
Research and development
Expenses on research activities undertaken with the
prospect of gaining new scientific or technical knowledge
and understanding are recognised in the statement of
profit and loss as incurred.
Development activities involve a plan or design for the
production of new or substantially improved products and
processes. Development expenditure is capitalised only if
development costs can be measured reliably, the product
or process is technically and commercially feasible, future
economic benefits are probable, the assets are controlled
by the Company and the Company intends to and has
sufficient resources to complete development and to use
or sell the asset. The expenditure capitalised includes
the cost of materials and other costs directly attributable
to preparing the asset for its intended use. Other
development expenditure is recognised in the statement
of profit and loss as incurred.
The Company's internal drug development expenditure
is capitalised only if they meet the recognition criteria as
mentioned above. Where uncertainties exist that the said
criteria may not be met, the expenditure is recognised
in the statement of profit and loss as incurred. Where
the recognition criteria are met, intangible assets are
recognised. Based on the management estimate of the
useful lives, indefinite useful life assets are tested for
impairment and assets with limited life amortised on a
straight-line basis over their useful economic lives from
when the asset is available for use. During the periods
prior to their launch (including periods when such products
have been out-licenced to other companies), these assets
are tested for impairment on an annual basis, as their
economic useful life is indeterminable till then.
Payments to in-license products and compounds from
third parties generally taking the form of up-front
payments and milestones are capitalised and amortised
on a straight-line basis, over their useful economic lives
from when the asset is available for use. During the
periods prior to their launch, these assets are tested for
impairment on an annual basis, as their economic useful
life is indeterminable till then.
The Company monetises the molecules under
development, as active market exists at each stage /
phase wise molecule development, either through out
licencing arrangement or subsequent product launches.
Accordingly the molecule under development which
meets criteria under Ind AS 38 Intangible Assets; para 57
are classified as intangible assets.
De-recognition of intangible assets
Intangible assets are de-recognised either on their
disposal or where no future economic benefits are
expected from their use or disposal. Losses arising on
such de-recognition are recorded in the statement of
profit and loss, and are measured as the difference
between the net disposal proceeds, if any, and the
carrying amount of respective intangible assets as on
the date of de-recognition.
Intangible assets relating to products under
development, other intangible assets not available for
use and intangible assets having indefinite useful life are
subject to impairment testing at each reporting date. All
other intangible assets are tested for impairment when
there are indications that the carrying value may not
be recoverable. Any impairment losses are recognised
immediately in the statement of profit and loss.
Other intangible assets
Other intangible assets that are acquired by the
Company, which have finite useful lives, are measured
at cost less accumulated amortisation and accumulated
impairment losses, if any.
Subsequent expenditure is capitalised only when it
increases the future economic benefits embodied in the
specific asset to which they relate.
Software for internal use, which is primarily acquired
from third-party vendors, including consultancy
charges for implementing the software, are capitalised.
Subsequent costs are charged to the statement of profit
and loss as incurred. The capitalised costs are amortised
over the estimated useful life of the software.
Amortisation
Amortisation of intangible assets, intangible assets
not available for use and intangible assets having
indeterminable life, is recognised in the statement of
profit and loss on a straight-line basis over the estimated
useful lives from the date they are available for use.
The estimated useful lives of intangible assets are 1 - 10
years.
2.8 Impairment of non-financial assets
The carrying amounts of the Company's non-financial
assets, are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such
indication exists, then the asset's recoverable amount is
estimated. Intangible assets that have indefinite lives or
that are not yet available for use are tested for impairment
annually; their recoverable amount is estimated annually
each year at the reporting date.
For the purpose of impairment testing, assets are
grouped together into the smallest group of assets
that generate cash inflows from continuing use that
are largely independent of the cash inflows of other
assets or groups of assets ("cash-generating unit"). The
recoverable amount of an asset or cash-generating unit
is the greater of its value in use or its fair value less costs
to sell. In assessing value in use, the estimated future
cash flows are 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. Intangibles with indefinite useful
lives are tested for impairment individually.
An impairment loss is recognised if the carrying amount
of an asset or its cash-generating unit exceeds its
estimated recoverable amount. Impairment losses are
recognised in the statement of profit and loss.
Impairment losses recognised in prior periods are
assessed at each reporting date for any indications
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. An impairment loss is reversed 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.
2.9 Investments and financial assets
Classification
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 entity's business model
for managing the financial assets and the contractual
terms of the cash flows.
For assets measured at fair value, gains and losses will
either be recorded in the statement of profit and loss or
other comprehensive income. For investments in debt
instruments, this will depend on the business model in
which the investment is held. For investments in equity
instruments, this will depend on whether the Company
has made an irrevocable selection at the time of initial
recognition to account for the equity investment at fair
value through other comprehensive income.
The Company reclassifies debt investments when and
only when its business model for managing those assets
changes.
Measurement
At initial recognition, the Company measures a financial
asset at its fair value plus, in the case of a financial
asset not at fair value through profit or loss, transaction
costs that are directly attributable to the acquisition of
the financial asset. Transaction costs of financial assets
carried at fair value through profit or loss are expensed
in the statement of profit and loss.
Financial assets with embedded derivatives are
considered in their entirety when determining whether
their cash flows are solely payment of principal and
interest.
Measurement of debt instruments
Subsequent measurement of debt instruments depends
on the Company's business model for managing the
asset and the cash flow characteristics of the asset.
There are three measurement categories into which the
Company classifies its debt instruments:
• 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 other
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 assets' 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 income
and foreign exchange gains and losses which are
recognised in the statement of profit and loss.
When the financial asset is derecognised, the
cumulative gain or loss previously recognised in
OCI is reclassified from equity to the statement of
profit and loss and recognised in other income/
expenses. Interest income from these financial
assets is included in other income using the
effective interest rate method.
• Fair value through profit or loss (FVTPL):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 the statement of profit and loss
and presented net in the statement of profit and
loss within other income/expenses in the period in
which it arises. Interest income from these financial
assets is included in other income.
Measurement of equity instruments
The Company subsequently measures all equity
investments at fair value other than those elected
to be at cost under Ind AS 27. Where the Company's
management has elected to present fair value gains and
losses on equity investments in other comprehensive
income, there is no subsequent reclassification of fair
value gains and losses to profit or loss. Dividends from
such investments are recognised in the statement of
profit and loss as other income when the Company's
right to receive dividends is established.
Changes in the fair value of financial assets at fair value
through profit or loss are recognised in other income/
expenses in the statement of profit and loss. Impairment
losses (and reversal of impairment losses) on equity
investments measured at FVOCI are not reported
separately from other changes in fair value.
Impairment of financial assets
The Company assesses on a forward looking basis the
expected credit losses associated with its assets carried
at amortised cost and FVOCI debt instruments. The
impairment methodology applied depends on whether
there has been a significant increase in credit risk.
For trade receivables only, the Company applies the
simplified approach permitted by Ind AS 109 Financial
Instruments, which requires expected lifetime losses to
be recognised from initial recognition of the receivables.
De-recognition of financial assets
A financial asset is derecognised only when
• the Company has transferred the rights to receive
cash flows from the financial asset or
• retains the contractual rights to receive the
cash flows of the financial asset, but assumes a
contractual obligation to pay the cash flows to one
or more recipients.
Where the entity 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 entity has not transferred substantially all risks and
rewards of ownership of the financial asset, the financial
asset is not derecognised.
Where the entity has neither transferred a financial
asset nor retains substantially all risks and rewards of
ownership of the financial asset, the financial asset is
derecognised if the Company has not retained control
of 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.
Interest income from financial assets
Interest income from debt instruments is recognised
using the effective interest rate method. The effective
interest rate is the rate that exactly discounts estimated
future cash receipts through the expected life of the
financial asset to the gross carrying amount of a
financial asset. When calculating the effective interest
rate, the Company estimates the expected cash flows
by considering all the contractual terms of the financial
instrument (for example, prepayment, extension, call
and similar options) but does not consider the expected
credit losses.
2.10 Financial liabilities
Non-derivative financial liabilities include borrowings,
lease liabilities, trade payables and other liabilities.
Company present the hybrid contract in balance sheet
as a single contractual arrangement. The embedded
derivative component is classified as at FVTPL for
measurement purposes; the host contract, as a financial
liability is measured at amortised cost using the effective
interest method.
Borrowings and other financial liabilities are initially
recognised at fair value (net of transaction costs
incurred). Difference between the fair value and the
transaction proceeds on initial recognition is recognised
as an asset / liability based on the underlying reason for
the difference.
Subsequently all financial liabilities are measured at
amortised cost using the effective interest rate method.
Borrowings and other financial liabilities are
derecognised from the balance sheet when the obligation
specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount
of a financial liability that has been extinguished or
transferred to another party and the consideration paid,
including any non-cash assets transferred or liabilities
assumed, is recognised in the statement of profit and
loss. The gain / loss is recognised in other equity in case
of transaction with shareholders.
Borrowings and other financial liabilities are classified
as current liabilities unless the Company has an
unconditional right to defer settlement of the liability
for at least 12 months after the reporting period. Where
there is a breach of a material provision of a long-term
loan arrangement on or before the end of the reporting
period with the effect that the liability becomes payable
on demand on the reporting date.
Trade payables are recognised initially at their
transaction values which also approximate their fair
values and subsequently measured at amortised cost
less settlement payments.
Offsetting financial instruments:
Financial assets and liabilities are offset and the net
amount is reported in the balance sheet where there
is a legally enforceable right to offset the recognised
amounts and there is an intention to settle on a net basis
or realise the asset and settle the liability simultaneously.
The legally enforceable right must not be contingent on
future events and must be enforceable in the normal
course of business and in the event of default, insolvency
or bankruptcy of the Company or the counterparty.
2.11 Inventories
Inventories of finished goods, stock in trade, work in
process, consumable stores and spares, raw material,
packing material are valued at cost or net realisable
value, whichever is lower. Cost of inventories is
determined on a weighted moving average basis. Cost
of materials 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.
Cost of work-in-process and finished goods include
the cost of materials consumed, labour, manufacturing
overheads and other related 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.
Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs of
completion and selling expenses.
The factors that the Company considers in determining
the allowance for slow moving, obsolete and other non¬
saleable inventory includes estimated shelf life, planned
product discontinuances, price changes, ageing of
inventory and introduction of competitive new products,
to the extent each of these factors impact the Company's
business and markets. The Company considers all these
factors and adjusts the inventory provision to reflect its
actual experience on a periodic basis.
2.12 Accounting for income taxes
Income tax expense consists of current and deferred
tax. Income tax expense is recognised in the statement
of profit and loss except to the extent that it relates to
items recognised in other comprehensive income, in
which case it is recognised in other comprehensive
income. Current tax is the expected tax payable on the
taxable income for the year, using tax rates enacted at
the reporting date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is recognised for temporary differences
between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used
for taxation purposes.
Deferred tax is not recognised for the following
temporary differences:
- The initial recognition of assets or liabilities in a
transaction that is not a business combination and
that affects neither accounting nor taxable profit,
and
- Taxable temporary differences relating to
investments in subsidiaries to the extent the
Company is probable that the temporary difference
will not reverse in the foreseeable future or taxable
profit will not be available against which the
temporary difference can be utilised.
Deferred tax is measured at the tax rates that are
expected to be applied to the temporary differences
when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting date.
Deferred tax assets are not recognised for temporary
differences between the carrying amount and tax bases
of investments in subsidiaries, where it is not probable
that the differences will reverse in the foreseeable future
and taxable profit will not be available against which the
temporary difference can be utilised.
A deferred tax asset is recognised to the extent that it
is probable that future taxable profits will be available
against which the temporary difference can be utilised.
Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities
and assets, and they relate to income taxes levied by
the same tax authority on the same taxable entity, or on
different tax entities, but they intend to settle current tax
liabilities and assets on a net basis or their tax assets and
liabilities will be realised/ settled simultaneously.
2.13 Leases
The Company has applied Ind AS 116 using the modified
retrospective approach.
The Company recognises a right-of-use asset and a lease
liability at the lease commencement date. The right-of-
use asset is initially measured at cost, which comprises
the initial amount of the lease liability adjusted for any
lease payments made at or before the commencement
date, plus any initial direct costs incurred and an estimate
of costs to dismantle and remove the underlying asset or
to restore the underlying asset or the site on which it is
located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using
the straight-line method from the commencement date
to the earlier of the end of the useful life of the right-of-
use asset or the end of the lease term. The estimated
useful lives of right-of-use assets are determined on
the same basis as those of property and equipment. In
addition, the right-of-use asset is periodically reduced
by impairment losses, if any, and adjusted for certain re¬
measurements of the lease liability.
The lease liability is initially measured at the present
value of the lease payments that are not paid at the
commencement date, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily
determined, company's incremental borrowing rate.
Generally, the Company uses its incremental borrowing
rate as the discount rate.
Lease payments included in the measurement of the
lease liability comprise the following:
- Fixed payments, including in-substance fixed
payments;
- Variable lease payments that depend on an index
or a rate, initially measured using the index or rate
as at the commencement date;
- Amounts expected to be payable under a residual
value guarantee; and
- The exercise price under a purchase option that
the company is reasonably certain to exercise,
lease payments in an optional renewal period
if the company is reasonably certain to exercise
an extension option, and penalties for early
termination of a lease unless the company is
reasonably certain not to terminate early.
The lease liability is measured at amortised cost using
the effective interest method. It is remeasured when
there is a change in future lease payments arising from
a change in an index or rate, if there is a change in the
Company's estimate of the amount expected to be
payable under a residual value guarantee, or if Company
changes its assessment of whether it will exercise a
purchase, extension or termination option.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying
amount of the right-of-use asset, or is recorded in profit
or loss if the carrying amount of the right-of-use asset
has been reduced to zero.
The Company presents right-of-use assets that do not
meet the definition of investment property in 'property,
plant and equipment' and lease liabilities as 'lease
liabilities' in the Balance sheet.
Short-term leases and leases of low-value assets
The Company has elected not to recognise right-of-use
assets and lease liabilities for short-term leases that have
a lease term of 12 months. The Company recognises
the lease payments associated with these leases as an
expense on a straight-line basis over the lease term.
Land acquired on long term leases
The Company has capitalised the land acquired on long
term lease. Such leases are acquired on payment of an
upfront amount and do not carry any other minimum
lease payments/other rentals over the lease term. The
asset is initially recognised at the value of the upfront
premium/charges paid to acquire the lease.
2.14 Equity
Share capital is determined using the nominal value
of shares that are issued. Incremental costs directly
attributable to the issue of ordinary shares are recognised
as a deduction from equity, net of any tax effects.
Securities premium includes any premium received
on the issue of share capital. Any transaction costs
associated with the issue of shares is deducted from
Securities premium, net of any related income tax
benefits.
Retained earnings include all current and prior period
results, as disclosed in the statement of profit and loss.
2.15 Employee benefits
Short-term benefits
Short-term benefit obligations are measured on an
undiscounted basis and are expensed as the related
service is provided. A liability is recognised for the
amount expected to be paid under short-term cash
bonus or profit-sharing plans if the Company has a
present legal or constructive obligation to pay this
amount as a result of past service provided by the
employee and the obligation can be estimated reliably.
Defined contribution plans
A defined contribution plan is a post-employment
benefit plan under which the Company pays fixed
contributions into a separate entity and will have no
legal or constructive obligation to pay further amounts.
Obligations for contributions to recognised provident
funds, approved superannuation schemes and other
social securities, which are defined contribution plans,
are recognised as an employee benefit expense in the
statement of profit and loss as incurred.
Defined benefit plans
A defined benefit plan is a post-employment benefit plan
other than a defined contribution plan. The Company's net
obligation in respect of an approved gratuity plan, which is a
defined benefit plan, and certain other defined benefit plans
is calculated separately for each material plan by estimating
the ultimate cost to the entity of the benefit that employees
have earned in return for their service in the current and
prior periods. This requires an entity to determine how
much benefit is attributable to the current and prior periods
and to make estimates (actuarial assumptions) about
demographic variables and financial variables that will
affect the cost of the benefit. The cost of providing benefits
under the defined benefit plan is determined using actuarial
valuation performed annually by a qualified actuary using
the projected unit credit method.
The benefit is discounted to determine the present value
of the defined benefit obligation and the current service
cost. The discount rate is the yield at the reporting date
on risk free government bonds that have maturity dates
approximating the terms of the Company's obligations
and that are denominated in the same currency in which
the benefits are expected to be paid.
The fair value of any plan assets is deducted from the
present value of the defined benefit obligation to
determine the amount of deficit or surplus. The net
defined benefit liability/ (asset) is determined as the
amount of the deficit or surplus, adjusted for any effect
of limiting a net defined benefit asset to the asset ceiling.
The net defined benefit liability/(asset) is recognised in
the balance sheet.
Defined benefit costs are recognised as follows:
• Service cost in the statement of profit and loss
• Net interest on the net defined benefit liability
(asset) in the statement of profit and loss
• Remeasurement of the net defined benefit liability/
(asset) in other comprehensive income
Service costs comprise of current service cost, past
service cost, as well as gains and losses on curtailment
and settlements. The benefit attributable to current and
past periods of service is determined using the plan's
benefit formula. However, if an employee's service in later
years will lead to a materially higher level of benefit than
in earlier years, the benefit is attributed on a straight-line
basis. Past service cost is recognised in the statement
of profit and loss in the period of plan amendment. A
gain or loss on the settlement of a defined benefit plan
is recognised when the settlement occurs.
Net interest is calculated by applying the discount rate
at the beginning of the period to the net defined benefit
liability/(asset) at the beginning of the period, taking
account of any changes in the net defined benefit liability/
(asset) during the period as a result of contribution and
benefit payments.
Remeasurement comprises of actuarial gains and
losses, the return on plan assets (excluding interest), and
the effect of changes to the asset ceiling (if applicable).
Remeasurement recognised in other comprehensive
income is not reclassified to the statement of profit and
loss.
Compensated absence
Eligible employees are entitled to accumulate
compensated absences up to prescribed limits in
accordance with the Company's policy and receive cash
in lieu thereof. The Company measures the expected
cost of accumulating compensated absences as the
additional amount that the Company expects to pay as
a result of the unused entitlement that has accumulated
at the date of the balance sheet. Such measurement is
based on actuarial valuation as at the date of the balance
sheet carried out by a qualified actuary.
Termination benefits
Termination benefits are recognised as an expense
when the Company is demonstrably committed,
without realistic possibility of withdrawal, to a formal
detailed plan to either terminate employment before
the normal retirement date, or to provide termination
benefits as a result of an offer made to encourage
voluntary redundancy. Termination benefits for
voluntary redundancies are recognised as an expense
if the Company has made an offer encouraging
voluntary redundancy, it is probable that the offer will
be accepted, and the number of acceptances can be
estimated reliably.
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