5. Material accounting policy information
The financial statements have been prepared
using the material accounting policy information
and measurement bases summarised below.
These policies have been consistently applied to
all the years presented, unless otherwise stated.
5.1 Current versus non-current classification
All assets and liabilities have been classified as
current or non-current as per the Company’s
operating cycle and other criteria set out in
Division II of Schedule III of the Act. Based on the
nature of the operations and the time between
the acquisition of assets for processing/servicing
and their realisation in cash or cash equivalents,
the Company has ascertained its operating cycle
as twelve months for the purpose of current/non-
current classification of assets and liabilities.
5.2 Property, plant and equipment
Recognition and initial measurement
Property, plant and equipment are stated 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. Property, plant
and equipment purchased on deferred payment
basis are recorded at equivalent cash price. The
difference between the cash price equivalent
and the total payment is recognised as interest
expense over the period until payment is made.
Subsequent costs and disposal
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 and the cost of the item can
be measured reliably. The carrying amount of any
component accounted for as a separate asset is
de-recognised when replaced. All other repair and
maintenance costs are recognised in statement of
profit and loss as incurred.
I tems such as spare parts, stand-by equipment
and servicing equipment are recognised as
property, plant and equipment when they meet
the definition of property, plant and equipment.
Otherwise, such items are classified as inventory.
An item of property, plant and equipment initially
recognised is de-recognised upon disposal or when
no future economic benefits are expected from its
use. Any gain or loss arising on de-recognition of
the asset (calculated as the difference between the
net disposal proceeds and the carrying amount of
the asset) is recognised in statement of profit and
loss when the asset is derecognised.
Capital work-in-progress includes property, plant
and equipment under construction and not ready
for intended use as on the balance sheet date.
An item of property, plant and equipment initially
recognised is derecognised upon disposal or when
no future economic benefits are expected from its
use. Any gain or loss arising on de-recognition of
the asset (calculated as the difference between the
net disposal proceeds and the carrying amount of
the asset) is recognised in statement of profit and
loss when the asset is derecognised.
Subsequent measurement (depreciation and
useful lives)
Freehold land is carried at historical cost. All
other items of property, plant and equipment are
subsequently measured at cost less accumulated
depreciation and impairment losses. Depreciation
on property, plant and equipment is provided on a
straight-line basis, computed on the basis of useful
lives (as set out below) prescribed in Schedule II to
the Act.
Leasehold improvements are amortised over the
lower of useful life and the lease term available to
the Company.
The residual values, useful lives and method of
depreciation of are reviewed at the end of each
financial year.
5.3 Intangible assets
Recognition and initial measurement
Intangible assets (software) are stated 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.
Subsequent measurement
The cost of capitalized software is amortized over a
period of five years from the date of its acquisition.
De-recognition
Intangible asset is de-recognised upon disposal or
when no future economic benefits are expected
from its use or disposal. Any gain or loss arising
on de-recognition of the asset (calculated as the
difference between the net disposal proceeds and
the carrying amount of the asset) is recognized in
the statement of profit and loss, when the asset is
derecognised.
Intangible assets under development
Intangible asset under development includes
intangible assets which are under development
and not ready for intended use as on the balance
sheet date.
5.4 Inventories
Inventories are valued at cost or net realisable value,
whichever is lower. Cost is calculated on weighted
average basis. Cost of these inventories comprises
of all cost of purchase, taxes (except where credit
is allowed) and other costs incurred in bringing the
inventories to their present location and condition.
Cost of purchased inventory is determined after
deducting rebates and discounts.
Net realisable value is the estimated selling price in
the ordinary course of business, less the estimated
costs of completion and the estimated costs
necessary to make the sale.
5.5 Business combination under common
control
Business combinations involving entities or
businesses in which all the combining entities
or businesses are ultimately controlled by the
same party or parties both before and after the
business combination and where that control
is not transitory, are accounted for as per the
pooling of interest method. The accounting for
the business combination is carried out from
the beginning of the earliest comparative period
presented. The assets and liabilities acquired are
recognised at their carrying amounts. The identity
of the reserves is preserved, and they appear in
the financial statements of the Company in the
same form in which they appeared in the financial
statements of the acquired entity. The difference,
if any, between the consideration and the amount
of share capital of the acquired entity is transferred
to capital reserve.
5.6 Revenue recognition and other income
Revenue is recognized upon transfer of control
of promised products or services to customers/
patients in an amount that reflects the
consideration the Company expects to receive in
exchange for those products or services. Revenue
is measured at transaction price net of rebates,
discounts and taxes. A receivable is recognised by
the Company when the control is transferred as
this is the case of point in time recognition where
consideration is unconditional because only the
passage of time is required. When either party to
a contract has performed, an entity shall present
the contract in the balance sheet as a contract
asset or a contract liability, depending on the
relationship between the entity’s performance and
the payment. No significant element of financing
is deemed present as the sales are either made
with a nil credit term or with a credit period of
0-90 days. The Company applies the revenue
recognition criteria to each component of the
revenue transaction as set out below.
Income from healthcare services
Revenue from healthcare services is recognized
as and when related services are rendered and
include services for patients undergoing treatment
and pending for discharge, which is shown as
unbilled revenue under other current financial
assets. The Company considers the terms of the
contract and its customary business practices to
determine the transaction price. The transaction
price is the amount of consideration to which
the Company expects to be entitled in exchange
for the services, excluding amounts collected on
behalf of third parties (for example, indirect taxes).
Income from sale of pharmacy products to
out-patients
Revenue from pharmacy products is recognized
as and when the control of products is transferred
to the customer. The Company considers its
customary business practices to determine the
transaction price. The transaction price is the
amount of consideration to which the Company
expects to be entitled in exchange for the products,
excluding amounts collected on behalf of third
parties (for example, indirect taxes).
Government grant
Benefits under the "Service exports from India
Scheme" and "Export promotion capital goods
scheme" on foreign exchange earned under
such incentive schemes of Government of India
are released to the statement of profit and loss
under other operating revenue when the right
to receive these benefits as per the terms of the
scheme is established, and to the extent there is no
significant uncertainty about their measurability
and utilization thereof.
Clinical research
Clinical research income is recognised in the
accounting year in which the services are rendered
as per the agreed terms with the customers.
Sponsorship income
Sponsorship income is recognised in the
accounting year in which the services are rendered
as per the agreed terms with the customers.
Revenue sharing agreements
Revenue arising from revenue sharing agreements
is recognized as per the terms of the arrangement.
Interest income
Interest income is recorded on accrual basis using
the effective interest rate (EIR) method.
Other income
Rental income is recognised on a straight-line
basis over the lease term, except for contingent
rental income which is recognised when it arises.
5.7 Borrowing costs
Borrowing cost includes interest expense as
per effective interest rate (EIR). Borrowing
costs directly attributable to the acquisition,
construction or production of a qualifying asset
are capitalized during the period of time that is
required to complete and prepare the asset for its
intended use or sale. Qualifying assets are assets
that necessarily take a substantial period of time
to get ready for its intended use or sale. All other
borrowing costs are expensed in the period they
occur.
5.8 Leases
Company as a lessee - Right of use assets and
lease liabilities
A lease is defined as ‘a contract, or part of a
contract, that conveys the right to use an asset (the
underlying asset) for a period of time in exchange
for consideration’.
Classification of leases
The Company enters into leasing arrangements
for various assets. The assessment of the lease is
based on several factors, including, but not limited
to, transfer of ownership of leased asset at end of
lease term, lessee’s option to extend/purchase etc.
Recognition and initial measurement of right of
use assets
At lease commencement date, the Company
recognises a right-of-use asset and a lease liability
on the balance sheet. The right-of-use asset is
measured at cost, which is made up of the initial
measurement of the lease liability, any initial direct
costs incurred by the Company, an estimate of any
costs to dismantle and remove the asset at the end
of the lease (if any), and any lease payments made
in advance of the lease commencement date (net
of any incentives received).
Subsequent measurement of right of use assets
The Company depreciates the right-of-use
assets on a straight-line basis from the lease
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 Company also assesses
the right-of-use asset for impairment when such
indicators exist.
Lease liabilities
At lease commencement date, the Company
measures the lease liability at the present value of
the lease payments unpaid at that date, discounted
using the interest rate implicit in the lease if that rate
is readily available or the Company’s incremental
borrowing rate. Lease payments included in the
measurement of the lease liability are made up
of fixed payments (including in substance fixed
payments) and variable payments based on an
index or rate. Subsequent to initial measurement,
the liability will be reduced for payments made and
increased for interest. It is re-measured to reflect
any reassessment or modification, or if there are
changes in in-substance fixed payments. When the
lease liability is re-measured, the corresponding
adjustment is reflected in the right-of-use asset.
The Company has elected to account for short¬
term leases using the practical expedients.
Instead of recognising a right-of-use asset and
lease liability, the payments in relation to these
short-term leases are recognised as an expense in
statement of profit and loss on a straight-line basis
over the lease term.
Company as a lessor
Leases in which the Company does not transfer
substantially all the risks and rewards of ownership
of an asset are classified as operating leases.
The respective leased assets are included in the
balance sheet based on their nature. Rental
income is recognized on straight-line basis over
the lease-term.
5.9 Impairment of non-financial assets
Assessment is done at each balance sheet
date as to whether there is any indication that
an asset may be impaired. For the purpose of
assessing impairment, the smallest identifiable
group of assets that generates cash inflows from
continuing use that are largely independent of
the cash inflows from other assets or groups of
assets, is considered as a cash generating unit.
If any such indication exists, an estimate of the
recoverable amount of the asset/cash generating
unit is made. Assets whose carrying value exceeds
their recoverable amount are written down to
the recoverable amount. Recoverable amount is
higher of an asset’s or cash generating unit’s net
selling price and its value in use. Value in use is
the present value of estimated future cash flows
expected to arise from the continuing use of an
asset and from its disposal at the end of its useful
life. Assessment is also done at each balance sheet
date as to whether there is any indication that an
impairment loss recognised for an asset in prior
accounting periods may no longer exist or may
have decreased. 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.
5.10 Foreign currency
Functional and presentation currency
Items included in the financial statement of the
Company are measured using the currency of the
primary economic environment in which the entity
operates (‘the functional currency’). The financial
statements have been prepared and presented
in Indian Rupees (INR), which is the Company’s
functional and presentation currency.
Transactions and balances
Foreign currency transactions are recorded in the
functional currency, by applying to the exchange
rate between the functional currency and the
foreign currency at the date of the transaction.
Foreign currency monetary items outstanding at
the balance sheet date are converted to functional
currency using the closing rate. Non-monetary
items denominated in a foreign currency which
are carried at historical cost are reported using the
exchange rate at the date of the transaction.
Exchange differences arising on monetary items
on settlement, or restatement as at reporting date,
at rates different from those at which they were
initially recorded, are recognized in the statement
of profit and loss in the year in which they arise.
5.11 Financial instruments
Recognition and initial measurement
Financial assets (except trade receivables) and
financial liabilities are recognised when the
Company becomes a party to the contractual
provisions of the financial instrument and are
measured initially at fair value adjusted for
transaction costs, except for those carried at fair
value through profit or loss which are measured
initially at fair value. Trade receivables are measured
at transaction price.
The classification depends on the Company’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 election at the time of initial
recognition to account for the equity investment
at fair value through other comprehensive income
(‘FVOCI’).
Non-derivative financial assets
Subsequent measurement
Financial assets carried at amortised cost - A ‘financial
asset’ is measured at the amortised cost if both the
following conditions are met:
• The asset is held within a business model
whose objective is to hold assets for collecting
contractual cash flows; and
• Contractual terms of the asset give rise on
specified dates to cash flows that are solely
payments of principal and interest (SPPI) on
the principal amount outstanding.
After initial measurement, such financial assets are
subsequently measured at amortised cost using
the effective interest rate (EIR) method.
Investments in equity instruments of subsidiaries -
These are measured at cost in accordance with
Ind AS 27 ‘Separate Financial Statements’.
Investments in equity instruments of others -
These are measured at fair value through other
comprehensive income.
De-recognition of financial assets
A financial asset is de-recognised when the
contractual rights to receive cash flows from the
asset have expired or the Company has transferred
its rights to receive cash flows from the asset.
Non-derivative financial liabilities
Subsequent measurement
Subsequent to initial recognition, all non-derivative
financial liabilities are measured at amortised cost
using the effective interest method.
De-recognition of financial liabilities
A financial liability is de-recognised when the
obligation under the liability is discharged or
cancelled or expires. 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
the de-recognition of the original liability and the
recognition of a new liability. The difference in the
respective carrying amounts is recognised in the
statement of profit and loss.
Offsetting of 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. 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.
Financial guarantees
Financial guarantee contracts 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, with
a corresponding adjustment basis the underlying
relationship i.e., investment in subsidiary.
Subsequently, the liability is measured at the
higher of the amount of expected loss allowance
determined as per impairment requirements
of Ind-AS 109 and the amount recognised less
cumulative amortisation.
5.12 Impairment of financial assets
The Company assesses on a forward looking
basis the expected credit loss associated with its
financial assets and the impairment methodology
depends on whether there has been a significant
increase in credit risk.
Trade receivables
In respect of trade receivables, the Company applies
the simplified approach of Ind AS 109 (‘Provision
matrix approach’), which requires measurement
of loss allowance 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.
Other financial assets
In respect of its other financial assets, the Company
assesses if the credit risk on those financial assets
has increased significantly since initial recognition.
If the credit risk has not increased significantly since
initial recognition, the Company measures the
loss allowance at an amount equal to 12-month
expected credit losses, else at an amount equal to
the lifetime expected credit losses.
When making this assessment, the Company uses
the change in the risk of a default occurring over
the expected life of the financial asset. To make
that assessment, the Company compares the risk
of a default occurring on the financial asset as at
the balance sheet date with the risk of a default
occurring on the financial asset as at the date of
initial recognition and considers reasonable and
supportable information, that is available without
undue cost or effort, that is indicative of significant
increases in credit risk since initial recognition. The
Company assumes that the credit risk on a financial
asset has not increased significantly since initial
recognition if the financial asset is determined to
have low credit risk at the balance sheet date.
5.13 Taxes
Tax expense comprises current and deferred
tax. Current and deferred tax is recognised in
statement of profit and loss except to the extent
that it relates to items recognised directly in equity
or other comprehensive income.
The current income-tax charge is calculated on the
basis of the tax laws enacted at the balance sheet
date. Management periodically evaluates positions
taken in tax returns with respect to situations
in which applicable tax regulation is subject to
interpretation. It establishes provisions where
appropriate on the basis of amounts expected to
be paid to the tax authorities.
Deferred tax is provided in full, on temporary
differences arising between the tax base of assets
and liabilities and their carrying amounts in the
financial statements. Deferred tax is determined
using tax rates (and laws) that have been enacted
or substantively enacted by the end of the
reporting period and are expected to apply when
the related deferred income tax asset is realised
or the deferred tax liability is settled. Deferred tax
assets are recognised for all deductible temporary
differences and unused tax losses (including
unabsorbed depreciation) only if it is probable that
future taxable amounts will be available to utilise
those temporary differences and losses.
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. Deferred tax assets and liabilities
are offset when there is a legally enforceable right
to offset current tax assets and liabilities and
when the deferred tax balances relate to the same
taxation authority.
5.14 Cash and cash equivalents
Cash and cash equivalents include cash in hand,
demand deposits with the banks, other short-term
highly liquid investments with original maturity of
three months and less.
5.15 Employee benefits
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 classified as short-term employee
benefits. These benefits include salaries and
wages, short-term bonus, incentives etc. These
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.
Defined contribution plan
Contribution towards provident fund is made to
the regulatory authorities, where the Company has
no further obligations. Such benefits are classified
as defined contribution plan as the Company
does not carry any further obligations, apart from
the contributions made on a monthly basis. In
addition, contributions are made to employees'
state insurance schemes and labour welfare
fund, which are also defined contribution plans
recognized and administered by the Government
of India and Haryana respectively. The Company's
contributions to these schemes are expensed in
the statement of profit and loss.
Defined benefit plan
The Company has unfunded gratuity as defined
benefit plan where the amount that an employee
will receive on retirement is defined by reference
to the employee’s length of service and final salary.
The gratuity plan provides a lump sum payment
to vested employees at retirement, death,
incapacitation or termination of employment, of
an amount based on the respective employee’s
salary and the tenure of employment. The
Company’s liability is actuarially determined
(using the Projected Unit Credit method) at the
end of each year. This is based on standard rates
of inflation, salary growth rate and mortality.
Discount factors are determined close to each year-
end by reference to market yields on government
bonds that have terms to maturity approximating
the terms of the related liability. Service cost and
interest expense on the Company’s defined benefit
plan is included in employee benefits expense.
Actuarial gains/losses resulting from re¬
measurements of the defined benefit obligation
are included in other comprehensive income.
Other long-term employee benefits
The Company also provides benefit of compensated
absences to its employees (as per policy) which
are in the nature of long-term employee benefit
plan. Liability in respect of compensated absences
becoming due and expected to be availed more
than one year after the balance sheet date is
estimated on the basis of an actuarial valuation
performed by an independent actuary using the
projected unit credit method as on the reporting
date. Service cost and net interest expense on the
Company’s other long-term employee benefits
plan is included in employee benefits expense.
Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions
are also recorded in the statement of profit and
loss in the year in which such gains or losses arise.
5.16 Treasury shares
The Company has created an GHL Employee
Welfare Trust (the “Trust”). The Company uses
the trust as a vehicle for distributing shares to
employees under the employee stock option
schemes. The Company treats the Trust as its
extension and shares held by Trust are treated
as treasury shares. Own equity instruments that
are held by the trust are recognised at cost and
deducted from equity. No gain or loss is recognised
in statement of profit and loss on the purchase,
sale, issue, or cancellation of the Company’s own
equity instruments. Any difference between the
carrying amount and the consideration, if reissued,
is recognised in other equity.
|