3 Summary of material accounting policies
(a) Revenue recognition
Medical services
Revenue primarily comprises fees charged for inpatient and
outpatient hospital services. Services include charges for
accommodation, medical professional services, equipment,
radiology, laboratory and pharmaceutical goods used
in treatments given to patients. As per Ind AS 115,
"Revenue from contracts with customers", revenue from
hospital services are recognized as and when services are
performed. The Company assess the distinct performance
obligation in the contract and measures revenue based on
the consideration specified in a contract with the customer
and excludes taxes and duties collected on behalf of the
Government. Further, the revenue is only recognised to the
extent that it is highly probable that a significant reversal
will not occur(adjusted for discounts and disallowances).
The Company based on contractual terms and past
experience determines the performance obligation
satisfaction over time. Unbilled revenue is recorded for the
service rendered where the patients are not discharged
and final invoice is not raised for the services.
Sale of medical and non-medical items
Pharmacy Sales are recognised when the control of the
products being sold is transferred to the customer based on
the consideration agreed with the customer and excludes
taxes or duties collected on behalf of the Government.
Other operating revenue
Other operating revenue comprises revenue from various
ancillary revenue generating activities like facilitation
of training programmes, operations and maintenance
arrangements as per the management agreement with
other entities. The service income is recognised only
once the services are rendered, there is no unfulfilled
performance obligation as per the terms of agreement and
no significant future uncertainties exist.
Disaggregation of revenue
The Company disaggregates revenue from hospital
services (medical and healthcare services), sale of medical
and non-medical items and other operating income.
The Company believes that this disaggregation best
depicts how the nature, amount, timing and uncertainty
of Company’s revenues and cash flows are affected by
industry, market and other economic factors.
Interest income
For all financial assets measured at amortised cost, interest
income is recorded using the effective interest rate (EIR).
EIR is the rate the exactly discounts the estimated future
cash payments or receipts overt the expected life of the
financial instrument or a shorter period, where appropriate,
to the gross carrying amount of the financial asset or to the
amortised cost of all financial liability. 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)
but does not consider the expected credit losses.
(b) Leases
Company as a lessee
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:
• the contract involves the use of an identified asset;
• the Company has the right to obtain substantially
all the economic benefits from use of the asset
throughout the period of use; and
• the Company has the right to direct the use of the asset.
At inception or on reassessment of a contract that
contains a lease component, the Company allocates the
consideration in the contract to each lease component on
the basis of the relative stand-alone prices of the lease
components and the aggregate stand-alone price of the
non-lease components.
The Company recognises right-of-use asset representing
its right to use the underlying asset for the lease term at
the lease commencement date. The cost of the right-of-
use asset measured at inception shall comprise of the
amount of the initial measurement of the lease liability,
adjusted for any lease payments made at or before the
commencement date, less any lease incentives received,
plus any initial direct costs incurred and an estimate of
the costs to be incurred by the lessee in dismantling and
removing the underlying asset or restoring the underlying
asset or site on which it is located.
The right-of-use asset is subsequently measured at cost
less accumulated depreciation, accumulated impairment
losses, if any and adjusted for any remeasurement of the
lease liability. The right-of-use assets is depreciated using
the straight-line method from the commencement date
over the shorter of lease term or useful life of right-of-use
asset. The estimated useful lives of right-of-use assets
are determined on the same basis as those of property,
plant and equipment. Right-of-use assets are tested for
impairment whenever there is any indication that their
carrying amounts may not be recoverable. Impairment
loss, if any, is recognised in the standalone statement of
profit and loss.
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, the incremental borrowing rate applicable to
the entity within the Company. Generally, the Company
uses its incremental borrowing rate as the discount rate.
The lease payments shall include fixed payments, variable
lease payments, residual value guarantees, exercise price
of a purchase option where the Company is reasonably
certain to exercise that option and payments of penalties
for terminating the lease, if the lease term reflects the
lessee exercising an option to terminate the lease.
The lease liability is subsequently remeasured by increasing
the carrying amount to reflect interest on the lease liability,
reducing the carrying amount to reflect the lease payments
made and remeasuring the carrying amount to reflect any
reassessment or lease modifications or to reflect revised
in-substance fixed lease payments.
The Company recognises the amount of the re¬
measurement of lease liability as an adjustment to the
right-of-use asset. Where the carrying amount of the
right-of-use asset is reduced to zero and there is a further
reduction in the measurement of the lease liability, the
Company recognises any remaining amount of the re¬
measurement in standalone statement of profit and loss.
The Company has elected not to recognise right-of-use
assets and lease liabilities for short-term leases of all assets
that have a lease term of 12 months or less and leases
of low-value assets. The Company recognizes the lease
payments associated with these leases as an expense on
a straight-line basis over the lease term. Variable lease
payments that depend on an index or a rate, initially
measured using the index or rate as at the commencement
date and the amounts expected to be payable under a
residual value guarantee.
Company as a lessor
When the Company act as a lessor, it determines at lease
inception whether each lease is a finance lease or an
operating lease.
To classify each lease, the Company makes an overall
assessment of whether the lease transfers substantially
all of the risks and rewards incidental ownership of the
underlying asset. If this is the case, then the lease is the
finance lease, if not, then it is an operating lease. As part of
this assessment, the Company considers certain indicators
such as whether the lease is for the major part of the
economic life of the asset.
When the Company is an intermediate lessor, it accounts
for its interests in the head lease and the sub-lease
separately. It assesses the lease classification of a sub¬
lease with reference to the right of use assets arising from
the head lease, not with reference to the underlying asset.
The Company applies the derecognition and impairment
requirements in Ind AS 109 to the net investment in the
lease. The Company further regularly reviews estimated
unguaranteed residual values used in calculating the gross
investments in the lease.
(c) Foreign currency transactions
Transactions in foreign currencies are translated into the
respective functional currencies of Company at the exchange
rates at the dates of the transactions or an average rate
approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at the
exchange rate at the reporting date.
Exchange differences on monetary items are recognised
in the Statement of profit and loss in the period in
which they arise.
Non-monetary items that are measured based on historical
cost in a foreign currency are translated at the exchange
rate at the date of the transaction.
Income and expense items in foreign currency are
translated at the average exchange rates for the period,
unless exchange rates fluctuate significantly during that
period, in which case the exchange rates at the dates of
the transactions are used.
(d ) Borrowing costs
Borrowing costs include:
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time
to get ready for their intended use or sale, are added to
the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
All other borrowing costs are recognised in the statement
of profit and loss in the period in which they are incurred.
(e) Employee benefits
Short-term employee benefits
Short-term employee benefits are measured on an
undiscounted basis and expensed as the related service is
provided. A liability is recognised for the amount expected
to be paid under short-term cash bonus, 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 benefit plan
For defined benefit retirement benefit plans, the cost of
providing benefits is determined using the projected unit
credit method, with actuarial valuations being carried out
at the end of each annual reporting period. When the
calculation results in a potential asset for the Company, the
recognised asset is limited to the present value of economic
benefits available in the form of any future refunds from the
plan or reduction in future contributions to the plan ('the
asset ceiling'). To calculate the present value of economic
benefits, consideration is given to any applicable minimum
funding requirements.
Remeasurement, comprising actuarial gains and losses,
the effect of the changes to the asset ceiling (if applicable)
and the return on plan assets (excluding net interest), is
reflected in the balance sheet with a charge or credit
recognised in other comprehensive income in the period
in which they occur. The service cost (including current
service cost, past service cost, as well as gains and losses
on curtailments and settlements) is recognised in the
Statement of profit and loss in the line item ‘Employee
benefits expense’. The net interest expense (income) on
the net defined benefit liability (asset) for the period is
determined by applying the discount rate determined
by reference to market yields at the end of the reporting
period on government bonds. The net interest expense is
recognised in the line item 'Finance costs'.
Defined contribution plan
A defined contribution plan is post-employment benefit
plan under which an entity pays specified contributions to
separate entity and has no obligation to pay any further
amounts. The Company makes specified obligations
towards employee provident fund and employee state
insurance to Government administered provident fund
scheme and ESI scheme which is a defined contribution
plan. Payments to defined contribution retirement benefit
plans are recognised as an expense when employees have
rendered service entitling them to the contributions. The
Company’s contributions are recognized as an expense in
the statement of profit and loss during the period in which
the employee renders the related service.
Compensated absences
The employees can carry-forward a portion of the
unutilized accrued compensated absences and utilize it
in future service periods or receive cash compensation
on termination of employment. Since the employee has
unconditional right to avail the leave, the benefit is classified
as a short term employee benefit. The Company records an
obligation for such compensated absences in the period
in which the employee renders the services that increase
this entitlement. The obligation is measured on the basis
of independent actuarial valuation using the projected unit
credit method. Remeasurements are recognised in profit or
loss in the period in which they arise.
Share-based payment transactions
The cost of equity-settled transactions is determined by
the fair value at the date when the grant is made using an
appropriate valuation model and Company's estimate of
equity instruments that will vest. That cost is recognised,
together with a corresponding increase in share-options
outstanding account in equity, over the period in which
the performance and/or service conditions are fulfilled in
employee benefits expense.
(f) Taxation
Income tax expense represents the sum of the tax
currently payable and deferred tax. It is recognised in profit
or loss except to the extent that it relates to a business
combination, or items recognised directly in equity or in
Other comprehensive income.
(i) Current tax
Current tax comprises the expected tax payable on
the taxable profit for the year and any adjustment to
the tax payable or receivable in respect of previous
years. Taxable profit differs from ‘profit before tax’ as
reported in the statement of profit and loss because
of items of income or expense that are taxable or
deductible in other years and items that are never
taxable or deductible. The Company’s current
tax is calculated using tax rates that have been
enacted or substantively enacted by the end of the
reporting period.
Current tax assets and current tax liabilities are offset
only if there is a legally enforceable right to set off
the recognised amounts, and it is intended to realize
the assets and settle the liability on a net basis or
simultaneously.
(ii) Deferred tax
Deferred tax is recognised on temporary differences
between the carrying amounts of assets and
liabilities in the standalone financial statements and
the corresponding tax bases used in the computation
of taxable profit. Deferred tax liabilities are generally
recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all
deductible temporary differences to the extent that
it is probable that taxable profits will be available
against which those deductible temporary differences
can be utilised. Such deferred tax assets and liabilities
are not recognised if the temporary difference arises
from the initial recognition of assets and liabilities in
a transaction that is not a business combination and
that affects neither accounting nor taxable profit or
loss at the time of transaction. Deferred tax liability is
also not recognised on taxable temporary differences
arising on the initial recognition of goodwill.
The carrying amount of deferred tax assets is
reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at
the tax rates that are expected to apply in the period
in which the liability is settled or the asset realised,
based on tax rates (and tax laws) that have been
enacted or substantively enacted by the end of the
reporting period.
The measurement of deferred tax liabilities and assets
reflects the tax consequences that would follow from
the manner in which the Company expects, at the
end of the reporting period, to recover or settle the
carrying amount of its assets and liabilities.
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
simultaneously. Temporary differences in relation to
a right-of-use asset and a lease liability for a specific
lease are regarded as a net package (the lease) for the
purpose of recognising deferred tax.
(g) Property, plant and equipment
The cost of an item of property, plant and equipment
shall be recognised as an asset if, and only if it is probable
that future economic benefits associated with the item
will flow to the Company and the cost of the item can be
measured reliably.
Property, plant and equipment (including capital work-in
progress) are measured at cost which includes capitalized
borrowing costs, less accumulated depreciation and
impairment losses, if any. The cost of an item of Property,
plant and equipment comprises its purchase price,
including import duties and other non-refundable taxes
or levies, freight, any directly attributable cost of bringing
the asset to its working condition for its intended use and
estimated cost of dismantling and restoring onsite; any
trade discounts and rebates are deducted in arriving at
the purchase price. 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.
Cost includes expenditures directly attributable to the
acquisition of the asset.
Transition to Ind AS:
The cost of property, plant and equipment as at 1 April
2015, the Company’s date of transition to Ind AS, was
determined with reference to its carrying value recognised
as per the previous GAAP (deemed cost), as at the date of
transition to Ind AS.
The Company depreciates property, plant and equipment
over the estimated useful life on a straight-line basis
from the date the assets are ready for intended use.
The estimated useful lives of assets for the current and
comparative period of significant items of property, plant
and equipment are as follows:
the statement of profit and loss as incurred. Amortisation
is recognised on a straight-line basis over their estimated
useful lives. The estimated useful life and amortisation
method are reviewed at the end of each reporting period,
with the effect of any changes in estimate being accounted
for on a prospective basis. Intangible assets with indefinite
useful lives that are acquired separately are carried at cost
less accumulated impairment losses.
Useful lives are reviewed at each reporting date and
adjusted if appropriate. Based on technical evaluation
and consequent advice, the management believes
that its estimates of useful lives as given above best
represent the period over which management expects to
use these assets.
The cost and related accumulated depreciation are
eliminated from the standalone financial statements upon
sale or disposition of the asset and the resultant gains or
losses are recognized in the standalone statement of profit
and loss. Amounts paid towards the acquisition of property,
plant and equipment outstanding as of each reporting date
are recognized as capital advance and the cost of property,
plant and equipment not ready for intended use before
such date are disclosed under capital work- in-progress.
Assets acquired under leasehold improvements are
amortized over the lower of estimated useful life
and lease term.
Freehold land is carried at historical cost less any
accumulated impairment losses.
(h) Intangible assets
Intangible assets acquired on business combination
are recognised at fair value as at the date of acquisition.
Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated amortisation
and accumulated impairment losses. Subsequent
expenditure is capitalised only when it increases the future
economic benefits embodied in the specific asset to which
it relates. All other expenditure, including expenditure on
internally generated goodwill and brands, is recognised in
The estimated useful life of intangible assets acquired
by the Company has been determined based on number
of factors including the competitive environment and
operating plan of the Company.
(i) Goodwill
Goodwill arising on a business combination is initially
measured at excess of purchase consideration over fair
value of identified net asset taken over. Subsequent
measurement is at initial recognition less any accumulated
impairment losses. Goodwill is tested annually for
impairment. An impairment loss in respect of goodwill is
not reversed subsequently.
(j) Government grants
Government grants are recognised where there is
reasonable assurance that the grant will be received and
all attached conditions will be complied with. Where the
Company receives non-monetary grants, the asset and
the grant are accounted at fair value and recognised in
the statement of profit and loss over the expected useful
life of the assets.
(k) Inventories
Inventories are measured at the lower of cost and net
realisable value. Net realisable value is the estimated selling
price in the ordinary course of business, less applicable
variable selling expenses. Cost of inventories comprises of
all costs of purchase and other costs incurred in bringing the
inventories to their present location, after adjusting for GST
wherever applicable applying weighted average method.
Imported inventories are accounted for at the applicable
exchange rates prevailing on the date of transaction.
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