LIV SIGNIFICANT ACCOUNTING POLICIES
1 BACKGROUND
Headquartered in Chandigarh, India, Ind-Swift Laboratories
Ltd is a public limited company incorporated on 04 Jan, 1995
under the provision of companies Act, 2013. Company is
global manufacturer of Pharamceutical Formulations . Having
commenced operations in 1997 as an API manufacturer,
the Company has shifted its focus to formulation as its key
business driver.
2.0 STATEMENT OF COMPLIANCE
The standalone financial statements have been prepared
in accordance with Indian Accounting Standards ("Ind AS")
notified under the Companies (Indian Accounting Standards)
Rules, 2015 and Companies (Indian Accounting Standards)
Amendment Rules, 2016, as applicable. For periods up to
and including the year ended March 31,2017, the Company
prepared its financial statements in accordance with the then
applicable Accounting Standards in India ('previous GAAP').
2.1 BASIS OF MEASUREMENT
The standalone financial statements have been prepared on
the historical cost basis except for: - certain financial assets
and liabilities.
Basis of Preparation
As fully described in Note No XLVI during the year Ind-Swift
Limited has merged with Ind are under common control.-
Swift Laboratories based on the Scheme sanctionedby NCLT.
Accordingly, the previously published financial statement of
the Company has been restated for accounting of merger as
the entities
2.2 PROPERTY PLANT & EQUIPMENT
2.2.1 COST OF PROPERTY PLANT & EQUIPMENT
All Property, plant and equipment held for use in the
production or supply of goods or services, or for administrative
purposes, are valued at cost/revalued cost net of tax credit
wherever eligible. Cost includes all expenses and borrowing
cost attributable to the project till the date of commercial
production / ready to use. Any asset transferred to assets
held for sale is value at cost or NRV whichever is lower.
2.2.2 DEPRECIATION /AMORTIZATION
Depreciation is recognized so as to write off the cost of
assets (other than freehold land and properties under
construction) less their residual values over their useful
lives, using the straight-line method. The estimated useful
lives, residual values and depreciation method are reviewed
at the end of each reporting period, with the effect of any
changes in estimate accounted for on a prospective basis.
Depreciation is provided on straight line method at the
rates specified in schedule II of the Companies Act 2013 on
pro rata basis and the assets having the value up to H 5000
have been depreciated at the rate of 100%. The policy
of company is to provide depreciation on the Buildings ,
Plant & Machinery and Other Fixed assets from the date of
commercial production/ ready to use.
2.2.3 INVESTMENT PROPERTY
Properties that is held for long-term rentals or for capital
appreciation or both, and that is not occupied by the Group,
is classified as investment property. Investment property is
measured initially at its cost, including related transaction
costs and where applicable borrowing costs. Subsequent
expenditure is capitalized to the asset's carrying amount
only when it is probable that future economic benefits
associated with the expenditure will flow to the group
and the cost of the item can be measured reliably. All
other repairs and maintenance costs are expensed when
incurred. When part of the investment property is replaced,
the carrying amount of the replaced part is derecognized.
Investment property are depreciated using the
straight line method over their estimated useful lives.
On transition to Ind AS, the Group has elected to continue
with the carrying value of its investment property
recognized as at April 1, 2016 measured as per the previous
GAAP and use that carrying value as the deemed cost of
investment properties.
2.2.4 INTANGIBLE ASSETS (OTHER ASSETS)
Intangible Assets with definite useful lives are subject to
amortization and are reviewed to determine whether there
is any indication that carrying Value of these assets may
not be recoverable . Management judgment is required in
the area of intangible assets loss particularly in assessing :
Whether an event has occurred that may indicate that
the related assets values may not be recoverable or
Whether the carrying value of an intangible assets
can be supported by the recoverable amount , being
the fair value less costs to sell or net present value
of future cash flows which are estimated based
upon the continued use of the asset in the group .
Useful Lives of Intangible assets:
Intangible assets related to R&D are amortized over the
period of 10 years on straight line method.
2.2.5 LEASES
The Company's lease asset classes consist primarily of 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. At the date of commencement of the
lease, the Company recognizes a right-of-use (ROU) asset
and a corresponding lease liability for all lease arrangements
in which it is a lessee, except for leases with a term of 12
months or less (short-term leases) and low value leases.
For these short-term and low-value leases, the Company
recognizes the lease payments as an operating expense on
a straight-line basis over the term of the lease. Certain lease
arrangements includes the options to extend or terminate
the lease before the end of the lease term. ROU assets and
lease liabilities includes these options when it is reasonably
certain that they will be exercised.
The ROU assets are initially recognized at cost, which
comprises the initial amount of the lease liability adjusted for
any lease payments made at or prior to the commencement
date of the lease plus any initial direct costs less any lease
incentives. They are subsequently measured at cost less
accumulated depreciation and impairment losses. ROU
assets are depreciated from the commencement date
on a straight-line basis over the shorter of the lease term
and useful life of the underlying asset. ROU assets are
evaluated for recoverability whenever events or changes in
circumstances indicate that their carrying amounts may not
be recoverable.
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 determinable, using the incremental
borrowing rates in the country of domicile of these leases.
Lease liabilities are remeasured with a corresponding
adjustment to the related ROU asset if the Company changes
its assessment of whether it will exercise an extension or
a termination option. Lease liability and ROU assets have
been separately presented in the Balance Sheet and lease
payments have been classified as financing cash flows.
2.3 BORROWING COSTS
Borrowing costs that are directly attributable to the
acquisition, construction or production of qualifying assets
have been capitalized as part of cost of assets. Other
Borrowing costs are recognized as an expense in the period
in which they are incurred.
2.4 INVENTORIES
Inventories are valued at the lower of cost and net
realizable value. Cost includes all expenses incurred
to bring the inventories to their present location and
condition. Depending on the nature of the inventory, cost is
determined using the weighted average method or, where
appropriate, the specific identification method. The method
of cost determination is as follows:
2..4.1 Raw Materials and Stores and Spares are valued
on a weighted average basis or at net realisable value
whichever is lower.
2.4.2 Work-in-Process is valued at cost plus an appropriate
share of production overheads or at net realizable value,
whichever is lower.
2.4.3 Finished Goods are valued at cost plus an appropriate
share of production overheads or at net realizable value,
whichever is lower.
2.4.4 Stock-in-Trade is valued on a weighted average basis
or at net realisable value whichever is lower.
2.4.5 Stock in Transit - At cost
2.5 REVENUE RECOGNITION
The Company derives revenues primarily from sale of
API business.
Ind AS 115 "Revenue from Contracts with Customers"
provides a control-based revenue recognition model
and provides a
Five step application approach to be followed for revenue
recognition.
1. Identify the contract(s) with a customer;
2. Identify the performance obligations;
3. Determine the transaction price;
4. Allocate the transaction price to the performance
obligations;
5. Recognize revenue when or as an entity satisfies
performance obligation.
Revenue from contracts with customers is recognized when
control of the goods or services are transferred to the customer
at an amount that reflects the consideration to which the
Company expects to be entitled in exchange for those
goods or services. The Company has generally concluded
that it is the principal in its revenue arrangements, except for
the agency services below, because it typically controls the
goods or services before transferring them to the customer.
Revenue excludes amounts collected on behalf of
third parties. The disclosures of significant accounting
judgements, estimates and assumptions relating to revenue
from contracts with customers are provided in Note XV and
disclosures of transition approach along with impact of
adoption of Ind AS 115 on financial statements are provided
in Note 2.18.
2.5.1 SALE OF GOODS
For sale of goods, revenue is recognized when control of
the goods has transferred at a point in time i.e. when the
goods have been delivered to the specific location (delivery).
Following delivery, the customer has full discretion over the
responsibility, manner of distribution, price to sell the goods
and bears the risks of obsolescence and loss in relation to the
goods. A receivable is recognized by the Company when the
goods are delivered to the customer as this represents the
point in time at which the right to consideration becomes
unconditional, as only the passage of time is required before
payment is due. Payment is due within 0-180 days. The
Company considers the effects of variable consideration,
the existence of significant financing components,
noncash consideration, and consideration payable to the
customer (if any).
2.5.2 CONTRACT BALANCES
Trade receivables
A receivable represents the Company's right to an amount of
consideration that is unconditional (i.e., only the passage of
time is required before payment of the consideration is due).
Refer to accounting policies of financial assets.
Contract liabilities
A contract liability is the obligation to transfer goods or
services to a customer for which the Company has received
consideration (or an amount of consideration is due) from
the customer. If a customer pays consideration before the
Company transfers goods or services to the customer, a
contract liability is recognized when the payment is made or
the payment is due (whichever is earlier). Contract liabilities
are recognized as revenue when the Company performs
under the contract.
2.5.3 Cost to obtain a contract
The Company pays sales commission to its selling agents
for each contract that they obtain for the Company. The
Company has elected to apply the optional practical
expedient for costs to obtain a contract which allows the
Company to immediately expense sales commissions
(included in advertisement and sales promotion expense
under other expenses) because the amortization period of
the asset that the Company otherwise would have used is
one year or less.
Costs to fulfil a contract i.e. freight, insurance and other
selling expenses are recognized as an expense in the period
in which related revenue is recognized.
2.5.4 Other revenue streams
EXPORT & OTHER INCENTIVES
In case of sale made by the Company as Manufacturer,
export benefits arising from ROPTEP and other Govt Scheme
RODTEP and other Govt Scheme are recognized on accrual
basis on fulfilment of eligibility criteria for availing the
incentives and when there is no uncertainty in receiving the
same. These incentives include estimated realizable values/
benefits from special import licenses and benefits under
specified schemes as applicable.
In case of sale made by the Company as Manufacturer, export
benefits arising from Duty Drawback scheme, RODTEP
and other Govt Scheme, are recognized on sale of such
goods in accordance with the agreed terms and conditions
with customers.
Revenue from exports benefits measured at the fair value
of consideration received or receivable net of returns and
allowances, cash discounts, trade discounts and
volume rebates.
Obligation / entitlements on account of Advance Licenses
Scheme for import of raw materials are not accounted for
as income and correspondingly no expenses is booked at
time of payment of custom duty. Custom duty amount of
pending export obligations are shown as contingent liability
by way of note.
Rendering of Services
Revenue from rendering of services is recognized when the
performance obligation to render the services are completed
as per contractually agreed terms.
Dividend
Revenue is recognized when the Company's right to
receive the payment is established, which is generally when
shareholders approve the dividend.
2.6 FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are recorded at the
exchange rates prevailing at the date of the transactions.
The gain or loss arising from forward transactions have
been recognized in the year in which the contract has been
cancelled/ matured. Monetary assets & current liabilities are
translated at year end exchange rates. The resulting gain or
loss on translation or settlement is recognized in the Profit&
Loss Account except to the extent of exchange differences
which are regarded as an adjustment to interest costs on
foreign currency borrowings that are directly attributable
to the acquisition or construction of qualifying assets, are
capitalized as cost of assets. Non-monetary assets and
liabilities that are measured in terms of historical cost in
foreign currencies are not retranslated.
In translating the financial statement ofrepresentative foreign
offices for incorporation in main financial statements, the
monetary assets and liabilities are translated at the closing
rates non monetary assets and liabilities are translated at
exchange rates prevailing at the dates of the transactions
and income and expenses items are converted at the yearly
average rate.
2.7 RETIREMENT BENEFITS
The retirement benefits of the employees include Gratuity
,Provident Fund & Compensated absences.
Defined Benefit Plans for defined benefit retirement 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. 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 immediately in the balance sheet with a
charge or credit recognized in other comprehensive income
in the period in which they occur. Remeasurement recognized
in other comprehensive income is reflected immediately
in retained earnings and is not reclassified to statement.
of profit and loss. Past service cost is recognized in statement
of profit and loss in the period of a plan amendment. Net
interest is calculated by applying the discount rate at
the beginning of the period to the net defined benefit
liability or asset.
- service cost (including current service cost, past service
cost, as well as gains and losses on curtailments and
settlements);
- net interest expense or income; and
- remeasurement
The Group presents the first two components of defined
benefit costs in statement of profit and loss in the line item
'Employee benefits expense'. Curtailment gains and losses
are accounted for as past service costs.
The retirement benefit obligation recognized in the balance
sheet represents the actual deficit or surplus in the Group's
defined benefit plans. Any surplus resulting from this
calculation is limited to the present value of any economic
benefits available in the form of refunds from the plans or
reductions in future contributions to the plans.
Defined contribution plans which include contribution to the
provident fund are recognized as expense when employees
have rendered services entitling them to such benefits.
The compensated absences are provided on the basis of
actuarial valuation of employees entitlement in accordance
with company's rules.
2.8 Share Based Payment Arrangements
Share-based payment transactions of the Company
Equity-settled share-based payments to employees are
measured at the Fair value of the equity instruments at
the grant date. The fair value determined at the grant date
of the equity-settled share-based payments is expensed
on a straight-line basis over the vesting period, based on
the Company's estimate of equity instruments that will
eventually vest, with a corresponding increase in equity. At
the end of each reporting period, the Company revises its
estimate of the number of equity instruments expected to
vest. The impact of the revision of the original estimates, if
any, is recognized in statement of profit and loss such that
the cumulative expense reflects the revised estimate, with a
corresponding adjustment to the equity-settled employee
benefits reserve.
2.9 TAXATION
2.9.1 Current tax
Current tax is the tax currently payable is based on taxable
profit for the year. Taxable profit differs from 'profit before tax'
as reported in the standalone 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.
2.9.2 Deferred Tax
Deferred tax is recognized 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 recognized for all taxable temporary
differences. Deferred tax assets are generally recognized 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 utilized.
Such deferred tax assets and liabilities are not recognized if
the temporary difference arises from the initial recognition
(other than in a business combination) of assets and liabilities
in a transaction that affects neither the taxable profit nor the
accounting profit. In addition, deferred tax liabilities are not
recognized if the temporary difference arises from 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 realized, 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 include Minimum Alternate Tax (MAT)
paid in accordance with the tax laws in India, which is likely
to give future economic benefits in the form of availability
of set-off against future tax liability. Accordingly, MAT is
recognized as deferred tax asset in the Balance sheet when
the asset can be measured reliably and it is probable that
the future economic benefit associated with the asset will
be realized.
2.9..3 Current and deferred tax for the year
Current and deferred tax are recognized in statement of
profit and loss, except when they relate to items that are
recognized in other comprehensive income or directly in
equity, in which case, the current and deferred tax are also
recognized in other comprehensive income or directly in
equity respectively.
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