(d) Summary of material accounting policies
The financial statements have been prepared using
the material accounting policies and measurement
bases summarised below. These policies have been
consistently applied to all the years presented, unless
otherwise stated.
(i) 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 Ill of the Act. Based on the
nature of the operations and the time between
the acquisition of assets for processing 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.
(ii) Property, plant and equipment
Initial recognition and measurement
Property, plant and equipment are stated at their
cost of acquisition. The cost comprises purchase
price, borrowing cost if capitalisation criteria are
met and directly attributable cost of bringing the
asset to its working condition for the intended use.
Any trade discount and rebates are deducted in
arriving at the purchase price.
Subsequent costs 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.
Items 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.
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.
The residual values, useful lives and method of
depreciation are reviewed at the end of each
reporting period and adjusted if appropriate.
(iii) Intangible assets
Recognition and initial measurement
Intangible assets are stated at their cost of
acquisition. The cost comprises purchase price,
borrowing cost if capitalisation criteria are met and
directly attributable cost of bringing the asset to
its working condition for the intended use.
Subsequent measurement
All items of intangible assets are subsequently
measured at cost less accumulated amortisation
and impairment losses, if any. Amortisation of
intangible assets is provided on a straight-line
basis, computed on the basis of useful lives (as set
out below).
(iv) Business combination
The Company applies the acquisition method
in accounting for business combinations. The
consideration transferred by the Company to
obtain control of a business is calculated as the sum
of acquisition-date fair values of assets transferred
and liabilities incurred. Acquisition date is the
date on which it obtains control of the acquiree.
Acquisition costs are expensed as incurred.
Identifiable acquired assets and liabilities and
contingent liabilities assumed in a business
combination are measured initially at their
acquisition-date fair values. Goodwill is measured
as excess of the fair value of the consideration
transferred over the fair value of the net of
identifiable assets acquired and liabilities assumed.
If the fair value of the net of identifiable assets
acquired and liabilities assumed is in excess of
the consideration transferred, the resulting
gain on bargain purchase is recognized in other
comprehensive income and accumulated in
equity as capital reserve. However, if there is no
clear evidence of bargain purchase, the entity
recognizes the gain directly in equity as capital
reserve, without routing the same through other
comprehensive income.
(v) Goodwill
Goodwill represents the future economic benefits
arising from a business combination that are not
individually identified and separately recognised.
(vi) Inventories
Inventories are valued at lower of cost or net
realisable value.
The methods of determining cost of various
categories of inventories are as follows:
The residual values, useful lives and method of
depreciation are reviewed at the end of each
reporting period and adjusted if appropriate.
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.
Cost includes all costs of purchase, costs of
conversion and other costs including taxes that are
not refundable incurred in bringing the inventories
to their present location and condition.
The factors that the Company considers in
determining the allowance for slow moving,
obsolete and other non-saleable inventory includes
estimated shelf life, ageing, usability etc., to the
extent each of these factors impact the Company
business and markets. The Company considers all
these factors and adjusts the inventory provision
to reflect its actual experience on a periodic basis.
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. The net realisable value
of work-in-progress is determined with reference
to the selling prices of related finished products.
Raw materials and other supplies held for use in
the production of finished products are not written
down below cost, except in cases where material
prices have declined and it is estimated that the
cost of the finished products will exceed their net
realisable value. The comparison of cost and net
realisable value is made on an item-by-item basis.
(vii) Revenue recognition and other income
Revenue from sale of products
Revenue from sale of products is recognised
when the Company satisfies a performance
obligation upon transfer of control of products to
customers at the time of shipment to or receipt of
products by the customers as per the terms of the
underlying contracts.
The Company exercises judgment in determining
whether the performance obligation is satisfied
at a point in time or over a period of time. The
Company considers indicators such as how
customer consumes benefits or who controls
the asset as it is being created or existence of
enforceable right to payment for performance to
date and alternate use of such product or service,
transfer of significant risks and rewards to the
customer, acceptance of delivery by the customer,
etc. Invoices are issued as per the general business
terms and are payable in accordance with the
contractually agreed credit period i.e., in the range
of days of 30 to 90 days.
Revenues are measured based on the transaction
price allocated to the performance obligation,
which is the consideration, net of taxes or
duties collected on behalf of the government
and applicable discounts and allowances. The
computation of these estimates using expected
value method involves judgment based on various
factors including, historical experience, estimated
inventory levels and expected sell-through levels
in supply chain. The transaction price is allocated
to each performance obligation in the contract on
the basis of the relative standalone selling prices
of the promised products. The transaction price
may be fixed or variable and is adjusted for time
value of money if the contract includes significant
financing component.
A receivable is recognised by the Company when
control of the products is transferred and the
Company's right to an amount of consideration
under the contract with the customer is
unconditional, as only the passage of time is
required. When either party to a contract has
performed, the Company presents the contract
in the balance sheet as a contract asset or a
contract liability, depending on the relationship
between the Company's performance and the
customer's payment.
Interest income
Interest income is recorded on accrual basis using
the effective interest rate (EIR) method.
Income from scrap sales
Scrap sales are recognised when control of scrap
goods are transferred i.e., on dispatch of goods
and are accounted for net of returns and rebates.
(viii) 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
(ix) 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 to use asset and a lease liability
on the balance sheet. The right to 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 to 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 to use asset or the end of the lease term.
The Company also assesses the right to 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 remeasured to reflect
any reassessment or modification, or if there are
changes in in-substance fixed payments. When the
lease liability is remeasured, the corresponding
adjustment is reflected in the right to use asset.
The Company has elected to account for short¬
term leases using the practical expedients.
Instead of recognising a right to 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.
(x) 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.
(xi) Financial instruments
Initial recognition and measurement
Financial assets 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. However,
trade receivables that do not contain a significant
financing component are measured at transaction
price under Ind AS 115 "Revenue from Contracts
with Customers".
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.
Derecognition of financial assets
A financial asset is derecognised 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.
Derecognition of financial liabilities
A financial liability is derecognised 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.
(xii) Impairment
(i) 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, which requires measurement of loss
allowance at an amount equal to lifetime
expected credit losses basis provision matrix
approach. 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.
(ii) Non-financial assets
Goodwill
Goodwill is tested for impairment on annual
basis. If on testing, any impairment exists,
the carrying amount of goodwill is reduced
to the extent of any impairment loss and
such loss is recognized in the statement of
profit and loss. For the purpose of assessing
impairment, goodwill is allocated to a cash
generating unit. After this, an estimate of the
recoverable amount of the cash generating
unit is made. If carrying value of cash
generating unit exceeds their recoverable
amount, are written down to the recoverable
amount after impairment of related assets
and goodwill. Recoverable amount is higher
of an 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 cash generating unit.
Other 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
fair value less costs of disposal 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.
(xiii)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.
(xiv) 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.
(xv) 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, which are also defined
contribution plans recognized and administered
by the Government of India. The Company's
contributions to these schemes are expensed in
the statement of profit and loss.
Defined benefit plan
The Company has funded 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. The
gratuity liability of the Company is funded with
Life Insurance Corporation of India and fair value
of plan assets is determined accordingly.
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
net interest expense (calculated on net balance
defined benefit obligations and fair value of plan
assets) on the Company's defined benefit plan is
included in employee benefits expense. Actuarial
gains/losses resulting from remeasurements of the
defined benefit obligation are included in other
comprehensive income.
Changes in the present value of the defined benefit
obligation resulting from plan amendments or
curtailments are recognised immediately in profit
or loss as past service cost.
Other long-term employee benefits
The Company also provides benefit of compensated
absences to its employees (as per policy and
approval mechanism) 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 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.
Changes in the present value of the defined benefit
obligation resulting from plan amendments or
curtailments are recognised immediately in profit
or loss as past service cost
(xvi)Share based payment expense
The fair value of options granted under Jagsonpal
Pharmaceuticals Limited Employees Stock Option
Plan 2022 ('JPL ESOP 2022') is recognized as an
employee benefit expense with a corresponding
increase in equity. The total amount to be
expensed is determined by reference to the fair
value of the options granted on the basis of an
option-pricing model. Total expense is recognized
over the vesting period, which is the period over
which all the specified vesting conditions are to
be satisfied. At the end of each period, the entity
revises its estimates of the number of options that
are expected to vest based on the non-market
vesting and service conditions. It recognizes the
impact of revision to original estimates, if any, in
profit or loss, with a corresponding adjustment
to equity.
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