Note 3 - Material Accounting Policies:A. Functional and presentation of currency:
The financial statements are presented in Indian
Rupees, which is the Company's functional currency
and all amounts are rounded to the nearest rupees in
lakhs.
B. Basis of measurement:
The Financial Statements have been prepared on
historical cost basis, except the following:
• Certain financial assets and liabilities are measured
at fair value.
• Defined benefit plans - plan assets measured at fair
value.
• Share Based Payments.
C. Use of Estimates:
The preparation of the financial statements requires
management to make estimates, judgements and
assumptions that affect the reported balances of assets
and liabilities, disclosure of contingent liabilities as on
the date of financial statements and reported amounts
of income and expenses during the period.
Uncertainty about these assumptions and estimates
could result in outcomes that require a material
adjustment to the carrying amount of assets or
liabilities affected in future periods.
The key assumptions concerning the future and other
key sources of estimation uncertainty at the reporting
date that have a significant risk of causing a material
adjustment to the carrying amounts of assets and
liabilities within the next financial year. The Company
based its assumptions and estimates on parameters
available when the financial statements were prepared.
Existing circumstances and assumptions about future
developments, however, may change due to market
changes or circumstances arising that are beyond the
control of the Company. Such changes are reflected in
the assumptions when they occur.
D. Property, Plant and Equipment:
Freehold land is carried at historical cost. Capital work
in progress, and all other items of property, plant and
equipment are stated at historical cost net of
accumulated depreciation and accumulated
impairment losses, if any.
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 derecognised when
replaced. All other repairs and maintenance are
charged to profit or loss during the reporting period in
which they are incurred.
Depreciation methods, estimated useful lives and
residual value
Depreciation is calculated using the Written down Value
method to allocate their cost, net of their residual
values, over their estimated useful lives as specified by
Schedule to the Companies Act; 2013. The residual
values are not more than 5% of the original cost of the
asset. The assets' residual values and useful lives and
method of depreciation are reviewed, and adjusted if
appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately
to its recoverable amount if the asset's carrying amount
is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by
comparing proceeds with carrying amount. These are
included in profit or loss.
E. Intangible assets:
Identifiable intangible assets are recognised when the
Company controls the asset & it is probable that future
economic benefits attributed to the asset will flow to the
Company and the cost of the asset can be reliably
measured.
Intangible assets acquired are measured on initial
recognition at cost. Following initial recognition,
intangible assets are carried at cost less any
accumulated amortisation and accumulated
impairment losses.
Intangible assets are amortised over the period on
straight line basis. The assets useful life reviewed at
each financial year end.
Amortisation methods and periods
Estimated useful lives of Intangible assets are
considered as 5 years. Intangible assets are amortised
over its useful life using the straight-line method. The
amortisation period and the amortisation method for an
intangible asset are reviewed at the end of each
reporting period. Changes in the expected useful life or
the expected pattern of consumption of future economic
benefits embodied in the asset are considered to modify
the amortisation period or method, as appropriate, and
are treated as changes in accounting estimates. The
amortisation expense on intangible assets with finite
lives is recognised in the statement of profit and loss.
F. Impairment of Non - Financial Assets:
The Company assesses at each reporting date whether
there is an indication that an asset may be impaired. If
any indication exists, or when annual impairment
testing for an asset is required, the Company estimates
the asset's recoverable amount. An asset's recoverable
amount is the higher of an asset's or Cash Generating
Unit's (CGU) fair value less costs of disposal and its
value in use. It is determined for an individual asset,
unless the asset does not generate cash inflows that are
largely independent of those from other assets or a
groups of assets. Where the carrying amount of an asset
or CGU exceeds its recoverable amount, the asset is
considered impaired and is written down to its
recoverable amount.
In assessing the value in use, the estimated future cash
flows are discounted to their present value using pre¬
tax discount rate that reflects current market
assessments of the time value of money and the risks
specific to the asset.
In determining fair value less costs of disposal, recent
market transactions are taken into account, if no such
transactions can be identified, an appropriate valuation
model is used.
G. Financial Instruments:
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or
equity instruments of another entity. Classifications of
financial instruments are in accordance with the
substance of the contractual arrangement and as per
the definitions of financial assets, financial liability and
an equity instruments.
Financial Assets and investmentsI. Initial recognition and measurement:
At initial recognition, the company measures a financial
asset (other than financial asset at fair value through
profit or loss) at its fair value plus or minus, transaction
costs that are directly attributable to the acquisition of
the financial asset. Transaction costs of financial assets
carried at fair value through profit or loss are expensed
in the statement of profit & loss.
II. Subsequent recognition and measurement:
Subsequent measurement of financial asset depends
on the company's business model for managing the
asset and the cash flow characteristics of the asset. For
the purpose of subsequent recognition and
measurement financial assets are classified in four
categories:
• Debt instrument at amortised cost:
Assets that are held for collection of contractual cash
flows where those cash flows represent solely
payments of principal and interest are measured at
amortised cost. A gain or loss on a debt investment that
is subsequently measured at amortised cost and is not
part of a hedging relationship is recognised in profit or
loss when the asset is derecognised or impaired.
Interest income from these financial assets is included
in finance income using the effective interest rate
method.
• Debt instrument at fair value through other
comprehensive income (FVOCI):
Assets that are held for collection of contractual cash
flows and for selling the financial assets, where the
assets' cash flows represent solely payments of
principal and interest, are measured at fair value
through other comprehensive income (FVOCI).
Movements in the carrying amount are taken through
OCI, except for the recognition of impairment gains or
losses and interest revenue which are recognised in the
statement of profit & loss. When the financial asset is
derecognised, the cumulative gain or loss previously
recognised in OCI is reclassified from equity to profit or
loss and recognised in other gains/ (losses). Interest
income from these financial assets is included in other
income using the effective interest rate method.
• Debt instrument at fair value through profit and
loss (FVTPL):
Assets that do not meet the criteria for amortised cost
or FVOCI are measured at fair value through profit or
loss. A gain or loss on a debt investment that is
subsequently measured at fair value through profit or
loss and is not part of a hedging relationship is
recognised in the statement of profit & loss and
presented net in the statement of profit & loss within
other gains/(losses) in the period in which it arises.
Interest income from these financial assets is included
in other income.
• Equity instruments:
All equity instruments are initially measured at fair
value. Any subsequent fair value gain / loss is
recognised through profit or loss if such investments
are held for trading purposes. The fair value gains or
losses of all other equity investments are recognised in
Other Comprehensive Income.
• Investment in Subsidiary and Associates:
The company has accounted for its Investment in
subsidiaries and associates at cost.
III. De-recognition:
A financial asset is primarily derecognised i.e. removed
from Company's financial statement when:
• The rights to receive cash flows from asset have
expired, or
• The Company has transferred its right to receive
cash flows from the asset or has assumed an
obligation to pay the received cash flows in full
without material delay to a third party under ‘pass¬
through' arrangement and either;
a) The Company has transferred substantially all the
risks and rewards of the assets,
b) The Company has neither transferred nor retained
substantially all the risks and rewards of the asset, but
has transferred control of the asset.
When the Company has transferred its rights to receive
cash flows from an asset or has entered into a pass¬
through arrangement, it evaluates if and to what extent
it has retained the risks and rewards of ownership.
When it has neither transferred nor retained
substantially all of the risks and rewards of the asset,
nor transferred control of the asset, the Company
continues to recognise the transferred asset to the
extent of the Company's continuing involvement. In that
case, the Company also recognises an associated
liability. The transferred asset and the associated
liability are measured on a basis that reflects the rights
and obligations that the Company has retained.
Continuing involvement that takes the form of a
guarantee over the transferred asset is measured at the
lower of the original carrying amount of the asset and
the maximum amount of consideration that the
company could be required to repay.
IV. Trade receivables:
A receivable is classified as a ‘trade receivable' if it is in
respect to the amount due from customers on account
of goods sold or services rendered in the ordinary
course of business. Trade receivables are recognised
initially at fair value and subsequently measured at fair
value less provision for impairment.
Financial Liabilities:I. Initial recognition and measurement:
AH financial liabilities are recognised initially at fair
value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.
The company's financial liabilities include trade and
other payables, loans and borrowings including bank
overdrafts.
II. Subsequent measurement:
The measurement of financial liabilities depends on
their classification, as described below:
Financial liabilities at fair value through profit and loss
Financial liabilities at fair value through profit or loss
include financial liabilities held for trading and has
designated upon initial measurement recognition at fair
value through profit or loss. Financial liabilities are
classified as held for trading if they are incurred for the
purpose of repurchasing in the near term. Gains or
losses on liabilities held for trading are recognised in
the statement of profit & loss.
Financial liabilities designated upon initial recognition
at fair value through profit or loss are designated as
such at the initial date of recognition, and only if the
criteria in Ind AS 109 are satisfied.
III. Loans and Borrowings:
After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortised
cost using the effective interest rate (EIR) method. Gains
and losses are recognised in the statement of profit &
loss when the liabilities are derecognised as well as
through the EIR amortisation process.
Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs
that are an integral part of the EIR. The EIR amortisation
is included as finance costs in the statement of profit
and loss.
IV. Trade and other payables:
These amounts represent liabilities for goods and
services provided to the company prior to the end of
financial year which are unpaid. Trade and other
payables are presented as current liabilities unless
payment is not due within 12 months after the reporting
period.
V. De-recognition:
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 or loss.
H. Impairment of Financial assets:
The company assesses impairment based on expected
credit losses (ECL) model to the following:
• Financial assets carried at amortised cost;
• Financial asset measured at FVOCI debt
instruments.
The Company follows ‘simplified approach' for
recognition of impairment loss allowance onTrade
receivables or contract revenue receivables.
The application of simplified approach does not require
the Company to track changes in credit risk. Rather, it
recognises impairment loss allowance based on
lifetime ECLs at each reporting date, right from its initial
recognition.
The Company uses a provision matrix to determine
impairment loss allowance on its trade receivables. The
provision matrix is based on its historically observed
default rates over the expected life of the trade
receivables and is adjusted for forward-looking
estimates. At every reporting date, the historical
observed default rates are updated and changes in the
forward-looking estimates are analysed.
For recognition of impairment loss on other financial
assets and risk exposure, the company determines that
whether there has been a significant increase in the
credit risk since initial recognition. If credit risk has not
increased significantly, 12-month ECL is used to provide
for impairment loss. However, if credit risk has
increased significantly, lifetime ECL is used. If, in a
subsequent period, credit quality of the instrument
improves such that there is no longer a significant
increase in credit risk since initial recognition, then the
entity reverts to recognising impairment loss allowance
based on 12-month ECL.
Lifetime ECL are the expected credit losses resulting
from all possible default events over the expected life of
a financial instrument. The 12-month ECL is a portion of
the lifetime ECL which results from default events that
are possible within 12 months after the reporting date.
For assessing increase in credit risk and impairment
loss, the company combines financial instruments on
the basis of shared credit risk characteristics with the
objective of facilitating an analysis that is designed to
enable significant increases in credit risk to be
identified on a timely basis.
I. Cash and cash equivalents:
Cash and cash equivalents includes cash on hand and at
bank, deposits with banks and other short-term, highly
liquid investments with original maturities of three
months or less that are readily convertible to known
amounts of cash and which are subject to an
insignificant risk of changes in value.
J. Inventories
Inventories are valued at lower of cost or net realisable
value. Cost is determined on FIFO basis.
Cost of inventories also includes all other costs incurred
in bringing the inventories to their present location and
condition. Net realisable value is the estimated selling
price in the ordinary course of business, less estimated
costs of completion and the estimated costs necessary
to make the sale.
K. Foreign currency transactions:
The transactions denominated in foreign currency are
recorded at the exchange rate prevailing on the date of
transaction. Monetary items denominated in foreign
currency at the end of year are translated using the
closing rate of exchange. Non- monetary items that are
to be carried at historical cost are recorded using
exchange rate prevailing on the date of transaction.
Non- monetary items that are to be carried at fair value
are recorded using exchange rate prevailing on the date
of fair value measured. Any income or expenses on
account of exchange difference either on settlement or
on translation is recognised in the statement of profit &
loss.
L. Classification of assets and liabilities as current and
non-current:
The Company presents assets and liabilities in Balance
Sheet based on current/non-current classification.
An asset is classified as current when it is:
• Expected to be realised or intended to be sold or
consumed in normal operating cycle,
• Held primarily for the purpose of trading,
• Expected to be realised within twelve months after
the reporting period, or
• Cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least
twelvemonths after the reporting period.
All other assets are classified as non-current.
A liability is classified as current when:
• It is expected to be settled in normal operating cycle,
• It is held primarily for the purpose of trading,
• It is due to be settled within twelve months after the
reporting period, or
• There is no unconditional right to defer the
settlement of the liability for at least twelve months
after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non¬
current assets and liabilities.
M. Equity share capital:
Ordinary shares are classified as equity. Incremental
costs net of taxes directly attributable to the issue of
new equity shares are reduced from retained earnings,
net of taxes.
N. Revenue Recognition:
Revenue is recognised to the extent that it is probable
that the future economic benefits will flow to the entity
and it can be reliably measured. Revenue is measured at
the fair value of the consideration received or
receivable, taking into account contractually defined
terms of payment and excluding taxes or duties
collected on behalf of the government.
• Sale of goods
Revenue from sale of goods is recognised when the
significant risks and rewards of ownership have been
transferred to the buyer, usually on delivery of goods, it
is probable that the economic benefit will flow to the
Company, the associated costs and possible return of
goods can be estimated reliably, there is neither
continuing management involvement to the degree
usually associated with ownership nor effective control
over the goods sold and the amount of revenue can be
measured reliably.
Provisions for chargeback, rebates, discounts and
medical aid payments are estimated and provided for in
the year of sales and recorded as reduction of revenue.
• Sales Returns
With respect to established products, the Company
considers its historical experience of sales returns,
levels of inventory in the distribution channel, estimated
shelf life, product discontinuances, price changes of
competitive products, and the introduction of
competitive new products, to the extent each of these
factors impact the Company's business and markets.
With respect to new products introduced by the
Company, such products have historically been either
extensions of an existing line of product where the
Company has historical experience or in therapeutic
categories where established products exist and are
sold either by the Company or the Company's
competitors.
• Interest income:
Interest income from debt instrument is recognised
using effective interest rate method. The effective
interest rate is the rate that discounts estimated future
cash receipts through the expected life of financial asset
to the gross carrying amount of financial asset. When
calculating effective interest rate, the company expects
cash flows by considering all contractual terms of
financial instrument but does not consider the expected
credit losses.
• Dividends
Dividends are recognised when the right to receive the
payment is established.
0. Employee's benefits:1. Short-term Employee benefits:
All employees' benefits payable wholly within 12 months
rendering services are classified as Short Term
obligations.
Benefits such as salaries, wages, short term
compensated absences, performance incentives,
expected cost of bonus and ex-gratia are recognised
during the period in which the employees renders
related services.
ii. Post-employment benefitsa. Defined Contribution Plan
The defined contribution plan is post-employment
benefit plan under which the Company contributes fixed
contribution to a government administered fund and
will have no legal or constructive obligation to pay
further contribution. The Company's defined
contribution plan comprises of Provident Fund, Labour
Welfare Fund and Employee State Insurance Scheme.
The Company's contribution to defined contribution
plans are recognised in the statement of profit & loss in
the period in which the employee renders the related
services.
b. Defined benefit plan
The Company has defined benefit plans comprising of
gratuity. Company's obligation towards gratuity liability
is partially funded as Management has initiated a
decision to be funded and managed by Life Insurance
Corporation of India over the period of 20 equated
quarterly instalments over a period of 5 years.
The present value of the defined benefit obligations is
determined based on actuarial valuation using the
projected unit credit method. The rate used to discount
defined benefit obligation is determined by reference to
market yields at the Balance Sheet date on Indian
Government Bonds for the estimated term of
obligations.
Based on actuarial valuation using the projected unit
credit method. The rate used to discount defined benefit
obligation is determined by reference to market yields
at the Balance Sheet date on Indian Government Bonds
for the estimated term of obligations.
Actuarial gains or losses arising on account of
experience adjustment and the effect of changes in
actuarial assumptions are recognised immediately in
the statement of profit & loss as income or expense.
Re-measurements comprising of
(a) Actuarial gains and losses,
(b) the effect of the asset ceiling (excluding amounts
included in net interest on the net defined benefit
liability) and the return on plan assets (excluding
amounts included in net interest on the net defined
benefit liability) are recognised immediately in the
balance sheet with a corresponding debit or credit to
retained earnings through other comprehensive
income in the period in which they occur. Re-
measurements are not reclassified to the statement of
profit & loss in subsequent periods.
The expected return on plan assets is the Company's
expectation of average long-term rate of return on the
investment of the fund over the entire life of the related
obligation. Plan assets are measured at fair value as at
the Balance Sheet date.
The interest cost on defined benefit obligation and
expected return on plan assets is recognised under
finance cost.
Gains or losses on the curtailment or settlement of
defined benefit plan are recognised when the
curtailment or settlement occurs.
c. Other long-term benefits
The Company has other long-term benefits in the form
of leave benefits. The present value of the other long
term employee benefits is determined Gains or losses
on the curtailment or settlement of other long-term
benefits are recognised when the curtailment or
settlement occurs.
d. Share-based payments
Share-based compensation benefits are provided to
employees via Employee Stock Option Plans with the
ESOS 2020.
The fair value of options granted under the Employee
Option Plan is recognised as an employee benefits
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: Including any
market performance conditions (e.g., the entity's share
price) excluding the impact of any service and non¬
market performance vesting conditions (e.g.
profitability, sales growth targets and remaining an
employee of the entity over a specified time period), and
Including the impact of any non-vesting conditions (e.g.
the requirement for employees to save or holdings
shares for a specific period of time).
The total expense, other than in respect of options
granted to employees of group companies, is
recognised over the vesting period, which is the period
over which all of the specified vesting conditions are to
be satisfied. The cost of options granted to employees of
group companies is debited to the cost of the investment
of the respective companies.
At the end of each period, the company revises its
estimates of the number of options that are expected to
vest based on the non-market vesting and service
conditions. It recognises the impact of the revision to
original estimates, if any, in the statement of profit &
loss / Investment, with a corresponding adjustment to
other equity.
P. Borrowing Cost:
General and specific borrowing costs that are directly
attributable to the acquisition, construction or
production of a qualifying asset are capitalised 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 their intended use or sale.
Investment income earned on the temporary
investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the
borrowing costs eligible for such capitalisation.
Other borrowing costs are expensed in the period in
which they are incurred.
Borrowing costs consist of interest and other costs that
are incurred in connection with the borrowing of funds.
Q. Income Taxes:• Current Income Tax:
Current Income Tax liabilities are measured at the
amount expected to be paid to the taxation authorities
using the tax rates and tax laws that are enacted or
subsequently enacted at the end of the reporting period.
Management periodically evaluates positions taken in
the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation
and creates provisions where appropriate.
• Deferred Tax:
Deferred Tax is provided, using the Balance sheet
approach, on temporary differences between the tax
bases of assets and liabilities and their carrying
amounts in the financial statements. Deferred Tax is
determined using the tax rates and tax laws that are
enacted or subsequently enacted at the end of the
reporting period.
Deferred Tax liabilities are recognised for all temporary
differences.
Deferred tax assets are recognised for all deductible
temporary differences, the carry forward of unused tax
credits and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those
temporary differences and losses.
Deferred tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets
against current tax liabilities and the deferred tax
balances relate to the same taxation authority. Current
tax asset and liabilities are offset where the company
has a legally enforceable right and intends either to
settle on net basis, or to realise the asset and settle the
liability simultaneously.
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