SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
The financial statements of the Company have been
prepared in accordance with Indian Accounting
Standards ('Ind AS’), under the historical cost basis
except for certain financial instruments which are
measured at fair values at the end of each reporting
period as explained in the accounting policies below,
the provisions of the Companies Act, 2013 ('the Act’) (to
the extent notified) and guidelines issued by Securities
and Exchange Board of India (SEBI). The Ind AS are
prescribed under Section 133 of the Act read with Rule 3
of the Companies (Indian Accounting Standards) Rules,
2015 and relevant amendment rules issued thereafter.
2.2 Current versus Non-Current classification
The Company presents assets and liabilities in
the balance sheet based on current/non-current
classification. An asset is treated as current when it is:
• Expected to be realized or intended to be sold or
consumed in normal operating cycle
• Held primarily for the purpose of trading
• Expected to be realized 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 twelve months after the reporting period.
All other assets are classified as non-current.
A liability is 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.
The Company classifies all other liabilities as non¬
current.
Deferred tax assets and liabilities are classified as non¬
current assets and liabilities.
The operating cycle is the time between the acquisition
of assets for processing and their realization in cash
and cash equivalents. The Company has identified
twelve months as its operating cycle.
2.3 Foreign Currencies
The financial statements are presented in Indian rupees,
which is the functional currency of the Company and
the currency of the primary economic environment in
which the Company operates.
Transactions in foreign currencies are initially recorded
by the Company at its functional currency spot rates at
the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign
currencies are translated at the functional currency
spot rates of exchange at the reporting date.
Exchange differences arising on settlement or
translation of monetary items are recognized in
Statement of Profit and Loss.
2.4 Fair Value Measurement
The Company measures financial instruments, such as
derivatives, at fair value at each balance sheet date. Fair
value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction
between market participants at the measurement
date. The fair value measurement is based on the
presumption that the transaction to sell the asset or
transfer the liability takes place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most
advantageous market for the asset or liability.
The principal or the most advantageous market must
be accessible by the Company.
The fair value of an asset or a liability is measured
using the assumptions that market participants would
use when pricing the asset or liability, assuming that
market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes
into account a market participant's ability to generate
economic benefits by using the asset in its highest and
best use or by selling it to another market participant
that would use the asset in its highest and best use.
The Company uses valuation techniques that are
appropriate in the circumstances and for which
sufficient data are available to measure fair value,
maximizing the use of relevant observable inputs and
minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured
or disclosed in the financial statements are categorized
within the fair value hierarchy, described as follows,
based on the lowest level input that is significant to the
fair value measurement as a whole:
• Level 1: Quoted (unadjusted) market prices in
active markets for identical assets or liabilities
• Level 2: Valuation techniques for which the lowest
level input that is significant to the fair value
measurement is directly or indirectly observable
• Level 3: Valuation techniques for which the lowest
level input that is significant to the fair value
measurement is unobservable.
For assets and liabilities that are recognized in the
financial statements on a recurring basis, the Company
determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorization
(based on the lowest level input that is significant to the
fair value measurement as a whole) at the end of each
reporting period.
The Company determines the appropriate valuation
techniques and inputs for fair value measurements. In
estimating the fair value of an asset or a liability, the
Company uses market-observable data to the extent
it is available. Where level 1 inputs are not available,
the Company engages third party qualified valuers to
perform the valuation. Any change in the fair value of
each asset and liability is also compared with relevant
external sources to determine whether the change is
reasonable.
For the purpose of fair value disclosures, the Company
has determined classes of assets and liabilities on the
basis of the nature, characteristics and risks of the
asset or liability and the level of the fair value hierarchy
as explained above.
2.5 Revenue Recognition
Revenue is recognized to the extent that it is probable
that the economic benefits will flow to the Company
and the revenue can be reliably measured, regardless
of when the payment is being made. Revenue is
measured at the fair value of the consideration received
or receivable, net of returns and allowances, trade
discounts and volume rebates after taking into account
contractually defined terms of payment and excluding
taxes or duties collected on behalf of the government.
The Company derives revenues primarily from
manufacture and export of Pharmaceuticals products.
2.6 Dividends
Revenue is recognized when the Company's right to
receive the payment is established, which is generally
when shareholders approve the dividend.
Final Dividend on shares is recorded as a liability on
the date of approval by the shareholders and interim
dividends are recorded as a liability on the date of
declaration by the Company's Board of Directors.
The entity recognized the income tax consequences
of dividends in profit or loss, other comprehensive
income or equity according to where the entity
originally recognized those past transactions or events.
The Finance Act, 2020 has repealed the Dividend
Distribution Tax (DDT). The Company is now required
to pay/distribute dividend after deducting applicable
taxes. The remittance of dividends outside India is
governed by Indian law on foreign exchange and is also
subject to withholding tax at applicable rates.
2.7 Current Income Tax
Current income tax assets and liabilities are measured
at the amount expected to be recovered from or paid
to the taxation authorities. The tax rates and tax laws
used to compute the amount are those that are enacted
or substantively enacted, at the reporting date in the
countries where the Company operates and generates
taxable income. Current income tax relating to items
recognized outside profit or loss is recognized outside
profit or loss (either in other comprehensive income
("OCI") or in equity). Current tax items are recognized in
correlation to the underlying transaction either in OCI or
directly in equity.
Management periodically evaluates positions taken
in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation
and establishes provision where appropriate.
2.8 Deferred Tax
Deferred tax is provided using the liability method on
temporary differences between the tax bases of assets
and liabilities and their carrying amounts for financial
reporting purposes at the reporting date.
Deferred tax liabilities are recognized for all taxable
temporary differences.
Deferred tax assets are recognized for all deductible
temporary differences, the carry forward of unused
tax credits and any unused tax losses. Deferred tax
assets are recognized to the extent that it is probable
that taxable profit will be available against which
the deductible temporary differences, and the carry
forward of unused tax credits and unused tax losses
can be utilized.
The carrying amount of deferred tax assets is reviewed
at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profit will
be available to allow all or part of the deferred tax asset
to be utilized. Unrecognized deferred tax assets are
reassessed at each reporting date and are recognized
to the extent that it has become probable that future
taxable profits will allow the deferred tax asset to be
recovered.
Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply in the year when
the asset is realized or the liability is settled, based
on tax rates and tax laws that have been enacted or
substantively enacted at the reporting date.
Deferred tax relating to items recognized outside profit
or loss is recognized outside profit or loss (either in
other comprehensive income or in equity). Deferred tax
items are recognized in correlation to the underlying
transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset
if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred
taxes relate to the same taxable entity and the same
taxation authority.
2.9 Property, Plant and Equipment
Capital work-in-progress, property, plant and
equipment is stated at cost, net of accumulated
depreciation and accumulated impairment losses,
if any. Such cost includes the cost of replacing part
of the plant and equipment and borrowing costs for
long-term construction projects if the recognition
criteria are met. When significant parts of plant and
equipment are required to be replaced at intervals, the
Company depreciates them separately based on their
specific useful lives. Likewise, when a major inspection
is performed, its cost is recognized in the carrying
amount of the plant and equipment as a replacement if
the recognition criteria are satisfied.
All other expenses on existing property, plant
and equipment, including day-to-day repair and
maintenance expenditure and cost of replacing parts,
are charged to the statement of profit and loss for the
period during which such expenses are incurred.
Subsequent expenditure related to an item of property,
plant and equipment is added to its book value only
if it increases the future benefits from the existing
asset beyond its previously assessed standard of
performance or extends its estimated useful life.
Depreciation is calculated on a straight-line basis over
the estimated useful lives of the assets as follows:
1. Factory Buildings : 30 Years
2. Lease Hold Land : 99 Years
3. Plant Equipment : 5 to 20 Years
4. Furniture and Fixtures : 10 Years
5. Vehicles : 3 to 10 Years
6. Computers : 3 to 6 Years
An item of Property, Plant and Equipment and any
significant part initially recognized is derecognized
upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or loss
arising from derecognition of the asset (calculated
as the difference between the net disposal proceeds
and the carrying amount of the asset) is included
in the statement of profit and loss when the asset is
derecognized.
The residual values, useful lives and methods of
depreciation of property, plant and equipment are
reviewed at each financial year end and adjusted
prospectively, if appropriate.
2.10 Intangible Assets
Costs relating to software, which is acquired, are
capitalized and amortized on a straight-line basis over
their estimated useful lives of 5 to 10 Years.
Gains or losses arising from derecognition of an
intangible asset are measured as the difference between
the net disposal proceeds and the carrying amount of
the asset and are recognized in the statement of profit
or loss when the asset is derecognized.
Amortization method, useful lives and residual values
are reviewed at the end of each financial year and
adjusted if appropriate.
2.11 Borrowing Costs
Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily
takes a substantial period of time to get ready for its
intended use or sale are capitalized as part of the cost
of the asset. All other borrowing costs are expensed
in the period in which they occur. Borrowing costs
consist of interest and other costs that an entity incurs
in connection with the borrowing of funds. Borrowing
cost also includes exchange differences to the extent
regarded as an adjustment to the borrowing costs.
2.12 Inventories
Inventories are valued at the lower of cost and net
realizable value. Costs incurred in bringing each product
to its present location and conditions are accounted for
as follows:
Raw Materials: Materials and other items held for use
in the production of inventories are not written down
below cost if the finished products in which they will
be incorporated are expected to be sold at or above
cost. Cost includes cost of purchase and other costs
incurred in bringing the inventories to their present
location and condition.
Finished Goods and Work-In-Progress: cost includes
cost of direct materials and labor and a proportion
of manufacturing overheads based on the normal
operating capacity.
Stores, Spares and Packing Materials: are valued at
the lower of cost and net realizable value, net realizable
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.
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