Q 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
• I t 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
the 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
liability takes place either:
• In the principal market for the asset or liability,
or
• I n 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
best economic 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 is 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 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
dividends 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 assets to be utilized.
Unrecognized deferred tax assets are re-assessed
at each reporting date and are recognized to the
extent that it has become probable that future
taxable profits will allow the deferred tax assets 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 are 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 on 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 labour 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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