a) 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.
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.
b) Inventories
Stores and Spares:
- Valued at lower of cost and net realizable value. Cost is determined on a moving weighted average basis.
- Stores and Spares which do not meet the definition of property, plant and equipment are accounted as inventories.
- Net Realizable Value in respect of store and spares is the estimated current procurement price in the ordinary course
of the business.
c) Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprises cash at banks and on hand and short-term deposits with an
original maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as
defined above, net of outstanding bank overdrafts as they are considered an integral part of the Company's cash
management.
d) Property, plant and equipment (PPE)
Property, plant and equipment (including capital work in progress) is stated at cost, net of accumulated depreciation
and accumulated impairment losses, if any. The cost comprises the purchase price, directly and indirectly attributable
costs arising directly from the development of the asset / project to its working condition for the intended use. 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 costis recognized in
the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other
repair and maintenance costs are recognized in profit or loss as incurred.
Borrowing cost relating to acquisition / construction of property, plant & equipment which take substantial period of
time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready
to be put to use.
Depreciation is calculated on a straight line basis over the useful lives of the assets prescribed in the Companies Act,
2013.
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 income statement 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.
e) Revenue recognition
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 products and services
Revenue from contracts with customers is recognised 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, since
it is the primary obligor in all of its revenue arrangement, as it has pricing latitude and is exposed to inventory and
credit risks. Revenue is stated net of goods and service tax and net of returns, chargebacks, rebates and other similar
allowances. These are calculated on the basis of historical experience and the specific terms in the individual contracts.
In determining the transaction price, the Company considers the effects of variable consideration, the existence of
significant financing components, noncash consideration, and consideration payable to the customer (if any). The
Company estimates variable consideration at contract inception until it is highly probable that a significant revenue
reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the
variable consideration is subsequently resolved.
Sales Returns
The Company accounts for sales returns accrual by recording an allowance for sales returns concurrent with the
recognition of revenue at the time of a product sale. This allowance is based on the Company's estimate of expected
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 a financial asset is recognised when it is probable that the economic benefits will flow to the
Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference
to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on
initial recognition.
f) Foreign Currency
On initial recognition, transactions in currencies other than the Company's functional currency (foreign currencies) are
translated at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign
currencies at the reporting date are translated into the functional currency at the exchange rate at that date. Exchange
differences arising on the settlement of monetary items or on translating monetary items at rates different from those
at which they were translated on initial recognition during the period or in previous period are recognised in profit or
loss in the period in which they arise except for:
- exchange differences on transactions entered into in order to hedge certain foreign currency risks
- exchange differences on foreign currency borrowings relating to assets under construction for future productive use,
which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those
foreign currency borrowings, if any
g) Retirement and other employee benefits
All employee benefits payable wholly within 12 months rendering services are classified as short term employee
benefits. Benefits such as salaries, wages, short term compensated absences, performance incentives etc. and the
expected cost of bonus, ex-gratia are recognised during the period in which the employee renders related service.
h) Provident fund
Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation,
other than the contribution payable to the provident fund. The Company recognizes contribution payable to the
provident fund scheme as an expense, when an employee renders the related service. Ifthe contribution payable to the
scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to
the scheme is recognized as a liability after deducting the contribution already paid.
i) Gratuity fund
The Company operates a defined benefit gratuity plan in India, which requires contributions to be made to a separately
administered fund. The cost of providing benefits under the defined benefit plan is determined using the projected unit
credit method.
Re-measurements, comprising of actuarial gains and losses, 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 OCI in the period in which they occur. Re-measurements are not
reclassified to profit or loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the
following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
> Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements;
and Net interest expense or income.
j) Compensated absences
Provision for compensated absence is determined using the projected unit credit method with actuarial valuation being
carried out at each balance sheet date. Accumulated leave, which is expected to be utilised within the next twelve
months, is treated as short term employee benefits. The Company treats accumulated leave expected to be carried
forward beyond twelve months as long term compensated absence. The Company measures the expected cost of such
absence as the additional amount that is expected to pay as a result of the unused estimate that has accumulated at
the reporting date.
k) 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 capitalised 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.
l) Segment reporting
The Chief Operational Decision Maker monitors the operating results of its business segments separately for the
purpose of making decisions about resource allocation and performance assessment. Segment performance is
evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements.
In accordance with the Ind-As 108 -" Operating Segments" , the Company has determined its business segment of
manufacturing of pharmaceutical products. Since there are no other business segments in which the Company
operates, there are no other primary reportable segments. Therefore, the segment revenue, results, segment assets,
segment liabilities, total cost incurred to acquire segment assets, depreciation charge are all as is reflected in the
financial statement.
m) Related party transactions
Disclosure of transactions with Related Parties, as required by Ind-AS 24 "Related Party Disclosures" has been set out in
a separate note. Related parties as defined under Ind-AS 24 have been identified on the basis of representations made
by key managerial personnel and information available with the Company.
n) Earnings per share
The Basic EPS has been computed by dividing the income available to equity shareholders by the weighted average
number of equity shares outstanding during the accounting year. For the purpose of calculating diluted earning per
share, the profit or loss for the period attributable to equity shareholders and the weighted average number of shares
outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
o) Taxes
Sakar Healthcare Limited is a Company incorporated under the provisions of the Companies Act, 1956. It is engaged in
manufacturing of Pharmaceutical products providing Liquid Orals, Cephalosporin Tablet, Capsule, Dry Powder Syrup,
Dry Powder Injections, Liquid Injectable (SVP) in Ampoules,Vials & Lyophilized Injections, Oral Solid Dossages and
Research & Development of above products.
i) Current income tax
Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-
Tax Act, 1961 enacted in India. The tax rates and tax laws used to compute the amount are those that are enacted or
substantially enacted, at the reporting date.
Current income tax relating to items recognized outside the statement of profit and loss is recognized outside the
statement of profit and loss (either in 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
provisions where appropriate.
ii) 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 for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognized for all taxable temporary differences, except
> When the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that affects
neither the accounting profit nor taxable profit or loss.
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, except:
> When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an
asset or liability in a transaction that affects neither the accounting profit nor taxable profit or loss.
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 future taxable profit will be available to allow all or part of the deferred tax asset 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 asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates thatare 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 assets and deferred tax liabilities are offset ifa 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.
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.
Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The Company
recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the Company will
pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried
forward. Deferred tax include MAT Credit Entitlement. The Company reviews the such tax credit asset at each reporting
date and writes down the asset to the extent The Company does not have sufficient taxable temporary difference
/convincing evidence that it will pay normal tax during the specified period. Deferred tax includes MAT tax credit.
p) 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. Recoverable amount is determined for an individual asset, unless the
asset does not generate cash inflows that are largely independent of those from other assets or group of assets. When
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 value in use, the estimated future cash flows are discounted to their presentvalue using a 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. These calculations are corroborated by valuation multiples,
quoted share prices for publicly traded companies or other available fair value indicators.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared
separately for each of the Company's CGUs to which the individual assets are allocated. These budgets and forecast
calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied
to project future cash flows after the fifth year.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the statement of
profit and loss, except for properties previously revalued with the revaluation surplus taken to OCI. For such properties,
the impairment is recognised in OCI up to the amount of any previous revaluation surplus.
Intangible assets with indefinite useful lives are tested for impairment annually as at year end at the CGU level, as
appropriate, and when circumstances indicate that the carrying value may be impaired.
|