NOTE - 1 : SIGNIFICANT ACCOUNTING POLICIES 1.1 Basis for brparation of financial statements The financial statements have been brpared and brsented under the historical cost convention on an accrual basis of accounting and in accordance with the Generally Accepted Accounting Principles (GAAP) in India. GAAP includes Accounting Standards (AS) notified by the Central Government of India under Section 133 of the Companies Act, 2013 read with Rule 7 of Companies (Accounts) Rules, 2014 and provisions of the Companies Act,2013, pronouncements of The Institute of Chartered Accountants of India and guidelines issued by The Securities and Exchange Board of India (SEBI). The Company has brsented financial statements as per format brscribed by Schedule III, notified under the Companies Act, 2013. Except where otherwise stated, the accounting policies are consistently applied. All the assets and liabilities have been classified as current or non current as per the Company's normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Current assets / liabilities include the current portion of non current financial assets / liabilities respectively. All other assets / liabilities are classified as non current. 1.2 Use of estimates The brparation of financial statements in conformity with GAAP requires management to make assumptions, critical judgements and estimates, which it believes are reasonable under the circumstances, that affect the reported amounts of assets, liabilities and contingent liabilities on the date of financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Difference between the actual results and estimates are recognized in the period in which the results are known or materialize. 1.3 Fixed assets, debrciation and amortization Tangible assets (a) Tangible fixed assets are stated at cost of acquisition or construction less accumulated debrciation. The cost of fixed asset comprises of its purchase price, non-refundable taxes & levies, freight and other incidental expenses related to the acquisition and installation of the respective assets. Borrowing cost attributable to acquisition or construction of qualifying fixed assets is capitalized to respective assets when the time taken to put the assets to use is substantial. (b) Pre-operative expenditure comprising of revenue expenses incurred in connection with project implementation during the period upto commencement of commercial production are treated as part of project costs and are capitalized. Such expenses are capitalized only if the project to which they relate, involve substantial expansion of capacity or upgradation (d) Cost of leasehold land (except for lease of long tenure) is amortized over the period of the lease. Cost of lease hold land where lease period is of long tenure and substantial rights of ownership are with lessee, is not amortized. Intangible assets (a) Acquired product licenses are capitalized at costs comprising of direct costs of purchase and expenses directly attributable to the purchase of product licenses. (b) Software costs are capitalized and recognized as intangible assets based on materiality, accounting prudence and significant economic benefits expected to flow there from for a period longer than one year. Impairment of assets (a) Fixed assets are reviewed for impairment losses at each balance sheet date for events or changes in circumstances indicating that the carrying amount may not be recoverable. An impairment loss is then recognized for the amount by which the carrying amount of the assets exceeds its recoverable amount, which is the higher of an asset's net selling price and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. (b) Fixed assets that have been retired from their active use and held for disposal, are classified as current assets, and are stated at lower of their cost and net realizable value. 1.4 Investments (a) Noncurrent investments are carried at cost.Provision is made to recognize any diminution in value, other than that of a temporary nature. (b) Current investments are carried at lower of cost and fair value. Diminution in value is charged to the statement of profit and loss. (c) Current investments readily convertible in known amount of cash and subject to insignificant risk of changes in value are classified as cash and cash equivalents for brparation of cash flow statement. 1.5 Cash flow statement The cash flow statement is brpared as per the "Indirect Method" as set out in AS - 3 "Cash Flow Statements" issued by the Institute of Chartered Accountants of India. 1.6 Inventories Inventories are valued at the lower of cost and net realizable value. Provision for impairment is made when there is uncertainty in salability of an item. Costs incurred in bringing inventories to its existing location and condition are determined on the following basis: (a) Raw materials and packing materials-Purchase cost of materials on moving average basis. (b) Finished goods (manufactured) and work-in-progress - Cost of purchase, cost of conversion and other costs proportionately allocated determined on weighted average basis. (c) Finished goods (traded) - Purchase cost on moving average basis. 1.7 Revenue recognition (a) Revenue from sale of goods is recognized when the significant risks and rewards of ownership of goods are transferred to the customers. Sales are net of discounts, sales tax, value added tax and estimated returns. Excise duty collected on sales are shown by way of deduction from sales. (b) Provision for sales returns are estimated on the basis of historical experience, market conditions and specific contractual terms and provided for in the year of sale as reduction from revenue. The methodology and assumptions used to estimate returns are monitored and adjusted regularly in line with contractual and legal obligations, trade practices, historical trends, past experience and projected market conditions. (c) Income from services is recognized when the services are rendered or when contracted milestones have been achieved. (d) Revenue from arrangements which includes performance of obligations is recognized in the period in which related performance obligations are completed. (e) Export entitlements are recognized as income when right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds. (f) Dividend income is recognized when the unconditional right to receive dividend is established. (g) Interest income is recognized using the time proportionate method, based on rates implicit in the transaction. (h) Revenue in respect of other income is recognized when a reasonable certainty as to its realization exists. 1.8 Employees retirement and other benefits Short-term employee benefits : Short-term employee benefits like salaries, wages, bonus and welfare expenses payable wholly within twelve months of rendering the service are accrued in the year in which the associated services are rendered by the employees. Long-term employee benefits : (a) Defined contribution plan : Contribution in case of defined contribution plans (provident fund, superannuation benefit, social security schemes and other fund / schemes) is charged to the statement of profit and loss as and when it is incurred as employee benefits. (b) Defined benefit plan : The accruing liability on account of gratuity (retirement benefit in the nature of defined benefits plan) is actuarially valued every year. The current service cost, interest cost, expected return on plan assets and the actuarial gain / loss are debited / credited, as the case may be, to the statement of profit and loss of the year as employees benefits. The liability for compensated absences and leave encashment is provided on the basis of actuary valuation, as at balance sheet date. 1.9 Government grants (a) Government grants are recognized when there is reasonable assurance that the grant will be received and all relevant conditions are complied with. (b) Grants received by way of investment subsidy scheme in relation to total investment are credited to capital reserve and are treated as part of owners' fund. (c) Grants that compensate expenses are recognized on receipt basis. 1.10 Finance costs Finance costs consist of interest, amortization of ancilliary costs and other costs in connection with the borrowing of funds and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. 1.11 Cenvat credit Cenvat (Central value added tax) credit in respect of excise, custom and service tax is accounted on an accrual basis on purchase of eligible inputs, capital goods and services. The balance of cenvat credit is reviewed at the end of each year and amount estimated to be un-utilisable is charged to the statement of profit and loss for the year. 1.12 Stores and spares Stores and spares (other than spares acquired with fixed assets) are charged to the statement of profit and loss as and when purchased. 1.13 Software costs Expenditure incurred for procuring, developing, improving and maintaining software programs are charged to the statement of profit and loss as and when incurred, except when capitalized in accordance with Note 1.3 above. 1.14 Research and development Revenue expenditure on research and development is expensed off under the respective head of expenses in the year in which it is incurred. Capital expenditure on research and development is reported as fixed assets under the relevant head. Debrciation on research and development fixed assets are not classified as research and development expenses and instead included under debrciation expenses. 1.15 Leases Lease rentals in respect of assets taken on operating lease are charged to the statement of profit and loss on accrual and straightline basis over the lease term. 1.16 Accounting for taxes (a) Current tax is accounted on the basis of estimated taxable income for the current accounting year and in accordance with the provisions of the Income Tax Act, 1961. (b) Deferred tax resulting from "timing differences" between accounting and taxable profit for the period is accounted by using tax rates and laws that have been enacted or substantively enacted as at the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future. Net deferred tax liabilities are arrived at after setting off deferred tax assets. (c) Minimum alternative tax (MAT) paid in accordance with the tax laws, which gives rise to future economic benefits in the form of adjustment of future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognised as an asset when it is probable that the future economic benefit associated with it will flow to the Company. 1.17 Foreign currency transactions and balances (a) Foreign currency transactions are recorded at the exchange rates brvailing on the date of the transaction. (b) The net gain or loss on account of exchange differences arising on settlement of foreign currency transactions are recognized as income or expense of the period in which they arise. (c) Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing rate. The resultant exchange differences are recognized in the statement of profit and loss. Non-monetary assets and liabilities are carried at the rates brvailing on the date of transaction. The Company has not exercised the option for capitalization or amortization of exchange differences on long term foreign currency monetary items as provided by notification issued by the Ministry of Corporate Affairs. (d) Investments in shares of foreign subsidiaries and other entities are exbrssed in reporting currency at the rates of exchange brvailing at the time when the original investments were made. 1.18 Derivative instruments and hedge accounting (a) In case of forward contracts, to which AS 11, "The Effects of Changes in Foreign Exchange Rates" applies, the difference between the forward rate and the exchange rate on the date of the contract is recognized as income or expense over the life of the contract. Exchange differences on such a contract are recognized in the statement of profit and loss in the period in which the exchange rates change. (b) Foreign currency forward contracts, to which AS 11 does not apply, hedge accounting principles set out in AS 30 "Financial Instruments: Recognition and Measurement" are adopted w.e.f. 01st April, 2011 to the extent they do not conflict with existing mandatory accounting standards and other authoritative pronouncements, Company law and other regulatory requirements. These transactions comprise of forward contracts taken to hedge risks associated with foreign currency fluctuations relating to highly probable forecast transactions and designated as cash flow hedges and valued at fair value. Changes in the fair value of these forward contracts that are effective hedges are recognized directly in cash flow hedge reserve account and the ineffective portion is recognized in the statement of profit and loss. Amount accumulated in cash flow hedge reserve account is reclassified to the statement of profit and loss in the same period during which the forecasted transaction materialize. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognized in cash flow hedge reserve account is immediately transferred to the statement of profit and loss for the period. 1.19 Provisions, contingent liabilities and contingent assets Provisions involving substantial degree of estimation in measurement are recognized when there is a brsent obligation as a result of past events and it is probable that there will be an outflow of resources for which reliable estimate can be made. Liabilities which are of a contingent nature are not provided but are disclosed at their estimated amount in the notes forming part of the financial statements. Contingent assets are neither recognized nor disclosed in the financial statements. NOTE - 2 : AMALGAMATION The Company acquired 100% stake in formulation facility of Zyg Pharma Private Limited on 17th July 2015, which is engaged in the business of manufacturing various dermatological formulations. The Hon'able High Court of Gujarat vide its Order dated 11th February, 2016, has sanctioned the Scheme of Amalgamation of Zyg Pharma Private Ltd with Torrent Pharmaceuticals Limited under Sections 391 to 394 and other applicable provisions of the Companies Act, 1956 ("the Act") with effect from Appointed Date of 1st October, 2015. The amalgamation has been accounted for under the "Purchase Method" as brscribed under Accounting Standard 14 -'Accounting for Amalgamations'.' The goodwill arising on account of the difference between the investment and the fair value of net assets acquired by the Company has been written off in the current year pursuant to the said scheme of amalgamation approved by the Hon'ble High Court of Gujarat vide its order dated 11th February, 2016. NOTE - 3 : EXCEPTIONAL ITEMS Exceptional items for year ended 31st March, 2016 includes: a) the write back of provision for diminuation in value of investment of Rs. 3749 crores and profit on sale of investments of Rs. 15.85 crores; b) the goodwill writen off of Rs. 192.82 crores [Note 42] For DELOITTE HASKINS & SELLS Chartered Accountants Samir Mehta Executive Chairman Hemendra Shah Partner Ashok Modi Executive Director & Chief Financial Officer Mahesh Agrawal VP (Legal) & Company Secretary Place : Ahmadabad Date : 23rd May, 2016 |