Notes forming part of the financial statements (Contd.) 1) Corporate Information: Dr. Agarwal's Eye Hospital Limited ('the Company') was incorporated on April 22, 1994 under the provisions of Companies Act, 1956. The Company is primarily engaged in running, owning and managing eye care hospitals, Opticals, Pharmacy along with various other objectives like rendering hospital services in all branches of medical sciences both in India, carrying out medical research activities, etc. As at March 31, 2015, the Company is operating with 21 branches and one main hospital in India. As on March 31, 2015, Dr.Agarwal's Health Care Limited is holding 71.75% of the Company's Equity share capital and has the ability to control its operating and financial policies. 2) Significant Accounting Policies: a. Basis of brparation of financial statements The financial statements of the Company have been brpared in accordance with the Generally Accepted Accounting Principles in India [Indian GAAP] to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013. The financial statements have been brpared on accrual basis under the historical cost convention. The brparation of financial statements requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities, revenues and expenses and disclosures relating to contingent liabilities. The Management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. Any revision to the accounting estimates is recognized prospectively in the current and future periods. Estimates include provisions for employee benefit plans, provision for income taxes and provision for diminution in the value of investments, b. Presentation of financial statements The Balance Sheet and the Statement of Profit and Loss are brpared and brsented in the format brscribed in Schedule III to the Companies Act, 2013 ("the Act"). The Cash Flow Statement has been brpared and brsented as per the requirements of Accounting Standard (AS) 3 "Cash Flow Statements". The disclosure requirements with respect to items in the Balance Sheet and Statement of Profit and Loss, as brscribed in the Schedule III to the Act, are brsented by way of notes forming part of accounts along with the other notes required to be disclosed under the notified Accounting Standards. c. Inventory Inventory of Traded Goods comprising Opticals, Pharmaceutical Products, Consumables and Food items are valued at lower of cost ascertained using the First-in-First-out method and net realizable value. Cost includes freight, taxes, duties and other charges incurred for bringing the goods to the brsent location and condition and are net of VAT credit, where applicable. Due allowance is estimated and made for unusable/ non-saleable/ expired items of inventory wherever necessary, based on the past experience of the Company and such allowances are adjusted against the inventory carrying value. d. Cash Flow Statement Cash flows are reported using the indirect method, whereby net profit/ (loss) before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, investing and financing activities of the Company are segregated based on available information including taxes paid relating to these activities. e. Prior Period and Extraordinary Items Prior period items and extraordinary items are separately classified, identified and dealt with as required under AS 5 'Net profit or loss for the period, prior period items and changes in accounting policies' as specified in the Companies (Accounting Standards) Rules, 2006. f Debrciation and Amortization Debrciation on assets has been provided on written down value method based on the useful life specified in the Schedule II of the Companies Act, 2013. Debrciation on additions/ deductions is calculated pro-rata from/ to the month of additions/ deductions. Improvements to Leasehold Premises are amortized over the remaining primary lease period. Individual low cost assets (acquired for less than Rs.5,000) are entirely debrciated in the year of acquisition. Goodwill is amortized at 1/10th of the total value of acquisition on a proportionate basis. Other Intangible assets namely specialized software is amortized over a period of three years. g. Revenue Recognition Revenue is recognized on accrual basis as and when goods are sold or services are rendered, to the extent there is no uncertainty in ultimate realization. Sales and Service Income exclude Value Added Tax (VAT) / Service Tax and are net of trade / volume discounts, where applicable. Sale of products comprises Sale of Optical Frames and Lens, Pharmaceutical Products, Contact Lens, related accessories and Food items which are recognized on delivery of items to the customers. Sale of services comprises Income from Consultation, Surgeries, Treatments and Investigations performed, which are recognized on rendering the related services. Interest income is recognized on a time proportion basis taking into account the principal amount outstanding and the interest rate. Dividend Income is accounted for when right to receive it is established. h. Fixed Assets Tangible fixed assets are stated at original cost, net of tax/duty credits availed if any, less accumulated debrciation and impairment losses recognized where necessary. Costs include all expenses incurred to bring the assets to its brsent location and condition. Subsequent expenditure relating to fixed assets is capitalized only if such expenditure results in an increase in the future benefits from such asset beyond its brviously assessed standard of performance. Improvements made to Leasehold Buildings are being capitalized. Fixed assets retired from active use and held for sale are stated at the lower of their net book value and net realizable value and are disclosed separately in the Balance Sheet. Intangible fixed assets are recorded at the consideration paid for acquisition and are carried at cost less accumulated amortization and Impairment Losses if any. Capital work-in-progress: Projects under which assets are not ready for their intended use and other capital work-in-progress are carried at cost, comprising direct cost, related incidental expenses and attributable interest. i. Transaction in Foreign Currencies Foreign currency transactions are recorded at the rates brvailing on the date of transaction. Monetary assets and liabilities in foreign currency are translated at closing rate. Exchange differences arising on settlement or translation of monetary items are recognized as income or expense in the statement of Profit and Loss in the period it arises. Investments Long term investments are stated at cost. However, the Company provides for diminution in the value of long term investments other than those temporary in nature. Current investments are valued at lower of cost and fair value. k. Employee Benefits (i) Defined Contribution Plan Contributions to Employee's Provident Fund and Pension Fund are deposited with the Government and the Company's contribution to the funds is charged to revenue. (ii) Defined Benefit Plan The Company makes annual contribution to a Gratuity fund which is administered by trustees and managed by the LIC of India. The Company accounts its liability for future gratuity benefits based on actuarial valuation as at the Balance Sheet date, determined every year using the projected unit credit method. Obligation under the defined benefit plan is measured at the brsent value of estimated future cash flows using a discounted rate that is determined by reference to brvailing market yields at the Balance Sheet date on Indian Government Bonds where the currency and terms of the Indian Government Bonds are consistent with the currency and estimated term of the defined benefit obligation. Actuarial gains / losses are recognized in the Statement of Profit and Loss in the year in which they arise. (iii) Compensated Absences The liability for long term compensated absences carried forward on the balance sheet date is provided for based on an actuarial valuation done by an independent actuary using the projected unit credit method done at the end of each accounting year. Short term compensated absences is recognized based on the eligible leave credit on the balance sheet date, and the estimated cost is based on the terms of the employment contract. (iv) Other Employee Benefits Other Employee Benefits are estimated based on the terms of the employment contract. l. Borrowing Cost Borrowing costs that are attributable to the acquisition or construction of qualifying assets are added to the cost of those assets, upto the date when the assets are ready for their intended use. All other borrowing costs are recognized in the statement of Profit and Loss in the period in which they are incurred m. Segment Reporting The Company has complied with Accounting Standard - 17 "Segment reporting" as specified in the Companies (Accounting Standards) Rules, 2006, with Business as the primary segment. Revenue and expenses have been identified to segments on the basis of their relationship to the operative activities of the segment. Revenue and expenses which relates to the enterprise as a whole and are not allocable to the segments on a reasonable basis have been included under unallocable expenses. Inter-segment revenue and expenses are eliminated. n. Leases Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor, are recognized as operating leases. Lease rentals under operating leases are recognized in the statement of profit and loss. o. Earnings Per Share Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) attributable to equity shareholders by the weighted average number of equity shares outstanding during the year / period. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. p. Taxes on Income (i) Current Tax Current Tax is the amount of tax payable on the taxable income for the year and is determined in accordance with the provisions of the Income Tax Act, 1961. (ii) Deferred Tax Deferred tax is recognized on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date. Deferred tax liabilities are recognized for all timing differences. Deferred tax assets are recognized for timing differences only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realized. However, if there is unabsorbed debrciation and carry forward of losses, deferred tax assets are recognized only if there is virtual certainty that there will be sufficient future taxable income available to realize the assets. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each balance sheet date for their realisability. q. Impairment of assets The carrying amounts of assets are reviewed at each Balance Sheet date to determine whether there is any indication of impairment of the carrying amount of the assets. If any indication exists, the recoverable amount of such assets is estimated. An impairment loss is recognized whenever the carrying amount of the asset exceeds the recoverable amount. When there is an indication that an impairment loss recognized for an asset in earlier accounting periods no longer exists or may have decreased such reversal of impairment loss is recognized in the Statement of Profit and Loss. r. Bad Debts Policy The Board of Directors approves the bad debt policy, based on the recommendation of the Audit Committee, after the review of recoverability of Trade Receivables as on Balance sheet date. s. Provisions, Contingent Liabilities and Contingent Assets A provision is recognized when the company has a brsent obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Contingent liabilities are not provided for unless a reliable estimate of probable outflow to the Company exists as at the balance sheet date. Contingent assets are neither disclosed nor recognized in the financial statements. t. Operating Cycle for current and non-current classification: All assets and liabilities have been classified as current or non-current as per the Companies Act, 2013. Based on the nature of activities and the normal time between the acquisition of the assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current. 2. Un-Hedged Foreign Currency Exposure as at the Balance Sheet date The Company does not use any derivative instruments to hedge its foreign currency exposures. Further, the Company has unhedged foreign currency receivable exposure of Rs.77.31 Lacs as at March 31, 2015. (Rs.53.98 Lacs as at March 31, 2014) 3. Previous year figures have been recast / restated to conform to the classification of the current year. As per our report attached For M.K. Dandeker & Co., (Firm Regn. No. 000679S) For and on behalf of the Board of Directors Dr.Amar Agarwal Chairman & Managing Director Dr.Anosh Agarwal Director sd/- S. Poosaidurai Partner Chartered Accountants Membership No. 223754 sd/- R.Sabesan Chief Financial Officer sd/- S.Ramanujam Company Secretary Place : Chennai Date : May 26, 2015 |