SIGNIFICANT ACCOUNTING POLICIES 1. CORPORATE INFORMATION Indoco Remedies Limited (the Company) is a public Limited Company domiciled in India and incorporated under the provision of the Companies Act, VII of 1913. Its Shares are listed on two stock exchanges in India. Indoco Remedies Limited is engaged in the manufacturing and marketing of Formulations (Finished Dosage Forms) and Active Pharmaceutical Ingredients (APIs). The Company caters to both Domestic and International markets. The Company has three wholly owned subsidiaries Xtend Industrial Designers and Engineers Pvt Ltd, Indoco Pharmchem Ltd and Indoco Remedies Singapore PTE Ltd. 2. SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of Accounting and brparation of Financial Statements The financial statements of the Company have been brpared in accordance with the generally Accepted Accounting Principles in India (Indian CAAP) to comply with the Accounting Standards notified under provisions of the Companies Act, 2013. The financial statements have been brpared on accrual basis under the historical cost convention. All 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. 2.2 Use of Estimates The brparation of the financial statements in conformity with Indian CAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialised. 2.3 Fixed Assets Tangible Assets Tangible Assets are stated at historical cost net of recoverable taxes such as CENVAT. In case of fixed assets acquired for new projects / expansion, interest cost on borrowings & other related revenue expenses such as salaries etc. are capitalised. Intangible Assets The cost of an intangible asset comprises its purchase price, including any import duties and other taxes (other than those subsequently recoverable from the taxing authorities), and any directly attributable expenditure on making the asset ready for its intended use and net of any trade discounts and rebates. 2.4 Capital work in progress Project 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. 2.5 Debrciation and Amortisation Tangible Assets Debrciation on Fixed Assets is provided on the straight line method on all assets except assets at Waluj, Rabale & HO which is provided on written down value method. However, debrciation on residential flat at HO and plant and machinery at Rabale is provided on straight line method. Debrciation is provided based on useful life of the assets as brscribed in Schedule II to the Companies Act, 2013. Intangible Assets Trademarks / Technical Knowhow are recorded at their acquisition cost and amortized on the written down value method over their estimated economic life. All revenue expenditure incurred till the development of ANDAs / DMFs / Dossiers etc. are grouped under intangible assets under development. Once the development is complete, the expenditure incurred on the said project is capitalized & grouped under "Intangible Assets" and amortized based on best estimated commercial revenue period, not exceeding 5 years. The carrying value of the capitalized project is reviewed for impairment annually. 2.6 Borrowing Cost Borrowing costs include interest, amortisation of ancillary costs incurred in connection with the arrangement of Borrowings and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. 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 are capitalised as part of the cost of the respective asset. All other Borrowing costs are expensed in the period they occur. 2.7 Impairment of Tangible Assets and Intangible Assets An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. An impairment loss is charged to the Profit and Loss Statement in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount. 2.8 Government Grants and Subsidies Government grants are accounted when there is reasonable assurance that the enterprise will comply with the conditions attached to them and it is reasonably certain that the ultimate collection will be made. Capital grants related to specific fixed assets are reduced from the gross value of the respective fixed assets. Revenue grants are recognized in the Profit & Loss account. Subsidies received from the State Government are treated as reserves. 2.9 Investments Current Investments are carried at lower of cost and quoted / fair value, computed category wise. Long Term Investments are stated at cost. Provision for diminution in the value of long term investments is made only if such a decline is other than temporary. 2.10 Inventories Raw Materials, Packing Materials & Consumables are valued at cost or net realizable value, whichever is lower. Work-in-process is valued at cost including proportionate related overheads or net realizable value, whichever is lower. Finished goods are valued at cost or net realizable value, whichever is lower. All materials are valued at weighted average cost. Samples are valued at cost. 2.11 Research & Development Expenses Research & Development costs of revenue nature are charged to Profit & Loss account when incurred. Expenditure of capital nature is capitalised and debrciation is provided on these assets as per the provisions as brscribed in Schedule II of the Companies Act, 2013. 2.12 Revenue Recognition: Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised. 2.13 Sale of goods and services 1. Sales of products are recognized when risk and rewards of ownership of the product are passed on to the customers, which is generally on dispatch of goods. 2. Export sales are recognized on the basis of Bill of Lading / Airway Bills. 3. All sales revenues are stated at net of returns, discounts and sales tax. 4. Exports benefits available under brvalent scheme are accrued and accounted in the year in which the goods are exported to the extent considered receivable. 5. Revenue from services rendered is recognised in the Profit and Loss account based on underlying contract. 2.14 Interest and Dividend Income Interest Income is accounted on accrual basis. Dividend income is accounted for when the right to receive it is established. 2.15 Foreign Currency Transactions 1. Transactions denominated in foreign currencies are recorded at the exchange rate brvailing on the date of the transaction or that approximates the actual rate at the date of the transaction. 2. Monetary items denominated in foreign currencies at the year end are restated at year end rates. In case of items which are covered by forward exchange contracts the same are denominated at forward rate. The brmium / (discount) paid on forward contract is recognized over the life of the contract. 3. Any income or expense on account of exchange difference either on settlement or on translation is recognized in the Profit & Loss account except in case of long term liabilities. 2.16 Retirement and Other Employees' Benefits Company's contribution to Provident, Superannuation Funds is accounted on accrual basis and charged to Profit & Loss account. The Company also provides for unutilized leave benefits to its employees on actuarial valuation. The company's contribution to LIC for group gratuity policy is charged to Profit and Loss account each year. 2.17 Income Taxes Current tax is determined as the amount of tax payable in respect of taxable income for the year. Minimum Alternate 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 tax after tax holiday period. Accordingly it is recognized as an asset in the Balance Sheet when it is probable that the future economic benefit associated with it will flow to the company and the asset can be measured reliably. Deferred tax is recognised, subject to the consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent years. 2.18 Earnings Per Share (EPS) Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding as on reporting date. The weighted average number of Equity Shares outstanding during the period is adjusted for events such as Bonus issue, share split that have changed the number of equity shares outstanding, without a corresponding change in resources. 2.19 Provisions A provision is recognised when the Company has a brsent obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are determined based on the best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. 2.20 Contingent Liabilities A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurence or non - occurence of one or more uncertain future events beyond the control of the company or a brsent obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contigent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliabily. Contingent liabilities are disclosed in the Note No.30. 2.21 Excise Duty Excise duty is accounted for as and when paid on the clearance of the goods from bonded brmises. Excise duty in respect of finished goods lying in bonded brmises are provided for and included in the valuation of inventory. Note 2 : Pursuant to the enactment of Companies Act 2013, the company has applied the estimated useful life as specified in Schedule II, except in certain assets as disclosed in the Accounting policy on Debrciation, Amortisation and depletion. Accordingly the unamortised carrying value is being debrciated / amortised over the revised / remaining useful lives. The written down value of Fixed Assets whose lives have expired at 1st April,2014 have been adjusted net of tax , in the opening balance of Profit and Loss account amounting to f 471.40 Lakhs in the brvious year. Note 3 : Previous year's figures have been regrouped and reclassified wherever necessary. As per our Report attached For Patkar & Pendse Chartered Accountants Firm Registration No. : 107824W Aditi Panandikar Managing Director DIN : 00179113 B. M. Pendse Partner membership No. 32625 Sunil D. Joshi President (Finance) & Company Secretary Sundeep V. Bambolkar Jt. Managing Director & CFO DIN : 00176613 Place : Mumbai, date : may 27, 2016 |