(i) Basis of preparation of financial statements
The financial statements have been prepared and presented under the
historical cost convention on the accrual basis of accounting and
mandatory Accounting Standards (''AS'') prescribed by the Companies
(Accounting Standards), Rules 2006 and the relevant provisions of the
Companies Act, 1956, to the extent applicable.
The Board of Directors at their meeting held on 23 February 2010 had
approved the change in the company''s statutory accounting year from
January- December to April- March. Accordingly, the previous period
financial accounts are for a period of 15 months, i.e. from 1 January
2010 to 31 March 2011 (the Period).
(ii) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent liabilities on the date of
the financial statements. Actual results could differ from those
estimates. Any revision to accounting estimates is recognised
prospectively in current and future years.
(iii) Revenue recognition
Revenue from sale of goods (including sale of scrap) is recognised on
transfer of all significant risks and rewards of ownership to the
buyer. The amount recognised as sale is exclusive of sales tax and net
of trade discounts and sales returns. Sales are presented both gross
and net of excise duty.
Interest on deployment of surplus funds is recognised using the time
proportion method, based on underlying interest rates.
The Company derives its service income from services for clinical
trials provided to its group companies and co-promotion services to its
customers. The income from clinical trials is based on a ''cost plus''
model as agreed with its group companies. As per the agreement, costs
incurred internally are charged with a mark-up and those incurred
externally are charged at actuals. Revenue from such services is
recognised when the service is performed in accordance with agreement
with the group companies. The income from co-promotion services is
recognised when the service is performed in accordance with the
agreement with the customer.
Revenues which have not been billed, but have been accrued as per the
terms of the contract with the customers are debited as unbilled
The Company derives its rental income from group companies for the
assets leased. Income is accrued based on the agreement entered.
(iv) Fixed assets and capital work-in- progress
Fixed assets are carried at cost of acquisition or construction less
accumulated depreciation. The cost of fixed assets includes freight,
duties, taxes and other incidental expenses related to the acquisition
or construction of the respective fixed assets. Borrowing costs
directly attributable to acquisition or construction of those fixed
assets which necessarily take a substantial period of time to get ready
for their intended use are capitalised. Intangible assets are recorded
at their acquisition cost.
The cost of the fixed assets not ready for their intended use before
such date, are disclosed as capital work-in-progress.
Depreciation on fixed assets is provided on the straight-line method,
based on useful lives of assets as estimated by management.
License for use and application of know-how and trademark are being
amortised on straight-line method over its useful life of 60 months as
specified in the contract, from the date it was available for use.
Pro-rata depreciation is provided on all assets purchased and sold
during the year. Assets costing individually Rs 5,000 or less are
depreciated fully in the year of purchase.
(vi) Impairment of assets
The Company periodically assesses whether there is any indication that
an asset or a group of assets comprising a cash generating unit may be
impaired. If any such indication exists, the Company estimates the
recoverable amount of the asset. For an asset or group of assets that
does not generate largely independent cash inflows, the recoverable
amount is determined for the cash-generating unit to which the asset
belongs. If such recoverable amount of the asset or the recoverable
amount of the cash generating unit to which the asset belongs is less
than its carrying amount, the carrying amount is reduced to its
recoverable amount. The reduction is treated as an impairment loss and
is recognised in the statement of profit and loss. If at the balance
sheet date there is an indication that if a previously assessed
impairment loss no longer exists, the recoverable amount is reassessed
and the asset is reflected at the recoverable amount subject to a
maximum of depreciable historical cost. An impairment loss is reversed
only to the extent that the carrying amount of asset does not exceed
the net book value that would have been determined, if no impairment
loss had been recognised.
(vii) Foreign exchange transactions
Foreign exchange transactions are recorded using the exchange rates
prevailing on the dates of the respective transactions. Exchange
differences arising on foreign exchange transactions settled during the
year are recognised in the statement of profit and loss for the year.
Monetary assets and liabilities denominated in foreign currencies as at
the balance sheet date are translated at the closing exchange rate on
that date, the resultant exchange differences are recognised in the
statement of profit and loss.
(viii) Employee benefits
Employees of the Company receive benefits from a provident fund, which
is a defined benefit plan. Both the employee and the Company make
monthly contributions to the provident plan equal to a specified
percentage of the employee''s salary. The Company contributes a part of
the contributions to the AstraZeneca Pharma India Limited Management
Staff Provident Fund Trust. The remaining portion is contributed to the
government administrated pension fund. The rate at which the annual
interest is payable to the beneficiaries by the trust is being
administered by the government. The Company has an obligation to make
shortfall, if any, between the returns from the investments of the
trust and the notified interest rate.
The Company has an arrangement with Life Insurance Corporation of India
and ICICI Prudential Life Insurance Company to administer its
superannuation scheme, which is a defined contribution scheme. The
contributions to the said scheme are charged to the statement of profit
and loss on an accrual basis.
Liability for gratuity, which is a defined benefit, is provided based
on an actuarial valuation at the balance sheet date, carried out by an
independent actuary using projected unit credit method and charged to
the statement of profit and loss. The Company makes contributions
towards gratuity into the approved gratuity fund administered by ICICI
Prudential Life Insurance Company.
Liability for compensated absences, which is a defined benefit, is
provided on the basis of an actuarial valuation and is charged to the
statement of profit and loss on an accrual basis.
Long-term investments are stated at cost less any other-than-temporary
diminution in value, determined separately for each individual
(x) Other current assets
Stock of samples have been valued at cost, as in the ordinary course of
business they have a realisable value at least equal to cost.
Inventories are valued at lower of cost and net realisable value. Cost
of inventories comprises all costs of purchase, costs of conversion and
other costs incurred in bringing inventories to their present location
The comparison of cost and net realisable value is made on an
The net realisable value of work-in-progress is determined with
reference to the selling prices of related finished goods. Raw
materials, packing materials and other supplies held for use in
production of inventories are not written down below cost except in
cases where material prices have declined, and it is estimated that the
cost of the finished products will exceed their net realisable value.
The provision for inventory obsolescence is assessed regularly based on
estimated usage and shelf life of products.
The methods of determination of cost of various categories of
inventories are as follows:
(i) Raw materials and packing materials
Monthly moving weighted average cost
(ii) Work-in-process and finished goods (Manufactured)
Weighted average cost of production. Fixed production overheads are
allocated on the basis of normal capacity of production facilities
(iii) Traded goods Weighted average cost
(iv) Goods in transit Actual cost
(xii) Provisions and contingent liabilities
The Company recognises a provision when there is a present obligation
as a result of an obligating event that probably requires outflow of
resources and a reliable estimate can be made of the amount of the
The disclosure of contingent liability is made when, as a result of
obligating events, there is a possible obligation or a present
obligation that may, but probably will not, require outflow of
No provision or disclosure is made when, as a result of obligating
events, there is a possible obligation or a present obligation where
the likelihood of outflow of resources is remote.
Provision for onerous contracts, i.e. contracts where the expected
unavoidable cost of meeting the obligations under the contract exceed
the economic benefits expected to be received under it, are recognised
when it is probable that an outflow of resources embodying economic
benefits will be required to settle a present obligation as a result of
an obligating event based on a reliable estimate of such obligation.
Income-tax expense comprises current tax (i.e. amount of tax for the
year determined in accordance with the income-tax law) and deferred tax
charge or credit (reflecting the tax effects of timing differences
between accounting income and taxable income for the year). The
deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the balance sheet date. Deferred
tax assets are recognised only to the extent there is reasonable
certainty that the assets can be realised in future; however, where
there is unabsorbed depreciation or carried forward business loss under
taxation laws, deferred tax assets are recognised only if there is a
virtual certainty of realisation of such assets. Deferred tax assets/
liabilities are reviewed as at each balance sheet date and written down
or written-up to reflect the amount that is reasonably/ virtually
certain (as the case may be) to be realised.
The Company offsets, on a year on year basis, the current tax assets
and liabilities, where it has a legally enforceable right and where it
intends to settle such assets and liabilities on a net basis.
(xiv) Earnings per share
The basic earnings per share is computed by dividing the net profit
attributable to equity shareholders for the year by the weighted
average number of equity shares outstanding during the year.
Lease payments under operating lease are recognised as an expense in
the statement of profit and loss on a straight line basis over the
(xvi) Cash flow statement
Cash flows are reported using indirect method, whereby net profits
before tax are 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.
(xvii) Research and development
Research costs are expensed as incurred. Product development costs are
expensed as incurred unless technical and commercial feasibility of the
project is demonstrated, future economic benefits are probable, the
Company has an intention and ability to complete and use or sell the
product and the costs can be measured reliably.
Terms and rights attached to equity shares
The Company has only one class of share referred to as equity shares
having par value of Rs. 2 each. Each holder of equity shares is entitled
to one vote per share. The Company declares and pays dividends in
Indian rupees. The dividend proposed by the Board of Directors is
subject to the approval of the shareholders in the ensuing Annual
During the year ended 31 March 2012, the amount of per share dividend
recognized as proposed distributions to equity shareholders is Rs. 3.50
per share (31 March 2011: Rs. 10 per share).
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive any of the remaining assets of the
company, after distribution of all preferential amounts. However, no
such preferential amounts exist currently. The distribution will be in
proportion to the number of equity shares held by the shareholders.