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SENSEX NIFTY India | Accounting Policy > Pharmaceuticals > Accounting Policy followed by Granules India - BSE: 532482, NSE: GRANULES

Granules India

BSE: 532482|NSE: GRANULES|ISIN: INE101D01020|SECTOR: Pharmaceuticals
Jan 18, 16:00
-3.8 (-2.72%)
VOLUME 159,954
Jan 18, 15:59
-4.5 (-3.21%)
VOLUME 1,824,797
Mar 15
Accounting Policy Year : Mar '16
Corporate information
 Granules India Limited (the company) is a public domiciled in India and
 incorporated under the Companies Act, 1956. Its shares are listed on
 two Stock exchanges in India. The company is engaged in the
 manufacturing and selling of Active Pharmaceutical Ingredients (APIs)
 and Pharmaceutical Formulation intermediates (PFIs) and Finished
 Dosages (FDs). The company caters to both domestic and international
 1.1 Basis of preparation
 The financial statements of the Company have been prepared in
 accordance with the Generally Accepted Accounting Principles in India
 (Indian GAAP) to comply with the Accounting Standards notified under
 Section 133 of the Companies Act, 2013, read with paragraph 7 of the
 Companies (Accounts) Rules 2014. The financial statements have been
 prepared on accrual basis under the historical cost convention. The
 accounting policies adopted in the preparation of the financial
 statements are consistent with those followed in the previous year.
 1.2 Use of estimates
 The preparation of the financial statements in conformity with Indian
 GAAP 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 preparation of
 the financial statements are prudent and reasonable. Future results
 could differ due to these estimates. Difference between the actual
 results and the estimates are recognized in the periods in which the
 results are known / materialize.
 1.3 Tangible Fixed Assets:
 a.  Tangible fixed assets are stated at cost less accumulated
 depreciation and impairment losses, if any. The cost of fixed asset
 comprises of its purchase price, non-refundable taxes and levies,
 freight and other incidental expenses related to the acquisition and
 installation of the respective assets. Borrowing costs 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. Exchange differences arising on restatement / settlement
 of long-term foreign currency borrowings relating to acquisition of
 depreciable fixed assets are adjusted to the cost of the respective
 assets and depreciated. 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 previously assessed standard
 of performance.
 b.  Pre-operative expenditure comprising of revenue expenses incurred
 in connection with project implementation during the period up to
 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.
 1.4 Depreciation on tangible fixed assets:
 Depreciation on fixed assets is provided on a straight-line method
 based on the useful lives estimated by the management which are in
 accordance with Schedule II to the Companies Act, 2013.
 The management believes that depreciation rates currently used fairly
 reflect its estimate of the useful lives and residual values of fixed
 1.5 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.
 1.6 Intangible assets:
 Intangible assets acquired separately are measured on initial
 recognition at cost. The cost of intangible assets acquired in an
 amalgamation in the nature of purchase is their fair value as at the
 date of amalgamation. Following initial recognition, intangible assets
 are carried at cost less accumulated amortization and accumulated
 impairment losses, if any. Internally generated intangible assets,
 excluding capitalized development costs, are not capitalized and the
 expenditure is reflected in the statement of profit and loss in the
 year in which the expenditure is incurred.
 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.
 Intangible assets are amortized on a straight line basis over the
 estimated useful lives. The company uses a rebuttable presumption that
 the useful life of an intangible asset will not exceed ten years from
 the date when the asset is available for use. All intangible assets are
 assessed for impairment whenever there is an indication that the
 intangible asset may be impaired.
 The amortization period and the amortization method are reviewed
 periodically. If the expected useful life of the asset is significantly
 different from previous estimates, the amortization period is changed
 accordingly. If there has been a significant change in the expected
 pattern of economic benefits from the asset, the amortization method is
 changed to reflect the changed pattern.
 Gains or losses arising from de recognition of an intangible asset are
 measured as the difference between the net disposal proceeds and the
 carrying amount of the asset and are recognized in the statement of
 profit and loss when the asset is derecognized.
 1.7 Investments:
 Long-term investments and investments in subsidiary companies are
 carried at cost less provision for other than temporary diminution in
 the carrying value of each investment.
 Current investments are carried at lower of cost and fair value.
 Diminution in value is charged to the statement of profit and loss.
 1.8 Valuation of Inventories:
 Inventories are valued at the lower of cost and net realizable value.
 Net realizable value (NRV) is the estimated selling price in the
 ordinary course of the business, less the estimated costs of completion
 and the estimated costs necessary to make the sale. Cost of inventories
 comprises all cost of purchase, cost of conversion and other costs
 incurred in bringing the inventories to their present location and
 condition. The cost of all categories of inventory is determined using
 weighted average cost method.
 a) Inventories of raw material, packing material, consumables and
 stores and spares are valued at cost as per weighted average method.
 Cost does not include duties and taxes that are subsequently
 b) Cost for the purpose of finished goods and material in process is
 computed on the basis of cost of material, labour and other related
 c) Goods in transit are stated at costs accrued up to the date of
 Balance Sheet.
 d) Stocks with consignment agents are stated at costs accrued up to the
 date of the Balance sheet.
 1.9 Government grants:
 Grants received by way of investment subsidy scheme in relation to
 total investment are credited to capital reserve.
 1.10 Foreign currency transactions and balances:
 (i) Initial recognition
 Foreign currency transactions are recorded in the reporting currency,
 by applying to the foreign currency amount the exchange rate between
 the reporting currency and the foreign currency at the date of the
 (ii) Conversion
 Foreign currency monetary items are retranslated using the exchange
 rate prevailing at the reporting date. Non- monetary items, which are
 measured in terms of historical cost denominated in a foreign currency,
 are reported using the exchange rate at the date of the transaction.
 (iii) Exchange differences
 The Company accounts for exchange differences arising on translation /
 settlement of foreign currency monetary items as below:
 a) Exchange differences arising on long-term foreign currency monetary
 items related to acquisition of a fixed asset are capitalized and
 depreciated over the remaining useful life of the asset.
 b) All other exchange differences are recognized as income or as
 expenses in the period in which they arise.
 1.11 Revenue Recognition:
 a.  Revenue from sales is recognized when significant risk and rewards
 in respect of ownership of the products are transferred, recovery of
 the consideration in reasonably certain.
 b.  Revenue from sale of goods include excise duty, sales tax and is
 net of sales returns.
 c.  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.
 d.  Dividend income is recognized when the unconditional right to
 receive dividend is established.
 e.  Interest income is recognized using the time proportionate method,
 based on rates implicit in the transaction.
 f.  Revenue in respect of other income is recognized when a reasonable
 certainty as to its realization exists.
 1.12 Research and development expenses:
 a.  Research costs not resulting in any tangible property/equipment are
 charged to revenue as and when incurred.
 b.  Know-how / product development costs incurred on an individual
 project are carried forward when its future recoverability can
 reasonably be regarded as assured. Any expenditure carried forward is
 amortized over the period of expected future benefits from the related
 project, not exceeding ten years.
 c.  The carrying value of know-how / product development costs are
 reviewed for impairment annually when the asset is not yet in use and
 otherwise when events or changes in circumstances indicate that the
 carrying value may not be recoverable.
 1.13 Employee Retirement Benefits:
 a.  Defined Contributions Plan: Contributions paid/payable to the
 defined contribution plan of Provident Fund for certain employees
 covered under the scheme are recognized in the Profit and Loss account
 each year.
 b.  The Company makes contributions to a State operated contribution
 scheme for certain employees at a specified percentage of the
 employees'' salary. The Company has an obligation only to the extent of
 the defined contribution.
 c.  Defined Benefit Plan: Gratuity for employees is covered under a
 scheme of Life Insurance Corporation of India (LIC). The cost of
 providing the benefits under this plan is determined on the basis of
 actuarial valuation at each year-end. Actuarial gains and losses for
 defined benefits plan is recognized in full in the period in which they
 occur in the statement of profit and loss.
 d.  Other long term employee benefits: Other long term employee
 benefits comprise of leave encashment which is provided on the basis of
 actuarial valuation carried out in accordance with revised Accounting
 Standard 15 as at the end of the year/period.
 1.14 Borrowing costs:
 Borrowing costs incurred in relation to the acquisition and
 constructions of assets are capitalized as part of the cost of such
 assets up to the date when such assets are ready for intended use.
 Other borrowing costs are charged as an expense in the year in which
 they are incurred.
 1.15 Income tax expense:
 a.  Current Tax
 The Current charge for income tax is calculated in accordance with the
 relevant tax regulations applicable to the Company.
 b.  Deferred Tax
 Deferred tax charge or credit reflects the tax effects of timing
 difference between accounting income and taxable income for the period.
 The deferred tax charge or credit and the corresponding deferred tax
 liabilities or assets are recognized using the tax rates that have been
 enacted or substantially enacted by the balance sheet date. Deferred
 tax assets are recognized only to the extent there is reasonable
 certainly that the assets can be realized in future, however, where
 there is unabsorbed depreciation or carry forward of losses, deferred
 tax assets are recognized only if there is a virtual certainly of
 realization of such assets.
 Deferred tax assets are reviewed at each balance sheet date and are
 written-down or written-up to reflect the amount that is
 reasonably/virtually certain (as the case may be) to be realized.
 1.16 EBITDA
 The company presents earnings before interest, tax, depreciation and
 amortization (EBITDA) as a separate line item on the face of the
 statement of profit and loss. The company measures EBITDA on the basis
 of profit/ (loss) from continuing operations. In its measurement, the
 company does not include depreciation and amortization expense, finance
 costs and tax expense.
 1.17 Earnings per share
 The basic earnings per share (EPS) is computed by dividing the profit
 after tax for the year by the weighted average number of equity shares
 outstanding during the year. For the purpose of calculating diluted
 earnings per share, profit after tax for the year and the weighted
 average number of shares outstanding during the year are adjusted for
 the effects of all dilutive potential equity shares. The dilutive
 potential equity shares are deemed converted as of the beginning of the
 period, unless they have been issued at a later date. The diluted
 potential equity shares have been adjusted for the proceeds receivable
 had the shares been actually issued at fair value (i.e., the average
 market value of the outstanding shares).
 1.18 Provisions and contingent liabilities and contingent assets
 A provision is recognised when the Company has a present obligation as
 a result of past events and it is probable that an outflow of resources
 embodying economic benefits will be required to settle the obligation.
 Provisions are measured at the best estimate of the expenditure
 required to settle the present obligation at the balance sheet date.
 Contingent liabilities and contingent assets
 A disclosure for a contingent liability is made when there is a
 possible obligation or a present obligation that may, but probably will
 not, require an outflow of resources. Where there is a possible
 obligation or a present obligation in respect of which the likelihood
 of outflow of resources is remote, no provision or disclosure is made.
 Contingent assets are not recognised in the financial statements.
 However, contingent assets are assessed continually and if it is
 virtually certain that an inflow of economic benefits will arise, the
 asset and related income are recognised in the period in which the
 change occurs.
 1.19 Impairment
 The Company assesses at each reporting date whether there is an
 indication that an asset/cash generating unit may be impaired. If any
 indication exists the Company estimates the recoverable amount of such
 assets and if carrying amount exceeds the recoverable amount,
 impairment is recognised. The recoverable amount is the higher of the
 net selling price and its value in use. In assessing value in use, the
 estimated future cash flows are discounted to their present value using
 an appropriate discount factor. When there is indication that
 previously recognised impairment loss no longer exists or may have
 decreased such reversal of impairment loss is recognised in the
 Statement of Profit and Loss.
 1.20 Leases
 The Company''s significant leasing arrangements are in respect of
 operating leases for premises that are cancellable in nature. The lease
 rentals under such agreements are recognised in the Statement of Profit
 and Loss as per the terms of the lease.
 1.21 CENVAT Credit
 CENVAT (Central Value added tax) credit in respect of excise, customs
 and service tax is accounted on 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
 utilizable is charged to the statement of profit and loss for the year.
 1.22 Cash and Cash equivalents
 Cash and cash equivalents consist of cash on hand, demand deposits and
 short term, highly liquid investments that are readily convertible into
 known amounts of cash and which are subject to insignificant risk of
 changes in value. For this purpose, short term means investments having
 maturity of three months or less from the date of investment.
Source : Dion Global Solutions Limited
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