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Moneycontrol.com India | Accounting Policy > Personal Care > Accounting Policy followed by Procter and Gamble Hygiene and Health Care - BSE: 500459, NSE: PGHH
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Procter and Gamble Hygiene and Health Care
BSE: 500459|NSE: PGHH|ISIN: INE179A01014|SECTOR: Personal Care
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« Jun 10
Accounting Policy Year : Jun '11
Accounting Convention
 
 The financial statements are prepared under the historical cost
 convention, on an accrual basis, in accordance with the Generally
 Accepted Accounting Principles and applicable accounting standards as
 notified under the Companies (Accounting Standards) Rules 2006.
 
 Use of estimates
 
 The preparation and presentation of financial statements in conformity
 with Generally Accepted Accounting Principles requires making of
 estimates and assumptions that effect the reported amounts of assets
 and liabilities and disclosure of contingent assets and liabilities at
 the date of the financial statements and the reported amounts of
 revenues and expenses during the reporting year. Differences between
 the actual result and estimates are recognised in the year in which the
 results are known/materialised.
 
 Revenue Recognition
 
 Sale of products are recognised when risk and rewards of ownership of
 the products are passed on to the customers, which is generally on the
 despatch of goods. Sales are exclusive of sales tax. Licence fee is
 accounted based on terms of the contract. Interest income is recognized
 on time proportion basis.
 
 Fixed Assets and Depreciation/Amortization
 
 Fixed assets are stated at cost of acquisition less accumulated
 depreciation and impairment, if any. Cost is inclusive of freight,
 duties, taxes and other directly attributable costs incurred to bring
 the assets to their working condition for intended use. Depreciation is
 charged using straight-line method based on the useful lives of the
 fixed assets as estimated by the management as specified below, or the
 rates specified in accordance with the provisions of Schedule XIV of
 the Companies Act, 1956, whichever is higher.
 
 Depreciation is charged on a pro-rata basis for assets purchased/sold
 during the year. Individual fixed assets costing less than Rs.5000 are
 depreciated in full, in the year of purchase. Cost of leasehold land is
 amortised over the period of the lease or management estimate whichever
 is lower.
 
 Impairment of Assets
 
 The Company assesses at each Balance Sheet date whether there is any
 indication that an asset may be impaired. If any such indication
 exists, the Company estimates the recoverable amount of the asset. 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 in the carrying amount is treated as an
 impairment loss and is recognised in the Profit and Loss Account. 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.
 
 Inventories
 
 Inventories consist of raw and packing materials, stores and spares,
 work in progress and finished goods. Inventories are valued at lower of
 cost and net realisable value. Cost of Inventories is determined on
 weighted average basis. Cost of manufactured finished goods and
 work-in-progress includes material cost determined on weighted average
 basis and also includes an appropriate portion of allocable overheads.
 
 Employee benefits
 
 (i) Post-employment Benefits
 
 (a) Defined Contribution Plans:
 
 The Company has Defined Contribution Plans for post-employment
 benefits, charged to Profit and Loss account, in the form of
 
 — Provident Fund administered by the Regional Provident Fund
 Commissioner;
 
 — Superannuation Fund as per Company policy administered by Company
 managed trust and
 
 — State Defined Contribution Plans: Employer''s Contribution to
 Employees'' State Insurance.
 
 (b) Defined Benefit Plans:
 
 Funded Plan: The Company has Defined Benefit Plan for post-employment
 benefits in the form of
 
 — Gratuity for all employees administered through trust.
 
 Unfunded Plan: The Company has unfunded Defined Benefit Plans in the
 form of
 
 — Post Retirement Medical Benefits (PRMB) as per its policy.
 
 Liability for the above defined benefit plans is provided on the basis
 of valuation, as at the Balance Sheet date, carried out by independent
 actuary. The actuarial method used for measuring the liability is the
 Projected Unit Credit method.
 
 (ii) Liability for Compensated Absences and Leave Travel Allowance
 which are in the nature of short term benefits is provided for as per
 company rules on an accrual basis
 
 (iii) Termination benefits and long service awards in terms of Company
 policy are recognized as an expense as and when incurred
 
 (iv) The Actuarial gains and losses arising during the year are
 recognized in the Profit and Loss Account for the year.
 
 (v) The Procter & Gamble Company, USA has a Employee Stock Option
 Plan whereby the employees covered by the plan are granted an option
 to purchase shares of the ultimate holding company i.e. - The Procter &
 Gamble Company, USA at a fixed price (grant price) for a fixed period
 of time. The difference between the market price and grant price on the
 exercise of the stock options issued by the Ultimate Holding Company to
 the employees of the Company is charged in the year of exercise by the
 employees.
 
 Research and Development
 
 Capital expenditure on Research and Development is capitalized as Fixed
 Assets. All revenue expenditure on Research and Development is charged
 off to the respective heads in the Profit and Loss account in the year
 in which it is incurred.
 
 Foreign Exchange Transactions
 
 Transactions in foreign currencies are recorded at the exchange rates
 prevailing on the date of transaction. Monetary items denominated in
 foreign currencies are stated at the closing exchange rate. In the case
 of Monetary items covered by forward exchange contracts, the premium or
 discount arising at the inception of such a forward exchange contract
 is amortised as expense or income over the life of the contract and the
 difference between the year end rate and rate on the date of the
 contract is recognised as exchange difference in the Profit and Loss
 Account. Gains/Losses on conversion/ translation have been recognised
 in the Profit and Loss Account.
 
 Taxation
 
 Income-tax expense comprises current tax (i.e. amount of tax for the
 year determined in accordance with the income-tax laws) and deferred
 tax charge or credit (reflecting the tax effect of timing differences
 between accounting income and taxable income for the year). Provision
 for taxation for the Company''s financial year ended on June 30,2011 is
 based on the results of the 9 months ended March 31,2011 (Assessment
 year 2011-12) and for the 3 months ended June 30, 2011 (Assessment year
 2012-13). The ultimate liability for the Assessment year 2011-12 is
 determined on the total income of the Company for the year ending on
 March 31, 2011. The deferred tax charge or credit and the corresponding
 deferred tax liabilities and/or assets are recognised using the tax
 rates that have been enacted or substantively enacted by the Balance
 Sheet date.  Deferred tax assets are recognized only to the extent
 there is reasonable certainty that the assets can be realised in
 future.  However, where there is unabsorbed depreciation or carry
 forward losses under taxation laws, deferred tax assets are recognized
 only if there is virtual certainty of realisation of such assets.
 Deferred tax assets are reviewed as 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 realised.
 
 Minimum Alternate Tax (MAT) credit entitlement is recognised as an
 asset by crediting the Profit and Loss Account to the extent there is
 convincing evidence that the same will be utilised within the
 stipulated period and disclosing an equivalent amount as an asset under
 ''Loans and Advances'' in accordance with Guidance Note on Accounting
 for Credit Available in respect of Minimum Alternate Tax under the
 Income Tax Act, 1961 issued by the Institute of Chartered Accountants
 of India.
 
 The Fringe Benefit Tax has been calculated and accounted for in
 accordance with the provisions of the Income-tax Act, 1961 and the
 guidance note on Accounting for Fringe Benefits Tax issued by the
 Institute of Chartered Accountants of India. Pursuant to enactment of
 Finance Act, 2009, Fringe Benefit stands abolished w.e.f. April 01,
 2009.
 
 Borrowing cost
 
 Borrowing costs directly attributable to acquisition or construction of
 qualifying assets (i.e. those fixed assets which necessarily take a
 substantial period of time to get ready for their intended use) are
 capitalised. Other borrowing costs are recognised as an expense in the
 period in which they are incurred.
 
 Leases
 
 Lease payments under operating lease are recognised as an expense in
 the Profit and Loss Account on a straight line basis over the lease
 term with the lessor.
 
 Provisions, Contingent Liabilities and Contingent Assets
 
 Provisions are recognised when the Company has a legal and constructive
 obligation as a result of a past event, for which it is probable that a
 cash outflow will be required and a reliable estimate can be made of
 the amount of the obligation. Contingent Liabilities are disclosed when
 the Company has a possible obligation or a present obligation and it is
 probable that a cash outflow will not be required to settle the
 obligation. Contingent Assets are not recognized in financial
 statements as they may never be realized.
Source : Dion Global Solutions Limited
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