1.01 Basis of accounting and preparation of financial statements
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
the Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. 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
1.02 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 and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
1.03 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
dispatch of goods. Sales excludes trade discounts and rebate. Sales
include excise duty but exclude sales tax and value added tax. License
fee is accounted based on terms of the contract. Interest income is
accounted on accrual basis.
1.04 Tangible fixed assets and depreciation / amortization
Fixed assets are stated at cost of acquisition less accumulated
depreciation and impairment losses, if any. Cost of fixed assets is
inclusive of freight, duties, taxes and other directly attributable
costs incurred to bring the assets to their working condition for
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 in respect
of qualifying assets.
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.5 000 are
depreciated in full, in the year of purchase. Accelerated depreciation
is charged on certain assets based on periodic review of useful life.
1.05 Impairment of Assets
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment. If any indication of impairment
exists, the recoverable amount of such assets is estimated and
impairment is recognised, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater
of the net selling price and their value in use. Value in use is
arrived at by discounting the future cash flows to their present value
based on an appropriate discount factor. When there is indication that
an impairment loss recognised for an asset in earlier accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised in the Statement of Profit and Loss,
except in case of revalued assets.
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 after providing for obsolescence and
other losses where considered necessary. 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
1.07 Foreign Exchange Transactions
Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of transaction or at rates that closely
approximate the rate at the date of the transaction. Monetary items in
foreign currencies are stated at the closing exchange rates. 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
Statement of Profit and Loss. Gains / Losses on conversion /
translation have been recognised in the Statement of Profit and Loss.
1.08 Employee benefits
(i) Post-employment Benefits
(a) Defined Contribution Plans:
The Company has Defined Contribution Plans for post employment
benefits, charged to Statement of Profit and Loss, in the form of:
- Provident Fund administered by the Regional Provident Fund
- 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
- 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 Statement of Profit and Loss for the year.
(v) The Procter and Gamble Company, USA has an International Stock
Ownership Plan (ISOP) (employee share purchase plan) whereby
specified employees of its subsidiaries have been given a right to
purchase shares of the Parent Company i.e. The Procter and Gamble
Company, USA. Every employee who opts for the scheme contributes by way
of payroll deduction up to a specified percentage (upto 15%) of base
salary towards purchase of shares on a monthly basis. The Company
contributes 50% of employee''s contribution (restricted to 2.5% of his
(vi) The Procter & Gamble Company, USA has a Employee Stock Option
Plan (ESOP) whereby specified 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.
1.09 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 Statement of Profit and Loss in the year
in which it is incurred.
1.10 Taxes on Income
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, 2012 is based on the results of the 9 months ended March 31, 2012
(Assessment year 2012-13) and for the 3 months ended June 30, 2012
(Assessment year 2013-14) as per the provisions of Income Tax Act,
1961. 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) paid in accordance with the tax laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax is recognised 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 substantially enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets in respect of unabsorbed depreciation and carry forward of
losses are recognised only if there is virtual certainty that there
will be sufficient future taxable income available to realise such
assets. Deferred tax assets are recognised for timing differences of
other items only to the extent that reasonable certainty exists that
sufficient future taxable income will be available against which these
can be realised. 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
1.11 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.
Assets taken on lease under which all risks and rewards of ownership
are effectively retained by the lessor are classified as operating
lease. Lease payments under operating leases are recognised in the
Statement of Profit and Loss on a straight line basis in accordance
with the respective lease agreements.
1.13 Provisions, 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
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions 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. Contingent liabilities are
disclosed in the Notes. Contingent liabilities are disclosed for (1)
possible obligations which will be confirmed only by future events not
wholly within the control of the Company or (2) present obligations
arising from past events where it is not probable that an outflow of
resources will be required to settle the obligation or a reliable
estimate of the amount of the obligation cannot be made. Contingent
assets are not recognised in the financial statements as this may
result in the recognition of income that may never be there.
1.14 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) by the weighted average number of equity shares outstanding during
the year. 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. Potential equity shares are deemed to be
dilutive only if their conversion to equity shares would decrease the
net profit per share from continuing ordinary operations. Potential
dilutive equity shares are deemed to be converted as at the beginning
of the period, unless they have been issued at a later date. The
dilutive potential equity shares are adjusted for the proceeds
receivable had the shares been actually issued at fair value (i.e.
average market value of the outstanding shares). Dilutive potential
equity shares are determined independently for each period presented.
The number of equity shares and potentially dilutive equity shares are
adjusted for share splits /reverse share splits and bonus shares, as
1.15 Insurance claims
Insurance claims are accounted for on the basis of claims admitted
/expected to be admitted and to the extent that there is no uncertainty
in receiving the claims.