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Ranbaxy Laboratories
BSE: 500359|NSE: RANBAXY|ISIN: INE015A01028|SECTOR: Pharmaceuticals
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Accounting Policy Year : Mar '14
a.  Basis of preparation of fnancial statements
 
 These fnancial statements have been prepared and presented on the
 accrual basis of accounting and comply with the Accounting Standards
 prescribed in the Companies (Accounting Standards) Rules, 2006 issued
 by the Central Government, which as per a clarifcation issued by the
 Ministry of Corporate Affairs continue to apply under section 133 of
 the Companies Act, 2013 (which has superseded section 211(3C) of the
 Companies Act, 1956 w.e.f.  12 September 2013), the other relevant
 provisions of the Companies Act, 1956 (including the new notifed
 sections under Companies Act, 2013, to the extent applicable),
 pronouncements of the Institute of Chartered Accountants of India,
 guidelines issued by the Securities and Exchange Board of India
 (SEBI) and other accounting principles generally accepted in India,
 to the extent applicable. The fnancial statements are presented in
 Indian rupees rounded off to the nearest million.
 
 The Board of Directors vide their resolution dated 29 October 2013 has
 approved the change of fnancial year of the Company from
 January-December to April-March effective 01 April 2014. In view of
 this, the current fnancial year is for a period of 15 months i.e. 01
 January 2013 to 31 March 2014 (current period) and, accordingly, the
 fgures for the current period are not comparable with fgures for the
 year ended 31 December 2012 (''previous year'') presented in the
 Statement of Proft and Loss, Cash Flow Statement and related notes.
 
 b.  Use of estimates
 
 The preparation of fnancial statements in conformity with Generally
 Accepted Accounting Principles (GAAP) requires management to make
 judgments, estimates and assumptions that affect the application of
 accounting policies and reported amounts of assets, liabilities, income
 and expenses and disclosure of contingent liabilities on the date of
 the fnancial statements. Examples of such estimates include transfer
 pricing related adjustments, provision against litigations and
 regulatory actions, provisions of future obligation under employee
 beneft plans, useful lives of fxed assets, provision in respect of
 non-current investments, provision for sales return, recoverability of
 tax assets, provision for customer claims, provision for inventory
 obsolescence including expiry of drugs and impairment of assets. Actual
 results could differ from these estimates. Estimates and underlying
 assumptions are reviewed on an ongoing basis. Any revision to
 accounting estimates is recognised prospectively in the current and
 future periods.
 
 c.  Current/ non-current classifcation
 
 All assets and liabilities have been classifed as current or
 non-current as per the Company''s normal operating cycle and other
 criteria set out in the Revised Schedule VI to the Companies Act, 1956.
 
 Assets
 
 An asset is classifed as current when it satisfes any of the following
 criteria:
 
 a.  it is expected to be realised in, or is intended for sale or
 consumption in, the Company''s normal operating cycle;
 
 b.  it is held primarily for the purpose of being traded;
 
 c.  it is expected to be realised within 12 months after the reporting
 date; or
 
 d.  it is cash or cash equivalent unless it is restricted from being
 exchanged or used to settle a liability for at least 12 months after
 the reporting date.
 
 Liabilities
 
 A liability is classifed as current when it satisfes any of the
 following criteria:
 
 a.  it is expected to be settled in the Company''s normal operating
 cycle;
 
 b.  it is held primarily for the purpose of being traded;
 
 c.  it is due to be settled within 12 months after the reporting date;
 or
 
 d.  the Company does not have an unconditional right to defer
 settlement of the liability for at least 12 months after the reporting
 date. Terms of a liability that could, at the option of the
 counterparty, result in its settlement by the issue of equity
 instruments do not affect its classifcation.
 
 Current assets/ liabilities include the current portion of non-current
 fnancial assets/ liabilities respectively. All other assets/
 liabilities are classifed as non-current.
 
 Operating cycle
 
 Operating cycle is the time between the acquisition of assets for
 processing and their realisation in cash or cash equivalents.
 
 d.  Fixed assets
 
 Tangible fxed assets and depreciation
 
 Tangible fxed assets are stated at the cost of acquisition or
 construction, less accumulated depreciation and impairment losses, if
 any. The cost of an item of tangible fxed asset comprises its purchase
 price, including import duties and other non-refundable taxes or levies
 and any attributable costs of bringing the asset to its working
 condition for its intended use. Any trade discount and rebates are
 deducted in arriving at the purchase price. Advances paid towards
 acquisition of tangible fxed assets outstanding at each Balance Sheet
 date, are shown under long-term loans and advances and cost of assets
 not ready for intended use before the period end, are shown as capital
 work-in-progress.
 
 Subsequent expenditure related to an item of tangible fxed asset are
 added to its book value only if they increase the future benefts from
 the existing asset beyond its previously assessed standard of
 performance.
 
 Depreciation on tangible fxed assets, except leasehold land, leasehold
 improvements (included in furniture and fxtures) and certain vehicles
 which are depreciated over their estimated useful life of 4 years, is
 provided on a pro- rata basis, using the straight-line method and at
 the rates specifed in Schedule  XIV to the Companies Act, 1956.
 Leasehold improvements (included in furniture and fxtures) are
 depreciated over their estimated useful life, or the remaining period
 of lease from the date of capitalization, whichever is shorter.
 Leasehold land are being amortised over the period of respective
 leases. In the opinion of the management, these rates are currently
 refective of the estimated useful lives of the fxed assets.
 
 Depreciation on additions is provided on a pro-rata basis from the date
 of acquisition/ installation. Depreciation on sale/ deduction from
 tangible fxed assets is provided for up to the date of sale/ disposal,
 as the case may be.  Modifcation or extension to an existing asset,
 which is of capital nature and which becomes an integral part thereof
 is depreciated prospectively over the remaining useful life of that
 asset.
 
 A tangible fxed asset is eliminated from the fnancial statements on
 disposal, or when no further beneft is expected from its use and
 disposal. Assets retired from active use and held for disposal are
 stated at the lower of their net book value and net realisable value
 and are shown under ''Other current assets''.
 
 Losses arising from retirement, or gains or losses arising from
 disposal of tangible fxed assets which are carried at cost are
 recognized in the Statement of Proft and Loss.
 
 Assets costing individually Rs. 5,000 (in absolute amount) or less are
 depreciated at the rate of 100% p.a.
 
 Intangible fxed assets and amortisation
 
 Intangible fxed assets comprise brands, trademarks and computer
 software, which are stated at cost less accumulated amortization and
 impairment losses, if any. The cost of an item of intangible fxed asset
 comprises its purchase price, including import duties and other
 non-refundable taxes or levies and any attributable costs of bringing
 the asset to its working condition for its intended use. Any trade
 discount and rebates are deducted in arriving at the purchase price.
 Advances paid towards acquisition of intangible fxed assets outstanding
 at each Balance Sheet date, are shown under long-term loans and
 advances and cost of assets not ready for intended use before the
 period end, are shown as intangible fxed assets under development.
 
 Subsequent expenditure is capitalised only when it increases the future
 economic benefts from the specifc asset to which it relates.
 
 Intangible assets are amortised in the Statement of Proft and Loss over
 their estimated useful lives, from the date that they are available for
 use based on the expected pattern of consumption of economic benefts of
 the asset.  Presently, these are being amortised on a straight line
 basis.
 
 The amortisation rates for Brands and Trademarks and Computer software
 are 20% and 16.21% per annum respectively.
 
 An intangible asset is derecognised on disposal or when no future
 economic beneft is expected from its use and disposal. Losses arising
 from retirement, and gains or losses arising from disposal of an
 intangible asset are measured as the difference between the net
 disposal proceeds and the carrying amount of the asset and are
 recognised in the Statement of Proft and Loss.
 
 Borrowing costs
 
 Borrowing costs are interest and other costs (including exchange
 differences arising from foreign currency borrowings to the extent that
 they are regarded as an adjustment to interest costs) incurred by the
 Company in connection with the borrowing of funds. Borrowing costs
 directly attributable to acquisition or construction of those fxed
 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 these are incurred.
 
 e.  Impairment of assets
 
 Fixed assets are reviewed at each reporting date to determine if there
 is any indication of impairment. For assets in respect of which any
 such indication exists and for intangible assets mandatorily tested
 annually for impairment, the asset''s recoverable amount is estimated.
 For assets that are not yet available for use, the recoverable amount
 is estimated at each reporting date. An impairment loss is recognised
 if the carrying amount of an asset exceeds its recoverable amount.
 
 For the purpose of impairment testing, assets are grouped together into
 the smallest group of assets (Cash Generating Unit or CGU) that
 generates cash infows from continuing use that are largely independent
 of the cash infows of other assets or CGUs.
 
 The recoverable amount of an asset or CGU is the greater of its value
 in use and its net selling price. In assessing value in use, the
 estimated future cash fows are discounted to their present value using
 a pre-tax discount rate that refects current market assessments of the
 time value of money and the risks specifc to the asset or CGU.
 Impairment losses are recognised in the Statement of Proft and Loss.
 
 An impairment loss is reversed only to the extent that the asset''s
 carrying amount does not exceed the carrying amount that would have
 been determined net of depreciation or amortisation, if no impairment
 loss had been recognised.
 
 f.  Revenue recognition
 
 Revenue from sale of goods in the course of ordinary activities is
 recognised when the property in the goods, or all signifcant risks and
 rewards of their ownership are transferred to the customer and no
 signifcant uncertainty exists regarding the amount of the consideration
 that will be derived from the sale of the goods as well as regarding
 its collection. Revenue includes excise duty and is net of sales tax,
 value added tax and applicable discounts and allowances. Allowances for
 sales returns are estimated and provided for in the period of sales.
 
 Income from royalty, milestone payments, technical know-how
 arrangements, exclusivity and patents settlement and licensing
 arrangements is recognised on an accrual basis in accordance with the
 terms of the relevant agreement.  Any non-compete fee is recognised
 over the term of the agreement on a straight line basis.
 
 Export incentive entitlements are recognised as income when the right
 to receive credit as per the terms of the scheme is established in
 respect of the exports made, and where there is no signifcant
 uncertainty regarding the ultimate collection of the relevant export
 proceeds.
 
 Proft on disposal/ sale of investments is recognised as income in the
 period in which the investment is sold/ disposed off.
 
 Dividend income is recognised when the right to receive the income is
 established. Interest income is recognised on a time proportion basis
 taking into account the amount outstanding and the interest rate
 applicable. Discount or premium on debt securities held is accrued over
 the period to maturity.
 
 g.  Investments
 
 Investments that are readily realisable and intended to be held for not
 more than a year from the date of acquisition are classifed as current
 investments. All other investments are classifed as long-term
 investments. However, that part of long term investments which is
 expected to be realised within 12 months after the reporting date is
 presented undercurrent assets'' in consonance with the current/
 non-current classifcation scheme of revised Schedule VI.
 
 Long-term investments (including current portion thereof) are carried
 at cost less any other-than-temporary diminution in value, determined
 separately for each individual investment. Current investments are
 carried at the lower of cost and fair value. The comparison of cost and
 fair value is done separately in respect of each category of
 investments i.e., equity shares, preference shares etc.
 
 Any reductions in the carrying amount and any reversals of such
 reductions are charged or credited to the Statement of Proft and Loss.
 Proft or loss on sale of investments is determined on the basis of
 weighted average carrying amount of investments disposed off.
 
 h.  Inventories
 
 Inventories which comprise raw materials, work-in-progress, fnished
 goods, stock-in-trade and stores and spares are carried at the lower of
 cost and net realisable value. Cost of inventories comprises all costs
 of purchase, costs of conversion and other costs incurred in bringing
 the inventories to their present location and condition. Work in
 progress also includes Active pharmaceutical ingredients (''API'') and
 Drug intermediates lying at plants for captive consumption.
 
 In determining the cost, weighted average cost method is used. In the
 case of manufactured inventories and work- in-progress, fxed production
 overheads are allocated on the basis of normal capacity of production
 facilities. Excise duty liability is included in the valuation of
 closing inventory of fnished goods.
 
 Net realisable value is the estimated selling price in the ordinary
 course of business, less the estimated costs of completion and the
 estimated costs necessary to make the sale.
 
 The net realisable value of work-in-progress is determined with
 reference to the selling prices of related fnished products. Raw
 materials and other supplies held for use in the production of fnished
 products are not written down below cost except in cases where material
 prices have declined and it is estimated that the cost of the fnished
 products will exceed their net realisable value. The comparison of cost
 and net realisable value is made on an item- by-item basis.
 
 i.  Cash and cash equivalents
 
 Cash and cash equivalents comprise cash balances on hand, cash balance
 with bank, and highly liquid investments with original maturities, at
 the date of purchase/ investment, of three months or less.
 
 j.  Research and development costs
 
 Expenditure on research is expensed off under the respective heads of
 account in the period in which it is incurred.
 
 Expenditure on development activities, whereby research fndings are
 applied to a plan or design for the production of new or substantially
 improved products and processes, is capitalised, if the cost can be
 reliably measured, the product or process is technically and
 commercially feasible and the Company has suffcient resources to
 complete the development and to use and sell the asset. The expenditure
 capitalised includes the cost of materials, direct labour and an
 appropriate proportion of overheads that are directly attributable to
 preparing the asset for its intended use.  Other development
 expenditure is recognised in the Statement of Proft and Loss as an
 expense as incurred.
 
 Capitalised development expenditure is stated at cost less accumulated
 amortisation and impairment losses. Fixed assets used for research and
 development are depreciated in accordance with the Company''s policy as
 stated above.
 
 Materials identifed for use in research and development process are
 carried as inventories and charged to the Statement of Proft and Loss
 on issuance of such materials for research and development activities.
 
 k.  Employee stock option based compensation
 
 The Company follows SEBI guidelines for accounting of employee stock
 options. The cost is calculated based on the intrinsic value method
 i.e. the excess of market price of underlying equity shares as of the
 date of the grant of options over the exercise price of such options is
 regarded as employee compensation and in respect of the number of
 options that are expected to ultimately vest, such cost is recognised
 on a straight line basis over the period over which the employees would
 become unconditionally entitled to apply for the shares. The cost
 recognised at any date at least equals the intrinsic value of the
 vested portion of the option at that date. Adjustment, if any, for
 difference in initial estimate for number of options that are expected
 to ultimately vest and related actual experience is recognised in the
 Statement of Proft and Loss of that period. In respect of vested
 options that expire unexercised, the cost is reversed in the Statement
 of Proft and Loss of that period.
 
 During the current period, the Company has changed its policy with
 respect to treatment of shares issued to Ranbaxy ESOP trust (''ESOP
 trust''). As per a recent opinion of the Expert Advisory Committee
 (''EAC) of The Institute of Chartered Accountants of India, as on the
 reporting date, the shares issued to an ESOP trust but yet to be
 allotted to employees be shown as a deduction from the Share Capital
 with a corresponding adjustment to the loan receivable from ESOP Trust.
 Accordingly, the Company has shown shares held by the ESOP Trust on the
 reporting date as a deduction from the share capital (refer to note 3).
 
 l.  Foreign currency transaction, derivatives and hedging
 
 Transactions in foreign currency are recorded at the exchange rate
 prevailing at the date of the transaction. Exchange differences arising
 on foreign currency transactions settled during the period are
 recognised in the Statement of Proft and Loss.
 
 Monetary assets and liabilities denominated in foreign currencies as at
 the Balance Sheet date are translated at period end rates. The
 resultant exchange differences are recognised in the Statement of Proft
 and Loss. Non-monetary assets are recorded at the rates prevailing on
 the date of the transaction.
 
 Representative offces located outside India are classifed as integral
 foreign operation as those carry on their operations as if they were an
 extension of Company''s operation. The fnancial statements of an
 integral foreign operation are translated into Indian rupees as if the
 transactions of the foreign operation were those of Company itself.
 
 The Company uses various forms of derivative instruments such as
 foreign exchange forward contracts, options, currency swaps, currency
 cum interest rate swaps and interest rate swaps to hedge its exposure
 on account of movements in foreign exchange and interest rates. These
 derivatives are generally entered with banks and not used for trading
 or speculation purposes. These derivative instruments are accounted as
 follows:
 
 - For forward contracts (including instruments which are in substance
 forward contracts) which are entered into to hedge the foreign currency
 risk of the underlying existing assets on the date of entering into
 that forward contract, the premium or discount on such contracts is
 amortised as income or expense over the life of the contract. Any proft
 or loss arising on the cancellation or renewal of forward contracts is
 recognised as an income or expense for the period in the Statement of
 Proft and Loss. The exchange difference on such a forward exchange
 contract is calculated as the difference between:
 
 a) the foreign currency amount of the contract translated at the
 exchange rate at the Balance Sheet date, or the settlement date where
 the transaction is settled during the reporting period; and
 
 b) the same foreign currency amount translated at the later of the date
 of inception of the forward exchange contract and the last reporting
 date.
 
 Such exchange differences are recognised in the Statement of Proft and
 Loss in the reporting period in which the exchange rates change.
 
 - Pursuant to early adoption of Accounting Standard (AS) 30 Financial
 Instruments: Recognition and Measurement and AS 31 Financial
 Instruments: Presentation, other derivatives such as forward contracts
 to hedge highly probable forecasted transactions, option contracts,
 currency swaps, interest rate swaps etc. which are outside the scope of
 AS 11, The Effects of Changes in foreign exchange rates, are fair
 valued at each Balance Sheet date.  The resultant gain or loss (except
 relating to the effective portion of cash fow hedges) from these
 transactions are recognised in the Statement of Proft and Loss. The
 gain or loss on effective portion of cash fow hedges is recorded in the
 Hedging Reserve (reported under the head Reserves and Surplus) which
 is transferred to the Statement of Proft and Loss in the same period in
 which the hedged item affects the Statement of Proft and Loss. If the
 hedging instrument no longer meets the criteria for hedge accounting,
 expires or is sold, terminated or exercised, or the designation is
 revoked, then hedge accounting is discontinued prospectively. If the
 forecast transaction is no longer expected to occur, then the balance
 in hedging reserve is reclassifed in the Statement of Proft and Loss.
 To designate a derivative instrument as an effective cash fow hedge,
 the management objectively evaluates and evidences with appropriate
 supporting documents at the inception of each contract and throughout
 the period of hedge relationship whether the contract is effective in
 achieving offsetting cash fows attributable to the hedged risk. The
 gain or loss on ineffective portion of cash fow hedge is recognised in
 the Statement of Proft and Loss.
 
 m.  Employee benefts
 
 Short-term employee benefts
 
 All employee benefts payable wholly within twelve months of receiving
 employee services are classifed as short-term employee benefts. These
 benefts include salaries and wages, bonus and ex-gratia. The
 undiscounted amount of short-term employee benefts to be paid in
 exchange for employee services is recognised as an expense as the
 related service is rendered by employees.
 
 Post-employment benefts
 
 Defned contribution plans
 
 A defned contribution plan is a post-employment beneft plan under which
 an entity pays specifed contributions to a separate entity and has no
 obligation to pay any further amounts. The Company makes specifed
 monthly contributions towards superannuation fund scheme and employee
 state insurance scheme ESI'') which are defned contribution plans. The
 Company''s contribution is recognised as an expense in the Statement of
 Proft and Loss during the period in which the employee renders the
 related service.
 
 Defned beneft plans
 
 Defned beneft plans of the Company comprise gratuity, provident fund
 and pension plans.
 
 Gratuity (Funded)
 
 The Company has an obligation towards gratuity, a defned beneft
 retirement plan covering eligible employees.  The plan provides for a
 lump sum payment to vested employees at retirement, death while in
 employment or on termination of employment of an amount based on the
 respective employee''s salary and the tenure of employment.  Vesting
 occurs upon completion of fve years of service. The Company makes
 annual contributions to gratuity fund established as a trust. In
 respect of gratuity, the Company fully contributes all ascertained
 liabilities in the respective employee trusts. Trustees administer
 contributions made to the Trusts and contributions are invested in
 specifc instruments, as permitted by the law.
 
 Provident fund (Funded)
 
 The Company makes specifed monthly contribution towards the employees''
 provident fund to the provident fund trust administered by the Company.
 The minimum interest payable by the provident fund trust to the
 benefciaries every year is notifed by the Government. The Company has
 an obligation to make good the shortfall, if any, between the return on
 respective investments of the trust and the notifed interest rate.
 
 Pension (Unfunded)
 
 Upto the previous year, the Company had an obligation towards pension,
 a defned beneft retirement plan covering eligible employees. The plan
 provided for a lump sum payment to vested employees at retirement,
 death while in employment or on termination of employment of an amount
 based on the respective employee''s salary and the tenure of employment.
 Vesting occurred after completion of a specifed number of years of
 service with the Company.
 
 During the current period, with effect from 1 March 2013, the Company
 has discontinued pension to eligible employees by settling the
 liability with such employees on a lump sum basis except for employees
 who had already retired as at 1 March 2013 (refer to note 35 for impact
 of discontinuation). Employees, who had retired as at 1 March 2013,
 will continue to receive the pension per the pension plan.
 
 Actuarial valuation
 
 The contributions made to provident fund trust are charged to the
 Statement of Proft and Loss as and when these become payable. In
 addition, the Company recognizes liability for shortfall in the plan
 assets vis--vis the fund obligation, if any, on the basis of actuarial
 valuation.
 
 The liability in respect of all defned beneft plans is accrued in the
 books of account on the basis of actuarial valuation carried out by an
 independent actuary using the Projected Unit Credit Method, which
 recognizes each year of service as giving rise to additional unit of
 employee beneft entitlement and measure each unit separately to build
 up the fnal obligation. The obligation is measured at the present value
 of estimated future cash fows. The discount rates used for determining
 the present value of obligation under defned beneft plans, is based on
 the market yields on Government securities as at the Balance Sheet
 date, having maturity periods approximating to the terms of related
 obligations.  Actuarial gains and losses are recognised immediately in
 the Statement of Proft and Loss. Gains or losses on the curtailment or
 settlement of any defned beneft plan are recognised when the
 curtailment or settlement occurs.
 
 Any differential between the plan assets (for a funded defned beneft
 plan) and the defned beneft obligation as per actuarial valuation is
 recognised as a liability if it is a defcit or as an asset if it is a
 surplus (to the extent of the lower of present value of any economic
 benefts available in the form of refunds from the plan or reduction in
 future contribution to the plan).
 
 Past service cost
 
 Past service cost is recognised as an expense in the Statement of Proft
 and Loss on a straight-line basis over the average period until the
 benefts become vested. To the extent that the benefts are already
 vested immediately following the introduction of, or changes to, a
 defned beneft plan, the past service cost is recognised immediately in
 the Statement of Proft and Loss. Past service cost may be either
 positive (where benefts are introduced or improved) or negative (where
 existing benefts are reduced).
 
 Other long term employee benefts
 
 Compensated absences
 
 As per the Company''s policy, eligible leaves can be accumulated by the
 employees and carried forward to future periods to either be utilised
 during the service, or encashed. Encashment can be made during service,
 on retirement/ early retirement, on withdrawal of scheme, at
 resignation and upon death of the employee. The value of benefts is
 determined based on the seniority and the employee''s salary.
 
 Long service award
 
 As per the Company''s policy, employees of the Company are eligible for
 an award after completion of a specifed number of years of service with
 the Company.
 
 Actuarial valuation
 
 The Company records an obligation for such compensated absences and
 long service award in the period in which the employee renders the
 services that increase the entitlements. The obligation is measured on
 the basis of independent actuarial valuation using the projected unit
 credit method.
 
 Termination benefts
 
 Termination benefts are recognised as an expense when, as a result of a
 past event, the Company has a present obligation that can be estimated
 reliably, and it is probable that an outfow of economic benefts will be
 required to settle the obligation.
 
 n.  Income taxes
 
 Income-tax expense comprises current tax (i.e. amount of tax for the
 period determined in accordance with the income-tax law) and deferred
 tax charge or credit (refecting the tax effects of timing differences
 between accounting income and taxable income for the period).
 Income-tax expense is recognised in the Statement of Proft and Loss
 except that tax expense related to items recognised directly in
 reserves is also recognised in those reserves.
 
 Current tax is measured at the amount expected to be paid to (recovered
 from) the taxation authorities, using the applicable tax rates and tax
 laws. Deferred tax is recognised in respect of timing differences
 between taxable income and accounting income i.e. differences that
 originate in one period and are capable of reversal in one or more
 subsequent periods. The deferred tax charge or credit and the
 corresponding deferred tax liabilities or assets are recognised using
 the tax rates and tax laws 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 loss under taxation laws, deferred tax assets are
 recognised only if there is a virtual certainty supported by convincing
 evidence that suffcient future taxable income will be available against
 which such deferred tax assets can be realised. Deferred tax assets are
 reviewed as at each balance sheet date and written down or written-up
 to refect the amount that is reasonably/ virtually certain (as the case
 may be) to be realised. Deferred tax consequences of timing differences
 that originate in the tax holiday period and reverse after the tax
 holiday period are recognised in the period in which the timing
 differences originate. Timing differences that originate and reverse
 within the tax holiday period are not considered for deferred tax
 purposes.
 
 Minimum Alternate Tax (''MAT) under the provisions of the Income-tax
 Act, 1961 is recognised as current tax in the Statement of Proft and
 Loss. The credit available under the Income-tax Act, 1961 in respect of
 MAT paid is recognised as an asset only when and to the extent there is
 convincing evidence that the Company will pay normal income tax during
 the period for which the MAT credit can be carried forward for set-off
 against the normal tax liability. MAT credit recognised as an asset is
 reviewed at each Balance Sheet date and written down to the extent the
 aforesaid convincing evidence no longer exists.
 
 o.  Provisions
 
 A provision is recognised if, as a result of a past event, the Company
 has a present obligation that can be estimated reliably, and it is
 probable that an outfow of economic benefts will be required to settle
 the obligation. Provisions are recognised at the best estimate of the
 expenditure required to settle the present obligation at the Balance
 Sheet date. The provisions are measured on an undiscounted basis.
 
 Sales return
 
 The Company as a trade practice accepts returns from market which are
 primarily in the nature of expired or near expiry products. Provisions
 for such returns are estimated on the basis of historical experience,
 market conditions and specifc contractual terms and are provided for.
 
 Onerous contracts
 
 A contract is considered as onerous when the expected economic benefts
 to be derived by the Company from the contract are lower than the
 unavoidable cost of meeting its obligations under the contract. The
 provision for an onerous contract is measured at the lower of the
 expected cost of terminating the contract and the expected net cost of
 continuing with the contract. Before a provision is established, the
 Company recognises any impairment loss on the assets associated with
 that contract.
 
 p.  Contingent liabilities and contingent assets
 
 A contingent liability exists when there is a possible but not a
 probable obligation, or a present obligation that may, but probably
 will not, require an outfow of resources, or a present obligation whose
 amount cannot be estimated reliably. Contingent liabilities do not
 warrant provisions, but are disclosed unless the possibility of outfow
 of resources is remote. Contingent assets are neither recognised nor
 disclosed in the fnancial statements. However, contingent assets are
 assessed continually and if it is virtually certain that an infow of
 economic benefts will arise, the asset and related income are
 recognised in the period in which the change occurs.
 
 q.  Operating leases
 
 Leases where the lessor effectively returns substantially all the risks
 and rewards of ownership of the leased assets are classifed as
 operating leases. The total lease rentals (including scheduled rental
 increases) in respect of an asset taken on operating lease are charged
 to the Statement of Proft and Loss on a straight line basis over the
 lease term.
 
 Assets given by the Company under operating lease are included in fxed
 assets. Lease income from operating leases is recognised in the
 Statement of Proft and Loss on a straight line basis over the lease
 term. Costs, including depreciation, incurred in earning the lease
 income are recognised as expenses.
 
 r.  Earnings per share
 
 Basic earnings/ (loss) per share are calculated by dividing the net
 proft/ (loss) for the period attributable to equity shareholders by the
 weighted average number of equity shares outstanding during the period.
 The weighted average number of equity shares outstanding during the
 period is adjusted for events of bonus issue and share split. For the
 purpose of calculating diluted earnings/ (loss) per share, the net
 proft or loss for the period attributable to equity shareholders and
 the weighted average number of shares outstanding during the period 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.
Source : Dion Global Solutions Limited
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