(a) Basis of Accounting
The financial statements have been prepared and presented under the
historical cost convention on an accrual basis of accounting and in
accordance with the provisions of the Companies Act, 1956 and
accounting principles generally accepted in India and comply with the
accounting standards prescribed in the Companies (Accounting Standards)
Rules, 2006 issued by the Central Government, in consultation with the
National Advisory Committee on Accounting Standards, to the extent
applicable.
(b) Fixed Assets
Fixed assets are stated at cost of acquisition, including any
attributable cost for bringing the asset to its working condition for
its intended use, less accumulated depreciation and impairment loss.
Leasehold Land and Leasehold Improvements are amortised over the period
of the lease.
Fixed assets costing Rs. 5,000 or less are fully depreciated in the
period/year of acquisition. Fixed assets costing more than Rs. 5,000
but up to USD 5,000 are fully depreciated in the period/year of
acquisition except for: multiple-like items the cost of which is over
USD 10,000 in aggregate; and
unlike items of capital nature within an asset category for large
scale projects the aggregate cost of which exceeds USD 10,000 are
considered as one asset and depreciated in accordance with the
accounting policy and depreciation rate specified above.
Computer Software are recorded at its acquisition cost and is amortised
on straight-line basis over 3 to 5 years, which in managements
estimate represents the period during which economic benefits will be
derived from their use. Cost of computer software not exceeding Rs. 50
lakhs is fully amortised in the period/year of acquisition.
(c) Impairment of Assets
In accordance with Accounting Standard 28 (AS 28) on Impairment of
Assets where there is an indication of impairment of the Companys
assets, the carrying amounts of the Companys assets are reviewed at
each Balance Sheet date to determine whether there is any impairment.
The recoverable amount of the assets (or where applicable that of the
cash generating unit to which the asset belongs) is estimated at the
higher of its net selling price and its value in use. Value in use is
the present value of estimated future cash flows expected to arise from
the continuing use of the assets and from its disposal at the end of
its useful life. An impairment loss is recognised whenever the carrying
amount of an asset or a cash-generating unit exceeds its recoverable
amount. Impairment loss is recognized in the Profit and Loss Account.
(d) Inventories
Inventories are valued at lower of cost and net realisable value. Cost
is determined on First-in-First-out basis. Cost of work-in-progress
and finished goods includes cost of materials, direct labour and
manufacturing overheads, where applicable. Stores and Spares are valued
at cost.
Finished goods expiring within 90 days (near-expiry inventory) as at
the Balance Sheet date have been fully provided for.
(e) Samples
Physicians samples are valued at standard cost, which approximates
actual cost and are charged to the Profit and Loss account when
distributed.
(f) Foreign Currency Transactions
Transactions in foreign exchange are accounted for at the standard
exchange rates as determined by the Company on a monthly basis. The
exchange differences arising on foreign exchange transactions settled
during the year are recognized in the Profit and Loss Account of the
year.
Monetary assets and liabilities in foreign exchange, which are
outstanding as at the year end, are translated at year end at the
closing exchange rate and the resultant exchange differences are
recognized in the Profit and Loss Account.
(g) Revenue Recognition
Revenue from sale of goods is recognised when significant risks and
rewards of ownership are transferred to the customers. Sales are net of
sales returns and trade discounts. Revenue from services is recognized
as and when services are rendered and related costs are incurred, in
accordance with the terms of the specific contracts. Interest income is
recognised on time proportionate basis.
(h) Employee Benefits
(i) Long-term Employee Benefits
(a) Defined Contribution Plans
The Company has Defined Contribution Plans for post employment benefits
in the form of Provident Fund, Superannuation Fund and Employees
Pension Scheme which are administered through Government of India
and/or Life Insurance Corporation of India (LIC). Provident Fund,
Superannuation Fund (which constitutes an insured benefit) and
Employees Pension Scheme are classified as Defined Contribution Plans
as the Company has no further obligation beyond making
the contributions. The Companys contributions to Defined Contribution
Plans are charged to the Profit and Loss Account as incurred.
(b) Defined Benefit Plans
The Company has Defined Benefit Plans for post employment benefits in
the form of Gratuity and Leave Encashment. Gratuity schemes of the
Company are administered through LIC. The employees of the Company are
entitled to Leave Encashment as per the policy of the Company.
Liability for Defined Benefit Plans is provided on the basis of
valuations, as at the Balance Sheet date, carried out by independent
actuary. The actuarial valuation method used by independent actuary for
measuring the liability is the Projected Unit Credit method.
The obligation is measured at the present value of the estimated future
cash flows. The discount rates used for determining the present value
of the obligation under defined benefit plan, are based on the market
yields on Government securities as at the Balance Sheet date.
(c) Other Long-term Employee Benefit
The employees of the Company are entitled to Compensated Absences as
per the policy of the Company. Liability for Compensated Absences is
provided on the basis of valuations, as at the Balance Sheet date,
carried out by independent actuary. The actuarial valuation method used
by independent actuary for measuring the liability is the Projected
Unit Credit method. The discount rates used for determining the present
value of the obligation under defined benefit plan, are based on the
market yields on Government securities as at the Balance Sheet date.
(ii) Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognised
immediately in the Profit and Loss Account as income or expense.
(i) Leases
Lease rentals under an operating lease, are recognized as an expense in
the statement of Profit and Loss Account on a straight line basis over
the lease term. Lease income from operating leases are recognized in
the Profit and Loss account on a straight line basis over the lease
term.
(j) Voluntary Retirement Scheme (VRS)
Liability under the VRS is accrued on the acceptance of the
applications of the employees under the VRS scheme issued by the
Company. Compensation paid during the current year and previous year
under the VRS is charged to the Profit and Loss Account.
(k) Expenditure on Research and Development
Revenue expenditure is recognised as an expense in the period/year in
which it is incurred and the expenditure on capital assets is
depreciated over the useful lives of the assets.
(l) Taxes on Income
Income tax expense comprises current tax, deferred tax charge or credit
and fringe benefits tax. Provision for current tax is based on the
results for the 16 months period ended 31st March, 2011, in accordance
with the provisions of the Income Tax Act, 1961.
The deferred tax charge or credit is recognized using substantively
enacted rates. In the case of unabsorbed depreciation or carried
forward losses, deferred tax assets are recognised only to the extent
there is virtual certainty of realisation of such assets. Other
deferred tax assets are recognized only to the extent there is
reasonable certainty of realization in future. Such assets are reviewed
as at each Balance Sheet date to reassess realization.
Fringe Benefit Tax is not applicable since April 2009.
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