Sanofi India

1.    Corporate Information
 
Sanofi India Limited (''the company'') is public limited company listed on Bombay Stock Exchange and
National Stock Exchange, incorporated and domiciled in India and has its registered office at Sanofi House,
CTS No. 117-B, L&T Business Park, Saki Vihar Road, Powai, Mumbai - 400072, India. It is primarily engaged in
the business of manufacturing and trading of drugs and pharmaceuticals. The Company has its own manufacturing
facility at Goa and Ankleshwar. The Company has various independent contract / third party manufacturers based
across the country. The Company sells its products through independent distributors primarily in India.
 
These financial statements were authorized for issue by the Board of Directors on February 26, 2019.
 
2.    Summary of Significant Accounting Policies
 
2.1    Basis of preparation
 
The financial statements are prepared on the accrual basis of accounting and in accordance with the
Indian Accounting Standards (hereinafter referred to as the Ind AS) as prescribed under Section 133 of the
Companies Act, 2013 (the Act) (as amended) and other relevant provisions of the Act.
 
2.2    Historical cost convention
 
The financial statements have been prepared on a historical cost basis, except for the following:
 
-    certain financial assets and liabilities are measured at fair value;
 
-    assets held for sale - measured at fair value less cost to sell;
 
-    share based payments; and
 
-    defined benefit plans - plan assets measured at fair value.
 
2.3    Summary of significant accounting policies
 
i. Current and non-current classification
 
The assets and liabilities reported in the balance sheet are classified on a current/non-current
basis.
 
An asset is treated as current when it is:
 
-    Expected to be realized or intended to be sold or consumed in normal operating cycle;
 
-    Held primarily for the purpose of trading;
 
-    Expected to be realized within twelve months after the reporting date, or
 
-    Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at
least twelve months after the reporting period.
 
All other assets are classified as non-current.
 
A liability is current when:
 
-    Itis expected to be settled in normal operating cycle;
 
-    Itis held primarily for the purpose of trading;
 
-    Itis due to be settled within twelve months after the reporting period, or
 
-    There is no unconditional right to defer the settlement of the liability for at least twelve months
after the reporting period.
 
All other liabilities are classified as non-current.
 
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
 
Based on the nature of products and the time between the acquisition of assets for processing and their
realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for
the purpose of current/non-current classification of assets and liabilities.
 
ii.    Fair value measurement
 
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value measurement is based
on the presumption that the transaction to sell the asset or transfer the liability takes place either:
 
-    In the principal market for the asset or liability, or
 
-    In the absence of a principal market, in the most advantageous market for the asset or
liability.
 
The principal or the most advantageous market must be accessible by the Company. The fair value of an
asset or a liability is measured using the assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their economic best interest.
 
The fair value measurement of a non-financial asset takes into account market participant''s ability to
generate economic benefits by using the asset in its highest and best use or by selling it to another market
participant that would use the asset in its highest and best use.
 
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient
data is available to measure fair value, maximizing the use of relevant observable inputs and minimizing the
use of unobservable inputs. Where required/appropriate, external valuers are involved.
 
All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorized within the fair value hierarchy, described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
 
-    Level 1 - Quoted (unadjusted) prices in active market for identical assets or liabilities.
 
-    Level 2 (if level 1 feed is not available / appropriate) - Valuation techniques for which the lowest
level input that is significant to the fair value measurement is directly or indirectly observable.
 
-    Level 3 (if level 1 and 2 feed is not available / appropriate) - Valuation techniques for which the
lowest level input that is significant to the fair value measurement is unobservable.
 
For financial assets and liabilities maturing within one year from the Balance Sheet date and which are
not carried at fair value, the carrying amount approximates fair value due to the short maturity of these
instruments.
 
The Company recognizes transfers between levels of fair value hierarchy at the end of reporting period
during which the change has occurred.
 
iii.    Segment reporting
 
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker, is responsible for allocating resources and
assessing performance of the operating segments and makes strategic decisions. Refer Note 35 for segment
information presented.
 
iv.    Foreign currency translation Functional and presentation currency
 
Items included in the financial statements are measured using the currency of the primary economic
environment in which the Company operates (''the functional currency''). The financial statements are
presented in Indian ? (INR), which is Sanofi India Limited''s functional and presentation currency.
 
Transactions and balances
 
Foreign currency transactions are translated into the functional currency using the exchange rates at the
dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at
year end exchange rates are generally recognized in the Statement of Profit and Loss.
 
Non-monetary items that are measured at historical cost in foreign currency are not retranslated.
 
All non-monetary items denominated in foreign currency are carried at historical cost or other similar
valuation and are reported using the exchange rate that existed when the values were determined.
 
v.    Revenue recognition
 
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as
revenue are inclusive of excise duty and net of discounts, allowances, returns, value added taxes/sales tax,
goods and services tax (GST) and amounts collected on behalf of third parties. The Company recognizes revenue
when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to
the Company, the significant risk and reward of ownership has passed onto the customer, the recovery of the
cost can be estimated reliably and there is no continuing managerial involvement with the product.
 
The Company has assumed that recovery of excise duty flows to the Company on its own account and thus,
revenue includes excise duty.
 
However, GST and sales tax/value added tax (VAT) is not received by the Company on its own account.
Rather, it is tax collected on value added to the commodity by the seller on behalf of the government.
Accordingly, it is excluded from revenue.
 
Sale of goods
 
Revenue from sale of goods is recognized when significant risk and rewards of ownership is passed on to
customer, Revenue from sale of goods is stated exclusive of Sales tax / VAT / GST and are net of sales
returns, discounts, provision for anticipated returns on expiry, made on the basis of management expectation
taking into account past experience.
 
Sale of services
 
Income from services rendered is recognized based on the terms of the agreements and when services are
rendered. Service income is net of service tax / GST.
 
Interest income
 
For all financial instruments measured at amortized cost, interest income is recorded using the effective
interest rate, which is the rate that exactly discounts the estimated future cash receipts through the
expected life of the financial instrument. Interest income is included in ''Other Income'' in the Statement
of Profit and Loss.
 
vi.    Government grants
 
Government grants are initially recognized as deferred income at fair value if there is reasonable
assurance that they will be received and the Company will comply with the conditions associated with the
grant;
 
-    In case of capital grants, they are then recognized in the Statement of Profit and Loss on a
systematic basis over the useful life of the asset.
 
-    In case of grants that compensate the Company for expenses incurred are recognized in the Statement
of Profit and Loss on a systematic basis in the periods in which the expenses are recognized.
 
Export benefits available under prevalent schemes are accrued in the year in which the goods are exported
and there is no uncertainty in receiving the same.
 
vii.    Income tax
 
The income tax expense or credit for the period is the tax payable on the current period''s taxable
income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences.
 
Current income tax
 
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted
at the end of the reporting period. The provision for current tax is made at the rate of tax as applicable for
the income of the previous year as defined under the Income tax Act, 1961.
 
Management periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation. It establishes provision where appropriate on the
basis of amounts expected to be paid to the tax authorities.
 
Current tax assets and current tax liabilities are offset where the entity has a legally enforceable
right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability
simultaneously.
 
Deferred tax
 
Deferred tax is recognized using the liability method, on temporary differences at the reporting date
arising between the tax bases of assets and liabilities and their carrying amounts for the financial
reporting purpose at the reporting date.
 
Deferred tax assets are recognized to the extent that it is probable that future taxable income will be
available against which the deductible temporary differences, unused tax losses, depreciation carry-forwards
and unused tax credits could be utilized.
 
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all or part of the
deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date
and are recognized to the extent that it has become probable that future taxable profit will allow the
deferred tax assets to be recovered.
 
Deferred tax assets and liabilities are measured based on the tax rates that are expected to apply in the
period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been
enacted or substantively enacted by the reporting date.
 
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets and liabilities and when the deferred tax balances relate to the same taxation
authority.
 
Current and deferred tax is recognized in the Statement of Profit and Loss, except to the extent that it
relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is
also recognized in other comprehensive income or directly in equity, respectively.
 
viii.    Leases As a lessee
 
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor
are classified as operating leases. Payments made under operating leases are charged to the Statement of
Profit and Loss on a straight-line basis over the period of the lease except where payments are structured to
increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost
increases or another systematic basis is more representative of the time pattern in which economic benefits
from the leased asset are consumed.
 
As a lessor
 
Lease income from operating leases where the Company is a lessor is recognized in income on a
straight-line basis over the lease term unless the receipts are structured to increase in line with expected
general inflation to compensate for the expected inflationary cost increases or another systematic basis is
more representative of the time pattern in which economic benefits from the leased asset are consumed. The
respective leased assets are included in the Balance Sheet based on their nature. Costs, including
depreciation, on such leased assets are recognized as an expense in the Statement of Profit and Loss.
 
ix.    Impairment of non-financial assets
 
At the end of each reporting period, the Company reviews the carrying amounts of non-financial assets
except inventories to ascertain whether there is any indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine
the extent of impairment loss (if any). When it is not possible to estimate the recoverable amount of an
individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset
belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also
allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of
cash-generating units for which a reasonable and consistent allocation basis can be identified.
 
Intangible assets excluding goodwill with indefinite useful lives are tested for impairment at least
annually, and whenever there is an indication that the asset may be impaired.
 
Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be
impaired.
 
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset
for which the estimates of future cash flows have not been adjusted.
 
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An
impairment loss is recognized in the Statement of Profit and Loss.
 
When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit)
is increased to the revised estimate of its recoverable amount, but only to the extent that the increased
carrying amount of the asset does not exceed the carrying amount that would have been determined had no
impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an
impairment loss is recognized immediately in the Statement of Profit and Loss.
 
x.    Cash and cash equivalents
 
For the purpose of presentation in the Statement of Cash Flows, Cash and Cash Equivalents includes
balance with banks and demand deposits with banks with original maturities of three months or less and other
short term highly liquid investments that are readily convertible into cash and which are subject to an
insignificant risk of changes in value.
 
xi.    Inventories
 
Inventories consist of raw materials, packing materials, work-in-progress, stock-in-trade and finished
goods. Inventories are valued at lower of cost and net realizable value (NRV). Cost is determined on weighted
average basis.
 
Cost of raw materials and packing materials includes cost of purchases and other costs incurred in
bringing the inventories to their present location and condition.
 
Cost of work-in-progress and finished goods includes direct materials, labour and proportion of
manufacturing overheads based on the normal operating capacity, wherever applicable. Cost of finished goods
includes excise duty and other costs incurred in bringing the inventories to their present location and
condition.
 
Cost of stock-in-trade includes cost of purchase and other costs incurred in bringing the inventories to
their present location and condition.
 
Net realizable value is the estimated selling price in the ordinary course of business, less estimated
costs of completion and estimated costs necessary to make the sale. However, materials and other items held
for use in the production of inventories are not written down below cost if the finished products in which
they will be used are expected to be sold at or above cost.
 
xii.    Financial instruments
 
A financial instrument is any contract that gives rise to a financial asset for one entity and a
financial liability or equity instrument for another entity.
 
Financial assets and liabilities are recognized when the Company becomes a party to the contractual
provisions of the instrument.
 
Financial assets: Classification
 
The Company classifies its financial assets in the following measurement categories:
 
-    those to be measured subsequently at fair value (either through other comprehensive income, or
through the Statement of Profit and Loss), and
 
-    those measured at amortized cost.
 
The classification depends on the entity''s business model for managing the financial assets and the
contractual terms of the cash flows.
 
Initial recognition and measurement
 
Financial assets are recognized when the Company becomes a party to the contractual provisions of the
instrument. Financial assets are recognized initially at fair value plus, in the case of financial assets not
recorded at fair value through Profit and Loss, transaction costs that are attributable to the acquisition of
the financial asset. Transaction costs of financial assets carried at fair value through Profit and Loss are
expensed in the Statement of Profit and Loss.
 
After initial recognition, financial assets are measured at:
 
-    fair value (either through other comprehensive income or through Profit and Loss), or
 
-    amortized cost.
 
Debt instruments
 
Debt instruments are subsequently measured at amortized cost, fair value through other comprehensive
income (''FVTOCI'') or fair value through Profit and Loss (''FVTPL'') till de-recognition on the basis of (i)
the entity''s business model for managing the financial assets and (ii) the contractual cash flow
characteristics of the financial asset.
 
There are three measurement categories into which the Company classifies its debt instruments.
 
(a)    Amortized cost:
 
Assets that are held for collection of contractual cash flows where those cash flows represent solely
payments of principal and interest are measured at Amortized cost. A gain or loss on a debt investment that
is subsequently measured at Amortized cost is recognized in the Statement of Profit and Loss when the asset
is derecognized or impaired. Interest income from these financial assets is included in other income using
the effective interest rate method.
 
(b)    Fair value through other comprehensive income (FVTOCI):
 
Assets that are held for collection of contractual cash flows and for selling the financial assets, where
the assets'' cash flows represent solely payments of principal and interest, are measured at FVTOCI. Movements
in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses,
interest revenue and foreign exchange gains and losses which are recognized in the Statement of Profit and
Loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is
reclassified from equity to the Statement of Profit and Loss and recognized in other gains / (losses).
Interest income from these financial assets is included in other income using the effective interest rate
method.
 
(c)    Fair value through profit or loss (FVTPL):
 
Assets that do not meet the criteria for Amortized cost or FVTOCI are measured at FVTPL. A gain or loss
on a debt investment that is subsequently measured at FVTPL is recognized in the Statement of Profit and Loss
in the period in which it arises. Interest income from these financial assets is recognized in the Statement
of Profit and Loss.
 
Equity instruments
 
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are
held for trading are classified as at FVTPL. For all other equity instruments, the Company decides to
classify the same either as at FVTOCI or FVTPL.
 
The Company makes such election on an instrument-by-instrument basis. The classification is made on
initial recognition and is irrevocable.
 
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the
instrument, excluding dividends, are recognized in Other Comprehensive Income (OCI). There is no recycling of
the amounts from OCI to Statement of Profit and Loss, even on sale of such investments.
 
Equity instruments included within the FVTPL category are measured at fair value with all changes
recognized in the Statement of Profit and Loss.
 
Impairment of financial assets
 
The Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss
on the following financial assets and credit risk exposure:
 
-    financial assets that are debt instruments, and are measured at Amortized cost e.g., loans,
deposits, and bank balance.
 
-    trade receivables.
 
The Company follows ''simplified approach'' for recognition of impairment loss allowance on trade
receivables which do not contain a significant financing component.
 
The application of simplified approach does not require the Company to track changes in credit risk.
Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its
initial recognition.
 
Derecognition of financial assets
 
A financial asset is derecognized only when:
 
-    the Company has transferred the rights to receive cash flows from the financial asset or
 
-    retains the contractual rights to receive the cash flows from the financial asset, but assumes a
contractual obligation to pay the cash flows to one or more recipients.
 
Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially
all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognized.
Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset,
the financial asset is not derecognized.
 
Where the entity has neither transferred a financial asset nor retains substantially all risks and
rewards of ownership of the financial asset, the financial asset is derecognized if the Company has not
retained control of the financial asset. Where the Company retains control of the financial asset, the asset
is continued to be recognized to the extent of continuing involvement in the financial asset.
 
Income recognition
 
Interest income
 
Interest income from debt instruments is recognized using the effective interest rate method. The
effective interest rate is the rate that exactly discounts estimated future cash receipts through the
expected life of the financial asset to the gross carrying amount of a financial asset.
 
Dividend income
 
Dividends are recognized in the Statement of Profit and Loss only when the right to receive payment is
established, it is probable that the economic benefits associated with the dividend will flow to the Company,
and the amount of the dividend can be measured reliably.
 
Financial liabilities:
 
Initial recognition and measurement
 
Financial liabilities are initially measured at its fair value plus or minus, in the case of a financial
liability not at FVTPL, transaction costs that are directly attributable to the issue/origination of the
financial liability.
 
Subsequent measurement
 
Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is
classified as FVTPL if it is classified as held- for- trading, or it is a derivative or it is designated as
such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and
losses, including any interest expense, are recognized in the Statement of Profit and Loss. Other financial
liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense
and foreign exchange gains and losses are recognized in Statement of Profit and Loss. Any gain or loss on
derecognition is also recognized in the Statement of Profit and Loss.
 
Derecognition
 
A financial liability is derecognized when the obligation specified in the contract is discharged,
cancelled or expires. Derivative financial instruments
 
The Company uses derivative financial instruments, such as foreign exchange forward contracts to manage
its exposure to interest rate and foreign exchange risks. Such derivative financial instruments are initially
recognized at fair value on the date on which a derivative contract is entered into and are subsequently
re-measured at fair value.
 
Derivatives are carried as financial assets when the fair value is positive and as financial liabilities
when the fair value is negative.
 
The Company enters into derivative contracts to hedge risks which are not designated in any hedging
relationship i.e. hedge accounting is not followed. Such contracts are accounted for at FVTPL.
 
Offsetting financial instruments
 
Financial assets and liabilities are offset and the net amount is reported in the Balance Sheet where
there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on
a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must
not be contingent on future events and must be enforceable in the normal course of business and in the event
of default, insolvency or bankruptcy of the Company or the counterparty.
 
xiii. Property, Plant and Equipment (PPE)
 
Freehold land is carried at historical cost. All other items of Property, plant and equipment acquired or
constructed are initially recognized at historical cost net of recoverable taxes, duties, trade discounts and
rebates, less accumulated depreciation and impairment loss, if any. The historical cost of Property, plant
and equipment comprises of its purchase price, borrowing costs and adjustment arising for exchange rate
variations attributable to the assets, including any cost directly attributable to bringing the assets to
their working condition for their intended use.
 
Capital Work-in-Progress represents Property, plant and equipment that are not ready for their intended
use as at the reporting date.
 
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the
Company and the cost of the item can be measured reliably.
 
The Company identifies and determines cost of each component/part of the plant and equipment separately,
if the component/part has a cost which is significant to the total cost of the plant and equipment and has
useful lives that is materially different from that of the remaining plant and equipment.
 
The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All
other repairs and maintenance are charged to the Statement of Profit and Loss during the year in which they
are incurred.
 
Gains and losses arising from derecognition of PPE 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.
 
Depreciation methods, estimated useful lives and residual values
 
Depreciation is provided, pro-rata for the period in use, on the straight-line method based on the
respective estimate of useful lives given below. Estimated useful lives of assets are determined based on
technical parameters/assessments.
 
The management believes that useful lives currently used, which is prescribed under Part C of Schedule II
to the Companies Act, 2013, fairly reflects its estimate of the useful lives and residual values of PPE,
though these lives in certain cases are different from lives prescribed under Schedule II.
 
*In respect of these assets, management estimates different useful life than prescribed under part C of
Schedule II based on internal assessment and independent technical evaluation.
 
Estimated useful lives, residual values and depreciation methods are reviewed annually, taking into
account commercial and technological obsolescence as well as normal wear and tear and adjusted prospectively,
if appropriate.
 
Advances paid towards the acquisition of PPE outstanding at each Balance Sheet date is classified as
capital advances under ''Other non-current assets'' and cost of assets not put to use before such date are
disclosed under ''Capital work-in-progress''.
 
xiv. Intangible assets
 
Intangible assets are stated at cost of acquisition less accumulated amortization / impairment
losses.
 
Goodwill
 
For measurement of goodwill arising on a business combination, subsequent measurement is at costs less
any accumulated impairment losses.
 
Goodwill is not amortized and is tested for impairment annually.
 
Acquired intangible assets
 
Separately acquired intangible assets are shown at historical cost. They have a finite useful life and
are subsequently carried at cost less accumulated amortization and impairment losses, if any.
 
In respect of the above assets, management''s estimate are based on internal assessment and independent
technical evaluations.
 
The amortization period and the amortization method for intangible assets are reviewed at the end of each
reporting period. The amortization expense on intangible assets is recognized in the Statement of Profit and
Loss.
 
Losses arising from retirement and gains or losses arising from disposal of Intangible assets are
determined by comparing sale proceeds with carrying amount and are disclosed in the Statement of Profit and
Loss.
 
Research and development expenditure
 
Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss. Development
costs of products are also charged to the Statement of Profit and Loss unless a product''s technical
feasibility has been established, in which case such expenditure is capitalized.
 
Development expenditure on an individual project are recognized as an intangible asset when the Company
can demonstrate:
 
-    The technical feasibility of completing the intangible asset so that the asset will be available for
use or sale.
 
-    Its intention to complete and its ability and intention to use or sell the asset.
 
-    How the asset will generate future economic benefits.
 
-    The availability of resources to complete the asset.
 
-    The ability to measure reliably the expenditure during development.
 
The amount capitalized comprise of expenditure that can be directly attributed or allocated on a
reasonable and consistent basis for creating, producing and making the asset ready for its intended use.
 
Following the initial recognition of the development expenditure as an asset, the cost model is applied
requiring the asset to be carried at cost less any accumulated amortization and accumulated impairment
losses. Amortization of the asset begins when development is complete and the asset is available for use. It
is amortized on a straight line basis over the period of expected future benefit from the related project,
i.e., the estimated useful life. Amortization is recognized in the Statement of Profit and Loss. During the
period of development, the asset is tested for impairment annually.
 
xv. Provisions and contingent liabilities Provisions
 
Provisions are recognized when there is a present legal or constructive obligation as a result of a past
events, it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and there is a reliable estimate of the amount of the obligation.
 
If the effect of the time value of money is material, provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of
money and the risks specific to the liability. Where discounting is used, the increase in the provision due
to the passage of time is recognized as a finance cost.
 
Contingencies
 
Contingent liabilities are disclosed in the Notes to the financial statements. Contingent liabilities are
disclosed for
 
-    when there is a possible obligation arising from past events, the existence of which will be
confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within
the control of the Company, or
 
-    present obligation that arises from past events where it is either not probable that an outflow of
resources will be required to settle the obligation or a reliable estimate of the amount cannot be made.
 
xvi. Employee benefits
 
I.    Short term benefits
 
All employee benefits payable wholly within twelve months of rendering the service are classified as
short term employee benefits. Benefits such as salaries, wages, bonus, short term compensated absences and
the expected cost of ex-gratia is recognized in the period in which the employee renders the related
service.
 
II.    Other long term employee benefits
 
The Company has for all employees other long-term benefits in the form of Long Service Award and
Compensated Absences as per the policy of the Company. Liabilities for such benefits are provided on the
basis of actuarial valuation, as at the reporting date, carried out by an independent actuary. The actuarial
valuation method used by an independent actuary for measuring the liability is the Projected Unit Credit
method.
 
III.    Post-employment benefit obligations
 
The company operates the following post-employment schemes:
 
a)    defined contribution plans such as superannuation fund and provident fund (Ankleshwar and Nepal),
and
 
b)    defined benefit plans such as gratuity, pension plan and provident fund (other than Ankleshwar and
Nepal) Defined contribution plans
 
The Company has defined contribution plans for post-employment benefits in the form of Superannuation
Fund which is recognized by the Income-tax authorities and administered through trustees and/or Life
Insurance Corporation of India (LIC). Further, the Company also has a defined contribution plan in the form
of a provident fund scheme for its staff and workmen at the Ankleshwar unit and Nepal and pension scheme
under the Employee''s Pension Scheme 1995 for its all employees, which are administered by the Provident Fund
Commissioner.
 
All the above mentioned schemes are classified as defined contribution plans as the Company has no
further obligation beyond making the contributions. The Company''s contributions to defined contribution
plans are charged to the Statement of Profit and Loss, when an employee renders the related service.
 
Defined benefit plans
 
The company has defined benefit plans for post-employment benefits in the form of Provident Fund (treated
as a defined benefit plan on account of guaranteed interest benefit), Gratuity and Pension Plan (treated as a
defined benefit plan on account of guaranteed pension).
 
The Company has for all employees other than Ankleshwar and Nepal, defined benefit plans for
post-employment benefits in the form of Provident Fund which is administered through trustees (treated as a
defined benefit plan on account of guaranteed interest benefit). Further, the Company has defined benefit
plan for post-retirement benefit in the form of Gratuity which is administered through trustees and LIC for
all its employees and pension plan for certain employees.
 
Provident Fund and Gratuity fund are recognized by the Income-tax authorities and administered through
trustees and/or LIC. Liability for Defined Benefit Plans is provided on the basis of valuations, as at the
Balance Sheet date, carried out by an independent actuary.
 
The defined benefit obligation is calculated annually by independent actuaries using the Projected Unit
Credit Method. The present value of the defined benefit obligation is determined by discounting the estimated
future cash outflows using interest rates of government bond that have terms to maturity approximating to the
terms of the related gratuity, pension plan and provident fund liabilities.
 
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions
are recognized in the period in which they occur, directly in other comprehensive income. They are included
in retained earnings in the statement of changes in equity and in the Balance Sheet.
 
xvii.    Share based payments
 
Sanofi S.A. France, ultimate holding company being the Ultimate Holding Company has given restricted
stock option plan to certain employees of the Company.
 
Pursuant to Ind AS 102 ''Share-based Payment'', the Company recognizes an expense based on the fair value
of the stock options as at grant date. The expenses are Amortized over the vesting period which is conditional
on the provision of services by the plan participant during the vesting period. The corresponding credit is
given to equity because the award represents in substance equity contribution by the Parent Company. The
cumulative expense recognized for stock options at each reporting date until the vesting date reflects the
extent to which the vesting period has expired and the Company''s best estimate of the number of equity
instruments that will ultimately vest.
 
xviii.    Contributed equity
 
Equity shares are classified as equity.
 
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
 
xix.    Dividends distribution to equity holders
 
Provision is made for the amount of any dividend declared, being appropriately authorized and no longer
at the discretion of the Company, on or before the end of the reporting period but not distributed at the end
of the reporting period.
 
xx.    Earnings per Share
 
Basic earnings per share is calculated by dividing the net profit after tax 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 and for all periods presented is
adjusted for events, such as bonus shares, other than the conversion of potential equity shares that have
changed the number of equity shares outstanding, without a corresponding change in resources.
 
For the purpose of calculating diluted earnings per share, the net profit for the period attributable to
equity shareholders and the weighted average number of shares outstanding during the period is adjusted for
the effects of all dilutive potential equity shares.
 
xxi.    Cash flow statement
 
Cash flows are reported using the Indirect Method, as set out in Ind AS 7 ''Statement of Cash Flow'',
whereby profit for the year is adjusted for the effects of transaction of non-cash nature, any deferrals or
accruals of past or future operating cash receipts or payments and item of income or expenses associated with
investing or financing cash flows. The cash flows from operating, investing and financing activities of the
Company are segregated.
 
3. Recent Accounting Pronouncements
 
Ministry of Corporate Affairs (MCA) through the Companies (Indian Accounting Standards) Amendment Rules,
2018 has notified the following new and amendments to Ind AS which the Company has not applied as they are
effective for annual periods beginning on or after April 01, 2018:
 
Ind AS 115 - Revenue from Contracts with Customers
 
Ind AS 115, is effective for periods beginning on or after April 01, 2018. Ind AS 115 sets out the
requirements for recognizing revenue that apply to all contracts with customers (except for contracts that
are within the scope of the Standards on leases, insurance contracts and financial instruments). Ind AS 115
replaces the previous revenue Standards: Ind AS 18 Revenue and Ind AS 11 Construction Contracts, and the
related appendices.
 
The standard establishes a comprehensive framework for determining when to recognize revenue and how much
revenue to recognize. Under Ind AS 115, an entity recognizes revenue when (or as) a performance obligation is
satisfied, i.e. when ''control'' of the goods or services underlying the particular performance obligation is
transferred to the customer. The core principle in that framework is that a Company should recognize revenue
to depict the transfer of promised goods or services to the customer in an amount that reflects the fair
value of consideration to which the Company expects to be entitled in exchange for those goods or
services.
 
Specifically, the standard introduces a 5-step approach to revenue recognition:
 
-    Step 1: Identify the contract(s) with a customer
 
-    Step 2: Identify the performance obligation in contract
 
-    Step 3: Determine the transaction price
 
-    Step 4: Allocate the transaction price to the performance obligations in the contract
 
-    Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
 
The Company is in the process of evaluating the impact of adoption of Ind AS 115 on its financial
statements.