Provisions and Contingencies
Provisions are recognised when the company has a
present legal or constructive obligation as a result of
past events, it is probable that an outflow of resources
will be required to settle the obligation and the amount
can be reliably estimated. Provisions are not recognised
for future operating losses.
Provisions are measured at the present value of
management's best estimate of the expenditure
required to settle the present obligation at the end of the
reporting period. The discount rate used to determine
the present value is a pre-tax rate that reflects current
market assessments of the time value of money and
the risks specific to the liability. The increase in the
provision due to the passage of time is recognised as
interest expense.
A provision for onerous contracts is recognized when
the expected benefits to be derived by the Company
from a contract are lower than the unavoidable cost of
meeting its obligations under The provision has been
recognised where cost to fulfil the terms of the project
contracts are estimated to be higher than financial and
economics benefits to be received. Before a provision is
established, the Company recognizes any impairment
loss on the assets associated with that contract.
Contingent liabilities are recognised at their fair
value only, if they were assumed as part of a business
combination. Contingent assets are not recognised.
However, when the realisation of income is virtually
certain, then the related asset is no longer a contingent
asset, and is recognised as an asset. Information on
contingent liabilities is disclosed in the notes to the
financial statements, unless the possibility of an outflow
of resources embodying economic benefits is remote.
The same applies to contingent assets where an inflow
of economic benefits is probable.
2.17 Segment reporting
Operating segments are reported in a manner consistent
with the internal reporting provided to the CODM. The
CODM monitors the operating results of its business
Segments separately for the purpose of making decision
about the resources allocation and performance
assessment. Segment performance is evaluated based
on the profit or loss and is measured consistently with
profit or loss in the financial statements. CODM reviews
the results of the Group engaged in the business of
Contract Research and Manufacturing Services (CRAMS),
quats, specialty chemicals, Vitamins D3 and its analogues,
cholesterols, disinfectants etc. Accordingly, the Company
as a whole is a single segment.
2.18 Cash and cash equivalent
Cash and cash equivalent in the balance sheet
comprises cash at bank and on hand and short-term
deposits with an original maturity of three months or
less, which are subject to an insignificant risk of changes
in value. Bank overdrafts are shown within borrowings
in current liabilities in the balance sheet.
2.19 Dividend distribution to equity shareholders
Dividend distributed to Equity shareholders is recognised
as distribution to owners of capital in the Statement of
Changes in Equity, in the period in which it is paid.
2.20 Earnings per share
The basic Earnings Per Share ("EPS”) is computed
by dividing the net profit/(loss) after tax for the
year attributable to the equity shareholders by
the weighted average number of equity shares
outstanding during the year.
For the purpose of calculating diluted earnings per
share, net profit/(loss) after tax for the year attributable
to the equity shareholders and the weighted average
number of equity shares outstanding during the year
are adjusted for the effects of all dilutive potential
equity shares.
2.21 Current/Non-current classification
An assets is classified as current if:
(a) it is expected to be realised or sold or consumed in
the Company's normal operating cycle;
(b) it is held primarily for the purpose of trading;
(c) it is expected to be realised within twelvemonths
after the reporting period; or
(d) it is cash or a cash equivalent unless it is 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 classified as current if:
(a) it is expected to be settled in normal operating
cycle;
(b) it is held primarily for the purpose of trading;
(c) it is expected to be settled within twelvemonths
after the reporting period;
(d) it has no unconditional right to defer the settlement
of the liability for at lease twelvemonths after the
reporting period.
All other liabilities are classified as non-current.
The operating cycle is the time between acquisition of
assets for processing and their realisation in cash and
cash equivalents. The Company's normal operating
cycle is twelve months.
2.22 Significant accounting estimates, judgements
and assumptions
The preparation of the Company's financial statements
in conformity with Ind AS requires management to
make judgements, estimates and assumptions that
affect the reported amounts of revenues, expenses,
assets and liabilities and the accompanying disclosures,
and the disclosure of contingent liabilities. Uncertainty
about these assumptions and estimates could result
in outcomes that require a material adjustment to
the carrying amount of assets or liabilities affected
in future periods. The estimates and associated
assumptions are based on historical experience and
various other factors that are believed to be reasonable
under the circumstances existing when the financial
statements were prepared. The estimates and
underlying assumptions are reviewed on an ongoing
basis. Revision to accounting estimates is recognised in
the year in which the estimates are revised and in any
future year affected.
In the process of applying the Company's accounting
policies, management has made the following
judgements which have significant effect on the
amounts recognised in the financial statements:
a. Useful lives of property, plant and equipment and
Goodwill: Determination of the estimated useful
life of tangible assets and the assessment as to
which components of the cost may be capitalised.
Useful life of tangible assets is based on the life
specified in Schedule II of the Companies Act,
2013 and also as per management estimate for
certain category of assets. Assumption also need
to be made, when company assesses, whether as
asset may be capitalised and which components
of the cost of the assets may be capitalised. The
goodwill recorded on merger has been amortised
in accordance with the power confirmed to Board
of Directors by Honorable High Court through
scheme.
b. Arrangement containing lease: At the inception
of an arrangement whether the arrangement is or
contain lease. At the inception or reassessment of
an arrangement that contains a lease, Company
separates payments and other consideration
required by the arrangement into those for the
lease and those for the other elements on the
basis of their relative fair values. The Company has
determined, based on an evaluation of the terms
and conditions of the arrangements, that such
contracts are not in the nature of leases.
c. Service Income: The Company uses the
percentage of completion method in accounting
for its fixed price contract. Use of percentage of
completion requires the Company to estimate
the service performed to date as a proportion of
the total service to be performed. Determination
of the stage of completion is technical matter and
determined by the management experts.
d. Fair value measurement of financial instruments:
When the fair values of financial assets and
financial liabilities recorded in the Balance Sheet
cannot be measured based on quoted prices in
active markets, their fair value is measured using
appropriate valuation techniques. The inputs for
these valuations are taken from observable sources
where possible, but where this is not feasible, a
degree of judgement is required in establishing
fair values. Judgements include considerations of
various inputs including liquidity risk, credit risk,
volatility etc. Changes in assumptions/judgements
about these factors could affect the reported fair
value of financial instruments.
e. Defined benefit plan: The cost ofthe defined benefit
gratuity plan and other post-employment benefits
and the present value of the gratuity obligation are
determined using actuarial valuations. An actuarial
valuation involves making various assumptions
that may differ from actual developments in the
future. These include the determination of the
discount rate, future salary increases and mortality
rates. Due to the complexities involved in the
valuation and its long term nature, a defined
benefit obligation is highly sensitive to changes in
these assumptions. All assumptions are reviewed
at each reporting date.
f. Allowances for uncollected accounts receivable
and advances: Trade receivables do not carry
interest and are stated at their normal value as
reduced by appropriate allowances for estimated
irrecoverable amounts. Individual trade receivables
are written off when management deems them
not collectable. Impairment is made on the
expected credit loss model, which are the present
value of the cash shortfall over the expected life of
the financial assets. The impairment provisions for
financial assets are based on assumption about the
risk of default and expected loss rates. Judgement
in making these assumption and selecting the
inputs to the impairment calculation are based
on past history, existing market condition as well
as forward looking estimates at the end of each
reporting period.
g. Allowances for inventories: Management reviews
the inventory age listing on a periodic basis. This
review involves comparison of the carrying value of
the aged inventory items with the respective net
realizable value. The purpose is to ascertain whether
an allowance is required to be made in the financial
statements for any obsolete and slow-moving items.
Management is satisfied that adequate allowance
for obsolete and slow-moving inventories has been
made in the financial statements.
h. Impairment of non-financial assets: The Company
assesses at each reporting date whether there is
an indication that an asset may be impaired. If any
indication exists, the Company estimates the asset's
recoverable amount. An asset's recoverable amount
is the higher of an asset's or Cash Generating Units
(CGU's) fair value less costs of disposal and its value
in use. It is determined for an individual asset, unless
the asset does not generate cash inflows that are
largely independent of those from other assets or a
groups of assets. Where the carrying amount of an
asset or CGU exceeds its recoverable amount, the
asset is considered impaired and is written down to
its recoverable amount.
In assessing value in use, the estimated future
cash flows are discounted to their present value
using pre-tax discount rate that reflects current
market assessments of the time value of money
and the risks specific to the asset. In determining
fair value less costs of disposal, recent market
transactions are taken into account, if no such
transactions can be identified, an appropriate
valuation model is used.
i. Taxation: Deferred tax assets are recognised for
unused tax losses to the extent that it is probable
that taxable profit will be available against which
the losses can be utilised. Significant management
judgment is required to determine the amount of
deferred tax assets that can be recognised, based
upon the likely timing and the level of future
taxable profits together with future tax planning
strategies. Management judgement is required for
the calculation of provision for income taxes and
deferred tax assets and liabilities. Company reviews
at each balance sheet date the carrying amount of
deferred tax assets. The factors used in estimates
may differ from actual outcome which could lead
to significant adjustment to the amounts reported
in the financial statements.
j. Contingencies: Management judgement is
required for estimating the possible outflow of
resources, if any, in respect of contingencies/claim/
litigation against company as it is not possible to
predict the outcome of pending matters with
accuracy.
2.23 Recent Accounting Pronouncements
MCA notifies Companies (Indian Accounting Standards)
Amendment Rules, 2023 vide Notification No. G.S.R
242(E) Dated: 31st March, 2023 and further amended
Companies (Indian Accounting Standards) Rules, 2015,
which shall come into force with effect from 1st day of
April, 2023.
The MCA has carried amendments to the following
existing standards which will be effective from 1st April,
2023. The Company is not expecting any significant
impact in the financial statements from these
amendments. The quantitative impacts would be
finalized based on a detailed assessment which has
been initiated to identify the key impacts along with
evaluation of appropriate transition options.
1. Ind AS 1 - Presentation of Financial Statements
2. Ind AS 8 - Accounting Policies, Changes in
Accounting Estimates and Errors
3. Ind AS 12 - Income Taxes
4. Ind AS 101 - First-time Adoption of Indian
Accounting Standards
5. Ind AS 102 - Share Based Payment
6. Ind AS 103 - Business Combinations
7. Ind AS 107 - Financial Instruments: Disclosures
8. Ind AS 109 - Financial Instruments
9. Ind AS 115 - Revenue from Contracts with Customers
10. Ind AS 34 - Interim Financial Reporting
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