5. Material accounting policy information
The financial statements have been prepared using
the material accounting policy information and
measurement bases summarised below. These
policies have been consistently applied to all the
years presented, unless otherwise stated.
5.1 Current versus non-current classification
All assets and liabilities have been classified as
current or non-current as per the Company’s
operating cycle and other criteria set out in Division
II of Schedule III of the Act. Based on the nature of the
operations and the time between the acquisition of
assets for processing/servicing and their realisation
in cash or cash equivalents, the Company has
ascertained its operating cycle as twelve months for
the purpose of current/non-current classification of
assets and liabilities.
5.2 Property, plant and equipment
Recognition and initial measurement
Property, plant and equipment are stated at their
cost of acquisition. The cost comprises purchase
price, borrowing cost if capitalization criteria are
met and directly attributable cost of bringing the
asset to its working condition for the intended
use. Any trade discount and rebates are deducted
in arriving at the purchase price. Property, plant
and equipment purchased on deferred payment
basis are recorded at equivalent cash price. The
difference between the cash price equivalent and
the total payment is recognised as interest expense
over the period until payment is made.
Subsequent costs and disposal
Subsequent costs are included in the asset’s
carrying amount or recognised 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 carrying amount of any
component accounted for as a separate asset is
de-recognised when replaced. All other repair and
maintenance costs are recognised in standalone
statement of profit and loss as incurred.
Items such as spare parts, stand-by equipment and
servicing equipment are recognised as property,
plant and equipment when they meet the definition
of property, plant and equipment. Otherwise, such
items are classified as inventory.
An item of property, plant and equipment initially
recognised is de-recognised upon disposal or when
no future economic benefits are expected from its
use. Any gain or loss arising on de-recognition of
the asset (calculated as the difference between the
net disposal proceeds and the carrying amount of
the asset) is recognised in statement of profit and
loss when the asset is derecognised.
Capital work-in-progress includes property, plant
and equipment under construction and not ready
for intended use as on the balance sheet date.
Subsequent measurement (depreciation and
useful lives)
Freehold land is carried at historical cost. All
other items of property, plant and equipment are
subsequently measured at cost less accumulated
depreciation and impairment losses (if any).
Depreciation is provided for property, plant and
equipment on a straight-line basis so as to expense
the cost less residual value over their estimated
useful lives as prescribed in Schedule II of the
Companies Act, 2013 except in respect of certain
categories of assets, where the useful life of the
assets has been assessed based on a technical
evaluation. The estimated useful lives and residual
values are reviewed at the end of each reporting
period, with the effect of any change in estimate
accounted for on a prospective basis.
*The Company believes that the technically evaluated
useful lives, different from Schedule II of the Companies Act,
2013, best represent the period over which these assets are
expected to be used
Leasehold improvements are amortised over the
lower of useful life and the lease term available
to the Company.
5.3 Intangible assets
Recognition and initial measurement
Intangible assets (software) are stated at their cost
of acquisition. The cost comprises purchase price,
borrowing cost if capitalization criteria are met and
directly attributable cost of bringing the asset to its
working condition for the intended use.
Subsequent measurement
The cost of capitalized software is amortized over a
period of five years from the date of its acquisition.
De-recognition
Intangible asset is de-recognised upon disposal or
when no future economic benefits are expected
from its use or disposal. Any gain or loss arising
on de-recognition of the asset (calculated as the
difference between the net disposal proceeds and
the carrying amount of the asset) is recognized in
the statement of profit and loss, when the asset
is derecognised.
Intangible assets under development
Intangible asset under development includes
intangible assets which are under development
and not ready for intended use as on the
balance sheet date.
5.4 Inventories
Inventories are valued at cost or net realisable value,
whichever is lower. Cost is calculated on weighted
average basis. Cost of these inventories comprises
of all cost of purchase, taxes (except where credit
is allowed) and other costs incurred in bringing the
inventories to their present location and condition.
Cost of purchased inventory is determined after
deducting rebates and discounts.
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.
5.5 Revenue recognition and other income
Revenue is recognized upon transfer of control
of promised products or services to customers/
patients in an amount that reflects the consideration
the Company expects to receive in exchange for
those products or services. Revenue is measured
at transaction price net of rebates, discounts and
taxes. A receivable is recognised by the Company
when the control is transferred as this is the case
of point in time recognition where consideration
is unconditional because only the passage of time
is required. When either party to a contract has
performed, an entity shall present the contract in
the balance sheet as a contract asset or a contract
liability, depending on the relationship between
the entity’s performance and the payment. No
significant element of financing is deemed present
as the sales are either made with a nil credit
term or with a credit period of 0-90 days. The
Company applies the revenue recognition criteria
to each component of the revenue transaction
as set out below.
Income from healthcare services
Revenue from healthcare services is recognized as
and when related services are rendered and include
services for patients undergoing treatment and
pending for discharge, which is shown as unbilled
revenue under other current financial assets. The
Company considers the terms of the contract and
its customary business practices to determine
the transaction price. The transaction price is the
amount of consideration to which the Company
expects to be entitled in exchange for the services,
excluding amounts collected on behalf of third
parties (for example, indirect taxes).
I ncome from sale of pharmacy products to out¬
patients
Revenue from pharmacy products is recognized
as and when the control of products is transferred
to the customer. The Company considers its
customary business practices to determine the
transaction price. The transaction price is the
amount of consideration to which the Company
expects to be entitled in exchange for the products,
excluding amounts collected on behalf of third
parties (for example, indirect taxes).
Grant income
Grants are recognised in the standalone statement
of profit and loss under other operating revenue
when the right to receive these benefits as per
the terms of the scheme is established, and to the
extent that there is no significant uncertainty about
their measurability and compliance thereof.
Clinical research income
Clinical research income is recognised in the
accounting year in which the services are rendered
as per the agreed terms with the customers.
Sponsorship income
Sponsorship income is recognised in the accounting
year in which the services are rendered as per the
agreed terms with the customers.
Revenue sharing agreements
Revenue arising from revenue sharing agreements
is recognized as per the terms of the arrangement.
Interest income
Interest income is recorded on accrual basis using
the effective interest rate (EIR) method.
Other income
Rental income is recognised on a straight-line basis
over the lease term, except for contingent rental
income which is recognised when it arises.
5.6 Borrowing costs
Borrowing cost includes interest expense as per
effective interest rate (EIR). Borrowing costs directly
attributable to the acquisition, construction or
production of a qualifying asset are capitalized
during the period of time that is required to
complete and prepare the asset for its intended use
or sale. Qualifying assets are assets that necessarily
take a substantial period of time to get ready for its
intended use or sale. All other borrowing costs are
expensed in the period they occur.
5.7 Leases
Company as a lessee - Right of use assets and lease
liabilities
A lease is defined as ‘a contract, or part of a
contract, that conveys the right to use an asset (the
underlying asset) for a period of time in exchange
for consideration’.
Classification of leases
The Company enters into leasing arrangements for
various assets. The assessment of the lease is based
on several factors, including, but not limited to,
transfer of ownership of leased asset at end of lease
term, lessee’s option to extend/purchase etc.
Recognition and initial measurement of right of
use assets
At lease commencement date, the Company
recognises a right-of-use asset and a lease liability
on the standalone balance sheet. The right-of-use
asset is measured at cost, which is made up of the
initial measurement of the lease liability, any initial
direct costs incurred by the Company, an estimate
of any costs to dismantle and remove the asset at
the end of the lease (if any), and any lease payments
made in advance of the lease commencement date
(net of any incentives received).
Subsequent measurement of right of use assets
The Company depreciates the right-of-use assets on
a straight-line basis from the lease commencement
date to the earlier of the end of the useful life of the
right-of-use asset or the end of the lease term. The
Company also assesses the right-of-use asset for
impairment when such indicators exist.
Lease liabilities
At lease commencement date, the Company
measures the lease liability at the present value of
the lease payments unpaid at that date, discounted
using the interest rate implicit in the lease if that rate
is readily available or the Company’s incremental
borrowing rate. Lease payments included in the
measurement of the lease liability are made up
of fixed payments (including in substance fixed
payments) and variable payments based on an
index or rate. Subsequent to initial measurement,
the liability will be reduced for payments made and
increased for interest. It is re-measured to reflect
any reassessment or modification, or if there are
changes in in-substance fixed payments. When the
lease liability is re-measured, the corresponding
adjustment is reflected in the right-of-use asset.
Variable lease payments that depend on sales are
recognised in profit or loss in the period in which
the condition that triggers those payments occurs.
The Company has elected to account for short-term
leases using the practical expedients. Instead of
recognising a right-of-use asset and lease liability,
the payments in relation to these short-term leases
are recognised as an expense in statement of profit
and loss on a straight-line basis over the lease term.
Company as a lessor
Leases in which the Company does not transfer
substantially all the risks and rewards of ownership
of an asset are classified as operating leases.
The respective leased assets are included in the
standalone balance sheet based on their nature.
Rental income is recognized on straight-line basis
over the lease-term.
5.8 Impairment of non-financial assets
Assessment is done at each balance sheet date as to
whether there is any indication that an asset may be
impaired. For the purpose of assessing impairment,
the smallest identifiable group of assets that
generates cash inflows from continuing use that
are largely independent of the cash inflows from
other assets or groups of assets, is considered as a
cash generating unit. If any such indication exists,
an estimate of the recoverable amount of the asset/
cash generating unit is made. Assets whose carrying
value exceeds their recoverable amount are written
down to the recoverable amount. Recoverable
amount is higher of an asset’s or cash generating
unit’s 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
an asset and from its disposal at the end of its useful
life. Assessment is also done at each balance sheet
date as to whether there is any indication that an
impairment loss recognised for an asset in prior
accounting periods may no longer exist or may
have decreased. An impairment loss is reversed if
there has been a change in the estimates used to
determine the recoverable amount. 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.
5.9 Foreign currency
Functional and presentation currency
Items included in the financial statement of the
Company are measured using the currency of the
primary economic environment in which the entity
operates (‘the functional currency’). The financial
statements have been prepared and presented
in Indian Rupees (INR), which is the Company’s
functional and presentation currency.
Transactions and balances
Foreign currency transactions are recorded in the
functional currency, by applying to the exchange
rate between the functional currency and the
foreign currency at the date of the transaction.
Foreign currency monetary items outstanding at
the balance sheet date are converted to functional
currency using the closing rate. Non-monetary
items denominated in a foreign currency which
are carried at historical cost are reported using the
exchange rate at the date of the transaction.
Exchange differences arising on monetary items
on settlement, or restatement as at reporting
date, at rates different from those at which they
were initially recorded, are recognized in the
standalone statement of profit and loss in the year
in which they arise.
5.10 Financial instruments
Recognition and initial measurement
Financial assets (except trade receivables) and
financial liabilities are recognised when the
Company becomes a party to the contractual
provisions of the financial instrument and are
measured initially at fair value adjusted for
transaction costs, except for those carried at fair
value through profit or loss which are measured
initially at fair value. Trade receivables are measured
at transaction price.
The classification depends on the Company’s
business model for managing the financial assets
and the contractual terms of the cash flows. For
assets measured at fair value, gains and losses will
either be recorded in the standalone statement of
profit and loss or other comprehensive income. For
investments in debt instruments, this will depend
on the business model in which the investment is
held. For investments in equity instruments, this
will depend on whether the Company has made an
irrevocable election at the time of initial recognition
to account for the equity investment at fair value
through other comprehensive income (‘FVOCI’).
Non-derivative financial assets
Subsequent measurement
Financial assets carried at amortised cost - A
‘financial asset’ is measured at the amortised cost if
both the following conditions are met:
• The asset is held within a business model
whose objective is to hold assets for collecting
contractual cash flows; and
• Contractual terms of the asset give rise on
specified dates to cash flows that are solely
payments of principal and interest (SPPI) on
the principal amount outstanding.
After initial measurement, such financial assets are
subsequently measured at amortised cost using
the effective interest rate (EIR) method.
Investments in equity and debenture
instruments of subsidiaries - These are measured
at cost in accordance with Ind AS 27 ‘Separate
Financial Statements’.
Investments in equity instruments of others -
These are measured at fair value through other
comprehensive income.
De-recognition of financial assets
A financial asset is de-recognised when the
contractual rights to receive cash flows from the
asset have expired or the Company has transferred
its rights to receive cash flows from the asset.
Non-derivative financial liabilities
Subsequent measurement
Subsequent to initial recognition, all non-derivative
financial liabilities are measured at amortised cost
using the effective interest method.
De-recognition of financial liabilities
A financial liability is de-recognised when the
obligation under the liability is discharged or
cancelled or expires. When an existing financial
liability is replaced by another from the same
lender on substantially different terms, or the terms
of an existing liability are substantially modified,
such an exchange or modification is treated as
the de-recognition of the original liability and the
recognition of a new liability. The difference in the
respective carrying amounts is recognised in the
standalone statement of profit and loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset
and the net amount is reported in the standalone
balance sheet if there is a currently enforceable legal
right to offset the recognised amounts and there is
an intention to settle on a net basis, to realise the
assets and settle the liabilities 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.
Financial guarantees
Financial guarantee contracts are those contracts
that require a payment to be made to reimburse
the holder for a loss it incurs because the specified
debtor fails to make a payment when due in
accordance with the terms of a debt instrument.
Financial guarantee contracts are recognised
initially as a liability at fair value, with a corresponding
adjustment basis the underlying relationship
i.e., investment in subsidiary. Subsequently, the
liability is measured at the higher of the amount
of expected loss allowance determined as per
impairment requirements of Ind-AS 109 and the
amount recognised less cumulative amortisation.
5.11 Impairment of financial assets
The Company assesses on a forward looking basis
the expected credit loss associated with its financial
assets and the impairment methodology depends
on whether there has been a significant increase
in credit risk.
Trade receivables
In respect of trade receivables, the Company
applies the simplified approach of Ind AS 109
(‘Provision matrix approach’), which requires
measurement of loss allowance at an amount equal
to lifetime expected credit losses basis provision
matrix approach. Lifetime expected credit losses
are the expected credit losses that result from all
possible default events over the expected life of a
financial instrument.
Other financial assets
In respect of its other financial assets, the Company
assesses if the credit risk on those financial assets
has increased significantly since initial recognition.
If the credit risk has not increased significantly
since initial recognition, the Company measures
the loss allowance at an amount equal to 12-month
expected credit losses, else at an amount equal to
the lifetime expected credit losses.
When making this assessment, the Company uses
the change in the risk of a default occurring over
the expected life of the financial asset. To make
that assessment, the Company compares the risk
of a default occurring on the financial asset as at
the balance sheet date with the risk of a default
occurring on the financial asset as at the date of
initial recognition and considers reasonable and
supportable information, that is available without
undue cost or effort, that is indicative of significant
increases in credit risk since initial recognition. The
Company assumes that the credit risk on a financial
asset has not increased significantly since initial
recognition if the financial asset is determined to
have low credit risk at the balance sheet date.
5.12 Taxes
Tax expense comprises current and deferred tax.
Current and deferred tax is recognised in standalone
statement of profit and loss except to the extent
that it relates to items recognised directly in equity
or other comprehensive income.
The current income-tax charge is calculated on
the basis of the tax laws enacted or substantively
enacted by the end of reporting period at the
balance sheet date. Management periodically
evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is
subject to interpretation. It establishes provisions
where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred tax is provided in full, on temporary
differences arising between the tax base of assets
and liabilities and their carrying amounts in the
financial statements. Deferred tax is determined
using tax rates (and laws) that have been enacted
or substantively enacted by the end of the reporting
period and are expected to apply when the related
deferred tax asset is realised or the deferred tax
liability is settled. Deferred tax assets are recognised
for all deductible temporary differences and unused
tax losses (including unabsorbed depreciation)
only if it is probable that future taxable amounts
will be available to utilise those temporary
differences and losses.
Current tax assets and 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 realise
the asset and settle the liability simultaneously.
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.
5.13 Cash and cash equivalents
Cash and cash equivalents include cash in hand,
demand deposits with the banks, other short-term
highly liquid investments with original maturity of
three months and less.
5.14 Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non¬
monetary benefits that are expected to be settled
wholly within 12 months after the end of the period
in which the employees render the related service
are classified as short-term employee benefits.
These benefits include salaries and wages, short¬
term bonus, incentives etc. These are measured
at the amounts expected to be paid when the
liabilities are settled. The liabilities are presented
as current employee benefit obligations in the
standalone balance sheet.
Defined contribution plan
Contribution towards provident fund is made to
the regulatory authorities, where the Company has
no further obligations. Such benefits are classified
as defined contribution plan as the Company does
not carry any further obligations, apart from the
contributions made on a monthly basis. In addition,
contributions are made to employees’ state
insurance schemes and labour welfare fund, which
are also defined contribution plans recognized
and administered by the Government of India and
respective states. The Company’s contributions
to these schemes are expensed in the standalone
statement of profit and loss.
Defined benefit plan
The Company has unfunded gratuity as defined
benefit plan where the amount that an employee
will receive on retirement is defined by reference
to the employee’s length of service and final
salary. The gratuity plan provides a lump sum
payment to vested employees at retirement, death,
incapacitation or termination of employment, of an
amount based on the respective employee’s salary
and the tenure of employment. The Company’s
liability is actuarially determined (using the
Projected Unit Credit method) at the end of each
year. This is based on standard rates of inflation,
salary growth rate and mortality.
Discount factors are determined close to each year-
end by reference to market yields on government
bonds that have terms to maturity approximating
the terms of the related liability. Service cost and
interest expense on the Company’s defined benefit
plan is included in employee benefits expense.
Actuarial gains/losses resulting from re¬
measurements of the defined benefit obligation
are included in other comprehensive income.
In case of managerial employees, in addition to
the ceiling defined under the Gratuity Act, certain
additional amounts are paid depending upon
the period served. This additional gratuity liability
is also determined on the basis of its actuarial
valuation based on the projected unit credit
method as on the balance sheet date; changes
in actuarial assumptions are charged or credited
to other comprehensive income in the period in
which they arise.
Other long-term employee benefits
The Company also provides benefit of compensated
absences to its employees (as per policy) which
are in the nature of long-term employee benefit
plan. Liability in respect of compensated absences
becoming due and expected to be availed more than
one year after the balance sheet date is estimated
on the basis of an actuarial valuation performed by
an independent actuary using the projected unit
credit method as on the reporting date. Service
cost and net interest expense on the Company’s
other long-term employee benefits plan is included
in employee benefits expense. Actuarial gains and
losses arising from experience adjustments and
changes in actuarial assumptions are also recorded
in the standalone statement of profit and loss in the
year in which such gains or losses arise.
Share-based payment transactions
Selected employees of the Company receive part of
remuneration in the form of equity-settled share-
based payment instruments for rendering services
over a defined vesting period.
Equity-settled instruments are measured at the
fair value on the grant date. In cases where such
instruments are granted at a nominal exercise
price, the intrinsic value at grant date approximates
their fair value. The resulting expense is recognised
in the standalone statement of profit and loss over
the vesting period, with a corresponding credit
to the share options outstanding account, which
forms part of equity.
These instruments generally vest in a graded
manner over the vesting period. Accordingly, the fair
value determined at the grant date is recognised as
an expense over the respective vesting periods of
each tranche on an accelerated amortisation basis.
The total compensation expense is based on the
Company’s estimate of the number of instruments
expected to vest.
5.16 Treasury shares
Treasury shares are recorded as deduction
from equity and other equity. No gain or loss is
recognised in standalone statement of profit and
loss on the purchase, sale, issue, or cancellation
of treasury shares. Any difference between the
carrying amount and the consideration, if reissued,
is recognised in other equity.
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