1. Capital Management
Capital includes equity attributable to the equity holders to ensure that it maintains an efficient capital structure and healthy capital ratios in order to support its business and maximize shareholder value. The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions or its business requirements. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the year ended 31st March 2017 and 31st March 2016.
The Company maintains a strong capital base and the primary objective of the Company''''s capital management is to maximize the shareholder value.
The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. Net debt is calculated as loans and borrowings less cash and cash equivalents. Based on this, the Company is a debt free Company and would like to remain debt free.
The Company does not have any interest bearing loans and borrowings in the current year as well as previous year.
2. First time adoption of IND AS
These Financial Statements have been prepared for the year ended 31st March 2017 in accordance with IND AS together with comparative period data for the year ended 31st March 2016.The Company has followed the guidance prescribed in IND AS 101- First Time adoption of Indian Accounting Standard, with 1st April 2015 as the transition date. As required, separate disclosures have been made for the transition to IND AS from IGAAP with detailed explanatory notes. The Company has opted few exemption on first time adoption of IND AS in accordance with IND AS 101 which are set out below.
Exemption availed on first time adoption of IND AS 101
IND AS 101 allows first -time adopters certain exemptions from the retrospective application of certain requirement under IND AS.
- Previous GAAP carrying values as deemed cost at the transition date for all its property, plant and equipment and intangible assets
- Designated quoted equity instruments held at 1st April 2015 as fair value through other comprehensive income
- Investments in subsidiaries and joint venture entity at deemed cost i.e. previous GAAP carrying amount as at 1st April 2015
The estimates at 1st April 2015 and at 31st March 2016 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies) apart from the following items where application of Indian GAAP did not require estimation:
- Impairment of financial assets based on expected credit loss model
The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at 1st April 2015, the date of transition to Ind AS and as of 31st March 2016.
A Revenue from operation and Excise duty
Under Indian GAAP, excise duty on sale of products was presented net basis whereas as per Ind AS, same needs to be presented on gross basis. Hence, excise duty on sale of products has been separately presented on the face of statement of profit and loss account. Thus, sale of products under Ind AS as increased by Rs. 2,212.94 lakhs and corresponding increase in expenses. Under Indian GAAP, incentive paid to distributors of Rs.952.93 lakhs and cash discounts of Rs.15.04 lakhs was recognized as part of Other Expenses whereas as required under Ind AS same shall be adjusted against the revenue.
(i) Mutual Funds and non-convertible debentures
Under Indian GAAP, the Company recognized long-term and short term investments in mutual funds and nonconvertible debentures at cost less provision for diminution in the value of investments. Under Ind AS, the Company has designated such investments as fair value through profit or loss (FVTPL). On the transition date, an increase of Rs. 2,097.77 lakhs between the instruments'''' fair value and Indian GAAP carrying amount has been recognized in retained earnings.
(ii) Equity Shares
Under Indian GAAP, the Company recognized long-term investments in equity shares at cost less provision for diminution in the value of investments. Under Ind AS, the Company has designated such investments as fair value through other comprehensive income (FVTOCI). On the transition date, an increase of Rs. 34.04 lakhs between the
ANNUAL REPORT 2016-2017
instruments'''' fair value and Indian GAAP carrying amount has been recognized in Other Comprehensive Income. Further for the year ended March 31, 2016 decrease in fair value of Rs. 34.65 lakhs has been recorded in Other Comprehensive Income.
C Employee benefits expense
Under Indian GAAP, the entire cost, including actuarial gains and losses, are charged to the statement of profit or loss. Under Ind AS, remeasurements comprising of actuarial gains and losses and the return on plan assets excluding amounts included in net interest on the net defined benefit liability are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI. Actuarial loss of Rs. 49.69 lakhs as at March 31, 2016 is recognized in OCI net of deferred tax.
D Trade receivables
Under Indian GAAP, the Company had recognized specific amount towards impairment of trade receivables on the basis of incurred losses model. Under Ind AS, impairment allowance has been recognized based on expected loss model (ECL). Accordingly, additional allowance for impairment amounting to Rs. 28.30 lakhs has been recognized with the corresponding adjustment to retained earnings.
Under Indian GAAP, proposed dividends including dividend distribution tax are recognized as a liability in the period to which they relate, irrespective of when they are declared. Under Ind AS, a proposed dividend is recognized as a liability in the period in which it is declared by the Company (usually when approved by shareholders in a general meeting) or paid. Accordingly, proposed dividends and the related tax have increased the retained earnings by Rs. 4,815.80 lakhs, at the transition date.
F Deferred tax liabilities (net)
Indian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base.
In addition, the various transitional adjustments has led to temporary differences. Accordingly, the Company has accounted for deferred tax on such differences in retained earnings at the transition date, thereby reducing deferred tax liabilities by Rs. 9.79 lakhs and increasing retained earnings by the same amount.
G Other equity
Adjustments to retained earnings and other comprehensive income has been made in accordance with Ind AS, for the above mentioned line items.
H Current tax
Tax component on actuarial gains and losses which was transferred to other comprehensive income under Ind AS.
I Amalgamation adjustments
Pursuant to the scheme of amalgamation (Scheme), the Hon''''ble High Court of Judicature at Bombay, vide its order dated September 04, 2015, had approved the Scheme amalgamation of Anand Synthochem Limited, Soven Trading and Investment Private Limited, Sudipta Trading and Investment Private Limited and Transgene Trading and Investment Private Limited (collectively known as Transferor Companies) with the Company. The appointed date of the Scheme was 1st September 2014. The Scheme has become effective on 04th September 2015,pursuant to its filling with registrar of Companies.
The Company has given effect for the said scheme in its books of accounts in accordance with the Scheme and in compliance with Accounting Standard 14 “Accounting for Amalgamations” under the “Pooling of Interest” method. Accordingly, the balance sheet as at 1st April, 2015 includes the impact of assets and liabilities taken over of transferor companies after giving effect to elimination of intercompany transactions and balances.