1. Critical accounting judgments, estimates and assumptions
The preparation of Company''''s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the assets or liabilities in future periods.
(a) Arrangement containing lease
At the inception of an arrangement, Company determines whether the arrangement is or contains a lease. At the inception or on 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.
Company has determined, based on an evaluation of the terms and conditions of the arrangements that such contracts are in the nature of operating leases.
(b) Multiple element contracts with vendors
Company has entered into multiple element contracts with vendors for supply of goods and rendering of services. The consideration paid is/may be determined independent of the value of supplies received and services availed. Accordingly, the supplies and services are accounted for based on their relative fair values to the overall consideration. The supplies with finite life under the contracts (as defined in the significant accounting policies) have been accounted under Property, Plant and Equipment and/or as Intangible assets, since Company has economic ownership in these assets. Company believes that the current treatment represents the substance of the arrangement.
(c) Property, Plant and equipment
Determination of the estimated useful life of tangible assets and the assessment as to which components of the cost may be capitalized. Useful life of tangible assets is based on the life prescribed in Schedule II of the Companies Act, 2013. Assumptions also need to be made, when Company assesses, whether an asset may be capitalized and which components of the cost of the asset may be capitalized.
(d) Intangible Assets
Internal technical or user team assess the remaining useful lives of Intangible assets. Management believes that assigned useful lives are reasonable.
(e) Recognition and measurement of defined benefit obligations:
The obligation arising from the defined benefit plan is determined on the basis of actuarial assumptions. Key actuarial assumptions include discount rate, trends in salary escalation and vested future benefits and life expectancy. The discount rate is determined with reference to market yields at the end of the reporting period on the government bonds. The period to maturity of the underlying bonds correspond to the probable maturity of the post-employment benefit obligations.
(f) Recognition of deferred tax assets and income tax:
Deferred tax asset is recognized for all the deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized. The management assumes that taxable profits will be available while recognizing deferred tax assets.
Management judgment 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 standalone financial statements.
(g) Recognition and measurement of other provisions:
The recognition and measurement of other provisions are based on the assessment of the probability of an outflow of resources, and on past experience and circumstances known at the balance sheet date. The actual outflow of resources at a future date may, therefore, vary from the figure included in other provisions.
Management judgment is required for estimating the possible outflow of resources, if any, in respect of contingencies/claim/litigations against Company as it is not possible to predict the outcome of pending matters with accuracy.
(i) Allowance for uncollected accounts receivable and advances
Trade receivables do not carry any 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 collectible. Impairment is made on the expected credit losses, 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 risk of default and expected loss rates. Judgment 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.
(j) Insurance claims
Insurance claims are recognized when Company have reasonable certainty of recovery.
(k) Impairment reviews
An impairment exists when the carrying value of an asset or cash generating unit (‘CGU'''') exceeds its recoverable amount. Recoverable amount is the higher of its fair value less costs to sell and its value in use. The value in use calculation is based on a discounted cash flow model. In calculating the value in use, certain assumptions are required to be made in respect of highly uncertain matters, including management''''s expectations of growth in EBITDA, long term growth rates; and the selection of discount rates to reflect the risks involved.
During the year ended 31st March 2017, the amount of dividend per equity share recognized as distribution to equity shareholders is '''' 13 (Pr. Yr. Rs, 14), which includes interim dividend of Rs, 13 (Pr. Yr. Rs, 8) per equity share.
In the event of liquidation of Company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the numbers of equity shares held by shareholders.
2. Capital Management:
Company''''s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital, as well as the level of dividends to equity shareholders. The board of directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowing and the advantages and security afforded by a sound capital position. Company''''s target is to achieve a return on capital above 35%; in 2016-17 the return was 43% and in 2015-16 the return was 47%.
Company monitors capital using a ratio of ‘adjusted net debt'''' to ‘adjusted equity''''. For this purpose, adjusted net debt is defined as total liabilities, comprising interest-bearing loans and borrowings and obligations under finance leases, less cash and cash equivalents and current investments. Adjusted equity comprises all components of equity.
3. Employee Benefits
As required by Ind AS 19 ‘Employee Benefits'''' the disclosures are as under:
4. Defined Contribution Plans
Company offers its employees defined contribution plans in the form of Provident Fund (PF) and Employees’ Pension Scheme (EPS) with the government, and certain state plans such as Employees'''' State Insurance (ESI). PF and EPS cover substantially all regular employees and the ESI covers certain employees. Contributions are made to the Government''''s funds. While both the employees and Company pay predetermined contributions into the Provident Fund and the ESI Scheme, contributions into the Pension fund is made only by Company. The contributions are normally based on a certain proportion of the employee''''s salary. During the year, Company has recognized the following amounts in the Account:
Defined Benefit Plans
Gratuity: Company makes annual contributions to Employees'''' Group Gratuity-cum Life Assurance (Cash Accumulation) Scheme of LIC, a funded defined benefit plan for qualifying employees. The scheme provides for payment to vested employees as under:
5. On normal retirement / early retirement / withdrawal / resignation:
As per the provisions of Payments of Gratuity Act, 1972 with vesting period of 5 years of service.
6. On the death in service:
As per the provisions of Payment of Gratuity Act, 1972 without any vesting period.
Death Benefit: Company provides for death benefit, a defined benefit plan (death benefit plan) to certain categories of employees. The death benefit plan provides a lump sum payment to vested employees on death, being compensation received from the insurance company and restricted to limits set forth in the sand plan. The death benefit plan is non-funded.
Although the analysis does not take into account full distribution of cash flows expected under the plan, it does provide an approximation of sensitivity of assumptions. The estimate of future increase in compensation levels, considered in the actuarial valuation, have been taken on account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.
The expected contributions for Defined Benefit Plan for the next financial year will be in line with FY 2016-17. 42.3 Leave Encashment:
Company''''s employees are entitled for compensated absences which are allowed to be accumulated and encased as per Company''''s rule. The liability of compensated absences, which is non-funded, has been provided based on report of independent actuary using “Projected Unit Credit Method”.
Accordingly Rs, 3.87 cr. (Pr. Yr. Rs, 3.29 cr.) being liability as at the year-end for compensated absences as per actuarial valuation has been provided in the accounts.
7. Share based payments
Company has implemented “Employees Stock Options Scheme 2011” (Rs,ESOS - 2011'''') as approved in earlier year by the shareholders of Company and Compensation committee of Board of Directors.
During the year 15,500 options have been granted by Company under the aforesaid ESOS - 2011 to the employees of Company.
The options are granted at an exercise price which is in accordance with the relevant SEBI guidelines in force, at the time of such grants. Each option entitles the holder to exercise the right to apply for and seek allotment of one equity share of '''' 2/- each.
Fair value hierarchy
This section explains the judgments and estimates made in determining the fair values of the financial instruments that are (a) recognized and measured at fair value and (b) measured at mortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes mutual funds that have quoted price. The mutual funds are valued using the closing NAV.
Level 2: The fair value of financial instruments that are not traded in an active market (like forward contracts) is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value as instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities etc. included in level 3.
B. Financial risk management
Company has exposure to following risks arising from financial instruments:
- credit risk
- liquidity risk
- market risk
i. Risk management framework
Company''''s board of directors has overall responsibility for the establishment and oversight of Company''''s risk management framework. Management is responsible for developing and monitoring Company''''s risk management policies, under the guidance of Audit Committee.
Company''''s risk management policies are established to identify and analyze the risks faced by it, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and Company''''s activities. Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations
Company''''s Audit committee oversees how management monitors compliance with Company''''s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by Company. The Audit committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit committee.
ii. Credit risk
Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks, mutual funds and financial institutions, foreign exchange transactions and other financial instruments.
(a) Trade receivables
Customer credit risk is managed by each business unit subject to Company''''s established policy, procedures and control relating to customer credit risk management. Trade receivables are mainly from wholesalers, non-interest bearing and are generally on 14 days to 150 days credit term. Credit limits are established for all customers based on internal rating criteria and any deviation in credit limit require approval of Directors. More than 90% of customers have been transacting with company for over 4 years and all of them are being monitored by individual business managers located in those countries/ places. Outstanding customer receivables are regularly monitored. Company has no concentration of credit risk as the customer base is widely distributed both economically and geographically.
As at 31st March 2017, Company had 42 customers, excluding own subsidiaries (31st March 2016: 55 customers, 1st April 2015: 45 customers) that owed the company more than Rs, 0.50 cr. each and accounted for approximately 50% for all 3 years i.e. 31st March 2017, 31st March 2016 and 1st April 2015 of all the receivables outstanding.
An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on exchange losses historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets. The company does not hold collateral as security. The company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and operate in largely independent markets.
(b) Financial instruments
Company limits its exposure to credit risk by investing only in liquid debt securities issued by mutual funds and only that have a credit ranking of at least 3 and above from CRISIL or equivalent rating agency. Company monitors changes in credit risk by tracking published external credit ranking. Based on its on-going assessment of counterparty risk, Company adjusts its exposure to various counterparties.
iii. Liquidity risk
Liquidity risk is the risk that Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses. Company''''s objective is to, at all times maintain optimum levels of liquidity to meet its cash and collateral requirements. Company closely monitors its liquidity position and deploys a robust cash management system. It maintains adequate sources of financing including bilateral loans, debt, and overdraft from banks at an optimized cost. Working capital requirements are adequately addressed by internally generated funds. Trade receivables are kept within manageable levels.
Company aims to maintain the level of its cash and cash equivalents and other highly marketable debt investments at an amount in excess of expected cash outflows on financial liabilities over the next six months. The ratio of cash and cash equivalents and other highly marketable debt investments to outflows is 0.96 at 31st March 2017 (31st March 2016: 0.37; 1st April 2015: 0.14).
iv. Market risk
Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will affect the company''''s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Financial instruments affected by market risk include loans and borrowings, deposits, investments, and derivative financial instruments.
Company''''s activities expose it to a variety of financial risks, including the effects of changes in foreign currency exchange rates and interest rates. Company uses derivative financial instruments such as foreign exchange contracts to manage its exposures to foreign exchange fluctuations. All such transactions are carried out within the guidelines set by the risk management committee.
The sensitivity analysis have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and derivatives and the proportion of financial instruments in foreign currencies are all constant.
The analysis excludes the impact of movements in market variables on the carrying value of postemployment benefit obligations, provisions and on the non-financial assets and liabilities.
The sensitivity of the relevant income statement item is the effect of the assumed changes in the respective market risks. This is based on the financial assets and financial liabilities held as of 31st March 2017 and 31st March 2016.
(a) Currency risk
The Group is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales, purchases and borrowings are denominated and the respective functional currencies of Company.
The currencies in which these transactions are primarily denominated are US dollars and Euro.
At any point in time, Company covers foreign currency risk by taking appropriate percentage of its foreign currency exposure, as approved by risk management committee in line with the laid down policy approved by the Board. Company uses forward exchange contracts to mitigate its currency risk, most with a maturity of less than one year from the reporting date. In respect of other monetary assets and liabilities denominated in foreign currencies, Company''''s policy is to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.
A reasonably possible change of 100 basis points in interest rates at the reporting date would have impacted profit before tax as per below. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.
(c) Price risk
Company does not have any exposure to price risk, as there is no equity investments by company except in its own subsidiaries.
8. Disclosure for operating leases under Ind AS 17 Leases”:
Company has taken various premises under operating lease. These are generally cancellable and ranges from 11 months to 5 years and are renewable by mutual consent on mutually agreeable terms. Some of these lease agreements have price escalation clauses. There are no restrictions imposed by lease arrangements and there are no sub leases. There are no contingent rents. The lease payments of Rs, 6.31 cr. (Pr. Yr. Rs, 8.44 cr.) are recognized in the Statement of Profit and Loss under “Rent” under Note 39.
The future minimum lease payments and payment profile of non-cancellable operating leases are as under:
In respect of clause (i) to (vi) above, Management has been advised that the demand is likely to be either deleted or substantially reduced and accordingly no provision is considered necessary.
Future cash outflows in respect of liability under clause (i) is dependent on terms agreed upon with the parties, in respect of clauses (ii) to (vi) is dependent on decisions by relevant authorities of respective disputes and in respect of clause (vii) it is dependent on call made by investee companies.
a) Estimated amounts of contracts remaining to be executed on capital account and not provided for, net of advances Rs, 132.28 cr. ( Pr. Yr. Rs, 103.66 cr.).
b) Other Commitments - Non-cancellable operating leases (Refer note 45).
Category II- Directors, Key Management Personnel & their Relatives:
Mr. Mannalal B. Agrawal Chairman
Mr. Purushottam B. Agrawal Executive Vice Chairman
Mr. Madhusudan B. Agrawal Executive Vice-Chairman
Mr. Yogesh M. Agrawal Managing Director
Mr. Rajesh M. Agrawal Joint Managing Director
Mr. Chandrakant M. Khetan Non-executive Director
Dr. Anil Kumar Non-executive Director
Mr. K. H. Viswanathan Non-executive Director
Mr. Prabhakar Dalal Non-executive Director
Dr. Anjana Grewal Non-executive Director
Mr. Arvind Agrawal Chief Financial Officer
Mr. Gaurang Shah Company Secretary
& Relatives of Key Management Personnel
Category III-Enterprise over which persons covered under Category II above are able to exercise significant control:
Gabs Investments Private Limited
Seth Bhagwandas Agrawal Charitable Trust
Ganga Exports being represented by Mr. Yogesh Agrawal, Mr. Rajesh Agrawal, Mr. Ravi Agrawal & Mr. Aayush Agrawal Yogesh Agrawal Trust, Trustee - Yogesh M Agrawal (w.e.f. 7th March 2017)
Rajesh Agrawal Trust, Trustee - Rajesh M Agrawal (w.e.f. 7th March 2017)
Ravi Agrawal Trust, Trustee - Ravi P Agrawal (w.e.f. 7th March 2017)
Ajanta Pharma Limited Group Gratuity Trust
Company has completed an independent evaluation for all international and domestic transactions for the year ended 31st March 2017 and has reviewed the same for the year ended 31st March 2016 to determine whether the transactions with associated enterprises are undertaken at arm''''s length price. Based on the internal and external transfer pricing review and validation, Company believes that all transactions with associated enterprises are undertaken on the basis of arm''''s length principle.
9. Contribution towards Corporate Social Responsibility:
The particulars of CSR expenditure are as follows:
a) Gross amount required to be spent by the company during the year is Rs, 8.42 cr. (Previous year: Rs, 6.09)
10.Note on foreign currency exposures on assets and liabilities:
During the year, Company has entered into forward exchange contract, being derivative instruments to mitigate foreign currency risk, to establish the amount of currency in Indian Rupees required or available at the settlement date of certain payables and receivables. The following are the outstanding foreign currency forward contracts entered into by Company:
11. Excise duty includes Rs, 0.03 cr. (Pr. Yr. Rs, 0.12 cr.) being net impact of the excise duty provision on opening and closing stock.
12. Company has not granted any loan or advances in the nature of loans, as stipulated in Regulation 34(3) and 53(f) read with Schedule V of Securities and Exchange Board of India (Listing Obligations and Disclosures Requirements) Regulations, 2015. For this purpose, the loans to employees as per Company''''s policy, security deposits paid towards premises taken on leave and license basis have not been considered. Hence, there are no investments by loans in the shares of the Parent Company and/or subsidiary companies.
13. Company had invested in a JV Turkmenderman Ajanta Pharma Ltd. (TDAPL) about two decade back, where it had management control. However later on, company surrendered management control in favour of local partner and since then do not have any control on the same. Further TDAPL operates under severe restriction that significantly impairs its ability to transfer the funds. Hence, company impaired entire investment in TDAPL and considered as unrelated party. Company has been making efforts to divest this investment since last few years without any success.
14. Pre-operative expenses pending capitalization included in Capital Work-In-Progress (Refer note 8) represent direct attributable expenditure for setting up of plants prior to the date of commencement of commercial production. The same will be capitalized on completion of projects and commencement of commercial operations. The details of preoperative expenses are:
The charge relating to temporary differences during the year ended 31st March 2017 are primarily on account of property plant and equipment and gain on investment at FVTPL partially offset by provision for expired goods, provision for loss allowance, compensated absences, MAT credit entitlement. The credit to temporary differences during the year ended 31st March 2016 are primarily on account of Property plant and equipment and gain on investment at FVTPL partially offset by provision for expired goods, compensated absences, provision for loss allowance, forward Contract receivable
15. First-time adoption of Ind AS
Pursuant to the Companies (Indian Accounting Standard) Rules, 2015, Company has adopted 31st March 2017 as reporting date for first time adoption of Indian Accounting Standard (Ind-AS) and consequently 1st April 2015 as the transition date for preparation of financial statements. The financial statements for the year ended 31st March 2017, are the first financials, prepared in accordance with Ind-AS. Up to the Financial year ended 31st March 2016, Company prepared its financial statements in accordance with the Accounting Standards notified under the Section 133 of the Companies Act, 2013, read together with Companies (Accounts) Rules 2014 (Previous GAAP). For preparing these financial statements, opening balance sheet was prepared as at 1st April 2015 i.e. the date of transition to Ind-AS. The figures for the previous periods and for the year ended 31st March 2016 have been restated, regrouped and reclassified, wherever required to comply with Ind-AS and Schedule III to the Companies Act, 2013 and to make them comparable.
This note explains the principal adjustments made by Company in restating its financial statements prepared in accordance with the Previous GAAP, including the balance sheet as at 1st April 2015 and the financial statements as at and for the year ended 31st March 2016.
Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS.
On transition to Ind AS, Company has applied the following exemptions:
Company has elected to continue with the carrying value of all of its property, plant and equipment recognized as at 1st April 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment.
Company has elected to continue with the carrying value of all of intangible assets recognized as at 1st April 2015 measured as per previous GAAP and use that carrying value as the deemed cost of intangible assets.
Ind AS 102 Share-based Payment has not been applied to equity instruments in share-based payment transactions that vested before the date of transition to Ind AS.
Appendix C of Ind AS 17 requires an entity to assess whether a contract or arrangement contains a lease. This assessment should be carried out at the inception of the contract or arrangement. However, Company has used Ind AS 101 exemption and assessed all arrangements based for embedded leases based on conditions in place as at the date of transition.
Company has elected to apply previous GAAP carrying amount of its investment in subsidiaries as deemed cost as on the date of transition to Ind AS.
The following exceptions have been applied in accordance with Ind AS 101 in preparing the financial statements.
- Derecognition of financial assets and financial liabilities
Company has elected to apply the derecognition requirements for financial assets and financial liabilities in Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS.
- Classification and measurement of financial assets Company has classified the financial assets in accordance with Ind AS 109 on the basis of facts and circumstances that exist at the date of transition to Ind AS.
- Government Loans
As per Ind AS 101, Company applied the requirements in Ind AS 109, Financial Instruments, and Ind AS 20, Accounting for Government Grants and Disclosure of Government Assistance, prospectively to Sales Tax Deferral Loan existing at the date of transition to Ind ASs and has not recognized the corresponding benefit of the loan at a below-market rate of interest as a government grant. Company has used its previous GAAP carrying amount of the loan at the date of transition to Ind ASs as the carrying amount of the loan in the opening Ind AS Balance Sheet. As per Ind AS 109, this loan will be classified as at Amortized cost. Since there is no difference between the carrying amount and the amount to be paid, there will be no impact of Effective Interest Rate i.e. no discounting/ unwinding is required.
Measurement and recognition difference between Ind AS and Previous GAAP for the year ended 31st March 2016.
1) Fair Valuation of Investments
Under the previous GAAP, investments in equity instruments and mutual funds were classified as long term investments or current investments based on the intended holding period and reliability. Long - Term investments were carried at cost less provision for other than the temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under Ind AS these investments are required to be measured at fair value. The resulting fair value changes of these investments have been recognized in retained earnings as at the date of transition and subsequently in the profit or loss for the year ended 31st March 2016. This increased the retained earnings by Rs, 6.79 cr. (net of differed tax) as at 31st March 2016 (1st April 2015 - Rs, 3.75 cr.).
2) Proposed dividend
Under Previous GAAP, proposed dividend including dividend distribution tax (DDT), are recognized as liability in the period to which they relate, irrespective of when they are declared. Under Ind AS, proposed dividend is recognized as liability in the period in which it is declared by Company, usually when approved by shareholders in a general meeting, or paid.
Therefore, the dividend liability (proposed dividend) including dividend distribution tax liability amounting to Rs, 58.51 cr. has been derecognized in the retained earnings as on the date of transition.
Proposed dividend including dividend distribution tax liability amounting to Rs, 58.51 cr. which was derecognized as on the transition date, has been recognized in retained earnings during the year ended 31st March, 2016 as declared and paid.
3) Defined benefit obligation
Both under Previous GAAP & Ind AS, Company recognized costs related to its post-employment defined benefit plan on an actuarial basis. Under Previous GAAP, the entire cost related to postemployment defined benefit plans, including actuarial gains and losses, were charged to profit or loss. Under Ind AS, remeasurements [comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability 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 Other Comprehensive Income. Thus, employee benefit expenses reduced by Rs, 0.35 cr. and is recognized in other comprehensive income Rs, 0.23 cr. (net of deffered tax) during the year ended 31st March 2016.
4) Deferred tax
Previous 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. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under previous GAAP.
In addition, the various transitional adjustments lead to different temporary differences. Deferred tax adjustments are recognized in correlation to the underlying transaction either in retained earnings or a separate component of equity.
5) Other comprehensive income
Under Ind AS, all items of income and expense recognized in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognized in profit or loss but are shown in the statement of profit and loss as ‘other comprehensive income'''' includes remeasurements of defined benefit plans. The concept of other comprehensive income did not exist under the previous GAAP.
6) Statement of cash flows
The transition from Previous GAAP to Ind AS has not had a material impact on the statement of cash flows.
Under Ind AS, bank overdrafts repayable on demand and which form an integral part of the cash management process are included in cash and cash equivalents for the purpose of presentation of statement of cash flows. Under previous GAAP, bank overdrafts were considered as part of borrowings and movements in bank overdrafts were shown as part of financing activities. Consequently, cash and cash equivalents have reduced by Rs, 11.58 cr. as at 31st March 2016 (1st April 2015 - Rs, 12.82 cr.)
7) Excise duty :
Under the previous GAAP, revenue from sale of products was presented exclusive of excise duty. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty. The excise duty paid is presented on the face of the statement of profit and loss as part of expenses. This change has resulted in an increase in total revenue and total expenses for the year ended 31st March 2016 by INR Rs, 15.39 cr. There is no impact on the total equity and profit.
8) Cash Discount:
Under previous GAAP, cash discount of Rs, 0.11 cr. was recognized as part of other expenses which has been adjusted against the revenue under Ind AS during the year ended 31st March 2016. There is no impact on the total equity and profit.
In the preparation of these Ind-AS Financial Statements, Company has made several presentation differences between previous GAAP and Ind-AS. These differences have no impact on reported profit or total equity. Accordingly, some assets and liabilities have been reclassified into another line item under Ind-AS at the date of transition. Further, in these Financial Statements, some line items are described differently under Ind-AS compared to previous GAAP, although the assets and liabilities included in these line items are unaffected.