Good Health Can’t Wait.

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Good Health Can’t Wait. Dr. Reddy’s Laboratories Limited NOTES TO FINANCIAL STATEMENTS (All amounts in Indian Rupees millions, except share data and where otherwise stated) h) Inventories Inventories are valued at the lower of cost and net realisable value (NRV). Cost of inventories comprises all cost of purchase, production or conversion costs and other costs incurred in bringing the inventories to their present location and condition. In the case of finished goods and work-in-progress, cost includes an appropriate share of overheads based on normal operating capacity. The cost of all categories of inventory is determined using weighted average cost method. NRV is the estimated selling price in the ordinary course of the business, less the estimated costs of completion and the estimated costs necessary to make the sale. i) Research and development Expenditure on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding is recognized as expense in the statement of profit and loss when incurred. Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalized only if: a) the product or the process is technically and commercially feasible; b) future economic benefits are probable and ascertainable; c) the Company intends to and has sufficient resources, technical and financial, to complete development of the product and has the ability to use or sell the asset; and d) development costs can be measured reliably. j) Employee benefits Defined benefit plans The liability in respect of defined benefit plans and other post-employment benefits is calculated using the projected unit credit method and spread over the period during which the benefit is expected to be derived from employees’ services, consistent with the advice of qualified actuaries. The long term obligations are measured at present value of estimated future cash flows discounted at rates reflecting the yields on risk free government bonds that have maturity dates approximating the terms of the Company’s obligations. Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. All actuarial gains and losses arising during the year are recognized in the statement of profit and loss. Other long term employee benefits The Company’s net obligation in respect of other long term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and previous periods. That benefit is discounted to determine its present value. Re-measurements are recognized in the statement of profit and loss in the period in which they arise. Defined contribution plans The Company’s contributions to defined contribution plans are recognized in the statement of profit and loss as and when the services are received from the employees. Compensated leave of absence The Company provides for accumulation of compensated absences by certain categories of its employees. These employees can carry forward a portion of the unutilized compensated absences and utilize it in future periods or receive cash in lieu thereof as per Company policy. The Company records an obligation for compensated absences in the period in which the employee renders the services that increases this entitlement. The measurement of such obligation is based on actuarial valuation as at the balance sheet date carried out by a qualified actuary. Employee stock option schemes In accordance with the SEBI guidelines, the cost calculated based on intrinsic value method i.e., the excess of the market price of shares, at the date prior to the day of grant of options under the Employee stock option schemes, over the exercise price is treated as employee compensation and amortised over the vesting period. k) Foreign currency transactions and balances Foreign currency transactions are recorded using the exchange rates prevailing on the dates of the respective transactions. Exchange differences arising on foreign currency transactions settled during the year are recognised in the statement of profit and loss. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are reported using the foreign exchange rates as at the balance sheet date. The resultant exchange differences are recognised in the statement of profit and loss. Non monetary assets and liabilities are carried at the rates prevailing on the date of transaction. 120
Standalone Financial Statements Annual Report 2014 - 15 NOTES TO FINANCIAL STATEMENTS (All amounts in Indian Rupees millions, except share data and where otherwise stated) Exchange differences arising on a monetary item that, in substance, forms part of the Company’s net investment in a non integral foreign operation are accumulated in a foreign currency translation reserve in the Company’s financial statements. Such exchange differences are recognized in the statement of profit and loss in the event of disposal of the net investment. l) Derivative instruments and hedge accounting The Company uses forward contracts, option contracts and swap contracts (derivatives) to mitigate its risk of changes in foreign currency exchange rates and interest rates. The Company does not use derivatives for trading or speculative purposes. The premium or discount on foreign exchange forward contracts is amortized as income or expense over the life of the contract. The exchange difference is calculated and recorded in accordance with AS 11 (revised) “ The Effect of Changes in Foreign Exchange Rates” in the statement of profit and loss. The changes in the fair value of foreign currency option contracts and swap contracts are recognised in the statement of profit and loss as they arise. Fair value of such option and swap contracts is determined based on the appropriate valuation techniques considering the terms of the contract. Pursuant to ICAI Announcement “Accounting for Derivatives” on the early adoption of AS 30 “Financial Instruments: Recognition and Measurement”, the Company has adopted the Standard, to the extent that the adoption does not conflict with existing mandatory accounting standards and other authoritative pronouncements, Company law and other regulatory requirements. Cashflow hedges The Company classifies its derivative contracts that hedge foreign currency risk associated with highly probable forecasted transactions as cash flow hedges and measures them at fair value. The effective portion of such cash flow hedges is recorded as part of reserves and surplus within the Company’s “hedging reserve”, and re-classified into the statement of profit and loss as revenue in the period corresponding to the occurrence of the forecasted transactions. The ineffective portion is immediately recorded in the statement of profit and loss. The Company also designates certain non derivative financial liabilities, such as foreign currency borrowings from banks, as hedging instruments for the hedge of foreign currency risk associated with highly probable forecasted transactions and, accordingly, applies cash flow hedge accounting for such relationships. Re-measurement gain/loss on such non derivative financial liabilities is recorded as part of reserves and surplus within the Company’s “hedging reserve”, and re-classified in the statement of profit and loss as revenue in the period corresponding to the occurrence of the forecasted transactions. If the hedging instrument no longer meets the criteria for hedge accounting, gets expired or is sold, terminated or exercised before the occurrence of the forecasted transaction, the hedge accounting on such transaction is discontinued prospectively. The cumulative gain or loss previously recognized in hedging reserve continues to remain there until the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, the balance in hedging reserve is recognized immediately in the statement of profit and loss. m) Revenue recognition Sale of goods Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is reasonably certain, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured reliably. Revenue from the sale of goods includes excise duty and is net of returns, sales tax and applicable trade discounts and allowances. Revenue includes shipping and handling costs billed to the customer. Sales returns The Company accounts for sales returns by recording an allowance for sales returns concurrent with the recognition of revenue at the time of a product sale. This allowance is based on the Company’s estimate of expected sales returns. The estimate of sales returns is determined primarily by the Company’s historical experience in the markets in which the Company operates. Profit share revenues The Company from time to time enters into marketing arrangements with certain business partners for the sale of its products in certain markets. Under such arrangements, the Company sells its products to the business partners at a non-refundable base purchase price agreed upon in the arrangement and is also entitled to a profit share which is over and above the base purchase price. Revenue in an amount equal to the base purchase price is recognized in these transactions upon delivery of products to the business partners. An additional amount representing the profit share component is recognized as revenue in the period which corresponds to the ultimate sales of the products made by business partners only when the collectability of the profit share becomes probable and a reliable measurement of the profit share is available. 121
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ANNUAL REPORT 2014-15 Good Health C
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Our Brand We are in the business of
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Notice Annual Report 2014 - 15 NOTI
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E-Voting Annual Report 2014 - 15 IN
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Dr. Reddy’s Laboratories Limited
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The future belongs, not to those wh
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