Page 122 - FBL AR 2019-20

Fermenta Biotech Limited
Annual Report 2019-20

Notes to the Standalone financial statements for the year ended March 31, 2020

(b) Operating cycle
Based on the nature of products/activities of the Company and the normal time between acquisition of assets/liabilities and their
realization/settlement in cash and cash equivalents, the Company has determined its operating cycle as twelve months for the purpose
of classification of its assets and liabilities as current and non-current.
(c) Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated
losses, if any.

For the purpose of impairment testing, goodwill is allocated to each of the Company’s cash-generating units (or groups of cash-
generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an
indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the
unit prorata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or
loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or
loss on disposal.
(d) Foreign currencies
Foreign currency transactions
In preparing the standalone financial statements of the Company, transactions in currencies other than the Company’s functional
currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each
reporting period, monetary items denominated in foreign currencies are re-translated at the rates prevailing at that date. Non-monetary
items carried at fair value that are denominated in foreign currencies are re-translated at the rates prevailing at the date when the fair
value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated.
Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for exchange differences
on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those
assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
(e) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until
such time as the assets are substantially ready for their intended use or sale.
Interest income earned on the temporary investment of specific borrowing pending their expenditure on qualifying assets is deducted
from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
(f) Employee Benefits
i) Defined contribution plans: The Company contributes towards state governed provident fund scheme, employee state insurance
scheme (ESIC) and labour welfare fund to all applicable employees and superannuation scheme for eligible employees. The
Company has no further payment obligations once the contributions have been paid. Hence payments to defined contribution
retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions.
ii) Defined benefit plan: The employees’ gratuity fund scheme represents the defined benefit plan. The cost of providing benefits is
determined using projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting
period. Remeasurement, comprising actuarial gains and losses, the effect of changes to the assets (if applicable) and the return
on plan assets (excluding net interest), is reflected immediately in the balance sheet with a charge or credit recognised in other
comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected
immediately in retained earnings and is not reclassified to profit or loss. Past service cost is recognised in profit or loss in the period
of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined
benefit liability or asset.

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