Page 42 - GlaxoSmithKline Pharmaceuticals AR 2012

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GENERAL INFORMATION
GlaxoSmithKline Pharmaceuticals Limited ('the Company') is a public limited company and is listed on the Bombay Stock Exchange
(BSE) and the National Stock Exchange (NSE). The Company is engaged interalia, in the business of manufacturing, distributing and
trading in pharmaceuticals.
1 STATEMENT OF ACCOUNTING POLICIES
(a) Basis for preparation of accounts
The financial statements are prepared under the historical cost convention and comply in all material aspects with the applicable
accounting principles in India and the accounting standards notified under sub-section (3C) of Section 211 of the Companies Act,
1956 and the other relevant provisions of the Companies Act, 1956.
All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other
criteria set out in the Revised Schedule VI to the Companies Act, 1956.
(b) Tangible Fixed Assets and Depreciation
Fixed assets are stated at cost of acquisition, including any attributable cost for bringing the asset to its working condition for its
intended use, less accumulated depreciation. Interest on borrowings attributable to new projects is capitalised and included in the
cost of fixed assets as appropriate.
Depreciation is provided on the straight-line method over the useful life of the assets as under:
Buildings 29 years
Plant and Equipment other than Gas Installations 10 years
Gas Installations 6 years
Personal Computers and Laptops 3 years
Other Computer Equipment 4 years
Furniture and Fixtures 10 years
Office Equipment 10 years
Vehicles 4 years
Depreciation on capital projects of Rs. 100 lakhs or more is provided pro-rata for the number of months availability for use and for other
assets for the full year. Depreciation on sale / disposal of assets is provided pro-rata up to the end of the month of sale / disposal.
An asset purchased on or after 1st April, 1993 and where the actual cost does not exceed Rs. 5,000 (other than on turnkey
contracts) is depreciated at the rate of 100%.
Leasehold land is not amortised.
Leasehold improvements are amortised over the period of the lease.
Assets that have been retired from active use and held for disposal and Assets identified and evaluated technically as obsolete and
held for disposal are stated at lower of book value and estimated net realisable value/salvage value, and are shown separately in
the Financial Statements.
(c) Impairment of Assets
Impairment loss, if any, is provided to the extent, the carrying amount of assets exceeds their recoverable amount. The recoverable
amount is the higher of an asset'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 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.
(d) Investments
Long term investments are stated at cost, except where there is a diminution in value other than temporary in which case the
carrying value is reduced to recognise the decline. Current investments are stated at lower of cost and fair value. The premium
on account of investments in debentures/bonds and Government of India Securities held as long-term investments is recognised
over the life of the security.
Investments that are readily realisable and are intended to be held for not more than one year from the date on which such
investments are made, are classified as current investments. All other investments are classified as non current investments.
(e) Provisions and Contingent Liabilities
A provision is recognised when there is a present obligation as a result of a past event, it is probable that an outflow of resources
will be required to settle the obligation and in respect of which a reliable estimate can be made. A provision is not discounted to its
present value and is determined based on the best estimate required to settle the obligation at the year end date. These provisions
are reviewed at each year end date and adjusted to reflect the best current estimate.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be
confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the
company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be
required to settle or a reliable estimate of the amount cannot be made.
(f) Inventories
Inventories are valued at lower of cost and net realisable value. Cost is determined on first-in first-out basis. The cost of work-in-
progress (other than those lying at third party manufacturing sites which is valued at material cost) and finished goods comprises
of raw materials, direct labour, other direct costs and related production overheads, but excludes interest expense. Net realisable
value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses.
(g) Cash and Cash Equivalents
Cash and cash equivalents include cash in hand and demand deposits with banks with original maturities of three months or less.
Notes to the Financial Statements for the year ended
31st December, 2012