DRIVIN G ROWTH - Dr. Reddy's

schedule to the consolidated balance sheet and profit and loss account
h) Research and development
Revenue expenditure on research and development is expensed as incurred. Capital expenditure incurred on research and
development is capitalised as fixed assets and depreciated in accordance with the depreciation policy of the Group.
i) Retirement benefits
Contributions payable to an approved gratuity fund, determined by an independent actuary are charged to profit and loss
account. Leave encashment cost which is a defined benefit, is accrued based on actuarial valuations at the balance sheet date
carried out by an independent actuary, and is charged to profit and loss account.
Contributions payable to the recognised provident fund, approved superannuation scheme and employee pension and social
security schemes in certain overseas subsidiaries, which are defined contribution schemes, are charged to the profit and loss
account.
j) Foreign exchange transactions and translation of financial statements of foreign subsidiaries
Foreign exchange transactions are recorded using the exchange rates prevailing on the dates of the respective transactions.
Exchange differences arising on foreign exchange transactions settled during the year are recognised in the profit and loss
account except that exchange differences related to acquisition of fixed assets are adjusted in the carrying amount of the
related fixed assets.
Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at year-end rates.
The resultant exchange differences (except those related to acquisition of fixed assets) are recognised in the profit and loss
account.
The premium or discount on forward exchange contracts is recognised over the period of the contracts. The premium or
discount in respect of forward exchange contracts related to acquisition of fixed assets is adjusted in the carrying amount of
the related fixed assets. In respect of other contracts, it is recognised in the profit and loss account.
The financial statements of the foreign subsidiaries and representative offices are translated into Indian rupees as follows:
� Revenue items, except opening and closing inventories and depreciation are translated at the respective monthly average
rates. Opening and closing inventories are translated at the rates prevalent at the commencement and close respectively
of the accounting period. Depreciation is translated at the rates used for the translation of the values of the assets on
which depreciation is calculated.
� Monetary items are translated using the closing rate.
� Non-monetary items, other than inventories and fixed assets, are translated using the exchange rate at the date of
transaction i.e., the date when they were acquired.
� Fixed assets are translated using the exchange rate at the date of their acquisition. Where there has been an increase or
decrease in the liability of the Group, as expressed in Indian rupees by applying the closing rate, for making payment
towards the whole or a part of the cost of a fixed asset or for repayment of the whole or a part of the monies borrowed,
in foreign currency specifically for the purpose of acquiring a fixed asset, the amount by which the liability is so increased
or reduced during the year, is added to, or reduced from, the cost of the fixed asset concerned.
� The net exchange difference resulting from the translation of items in the financial statements of foreign subsidiaries is
recognised as income or as expense for the year, except to the extent adjusted in the carrying amount of the related fixed
assets as stated above.
� Contingent liabilities are translated at the closing rate.
k) Revenue recognition
Revenue from sale of goods is recognised when significant risks and rewards in respect of ownership of the products are
transferred to the customer. Revenue from domestic sales of formulation products is recognised on despatch of products to
stockists by consignment agents and clearing and forwarding agents of the Group. Revenue from domestic sales of active
pharmaceutical ingredients and intermediates are recognised on despatch of products from the factories of the Group.
Revenue from export sales is recognised on shipment of products.
Revenue from product sales is stated inclusive of excise duty and exclusive of returns, sales tax and applicable trade discounts
and allowances.
Revenue from services is recognised as per the terms of the contracts with the customers when the services are performed.
CONSOLIDATED FINANCIALS | FINANCIALS | ANNUAL REPORT 2001-2002
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