DRIVIN G ROWTH - Dr. Reddy's

224
notes to the financial statements
note1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business
Dr. Reddy’s Laboratories, Inc., (the Company) formerly Reddy Cheminor, Inc., was incorporated May 11, 1992 in the State of New
Jersey. The Company is the importer of bulk active ingredients used in the pharmaceutical industry, and generic dosage drug products
distributed to pharmaceutical wholesalers. The Company’s customers are primarily located throughout North America.
Accounts receivable
The Company makes a provision of uncollectible accounts based on a periodic review of the outstanding customer balances. At March
31, 2002, the balance of accounts receivable were deemed to be collectible.
Inventory
Inventory consists primarily of finished goods, which are valued at cost, on the first in, first out basis, or market, whichever is lower.
Property and equipment
Property and equipment are recorded at cost. Depreciation is provided using both the straight-line and Modified Accelerated Cost
Recovery System (MACRS) method, over statutory lives, which approximate the estimated useful lives of the assets.
Income taxes
The Company records income taxes in accordance with Financial Accounting Standards No. 109 (FAS 109). Under the provision of FAS
100, the Company provides for deferred taxes on temporary differences arising from assets and liabilities whose basis are different for
financial reporting and income tax purposes. The deferred tax asset relates to the income tax benefit derived from the capitalisation
of deferred costs in connection with obtaining Food and Drug Administration (FDA) approvals, and contractual agreements for tax
purposes.
Reclassifications
Certain reclassifications were made to the 2001 financial statements presentation in order to conform to the 2002 financial statements
presentation.
Fair value of financial instruments
The Company’s financial instruments include cash and trade receivables. The carrying amounts of these financial instruments have
been estimated by management to approximate fair value.
Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those
estimates.
note 2
FINANCIAL INSTRUMENTS – CONCENTRATION OF CREDIT RISK
The Company’s financial instruments that are exposed to concentrations of credit risk consists primarily of cash and trade accounts
receivable.
The Company maintains its cash balances at one financial institution. At times, such balances may be in excess of the Federal Deposit
Insurance Corporation (FDIC) limit. At March 31, 2002, the Company maintained its cash account with a balance of US$ 978,172 that
was not FDIC insured.
The Company routinely assesses the financial strength of its customers, and, as a consequence, believes that its trade accounts
receivable credit risk exposure is limited.
DR. REDDY’S LABORATORIES, INC. | FINANCIALS | ANNUAL REPORT 2001-2002