DRIVIN G ROWTH - Dr. Reddy's

302
notes to the financial statements
1. PRINCIPAL ACTIVITIES
The Company, located in K.E.T.D, is a sino-foreign equity joint venture company established on December 31, 1993 for an
operating period of 50 years. The registered capital of the Company shall be USD11,000,000 and the share holding structure of
the Company at present is as below:
Kunshan Double-Crane Pharmaceutical Co., Ltd. 1.59% of the registered capital
Canada Rotam Enterprises Co., Ltd. 47.41% of the registered capital
Dr. Reddy’s Laboratories Ltd., India 51% of the registered capital
The principal activities of the Company are to produce and repackage bulk formulations, capsules, ointments, gels and other
products and to sell self-produced products.
2. BASIS OF PREPARATION
The financial statements have been prepared in accordance with the Accounting Standards for Enterprises and the Accounting
Regulations of the People’s Republic of China for Enterprises with Foreign Investment.
3. PRINCIPAL ACCOUNTING POLICIES
a) Sales revenue
Sales revenue is recognised upon goods delivery. Sales revenue represents sales amount net of output value added tax.
b) Depreciation
Fixed assets are depreciated at rates sufficient to write off their cost over their estimated useful lives on the straight line basis,
taking into account their residual value which is estimated at 10% of cost. The applicable useful lives of fixed assets are as
follows:
Buildings 20 years
Plant and Machinery 10 years
Instrument 5 years
Motor vehicles 5 years
Other equipment 5 years
c) Pre-operating expenses
Pre-operating expenses are amortised using the straight line method over a period of five years.
d) Land occupancy expense
Land occupancy expense is amortised using the straight line method over a period of fifty years.
e) Other deferred expenses
Other deferred expenses are amortised using the straight line method over a period of ten years.
f) Foreign currencies
Transactions in foreign currencies are translated into Renminbi at the exchange rates stipulated by People’s Bank of China
prevailing on the day on which the transactions took place. Monetary assets and liabilities expressed in foreign currencies at
the Balance Sheet date are translated into Renminbi at the exchange rates stipulated by People’s Bank of China at the Balance
Sheet date. Exchange differences arising in these cases are dealt with in the Profit and Loss Account.
Foreign exchange differences arising during the pre-operating period have been capitalised and are separately disclosed in the
Balance Sheet as “exchange losses during pre-operating period”. These are being amortised using the straight line method
over a period of five years from the date of commencement of full operation of the Company.
g) Cash and cash equivalents
Cash comprises cash on hand and deposits that are readily available for payment. Cash equivalents are short-term, highly
liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value.
h) Inventories
Inventories are stated at cost. Cost, calculated on the weighted average basis, comprises materials, direct labour and an
appropriate proportion of all production overhead expenditure.
4. MAIN TAXATION
Tax rate
Value added tax 17%
KUNSHAN ROTAM REDDY PHARMACEUTICAL CO. LTD. | FINANCIALS | ANNUAL REPORT 2001