RANBAXY NIGERIA LIMITED FINANCIAL STATEMENTS 31 MARCH 2016

Transcription

1 RANBAXY NIGERIA LIMITED FINANCIAL STATEMENTS 31 MARCH 2016

2 i DIRECTORS, ADVISORS AND REGISTERED OFFICE Corporate information Chairman of the Board Directors Olaogun Badru Atanda Mahendra Bharadwaj (Indian- Vice chairman) Hanwant Singh Arora (Indian) Samson Yomi Osewa Harin Mehta (Indian) Mihaly Kaszas (Hungary) Registered office 2nd floor 52A Campbell Street Lagos Company Secretary Mr. Kufre Udoh 24 Abimbola Street Isolo Lagos Auditors Bankers BDO Professional Services (Chartered Accountants) ADOL House 15, CIPM Avenue Cental Business District Alausa, Ikeja Lagos. Diamond Bank Plc Zenith Bank Plc Standard Chartered Bank Plc Wema Bank Plc Stanbic IBTC Bank Limited

3 RANBAXY NIGERIA LIMITED Directors Report ii The directors are pleased to present their annual report on the affairs of Ranbaxy Nigeria Limited ( the Company ) together with the financial statements and the independent auditor s report for the year ended 31 March Legal form and principal activities The Company was incorporated in Nigeria as a limited liability company on 12 May 1987 under the name Ranmax Laboratories Nigeria Limited. The name was changed to Ranbaxy Nigeria Limited at an extra ordinary general meeting held on 6 October The principal activities of the Company continue to be the manufacture, importation and sale of pharmaceutical products in Nigeria. Operating results The following is a summary of the Company s operating results for the year: N 000 N 000 Revenue 3,471,793 3,323,292 Operating profit 748, ,611 Profit before tax 766, ,611 Profit after tax 375, ,196 Directors and their interests The directors that served during the year together with their interests in the shares of the Company at the year end were as follows: No of ordinary shares of N1 each Olaogun Badru Atanda 684, ,104 Mahendra Bharadwaj (Indian) - - Bhupendra Singh (Indian) - - Samson Yomi Osewa - - Malhotra Ashwani Kumar (Indian) - - Madan Ashish (Indian) - - Banerjee Indrajit (Indian) - - Suresh Reddy (Indian) - - Hanwant Singh Arora (India) - - Harin Mehta (Indian) - - Mihaly Kaszas (Hungary) - - Analysis of shareholding The names of significant shareholders and their allotted holding at the year end were as follows: Shareholders % No of ordinary Amount (N) shares of N1 each Ranbaxy (Netherlands) B.V ,052,302 21,052,302 Sun Pharmaceutical Industries Limited, India ,070,648 13,070,648 Individual Shareholders ,877,050 5,877, ,000,000 40,000,000

4 RANBAXY NIGERIA LIMITED Directors Report (cont'd) iii Apart from SUN Pharmaceutical Industries Limited Group that jointly holds 85.31% of the issued share capital, no other shareholder held 5% or more of the issued share capital of the Company as at 31 March Employment and employees Employment of physically challenged persons: The Company does not discriminate in considering applications for employment from physically challenged persons. All employees, whether or not physically challenged, are given equal opportunities to develop their experience and knowledge and qualify for promotion in furtherance of their careers. In the event of members of staff becoming physically challenged, every effort is made to ensure that their employment with the Company continues and that appropriate training is arranged. It is the policy of the Company that the training, career development and promotion of physically challenged persons should, as far as possible, be identical with that of other employees. The Company had no physically challenged person in its employment as at 31 March Health, safety and welfare at work: The Company takes the health, safety and welfare of its employees very seriously, with a strong conviction that a healthy workforce will always be highly productive and will deliver superior performance at all times. The Company also has various forms of insurance policies to adequately secure and protect its employees. Employees consultation and training: The Company places considerable value on the involvement of its employees and has continued the practice of keeping them informed on matters affecting them as employees and on various factors affecting the performance of the Company. Employee representatives are consulted regularly on a wide range of matters affecting their current and future interests. The Company has in-house training facilities, complemented, when and where necessary, with external and overseas training for its employees. This has broadened opportunities for career development within the organisation. Independent Auditors Messrs BDO Professional Services have indicated their willingness to continue in office as auditors in accordance with Section 357 (2) of the Companies and Allied Matters Act, CAP C20, Laws of the Federation of Nigeria, BY ORDER OF THE BOARD COMPANY SECRETARY LAGOS, NIGERIA 30 May 2016

5 RANBAXY NIGERIA LIMITED Statement of Directors Responsibilities iv The directors accept responsibility for the preparation of the annual financial statements set out on pages 3 to 37 that give a true and fair view in accordance with the International Financial Reporting Standards and in the manner required by the Companies and Allied Matters Act CAP C20 LFN 2004 and the Financial Reporting Council of Nigeria Act, No 6, The directors further accept responsibility for maintaining adequate accounting records as required by the Companies and Allied Matters Act CAP C20, LFN, 2004 and for such internal control as the directors determine as necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error. The directors have made an assessment of the Company s ability to continue as a going concern and have no reason to believe the Company will not remain a going concern in the year ahead. SIGNED ON BEHALF OF THE BOARD OF DIRECTORS BY: Chief Badru Atanda Olaogun Mr. Hanwant Singh Arora Chairman Managing Director 30 May May 2016

6 REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF RANBAXY NIGERIA LIMITED We have audited the accompanying financial statements of Ranbaxy Nigeria Limited for the financial year ended 31 March 2016, which comprises the statement of financial position, statement of profit or loss and other comprehensive income, statement of changes in equity, statement of cashflows for the year then ended, and a summary of significant accounting policies and other explanatory notes. Directors responsibility for the financial statements 2. The directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board, and in compliance with relevant provisions of the Financial Reporting Council of Nigeria Act, No 6, 2011 and the Companies and Allied Matters Act, CAP C20 LFN, This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances. Auditors responsibility 3. Our responsibility is to express an independent opinion on the financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform our audit to obtain reasonable assurance that the financial statements are free from material misstatement. An audit involves performing procedures to obtain evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors as well as evaluating the overall presentation of the financial statements.

7 2 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion 4. In our opinion, the financial statements give a true and fair view of the state of affairs of the Company s financial position as at 31 March 2016 and of its financial performance and cashflows for the year then ended in accordance with International Financial Reporting Standards, the relevant provisions of the Financial Reporting Council of Nigeria Act, No 6, 2011 and the Companies and Allied Matters Act, CAP C20 LFN, Report on other legal requirements 5. The Companies and Allied Matters Act, CAP C20, LFN, 2004 requires that in carrying out our audit we consider and report to you on the following matters. We confirm that: i) ii) iii) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit in our opinion, proper books of account have been kept by the Company, and the Company s statement of financial position, and its statement of profit or loss and other comprehensive income are in agreement with the books of account. Olugbemiga A. Akibayo Lagos, Nigeria FRC/2013/ICAN/ May 2016 For: BDO Professional Services Chartered Accountants

8 RANBAXY NIGERIA LIMITED 3 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH Notes N'000 N'000 Revenue 8 3,471,793 3,323,292 Cost of sales 9 (1,827,084) (1,772,786) Gross profit 1,644,709 1,550,506 Other operating income 10 11,503 3,947 Selling & distribution expenses 11 (343,621) (324,270) Administrative expenses 12 (564,131) (872,572) Profit from operating activities 748, ,611 Finance income 13 18,201 - Finance costs Net finance income 18,201 - Profit before taxation , ,611 Taxation 15(a) (390,965) (165,415) Profit after tax for the year 375, ,196 Other comprehensive income: Items that will not be reclassified to profit or loss Remeasurement (loss)/gain on defined benefit plan 18 (11,835) 6,364 Income tax effect 3,551 (1,909) Items that will be reclassified to profit or loss - - Other comprehensive (loss)/income for the year, net of tax (8,284) 4,455 Total comprehensive income for the year 367, ,651 The accompanying notes on pages 7 to 35 and other national disclosures on pages 36 and 37 form an integral part of these financial statements. Auditors' report, pages 1 and 2

9 RANBAXY NIGERIA LIMITED 4 STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH, 2016 Notes Non-current assets N'000 N'000 Property, plant and equipment 16 4,379,419 3,847,686 Intangible assets Employee defined benefit asset 18(e) 69,318 66,424 Deferred tax asset 15(c) - 28,690 Total non-current assets 4,448,737 3,942,800 Current assets Inventory , ,606 Trade and other receivables 20 1,079,330 1,542,515 Cash and cash equivalents 21 1,934, ,371 3,685,042 2,856,492 Current liabilities Short term borrowings 22(i) 766,413 (53,265) Trade and other payables 23 2,644,616 1,872,425 Provisions 24 28,023 57,934 Taxation 15(b) 275, ,726 3,714,236 2,049,820 Net current(liabilities)/assets (29,194) 806,672 Total assets less current liabilities 4,419,543 4,749,472 Non-current liabilities Long term borrowings 22(ii) 956,400 1,610,707 Employment benefits obligation 18 63,863 45,791 Deferred tax liability 15c 45,424-1,065,687 1,656,498 Net assets 3,353,856 3,092,974 Equity Share capital 25 40,000 40,000 Share premium 26 38,951 38,951 Revenue reserve 27 3,274,905 2,907,493 Total equity 3,353,856 2,986,444 The financial statements and notes on pages 3 to 37 were approved by the Board of directors on 30 May 2016 and signed on its behalf by: (i) Chief Badru Atanda Olaogun (Life Bencher) ) Chairman ) (ii) Mr. Hanwant Singh Arora ) Managing Director ) (iii) Mr. Gunakesh Kumar ) Finance Controller The accompanying notes on pages 7 to 35 and other national disclosures on pages 36 and 37 form an integral part of these financial statements. Auditors' report, pages 1 and 2

10 RANBAXY NIGERIA LIMITED 5 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2016 Share capital Share premium Retained earnings Total equity N'000 N'000 N'000 N'000 Balance at 1 April ,000 38,951 2,907,493 2,986,444 Comprehensive Income for the year Profit for the year , ,696 Other comprehensive income: Remeasurement loss on defined benefit plan - - (8,284) (8,284) Total comprehensive income for the year , ,412 Contributions by and distributions to owners Balance at 31 March ,000 38,951 3,274,905 3,353,856 N'000 N'000 N'000 N'000 Balance at 1 April ,000 38,951 2,710,842 2,789,793 Comprehensive Income for the year Profit for the year , ,196 Other comprehensive income: Remeasurement gain on defined benefit plan - - 4,455 4,455 Total comprehensive income for the year , ,651 Contributions by and distributions to owners Balance at 31 March ,000 38,951 2,907,493 2,986,444 The accompanying notes on pages 7 to 35 and other national disclosures on pages 36 and 37 form an integral part of these financial statements. Auditors' report, pages 1 and 2

11 RANBAXY NIGERIA LIMITED 6 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH,2016 Notes Cash flows from operating activities N'000 N'000 Profit after taxation 375, ,196 Adjustments for: Depreciation of property, plant and equipment 16 72,301 95,356 Amortisation of intangible assets 17-2,215 Finance income 13 (18,201) - Gains on disposal of property, plant and equipment 10 - (3,470) Asset written off 1,268 - Employee costs under defined benefit plan 3,343 4,242 Exchange difference on interest bearing loan 1, ,694 Income tax expense 15(a) 390, , , ,648 Decrease in inventory 185, ,505 Decrease in trade and other receivables 463,185 73,967 Increase in trade and other payables 772, ,324 (Decrease)/increase in provisions (29,911) 1,662 Cash generated by operations 2,217,593 1,562,106 Tax paid 15(b) (210,842) (153,557) Net cashflow from operating activities 2,006,751 1,408,549 Cash flows from investing activities Additions to property, plant and equipment 16 (547,581) (1,082,724) Finance income 13 18,201 - Proceeds from disposal of property, plant and equipment - 3,470 Net cash outflow from investing activities (529,380) (1,079,254) Cash flows from financing activities Dividend paid - (74) Net cash outflow from financing activities - (74) Net increase in cash and cash equivalents 1,477, ,221 Cash and cash equivalents at the beginning of the year 457, ,150 Cash and cash equivalents at the end of the year 21 1,934, ,371 The accompanying notes on pages 7 to 35 and other national disclosures on pages 36 and 37 form an integral part of these financial statements. Auditors' report, pages 1 and 2

12 RANBAXY NIGERIA LIMITED 7 1 Corporate information and principal activities The Company was incorporated in Nigeria as a limited liability Company on 12 May 1987 under the name Ranmax Laboratories Nigeria Limited. The name was changed to Ranbaxy Nigeria Limited at an extra-ordinary general meeting held on 6 October The principal activities of the company continue to be the manufacturing, importation and sale of pharmaceutical products in Nigeria. The company is a subsidiary of Ranbaxy Laboratories Limited - India. RNBV holds 52.63% of the ordinary share capital of the company. RNBV is subsidiary of Ranbaxy Laboratories Limited (RLL) of India. Ranbaxy Laboratories Limited holds 32.68% equity interest in Ranbaxy Nigeria. RLL merged with the SUN Pharmaceutical Industry Limited, india with effect from 25 March Consequently, SUN Pharmaceutical Industries Limited now hold 32.68% equity interest in Ranbaxy Nigeria Limited while the SUN Pharmaceutical industries Limited group jointly holds 85.31% of the issued share capital. Its registered office is at 2nd floor 52A Campbell Street Lagos and its operational office is located at 24, Abimbola Street, Isolo Lagos. 2 Basis of preparation a Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), the requirements of the Companies and Allied Matters Act, CAP C20 LFN, 2004 and the requirements of the Financal Reporting Council of Nigeria Act, No 6, The financial statements were authorised for issue by the Board of Directors 30 May b. Basis of measurement The financial statements have been prepared on the historical cost basis except for certain financial assets which are measured at fair value as mentioned in the accounting policies below. c. Functional and presentation currency The Company functional and presentation currency is the Nigerian naira. The financial statements are presented in Nigerian Naira and have been rounded to the nearest thousand except otherwise stated. d. Use of estimates and judgement The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and judgments. It also requires management to exercise its judgement in the process of applying the Company s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 4. 3 New standards, amendments and interpretation issued but not yet adopted by the Company The following new/amended accounting standards and interpretations have been issued, but are not mandatory for financial year ended 31 March They have not been adopted in preparing the financial statements for the year ended 31 March 2016 and are expected to affect the Company in the period of initial application. In all cases the Company intends to apply these standards from application date as indicated in the table below.

13 RANBAXY NIGERIA LIMITED 8 IFRS Reference IFRS 9 (2014) (issued Jul 2014) Title and Affected Standard(s) Financial Instruments Nature of change Classification and measurement Financial assets will either be measured - at amortised cost, - fair value through other comprehensive income (FVTOCI) or - fair value through profit or loss - (FVTPL). Impairment The impairment model is a more forward looking model in that a credit event no longer has to occur before credit losses are recognised. For financial assets measured at amortised cost or fair value through other comprehensive income (FVTOCI), an entity will now always recognise (at a minimum) 12 months of expected losses in profit or loss. Lifetime expected losses will be recognised on these assets when there is a significant increase in credit risk after initial recognition. Hedging The new hedge accounting model introduced the following key changes: -Simplified effectiveness testing, including removal of the % highly effective threshold -More items will now qualify for hedge accounting, e.g. pricing components within a non-financial item, and net foreign exchange cash positions -Entities can hedge account more effectively the exposures that give rise to two risk positions (e.g. interest rate risk and foreign exchange risk, or commodity risk and foreign exchange risk) that are managed by separate derivatives over different periods -Less profit or loss volatility when using options, forwards, and foreign currency swaps -New alternatives available for economic hedges of credit risk and own use contracts which will reduce profit or loss volatility. Application date Annual reporting periods commencing on or after 1 January 2018 Impact on initial Application The first time application of IFRS 9 will have a wide and potentially very significant impact on the accounting for financial instruments. The new impairment requirements are likely to bring significant changes for impairment provisions for trade receivables, loans and other financial assets not measured at fair value through profit or loss. Due to the recent release of this standard, the entity has not yet made a detailed assessment of the impact of this standard.

14 RANBAXY NIGERIA LIMITED 9 IFRS Reference IFRS 15 Issued in May 2014 Title and Affected Standard(s) Revenue from contracts with customers Nature of change Application date Impact on initial Application IFRS 15 contains comprehensive guidance for accounting for revenue and will replace existing requirements which are currently set out in a number of Standards and Interpretations. The standard introduces significantly more disclosures about revenue recognition and it is possible that new and/or modified internal processes will be needed in order to obtain the necessary information. The Standard requires revenue recognised by an entity to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This core principle is delivered in a fivestep model framework: (i) Identify the contract(s) with a customer (ii)identify the performance obligations in the contract (iii)determine the transaction price (iv)allocate the transaction price to the performance obligations in the contract (v)recognise revenue when (or as) the entity satisfies a performance obligation. 1 January 2018 The Board is currently reviewing the impact the standard may have on the preparation and presentation of the financial statements when the standard is adopted. Consideration will be given to the following: (i)at what point in time the company recognises revenue from each contract whether at a single point in time or over a period of time; (ii) whether the contract needs to be unbundled into two or more components; (iii)how should contracts which include variable amounts of consideration be dealt with; (iv)what adjustments are required for the effects of the time value of money; (v) what changes will be required to the company s internal controls and processes.

15 RANBAXY NIGERIA LIMITED 10 4) Critical accounting estimates and judgements The Company makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstatnces. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are: i) Income and deferred taxation Ranbaxy Nigeria Limited annually incurs significant amounts of corporate tax liabilities, and also recognises significant changes to deferred tax assets and deferred tax liabilities, all of which are based on management s interpretations of applicable laws and regulations. The quality of these estimates is highly dependent upon management s ability to properly apply at times a very complex sets of rules, to recognise changes in applicable rules and, in the case of deferred tax assets, management s ability to project future earnings from activities that may apply loss carry forward positions against future income taxes. ii) Impairment of property, plant and equipment The Company assesses assets or groups of assets for impairment annually or whenever events or changes in circumstances indicate that carrying amounts of those assets may not be recoverable. In assessing whether a writedown of the carrying amount of a potentially impaired asset is required, the asset s carrying amount is compared to the recoverable amount. Frequently, the recoverable amount of an asset proves to be the Company s estimated value in use. The estimated future cash flows applied are based on reasonable and supportable assumptions and represent management s best estimates of the range of economic conditions that will exist over the remaining useful life of the cash flow generating assets. iii) Legal proceedings The Company reviews outstanding legal cases following developments in the legal proceedings at each reporting date, in order to assess the need for provisions and disclosures in its financial statements. Among the factors considered in making decisions on provisions are the nature of litigation, claim or assessment, the legal process and potential level of damages in the jurisdiction in which the litigation, claim or assessment has been brought, the progress of the case (including the progress after the date of the financial statements but before those statements are issued),the opinions or views of legal advisers, experience on similar cases and any decision of the Company's management as to how it will respond to the litigation, claim or assessment. (iv) Gratuity The cost of defined benefit pension and other post employment medical benefits and the present value of the pension obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions which may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, morality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and its long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at ecah reporting date. The discount rate is determined on the company's statement of financial position date by reference to market yields on high quality government bonds. The discount rate should reflect the duration of the liabilities of the benefit programme. 5) Summary of significant accounting policies The accounting policies set out below have been applied consistently to all years presented in these financial statements. a Going concern The directors assess the Company's future performance and financial position on a going concern basis and have no reason to believe that the Company will not be a going concern in the year ahead. For this reason, these financial statements have been prepared on the basis of accounting policies applicable to a going concern.

16 RANBAXY NIGERIA LIMITED 11 b Foreign currency Foreign currency transactions In preparing the financial statements of the Company, transactions in currencies other than the entity's presentation currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at yearend exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of profit or loss. Non -monetary items that are measured in terms of cost in a foreign currency are translated using the exchange rate at the end of the period. c Revenue recognition Revenue represents the fair value of the consideration received or receivable for sales of goods and services, in the ordinary course of the Company s activities and is stated net of value-added tax (VAT), rebates and discounts. (i) Sale of goods Revenue is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised. (ii) Finance income Finance income comprises interest income on short-term deposits with banks and changes in the fair value of financial assets at fair value through profit or loss where the Company holds such financial assets. Interest income on short-term deposits is recognised by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the asset s net carrying amount on initial recognition. Interest income is recognised in the statement of profit or loss and other comprehensive income as it accrues, using the effective interest method. Finance costs constitute mainly interest expenses. d Expenditures Expenditures are recognised as they accrue during the course of the year. Analysis of expenses recognised in the income statement is presented in classification based on the function of the expenses as this provides information that is reliable and more relevant than their nature. The company classifies its expenses as follows: - Cost of sales; - Administration expenses; and - Selling and distribution expenses; e Borrowing costs Borrowing costs directly attributable to the construction of qualifying assets, which are assets that necessarily take a substantial period of time to prepare for their intended use, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. All other borrowing costs are recognised as interest payable in the income statement in the period in which they are incurred.

17 RANBAXY NIGERIA LIMITED 12 f Property, plant and equipment Items of property, plant and equipment are measured at cost and less accumulated depreciation and impairment losses. The cost of property plant and equipment includes expenditures that are directly attributable to the acquisition of the asset. Property, plant and equipment under construction are disclosed as capital work-in-progress. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as a separate item of property, plant and equipment and are depreciated accordingly. Subsequent costs and additions are included in the asset s carrying amount or are recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred. Depreciation Depreciation is recognised so as to write off the cost of the assets less their residual values over their useful lives, using the straight-line method on the following bases: Major overhaul expenditure, including replacement spares and labour costs, is capitalised and amortised over the average expected life between major overhaul. Leasehold improvements Plant and Machinery Furniture and Fixtures Generators Motor Vehicles Derecognition g Intangible Assets Computer software Over the period of the lease 10-15years 5-7years 4-6 years 4-6 years The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Capital work in progress is not depreciated. The attributable cost of each asset is transferred to the relevant asset category immediately the asset is available for use and depreciated accordingly An item of property, plant and equipment is derecognised upon disposal or when no future economic benefit is expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in income statement within other income in the year that the asset is derecognised. The assets residual values, useful lives and methods of depreciation are reviewed at each financial year end, and adjusted prospectively, if appropriate. Computer software purchased from third parties. They are measured at cost less accumulated amortisation and accumulated impairment losses. Purchased computer software is capitalised on the basis of costs incurred to acquire and bring into use the specific software. These costs are amortised on a straight line basis over the useful life of the asset. Expenditure that enhances and extends the benefits of computer software beyond their original specifications and lives, is recognised as a capital improvement cost and is added to the original cost of the software. All other expenditure is expensed as incurred.

18 RANBAXY NIGERIA LIMITED 13 Amortisation is recognised in the income statement on a straight-line basis over the estimated useful life of the software, from the date that it is available for use. The residual values and useful lives are reviewed at the end of each reporting period and adjusted if appropriate. An Intangible asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount. The estimated useful lives for the current and comparative period are as follows: Computer software 5 years Derecognition of intangible assets An intangible assets is derecognised on disposal, or when no future economic benefits are expected from its use or disposal. Gains or losses arising from derecognition of an intangible assets, (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in income statement within other income in the year that the intagible asset is derecognised. h Impairment of non-financial assets Non-financial assets other than inventories are reviewed at each reporting date for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which they have separately identifiable cash flows (cash-generating units). If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statement, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in the income statement, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment is treated as a revaluation increase. i Inventories Inventories are valued at the lower of cost and net realisable value. Cost incurred in briging each product to its present location and condition is accounted for as follows: Raw materials Raw materials which includes purchase cost and other costs incurred to bring the materials to their location and condition are valued using weighted average cost. Finsished goods and Work in progress Cost of finished goods and work in progress includes cost of raw materials, labour, production and attributable overheads based on normal operating capacity and are valued using the weighted average cost. Spare parts and consumables Spare parts which are expected to be fully utilized in production within the next operating cycle and other consumables are valued at weigted average cost after making allowance for obsolete and damaged stocks. Goods in transit Goods in transit are valued at cost incurred to date.

19 RANBAXY NIGERIA LIMITED 14 j Financial Assets The company financial assets include loans and receivables which further comprise of trade receivables and cash and short-term deposits. After initial measurement, the subsequent measurement of financial assets depends on their classifications as follows: i) Loans and receivables Loans and receivables including staff loans are non- derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, loan and receivables are subsequently measured at amortised cost using the Effective Interest Rate(EIR) method, less impairment. Amortised calculated by taking into account any discount or premium on acquisition and fees or cost that are an integral part of the EIR. The EIR amortisation is included in finance/interest income in the income statement. Gains and losses are recognised in the income statement when the investments are derecognised or impaired as well as through the amortisation process. ii) Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less allowance for impairment. The carrying amount of trade receivable is reduced through the use of an allowance account. When trade receivables are uncollectable, it is written off as 'administrative expenses' in the income statemement. Subsequent recoveries of amounts written off are included in other operating income. iii) Cash and equivalents Cash and cash equivalents includes cash in hand, deposit held at call with banks, other short-term highly liquid investments with original maturities of three months. Bank overdraft are shown within borrowings in current liabilities in the statement of financial position. For the purpose of cash flows, cash and cash equivalents consist of cash and short- term deposits as defined above, net of oustanding bank overdrafts( if any). k Impairment of financial assets The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicates that there is a measurable decrease in the estimated future cash flows such as changes in arrears or economic conditions that correlate with defaults. For the loans and receivables category, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the income statement. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the company may measure impairment on the basis of an instrument s fair value using an observable market price. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in the income statement.

20 RANBAXY NIGERIA LIMITED 15 l Prepayments Prepayments are payments made in advance relating to the following year and are recognised and carried at original amount less amounts utilised in the income statement. m Financial liabilities Financial liabilities are initially recognised at fair value when the Company become a party to the contractual provisions of the liability. Subsequent measurement of financial liabilities is based on amortized cost using the effective interest method. The Company financial liabilities includes: trade payables. Financial liabilities are presented as if the liability is due to be settled within 12 months after the reporting date, or if they are held for the purpose of being traded. Other financial liabilities which contractually will be settled more than 12 months after the reporting date are classified as non-current. Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. De-recognition of financial liabilities The Company derecognises financial liabilities when, and only when, the Company's obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid or payable is recognised in income statement. A provision is recognized only if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. The provision is measured at the best estimate of the expenditure required to settle the obligation at the reporting date. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. The Company's provisions are measured at the present value of the expenditures expected to be required to settle the obligation. n Borrowings Borrowings are recognized initially at their issue proceeds and subsequently stated at cost less any repayments. Transaction costs where immaterial, are recognized immediately in the income statement. Where transaction costs are material, they are capitalized and amortised over the life of the loan. Interest paid on borrowing is recognized in the income statement for the period. o Employee benefits The Company operates the following contribution and benefit schemes for its employees: (i) Defined contribution pension scheme In line with the provisions of the Pension Reform Act, 2014, the company has instituted a defined contributory pension scheme for its employees. The scheme is funded by fixed contributions from employees and the company at the rate of 8% by employees and 10% by the company of basic salary, transport and housing allowances invested outside the company through Pension Fund Administrators (PFAs) of the employees' choice. The Company has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employees service in the current and prior periods.

21 RANBAXY NIGERIA LIMITED 16 The monthly contributions made by the Company to the relevant PFAs are recognised as expenses when the costs become payable in the reporting periods during which employees have rendered services in exchange for those contributions. Liabilities in respect of the defined contribution scheme are charged against the profit of the period in which they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. (ii) Gratuity scheme The employee gratuity is a defined benefit plan. The cost of providing benefits under the defined benefit plan is determined separately using the projected unit credit method. Actuarial gains and losses are recognised in other comprehensive income (OCI). Remeasurements, comparising of actuarial gains and losses, the effect of the asset ceiling, excluding net interest and return on plan assets (excluding net interest), are recognised immediately in the statement of financial position with corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to the income statement in subsequent periods. Past service costs are recognised in income statement on the earlier of The date of the plan amendment or curtailment,and The date that the company recognises restructuring - related costs Net interest calculated by applying the discount rate to the net defined benefit liability or asset. The company recognises the following changes in the net defined benefit obligation under administrative expenses' in the income statement (by function): Service costs comprising current service costs, past-service costs, and non-routine settlements Net interest expense or income (iii) Short-term benefits Short term employee benefit obligations which include wages, salaries, bonuses and other allowances for current employees are measured on an undiscounted basis and recognised and expensed by Ranbaxy Nigeria Limited in the income statement as the employees render such services. A liability is recognised for the amount expected to be paid under short - term benefits if the company has a present legal or constructive obligation to pay the amount as a result of past service provided by the employee and the obligation can be estimated reliably. p Income taxes Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity or in other comprehensive income. Current income tax is the estimated income tax payable on taxable income for the year, using tax rates enacted or substantively enacted at the statement of financial position date, and any adjustment to tax payable in respect of previous years. The tax currently payable is based on taxable results for the year. Taxable results differs from results as reported in the income statement because it includes not only items of income or expense that are taxable or deductible in other years but it further excludes items that are never taxable or deductible. The Company's liabilities for current tax is calculated using tax rates that have been enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability differs from its tax base. Deferred taxes are recognized using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes (tax bases of the assets or liability). The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted by the reporting date. Deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised.

22 RANBAXY NIGERIA LIMITED 17 q Share capital and Share premium Shares are classified as equity when there is no obligation to transfer cash or other assets. Any amounts received over and above the par value of the shares issued is classified as share premium in equity. Incremental costs directly attributable to the issue of equity instruments are shown in equity as a deduction from the proceeds, net of tax. r Dividend on ordinary shares Dividends on ordinary shares are recognised as a liability and deducted from equity when they are approved by the Company's shareholders. Interim dividends are deducted from equity when they are declared and no longer at the discretion of the shareholders. Dividends for the year that are approved after the statement of financial position date are disclosed as an event after the statement of financial position date. s Retained earnings General reserve represents amount set aside out of profits of the Company which shall at the discretion of the directors be applied to meeting contingencies, repairs or maintenance of any works connected with the business of the Company, for equalising dividends, for special dividend or bonus, or such other purposes for which the profits of the Company may lawfully be applied. t Contingent liability A contingent liability is disclosed, unless the possibility of an outflow of resources embodying economic benefits is remote. Where the Company is jointly and severally liable for an obligation, the part of the obligation that is expected to be met by other parties is treated as a contingent liability. The entity recognises a provision for the part of the obligation for which an outflow of resources embodying economic benefits is probable, except in the extremely rare circumstances where no reliable estimate can be made. Contingent liabilities are assessed continually to determine whether an outflow of resources embodying economic benefits has become probable. If it becomes probable that an outflow of future economic benefits will be required for an item previously dealt with as a contingent liability, a provision is recognised in the financial statements of the period in which the change probability occurs except in the extremely rare circumstances where no reliable estimate can be made. u Related party transactions Related parties include the related companies, the directors, their close family members and any employee who is able to exert significant influence on the operating policies of the Company. Key management personnel are also considered related parties. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity directly, including any director (whether executive or otherwise) of that entity. The Company considers two parties to be related if, directly or indirectly one party has the ability to control the other party or exercise significant influence over the other party in making financial or operating decisions. Where there is a related party transactions within the Company, the transactions are disclosed separately as to the type of relationship that exists within the Company and the outstanding balances necessary to understand their effects on the financial position and the mode of settlement. v Off statement of financial position events Transactions that are not currently recognized as assets or liability in the statement of financial position but which nonetheless give rise to credit risks, contingencies and commitments are reported off statement of financial position. Such transactions include letters of credit, bonds and guarantees, indemnities, acceptances and trade related contingencies such as documentary credits. Outstanding unexpired commitments at the year-end in respect of these transactions are shown by way of note to the financial statements.