To the Members of Abbott India Limited
Report on the Audit of the Ind AS Financial Statements
We have audited the accompanying Ind AS financial statements of Abbott India Limited("the Company") which comprise the Balance Sheet as at March 31 2021 theStatement of Profit and Loss including the statement of Other Comprehensive Income theCash Flow Statement and the Statement of Changes in Equity for the year then ended andnotes to the Ind AS financial statements including a summary of significant accountingpolicies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Ind AS financial statements give the information required bythe Companies Act 2013 as amended ("the Act") in the manner so required andgive a true and fair view in conformity with the accounting principles generally acceptedin India of the state of affairs of the sCompany as at March 31 2021 its profitincluding other comprehensive income its cash flows and the changes in equity for theyear ended on that date.
BASIS FOR OPINION
We conducted our audit of the Ind AS financial statements in accordance with theStandards on Auditing (SAs) as specified under Section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Ind AS Financial Statements' section of our report.We are independent of the Company in accordance with the Code of Ethics' issued bythe Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the financial statements under the provisions of the Actand the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion on the Ind AS financial statements.
KEY AUDIT MATTERS
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Ind AS financial statements for the financial year endedMarch 31 2021. These matters were addressed in the context of our audit of the Ind ASfinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. For each matter below our description of how ouraudit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the Ind AS financial statements section of ourreport including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the Ind AS financial statements. The results of our audit proceduresincluding the procedures performed to address the matters below provide the basis for ouraudit opinion on the accompanying Ind AS financial statements.
|Key audit matter ||How our audit addressed the key audit matter |
|(a) Provision for Non-Saleable returns (as described in note 24 of the Ind AS financial statements) || |
|The Company makes sales to stockiest who further sells products in the market. Stockiest have a right of return in case goods expiring while in supply chain till end consumers. Return of these expired goods results in deductions to gross amounts invoiced in arriving at revenue and creation of obligations for the Company to give credit for sales returns. ||Our audit procedures included amongst others |
|The amounts pertaining to such sales return are estimated at the time of sale and deducted from gross sales and recorded as provisions for sales returns. These estimates are based on analysis of historical trends of sales return and shelf life of the products. || Obtained an understanding of management process for making provision for Non-saleable returns including related controls. |
|The management has determined provision for sales returns amounting to Rs. 159.54 crores which have been recorded at March 31 2021 (including reimbursable sales return amounting to Rs. 50.80 crores) || Tested the Companys key controls relating to the deductions made to gross sales for sales returns including those controls over booking of sales and sales return process. |
| || We obtained management's calculations for provisions recalculated the amounts and evaluated the assumptions used with reference to historical sales returns levels and current trends. |
| || We considered the management's estimates by comparing historical accrued provisions and revenue deductions recorded to the actual amounts. |
|We focused on this area because establishing an appropriate year-end position requires significant judgement and estimation by the management. The assumptions required for estimating provisions for sales returns are complex in nature the estimates may not be appropriate and as a result provisions and revenue may be incorrectly recorded. Accordingly we regard these as key audit matter. || We tested the working of discounting of non-current provisions for sales return prepared by the management including the underlying assumptions. |
| || We understood and assessed the Company's revenue recognition accounting policies including the recognition and measurement of deductions to gross sales relating to sales returns and related disclosures. |
|(b) Evaluation of uncertain tax positions (as described in note : 39 (b) (ii) of the Ind AS financial statements) || |
|The Company has litigations involving question of law and certain disallowances made by Income tax authorities in assessment orders that the Company has appealed against before the relevant appellate authorities. || We obtained an understanding of the management's process for : |
| ||- identification of tax matters initiated against the Company |
|The Company has disclosed Rs.78.74 crores as Contingent liability (including uncertain tax positions for open assessment orders) in accordance with Ind AS 37 Provisions Contingent Liabilities and Contingent Assets based on management's assessment in consultation with professional advice from the external legal counsel. ||- assessment of accounting treatment for each such litigation identified under applicable accounting principles and for measurement of amounts involved. |
| || We evaluated the design and tested the operating effectiveness of controls around the above process. |
|The eventual outcome of the legal proceedings is dependent on the outcome of future events and unexpected adverse outcomes could significantly impact the Company's reported profits and Balance Sheet position. || We obtained an understanding of the nature of litigations pending against the Company and discussed the key developments during the year with the management. |
|Key judgments are also made by the management in estimating the amount of contingent liabilities related to aforementioned litigations. || We focused on the key developments in the tax litigations which could have materially impacted the amounts recorded as provisions or disclosed as contingent liability in the financial statements. We inspected the demand notices assessment orders received for such cases and obtained grounds of appeal submitted by the management in consultation with their external legal counsel. |
|Considering the degree of judgment significance of the amounts involved inherent high estimation uncertainty and reliance on external legal counsel this matter has been identified as a key audit matter. || We evaluated the appropriateness of methods used and the reliability of underlying data for quantifying the amounts involved by analyzing the relevant demand notices assessment orders received. We also tested the arithmetical accuracy of such calculations. |
| || We evaluated external legal counsel's response and analysed the conclusions reached which are supported by legal rationale. |
| || We also tested the independence objectivity and competence of such external legal counsel involved. |
| || We have obtained direct confirmation for litigation cases from the external legal counsel to support the decisions and rationale for disclosure of contingent liabilities in respect of the litigation cases. |
| || We engaged internal tax specialists to evaluate management assessment of the outcome of such litigation cases. The tax specialists considered legal precedence and other rulings in evaluating management's position on such litigation cases. |
| || We have evaluated the disclosures made by the Company in the financial statements in view of the requirements as specified in the Indian Accounting Standards. |
INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITOR'S REPORT THEREON
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the Director's Report Management Discussion and Analysis CorporateGovernance Report but does not include the Ind AS financial statements and our auditor'sreport thereon.
Our opinion on the Ind AS financial statements does not cover the other information andwe do not express any form of assurance conclusion thereon.
In connection with our audit of the Ind AS financial statements our responsibility isto read the other information identified as above and in doing so consider whether suchother information is materially inconsistent with the financial statements or ourknowledge obtained in the audit or otherwise appears to be materially misstated. If basedon the work we have performed we conclude that there is a material misstatement of thisother information we are required to report that fact. We have nothing to report in thisregard.
RESPONSIBILITIES OF MANAGEMENT FOR THE IND AS FINANCIAL STATEMENTS
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Act with respect to the preparation of these Ind AS financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income cash flows and changes in equity of the Company in accordancewith the accounting principles generally accepted in India including the IndianAccounting Standards (Ind AS) specified under Section 133 of the Act read with [theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and the designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the Ind AS financial statementsthat give a true and fair view and are free from material misstatement whether due tofraud or error.
In preparing the Ind AS financial statements management is responsible for assessingthe Company's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE IND AS FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the Ind AS financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these Ind AS financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the Ind AS financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under Section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
ANNEXURE 1 TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE FINANCIAL STATEMENTSOF ABBOTT INDIA LIMITED
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) Some fixed assets were physically verified by the management during the year inaccordance with a planned programme of verifying them once in three years which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. No material discrepancies were noticed on such verification.
(c) According to the information and explanations given by the management the titledeeds of immovable properties included in Property plant and equipment are held in thename of the Company except for the following :
|Sr. No. ||Asset Category ||Gross Block at March 31 2021 ||(Rs. in crores) ||Remarks |
|1 ||Buildings ||6.41 ||5.19 ||The title deeds are in the erstwhile name of the Company |
|2 ||Buildings ||30.51 ||26.32 ||The title deeds are in the name of the entities that was merged with the Company |
(ii) The management has conducted physical verification of inventory at reasonableintervals during the year and no material discrepancies were noticed on such physicalverification. Inventories lying with third parties have been confirmed by them as at yearend and no material discrepancies were noticed in respect of such confirmations.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to Companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under Section 189 of theCompanies Act 2013. Accordingly the provisions of clause 3(iii) (a) (b) and (c) of theOrder are not applicable to the Company and hence not commented upon.
(iv) In our opinion and according to the information and explanations given to usthere are no loans investments guarantees and securities given in respect of whichprovisions of Section 185 and 186 of the Companies Act 2013 are applicable and hence notcommented upon.
(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of the Act and the Companies (Acceptance of Deposits) Rules 2014 (as amended).Accordingly the provisions of clause 3(v) of the Order are not applicable.
(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the rules made by the Central Government for the maintenance of cost records underSection 148 (1) of the Companies Act 2013 related to the manufacture of pharmaceuticalproducts and are of the opinion that prima facie the specified accounts and records havebeen made and maintained. We have not however made a detailed examination of the same.
(vii) (a) The Company is generally regular in depositing undisputed statutory duesincluding provident fund income-tax duty of customs goods and service tax cess andother statutory dues applicable to it with appropriate authorities though there have beenslight delays in few cases for payment of professional tax.
(b) According to the information and explanations given to us and audit proceduresperformed by us no undisputed amounts payable in respect of provident fund income-taxduty of custom goods and service tax cess and other statutory dues were outstanding atthe year end for a period of more than six months from the date they became payable.
(c) According to the records of the Company the dues of income-tax sales-tax servicetax duty of custom duty of excise value added tax and cess on account of any disputeare as follows :
|Name of Statute ||Nature of Dues ||Amount disputed in Rs.crores (net of payments) ||Forum where dispute is pending ||Period to which the amount relates |
|Income Tax Act 1961 ||Income Tax ||2.92 ||Hon'ble High Court ||A.Y. 1998-99 |
|Income Tax Act 1961 ||Income Tax ||2.76 ||Income Tax Appellate Tribunal ||A.Y. 2006-07 and A.Y. 2011-12 |
|Income Tax Act 1961 ||Income Tax ||34.62 ||Commissioner of Income Tax (Appeals) ||A.Y. 2004-05 A.Y. 2016-17 A.Y. 2017-18 and A.Y. 2019-20 |
|Central Excise Act 1944 ||Excise Duty ||0.03 ||Commissioner (Appeals) ||1991-1992 |
| || ||0.04 ||Commissioner ||1994 - 1995 |
| || ||0.03 ||Assistant Commissioner ||1994 and 1997 to 2002 |
| || ||0.26 ||CESTAT ||2005 to 2006 |
|Customs Act 1962 ||Custom Duty ||0.04 ||Commissioner (Appeals) ||1996 |
| || ||0.75 ||CESTAT ||2011 to 2013 |
|The Bombay Sales Tax Act 1959 ||Sales Tax ||0.40 ||Deputy Commissioner of Sales Tax ||1999-2000 |
|Gujarat Value Added Tax ||Value Added Tax ||0.13 ||Deputy Commissioner Commercial Taxes Gujarat ||2017-18 |
|Uttar Pradesh Value Added Tax Act 2008 ||Value Added Tax ||0.01 ||Additional Commissioner Appeal Grade- 2 Commercial Tax ||2008-09 and 2009-10 |
|Kerala General Sales Tax Act 1963 ||Sales Tax ||0.13 ||Sales Tax Appellate Tribunal Additional Bench ||2002-03 |
|Goa Value Added Tax Act 2005 ||Value Added Tax ||0.02 ||Additional Commissioner of Commercial Taxes Panaji Goa ||2006-07 |
|Central Sales Tax 1956 (Goa) ||Sales Tax ||6.34 ||Additional Commissioner of Commercial Taxes Panaji Goa ||2006-07 and 2007-08 |
| || ||0.17 ||Assistant Commissioner of Commercial Taxes Panaji Goa ||2009-10 |
|The West Bengal - Value Added Tax Rules 2005 ||Value Added Tax ||0.34 ||Additional Commissioner of Sales Tax West Bengal ||2016-17 |
|Central Excise Act 1944 (Goa) ||Excise Duty ||4.52 ||CESTAT Mumbai ||2014-15 to 2017-18 |
|The Central Sales Tax (West Bengal) Rules 1958 ||Sales Tax ||0.03 ||Additional Commissioner of Sales Tax West Bengal ||2016-17 |
|Maharashtra Value Added Tax Act 2002 ||Value Added Tax ||27.67 ||Deputy Commissioner of Sales Tax (Appeals) ||2011-12 |
(viii) The Company did not have any outstanding loans or borrowing dues in respect of afinancial institution or bank or to government or dues to debenture holders during theyear.
(ix) According to the information and explanations given by the management the Companyhas not raised any money way of initial public offer / further public offer / debtinstruments and term loans hence reporting under clause (ix) is not applicable to theCompany and hence not commented upon.
(x) Based upon the audit procedures performed for the purpose of reporting the true andfair view of the financial statements and according to the information and explanationsgiven by the management we report that no fraud by the company or no material fraud onthe company by the officers and employees of the Company has been noticed or reportedduring the year.
(xi) According to the information and explanations given by the management themanagerial remuneration has been paid / provided in accordance with the requisiteapprovals mandated by the provisions of Section 197 read with Schedule V to the CompaniesAct 2013.
(xii) In our opinion the Company is not a nidhi company. Therefore the provisions ofclause 3(xii) of the order are not applicable to the Company and hence not commented upon.
(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with Section 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the notes tothe financial statements as required by the applicable accounting standards.
(xiv) According to the information and explanations given to us and on an overallexamination of the Balance Sheet the Company has not made any preferential allotment orprivate placement of shares or fully or partly convertible debentures during the yearunder review and hence reporting requirements under clause 3(xiv) are not applicable tothe company and not commented upon.
(xv) According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions with directors or persons connected withhim as referred to in Section 192 of Companies Act 2013. (xvi) According to theinformation and explanations given to us the provisions of Section 45-IA of the ReserveBank of India Act 1934 are not applicable to the Company.
For S R B C & CO LLP
ICAI Firm Registration Number: 324982E/E300003
per Ravi Bansal
Membership Number: 49365
Place of Signature: Mumbai
Date: May 18 2021
ANNEXURE 2 TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE FINANCIAL STATEMENTSOF ABBOTT INDIA LIMITED
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 (the Act)
We have audited the internal financial controls with reference to financial statementof Abbott India Limited (the Company) as of March 31 2021 in conjunction withour audit of the financial statements of the Company for the year ended on that date.
MANAGEMENT'S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS
The Company's Management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to the Company's policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to these financial statements based on our audit. We conducted ouraudit in accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the Guidance Note) and the Standards on Auditing asspecified under Section 143(10) of the Companies Act 2013 to the extent applicable to anaudit of internal financial controls and both issued by ICAI. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlswith reference to these financial statements was established and maintained and if suchcontrols operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to these financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference to thesefinancial statements included obtaining an understanding of internal financial controlswith reference to these financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgement including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our audit opinion on theCompany's internal financial controls with reference to these financial statements.
MEANING OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THESE FINANCIAL STATEMENTS
A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect and dispositions of the assets of the company; (2) provide reasonable assurancethat transactions are recorded as necessary to permit preparation of financial statementsin accordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIALSTATEMENTS
Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial control with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls with reference to financial statements and such internal financialcontrols with reference to financial statements were operating effectively as at March 312021 based on the internal control over financial reporting criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote issued by the ICAI.
For S R B C & CO LLP
ICAI Firm Registration Number: 324982E/E300003
per Ravi Bansal
Membership Number: 49365
Place of Signature: Mumbai
Date: May 18 2021.