Mar 31, 2023
A. Corporate Information
Reliance Industries Limited ("the Companyâ) is a listed entity incorporated in India. The registered office of the Company is located at 3rd Floor, Maker Chambers IV, 222, Nariman Point, Mumbai - 400 021, India.
The Company is engaged in activities spanning across hydrocarbon exploration and production, Oil to Chemicals, Retail and Digital Services.
B. Significant Accounting Policies:
The Financial Statements have been prepared on the historical cost basis except for following assets and liabilities which have been measured at fair value amount:
i) Certain Financial Assets and Liabilities (including derivative instruments),
ii) Defined Benefit Plans - Plan Assets and
iii) Equity settled Share Based Payments
The Financial Statements of the Company have been prepared to comply with the Indian Accounting standards (''Ind AS''), including the rules notified under the relevant provisions of the Companies Act, 2013,
(as amended from time to time) and Presentation and disclosure requirements of Division II of Schedule III to the Companies Act, 2013, (Ind AS Compliant Schedule III) as amended from time to time.
The Company''s Financial Statements are presented in Indian Rupees (C), which is also its functional currency and all values are rounded to the nearest crore (C00,00,000), except when otherwise indicated.
The Company presents assets and liabilities in the Balance Sheet based on Current/ Non-Current classification.
An asset is treated as Current when it is -
- Expected to be realised or intended to be sold or consumed in normal operating cycle;
- Held primarily for the purpose of trading;
- Expected to be realised within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle;
- It is held primarily for the purpose of trading;
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Property, Plant and Equipment are stated at cost, net of recoverable taxes, trade discount and rebates less accumulated depreciation and impairment losses, if any. Such cost includes purchase price, borrowing cost and any cost directly attributable to bringing the assets to its working condition for its intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the assets. In case of land the Company has availed fair value as deemed cost on the date of transition to Ind AS.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.
Property, Plant and Equipment which are significant to the total cost of that item of Property, Plant and Equipment and having different useful life are accounted separately.
Other Indirect Expenses incurred relating to project, net of income earned during the project development stage prior to its intended use, are considered as pre-operative expenses and disclosed under Capital Work-in-Progress.
Depreciation on Property, Plant and Equipment is provided using written down value method on depreciable amount except in case of certain assets of Oil to Chemicals and Other segment which are depreciated using straight line method. Depreciation is provided based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 except in respect of the following assets, where useful life is different than those prescribed in Schedule II;
Particular |
Depreciation |
Fixed Bed Catalyst (useful |
Over its useful life as |
life: 2 years or more) |
technically assessed |
Fixed Bed Catalyst (useful |
100% depreciated in the |
life: up to 2 years) |
year of addition |
Plant and Machinery (useful |
Over its useful life as |
life: 25 to 50 years) |
technically assessed |
Buildings (Useful life : 30 to |
Over its useful life as |
65 years) |
technically assessed |
The residual values, useful lives and methods of depreciation of Property, Plant and Equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Gains or losses arising from derecognition of a Property, Plant and Equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.
The Company, as a lessee, recognises a right-of-use asset and a lease liability for its leasing arrangements, if the contract conveys the right to control the use of an identified asset.
The contract conveys the right to control the use of an identified asset, if it involves the use of an identified asset and the Company has substantially all of the economic benefits from use of the asset and has right to direct the use of the identified asset. The cost of the right-of-use asset shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs incurred. The right-of-use assets is subsequently measured at cost less any accumulated depreciation/ amortisation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. The right-of-use assets is depreciated/ amortised using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use asset.
The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses incremental borrowing rate.
For short-term and low value leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the lease term.
Intangible Assets are stated at cost of acquisition net of recoverable taxes, trade discount and rebates less accumulated amortisation/depletion and impairment losses, if any. Such cost includes purchase price, borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the Intangible Assets.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.
Other Indirect Expenses incurred relating to project, net of income earned during the project development stage prior to its intended use, are considered as pre-operative expenses and disclosed under Intangible Assets Under Development.
Gains or losses arising from derecognition of an Intangible Asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised. The Company''s intangible assets comprises assets with finite useful life which are amortised on a straight-line basis over the period of their expected useful life.
A summary of amortisation/depletion policies applied to the Company''s Intangible Assets to the extent of depreciable amount is as follows:
Particular |
Amortisation / Depletion |
Technical Know-How |
Over the useful life of the underlying assets ranging from 5 years to 35 years. |
Computer Software |
Over a period of 5 years. |
Development Rights |
W.r.t. Oil and Gas, depleted using the unit of production method. The cost of producing wells along with its related facilities including decommissioning costs are depleted in proportion of oil and gas production achieved vis-a-vis Proved Developed Reserves. The cost for common facilities including its decommissioning costs are depleted using Proved Reserves. W.r.t. other development rights, amortized over the period of contract. |
Others |
In case of Jetty, the aggregate amount amortised to date is not less than the aggregate rebate availed by the Company. |
The amortisation period and the amortisation method for Intangible Assets with a finite useful life are reviewed at each reporting date.
Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss as and when incurred.
Development costs are capitalised as an intangible asset if it can be demonstrated that the project is expected to generate future economic benefits, it is probable that those future economic benefits will flow to the entity and the costs of the asset can be measured reliably, else it is charged to the Statement of Profit and Loss.
Cash and cash equivalents comprise of cash on hand, cash at banks, short-term deposits and 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.
Borrowing costs include exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are charged to the Statement of Profit and Loss for the period for which they are incurred.
Items of inventories are measured at lower of cost and net realisable value after providing for obsolescence, if any, except in case of by-products which are valued at net realisable value. Cost of inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overheads net of recoverable taxes incurred in bringing them to their respective present location and condition.
Cost of finished goods, work-in-progress, raw materials, chemicals, stores and spares, packing materials, trading and other products are determined on weighted average basis.
The Company assesses at each reporting date as to whether there is any indication that any Property, Plant and Equipment and Intangible Assets or group of Assets, called Cash Generating Units (CGU) may be impaired. If any such indication exists, the recoverable amount of an asset or CGU is estimated to determine the extent of impairment, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the CGU to which the asset belongs.
An impairment loss is recognised in the Statement of Profit and Loss to the extent, asset''s carrying amount exceeds its recoverable amount. The recoverable amount is higher of an asset''s fair value less cost of disposal and value ir use. Value in use is based on the estimated futur cash flows, discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and risk specific to the assets.
The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Provision for Decommissioning Liability
The Company records a provision for decommissioning costs towards site restoration activity. Decommissioning costs are provided at the present value of future expenditure using a current pre-tax rate expected to be incurred to fulfil decommissioning obligations and are recognised as part of the cost of the underlying assets. Any change in the present value of the expenditure, other than unwinding of discount on the provision, is reflected as adjustment to the provision and the corresponding asset. The change in the provision due to the unwinding of discount is recognised in the Statement of Profit and Loss.
Disclosure of contingent liability is made when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources embodying economic benefits will be required to settle or a reliable estimate of amount cannot be made.
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised as an expense during the period when the employees render the services.
Post-Employment Benefits Defined Contribution Plans
The Company recognises contribution payable to the provident fund scheme as an expense, when an employee renders the related service.
If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognised as a liability. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognised as an asset to the extent that the pre-payment will lead to a reduction in future payment or a cash refund.
Defined Benefit Plans
The Company pays gratuity to the employees who have completed five years of service with the Company at the time of resignation/ superannuation. The gratuity is paid @15 days basic salary for every completed year of service as per the Payment of Gratuity Act, 1972. The gratuity liability amount is contributed to the approved gratuity fund formed exclusively for gratuity payment to the employees. The gratuity fund has been approved by respective Income Tax authorities. The liability in respect of gratuity and other post-employment benefits is calculated using the Projected Unit Credit Method and
spread over the period during which the benefit is expected to be derived from employees'' services.
Remeasurement gains and losses arising from adjustments and changes in actuarial assumptions are recognised in the period in which they occur in Other Comprehensive Income.
Employee Separation Costs: The Company recognises the employee separation cost when the scheme is announced, and the Company is demonstrably committed to it.
The tax expenses for the period comprises of current tax and deferred income tax. Tax is recognised in Statement of Profit and Loss, except to the extent that it relates to items recognised in the Other Comprehensive Income. In which case, the tax is also recognised in Other Comprehensive Income.
i. Current Tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the Income Tax authorities, based on tax rates and laws that are enacted at the Balance sheet date.
ii. Deferred Tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Financial Statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax assets are recognised to the extent it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax losses can be utilised. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The carrying amount of Deferred tax liabilities and assets are reviewed at the end of each reporting period.
Equity-settled share based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-
settled share based payments transactions are set out in Note 29.2.
The fair value determined at the grant date of the equity-settled share based payments is expensed on a straight-line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in Statement of Profit and Loss such that the cumulative expenses reflects the revised estimate, with a corresponding adjustment to the Share Based Payments Reserve.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
In case of Group equity-settled share-based payment transactions, where the Company grants stock options to the employees of its subsidiaries, the transactions are accounted by increasing the cost of investment in subsidiary with a corresponding credit in the equity.
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognised in Statement of Profit and Loss except to the extent of exchange differences which are regarded as an adjustment to interest costs on foreign currency borrowings that are directly attributable to the acquisition or construction of qualifying assets which are capitalised as cost of assets. Additionally, exchange gains or losses on foreign currency borrowings taken prior to April 1, 2016 which are related to the acquisition or construction of qualifying assets are adjusted in the carrying cost of such assets.
Non-monetary items that are measured in terms of historical cost in a foreign currency are recorded using the exchange rates at the date of the transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e. translation differences on items whose fair value gain or loss is recognised in Other Comprehensive Income or Statement of Profit and Loss are also recognised in Other Comprehensive Income or Statement of Profit and Loss, respectively).
In case of an asset, expense or income where a non-monetary advance is paid/received, the date of transaction is the date on which the advance was initially recognised. If there were multiple payments or receipts in advance, multiple dates of transactions are determined for each payment or receipt of advance consideration.
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration entitled in exchange for those goods or services. The Company is generally the principal as it typically controls the goods or services before transferring them to the customer.
Generally, control is transferred upon shipment of goods to the customer or when the goods is made available to the customer, provided transfer of title to the customer occurs and the Company has not retained any significant risks of ownership or future obligations with respect to the goods shipped.
Revenue from rendering of services is recognised over time by measuring the progress towards complete satisfaction of performance obligations at the reporting period.
Revenue is measured at the amount of consideration which the Company expects to be entitled to in exchange for transferring distinct goods or services to a customer as specified in the contract, excluding amounts collected on behalf of third parties (for example taxes and duties collected on behalf of the government). Consideration is generally due upon satisfaction of performance obligations and a receivable is recognised when it becomes unconditional. Generally, the credit period varies between 0-60 days from the shipment or delivery of goods or services as the case may be. The Company provides volume rebates to certain customers once the quantity of products purchased during the period exceeds a threshold specified and also accrues discounts to certain customers based on customary business practices which is derived on the basis of crude price volatility and various market demand - supply situations. Consideration are determined based on its most likely amount. Generally, sales of petroleum products contain provisional pricing features
where revenue is initially recognised based on provisional price.
Difference between final settlement price and provisional price is recognised subsequently. The Company does not adjust short-term advances received from the customer for the effects of significant financing component if it is expected at the contract inception that the promised good or service will be transferred to the customer within a period of one year.
Contract Balances Trade Receivables
A receivable represents the Company''s right to an amount of consideration that is unconditional.
Contract Liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration or is due from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier).
Contract liabilities are recognised as revenue when the Company performs under the contract.
Interest Income
Interest Income from a Financial Assets is recognised using effective interest rate method.
Dividend Income
Dividend Income is recognised when the Company''s right to receive the amount has been established.
i. Financial Assets
A. Initial Recognition and Measurement
All Financial Assets are initially recognised at fair value. Transaction costs that are directly attributable to the acquisition or issue of Financial Assets, which are not at Fair Value Through Profit or Loss, are adjusted to the fair value on initial recognition. Purchase and sale of Financial Assets are recognised using trade date accounting. However, trade receivables that do not contain a significant financing component are measured at transaction price.
B. Subsequent Measurement
a) Financial Assets measured at Amortised Cost (AC)
A Financial Asset is measured at Amortised Cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the Financial Asset give rise to cash flows on specified dates that represent solely payments of principal and interest on the principal amount outstanding.
b) Financial Assets measured at Fair Value Through Other Comprehensive Income (FVTOCI)
A Financial Asset is measured at FVTOCI if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling Financial Assets and the contractual terms of the Financial Asset give rise on specified dates to cash flows that represents solely payments of principal and interest on the principal amount outstanding.
c) Financial Assets measured at Fair Value Through Profit or Loss (FVTPL)
A Financial Asset which is not classified in any of the above categories are measured at FVTPL. Financial assets are reclassified subsequent to their recognition, if the Company changes its business model for managing those financial assets. Changes in business model are made and applied prospectively from the reclassification date following the changes in business model in accordance with principles laid down under Ind AS 109 -Financial Instruments.
C. Investment in Subsidiaries, Associates and Joint Ventures
The Company has accounted for its investments in Subsidiaries, associates and joint venture at cost less impairment loss (if any). The investments in preference shares with the right of surplus assets which are in nature of equity in accordance with Ind AS 32 are treated as separate category of investment and measured at FVTOCI.
D. Other Equity Investments
All other equity investments are measured at fair value, with value changes recognised in Statement of Profit and Loss, except for those equity investments for which the Company has elected to present the value changes in ''Other Comprehensive Income''. However, dividend on such equity investments are recognised in Statement of Profit and loss when the Company''s right to receive payment is established.
E. Impairment of Financial Assets
In accordance with Ind AS 109, the Company uses ''Expected Credit Loss''
(ECL) model, for evaluating impairment of Financial Assets other than those measured at Fair Value Through Profit and Loss (FVTPL).
Expected Credit Losses are measured through a loss allowance at an amount equal to:
⢠The 12-months expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date); or
⢠Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument).
For Trade Receivables the Company applies ''simplified approach'' which requires expected lifetime losses to be recognised from initial recognition of the receivables.
The Company uses historical default rates to determine impairment loss on the portfolio of trade receivables. At every reporting date these historical default rates are reviewed and changes in the forward-looking estimates are analysed.
For other assets, the Company uses 12 month ECL to provide for impairment loss where there is no significant increase in credit risk. If there is significant increase in credit risk full lifetime ECL is used.
ii. Financial Liabilities
A. Initial Recognition and Measurement
All Financial Liabilities are recognised at fair value and in case of borrowings, net of directly attributable cost. Fees of recurring nature are directly recognised in the Statement of Profit and Loss as finance cost.
B. Subsequent Measurement
Financial Liabilities are carried at amortised cost using the effective interest method. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
iii. Derivative Financial Instruments and Hedge Accounting
The Company uses various derivative financial instruments such as interest rate swaps, currency swaps, forwards & options and commodity contracts to mitigate the risk of changes in interest rates, exchange rates and commodity prices.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are also subsequently measured at fair value.
Derivatives are carried as Financial Assets when the fair value is positive and as Financial Liabilities when the fair value is negative. Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss, except for the effective portion of cash flow hedge which is recognised in Other Comprehensive Income and later to Statement of Profit and Loss when the hedged item affects profit or loss or is treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a Non-Financial Assets or Non-Financial liability.
Hedges that meet the criteria for hedge accounting are accounted for as follows:
A. Cash Flow Hedge
The Company designates derivative contracts or non-derivative Financial Assets/ Liabilities as hedging instruments to mitigate the risk of movement in interest rates and foreign exchange rates for foreign exchange exposure on highly probable future cash flows attributable to a recognised asset or liability or forecast cash transactions.
When a derivative is designated as a cash flow hedging instrument, the effective
portion of changes in the fair value of the derivative is recognised in the cash flow hedging reserve being part of Other Comprehensive Income. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold or terminated or exercised, the cumulative gain or loss on the hedging instrument recognised in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the underlying transaction occurs. The cumulative gain or loss previously recognised in the cash flow hedging reserve is transferred to the Statement of Profit and Loss upon the occurrence of the underlying transaction.
If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified in the Statement of Profit and Loss.
B. Fair Value Hedge
The Company designates derivative contracts or non-derivative Financial Assets/Liabilities as hedging instruments to mitigate the risk of change in fair value of hedged item due to movement in interest rates, foreign exchange rates and commodity prices.
Changes in the fair value of hedging instruments and hedged items that are designated and qualify as fair value hedges are recorded in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to Statement of Profit and Loss over the period of maturity.
iv. Derecognition of Financial Instruments
The Company derecognises a Financial Asset when the contractual rights to the cash flows from the Financial Asset expire or it transfers the Financial Asset and the transfer qualifies for derecognition under Ind AS 109. A Financial liability (or a part of a Financial liability) is derecognised from the Company''s Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
v. Offsetting
Financial Assets and Financial Liabilities are offset and the net amount is presented in the balance sheet when, and only when, the Company has a legally enforceable right to set off the amount and it intends, either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and sale is considered highly probable.
A sale is considered as highly probable when decision has been made to sell, assets are available for immediate sale in its present condition, assets are being actively marketed and sale has been agreed or is expected to be concluded within 12 months of the date of classification.
Non-current assets held for sale are neither depreciated nor amortised.
Assets and liabilities classified as held for sale are measured at the lower of their carrying amount and fair value less cost of disposal and are presented separately in the Balance Sheet.
The Company has adopted Successful Efforts Method (SEM) of accounting for its Oil and Gas activities. The policy of recognition of exploration and evaluation expenditure is considered in line with the principle of SEM. Seismic costs, geological and geophysical studies, petroleum exploration license fees and general and administration costs directly attributable to exploration and evaluation activities are expensed off. The costs incurred on acquisition of interest in oil and gas blocks and on exploration and evaluation other than those which are expensed off are accounted for as Intangible Assets Under Development. All development costs incurred in respect of proved reserves are also capitalised under Intangible Assets Under Development. Once a well is ready to commence commercial production, the costs accumulated in Intangible Assets Under Development are classified as Intangible Assets corresponding to proved developed oil and gas reserves. The exploration and evaluation expenditure which does not result in discovery of proved oil and gas reserves and all cost pertaining to production are charged to the Statement of Profit and Loss.
by amortising the remaining carrying value of the asset over the expected future production. Oil and natural gas reserves also have a direct impact on the assessment of the recoverability of asset carrying values reported in the Financial Statements.
Details on proved reserves and production both on product and geographical basis are provided in Note 36.2.
(B) Decommissioning Liabilities
The liability for decommissioning costs is recognised when the Company has an obligation to perform site restoration activity. The recognition and measurement of decommissioning provisions involves the use of estimates and assumptions. These include; the timing of abandonment of well and related facilities which would depend upon the ultimate life of the field, expected utilisation of assets by other fields, the scope of abandonment activity and pre-tax rate applied for discounting.
(C) Property Plant and Equipment/Intangible Assets
Estimates are involved in determining the cost attributable to bringing the assets to the location and condition necessary for it to be capable of operating in the manner intended by the management.
Property, Plant and Equipment/Intangible Assets are depreciated/amortised over their estimated useful life, after taking into account estimated residual value. Management reviews the estimated useful life and residual values of the assets annually in order to determine the amount of depreciation/ amortisation to be recorded during any reporting period. The useful life and residual values are based on the Company''s historical experience with similar assets and take into account anticipated technological and future risks. The depreciation/amortisation for future periods is revised if there are significant changes from previous estimates.
(D) Recoverability of Trade Receivables
Judgments are required in assessing the recoverability of overdue trade receivables and determining whether a provision against those receivables is required. Factors considered include the credit rating of the counterparty, the amount and timing of anticipated future payments and any possible actions that can be taken to mitigate the risk of non-payment.
(E) Provisions
The timing of recognition and quantification of the liability (including litigations) requires the application of judgement to existing facts and circumstances, which can be subject to change. The carrying amounts of provisions and liabilities are reviewed
The Company uses technical estimation of reserves as per the Petroleum Resources Management System guidelines 2011 and standard geological and reservoir engineering methods. The reserve review and evaluation is carried out annually.
Oil and Gas Joint Ventures are in the nature of joint operations. Accordingly, assets and liabilities as well as income and expenditure are accounted on the basis of available information on a line-by-line basis with similar items in the Company''s Financial Statements, according to the participating interest of the Company.
Basic earnings per share is calculated by dividing the net profit after tax by the weighted average number of equity shares outstanding during the year adjusted for bonus element in equity share. Diluted earnings per share adjusts the figures used in determination of basic earnings per share to take into account the conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed converted as at the beginning of the period unless issued at a later date.
C. Critical Accounting Judgements and Key Sources Of Estimation Uncertainty
The preparation of the Company''s Financial Statements requires management to make judgement, estimates and assumptions that affect the reported amount of revenue, expenses, assets and liabilities and the accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in next financial years.
The determination of the Company''s estimated oil and natural gas reserves requires significant judgements and estimates to be applied and these are regularly reviewed and updated. Factors such as the availability of geological and engineering data, reservoir performance data, acquisition and divestment activity, drilling of new wells, and commodity prices all impact on the determination of the Company''s estimates of its oil and natural gas reserves. The Company bases it''s proved reserves estimates on the requirement of reasonable certainty with rigorous technical and commercial assessments based on conventional industry practice and regulatory requirements.
Estimates of oil and natural gas reserves are used to calculate depletion charges for the Company''s oil and gas properties. The impact of changes in estimated proved reserves is dealt with prospectively
regularly and revised to take account of changing facts and circumstances.
The impairment provisions for Financial Assets are based on assumptions about risk of default and expected cash loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Company''s past history, existing market conditions as well as forward-looking estimates at the end of each reporting period.
In case of non-financial assets, assessment of impairment indicators involves consideration of future risks. Further, the company estimates asset''s recoverable amount, which is higher of an asset''s or Cash Generating Units (CGU''s) fair value less costs of disposal and its value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account, if no such transactions can be identified, an appropriate valuation model is used.
Deferred tax assets and liabilities are recognised for temporary differences and unused tax losses for which there is probability of utilisation against the future taxable profit. The Company uses judgement to determine the amount of deferred tax that can be
recognised, based upon the likely timing and the level of future taxable profits and business developments.
For estimates relating to fair value of financial instruments refer note 39 of financial statements.
D. Standards Issued but not Effective
On March 23, 2023, the Ministry of Corporate Affairs (MCA) has notified Companies (Indian Accounting Standards) Amendment Rules, 2023. This notification has resulted into amendments in the following existing accounting standards which are applicable to company from April 1, 2023.
i. Ind AS 101 - First-time Adoption of Indian Accounting Standards
ii. Ind AS 102 - Share-based Payment
iii. Ind AS 103 - Business Combination
iv. Ind AS 107 - Financial Instruments Disclosures
v. Ind AS 109 - Financial Instrument
vi. Ind AS 115 - Revenue from Contracts with Customers
vii. Ind AS 1 - Presentation of Financial Statements
viii. Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors
ix. Ind AS 12 - Income Taxes
x. Ind AS 34 - Interim Financial Reporting
Application of above standards are not expected to have any significant impact on the company''s financial statements.
Mar 31, 2022
A. Corporate Information
Reliance Industries Limited ("the Company") is a listed entity incorporated in India. The registered office of the Company is located at 3rd Floor, Maker Chambers IV, 222, Nariman Point, Mumbai - 400 021, India.
The Company is engaged in activities spanning across hydrocarbon exploration and production, Oil to chemicals, retail, digital services and financial services.
B. Significant Accounting Policies:
The Financial Statements have been prepared on the historical cost basis except for following assets and liabilities which have been measured at fair value amount:
i) Certain Financial Assets and Liabilities (including derivative instruments),
ii) Defined Benefit Plans - Plan Assets and
iii) Equity settled Share Based Payments
The Financial Statements of the Company have been prepared to comply with the Indian Accounting standards (''Ind AS''), including the rules notified under the relevant provisions of the Companies Act, 2013, (as amended from time to time) and Presentation and disclosure requirements of Division II of Schedule III to the Companies Act, 2013, (Ind AS Compliant Schedule III) as amended from time to time.
The Company''s Financial Statements are presented in Indian Rupees (''), which is also its functional currency and all values are rounded to the nearest crore (?00,00,000), except when otherwise indicated.
The Company presents assets and liabilities in the Balance Sheet based on Current/ Non-Current classification.
An asset is treated as Current when it is -
- Expected to be realised or intended to be sold or consumed in normal operating cycle;
- Held primarily for the purpose of trading;
- Expected to be realised within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle;
- It is held primarily for the purpose of trading;
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Property, Plant and Equipment are stated at cost, net of recoverable taxes, trade discount and rebates less accumulated depreciation and impairment losses, if any. Such cost includes purchase price, borrowing cost and any cost directly attributable to bringing the assets to its working condition for its intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the assets. In case of land the Company has availed fair value as deemed cost on the date of transition to Ind AS.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.
Property, Plant and Equipment which are significant to the total cost of that item of Property, Plant and Equipment and having different useful life are accounted separately.
Other Indirect Expenses incurred relating to project, net of income earned during the project development stage prior to its intended use, are considered as pre-operative expenses and disclosed under Capital Work-in-Progress.
Depreciation on Property, Plant and Equipment is provided using written down value method on depreciable amount except in case of certain assets of Oil to Chemicals segment which are depreciated using straight line method. Depreciation is provided based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 except in respect of the following assets, where useful life is different than those prescribed in Schedule II;
Particular |
Depreciation |
Fixed Bed Catalyst (useful life: 2 years or more) |
Over its useful life as technically assessed |
Fixed Bed Catalyst (useful life: up to 2 years) |
100% depreciated in the year of addition |
Plant and Machinery (useful life: 25 to 50 years) |
Over its useful life as technically assessed |
The residual values, useful lives and methods of depreciation of Property, Plant and Equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Gains or losses arising from derecognition of a Property, Plant and Equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.
The Company, as a lessee, recognises a right-of-use asset and a lease liability for its leasing arrangements, if the contract conveys the right to control the use of an identified asset.
The contract conveys the right to control the use of an identified asset, if it involves the use of an identified asset and the Company has substantially all of the economic benefits from use of the asset and has right to direct the use of the identified asset. The cost of the right-of-use asset shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs incurred. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. The right-of-use assets is depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use asset.
The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease.
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses incremental borrowing rate.
For short-term and low value leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the lease term.
Intangible Assets are stated at cost of acquisition net of recoverable taxes, trade discount and rebates less accumulated amortisation/depletion and impairment losses, if any. Such cost includes purchase price, borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the Intangible Assets.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.
Other Indirect Expenses incurred relating to project, net of income earned during the project development stage prior to its intended use, are considered as pre-operative expenses and disclosed under Intangible Assets Under Development.
Gains or losses arising from derecognition of an Intangible Asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised. The Company''s intangible assets comprises assets with finite useful life which are amortised on a straight-line basis over the period of their expected useful life.
A summary of amortisation/depletion policies applied to the Company''s Intangible Assets to the extent of depreciable amount is as follows:
Particular |
Amortisation / Depletion |
Technical Know-How |
Over the useful life of the underlying assets ranging from 5 years to 35 years. |
Computer Software |
Over a period of 5 years. |
Development Rights |
Depleted using the unit of production method. The cost of producing wells along with its related facilities including decommissioning costs are depleted in proportion of oil and gas production achieved vis-a-vis Proved Developed Reserves. The cost for common facilities including its decommissioning costs are depleted using Proved Reserves. |
Others |
In case of Jetty, the aggregate amount amortised to date is not less than the aggregate rebate availed by the Company. |
The amortisation period and the amortisation method for Intangible Assets with a finite useful life are reviewed at each reporting date.
Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss as and when incurred.
Development costs are capitalised as an intangible asset if it can be demonstrated that the project is expected to generate future economic benefits, it is probable that those future economic benefits will flow to the entity and the costs of the asset can be measured reliably, else it is charged to the Statement of Profit and Loss.
Cash and cash equivalents comprise of cash on hand, cash at banks, short-term deposits and 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.
Borrowing costs include exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are charged to the Statement of Profit and Loss for the period for which they are incurred.
Items of inventories are measured at lower of cost and net realisable value after providing for obsolescence, if any, except in case of by-products which are valued at net realisable value. Cost of inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overheads net of recoverable taxes incurred in bringing them to their respective present location and condition.
Cost of finished goods, work-in-progress, raw materials, chemicals, stores and spares, packing materials, trading and other products are determined on weighted average basis.
The Company assesses at each reporting date as to whether there is any indication that any Property, Plant and Equipment and Intangible Assets or group of Assets, called Cash Generating Units (CGU) may be impaired. If any such indication exists, the recoverable amount of an asset or CGU is estimated to determine the extent of impairment, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the CGU to which the asset belongs.
An impairment loss is recognised in the Statement of Profit and Loss to the extent, asset''s carrying amount exceeds its recoverable amount. The recoverable
amount is higher of an asset''s fair value less cost of disposal and value in use. Value in use is based on the estimated future cash flows, discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and risk specific to the assets.
The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
The Company records a provision for decommissioning costs towards site restoration activity. Decommissioning costs are provided at the present value of future expenditure using a current pre-tax rate expected to be incurred to fulfil decommissioning obligations and are recognised as part of the cost of the underlying assets. Any change in the present value of the expenditure, other than unwinding of discount on the provision, is reflected as adjustment to the provision and the corresponding asset. The change in the provision due to the unwinding of discount is recognised in the Statement of Profit and Loss.
Disclosure of contingent liability is made when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources embodying economic benefits will be required to settle or a reliable estimate of amount cannot be made.
Short-Term Employee Benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised as an expense during the period when the employees render the services.
The Company recognises contribution payable to the provident fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognised as a liability. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognised as an asset to the extent that the pre-payment will lead to a reduction in future payment or a cash refund.
The Company pays gratuity to the employees who have completed five years of service with the Company at the time of resignation/superannuation. The gratuity is paid @15 days basic salary for every completed year of service as per the Payment of Gratuity Act, 1972. The gratuity liability amount is contributed to the approved gratuity fund formed exclusively for gratuity payment to the employees. The gratuity fund has been approved by respective Income Tax authorities. The liability in respect of gratuity and other post-employment benefits is calculated using the Projected Unit Credit Method and spread over the period during which the benefit is expected to be derived from employees'' services.
Remeasurement gains and losses arising from adjustments and changes in actuarial assumptions are recognised in the period in which they occur in Other Comprehensive Income.
Employee Separation Costs: The Company recognises the employee separation cost when the scheme is announced, and the Company is demonstrably committed to it.
The tax expenses for the period comprises of current tax and deferred income tax. Tax is recognised in Statement of Profit and Loss, except to the extent that it relates to items recognised in the Other Comprehensive Income. In which case, the tax is also recognised in Other Comprehensive Income.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the Income Tax authorities, based on tax rates and laws that are enacted at the Balance sheet date.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Financial Statements
and the corresponding tax bases used in the computation of taxable profit.
Deferred tax assets are recognised to the extent it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax losses can be utilised. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The carrying amount of Deferred tax liabilities and assets are reviewed at the end of each reporting period.
Equity-settled share based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share based payments transactions are set out in Note 29.2.
The fair value determined at the grant date of the equity-settled share based payments is expensed on a straight-line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in Statement of Profit and Loss such that the cumulative expenses reflects the revised estimate, with a corresponding adjustment to the Share Based Payments Reserve.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
In case of Group equity-settled share-based payment transactions, where the Company grants stock options to the employees of its subsidiaries, the transactions are accounted by increasing the cost of investment in subsidiary with a corresponding credit in the equity.
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognised in Statement of Profit and Loss except to the extent of exchange differences which are regarded
as an adjustment to interest costs on foreign currency borrowings that are directly attributable to the acquisition or construction of qualifying assets which are capitalised as cost of assets. Additionally, exchange gains or losses on foreign currency borrowings taken prior to April 1, 2016 which are related to the acquisition or construction of qualifying assets are adjusted in the carrying cost of such assets.
Non-monetary items that are measured in terms of historical cost in a foreign currency are recorded using the exchange rates at the date of the transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e. translation differences on items whose fair value gain or loss is recognised in Other Comprehensive Income or Statement of Profit and Loss are also recognised in Other Comprehensive Income or Statement of Profit and Loss, respectively).
In case of an asset, expense or income where a non-monetary advance is paid/received, the date of transaction is the date on which the advance was initially recognised. If there were multiple payments or receipts in advance, multiple dates of transactions are determined for each payment or receipt of advance consideration.
(p) Revenue Recognition
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration entitled in exchange for those goods or services. The Company is generally the principal as it typically controls the goods or services before transferring them to the customer.
Generally, control is transferred upon shipment of goods to the customer or when the goods is made available to the customer, provided transfer of title to the customer occurs and the Company has not retained any significant risks of ownership or future obligations with respect to the goods shipped.
Revenue from rendering of services is recognised over time by measuring the progress towards complete satisfaction of performance obligations at the reporting period.
Revenue is measured at the amount of consideration which the Company expects to be entitled to in exchange for transferring distinct goods or services to a customer as specified in the contract, excluding amounts collected on behalf of third parties (for example taxes and duties collected on behalf of the government). Consideration is generally due upon satisfaction of performance obligations and a receivable is recognised when it becomes unconditional. Generally, the credit period varies between 0-60 days from the shipment or delivery of goods or services as the case may be. The Company provides volume rebates to certain customers once the quantity of products purchased during the period exceeds a threshold specified and also accrues discounts to certain customers based on customary business practices which is derived on the basis of crude price volatility and various market demand - supply situations. Consideration are determined based on its most likely amount. Generally, sales of petroleum products contain provisional pricing features where revenue is initially recognised based on provisional price.
Difference between final settlement price and provisional price is recognised subsequently. The Company does not adjust short-term advances received from the customer for the effects of significant financing component if it is expected at the contract inception that the promised good or service will be transferred to the customer within a period of one year.
A receivable represents the Company''s right to an amount of consideration that is unconditional.
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration or is due from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier).
Contract liabilities are recognised as revenue when the Company performs under the contract.
Interest Income from a Financial Assets is recognised using effective interest rate method.
Dividend Income is recognised when the Company''s right to receive the amount has been established.
(q) Financial Instruments
A. Initial Recognition and Measurement
All Financial Assets are initially recognised at fair value. Transaction costs that are directly attributable to the acquisition or issue of Financial Assets, which are not at Fair Value Through Profit or Loss, are adjusted to the fair
value on initial recognition. Purchase and sale of Financial Assets are recognised using trade date accounting.
a) Financial Assets measured at Amortised Cost (AC)
A Financial Asset is measured at Amortised Cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the Financial Asset give rise to cash flows on specified dates that represent solely payments of principal and interest on the principal amount outstanding.
b) Financial Assets measured at Fair Value Through Other Comprehensive Income (FVTOCI)
A Financial Asset is measured at FVTOCI if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling Financial Assets and the contractual terms of the Financial Asset give rise on specified dates to cash flows that represents solely payments of principal and interest on the principal amount outstanding.
c) Financial Assets measured at Fair Value Through Profit or Loss (FVTPL)
A Financial Asset which is not classified in any of the above categories are measured at FVTPL. Financial assets are reclassified subsequent to their recognition, if the Company changes its business model for managing those financial assets. Changes in business model are made and applied prospectively from the reclassification date which is the first day of immediately next reporting period following the changes in business model in accordance with principles laid down under Ind AS 109 -Financial Instruments.
The Company has accounted for its investments in Subsidiaries, associates and joint venture at cost less impairment loss (if any). The investments in preference shares with the right of surplus assets which are in nature of equity in accordance with Ind AS 32 are treated as separate category of investment and measured at FVTOCI.
All other equity investments are measured at fair value, with value changes recognised in Statement of Profit and Loss, except for those equity investments for which the Company has elected to present the value changes in ''Other Comprehensive Income''. However, dividend on such equity investments are recognised in Statement of Profit and loss when the Company''s right to receive payment is established.
In accordance with Ind AS 109, the Company uses ''Expected Credit Loss'' (ECL) model, for evaluating impairment of Financial Assets other than those measured at Fair Value Through Profit and Loss (FVTPL).
Expected Credit Losses are measured through a loss allowance at an amount equal to:
⢠The 12-months expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date); or
⢠Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument).
For Trade Receivables the Company applies ''simplified approach'' which requires expected lifetime losses to be recognised from initial recognition of the receivables.
The Company uses historical default rates to determine impairment loss on the portfolio of trade receivables. At every reporting date these historical default rates are reviewed and changes in the forward-looking estimates are analysed.
For other assets, the Company uses 12 month ECL to provide for impairment loss where there is no significant increase in credit risk.
If there is significant increase in credit risk full lifetime ECL is used.
A. Initial Recognition and Measurement
All Financial Liabilities are recognised at fair value and in case of borrowings, net of directly attributable cost. Fees of recurring nature are directly recognised in the Statement of Profit and Loss as finance cost.
Financial Liabilities are carried at amortised cost using the effective interest method. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
The Company uses various derivative financial instruments such as interest rate swaps, currency swaps, forwards & options and commodity contracts to mitigate the risk of changes in interest rates, exchange rates and commodity prices. At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are also subsequently measured at fair value.
Derivatives are carried as Financial Assets when the fair value is positive and as Financial Liabilities when the fair value is negative. Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss, except for the effective portion of cash flow hedge which is recognised in Other Comprehensive Income and later to Statement of Profit and Loss when the hedged item affects profit or loss or is treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a Non-Financial Assets or NonFinancial liability.
Hedges that meet the criteria for hedge accounting are accounted for as follows:
The Company designates derivative contracts or non-derivative Financial Assets/ Liabilities as hedging instruments to mitigate the risk of movement in interest rates and foreign exchange rates for foreign exchange exposure on highly probable future cash flows attributable to a recognised asset or liability or forecast cash transactions.
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in the cash flow hedging reserve being part of Other Comprehensive Income. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold or terminated or exercised, the cumulative gain or loss on the hedging instrument recognised in cash flow hedging reserve till the period
the hedge was effective remains in cash flow hedging reserve until the underlying transaction occurs. The cumulative gain or loss previously recognised in the cash flow hedging reserve is transferred to the Statement of Profit and Loss upon the occurrence of the underlying transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified in the Statement of Profit and Loss.
The Company designates derivative contracts or non-derivative Financial Assets/Liabilities as hedging instruments to mitigate the risk of change in fair value of hedged item due to movement in interest rates, foreign exchange rates and commodity prices.
Changes in the fair value of hedging instruments and hedged items that are designated and qualify as fair value hedges are recorded in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to Statement of Profit and Loss over the period of maturity.
The Company derecognises a Financial Asset when the contractual rights to the cash flows from the Financial Asset expire or it transfers the Financial Asset and the transfer qualifies for derecognition under Ind AS 109. A Financial liability (or a part of a Financial liability) is derecognised from the Company''s Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
Financial Assets and Financial Liabilities are offset and the net amount is presented in the balance sheet when, and only when, the Company has a legally enforceable right to set off the amount and it intends, either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and sale is considered highly probable.
A sale is considered as highly probable when decision has been made to sell, assets are available for immediate sale in its present condition, assets are being actively marketed and sale has been agreed or is expected to be concluded within 12 months of the date of classification.
Non-current assets held for sale are neither depreciated nor amortised.
Assets and liabilities classified as held for sale are measured at the lower of their carrying amount and fair value less cost of disposal and are presented separately in the Balance Sheet.
The Company has adopted Successful Efforts Method (SEM) of accounting for its Oil and Gas activities. The policy of recognition of exploration and evaluation expenditure is considered in line with the principle of SEM. Seismic costs, geological and geophysical studies, petroleum exploration license fees and general and administration costs directly attributable to exploration and evaluation activities are expensed off. The costs incurred on acquisition of interest in oil and gas blocks and on exploration and evaluation other than those which are expensed off are accounted for as Intangible Assets Under Development. All development costs incurred in respect of proved reserves are also capitalised under Intangible Assets Under Development. Once a well is ready to commence commercial production, the costs accumulated in Intangible Assets Under Development are classified as Intangible Assets corresponding to proved developed oil and gas reserves. The exploration and evaluation expenditure which does not result in discovery of proved oil and gas reserves and all cost pertaining to production are charged to the Statement of Profit and Loss.
The Company uses technical estimation of reserves as per the Petroleum Resources Management System guidelines 2011 and standard geological and reservoir engineering methods. The reserve review and evaluation is carried out annually.
Oil and Gas Joint Ventures are in the nature of joint operations. Accordingly, assets and liabilities as well as income and expenditure are accounted on the basis of available information on a line-by-line basis with similar items in the Company''s Financial Statements, according to the participating interest of the Company.
Basic earnings per share is calculated by dividing the net profit after tax by the weighted average number of equity shares outstanding during the year adjusted for bonus element in equity share. Diluted earnings per share adjusts the figures used in determination of basic earnings per share to take into account the conversion of all dilutive potential
equity shares. Dilutive potential equity shares are deemed converted as at the beginning of the period unless issued at a later date.
C. Critical Accounting Judgements and Key Sources of Estimation Uncertainty
The preparation of the Company''s Financial Statements requires management to make judgement, estimates and assumptions that affect the reported amount of revenue, expenses, assets and liabilities and the accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in next financial years.
(A) Estimation of Oil and Gas Reserves
The determination of the Company''s estimated oil and natural gas reserves requires significant judgements and estimates to be applied and these are regularly reviewed and updated. Factors such as the availability of geological and engineering data, reservoir performance data, acquisition and divestment activity, drilling of new wells, and commodity prices all impact on the determination of the Company''s estimates of its oil and natural gas reserves. The Company bases it''s proved reserves estimates on the requirement of reasonable certainty with rigorous technical and commercial assessments based on conventional industry practice and regulatory requirements.
Estimates of oil and natural gas reserves are used to calculate depletion charges for the Company''s oil and gas properties. The impact of changes in estimated proved reserves is dealt with prospectively by amortising the remaining carrying value of the asset over the expected future production. Oil and natural gas reserves also have a direct impact on the assessment of the recoverability of asset carrying values reported in the Financial Statements.
Details on proved reserves and production both on product and geographical basis are provided in Note 35.1.
(B) Decommissioning Liabilities
The liability for decommissioning costs is recognised when the Company has an obligation to perform site restoration activity. The recognition and measurement of decommissioning provisions involves the use of estimates and assumptions. These include; the timing of abandonment of well and related facilities which would depend upon the ultimate life of the field, expected utilisation of assets by other fields, the scope of abandonment activity and pre-tax rate applied for discounting.
Estimates are involved in determining the cost attributable to bringing the assets to the location and condition necessary for it to be capable of operating in the manner intended by the management. Property, Plant and Equipment/Intangible Assets are depreciated/ amortised over their estimated useful life, after taking into account estimated residual value. Management reviews the estimated useful life and residual values of the assets annually in order to determine the amount of depreciation/ amortisation to be recorded during any reporting period. The useful life and residual values are based on the Company''s historical experience with similar assets and take into account anticipated technological and future risks. The depreciation/ amortisation for future periods is revised if there are significant changes from previous estimates.
Judgments are required in assessing the recoverability of overdue trade receivables and determining whether a provision against those receivables is required. Factors considered include the credit rating of the counterparty, the amount and timing of anticipated future payments and any possible actions that can be taken to mitigate the risk of non-payment.
The timing of recognition and quantification of the liability (including litigations) requires the application of judgement to existing facts and circumstances, which can be subject to change. The carrying amounts of provisions and liabilities are reviewed regularly and revised to take account of changing facts and circumstances.
The impairment provisions for Financial Assets are based on assumptions about risk of default and expected cash loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Company''s past history, existing market conditions as well as forwardlooking estimates at the end of each reporting period.
In case of non-financial assets, assessment of impairment indicators involves consideration of future risks. Further, the company estimates asset''s recoverable amount, which is higher of an asset''s or Cash Generating Units (CGU''s) fair value less costs of disposal and its value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account, if no such transactions can be identified, an appropriate valuation model is used.
Deferred tax assets and liabilities are recognised for deductible temporary differences and unused tax losses for which there is probability of utilisation against the future taxable profit. The Company uses judgement to determine the amount of deferred tax that can be recognised, based upon the likely timing and the level of future taxable profits and business developments.
For estimates relating to fair value of financial instruments refer note 38 of financial statements.
The continuance of corona virus (COVID-19) pandemic globally and in India is causing significant disturbance and slowdown of economic activity. The Company''s operations and revenue during the period were impacted due to COVID-19. The Company has taken into account the possible impact of COVID-19 in preparation of financial statements, including its assessment of recoverable value of its assets based on internal and external information upto the date of approval of these financial statements and current indicators of future economic conditions.
D. Standards Issued but not Effective
On March 23, 2022, the Ministry of Corporate Affairs (MCA) has notified Companies (Indian Accounting Standards) Amendment Rules, 2022. This notification has resulted into amendments in the following existing accounting standards which are applicable to company from April 1, 2022.
i. Ind AS 101 - First time adoption of Ind AS
ii. Ind AS 103 - Business Combination
iii. Ind AS 109 - Financial Instrument
iv. Ind AS 16 - Property, Plant and Equipment
v. Ind AS 37 -Provisions, Contingent Liabilities and Contingent Assets
vi. Ind AS 41 - Agriculture
Application of above standards are not expected to have any significant impact on the company''s financial statements
Mar 31, 2021
B. Significant Accounting Policies:
B.1 Basis of Preparation and Presentation
The Financial Statements have been prepared on the historical cost basis except for following assets and liabilities which have been measured at fair value amount:
i) Certain Financial Assets and Liabilities (including derivative instruments),
ii) Defined Benefit Plans - Plan Assets and
iii) Equity settled Share Based Payments
The Financial Statements of the Company have been prepared to comply with the Indian Accounting standards (''Ind AS''), including the rules notified under the relevant provisions of the Companies Act, 2013, amended from time to time.
The Company''s Financial Statements are presented in Indian Rupees (''), which is also its functional currency and all values are rounded to the nearest crore (''00,00,000), except when otherwise indicated.
B.2 Summary of Significant Accounting Policies
(a) Current and Non-Current Classification
The Company presents assets and liabilities in the Balance Sheet based on Current/ NonCurrent classification.
An asset is treated as Current when it is -
- Expected to be realised or intended to be sold or consumed in normal operating cycle;
- Held primarily for the purpose of trading;
- Expected to be realised within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle;
- It is held primarily for the purpose of trading;
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the
settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
(b) Property, Plant and Equipment
Property, Plant and Equipment are stated at cost, net of recoverable taxes, trade discount and rebates less accumulated depreciation and impairment losses, if any. Such cost includes purchase price, borrowing cost and any cost directly attributable to bringing the assets to its working condition for its intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the assets. In case of land the Company has availed fair value as deemed cost on the date of transition to Ind AS.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.
Property, Plant and Equipment which are significant to the total cost of that item of Property, Plant and Equipment and having different useful life are accounted separately.
Other Indirect Expenses incurred relating to project, net of income earned during the project development stage prior to its intended use, are considered as pre-operative expenses and disclosed under Capital Work-in-Progress.
Depreciation on Property, Plant and Equipment is provided using written down value method on depreciable amount except in case of certain assets of Oil to Chemicals segment which are depreciated using straight line method. Depreciation is provided based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 except in respect of the following assets, where useful life is different than those prescribed in Schedule II;
Depreciation |
|
Fixed Bed Catalyst (useful life: 2 years or more) Fixed Bed Catalyst (useful life: up to 2 years) Plant and Machinery (useful life: 25 to 50 years) |
Over its useful life as technically assessed 100% depreciated in the year of addition Over its useful life as technically assessed |
The residual values, useful lives and methods of depreciation of Property, Plant and Equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Gains or losses arising from derecognition of a Property, Plant and Equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.
(c) Leases
The Company, as a lessee, recognises a right-of-use asset and a lease liability for its leasing arrangements, if the contract conveys the right to control the use of an identified asset.
The contract conveys the right to control the use of an identified asset, if it involves the use of an identified asset and the Company has substantially all of the economic benefits from use of the asset and has right to direct the use of the identified asset. The cost of the right-of-use asset shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs incurred. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. The right-of-use assets is depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use asset.
The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses incremental borrowing rate.
For short-term and low value leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the lease term.
(d) Intangible Assets
Intangible Assets are stated at cost of acquisition net of recoverable taxes, trade discount and rebates less accumulated amortisation/depletion and impairment losses, if any. Such cost includes purchase price, borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the Intangible Assets.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.
Other Indirect Expenses incurred relating to project, net of income earned during the project development stage prior to its intended use, are considered as pre-operative expenses and disclosed under Intangible Assets Under Development.
Gains or losses arising from derecognition of an Intangible Asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised. The Company''s intangible assets comprises assets with finite useful life which are amortised on a straight-line basis over the period of their expected useful life.
(e) Research and Development Expenditure
Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss as and when incurred.
Development costs are capitalised as an intangible asset if it can be demonstrated that the project is expected to generate future economic benefits, it is probable that those future economic benefits will flow to the entity and the costs of the asset can be measured reliably, else it is charged to the Statement of Profit and Loss.
Cash and cash equivalents comprise of cash on hand, cash at banks, short-term deposits and 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.
(g) Finance Costs
Borrowing costs include exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are charged to the Statement of Profit and Loss for the period for which they are incurred.
(h) Inventories
Items of inventories are measured at lower of cost and net realisable value after providing for obsolescence, if any, except in case of by-products which are valued at net realisable value. Cost of inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overheads net of recoverable taxes incurred in bringing them to their respective present location and condition.
Cost of finished goods, work-in-progress, raw materials, chemicals, stores and spares, packing materials, trading and other products are determined on weighted average basis.
(i) Impairment of Non-Financial Assets - Property, Plant and Equipment and Intangible Assets
The Company assesses at each reporting date as to whether there is any indication that any
Property, Plant and Equipment and Intangible Assets or group of Assets, called Cash Generating Units (CGU) may be impaired. If any such indication exists, the recoverable amount of an asset or CGU is estimated to determine the extent of impairment, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the CGU to which the asset belongs.
An impairment loss is recognised in the Statement of Profit and Loss to the extent, asset''s carrying amount exceeds its recoverable amount. The recoverable amount is higher of an asset''s fair value less cost of disposal and value in use. Value in use is based on the estimated future cash flows, discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and risk specific to the assets.
The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Provision for Decommissioning Liability
The Company records a provision for decommissioning costs towards site restoration activity. Decommissioning costs are provided at the present value of future expenditure using a current pre-tax rate expected to be incurred to fulfil decommissioning obligations and are recognised as part of the cost of the underlying assets. Any change in the present value of the expenditure, other than unwinding of discount on the provision, is reflected as adjustment to the provision and the corresponding asset. The change in the provision due to the unwinding of discount is recognised in the Statement of Profit and Loss.
Mar 31, 2019
A. SIGNIFICANT ACCOUNTING POLICIES
A.1 BASIS OF PREPARATION AND PRESENTATION
The Financial Statements have been prepared on the historical cost basis except for following assets and liabilities which have been measured at fair value amount:
i) Certain Financial Assets and Liabilities (including derivative instruments),
ii) Defined Benefit Plans - Plan Assets and
iii) Equity settled Share Based Payments
The Financial Statements of the Company have been prepared to comply with the Indian Accounting standards (âInd ASâ), including the rules notified under the relevant provisions of the Companies Act, 2013.
With effect from 1st April 2018, Ind AS 115 - âRevenue from Contracts with Customersâ (Ind AS 115) supersedes Ind AS 18 - âRevenueâ and related Appendices.
The Company has adopted Ind AS 115 using the modified retrospective approach. The application of Ind AS 115 did not have any material impact on recognition and measurement principles. However, it results in additional presentation and disclosure requirements for the company.
The Companyâs Financial Statements are presented in Indian Rupees (Rs.), which is also its functional currency and all values are rounded to the nearest crore (Rs. 00,00,000), except when otherwise indicated.
B.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Current and Non-Current Classification
The Company presents assets and liabilities in the Balance Sheet based on Current/ Non-Current classification.
An asset is treated as Current when it is -
- Expected to be realised or intended to be sold or consumed in normal operating cycle;
- Held primarily for the purpose of trading;
- Expected to be realised within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle;
- It is held primarily for the purpose of trading;
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
(b) Property, Plant and Equipment
Property, Plant and Equipment are stated at cost, net of recoverable taxes, trade discount and rebates less accumulated depreciation and impairment losses, if any. Such cost includes purchase price, borrowing cost and any cost directly attributable to bringing the assets to its working condition for its intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the assets. In case of land the Company has availed fair value as deemed cost on the date of transition to Ind AS.
Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.
Property, Plant and Equipment which are significant to the total cost of that item of Property, Plant and Equipment and having different useful life are accounted separately.
Other Indirect Expenses incurred relating to project, net of income earned during the project development stage prior to its intended use, are considered as pre-operative expenses and disclosed under Capital Work-in-Progress.
Depreciation on Property, Plant and Equipment is provided using written down value method on depreciable amount except in case of certain assets from Refining segment and Petrochemical segment & SEZ units / developer which are depreciated using straight line method. Depreciation is provided based on useful life of the assets as prescribed in Schedule
II to the Companies Act, 2013 except in respect of the following assets, where useful life is different than those prescribed in Schedule II;
The residual values, useful lives and methods of depreciation of Property, Plant and Equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Gains or losses arising from derecognition of a Property, Plant and Equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.
(c) Leases
Leases are classified as finance leases whenever the terms of the lease, transfers substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating lease.
Leased Assets: Assets held under finance leases are initially recognised as Assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in Statement of Profit and Loss, unless they are directly attributable to qualifying assets, in which case they are capitalised. Contingent rentals are recognised as expenses in the periods in which they are incurred.
A leased asset is depreciated over the useful life of the asset ranging from 18 years to 99 years. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are recognised as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term except where another systematic basis is more representative of time pattern in which economic benefits from the leased assets are consumed.
(d) Intangible Assets
Intangible Assets are stated at cost of acquisition net of recoverable taxes, trade discount and rebates less accumulated amortisation / depletion and impairment losses, if any. Such cost includes purchase price, borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the Intangible Assets.
Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.
Other Indirect Expenses incurred relating to project, net of income earned during the project development stage prior to its intended use, are considered as pre-operative expenses and disclosed under Intangible Assets Under Development.
Gains or losses arising from derecognition of an Intangible Asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.
The companyâs intangible assets comprises assets with finite useful life which are amortised on a straight-line basis over the period of their expected useful life.
A summary of amortisation / depletion policies applied to the Companyâs Intangible Assets to the extent of depreciable amount is as follows:
The amortisation period and the amortisation method for Intangible Assets with a finite useful life are reviewed at each reporting date.
(e) Research and Development Expenditure
Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss.
Development costs are capitalised as an intangible asset if it can be demonstrated that the project is expected to generate future economic benefits, it is probable that those future economic benefits will flow to the entity and the costs of the asset can be measured reliably, else it is charged to the Statement of Profit and Loss.
(f) Cash and Cash Equivalents
Cash and cash equivalents comprise of cash on hand, cash at banks, short-term deposits and 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.
(g) Finance Costs
Borrowing costs include exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are charged to the Statement of Profit and Loss for the period for which they are incurred.
(h ) Inventories
Items of inventories are measured at lower of cost and net realisable value after providing for obsolescence, if any, except in case of by-products which are valued at net realisable value. Cost of inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overheads net of recoverable taxes incurred in bringing them to their respective present location and condition.
Cost of finished goods, work-in-progress, raw materials, chemicals, stores and spares, packing materials, trading and other products are determined on weighted average basis.
(i) Impairment of Non-Financial Assets -
Property, Plant and Equipment and Intangible Assets
The Company assesses at each reporting date as to whether there is any indication that any Property, Plant and Equipment and Intangible Assets or group of Assets, called Cash Generating Units (CGU) may be impaired. If any such indication exists, the recoverable amount of an asset or CGU is estimated to determine the extent of impairment, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the CGU to which the asset belongs.
An impairment loss is recognised in the Statement of Profit and Loss to the extent, assetâs carrying amount exceeds its recoverable amount. The recoverable amount is higher of an assetâs fair value less cost of disposal and value in use. Value in use is based on the estimated future cash flows, discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and risk specific to the assets.
The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
(j) Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Provision for Decommissioning Liability
The Company records a provision for decommissioning costs towards site restoration activity. Decommissioning costs are provided at the present value of future expenditure using a current pre-tax rate expected to be incurred to fulfil decommissioning obligations and are recognised as part of the cost of the underlying assets. Any change in the present value of the expenditure, other than unwinding of discount on the provision, is reflected as adjustment to the provision and the corresponding asset. The change in the provision due to the unwinding of discount is recognised in the Statement of Profit and Loss.
(k) Employee Benefits Expense
Short-Term Employee Benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised as an expense during the period when the employees render the services.
Post-Employment Benefits
Defined Contribution Plans
The Company recognises contribution payable to the provident fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognised as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognised as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
Defined Benefit Plans
The Company pays gratuity to the employees who have completed five years of service with the Company at the time of resignation/superannuation. The gratuity is paid @15 days salary for every completed year of service as per the Payment of Gratuity Act, 1972.
The gratuity liability amount is contributed to the approved gratuity fund formed exclusively for gratuity payment to the employees. The gratuity fund has been approved by respective Income Tax authorities.
The liability in respect of gratuity and other post-employment benefits is calculated using the Projected Unit Credit Method and spread over the period during which the benefit is expected to be derived from employeesâ services.
Re-measurement of Defined Benefit Plans in respect of post-employment are charged to the Other Comprehensive Income.
Employee Separation Costs The Company recognises the employee separation cost when the scheme is announced and the Company is demonstrably committed to it.
(l) Tax Expenses
The tax expenses for the period comprises of current tax and deferred income tax. Tax is recognised in Statement of Profit and Loss, except to the extent that it relates to items recognised in the Other Comprehensive Income or in Equity. In which case, the tax is also recognised in Other Comprehensive Income or Equity.
i. Current Tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the Income Tax authorities, based on tax rates and laws that are enacted at the Balance sheet date.
ii. Deferred Tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Financial Statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax assets are recognised to the extent it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax losses can be utilised
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The carrying amount of Deferred tax liabilities and assets are reviewed at the end of each reporting period.
(m) Share Based Payments
Equity-settled share based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share based payments transactions are set out in Note 27.3.
The fair value determined at the grant date of the equity-settled share based payments is expensed on a straight line basis over the vesting period, based on the Companyâs estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in Statement of Profit and Loss such that the cumulative expenses reflects the revised estimate, with a corresponding adjustment to the Share Based Payments Reserve.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
(n) Foreign Currencies Transactions and Translation
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in Statement of Profit and Loss except to the extent of exchange differences which are regarded as an adjustment to interest costs on foreign currency borrowings that are directly attributable to the acquisition or construction of qualifying assets which are capitalised as cost of assets. Additionally, exchange gains or losses on foreign currency borrowings taken prior to April 1, 2016 which are related to the acquisition or construction of qualifying assets are adjusted in the carrying cost of such assets.
Non-monetary items that are measured in terms of historical cost in a foreign currency are recorded using the exchange rates at the date of the transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e. translation differences on items whose fair value gain or loss is recognised in Other Comprehensive Income or Statement of Profit and Loss are also recognised in Other Comprehensive Income or Statement of Profit and Loss, respectively).
In case of an asset, expense or income where a non-monetary advance is paid/received, the date of transaction is the date on which the advance was initially recognised. If there were multiple payments or receipts in advance, multiple dates of transactions are determined for each payment or receipt of advance consideration.
(o) Revenue Recognition
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration entitled in exchange for those goods or services. The Company is generally the principal as it typically controls the goods or services before transferring them to the customer.
Generally, control is transferred upon shipment of goods to the customer or when the goods is made available to the customer, provided transfer of title to the customer occurs and the Company has not retained any significant risks of ownership or future obligations with respect to the goods shipped.
Revenue from rendering of services is recognised over time by measuring the progress towards complete satisfaction of performance obligations at the reporting period.
Revenue is measured at the amount of consideration which the company expects to be entitled to in exchange for transferring distinct goods or services to a customer as specified in the contract, excluding amounts collected on behalf of third parties (for example taxes and duties collected on behalf of the government). Consideration is generally due upon satisfaction of performance obligations and a receivable is recognised when the it becomes unconditional. Generally, the credit period varies between 0-60 days from the shipment or delivery of goods or services as the case may be.
The Company provides volume rebates to certain customers once the quantity of products purchased during the period exceeds a threshold specified and also accrues discounts to certain customers based on customary business practices which is derived on the basis of crude price volatility and various market demand - supply situations. Consideration are determined based on its most likely amount.
Generally, sales of petroleum products contain provisional pricing features where revenue is initially recognised based on provisional price. Difference between final settlement price and provisional price is recognised subsequently.
The Company does not adjust short-term advances received from the customer for the effects of significant financing component if it is expected at the contract inception that the promised good or service will be transferred to the customer within a period of one year.
Contract Balances:
Trade Receivables
A receivable represents the Companyâs right to an amount of consideration that is unconditional.
Contract Liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs under the contract.
Interest Income
Interest Income from a Financial Assets is recognised using effective interest rate method.
Dividend Income
Dividend Income is recognised when the Companyâs right to receive the amount has been established.
(p) Financial Instruments
i. Financial Assets
A. Initial Recognition and Measurement
All Financial Assets are initially recognised at fair value. Transaction costs that are directly attributable to the acquisition or issue of Financial Assets, which are not at Fair Value Through Profit or Loss, are adjusted to the fair value on initial recognition. Purchase and sale of Financial Assets are recognised using trade date accounting.
B. Subsequent Measurement
a) Financial Assets measured at Amortised Cost (AC)
A Financial Asset is measured at Amortised Cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the Financial Asset give rise on specified dates to cash flows that represent solely payments of principal and interest on the principal amount outstanding.
b) Financial Assets measured at Fair Value Through Other Comprehensive Income (FVTOCI)
A Financial Asset is measured at FVTOCI if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling Financial Assets and the contractual terms of the Financial Asset give rise on specified dates to cash flows that represents solely payments of principal and interest on the principal amount outstanding.
c) Financial Assets measured at Fair Value Through Profit or Loss (FVTPL)
A Financial Asset which is not classified in any of the above categories are measured at FVTPL.
Financial assets are reclassified subsequent to their recognition, if the Company changes its business model for managing those financial assets. Changes in business model are made and applied prospectively from the reclassification date which is the first day of immediately next reporting period following the changes in business model in accordance with principles laid down under Ind AS 109 -Financial Instruments.
C. Investment in Subsidiaries, Associates and Joint Ventures
The Company has accounted for its investments in Subsidiaries, associates and joint venture at cost less impairment loss (if any).
The investments in preference shares with the right of surplus assets which are in nature equity in accordance with Ind AS 32 are treated as separate category of investment and measured as at FVTOCI.
D. Other Equity Investments
All other equity investments are measured at fair value, with value changes recognised in Statement of Profit and Loss, except for those equity investments for which the Company has elected to present the value changes in âOther Comprehensive Incomeâ. However, dividend on such equity investments are recognised in Statement of Profit and loss when the companyâs right to receive payment is established.
E. Impairment of Financial Assets
In accordance with Ind AS 109, the Company uses âExpected Credit Lossâ (ECL) model, for evaluating impairment of Financial Assets other than those measured at Fair Value Through Profit and Loss (FVTPL).
Expected Credit Losses are measured through a loss allowance at an amount equal to:
- The 12-months expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date); or
- Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument)
For Trade Receivables the Company applies âsimplified approachâ which requires expected lifetime losses to be recognised from initial recognition of the receivables. The Company uses historical default rates to determine impairment loss on the portfolio of trade receivables. At every reporting date these historical default rates are reviewed and changes in the forward-looking estimates are analysed.
For other assets, the Company uses 12 month ECL to provide for impairment loss where there is no significant increase in credit risk. If there is significant increase in credit risk full lifetime ECL is used.
ii. Financial Liabilities
A. Initial Recognition and Measurement
All Financial Liabilities are recognised at fair value and in case of borrowings, net of directly attributable cost. Fees of recurring nature are directly recognised in the Statement of Profit and Loss as finance cost.
B. Subsequent Measurement
Financial Liabilities are carried at amortised cost using the effective interest method.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
iii. Derivative Financial Instruments and Hedge Accounting
The Company uses various derivative financial instruments such as interest rate swaps, currency swaps, forwards & options and commodity contracts to mitigate the risk of changes in interest rates, exchange rates and commodity prices. At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge.
Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are also subsequently measured at fair value. Derivatives are carried as Financial Assets when the fair value is positive and as Financial Liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss, except for the effective portion of cash flow hedge which is recognised in Other Comprehensive Income and later to Statement of Profit and Loss when the hedged item affects profit or loss or is treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a Non-Financial Assets or Non-Financial liability.
Hedges that meet the criteria for hedge accounting are accounted for as follows:
A. Cash Flow Hedge
The Company designates derivative contracts or non-derivative Financial Assets / Liabilities as hedging instruments to mitigate the risk of movement in interest rates and foreign exchange rates for foreign exchange exposure on highly probable future cash flows attributable to a recognised asset or liability or forecast cash transactions.
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in the cash flow hedging reserve being part of Other Comprehensive Income. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively.
If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognised in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the underlying transaction occurs.
The cumulative gain or loss previously recognised in the cash flow hedging reserve is transferred to the Statement of Profit and Loss upon the occurrence of the underlying transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified in the Statement of Profit and Loss.
B. Fair Value Hedge
The Company designates derivative contracts or non-derivative Financial Assets / Liabilities as hedging instruments to mitigate the risk of change in fair value of hedged item due to movement in interest rates, foreign exchange rates and commodity prices.
Changes in the fair value of hedging instruments and hedged items that are designated and qualify as fair value hedges are recorded in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to Statement of Profit and Loss over the period of maturity.
iv. Derecognition of Financial Instruments
The Company derecognises a Financial Asset when the contractual rights to the cash flows from the Financial Asset expire or it transfers the Financial Asset and the transfer qualifies for derecognition under Ind AS 109. A Financial liability (or a part of a Financial liability) is derecognised from the Companyâs Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
v. Offsetting
Financial Assets and Financial Liabilities are offset and the net amount is presented in the balance sheet when, and only when, the Company has a legally enforceable right to set off the amount and it intends, either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
(q) Non-current Assets Held for Sale
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and sale is considered highly probable.
A sale is considered as highly probable when decision has been made to sell, assets are available for immediate sale in its present condition, assets are being actively marketed and sale has been agreed or is expected to be concluded within 12 months of the date of classification.
Assets and liabilities classified as held for sale are measured at the lower of their carrying amount and fair value less cost of sell and are presented separately in the Balance Sheet.
(r) Accounting for Oil and Gas Activity
The Company has adopted Successful Efforts Method (SEM) of accounting for its Oil and Gas activities. The policy of recognition of exploration and evaluation expenditure is considered in line with the principle of SEM. Seismic costs, geological and geophysical studies, petroleum exploration license fees and general and administration costs directly attributable to exploration and evaluation activities are expensed off. The costs incurred on acquisition of interest in oil and gas blocks and on exploration and evaluation other than those which are expensed off are accounted for as Intangible Assets Under Development. All development costs incurred in respect of proved reserves are also capitalised under Intangible Assets Under Development. Once a well is ready to commence commercial production, the costs accumulated in Intangible Assets Under Development are classified as Intangible Assets corresponding to proved developed oil and gas reserves. The exploration and evaluation expenditure which does not result in discovery of proved oil and gas reserves and all cost pertaining to production are charged to the Statement of Profit and Loss.
The Company used technical estimation of reserves as per the Petroleum Resources Management System guidelines 2011 and standard geological and reservoir engineering methods. The reserve review and evaluation is carried out annually.
Oil and Gas Joint Ventures are in the nature of joint operations. Accordingly, assets and liabilities as well as income and expenditure are accounted on the basis of available information on a line-by-line basis with similar items in the Companyâs Financial Statements, according to the participating interest of the Company.
(s) Earnings Per Share
Basic earnings per share is calculated by dividing the net profit after tax by the weighted average number of equity shares outstanding during the year adjusted for bonus element in equity share. Diluted earnings per share adjusts the figures used in determination of basic earnings per share to take into account the conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed converted as at the beginning of the period unless issued at a later date.
C. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of the Companyâs Financial Statements requires management to make judgement, estimates and assumptions that affect the reported amount of revenue, expenses, assets and liabilities and the accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in next financial years.
(A) ESTIMATION OF OIL AND GAS RESERVES
The determination of the Companyâs estimated oil and natural gas reserves requires significant judgements and estimates to be applied and these are regularly reviewed and updated. Factors such as the availability of geological and engineering data, reservoir performance data, acquisition and divestment activity, drilling of new wells, and commodity prices all impact on the determination of the Companyâs estimates of its oil and natural gas reserves. The Company bases itâs proved reserves estimates on the requirement of reasonable certainty with rigorous technical and commercial assessments based on conventional industry practice and regulatory requirements.
Estimates of oil and natural gas reserves are used to calculate depletion charges for the Companyâs oil and gas properties. The impact of changes in estimated proved reserves is dealt with prospectively by amortising the remaining carrying value of the asset over the expected future production. Oil and natural gas reserves also have a direct impact on the assessment of the recoverability of asset carrying values reported in the Financial Statements.
Details on proved reserves and production both on product and geographical basis are provided in Note 32.2.
(B) DECOMMISSIONING LIABILITIES
The liability for decommissioning costs are recognised when the Company has an obligation to perform site restoration activity. The recognition and measurement of decommissioning provisions involves the use of estimates and assumptions. These include; the timing of abandonment of well and related facilities which would depend upon the ultimate life of the field, expected utilisation of assets by other fields, the scope of abandonment activity and pre-tax rate applied for discounting.
(C) DEPRECIATION / AMORTISATION AND USEFUL LIFE OF PROPERTY PLANT AND EQUIPMENT / INTANGIBLE ASSETS
Property, Plant and Equipment / Intangible Assets are depreciated / amortised over their estimated useful life, after taking into account estimated residual value. Management reviews the estimated useful life and residual values of the assets annually in order to determine the amount of depreciation / amortisation to be recorded during any reporting period. The useful life and residual values are based on the Companyâs historical experience with similar assets and take into account anticipated technological changes. The depreciation / amortisation for future periods is revised if there are significant changes from previous estimates.
(D) RECOVERABILITY OF TRADE RECEIVABLES
Judgements are required in assessing the recoverability of overdue trade receivables and determining whether a provision against those receivables is required.
Factors considered include the credit rating of the counterparty, the amount and timing of anticipated future payments and any possible actions that can be taken to mitigate the risk of non-payment.
(E) PROVISIONS
The timing of recognition and quantification of the liability requires the application of judgement to existing facts and circumstances, which can be subject to change. The carrying amounts of provisions and liabilities are reviewed regularly and revised to take account of changing facts and circumstances.
(F ) IMPAIRMENT OF FINANCIAL AND NON-FINANCIAL ASSETS
The impairment provisions for Financial Assets are based on assumptions about risk of default and expected cash loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Companyâs past history, existing market conditions as well as forward-looking estimates at the end of each reporting period.
In case of non-financial assets company estimates assetâs recoverable amount, which is higher of an assetâs or Cash Generating Units (CGUâs) fair value less costs of disposal and its value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account, if no such transactions can be identified, an appropriate valuation model is used.
(G) RECOGNITION OF DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and liabilities are recognised for deductible temporary differences and unused tax losses for which there is probability of utilisation against the future taxable profit. The Company uses judgement to determine the amount of deferred tax that can be recognised, based upon the likely timing and the level of future taxable profits and business developments.
(H) FAIR VALUE MEASUREMENT
For estimates relating to fair value of financial instruments refer note 35 of financial statements.
D. STANDARDS ISSUED BUT NOT EFFECTIVE
On March 30,2019, the Ministry of Corporate Affairs (MCA) has notified Ind AS 116 - Leases and certain amendment to existing Ind AS. These amendments shall be applicable to the Company from April 01, 2019.
A) ISSUE OF IND AS 116 - LEASES
Ind AS 116 will replace the existing leasing standard i.e. Ind AS 17 and related interpretations. Ind AS 116 introduces a single lessee accounting model and requires lessee to recognise assets and liabilities for all leases with non-cancellable period of more than twelve months except for low value assets. Ind AS 116 substantially carries forward the lessor accounting requirement in Ind AS 17.
B) AMENDMENT TO EXISTING STANDARD
The MCA has also carried out amendments of the following accounting standards
i. Ind AS 101- First time adoption of Indian Accounting Standards
ii. Ind AS 103 - Business Combinations
iii. Ind AS 109 - Financial Instruments
iv. Ind AS 111 - Joint Arrangements
v. Ind AS 12 - Income Taxes
vi. Ind AS 19 - Employee Benefits
vii. Ind AS 23 - Borrowing Costs
viii. Ind AS 28 - Investment in Associates and Joint Ventures
Application of above standards are not expected to have any significant impact on the Companyâs financial statements.
Mar 31, 2018
A. Â Â Â Corporate Information
Reliance Industries Limited ("the Companyâ) is a listed entity incorporated in India. The registered office of the Company is located at 3rd Floor, Maker Chambers IV, 222, Nariman Point, Mumbai 400 021, India.
The Company is engaged in activities spanning across hydrocarbon exploration and production, petroleum refining and marketing, petrochemicals, retail and digital services.
B. Â Â Â Significant Accounting Policies
B.1 Basis of Preparation and Presentation
The Financial Statements have been prepared on the historical cost basis except for following assets and liabilities which have been measured at fair value amount:
i) Â Â Â Certain Financial Assets and Liabilities (including derivative instruments),
ii) Â Â Â Defined Benefit Plans - Plan Assets and
iii) Â Â Â Equity settled Share Based Payments
The Financial Statements of the Company have been prepared to comply with the Indian Accounting standards ('Ind AS'), including the rules notified under the relevant provisions of the Companies Act, 2013.
Company's Financial Statements are presented in Indian Rupees ('), which is also its functional currency and all values are rounded to the nearest crore (' 00,00,000), except when otherwise indicated.
B.2 Summary of Significant Accounting Policies
(a) Property, Plant and Equipment
Property, Plant and Equipment are stated at cost, net of recoverable taxes, trade discount and rebates less accumulated depreciation and impairment losses, if any. Such cost includes purchase price, borrowing cost and any cost directly attributable to bringing the assets to its working condition for its intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the assets. In case of land the Company has availed fair value as deemed cost on the date of transition to Ind AS. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.
Property, Plant and Equipment which are significant to the total cost of that item of Property, Plant and Equipment and having different useful life are accounted separately.
Other Indirect Expenses incurred relating to project, net of income earned during the project development stage prior to its intended use, are considered as pre - operative expenses and disclosed under Capital Work - in - Progress.
Depreciation on Property, Plant and Equipment is provided using written down value method on depreciable amount except in case of certain assets from Refining segment and Petrochemical segment &Â SEZ units / developer which are depreciated using straight line method. Depreciation is provided based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 except in respect of the following assets, where useful life is different than those prescribed in Schedule II;
The residual values, useful lives and methods of depreciation of Property, Plant and Equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Gains or losses arising from derecognition of a Property, Plant and Equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss when the asset is derecognized.
(b) Â Â Â Leases
Leases are classified as finance leases whenever the terms of the lease, transfers substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating lease.
Leased Assets:Â Assets held under finance leases are initially recognized as Assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in Statement of Profit and Loss, unless they are directly attributable to qualifying assets, in which case they are capitalized. Contingent rentals are recognized as expenses in the periods in which they are incurred.
A leased asset is depreciated over the useful life of the asset ranging from 18 years to 99 years. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term except where another systematic basis is more representative of time pattern in which economic benefits from the leased assets are consumed.
(c) Â Â Â Intangible Assets
Intangible Assets are stated at cost of acquisition net of recoverable taxes, trade discount and rebates less accumulated amortization / depletion and impairment losses, if any. Such cost includes purchase price, borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the Intangible Assets.
Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.
Other Indirect Expenses incurred relating to project, net of income earned during the project development stage prior to its intended use, are considered as pre - operative expenses and disclosed under Intangible Assets Under Development.
Gains or losses arising from derecognition of an Intangible Asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss when the asset is derecognized.
The amortization period and the amortization method for Intangible Assets with a finite useful life are reviewed at each reporting date.
(d) Â Â Â Research and Development Expenditure
Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss. Development costs of products are charged to the Statement of Profit and Loss unless a product's technological and commercial feasibility has been established, in which case such expenditure is capitalized.
(e) Â Â Â Finance Cost
Borrowing costs include exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are charged to the Statement of Profit and Loss for the period for which they are incurred.
(f ) Inventories
Items of inventories are measured at lower of cost and net realizable value after providing for obsolescence, if any, except in case of by-products which are valued at net realizable value. Cost of inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overheads net of recoverable taxes incurred in bringing them to their respective present location and condition.
Cost of raw materials, chemicals, stores and spares, packing materials, trading and other products are determined on weighted average basis.
(g) Impairment of Non-Financial Assets - Property, Plant and Equipment and Intangible Assets
The Company assesses at each reporting date as to whether there is any indication that any Property, Plant and Equipment and Intangible Assets or group of Assets, called Cash Generating Units (CGU) may be impaired. If any such indication exists, the recoverable amount of an asset or CGU is estimated to determine the extent of impairment, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the CGU to which the asset belongs.
An impairment loss is recognized in the Statement of Profit and Loss to the extent, asset's carrying amount exceeds its recoverable amount. The recoverable amount is higher of an asset's fair value less cost of disposal and value in use. Value in use is based on the estimated future cash flows, discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and risk specific to the assets.
The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
(h) Â Â Â Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
Provision for Decommissioning Liability
The Company records a provision for decommissioning costs towards site restoration activity. Decommissioning costs are provided at the present value of future expenditure using a current pre-tax rate expected to be incurred to fulfill decommissioning obligations and are recognized as part of the cost of the underlying assets. Any change in the present value of the expenditure, other than unwinding of discount on the provision, is reflected as adjustment to the provision and the corresponding asset. The change in the provision due to the unwinding of discount is recognized in the Statement of Profit and Loss.
(i) Â Â Â Employee Benefits Expense Short Term Employee Benefits
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are recognized as an expense during the period when the employees render the services.
Post-Employment Benefits
Defined Contribution Plans
The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
Defined Benefit Plans
The Company pays gratuity to the employees who have completed five years of service with the Company at the time of resignation/superannuation. The gratuity is paid @15 days salary for every completed year of service as per the Payment of Gratuity Act 1972.
The gratuity liability amount is contributed to the approved gratuity fund formed exclusively for gratuity payment to the employees. The gratuity fund has been approved by respective Income Tax authorities.
The liability in respect of gratuity and other post-employment benefits is calculated using the Projected Unit Credit Method and spread over the period during which the benefit is expected to be derived from employees' services.
Re-measurement of Defined Benefit Plans in respect of post-employment are charged to the Other Comprehensive Income.
Employee Separation Costs
Compensation to employees who have opted for retirement under the voluntary retirement scheme of the Company is payable in the year of exercise of option by the employee. The Company recognizes the employee separation cost when the scheme is announced and the Company is demonstrably committed to it.
(j) Tax Expenses
The tax expense for the period comprises of current tax and deferred income tax. Tax is recognized in Statement of Profit and Loss, except to the extent that it relates to items recognized in the Other Comprehensive Income or in equity. In which case, the tax is also recognized in Other Comprehensive Income or Equity.
i) Â Â Â Current tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the Income Tax authorities, based on tax rates and laws that are enacted at the Balance sheet date.
ii) Â Â Â Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the Financial Statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The carrying amount of Deferred tax liabilities and assets are reviewed at the end of each reporting period.
(k) Share Based Payments
Equity-settled share based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share based payments transactions are set out in Note 27.3.
The fair value determined at the grant date of the equity-settled share based payments is expensed on a straight line basis over the vesting period, based on the Company's estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in Statement of Profit and Loss such that the cumulative expenses reflects the revised estimate, with a corresponding adjustment to the Share Based Payments Reserve.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
(l) Foreign Currencies Transactions and Translation
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognized in Statement of Profit and Loss except to the extent of exchange differences which are regarded as an adjustment to interest costs on foreign currency borrowings that are directly attributable to the acquisition or construction of qualifying assets which are capitalized as cost of assets. Additionally, exchange gains or losses on foreign currency borrowings taken prior to April 1, 2016 which are related to the acquisition or construction of qualifying assets are adjusted in the carrying cost of such assets.
Non-monetary items that are measured in terms of historical cost in a foreign currency are recorded using the exchange rates at the date of the transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognized in Other Comprehensive Income or Statement of Profit and Loss are also recognized in Other Comprehensive Income or Statement of Profit and Loss, respectively).
(m) Revenue Recognition
Revenue from sale of goods is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated cost can be estimated reliably, there is no continuing effective control or managerial involvement with the goods, and the amount of revenue can be measured reliably.
Revenue from rendering of services is recognized when the performance of agreed contractual task has been completed.
Revenue from operations is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government.
Interest Income
Interest Income from a Financial Assets is recognized using effective interest rate method.
Dividend Income
Dividend Income is recognized when the Company's right to receive the amount has been established.
(n) Financial Instruments i) Financial Assets
A. Â Â Â Initial Recognition and Measurement
All Financial Assets are initially recognized at fair value. Transaction costs that are directly attributable to the acquisition or issue of Financial Assets, which are not at Fair Value Through Profit or Loss, are adjusted to the fair value on initial recognition. Purchase and sale of Financial Assets are recognized using trade date accounting.
B. Â Â Â Subsequent measurement
a) Â Â Â Financial Assets measured at Amortized Cost (AC)
A Financial Asset is measured at Amortized Cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the Financial Asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
b) Â Â Â Financial Assets measured at Fair Value Through Other Comprehensive Income (FVTOCI)
A Financial Asset is measured at FVTOCI if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling Financial Assets and the contractual terms of the Financial Asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
c) Â Â Â Financial Assets measured at Fair Value Through Profit or Loss (FVTPL)
A Financial Asset which is not classified in any of the above categories are measured at FVTPL.
C. Â Â Â Investment in Subsidiaries, Associates and Joint Ventures
The Company has accounted for its investments in Subsidiaries, associates and joint venture at cost less impairment loss (if any).
D. Â Â Â Other Equity Investments
All other equity investments are measured at fair value, with value changes recognized in Statement of Profit and Loss, except for those equity investments for which the Company has elected to present the value changes in 'Other Comprehensive Income'.
E. Impairment of Financial Assets
In accordance with Ind AS 109, the Company uses 'Expected Credit Loss' (ECL) model, for evaluating impairment of Financial Assets other than those measured at Fair Value Through Profit and Loss (FVTPL).
Expected credit losses are measured through a loss allowance at an amount equal to:
- Â Â Â The 12-months expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date); or
- Â Â Â Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument)
For Trade Receivables the Company applies 'simplified approach' which requires expected lifetime losses to be recognized from initial recognition of the receivables. The Company uses historical default rates to determine impairment loss on the portfolio of trade receivables. At every reporting date these historical default rates are reviewed and changes in the forward looking estimates are analysed.
For other assets, the Company uses 12 month ECL to provide for impairment loss where there is no significant increase in credit risk. If there is significant increase in credit risk full lifetime ECL is used.
ii) Â Â Â Financial Liabilities
A. Â Â Â Initial Recognition and Measurement
All Financial Liabilities are recognized at fair value and in case of borrowings, net of directly attributable cost. Fees of recurring nature are directly recognized in the Statement of Profit and Loss as finance cost.
B. Â Â Â Subsequent Measurement
Financial Liabilities are carried at amortized cost using the effective interest method.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
iii) Â Â Â Derivative Financial Instruments and Hedge Accounting
The Company uses various derivative financial instruments such as interest rate swaps, currency swaps, forwards &Â options and commodity contracts to mitigate the risk of changes in interest rates, exchange rates and commodity prices. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are also subsequently measured at fair value.
Derivatives are carried as Financial Assets when the fair value is positive and as Financial Liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss, except for the effective portion of cash flow hedge which is recognized in Other Comprehensive Income and later to Statement of Profit and Loss when the hedged item affects profit or loss or is treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a Non-Financial Assets or Non-Financial liability.
Hedges that meet the criteria for hedge accounting are accounted for as follows:
A. Cash Flow Hedge
The Company designates derivative contracts or non-derivative Financial Assets / Liabilities as hedging instruments to mitigate the risk of movement in interest rates and foreign exchange rates for foreign exchange exposure on highly probable future cash flows attributable to a recognized asset or liability or forecast cash transactions. When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognized in the cash flow hedging reserve being part of Other Comprehensive Income. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognized in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the underlying transaction occurs. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to the Statement of Profit and Loss upon the occurrence of the underlying transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified in the Statement of Profit and Loss.
B. Fair Value Hedge
The Company designates derivative contracts or non-derivative Financial Assets / Liabilities as hedging instruments to mitigate the risk of change in fair value of hedged item due to movement in interest rates, foreign exchange rates and commodity prices.
Changes in the fair value of hedging instruments and hedged items that are designated and qualify as fair value hedges are recorded in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortized to Statement of Profit and Loss over the period of maturity.
iv) Â Â Â Derecognition of Financial Instruments
The Company derecognizes a Financial Asset when the contractual rights to the cash flows from the Financial Asset expire or it transfers the Financial Asset and the transfer qualifies for derecognition under Ind AS 109. A Financial liability (or a part of a Financial liability) is derecognized from the Company's Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
v) Â Â Â Offsetting
Financial Assets and Financial Liabilities are offset and the net amount is presented in the balance sheet when, and only when, the Company has a legally enforceable right to set off the amount and it intends, either to settle them on a net basis or to realize the asset and settle the liability simultaneously
(o) Accounting For Oil and Gas Activity
The Company has adopted Successful Efforts Method (SEM) of accounting for its Oil and Gas activities. The policy of recognition of exploration and evaluation expenditure is considered in line with the principle of SEM. Seismic costs, geological and geophysical studies, petroleum exploration license fees and general and administration costs directly attributable to exploration and evaluation activities are expensed off. The costs incurred on acquisition of interest in oil and gas blocks and on exploration and evaluation other than those which are expensed off are accounted for as Intangible Assets Under Development. All development costs incurred in respect of proved reserves are also capitalized under Intangible Assets Under Development. Once a well is ready to commence commercial production, the costs accumulated in Intangible Assets Under Development are classified as Intangible Assets corresponding to proved developed oil and gas reserves. The exploration and evaluation expenditure which does not result in discovery of proved oil and gas reserves and all cost pertaining to production are charged to the Statement of Profit and Loss.
The Company used technical estimation of reserves as per the Petroleum Resources Management System guidelines 2011 and standard geological and reservoir engineering methods. The reserve review and evaluation is carried out annually.
Oil and Gas Joint Ventures are in the nature of joint operations. Accordingly, assets and liabilities as well as income and expenditure are accounted on the basis of available information on a line-by-line basis with similar items in the Company's Financial Statements, according to the participating interest of the Company.
C. Critical Accounting Judgments And Key Sources Of Estimation Uncertainty
The preparation of the Company's Financial Statements requires management to make judgement, estimates and assumptions that affect the reported amount of revenue, expenses, assets and liabilities and the accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in next financial years.
(a) Â Â Â Estimation of Oil and Gas Reserves
The determination of the Company's estimated oil and natural gas reserves requires significant judgements and estimates to be applied and these are regularly reviewed and updated. Factors such as the availability of geological and engineering data, reservoir performance data, acquisition and divestment activity, drilling of new wells, and commodity prices all impact on the determination of the Company's estimates of its oil and natural gas reserves. The Company bases it's proved reserves estimates on the requirement of reasonable certainty with rigorous technical and commercial assessments based on conventional industry practice and regulatory requirements.
Estimates of oil and natural gas reserves are used to calculate depletion charges for the Company's oil and gas properties. The impact of changes in estimated proved reserves is dealt with prospectively by amortizing the remaining carrying value of the asset over the expected future production. Oil and natural gas reserves also have a direct impact on the assessment of the recoverability of asset carrying values reported in the Financial Statements.
Details on proved reserves and production both on product and geographical basis are provided in Note 32.2.
(b) Â Â Â Decommissioning Liabilities
The liability for decommissioning costs are recognized when the Company has an obligation to perform site restoration activity. The recognition and measurement of decommissioning provisions involves the use of estimates and assumptions. These include; the timing of abandonment of well and related facilities which would depend upon the ultimate life of the field, expected utilization of assets by other fields, the scope of abandonment activity and pre-tax rate applied for discounting.
(c) Â Â Â Depreciation / Amortisation and useful lives of Property Plant and Equipment / Intangible Assets
Property, Plant and Equipment / Intangible Assets are depreciated / amortised over their estimated useful lives, after taking into account estimated residual value. Management reviews the estimated useful lives and residual values of the assets annually in order to determine the amount of depreciation / amortisation to be recorded during any reporting period. The useful lives and residual values are based on the Company's historical experience with similar assets and take into account anticipated technological changes. The depreciation / amortisation for future periods is revised if there are significant changes from previous estimates.
(d) Â Â Â Recoverability of Trade Receivables
Judgements are required in assessing the recoverability of overdue trade receivables and determining whether a provision against those receivables is required. Factors considered include the credit rating of the counterparty, the amount and timing of anticipated future payments and any possible actions that can be taken to mitigate the risk of non-payment.
(e) Â Â Â Provisions
Provisions and liabilities are recognized in the period when it becomes probable that there will be a future outflow of funds resulting from past operations or events and the amount of cash outflow can be reliably estimated. The timing of recognition and quantification of the liability requires the application of judgement to existing facts and circumstances, which can be subject to change. The carrying amounts of provisions and liabilities are reviewed regularly and revised to take account of changing facts and circumstances.
(f ) Impairment of Non-Financial Assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, the Company estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or Cash Generating Units (CGU's) fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or a groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account, if no such transactions can be identified, an appropriate valuation model is used.
(g) Impairment of Financial Assets
The impairment provisions for Financial Assets are based on assumptions about risk of default and expected cash loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Company's past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
D. Standards Issued but not Effective
On March 28, 2018, the Ministry of Corporate Affairs (MCA) has notified Ind AS 115 - Revenue from Contract with Customers and certain amendment to existing Ind AS. These amendments shall be applicable to the Company from April 01, 2018.
(a) Â Â Â Issue of Ind AS 115 - Revenue from Contracts with Customers
Ind AS 115 will supersede the current revenue recognition guidance including Ind AS 18 Revenue, Ind AS 11 Construction Contracts and the related interpretations. Ind AS 115 provides a single model of accounting for revenue arising from contracts with customers based on the identification and satisfaction of performance obligations.
(b) Â Â Â Amendment to Existing issued Ind AS
The MCA has also carried out amendments of the following accounting standards:
i. Â Â Â Ind AS 21 - The Effects of Changes in Foreign Exchange Rates
ii. Â Â Â Ind AS 40 - Investment Property
iii. Â Â Â Ind AS 12 - Income Taxes
iv. Â Â Â Ind AS 28 - Investments in Associates and Joint Ventures and
v. Â Â Â Ind AS 112 - Disclosure of Interests in Other Entities
Application of above standards are not expected to have any significant impact on the Company's Financial Statements.
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Mar 31, 2017
A. CORPORATE INFORMATION
Reliance Industries Limited ("the Company") is a listed entity incorporated in India.
The addresses of its registered office and principal place of business are disclosed in the introduction to the annual report.
B. SIGNIFICANT ACCOUNTING POLICIES
B.1 BASIS OF PREPARATION AND PRESENTATION
The financial statements have been prepared on the historical cost basis except for following assets and liabilities which have been measured at fair value amount:
i) Certain financial assets and liabilities (including derivative instruments),
ii) Defined benefit plans - plan assets and
iii) Equity settled share based payments
The financial statements of the Company have been prepared to comply with the Indian Accounting standards (''Ind AS''), including the rules notified under the relevant provisions of the Companies Act, 2013.
Up to the year ended March 31, 2016, the Company has prepared its financial statements in accordance with the requirement of Indian Generally Accepted Accounting Principles (GAAP), which includes Standards notified under the Companies (Accounting Standards) Rules, 2006 and considered as "Previous GAAP"
These financial statements are the Company''s first Ind AS standalone financial statements.
Company''s financial statements are presented in Indian Rupees (''), which is also its functional currency.
B.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Property, plant and equipment
Property, plant and equipment are stated at cost, net of recoverable taxes, trade discount and rebates less accumulated depreciation and impairment losses, if any. Such cost includes purchase price, borrowing cost and any cost directly attributable to bringing the assets to its working condition for its intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the assets.
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.
Expenses incurred relating to project, net of income earned during the project development stage prior to its intended use, are considered as pre - operative expenses and disclosed under Capital Work - in - Progress.
Depreciation on property, plant and equipment is provided using written down value method except in case of certain assets from Refining segment and Petrochemical segment & SEZ units / developer which are depreciated using straight line method. Depreciation is provided based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 except in respect of the following assets, where useful life is different than those prescribed in Schedule II;
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Gains or losses arising from derecognition of a property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss when the asset is derecognized.
(b) Leases
Leases are classified as finance leases whenever the terms of the lease, transfers substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Leased assets: Assets held under finance leases are initially recognized as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the less or is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in Statement of Profit and Loss, unless they are directly attributable to qualifying assets, in which case they are capitalized. Contingent rentals are recognized as expenses in the periods in which they are incurred.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term except where another systematic basis is more representative of time pattern in which economic benefits from the leased assets are consumed.
(c) Intangible assets
Intangible Assets are stated at cost of acquisition net of recoverable taxes, trade discount and rebates less accumulated amortization/depletion and impairment loss, if any. Such cost includes purchase price, borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the intangible assets.
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss when the asset is derecognized.
(d) Research and Development Expenditure
Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss. Development costs of products are charged to the Statement of Profit and Loss unless a product''s technological and commercial feasibility has been established, in which case such expenditure is capitalized
(e) Finance Cost
Borrowing costs include exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are charged to the Statement of Profit and Loss for the period for which they are incurred.
(f) Inventories
Items of inventories are measured at lower of cost and net realizable value after providing for obsolescence, if any, except in case of by-products which are valued at net realizable value. Cost of inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overheads net of recoverable taxes incurred in bringing them to their respective present location and condition.
Cost of raw materials, chemicals, stores and spares, packing materials, trading and other products are determined on weighted average basis.
(g) Impairment of non-financial assets - property, plant and equipment and intangible assets
The Company assesses at each reporting date as to whether there is any indication that any property, plant and equipment and intangible assets or group of assets, called cash generating units (CGU) may be impaired. If any such indication exists the recoverable amount of an asset or CGU is estimated to determine the extent of impairment, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the CGU to which the asset belongs.
An impairment loss is recognized in the Statement of Profit and Loss to the extent, asset''s carrying amount exceeds its recoverable amount. The recoverable amount is higher of an asset''s fair value less cost of disposal and value in use. Value in use is based on the estimated future cash flows, discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and risk specific to the assets.
The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
(h) Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
Decommissioning liability
The Company records a provision for decommissioning costs towards site restoration activity. Decommissioning costs are provided at the present value of future expenditure using a current pre-tax rate expected to be incurred to fulfill decommissioning obligations and are recognized as part of the cost of the underlying assets. Any change in the present value of the expenditure, other than unwinding of discount on the provision, is reflected as adjustment to the provision and the corresponding asset. The change in the provision due to the unwinding of discount is recognized in the Statement of Profit and Loss.
(i) Employee Benefits Expense Short Term Employee Benefits
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are recognized as an expense during the period when the employees render the services.
Post-Employment Benefits Defined Contribution Plans
A defined contribution plan is a post-employment benefit plan under which the Company pays specified contributions to a separate entity. The Company makes specified monthly contributions towards Provident Fund, Superannuation Fund and Pension Scheme. The Company''s contribution is recognized as an expense in the Statement of Profit and Loss during the period in which the employee renders the related service.
Defined Benefit Plans
The Company pays gratuity to the employees whoever has completed five years of service with the Company at the time of resignation/superannuation. The gratuity is paid @15 days salary for every completed year of service as per the Payment of Gratuity Act 1972.
The gratuity liability amount is contributed to the approved gratuity fund formed exclusively for gratuity payment to the employees. The gratuity fund has been approved by respective IT authorities.
The liability in respect of gratuity and other post-employment benefits is calculated using the Projected Unit Credit Method and spread over the period during which the benefit is expected to be derived from employees'' services.
Re-measurement of defined benefit plans in respect of post-employment are charged to the Other Comprehensive Income.
Employee Separation Costs
Compensation to employees who have opted for retirement under the voluntary retirement scheme of the Company is payable in the year of exercise of option by the employee. The Company recognizes the employee separation cost when the scheme is announced and the Company is demonstrably committed to it.
(j) Tax Expenses
The tax expense for the period comprises current and deferred tax. Tax is recognized in Statement of Profit and Loss, except to the extent that it relates to items recognized in the comprehensive income or in equity. In which case, the tax is also recognized in other comprehensive income or equity.
- Current tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted at the Balance sheet date.
- Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The carrying amount of Deferred tax liabilities and assets are reviewed at the end of each reporting period.
(k) Share based payments
Equity-settled share based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share based payments transactions are set out in Note 26.3.
The fair value determined at the grant date of the equity-settled share based payments is expensed on a straight line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in Statement of Profit and Loss such that the cumulative expenses reflects the revised estimate, with a corresponding adjustment to the Share Based Payments Reserve.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
(l) Foreign currencies transactions and translation
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognized in Statement of Profit and Loss except to the extent of exchange differences which are regarded as an adjustment to interest costs on foreign currency borrowings that are directly attributable to the acquisition or construction of qualifying assets, are capitalized as cost of assets. Additionally, exchange gains or losses on foreign currency borrowings taken prior to April 1, 2016 which are related to the acquisition or construction of qualifying assets are adjusted in the carrying cost of such assets.
Non-monetary items that are measured in terms of historical cost in a foreign currency are recorded using the exchange rates at the date of the transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognized in OCI or Statement of Profit and Loss are also recognized in OCI or Statement of Profit and Loss, respectively).
(m) Revenue recognition
Revenue from sale of goods is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated cost can be estimated reliably, there is no continuing effective control or managerial involvement with the goods, and the amount of revenue can be measured reliably.
Revenue from rendering of services is recognized when the performance of agreed contractual task has been completed.
Revenue from sale of goods is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government.
Revenue from operations includes sale of goods, services, service tax, excise duty and adjusted for discounts (net), and gain/ loss on corresponding hedge contracts.
Interest income
Interest income from a financial asset is recognized using effective interest rate method.
Dividends
Revenue is recognized when the Company''s right to receive the payment has been established.
(n) Financial instruments
i) Financial Assets
A. Initial recognition and measurement
All financial assets and liabilities are initially recognized at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, which are not at fair value through profit or loss, are adjusted to the fair value on initial recognition. Purchase and sale of financial assets are recognized using trade date accounting.
B. Subsequent measurement
a) Financial assets carried at amortized cost (AC)
A financial asset is measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
b) Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is measured at FVTOCI if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
c) Financial assets at fair value through profit or loss (FVTPL)
A financial asset which is not classified in any of the above categories are measured at FVTPL.
C. Investment in subsidiaries, Associates and Joint Ventures
The Company has accounted for its investments in subsidiaries, associates and joint venture at cost.
D. Other Equity Investments
All other equity investments are measured at fair value, with value changes recognized in Statement of Profit and Loss, except for those equity investments for which the Company has elected to present the value changes in ''Other Comprehensive Income''.
E. Impairment of financial assets
In accordance with Ind AS 109, the Company uses ''Expected Credit Loss'' (ECL) model, for evaluating impairment of financial assets other than those measured at fair value through profit and loss (FVTPL).
Expected credit losses are measured through a loss allowance at an amount equal to:
- The 12-months expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date); or
Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument)
For trade receivables Company applies ''simplified approach'' which requires expected lifetime losses to be recognized from initial recognition of the receivables. The Company uses historical default rates to determine impairment loss on the portfolio of trade receivables. At every reporting date these historical default rates are reviewed and changes in the forward looking estimates are analyzed.
For other assets, the Company uses 12 month ECL to provide for impairment loss where there is no significant increase in credit risk. If there is significant increase in credit risk full lifetime ECL is used.
ii) Financial liabilities
A. Initial recognition and measurement
All financial liabilities are recognized at fair value and in case of loans, net of directly attributable cost. Fees of recurring nature are directly recognized in the Statement of Profit and Loss as finance cost.
B. Subsequent measurement
Financial liabilities are carried at amortized cost using the effective interest method. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
iii) Derivative financial instruments and Hedge Accounting
The Company uses various derivative financial instruments such as interest rate swaps, currency swaps, forwards & options and commodity contracts to mitigate the risk of changes in interest rates, exchange rates and commodity prices. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are also subsequently measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss, except for the effective portion of cash flow hedges which is recognized in Other Comprehensive Income and later to Statement of Profit and Loss when the hedged item affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-financial assets or non-financial liability.
Hedges that meet the criteria for hedge accounting are accounted for as follows:
a) Cash flow hedge
The Company designates derivative contracts or non derivative financial assets / liabilities as hedging instruments to mitigate the risk of movement in interest rates and foreign exchange rates for foreign exchange exposure on highly probable future cash flows attributable to a recognized asset or liability or forecast cash transactions. When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognized in the cash flow hedging reserve being part of other comprehensive income. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognized in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the underlying transaction occurs. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to the Statement of Profit and Loss upon the occurrence of the underlying transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified in the Statement of Profit and Loss.
b) Fair Value Hedge
The Company designates derivative contracts or non derivative financial assets / liabilities as hedging instruments to mitigate the risk of change in fair value of hedged item due to movement in interest rates, foreign exchange rates and commodity prices.
Changes in the fair value of hedging instruments and hedged items that are designated and qualify as fair value hedges are recorded in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortized to Statement of Profit and Loss over the period of maturity.
iv) Derecognition of financial instruments
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109. A financial liability (or a part of a financial liability) is derecognized from the Company''s Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
(o) Accounting For Oil and Gas Activity
The Company has adopted Successful Efforts Method (SEM) of accounting for its Oil and Gas activities. The policy of recognition of exploration and evaluation expenditure is considered in line with the principle of SEM. Seismic costs, geological and geophysical studies, petroleum exploration license fees and general and administration costs directly attributable to exploration and evaluation activities are expensed off. The costs incurred on acquisition of interest in oil and gas blocks and on exploration and evaluation other than those which are expensed off are accounted for as Intangible Assets under Development. All development costs incurred in respect of Proved reserves are also capitalized under Intangible Assets under Development. Untill a well is ready to commence commercial production, the costs accumulated in Intangible Assets under Development are classified as Intangible Assets corresponding to proved developed oil and gas reserves. The exploration and evaluation expenditure which does not result in discovery of proved oil and gas reserves and all cost pertaining to production are charged to the Statement of Profit and Loss.
The Company used technical estimation of reserves as per the Petroleum Resources Management System guidelines 2011 and standard geological and reservoir engineering methods. The reserve review and evaluation is carried out annually.
Oil and Gas Joint Ventures are in the nature of joint operations. Accordingly, assets and liabilities as well as income and expenditure are accounted on the basis of available information on a line-by-line basis with similar items in the Company''s financial statements, according to the participating interest of the Company.
C. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of the Company''s financial statements requires management to make judgment, estimates and assumptions that affect the reported amount of revenue, expenses, assets and liabilities and the accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
a) Estimation of oil and gas reserves
The determination of the Company''s estimated oil and natural gas reserves requires significant judgments and estimates to be applied and these are regularly reviewed and updated. Factors such as the availability of geological and engineering data, reservoir performance data, acquisition and divestment activity, drilling of new wells, and commodity prices all impact on the determination of the Company''s estimates of its oil and natural gas reserves. The Company bases its proved reserves estimates on the requirement of reasonable certainty with rigorous technical and commercial assessments based on conventional industry practice and regulatory requirements.
Estimates of oil and natural gas reserves are used to calculate depletion charges for the Company''s oil and gas properties. The impact of changes in estimated proved reserves is dealt with prospectively by amortizing the remaining carrying value of the asset over the expected future production. Oil and natural gas reserves also have a direct impact on the assessment of the recoverability of asset carrying values reported in the financial statements.
Details on proved reserves and production both on product and geographical basis are provided in Note 31.2.
b) Decommissioning Liabilities
The liability for decommissioning costs are recognized when the Company has obligation to perform site restoration activity. The recognition and measurement of decommissioning provisions involves the use of estimates and assumptions. These include; the timing of abandonment of well and related facilities which would depend upon the ultimate life of the field, expected utilization of assets by other fields, the scope of abandonment activity and pre-tax rate applied for discounting.
c) Depreciation / amortization and useful lives of property plant and equipment / intangible assets
Property, plant and equipment / intangible assets are depreciated / amortized over their estimated useful lives, after taking into account estimated residual value. Management reviews the estimated useful lives and residual values of the assets annually in order to determine the amount of depreciation / amortization to be recorded during any reporting period. The useful lives and residual values are based on the Company''s historical experience with similar assets and take into account anticipated technological changes. The depreciation / amortization for future periods is revised if there are significant changes from previous estimates.
d) Recoverability of trade receivable
Judgments are required in assessing the recoverability of overdue trade receivables and determining whether a provision against those receivables is required. Factors considered include the credit rating of the counterparty, the amount and timing of anticipated future payments and any possible actions that can be taken to mitigate the risk of non-payment.
e) Provisions
Provisions and liabilities are recognized in the period when it becomes probable that there will be a future outflow of funds resulting from past operations or events and the amount of cash outflow can be reliably estimated. The timing of recognition and quantification of the liability requires the application of judgment to existing facts and circumstances, which can be subject to change. The carrying amounts of provisions and liabilities are reviewed regularly and revised to take account of changing facts and circumstances.
f) Impairment of non-financial assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or Cash Generating Units (CGU''s) fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or a groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account, if no such transactions can be identified, an appropriate valuation model is used.
g) Impairment of financial assets
The impairment provisions for financial assets are based on assumptions about risk of default and expected cash loss rates.
The Company uses judgment in making these assumptions and selecting the inputs to the impairment calculation, based on Company''s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
D. FIRST TIME ADOPTION OF IND AS
The Company has adopted Ind AS with effect from 1st April 2016 with comparatives being restated. Accordingly the impact of transition has been provided in the Opening Reserves as at 1st April 2015. The figures for the previous period have been restated, regrouped and reclassified wherever required to comply with the requirement of Ind AS and Schedule III.
a) Exemptions from retrospective application
(i) Business combination exemption
The Company has applied the exemption as provided in Ind AS 101 on non-application of Ind AS 103, "Business Combinations" to business combinations consummated prior to April 1, 2015 (the "Transition Date"), pursuant to which goodwill/capital reserve arising from a business combination has been stated at the carrying amount prior to the date of transition under Indian GAAP. The Company has also applied the exemption for past business combinations to acquisitions of investments in subsidiaries / associates / joint ventures consummated prior to the Transition Date.
(ii) Share-based payment transactions
Ind AS 101 encourages, but does not require, first time adopters to apply Ind AS 102 Share based Payment to equity instruments that were vested before the date of transition to Ind AS. The Company has elected not to apply Ind AS 102 to options that vested prior to April 1, 2015.
(iii) Fair value as deemed cost exemption
The Company has elected to measure items of property, plant and equipment and intangible assets at its carrying value at the transition date except for certain class of assets which are measured at fair value as deemed cost.
(iv) Cumulative translation differences
The Company has elected to apply Ind AS 21 - The Effects of changes in Foreign Exchange Rate prospectively. Accordingly all cumulative gains and losses recognized are reset to zero by transferring it to retained earnings.
(v) Long Term Foreign Currency Monetary Items
The Company continues the policy of capitalizing exchange differences arising on translation of long term foreign currency monetary items.
(vi) Investments in subsidiaries, joint ventures and associates
The Company has elected to measure investment in subsidiaries, joint venture and associate at cost.
(vii) Decommissioning liabilities
The Company has elected to apply the transitional provision with respect to recognition of Decommissioning, Restoration and Similar Liabilities.
1.1 Leasehold Land includes Rs, 778 crore (Previous Year Rs, 777 crore) in respect of which lease-deeds are pending execution.
1.2 Buildings includes :
i) Cost of shares in Co-operative Societies Rs, 2,00,200 (Previous Year Rs, 1,99,950).
ii) Rs, 135 crore (Previous Year Rs, 135 crore) in shares of Companies / Societies with right to hold and use certain area of Buildings.
1.3 Intangible Assets - Others includes :
i) Jetties amounting to Rs, 812 crore (Previous Year Rs, 812 crore), the Ownership of which vests with Gujarat Maritime Board.
ii) Rs, 7,403 crore (Previous Year Rs, 8,367 crore) in preference shares of subsidiaries and lease premium paid with right to hold and use Land and Buildings.
1.4 Capital Work-in-Progress and Intangible Assets under Development includes :
i) Rs, 15,544 crore (Previous Year Rs, 11,022 crore) on account of project development expenditure.
ii) Rs, 11,526 crore (Previous Year Rs, 18,646 crore) on account of cost of construction materials at site.
1.6 Additions in plant and machinery, Capital work-in-progress, Intangible Assets - Development Rights and Intangible assets under Development includes Rs, 2,166 crore (net loss) [Previous Year Rs, 8,605 crore (net loss)] on account of exchange difference during the year.
1.7 For Properties pledged as security - refer note 15.1.
These plans typically expose the Company to actuarial risks such as: investment risk, interest risk, longevity risk and salary risk.
Investment risk The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds.
Interest risk A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the plan debt investments.
Longevity risk The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan''s liability.
Salary risk The present value of the defined plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan''s liability.
26.2 The Company had announced Voluntary Separation Scheme (VSS) for the employees of Allahabad & Nagpur Manufacturing Divisions in the previous year. A sum of Rs, 156 crore had been paid during the previous year and debited to the Statement of Profit and Loss under the head "Employee Benefits Expense"
26.3 Share based payments
a) Scheme details
Company has an Employee Stock Option Scheme under which the maximum quantum of options was granted at Rs, 642 (face value Rs, 10 each) with options to be vested from time to time on the basis of performance and other eligibility criteria.
c) Fair Value on the grant date
The fair value at grant date is determined using Black Scholes Model which takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The model inputs for options granted during the year ended March 31, 2017 included;
a. Weighted average exercise price Rs, 1,096 (March 31, 2016 Rs, 887)
b. Grant date: 05.10.2016 & 10.10.2016 (March 31, 2016: 10.10.2015)
c. Vesting year: 2017-18 to 2020-21 (March 31, 2016: 2016-17 to 2019-20)
d. Share price at grant date: Rs, 1,089 at 05.10.2016 & 1,096 at 10.10.2016)
e. Expected price volatility of Company''s share: 25.1 % to 26.5%
f. Expected dividend yield: 1.07 %
g. Risk free interest rate: 7 %
The expected price volatility is based on the historic volatility (based on remaining life of the options).
The reserve estimates for producing fields are revised based on the performance of producing fields and with respect to discovered fields, the revision are based on the revised geological and reservoir simulation studies.
Mar 31, 2016
A. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
These financial statements have been prepared to comply with the
Generally Accepted Accounting Principles in India (Indian GAAP),
including the Accounting Standards notified under the relevant
provisions of the Companies Act, 2013.
The financial statements are prepared on accrual basis under the
historical cost convention, except for certain Fixed Assets which are
carried at revalued amounts. The financial statements are presented in
Indian rupees rounded of to the nearest rupees in crore.
B. USE OF ESTIMATES
The preparation of financial statements in conformity with Indian GAAP
requires judgments, estimates and assumptions to be made that affect
the reported amount of assets and liabilities, disclosure of contingent
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Difference
between the actual results and estimates are recognised in the period
in which the results are known/materialised. The management believes
that the estimates used in the preparation of the financial statements
are prudent and reasonable.
C. FIXED ASSETS
Tangible Assets
Tangible Assets are stated at cost net of recoverable taxes, trade
discounts and rebates and include amounts added on revaluation, less
accumulated depreciation and impairment loss, if any. The cost of
Tangible Assets comprises its purchase price, borrowing cost and any
cost directly attributable to bringing the asset to its working
condition for its intended use, net charges on foreign exchange
contracts and adjustments arising from exchange rate variations
attributable to the assets.
Subsequent expenditures related to an item of Tangible Asset are added
to its book value only if they increase the future benefits from the
existing asset beyond its previously assessed standard of performance.
Projects under which assets are not ready for their intended use are
disclosed under Capital Work-in-Progress.
Intangible Assets
Intangible Assets are stated at cost of acquisition net of recoverable
taxes less accumulated amortisation/depletion and impairment loss, if
any. The cost comprises purchase price, borrowing costs, and any cost
directly attributable to bringing the asset to its working condition
for the intended use and net charges on foreign exchange contracts and
adjustments arising from exchange rate variations attributable to the
intangible assets.
D. LEASES
a) Operating Leases: Rentals are expensed on a straight line basis with
reference to the lease terms and other considerations.
b) (i) Finance leases prior to 1st April, 2001: Rentals are expensed
with reference to lease terms and other considerations.
(ii) Finance leases on or after 1st April, 2001: The lower of the fair
value of the assets and present value of the minimum lease rentals is
capitalised as Fixed Assets with corresponding amount disclosed as
lease liability. The principal component in the lease rental is
adjusted against the lease liability and the interest component is
charged to Profit and Loss Statement.
c) However, rentals referred to in (a) or (b) (i) above and the
interest component referred to in (b) (ii) above, pertaining to the
period upto the date of commissioning of the asset are capitalised.
E. DEPRECIATION, AMORTISATION AND DEPLETION
Tangible Assets
Depreciation on Fixed Assets is provided to the extent of depreciable
amount on the Written Down Value (WDV) Method except in case of assets
pertaining to Refining segment, SEZ units / developer and Petrochemical
Plants capitalised after April 1, 2015 where depreciation is provided
on Straight Line Method (SLM). Depreciation is provided based on useful
life of the assets as prescribed in Schedule II to the Companies Act,
2013 except in respect of the following assets, where useful life is
different than those prescribed in Schedule II are used;
In respect of additions or extensions forming an integral part of
existing assets and insurance spares, including incremental cost
arising on account of translation of foreign currency liabilities for
acquisition of Fixed Assets, depreciation is provided as aforesaid over
the residual life of the respective assets.
F. IMPAIRMENT
The Company assesses at each reporting date as to whether there is any
indication that an asset (tangible and intangible) may be impaired. An
asset is treated as impaired, when the carrying cost of the asset
exceeds its recoverable amount. Recoverable amount is higher of an
asset''s or cash generating unit''s net selling price and its value in
use. Value in use is the present value of estimated future cash flows
expected to arise from the continuing use of an asset and from its
disposal at the end of its useful life.
An impairment loss is charged to Profit and Loss Account in the year in
which an asset is identified as impaired. The impairment loss
recognised in prior accounting period is reversed if there has been a
change in the estimate of recoverable amount.
G. FOREIGN CURRENCY TRANSACTIONS
a. Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing on the date of the transaction or that
approximates the actual rate at the date of the transaction.
b. Monetary items denominated in foreign currencies at the year end
are restated at year end rates. In case of items which are covered by
forward exchange contracts, the difference between the year end rate
and rate on the date of the contract is recognised as exchange
difference and the premium paid on forward contracts is recognised over
the life of the contract.
c. Non-monetary foreign currency items are carried at cost.
d. In respect of integral foreign operations, all transactions are
translated at rates prevailing on the date of transaction or that
approximates the actual rate at the date of transaction. Monetary
assets and liabilities are restated at the year end rates.
e. Any income or expense on account of exchange difference either on
settlement or on translation is recognised in the Profit and Loss
Statement, except in case of long term liabilities, where they relate
to acquisition of Fixed Assets, in which case they are adjusted to the
carrying cost of such assets.
H. INVESTMENTS
Current investments are carried at lower of cost and quoted/fair value,
computed category-wise. Non Current investments are stated at cost.
Provision for diminution in the value of Non Current investments is
made only if such a decline is other than temporary.
Investments that are readily realisable and intended to be held for not
more than 12 months from the date of acquisition are classified as
current investment. All other investments are classified as non-current
investments.
I. INVENTORIES
Items of inventories are measured at lower of cost and net realisable
value after providing for obsolescence, if any, except in case of
by-products which are valued at net realisable value. Cost of
inventories comprises of cost of purchase, cost of conversion and other
costs including manufacturing overheads net of recoverable taxes
incurred in bringing them to their respective present location and
condition.
Cost of raw materials, process chemicals, stores and spares, packing
materials, trading and other products are determined on weighted
average basis.
J. REVENUE RECOGNITION
Revenue is recognised only when risks and rewards incidental to
ownership are transferred to the customer, it can be reliably measured
and it is reasonable to expect ultimate collection. Revenue from
operations includes sale of goods, services, service tax, excise duty
and sales during trial run period, adjusted for discounts (net), and
gain/loss on corresponding hedge contracts.
Dividend income is recognised when the right to receive payment is
established.
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the interest rate applicable.
Excise Duty / Service Tax
Excise duty / Service tax is accounted on the basis of both, payments
made in respect of goods cleared / services provided and provisions
made for goods lying in bonded warehouses.
K. EMPLOYEE BENEFITS
Short Term Employee Benefits
The undiscounted amount of short term employee benefits expected to be
paid in exchange for the services rendered by employees are recognised
as an expense during the period when the employees render the services.
Post-Employment Benefits
Defined Contribution Plans
A defined contribution plan is a post-employment benefit plan under
which the Company pays specified contributions to a separate entity.
The Company makes specified monthly contributions towards Provident
Fund, Superannuation Fund and Pension Scheme. The Company''s
contribution is recognised as an expense in the Profit and Loss
Statement during the period in which the employee renders the related
service.
Defined Benefit Plans
The liability in respect of defined benefit plans and other
post-employment benefits is calculated using the Projected Unit Credit
Method and spread over the period during which the benefit is expected
to be derived from employees'' services.
Actuarial gains and losses in respect of post-employment and other long
term benefits are charged to the Profit and Loss Statement.
Employee Separation Costs
Compensation to employees who have opted for retirement under the
voluntary retirement scheme of the Company is charged to the Profit and
Loss Statement in the year of exercise of option by the employee.
L. BORROWING COSTS
Borrowing costs include exchange differences arising from foreign
currency borrowings to the extent they are regarded as an adjustment to
the interest cost. Borrowing costs that are attributable to the
acquisition or construction of qualifying assets are capitalised as
part of the cost of such assets. A qualifying asset is one that
necessarily takes substantial period of time to get ready for its
intended use. All other borrowing costs are charged to the Profit and
Loss Statement in the period in which they are incurred.
M. RESEARCH AND DEVELOPMENT EXPENSES
Revenue expenditure pertaining to research is charged to the Profit and
Loss Statement. Development costs of products are charged to the Profit
and Loss Statement unless a product''s technological feasibility has
been established, in which case such expenditure is capitalised.
N. FINANCIAL DERIVATIVES AND COMMODITY HEDGING TRANSACTIONS
In respect of derivative contracts, premium paid, gains/losses on
settlement and losses on restatement are recognised in the Profit and
Loss Statement except in case where they relate to the acquisition or
construction of Fixed Assets, in which case, they are adjusted to the
carrying cost of such assets.
O. INCOME TAXES
Tax expense comprises of current tax and deferred tax. Current tax is
measured at the amount expected to be paid to the tax authorities,
using the applicable tax rates. Deferred income tax reflect the current
period timing differences between taxable income and accounting income
and reversal of timing differences of earlier years/period. Deferred
tax assets are recognised only to the extent that there is a reasonable
certainty that sufficient future income will be available except that
deferred tax assets, in case there are unabsorbed depreciation or
losses, are recognised if there is virtual certainty that sufficient
future taxable income will be available to realise the same.
Deferred tax assets and liabilities are measured using the tax rates
and tax law that have been enacted or substantively enacted by the
Balance Sheet date.
P. PREMIUM ON REDEMPTION OF BONDS / DEBENTURES
Premium on redemption of bonds/debentures, net of tax impact, are
adjusted against the Securities Premium Reserve.
Q. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Provision is recognised in the accounts when there is a present
obligation as a result of past event(s) and it is probable that an
outflow of resources will be required to settle the obligation and a
reliable estimate can be made. Provisions are not discounted to their
present value and are determined based on the best estimate required to
settle the obligation at the reporting date. These estimates are
reviewed at each reporting date and adjusted to reflect the current
best estimates.
Contingent liabilities are disclosed unless the possibility of outflow
of resources is remote.
Contingent assets are neither recognised nor disclosed in the financial
statements.
R. ACCOUNTING FOR OIL AND GAS ACTIVITY
The Company has adopted Full Cost Method of accounting for its'' Oil and
Gas activities and all costs incurred are accumulated considering the
country as a cost centre. Costs incurred on acquisition of interest in
oil and gas blocks and on exploration and evaluation are accounted for
as Intangible Assets under Development. Upon a reserve being either
''proved'' or deemed to be ''dry'', the costs accumulated in Intangible
Assets under Development are capitalised to intangible assets.
Development costs incurred thereafter in respect of ''proved'' reserves
are capitalised to the said intangible asset. All costs relating to
production are charged to the Profit and Loss Statement.
Oil and Gas Joint Ventures are in the nature of Jointly Controlled
Assets. Accordingly, assets and liabilities as well as income and
expenditure are accounted on the basis of available information on a
line-by-line basis with similar items in the Company''s financial
statements, according to the participating interest of the Company.
Mar 31, 2015
A. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
These financial statements have been prepared to comply with the
Generally Accepted Accounting Principles in India (Indian GAAP),
including the Accounting Standards notified under the relevant
provisions of the Companies Act, 2013.
The financial statements are prepared on accrual basis under the
historical cost convention, except for certain Fixed Assets which are
carried at revalued amounts. The financial statements are presented in
Indian rupees rounded off to the nearest rupees in crore.
B. USE OF ESTIMATES
The preparation of financial statements in conformity with Indian GAAP
requires judgements, estimates and assumptions to be made that affect
the reported amount of assets and liabilities, disclosure of contingent
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Difference
between the actual results and estimates are recognised in the period
in which the results are known/materialised.
C. FIXED ASSETS
Tangible Assets
Tangible Assets are stated at cost net of recoverable taxes, trade
discounts and rebates and include amounts added on revaluation, less
accumulated depreciation and impairment loss, if any. The cost of
Tangible Assets comprises its purchase price, borrowing cost and any
cost directly attributable to bringing the asset to its working
condition for its intended use, net charges on foreign exchange
contracts and adjustments arising from exchange rate variations
attributable to the assets.
Subsequent expenditures related to an item of Tangible Asset are added
to its book value only if they increase the future benefits from the
existing asset beyond its previously assessed standard of performance.
Projects under which assets are not ready for their intended use are
disclosed under Capital Work-in-Progress.
Intangible Assets
Intangible Assets are stated at cost of acquisition net of recoverable
taxes less accumulated amortisation/depletion and impairment loss, if
any. The cost comprises purchase price, borrowing costs, and any cost
directly attributable to bringing the asset to its working condition
for the intended use and net charges on foreign exchange contracts and
adjustments arising from exchange rate variations attributable to the
intangible assets.
D. LEASES
a) Operating Leases: Rentals are expensed on a straight line basis with
reference to the lease terms and other considerations.
b) (i) Finance leases prior to 1st April, 2001: Rentals are expensed
with reference to lease terms and other considerations.
(ii) Finance leases on or after 1st April, 2001: The lower of the fair
value of the assets and present value of the minimum lease rentals is
capitalised as Fixed Assets with corresponding amount disclosed as
lease liability. The principal component in the lease rental is
adjusted against the lease liability and the interest component is
charged to Profit and Loss Statement.
c) However, rentals referred to in (a) or (b) (i) above and the
interest component referred to in (b) (ii) above, pertaining to the
period upto the date of commissioning of the asset are capitalised.
E. DEPRECIATION, AMORTISATION AND DEPLETION
Tangible Assets
Depreciation on Fixed Assets is provided to the extent of depreciable
amount on the Written Down Value (WDV) Method except in case of assets
pertaining to Refining segment and SEZ units / developer where
depreciation is provided on Straight Line Method (SLM). Depreciation is
provided based on useful life of the assets as prescribed in Schedule
II to the Companies Act, 2013 except in respect of the following
assets, where useful life is different than those prescribed in
Schedule II are used;
In respect of additions or extensions forming an integral part of
existing assets and insurance spares, including incremental cost
arising on account of translation of foreign currency liabilities for
acquisition of Fixed Assets, depreciation is provided as aforesaid over
the residual life of the respective assets.
F. IMPAIRMENT
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. An impairment loss is charged to the Profit and
Loss Statement in the year in which an asset is identified as impaired.
The impairment loss recognised in prior accounting period is reversed
if there has been a change in the estimate of recoverable amount.
G. FOREIGN CURRENCY TRANSACTIONS
a. Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing on the date of the transaction or that
approximates the actual rate at the date of the transaction.
b. Monetary items denominated in foreign currencies at the year end are
restated at year end rates. In case of items which are covered by
forward exchange contracts, the difference between the year end rate
and rate on the date of the contract is recognised as exchange
difference and the premium paid on forward contracts is recognised over
the life of the contract.
c. Non-monetary foreign currency items are carried at cost.
d. I n respect of integral foreign operations, all transactions are
translated at rates prevailing on the date of transaction or that
approximates the actual rate at the date of transaction. Monetary
assets and liabilities are restated at the year end rates.
e. Any income or expense on account of exchange difference either on
settlement or on translation is recognised in the Profit and Loss
Statement, except in case of long term liabilities, where they relate
to acquisition of Fixed Assets, in which case they are adjusted to the
carrying cost of such assets.
H. INVESTMENTS
Current investments are carried at lower of cost and quoted/fair value,
computed category-wise. Non Current investments are stated at cost.
Provision for diminution in the value of Non Current investments is
made only if such a decline is other than temporary.
I. INVENTORIES
Items of inventories are measured at lower of cost and net realisable
value after providing for obsolescence, if any, except in case of
by-products which are valued at net realisable value. Cost of
inventories comprises of cost of purchase, cost of conversion and other
costs including manufacturing overheads incurred in bringing them to
their respective present location and condition.
Cost of raw materials, process chemicals, stores and spares, packing
materials, trading and other products are determined on weighted
average basis.
J. REVENUE RECOGNITION
Revenue is recognised only when risks and rewards incidental to
ownership are transferred to the customer, it can be reliably measured
and it is reasonable to expect ultimate collection. Revenue from
operations includes sale of goods, services, service tax, excise duty
and sales during trial run period, adjusted for discounts (net), and
gain/loss on corresponding hedge contracts.
Dividend income is recognised when the right to receive payment is
established.
I nterest income is recognised on a time proportion basis taking into
account the amount outstanding and the interest rate applicable.
EXCISE DUTY / SERVICE TAX
Excise duty / Service tax is accounted on the basis of both, payments
made in respect of goods cleared / services provided and provisions
made for goods lying in bonded warehouses.
K. EMPLOYEE BENEFITS
Short Term Employee Benefits
The undiscounted amount of short term employee benefits expected to be
paid in exchange for the services rendered by employees are recognised
as an expense during the period when the employees render the services.
These benefits include performance incentive and compensated absences.
Post-Employment Benefits Defined Contribution Plans
A defined contribution plan is a post-employment benefit plan under
which the Company pays specified contributions to a separate entity.
The Company makes specified monthly contributions towards Provident
Fund, Superannuation Fund and Pension Scheme. The Company's
contribution is recognised as an expense in the Profit and Loss
Statement during the period in which the employee renders the related
service.
Defined Benefit Plans
The liability in respect of defined benefit plans and other
post-employment benefits is calculated using the Projected Unit Credit
Method and spread over the period during which the benefit is expected
to be derived from employees' services.
Actuarial gains and losses in respect of post-employment and other long
term benefits are charged to the Profit and Loss Statement.
Employee Separation Costs
Compensation to employees who have opted for retirement under the
voluntary retirement scheme of the Company is charged to the Profit and
Loss Statement in the year of exercise of option by the employee.
L. BORROWING COSTS
Borrowing costs include exchange differences arising from foreign
currency borrowings to the extent they are regarded as an adjustment to
the interest cost. Borrowing costs that are attributable to the
acquisition or construction of qualifying assets are capitalised as
part of the cost of such assets. A qualifying asset is one that
necessarily takes substantial period of time to get ready for its
intended use. All other borrowing costs are charged to the Profit and
Loss Statement in the period in which they are incurred.
M. RESEARCH AND DEVELOPMENT EXPENSES
Revenue expenditure pertaining to research is charged to the Profit and
Loss Statement. Development costs of products are charged to the Profit
and Loss Statement unless a product's technological feasibility has
been established, in which case such expenditure is capitalised.
N. FINANCIAL DERIVATIVES AND COMMODITY HEDGING TRANSACTIONS
I n respect of derivative contracts, premium paid, gains/losses on
settlement and losses on restatement are recognised in the Profit and
Loss Statement except in case where they relate to the acquisition or
construction of Fixed Assets, in which case, they are adjusted to the
carrying cost of such assets.
O. INCOME TAXES
Tax expense comprises of current tax and deferred tax. Current tax is
measured at the amount expected to be paid to the tax authorities,
using the applicable tax rates. Deferred income tax reflect the current
period timing differences between taxable income and accounting income
for the period and reversal of timing differences of earlier
years/period. Deferred tax assets are recognised only to the extent
that there is a reasonable certainty that sufficient future income will
be available except that deferred tax assets, in case there are
unabsorbed depreciation or losses, are recognised if there is virtual
certainty that sufficient future taxable income will be available to
realise the same.
Deferred tax assets and liabilities are measured using the tax rates
and tax law that have been enacted or substantively enacted by the
Balance Sheet date.
P. PREMIUM ON REDEMPTION OF BONDS / DEBENTURES
Premium on redemption of bonds/debentures, net of tax impact, are
adjusted against the Securities Premium Reserve.
Q. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Provision is recognised in the accounts when there is a present
obligation as a result of past event(s) and it is probable that an
outflow of resources will be required to settle the obligation and a
reliable estimate can be made. Provisions are not discounted to their
present value and are determined based on the best estimate required to
settle the obligation at the reporting date. These estimates are
reviewed at each reporting date and adjusted to reflect the current
best estimates.
Contingent liabilities are disclosed unless the possibility of outflow
of resources is remote.
Contingent assets are neither recognised nor disclosed in the financial
statements.
R. ACCOUNTING FOR OIL AND GAS ACTIVITY
The Company has adopted Full Cost Method of accounting for its' Oil and
Gas activities and all costs incurred are accumulated considering the
country as a cost centre. Costs incurred on acquisition of interest in
oil and gas blocks and on exploration and evaluation are accounted for
as Intangible Assets under Development. Upon a reserve being either
'proved' or deemed to be 'dry', the costs accumulated in Intangible
Assets under Development are capitalised to intangible assets.
Development costs incurred thereafter in respect of 'proved' reserves
are capitalised to the said intangible asset. All costs relating to
production are charged to the Profit and Loss Statement.
Oil and Gas Joint Ventures are in the nature of Jointly Controlled
Assets. Accordingly, assets and liabilities as well as income and
expenditure are accounted on the basis of available information on a
line-by-line basis with similar items in the Company's financial
statements, according to the participating interest of the Company.
Mar 31, 2014
A. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
These financial statements have been prepared to comply with Accounting
Principles Generally accepted in India (Indian GAAP), the Accounting
Standards notified under the Companies (Accounting Standards) Rules,
2006 and the relevant provisions of the Companies Act, 1956.
The financial statements are prepared on accrual basis under the
historical cost convention, except for certain fixed assets which are
carried at revalued amounts. The financial statements are presented in
Indian rupees rounded off to the nearest rupees in crore.
B. USE OF ESTIMATES
The preparation of financial statements in conformity with Indian GAAP
requires judgments, estimates and assumptions to be made that affect
the reported amount of assets and liabilities, disclosure of contingent
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Difference
between the actual results and estimates are recognised in the period
in which the results are known/materialised.
C. FIXED ASSETS
Tangible Assets
Tangible Assets are stated at cost net of recoverable taxes, trade
discounts and rebates and include amounts added on revaluation, less
accumulated depreciation and impairment loss, if any. The cost of
tangible assets comprises its purchase price, borrowing cost and any
cost directly attributable to bringing the asset to its working
condition for its intended use, net charges on foreign exchange
contracts and adjustments arising from exchange rate variations
attributable to the assets.
Subsequent expenditures related to an item of tangible asset are added
to its book value only if they increase the future benefits from the
existing asset beyond its previously assessed standard of performance.
Projects under which assets are not ready for their intended use are
shown as Capital Work-in-Progress.
Intangible Assets
Intangible Assets are stated at cost of acquisition net of recoverable
taxes less accumulated amortisation/depletion and impairment loss, if
any. The cost comprises purchase price, borrowing costs, and any cost
directly attributable to bringing the asset to its working condition
for the intended use and net charges on foreign exchange contracts and
adjustments arising from exchange rate variations attributable to the
intangible assets.
D. LEASES
a) Operating Leases: Rentals are expensed on a straight line basis with
reference to lease terms and other considerations.
b) (i) Finance leases prior to 1st April, 2001: Rentals are expensed
with reference to lease terms and other considerations.
(ii) Finance leases on or after 1st April, 2001: The lower of the fair
value of the assets and present value of the minimum lease rentals is
capitalised as fixed assets with corresponding amount shown as lease
liability. The principal component in the lease rental is adjusted
against the lease liability and the interest component is charged to
Statement of Profit and Loss.
c) However, rentals referred to in (a) or (b) (i) above and the
interest component referred to in (b) (ii) above, pertaining to the
period up to the date of commissioning of the asset are capitalised.
d) All assets given on finance lease are shown as receivables at an
amount equal to net investment in the lease. Initial direct costs in
respect of lease are expensed in the period in which such costs are
incurred. Income from lease assets is accounted by applying the
interest rate implicit in the lease to the net investment.
E. DEPRECIATION, AMORTISATION AND DEPLETION
Tangible Assets
Depreciation on fixed assets is provided to the extent of depreciable
amount on the Written Down Value (WDV) Method except in case of assets
pertaining to Refining segment and SEZ units / developer where
depreciation is provided on Straight Line Method (SLM). Depreciation is
provided at the rates and in the manner prescribed in Schedule XIV to
the Companies Act, 1956 except in respect of the following assets,
where rates higher than those prescribed in Schedule XIV are used;
F. IMPAIRMENT
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. An impairment loss is charged to the Statement
of Profit and Loss in the year in which an asset is identified as
impaired. The impairment loss recognised in prior accounting period is
reversed if there has been a change in the estimate of recoverable
amount.
G. FOREIGN CURRENCYTRANSACTIONS
a. Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing on the date of the transaction or that
approximates the actual rate at the date of the transaction.
b. Monetary items denominated in foreign currencies at the year end
are restated at year end rates. In case of items which are covered by
forward exchange contracts, the difference between the yearend rate
and rate on the date of the contract is recognised as exchange
difference and the premium paid on forward contracts is recognised over
the life of the contract.
c. Non-monetary foreign currency items are carried at cost.
d. In respect of branches, which are integral foreign operations, all
transactions are translated at rates prevailing on the date of
transaction or that approximates the actual rate at the date of
transaction. Branch monetary assets and liabilities are restated at the
year end rates.
e. Any income or expense on account of exchange difference either on
settlement or on translation is recognised in the Statement of Profit
and Loss, except in case of long term liabilities, where they relate to
acquisition of fixed assets, in which case they are adjusted to the
carrying cost of such assets.
H. INVESTMENTS
Current investments are carried at lower of cost and quoted/fair value,
computed category-wise. Long-term investments are stated at cost.
Provision for diminution in the value of long-term investments is made
only if such a decline is other than temporary.
I. INVENTORIES
Items of inventories are measured at lower of cost and net realisable
value after providing for obsolescence, if any, except in case of
by-products which are valued at net realisable value. Cost of
inventories comprises of cost of purchase, cost of conversion and other
costs including manufacturing overheads incurred in bringing them to
their respective present location and condition.
Cost of raw materials, process chemicals, stores and spares, packing
materials, trading and other products are determined on weighted
average basis.
J. REVENUE RECOGNITION
Revenue is recognised only when risks and rewards incidental to
ownership are transferred to the customer, it can be reliably measured
and it is reasonable to expect ultimate collection. Revenue from
operations includes sale of goods, services, service tax, excise duty
and sales during trial run period, adjusted for discounts (net), and
gain/loss on corresponding hedge contracts.
Dividend income is recognised when the right to receive payment is
established.
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the interest rate applicable.
EXCISE DUTY / SERVICE TAX
Excise duty / Service tax is accounted on the basis of both, payments
made in respect of goods cleared / services provided and provisions
made for goods lying in bonded warehouses.
K. EMPLOYEE BENEFITS
Short term employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees are recognised
as an expense during the period when the employees render the services.
These benefits include performance incentive and compensated absences.
Post-employment benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under
which the Company pays specified contributions to a separate entity The
Company makes specified monthly contributions towards Provident Fund,
Superannuation Fund and Pension Scheme. The Companys contribution is
recognised as an expense in the Statement of Profit and Loss during the
period in which the employee renders the related service.
Defined benefit plans
The liability in respect of defined benefit plans and other
post-employment benefits is calculated using the Projected Unit Credit
Method and spread over the period during which the benefit is expected
to be derived from employees services.
Actuarial gains and losses in respect of post-employment and other long
term benefits are charged to the Statement of Profit and Loss.
Employee Separation Costs
Compensation to employees who have opted for retirement under the
voluntary retirement scheme of the Company is charged to the Statement
of Profit and Loss in the year of exercise of option by the employee.
L. BORROWING COSTS
Borrowing costs include exchange differences arising from foreign
currency borrowings to the extent they are regarded as an adjustment to
the interest cost. Borrowing costs that are attributable to the
acquisition or construction of qualifying assets are capitalised as
part of the cost of such assets. A qualifying asset is one that
necessarily takes substantial period of time to get ready for its
intended use. All other borrowing costs are charged to the Statement of
Profit and Loss in the period in which they are incurred.
M. RESEARCH AND DEVELOPMENT EXPENSES
Revenue expenditure pertaining to research is charged to the Statement
of Profit and Loss. Development costs of products are charged to the
Statement of Profit and Loss unless a products technological
feasibility has been established, in which case such expenditure is
capitalised.
N. FINANCIAL DERIVATIVES AND COMMODITY HEDGING TRANSACTIONS
In respect of derivative contracts, premium paid, gains/losses on
settlement and losses on restatement are recognised in the Statement of
Profit and Loss except in case where they relate to the acquisition or
construction of fixed assets, in which case, they are adjusted to the
carrying cost of such assets.
O. INCOME TAXES
Tax expense comprises of current tax and deferred tax. Current tax is
measured at the amount expected to be paid to the tax authorities,
using the applicable tax rates. Deferred income tax reflect the current
period timing differences between taxable income and accounting income
for the period and reversal of timing differences of earlier years/
period. Deferred tax assets are recognised only to the extent that
there is a reasonable certainty that sufficient future income will be
available except that deferred tax assets, in case there are unabsorbed
depreciation or losses, are recognised if there is virtual certainty
that sufficient future taxable income will be available to realise the
same.
Deferred tax assets and liabilities are measured using the tax rates
and tax law that have been enacted or substantively enacted by the
Balance Sheet date.
P. PREMIUM ON REDEMPTION OF BONDS / DEBENTURES
Premium on redemption of bonds/debentures, net of tax impact, are
adjusted against the Securities Premium Reserve.
Q. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Provision is recognised in the accounts when there is a present
obligation as a result of past event(s) and it is probable that an
outflow of resources will be required to settle the obligation and a
reliable estimate can be made. Provisions are not discounted to their
present value and are determined based on the best estimate required to
settle the obligation at the reporting date. These estimates are
reviewed at each reporting date and adjusted to reflect the current
best estimates.
Contingent liabilities are disclosed unless the possibility of outflow
of resources is remote.
Contingent assets are neither recognised nor disclosed in the financial
statements.
R. ACCOUNTING FOR OIL AND GAS ACTIVITY
The Company has adopted Full Cost Method of accounting for its Oil and
Gas activities and all costs incurred are accumulated considering the
country as a cost centre. Costs incurred on acquisition of interest in
oil and gas blocks and on exploration and evaluation are accounted for
as capital work-in-progress. Upon a reserve being either proved or
deemed to be dry, the costs accumulated in capital work-in-progress
are capitalised to intangible assets. Development costs incurred
thereafter in respect of proved reserves are capitalised to the said
intangible asset. All costs relating to production are charged to the
Statement of Profit and Loss.
Oil and Gas Joint Ventures are in the nature of Jointly Controlled
Assets. Accordingly, assets and liabilities as well as income and
expenditure are accounted on the basis of available information on a
line-by-line basis with similar items in the Companys financial
statements, according to the participating interest of the Company.
Mar 31, 2013
A. Basis of Preparation of Financial Statements
The financial statements are prepared under the historical cost
convention, except for certain fixed assets which are revalued, in
accordance with the generally accepted accounting principles in India
and the provisions of the Companies Act, 1956.
B. use of Estimates
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Difference
between the actual results and estimates are recognised in the period
in which the results are known/ materialised.
C. Own Fixed Assets
Fixed Assets are stated at cost net of recoverable taxes and includes
amounts added on revaluation, less accumulated depreciation and
impairment loss, if any. All costs, including financing costs till
commencement of commercial production, net charges on foreign exchange
contracts and adjustments arising from exchange rate variations
attributable to the fixed assets are capitalised.
D. Leased Assets
a) Operating Leases: Rentals are expensed with reference to lease terms
and other considerations.
b) (i) Finance leases prior to 1st April, 2001: Rentals are expensed
with reference to lease terms and other considerations.
(ii) Finance leases on or after 1st April, 2001: The lower of the fair
value of the assets and present value of the minimum lease rentals is
capitalised as fixed assets with corresponding amount shown as lease
liability. The principal component in the lease rental is adjusted
against the lease liability and the interest component is charged to
Profit and Loss account.
c) However, rentals referred to in (a) or (b) (i) above and the
interest component referred to in (b) (ii) above pertaining to the
period upto the date of commissioning of the assets are capitalised.
d) All assets given on finance lease are shown as receivables at an
amount equal to net investment in the lease. Initial direct costs in
respect of lease are expensed in the year in which such costs are
incurred. Income from lease assets is accounted by applying the
interest rate implicit in the lease to the net investment.
E. Intangible Assets
Intangible Assets are stated at cost of acquisition net of recoverable
taxes less accumulated amortisation / depletion. All costs, including
financing costs till commencement of commercial production, net charges
on foreign exchange contracts and adjustments arising from exchange
rate variations attributable to the intangible assets are capitalised.
F. Depreciation and Amortisation
Depreciation on fixed assets is provided to the extent of depreciable
amount on written down value method (WDV) at the rates and in the
manner prescribed in Schedule XIV to the Companies Act, 1956 over their
useful life except, on fixed assets pertaining to refining segment and
SEZ units, depreciation is provided on Straight Line method (SLM) over
their useful life; on fixed bed catalyst with a life of 2 years or
more, depreciation is provided over its useful life; on fixed bed
catalysts having life of less than 2 years, 100% depreciation is
provided in the year of addition; on additions or extensions forming an
integral part of existing plants, including incremental cost arising on
account of translation of foreign currency liabilities for acquisition
of fixed assets and insurance spares, depreciation is provided as
aforesaid over the residual life of the respective plants; premium on
leasehold land is amortised over the period of lease; technical know
how is amortised over the useful life of the underlying assets and
computer software is amortised over a period of 5 years; on intangible
assets - development rights, depletion is provided in proportion of oil
and gas production achieved vis-a-vis the proved reserves (net of
reserves to be retained to cover abandonment costs as per the
production sharing contract and the Government of India''s share in the
reserves) considering the estimated future expenditure on developing
the reserves as per technical evaluation; intangible assets - others
are amortised over the period of agreement of right to use, provided in
case of jetty the aggregate amount amortised to date is not less than
the aggregate rebate availed by the Company; on amounts added on
revaluation, depreciation is provided as aforesaid over the residual
life of the assets as certified by the values on assets acquired
under finance lease from 1st April 2001, depreciation is provided over
the lease term.
G. Impairment of Assets
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. An impairment loss is charged to the Profit and
Loss Account in the year in which an asset is identified as impaired.
The impairment loss recognised in prior accounting period is reversed
if there has been a change in the estimate of recoverable amount.
H. Foreign Currency Transactions
(a) Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing on the date of the transaction or that
approximates the actual rate at the date of the transaction.
(b) Monetary items denominated in foreign currencies at the year end
are restated at year end rates. In case of items which are covered by
forward exchange contracts, the difference between the yearend rate
and rate on the date of the contract is recognised as exchange
difference and the premium paid on forward contracts is recognised over
the life of the contract.
(c) Non monetary foreign currency items are carried at cost.
(d) In respect of branches, which are integral foreign operations, all
transactions are translated at rates prevailing on the date of
transaction or that approximates the actual rate at the date of
transaction. Branch monetary assets and liabilities are restated at the
year end rates.
(e) Any income or expense on account of exchange difference either on
settlement or on translation is recognised in the Profit and Loss
account except in case of long term liabilities, where they relate to
acquisition of fixed assets, in which case they are adjusted to the
carrying cost of such assets.
I. Investments
Current investments are carried at lower of cost and quoted/fair value,
computed category wise. Long Term Investments are stated at cost.
Provision for diminution in the value of long-term investments is made
only if such a decline is other than temporary.
J. Inventories
Items of inventories are measured at lower of cost and net realisable
value after providing for obsolescence, if any. Cost of inventories
comprises of cost of purchase, cost of conversion and other costs
including manufacturing overheads incurred in bringing them to their
respective present location and condition. Cost of raw materials,
process chemicals, stores and spares, packing materials, trading and
other products are determined on weighted average basis. By-products
are valued at net realisable value.
K. Revenue Recognition
Revenue is recognized only when it can be reliably measured and it is
reasonable to expect ultimate collection. Revenue from operations
includes sale of goods, services, sales tax, service tax, excise duty
and sales during trial run period, adjusted for discounts (net), Value
Added Tax (VAT) and gain / loss on corresponding hedge contracts.
Dividend income is recognized when right to receive is established.
Interest income is recognized on time proportion basis taking into
account the amount outstanding and rate applicable.
L. Excise Duty / Service Tax and Sales Tax / Value Added Tax
Excise duty / Service tax is accounted on the basis of both, payments
made in respect of goods cleared / services provided as also provision
made for goods lying in bonded warehouses. Sales tax / Value added tax
paid is charged to Profit and Loss account.
M. Employee Benefits
(i) Short-term employee benefits are recognised as an expense at the
undiscounted amount in the Profit and Loss account of the year in which
the related service is rendered.
(ii) Post employment and other long term employee benefits are
recognised as an expense in the Profit and Loss account for the year in
which the employee has rendered services. The expense is recognised at
the present value of the amounts payable determined using actuarial
valuation techniques. Actuarial gains and losses in respect of post
employment and other long term benefits are charged to the Profit and
Loss account.
N. Employee Separation Costs
Compensation to employees who have opted for retirement under the
voluntary retirement scheme of the Company is charged to the Profit and
Loss account in the year of exercise of option.
O. Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for its intended use. All other
borrowing costs are charged to Profit and Loss account.
P. Financial Derivatives and Commodity Hedging Transactions
In respect of derivative contracts, premium paid, gains / losses on
settlement and losses on restatement are recognised in the Profit and
Loss account except in case where they relate to the acquisition or
construction of fixed assets, in which case, they are adjusted to the
carrying cost of such assets.
Q. Accounting for Oil and Gas Activity
The Company has adopted Full Cost Method of accounting for its Oil and
Gas activity and all costs incurred in acquisition, exploration and
development are accumulated considering the country as a cost centre.
Oil and Gas Joint Ventures are in the nature of Jointly Controlled
Assets. Accordingly, assets and liabilities as well as income and
expenditure are accounted on the basis of available information on line
by line basis with similar items in the Company''s financial statements,
according to the participating interest of the Company.
R. Provision for Current and Deferred Tax
Provision for current tax is made after taking into consideration
benefits admissible under the provisions of the Income-tax Act, 1961.
Deferred tax resulting from "timing difference" between taxable and
accounting income is accounted for using the tax rates and laws that
are enacted or substantively enacted as on the balance sheet date.
Deferred tax asset is recognised and carried forward only to the extent
that there is a virtual certainty that the asset will be realised in
future.
S. Premium on Redemption of bonds / Debentures
Premium on redemption of bonds / debentures, net of tax impact, are
adjusted against the Securities Premium Account.
T. Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognised but are disclosed in the
notes. Contingent Assets are neither recognized nor disclosed in the
financial statements.
Mar 31, 2012
A. Basis of Preparation of Financial Statements
The financial statements are prepared under the historical cost
convention, except for certain fixed assets which are revalued, in
accordance with the generally accepted accounting principles in India
and the provisions of the Companies Act, 1956.
B. Use of Estimates
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Difference
between the actual results and estimates are recognised in the period
in which the results are known/ materialised.
C. Own Fixed Assets
Fixed Assets are stated at cost net of recoverable taxes and includes
amounts added on revaluation, less accumulated depreciation and
impairment loss, if any. All costs, including financing costs till
commencement of commercial production, net charges on foreign exchange
contracts and adjustments arising from exchange rate variations
attributable to the fixed assets are capitalised.
D. Leased Assets
a) Operating Leases: Rentals are expensed with reference to lease terms
and other considerations.
b) (i) Finance leases prior to 1st April, 2001: Rentals are expensed
with reference to lease terms and other considerations.
(ii) Finance leases on or after 1st April, 2001: The lower of the fair
value of the assets and present value of the minimum lease rentals is
capitalised as fixed assets with corresponding amount shown as lease
liability. The principal component in the lease rental is adjusted
against the lease liability and the interest component is charged to
Profit and Loss account.
c) However, rentals referred to in (a) or (b) (i) above and the
interest component referred to in (b) (ii) above pertaining to the
period upto the date of commissioning of the assets are capitalised.
d) All assets given on finance lease are shown as receivables at an
amount equal to net investment in the lease. Initial direct costs in
respect of lease are expensed in the year in which such costs are
incurred. Income from lease assets is accounted by applying the
interest rate implicit in the lease to the net investment.
E Intangible Assets
Intangible Assets are stated at cost of acquisition net of recoverable
taxes less accumulated amortisation / depletion. All costs, including
financing costs till commencement of commercial production, net charges
on foreign exchange contracts and adjustments arising from exchange
rate variations attributable to the intangible assets are capitalised.
F. Depreciation and Amortisation
Depreciation on fixed assets is provided to the extent of depreciable
amount on written down value method (WDV) at the rates and in the
manner prescribed in Schedule XIV to the Companies Act, 1956 over their
useful life except,: on fixed assets pertaining to refining segment and
SEZ units, depreciation is provided on Straight Line method (SLM) over
their useful life; on fixed bed catalyst with a life of 2 years or
more, depreciation is provided over its useful life; on fixed bed
catalysts having life of less than 2 years, 100% depreciation is
provided in the year of addition; on additions or extensions forming an
integral part of existing plants, including incremental cost arising on
account of translation of foreign currency liabilities for acquisition
of fixed assets and insurance spares, depreciation is provided as
aforesaid over the residual life of the respective plants; premium on
leasehold land is amortised over the period of lease; technical know
how is amortised over the useful life of the underlying assets and
computer software is amortised over a period of 5 years; on intangible
assets - development rights, depletion is provided in proportion of oil
and gas production achieved vis-a-vis the proved reserves (net of
reserves to be retained to cover abandonment costs as per the
production sharing contract and the Government of India's share in the
reserves) considering the estimated future expenditure on developing
the reserves as per technical evaluation; intangible assets - others
are amortised over the period of agreement of right to use, provided in
case of jetty the aggregate amount amortised to date is not less than
the aggregate rebate availed by the Company; on amounts added on
revaluation, depreciation is provided as aforesaid over the residual
life of the assets as certified by the valuers'; on assets acquired
under finance lease from 1st April 2001, depreciation is provided over
the lease term.
G Impairment of Assets
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. An impairment loss is charged to the Profit and
Loss Account in the year in which an asset is identified as impaired.
The impairment loss recognised in prior accounting period is reversed
if there has been a change in the estimate of recoverable amount.
H Foreign Currency Transactions
(a) Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing on the date of the transaction or that
approximates the actual rate at the date of the transaction.
(b) Monetary items denominated in foreign currencies at the year end
are restated at year end rates. In case of items which are covered by
forward exchange contracts, the difference between the year end rate
and rate on the date of the contract is recognised as exchange
difference and the premium paid on forward contracts is recognised over
the life of the contract.
(c) Non monetary foreign currency items are carried at cost.
(d) In respect of branches, which are integral foreign operations, all
transactions are translated at rates prevailing on the date of
transaction or that approximates the actual rate at the date of
transaction. Branch monetary assets and liabilities are restated at the
year end rates.
(e) Any income or expense on account of exchange difference either on
settlement or on translation is recognised in the Profit and Loss
account except in case of long term liabilities, where they relate to
acquisition of fixed assets, in which case they are adjusted to the
carrying cost of such assets.
I. Investments
Current investments are carried at lower of cost and quoted/fair value,
computed category wise. Long Term Investments are stated at cost.
Provision for diminution in the value of long-term investments is made
only if such a decline is other than temporary.
J. Inventories
Items of inventories are measured at lower of cost and net realisable
value after providing for obsolescence, if any. Cost of inventories
comprises of cost of purchase, cost of conversion and other costs
including manufacturing overheads incurred in bringing them to their
respective present location and condition. Cost of raw materials,
process chemicals, stores and spares, packing materials, trading and
other products are determined on weighted average basis. By-products
are valued at net realisable value.
K Revenue Recognition
Revenue is recognized only when it can be reliably measured and it is
reasonable to expect ultimate collection. Revenue from operations
includes sale of goods, services, sales tax, service tax, excise duty
and sales during trial run period, adjusted for discounts (net), Value
Added Tax (VAT) and gain / loss on corresponding hedge contracts.
Dividend income is recognized when right to receive is established.
Interest income is recognized on time proportion basis taking into
account the amount outstanding and rate applicable.
L. Excise Duty / Service Tax and Sales Tax / Value Added Tax
Excise duty / Service tax is accounted on the basis of both, payments
made in respect of goods cleared / services provided as also provision
made for goods lying in bonded warehouses. Sales tax / Value added tax
paid is charged to Profit and Loss account.
M Employee Benefits
(i) Short-term employee benefits are recognised as an expense at the
undiscounted amount in the profit and loss account of the year in which
the related service is rendered.
(ii) Post employment and other long term employee benefits are
recognised as an expense in the Profit and Loss account for the year in
which the employee has rendered services. The expense is recognised at
the present value of the amounts payable determined using actuarial
valuation techniques. Actuarial gains and losses in respect of post
employment and other long term benefits are charged to the Profit and
Loss account.
(iii) In respect of employees stock options, the excess of fair price
on the date of grant over the exercise price is recognised as deferred
compensation cost amortised over the vesting period.
N. Employee Separation Costs
Compensation to employees who have opted for retirement under the
voluntary retirement scheme of the Company is charged to the Profit and
Loss account in the year of exercise of option.
O. Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for its intended use. All other
borrowing costs are charged to Profit and Loss account.
P. Financial Derivatives and Commodity Hedging Transactions
In respect of derivative contracts, premium paid, gains / losses on
settlement and losses on restatement are recognised in the Profit and
Loss account except in case where they relate to the acquisition or
construction of fixed assets, in which case, they are adjusted to the
carrying cost of such assets.
Q. Accounting for Oil and Gas Activity
The Company has adopted Full Cost Method of accounting for its Oil and
Gas activity and all costs incurred in acquisition, exploration and
development are accumulated considering the country as a cost centre.
Oil and Gas Joint Ventures are in the nature of Jointly Controlled
Assets. Accordingly, assets and liabilities as well as income and
expenditure are accounted on the basis of available information on line
by line basis with similar items in the Company's financial statements,
according to the participating interest of the Company.
R Provision for Current and Deferred Tax
Provision for current tax is made after taking into consideration
benefits admissible under the provisions of the Income-tax Act, 1961.
Deferred tax resulting from 'timing difference-between taxable and
accounting income is accounted for using the tax rates and laws that
are enacted or substantively enacted as on the balance sheet date.
Deferred tax asset is recognised and carried forward only to the extent
that there is a virtual certainty that the asset will be realised in
future.
S. Premium on Redemption of Bonds / Debentures
Premium on redemption of bonds / debentures, net of tax impact, are
adjusted against the Securities Premium Account.
T. Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognised but are disclosed in the
notes. Contingent Assets are neither recognized nor disclosed in the
financial statements.
Mar 31, 2011
A. Basis of Preparation of Financial Statements
The financial statements are prepared under the historical cost
convention, except for certain fixed assets which are revalued, in
accordance with the generally accepted accounting principles in India
and the provisions of the Companies Act, 1956.
B. Use of Estimates
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Difference
between the actual results and estimates are recognised in the period
in which the results are known/ materialised.
C. Own Fixed Assets
Fixed Assets are stated at cost net of recoverable taxes and includes
amounts added on revaluation, less accumulated depreciation and
impairment loss, if any. All costs, including financing costs till
commencement of commercial production, net charges on foreign exchange
contracts and adjustments arising from exchange rate variations
attributable to the fixed assets are capitalised.
D. Leased Assets
a) Operating Leases: Rentals are expensed with reference to lease terms
and other considerations.
b) (i) Finance leases prior to 1st April, 2001: Rentals are expensed
with reference to lease terms and other considerations.
(ii) Finance leases on or after 1st April, 2001: The lower of the fair
value of the assets and present value of the minimum lease rentals is
capitalised as fixed assets with corresponding amount shown as lease
liability. The principal component in the lease rental is adjusted
against the lease liability and the interest component is charged to
Profit and Loss account.
c) However, rentals referred to in (a) or (b) (i) above and the
interest component referred to in (b) (ii) above pertaining to the
period upto the date of commissioning of the assets are capitalised.
d) All assets given on finance lease are shown as receivables at an
amount equal to net investment in the lease. Initial direct costs in
respect of lease are expensed in the year in which such costs are
incurred. Income from lease assets is accounted by applying the
interest rate implicit in the lease to the net investment.
E. Intangible Assets
Intangible Assets are stated at cost of acquisition net of recoverable
taxes less accumulated amortisation / depletion. All costs, including
financing costs till commencement of commercial production, net charges
on foreign exchange contracts and adjustments arising from exchange
rate variations attributable to the intangible assets are capitalised.
F. Depreciation
Depreciation on fixed assets is provided to the extent of depreciable
amount on written down value method (WDV) at the rates and in the
manner prescribed in Schedule XIV to the Companies Act, 1956 over their
useful life except,: on fixed assets pertaining to refining segment and
SEZ units, depreciation is provided on Straight Line method (SLM) over
their useful life; on fixed bed catalyst with a life of 2 years or
more, depreciation is provided over its useful life; on fixed bed
catalysts having life of less than 2 years, 100% depreciation is
provided in the year of addition; on additions or extensions forming an
integral part of existing plants, including incremental cost arising on
account of translation of foreign currency liabilities for acquisition
of fixed assets and insurance spares, depreciation is provided as
aforesaid over the residual life of the respective plants; premium on
leasehold land is amortised over
the period of lease; technical know how is amortised over the useful
life of the underlying assets and computer software is amortised over a
period of 5 years; on intangible assets - development rights, depletion
is provided in proportion of oil and gas production achieved vis-a-vis
the proved reserves (net of reserves to be retained to cover
abandonment costs as per the production sharing contract and the
Government of Indias share in the reserves) considering the estimated
future expenditure on developing the reserves as per technical
evaluation; intangible assets - others are amortised over the period of
agreement of right to use, provided in case of jetty the aggregate
amount amortised to date is not less than the aggregate rebate availed
by the Company; on amounts added on revaluation, depreciation is
provided as aforesaid over the residual life of the assets as certified
by the valuers; on assets acquired under finance lease from 1st April
2001, depreciation is provided over the lease term.
G. Impairment of Assets
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. An impairment loss is charged to the Profit and
Loss Account in the year in which an asset is identified as impaired.
The impairment loss recognised in prior accounting period is reversed
if there has been a change in the estimate of recoverable amount.
H. Foreign Currency Transactions
(a) Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing on the date of the transaction or that
approximates the actual rate at the date of the transaction.
(b) Monetary items denominated in foreign currencies at the year end
are restated at year end rates. In case of items which are covered by
forward exchange contracts, the difference between the year end rate
and rate on the date of the contract is recognised as exchange
difference and the premium paid on forward contracts is recognised over
the life of the contract.
(c) Non monetary foreign currency items are carried at cost.
(d) In respect of branches, which are integral foreign operations, all
transactions are translated at rates prevailing on the date of
transaction or that approximates the actual rate at the date of
transaction. Branch monetary assets and liabilities are restated at the
year end rates.
(e) Any income or expense on account of exchange difference either on
settlement or on translation is recognised in the Profit and Loss
account except in case of long term liabilities, where they relate to
acquisition of fixed assets, in which case they are adjusted to the
carrying cost of such assets.
I. Investments
Current investments are carried at lower of cost and quoted/fair value,
computed category wise. Long Term Investments are stated at cost.
Provision for diminution in the value of long-term investments is made
only if such a decline is other than temporary.
J. Inventories
Items of inventories are measured at lower of cost and net realisable
value after providing for obsolescence, if any. Cost of inventories
comprises of cost of purchase, cost of conversion and other costs
including manufacturing overheads incurred in bringing them to their
respective present location and condition. Cost of raw materials,
process chemicals, stores and spares, packing materials, trading and
other products are determined on weighted average basis. By-products
are valued at net realisable value.
K. Revenue Recognition
Revenue is recognized only when it can be reliably measured and it is
reasonable to expect ultimate collection. Turnover includes sale of
goods, services, sales tax, service tax, excise duty and sales during
trial run period, adjusted for discounts (net), Value Added Tax (VAT)
and gain / loss on corresponding hedge contracts. Dividend income is
recognized when right to receive is established. Interest income is
recognized on time proportion basis taking into account the amount
outstanding and rate applicable.
L. Excise Duty / Service Tax and Sales Tax / Value Added Tax
Excise duty / Service tax is accounted on the basis of both, payments
made in respect of goods cleared / services provided as also provision
made for goods lying in bonded warehouses. Sales tax / Value added tax
paid is charged to Profit and Loss account.
M. Employee Benefits
(i) Short-term employee benefits are recognised as an expense at the
undiscounted amount in the profit and loss account of the year in which
the related service is rendered.
(ii) Post employment and other long term employee benefits are
recognised as an expense in the Profit and Loss account for the year in
which the employee has rendered services. The expense is recognised at
the present value of the amounts payable determined using actuarial
valuation techniques. Actuarial gains and losses in respect of post
employment and other long term benefits are charged to the Profit and
Loss account.
(iii) In respect of employees stock options, the excess of fair price
on the date of grant over the exercise price is recognised as deferred
compensation cost amortised over the vesting period.
N. Employee Separation Costs
Compensation to employees who have opted for retirement under the
voluntary retirement scheme of the Company is charged to the Profit and
Loss account in the year of exercise of option.
O. Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for its intended use. All other
borrowing costs are charged to Profit and Loss account.
P. Financial Derivatives and Commodity Hedging Transactions
In respect of derivative contracts, premium paid and gains / losses on
settlement are recognised in the Profit and Loss account except in case
where they relate to the acquisition or construction of fixed assets,
in which case, they are adjusted to the carrying cost of such assets.
Q. Accounting for Oil and Gas Activity
The Company has adopted Full Cost Method of accounting for its Oil and
Gas activity and all costs incurred in acquisition, exploration and
development are accumulated considering the country as a cost centre.
Oil and Gas Joint Ventures are in the nature of Jointly Controlled
Assets. Accordingly, assets and liabilities as well as income and
expenditure are accounted on the basis of available information on line
by line basis with similar items in the Companys financial statements,
according to the participating interest of the Company.
R. Provision for Current and Deferred Tax
Provision for current tax is made after taking into consideration
benefits admissible under the provisions of the Income-tax Act, 1961.
Deferred tax resulting from "timing difference" between taxable and
accounting income is accounted for using the tax rates and laws that
are enacted or substantively enacted as on the balance sheet date.
Deferred tax asset is recognised and carried forward only to the extent
that there is a virtual certainty that the asset will be realised in
future.
S. Premium on Redemption of Bonds / Debentures
Premium on redemption of bonds / debentures, net of tax impact, are
adjusted against the Securities Premium Account.
T. Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognised but are disclosed in the
notes. Contingent Assets are neither recognized nor disclosed in the
financial statements.
Mar 31, 2010
A. Basis of Preparation of Financial Statements
The financial statements are prepared under the historical cost
convention, except for certain fixed assets which are revalued in
accordance with the generally accepted accounting principles in India
and the provisions of the Companies Act, 1956.
B. Use of Estimates
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Difference
between the actual results and estimates are recognised in the period
in which the results are known/ materialised.
C. Own Fixed Assets
Fixed Assets are stated at cost net of cenvat / value added tax and
includes amounts added on revaluation, less accumulated depreciation
and impairment loss, if any. All costs, including financing costs till
commencement of commercial production, net charges on foreign exchange
contracts and adjustments arising from exchange rate variations
attributable to the fixed assets are capitalised.
D. Leased Assets
a) Operating Leases: Rentals are expensed with reference to lease terms
and other considerations.
b) (i) Finance leases prior to 1st April, 2001: Rentals are expensed
with reference to lease terms and other considerations.
(ii) Finance leases on or after 1st April, 2001: The lower of the fair
value of the assets and present value of the minimum lease rentals is
capitalised as fixed assets with corresponding amount shown as lease
liability. The principal component in the lease rental is adjusted
against the lease liability and the interest component is charged to
Profit and Loss account.
c) However, rentals referred to in (a) or (b) (i) above and the
interest component referred to in (b) (ii) above pertaining to the
period upto the date of commissioning of the assets are capitalised.
d) All assets given on finance lease are shown as receivables at an
amount equal to net investment in the lease. Initial direct costs in
respect of lease are expensed in the year in which such costs are
incurred. Income from lease assets is accounted by applying the
interest rate implicit in the lease to the net investment.
E. Intangible Assets
Intangible Assets are stated at cost of acquisition less accumulated
amortisation.
F. Depreciation
Depreciation on fixed assets is provided to the extent of depreciable
amount on written down value method (WDV) at the rates and in the
manner prescribed in Schedule XIV to the Companies Act, 1956 over their
useful life except,: on fixed assets pertaining to refining segment and
SEZ units, depreciation is provided on Straight Line method (SLM) over
their useful life; on fixed bed catalyst with a life of 2 years or
more, depreciation is provided over its useful life; on fixed bed
catalysts having life of less than 2 years, 100% depreciation is
provided in the year of addition; on additions or extensions forming an
integral part of existing plants, including incremental cost arising on
account of translation of foreign currency liabilities for acquisition
of fixed assets and insurance spares, depreciation is provided as
aforesaid over the residual life of the respective plants; on
development rights and producing properties, depreciation is provided
in proportion of oil and gas production achieved vis-a-vis the proved
reserves (net of reserves to be retained to cover abandonment costs as
per the production sharing contract and the Government of IndiaÃs share
in the reserves) considering the estimated future expenditure on
developing the reserves as per technical evaluation; premium on
leasehold land is amortised over the period of lease; technical know
how is amortised over the useful life of the underlying assets and
computer software is amortised over a period of 5 years; intangible
assets - others are amortised over the period of agreement of right to
use, provided in case of jetty the aggregate amount amortised to date
is not less than the aggregate rebate availed by the company; on
amounts added on revaluation, depreciation is provided as aforesaid
over the residual life of the assets as certified by the valuersÃ; on
assets acquired under finance lease from 1st April 2001, depreciation
is provided over the lease term.
G. Impairment of Assets
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. An impairment loss is charged to the Profit and
Loss Account in the year in which an asset is identified as impaired.
The impairment loss recognised in prior accounting period is reversed
if there has been a change in the estimate of recoverable amount.
H. Foreign Currency Transactions
(a) Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing on the date of the transaction or that
approximates the actual rate at the date of the transaction.
(b) Monetary items denominated in foreign currencies at the year end
are restated at year end rates. In case of items which are covered by
forward exchange contracts, the difference between the year end rate
and rate on the date of the contract is recognised as exchange
difference and the premium paid on forward contracts is recognised over
the life of the contract.
(c) Non monetary foreign currency items are carried at cost.
(d) In respect of branches, which are integral foreign operations, all
transactions are translated at rates prevailing on the date of
transaction or that approximates the actual rate at the date of
transaction. Branch monetary assets and liabilities are restated at the
year end rates.
(e) Any income or expense on account of exchange difference either on
settlement or on translation is recognised in the Profit and Loss
account except in case of long term liabilities, where they relate to
acquisition of fixed assets, in which case they are adjusted to the
carrying cost of such assets.
I. Investments
Current investments are carried at lower of cost and quoted/fair value,
computed category wise. Long Term Investments are stated at cost.
Provision for diminution in the value of long-term investments is made
only if such a decline is other than temporary.
J. Inventories
Items of inventories are measured at lower of cost and net realisable
value after providing for obsolescence, if any. Cost of inventories
comprises of cost of purchase, cost of conversion and other costs
incurred in bringing them to their respective present location and
condition. Cost of raw materials, process chemicals, stores and spares,
packing materials, trading and other products are determined on
weighted average basis. By-products are valued at net realisable value.
Cost of work-in-progress and finished stock is determined on absorption
costing method.
K. Revenue Recognition
Revenue is recognized only when it can be reliably measured and it is
reasonable to expect ultimate collection. Turnover includes sale of
goods, services, sales tax, service tax, excise duty and sales during
trial run period, adjusted for discounts (net), Value Added Tax (VAT)
and gain / loss on corresponding hedge contracts. Dividend income is
recognized when right to receive is established. Interest income is
recognized on time proportion basis taking into account the amount
outstanding and rate applicable.
L. Excise Duty and Sales Tax / Value Added Tax
Excise duty is accounted on the basis of both, payments made in respect
of goods cleared as also provision made for goods lying in bonded
warehouses. Sales tax / Value added tax paid is charged to Profit and
Loss account.
M. Employee Benefits
(i) Short-term employee benefits are recognised as an expense at the
undiscounted amount in the profit and loss account of the year in which
the related service is rendered.
(ii) Post employment and other long term employee benefits are
recognised as an expense in the Profit and Loss account for the year in
which the employee has rendered services. The expense is recognised at
the present value of the amounts payable determined using actuarial
valuation techniques. Actuarial gains and losses in respect of post
employment and other long term benefits are charged to the Profit and
Loss account.
(iii) I n respect of employees stock options, the excess of fair price
on the date of grant over the exercise price is recognised as deferred
compensation cost amortised over the vesting period.
N. Employee Separation Costs
Compensation to employees who have opted for retirement under the
voluntary retirement scheme of the Company is charged to the Profit and
Loss account in the year of exercise of option.
O. Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for its intended use. All other
borrowing costs are charged to Profit and Loss account.
P. Financial Derivatives and Commodity Hedging Transactions
In respect of derivative contracts, premium paid, gains / losses on
settlement and provision for losses for cash flow hedges are recognised
in the Profit and Loss account except in case where they relate to the
acquisition or construction of fixed assets, in which case, they are
adjusted to the carrying cost of such assets.
Q. Accounting for Oil and Gas Activity
The Company has adopted Full Cost Method of accounting for its Oil and
Gas activity and all costs incurred in acquisition, exploration and
development are accumulated considering the country as a cost centre.
Oil and Gas Joint Ventures are in the nature of Jointly Controlled
Assets. Accordingly, assets and liabilities as well as income and
expenditure are accounted on the basis of available information on line
by line basis with similar items in the CompanyÃs financial statements,
according to the participating interest of the Company.
R. Provision for Current and Deferred Tax
Provision for current tax is made after taking into consideration
benefits admissible under the provisions of the Income-tax Act, 1961.
Deferred tax resulting from Ãtiming differenceà between taxable and
accounting income is accounted for using the tax rates and laws that
are enacted or substantively enacted as on the balance sheet date.
Deferred tax asset is recognised and carried forward only to the extent
that there is a virtual certainty that the asset will be realised in
future.
S. Premium on Redemption of Bonds / Debentures
Premium on redemption of bonds / debentures, net of tax impact, are
adjusted against the Securities Premium Account.
T. Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognized but are disclosed in the
notes. Contingent Assets are neither recognized nor disclosed in the
financial statements.
Mar 31, 2009
A. Basis of Preparation of Financial Statements
The financial statements are prepared under the historical cost
convention, except for certain fixed assets which are revalued in
accordance with the generally accepted accounting principles in India
and the provisions of the Companies Act, 1956.
B. Use of Estimates
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Difference
between the actual results and estimates are recognised in the period
in which the results are known/ materialised.
C. Own Fixed Assets
Fixed Assets are stated at cost net of cenvat / value added tax and
includes amounts added on revaluation, less accumulated depreciation
and impairment loss, if any. All costs, including financing costs till
commencement of commercial production, net charges on foreign exchange
contracts and adjustments arising from exchange rate variations
attributable to the fixed assets are capitalised.
D. Leased Assets
a) Operating Leases: Rentals are expensed with reference to lease terms
and other considerations.
b) (i) Finance leases prior to 1st April, 2001: Rentals are expensed
with reference to lease terms and other considerations.
(ii) Finance leases on or after 1st April, 2001: The lower of the fair
value of the assets and present value of the minimum lease rentals is
capitalised as fixed assets with corresponding amount shown as lease
liability. The principal component in the lease rental is adjusted
against the lease liability and the interest component is charged to
profit and loss account.
c) However, rentals referred to in (a) or (b) (i) above and the
interest component referred to in (b) (ii) above pertaining to the
period upto the date of commissioning of the assets are capitalised.
d) All assets given on finance lease are shown as receivables at an
amount equal to net investment in the lease. Initial direct costs in
respect of lease are expensed in the year in which such costs are
incurred. Income from lease assets is accounted by applying the
interest rate implicit in the lease to the net investment.
E. Intangible Assets
Intangible Assets are stated at cost of acquisition less accumulated
amortisation.
F. Depreciation
Depreciation on fixed assets is provided on written down value method
(WDV) at the rates and in the manner prescribed in Schedule XIV to the
Companies Act, 1956 over their useful life except,: on fixed assets
pertaining to refining segment, depreciation is provided on Straight
Line method (SLM) over their useful life; on fixed bed catalyst with a
life of 2 years or more, depreciation is provided over its useful life
; on fixed bed catalysts having life of less than 2 years, 100%
depreciation is provided in the year of addition; on additions or
extensions forming an integral part of existing plants, including
incremental cost arising on account of translation of foreign currency
liabilities for acquisition of fixed assets and insurance spares,
depreciation is provided as aforesaid over the residual life of the
respective plants; on development rights and producing properties,
depreciation is provided in proportion of oil and gas production
achieved vis-a-vis the proved reserves (net of reserves to be retained
to cover abandonment costs as per the production sharing contract and
the Government of IndiaÃs share in the reserves) considering the
estimated future expenditure on developing the reserves as per
technical evaluation; premium on leasehold land is amortised over the
period of lease; technical know how is amortised over the useful life
of the underlying assets and computer software is amortised over a
period of 5 years; intangible assets - others are amortised over the
period of agreement of right to use, provided in case of jetty the
aggregate amount amortised to date is not less than the aggregate
rebate availed by the Company; on amounts added on revaluation,
depreciation is provided as aforesaid over the residual life of the
assets as certified by the valuersÃ; on assets acquired under finance
lease from 1st April 2001, depreciation is provided over the lease
term.
G. Impairment of Assets
An asset is treated as impaired when the carrying cost of assets
exceeds its recoverable value. An impairment loss is charged to the
Profit and Loss Account in the year in which an asset is identified as
impaired. The impairment loss recognised in prior accounting period is
reversed if there has been a change in the estimate of recoverable
amount.
H. Foreign Currency Transactions
(a) Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing on the date of the transaction or that
approximates the actual rate at the date of the transaction.
(b) Monetary items denominated in foreign currencies at the year end
are restated at year end rates. In case of items which are covered by
forward exchange contracts, the difference between the year end rate
and rate on the date of the contract is recognised as exchange
difference and the premium paid on forward contracts is recognised over
the life of the contract.
(c) Non monetary foreign currency items are carried at cost.
(d) In respect of branches, which are integral foreign operations, all
transactions are translated at rates prevailing on the date of
transaction or that approximates the actual rate at the date of
transaction. Branch monetary assets and liabilities are restated at the
year end rates.
(e) Any income or expense on account of exchange difference either on
settlement or on translation is recognised in the profit and loss
account except in case of long term liabilities, where they relate to
acquisition of fixed assets, in which case they are adjusted to the
carrying cost of such assets.
I. Investments
Current investments are carried at lower of cost or quoted/ fair value,
computed category wise. Long Term Investments are stated at cost.
Provision for diminution in the value of long-term investments is made
only if such a decline is other than temporary.
J. Inventories
Items of inventories are measured at lower of cost or net realisable
value after providing for obsolescence, if any. Cost of inventories
comprises of cost of purchase, cost of conversion and other costs
incurred in bringing them to their respective present location and
condition. Cost of raw materials, process chemicals, stores and spares,
packing materials, trading and other products are determined on
weighted average basis. By-products are valued at net realisable value.
Cost of work-in-progress and finished stock is determined on absorption
costing method.
K. Turnover
Turnover includes sale of goods, services, sales tax, service tax,
excise duty and sales during trial run period, adjusted for discounts
(net), Value Added Tax (VAT) and gain / loss on corresponding hedge
contracts.
L. Excise Duty and Sales Tax / Value Added Tax
Excise duty is accounted on the basis of both, payments made in respect
of goods cleared as also provision made for goods lying in bonded
warehouses. Sales tax / Value added tax paid is charged to profit and
loss account.
M. Employee Benefits
(i) Short-term employee benefits are recognised as an expense at the
undiscounted amount in the profit and loss account of the year in which
the related service is rendered.
(ii) Post employment and other long term employee benefits are
recognised as an expense in the profit and loss account for the year in
which the employee has rendered services. The expense is recognised at
the present value of the amounts payable determined using actuarial
valuation techniques. Actuarial gains and losses in respect of post
employment and other long term benefits are charged to the profit and
loss account.
(iii) I n respect of employees stock options, the excess of fair price
on the date of grant over the exercise price is recognised as deferred
compensation cost amortised over the vesting period.
N. Employee Separation Costs
Compensation to employees who have opted for retirement under the
voluntary retirement scheme of the Company is charged to the profit and
loss account in the year of exercise of option.
O. Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to profit and loss account.
P. Financial Derivatives and Commodity Hedging Transactions
In respect of derivative contracts, premium paid, gains / losses on
settlement and provision for losses for cash flow hedges are recognised
in the profit and loss account except in case where they relate to the
acquisition or construction of fixed assets, in which case, they are
adjusted to the carrying cost of such assets.
Q. Accounting for Oil and Gas Activity
The Company has adopted Full Cost Method of accounting for its Oil and
Gas activity and all costs incurred in acquisition, exploration and
development are accumulated considering the country as a cost centre.
Oil and Gas Joint Ventures are in the nature of Jointly Controlled
Assets. Accordingly assets and liabilities as well as income and
expenditure are accounted on the basis of available information on line
by line basis with similar items in the CompanyÃs financial statements,
according to the participating interest of the Company.
R. Provision for Current and Deferred Tax
Provision for current tax is made after taking into consideration
benefits admissible under the provisions of the Income-tax Act, 1961.
Deferred tax resulting from Ãtiming differenceà between taxable and
accounting income is accounted for using the tax rates and laws that
are enacted or substantively enacted as on the balance sheet date. The
deferred tax asset is recognised and carried forward only to the extent
that there is a virtual certainty that the asset will be realised in
future.
S. Premium on Redemption of Bonds / Debentures
Premium on redemption of bonds / debentures, net of tax impact, are
adjusted against the Securities Premium Account.
T. Provision, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognised but are disclosed in the
notes. Contingent Assets are neither recognised nor disclosed in the
financial statements.
Mar 31, 2008
A. Basis of Preparation of Financial Statements
The financial statements are prepared under the historical cost
convention, except for certain fixed assets which are revalued, in
accordance with the generally accepted accounting principles in India
and the provisions of the Companies Act, 1956.
B. Use of Estimates
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period.
Difference between the actual results and estimates are recognised in
the period in which the results are known / materialised.
C. Own Fixed Assets
Fixed Assets are stated at cost net of cenvat / value added tax and
includes amounts added on revaluation, less accumulated depreciation
and impairment loss, if any. All costs, including financing costs till
commencement of commercial production, net charges on foreign exchange
contracts and adjustments arising from exchange rate variations
attributable to the fixed assets are capitalised.
D. Leased Assets
a) Operating Leases : Rentals are expensed with reference to lease
terms and other considerations.
b) (i) Finance leases prior to 1st April, 2001: Rentals are expensed
with reference to lease terms and other considerations.
(ii) Finance leases on or after 1st April, 2001 : The lower of the fair
value of the assets and present value of the minimum lease rentals is
capitalised as fixed assets with corresponding amount shown as lease
liability. The principal component in the lease rental is adjusted
against the lease liability and the interest component is charged to
profit and loss account.
c) However, rentals referred to in (a) or (b) (i) above and the
interest component referred to in (b) (ii) above pertaining to the
period upto the date of commissioning of the assets are capitalized.
d) All assets given on finance lease are shown as receivables at an
amount equal to net investment in the lease. Initial direct costs in
respect of lease are expensed in the year in which such costs are
incurred. Income from lease assets is accounted by applying the
interest rate implicit in the lease to the net investment.
E. Intangible Assets
Intangible Assets are stated at cost of acquisition less accumulated
amortisation. Technical know how is amortised over the useful life of
the underlying assets. Computer Software is amortised over a period of
5 years. Amortisation is done on written down value basis except in
respect of crude oil refining where it is amortised on straight-line
basis.
F. Depreciation
Depreciation on fixed assets is provided on written down value method
(WDV) at the rates and in the manner prescribed in Schedule XIV to the
Companies Act, 1956 over their useful life except, on fixed assets
pertaining to crude oil refining and marketing infrastructure for
petroleum products where depreciation is charged on Straight Line
method (SLM) over their useful life; on fixed bed catalyst with a life
of 2 years or more depreciation is provided over its useful life; on
fixed bed catalysts having life of less than 2 years 100% depreciation
is provided in the year of addition; on additions or extensions forming
an integral part of existing plants, including incremental cost arising
on account of translation of foreign currency liabilities for
acquisition of fixed assets and insurance spares, depreciation is
provided as aforesaid over the residual life of the respective plants;
on development rights and producing properties depreciation is provided
in proportion of oil and gas production achieved vis-a-vis the proved
reserves (net of reserves to be retained to cover abandonment costs as
per the production sharing contract and the Government of IndiaÂs share
in the reserves) considering the estimated future expenditure on
developing the reserves as per technical evaluation; premium on
leasehold land is amortised over the period of lease; cost of jetty is
amortised over the period of agreement of right to use, provided
however that the aggregate amount amortised to date is not less than
the aggregate rebate availed by the Company; on amounts added on
revaluation depreciation is charged as aforesaid over the residual life
of the assets as certified by the valuers; on assets acquired under
finance lease from 1st April, 2001 depreciation is spread over the
lease term.
G. Impairment of Assets
An asset is treated as impaired when the carrying cost of assets
exceeds its recoverable value. An impairment loss is charged to the
profit and loss account in the year in which an asset is identified as
impaired. The impairment loss recognized in prior accounting period is
reversed if there has been a change in the estimate of recoverable
amount.
H. Foreign Currency Transactions
(a) Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing on the date of the transaction.
(b) Monetary items denominated in foreign currencies at the year end
are restated at year end rates. In case of items which are covered by
forward exchange contracts, the difference between the year end rate
and rate on the date of the contract is recognized as exchange
difference and the premium paid on forward contracts is recognized over
the life of the contract.
(c) Non monetary foreign currency items are carried at cost.
(d) In respect of branches, which are integral foreign operations, all
transactions are translated at rates prevailing on the date of
transaction or that approximates the actual rate on the date of
transaction. Branch monetary assets and liabilities are restated at the
year end rates.
(e) Any income or expense on account of exchange difference either on
settlement or on translation is recognised in the profit and loss
account except in cases where they relate to acquisition of fixed
assets, in which case they are adjusted to the carrying cost of such
assets.
I. Investments
Current investments are carried at the lower of cost or quoted / fair
value, computed category wise. Long Term Investments are stated at
cost. Provision for diminution in the value of long-term investments is
made only if such a decline is other than temporary.
J. Inventories
Items of inventories are measured at lower of cost or net realisable
value after providing for obsolescence, if any. Cost of inventories
comprises of cost of purchase, cost of conversion and other costs
incurred in bringing them to their respective present location and
condition. Cost of raw materials, process chemicals, stores and spares,
packing materials, trading and other products are determined on
weighted average basis. By-products are valued at net realisable value.
Cost of work-in-progress and finished stock is determined on absorption
costing method.
K. Turnover
Turnover includes sale of goods, services, sales tax, service tax,
excise duty and sales during trial run period, adjusted for discounts
(net), Value Added Tax (VAT) and gain / loss on corresponding hedge
contracts.
L. Excise Duty and Sales Tax
Excise duty is accounted on the basis of both, payments made in respect
of goods cleared as also provision made for goods lying in bonded
warehouses. Sales tax paid is charged to profit and loss account.
M. Employee Benefits
(i) Short-term employee benefits are recognized as an expense at the
undiscounted amount in the profit and loss account of the year in which
the related service is rendered.
(ii) Post employment and other long term employee benefits are
recognized as an expense in the profit and loss account for the year in
which the employee has rendered services. The expense is recognized at
the present value of the amount payable determined using actuarial
valuation techniques. Actuarial gains and losses in respect of post
employment and other long term benefits are charged to the profit and
loss account.
(iii) In respect of employees stock options, the excess of fair price
on the date of grant over the exercise price is recognized as deferred
compensation cost amortised over vesting period.
N. Employee Separation Costs
Compensation to employees who have opted for retirement under the
voluntary retirement scheme of the Company is charged to the profit and
loss account in the year of exercise of option.
O. Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that takes necessarily
substantial period of time to get ready for its intended use. All other
borrowing costs are charged to revenue.
P. Financial Derivatives and Commodity Hedging Transactions
In respect of derivative contracts, premium paid, gains / losses on
settlement and provision for losses for cash flow hedges are recognised
in the Profit and Loss Account, except in case where they relate to
borrowing costs that are attributable to the acquisition or
construction of fixed assets, in which case, they are adjusted to the
carrying cost of such assets.
Q. Accounting for Oil and Gas Activity
The Company has adopted Full Cost Method of accounting for its Oil and
Gas activity and all costs incurred in acquisition, exploration and
development are accumulated considering the country as a cost centre.
Oil and Gas Joint Ventures are in the nature of Jointly Controlled
Assets. Accordingly assets and liabilities as well as income and
expenditure are accounted, on the basis of available information, on
line by line basis with similar items in the CompanyÂs financial
statements, according to the participating interest of the Company.
R. Provision for Current and Deferred Tax
Provision for current tax is made after taking into consideration
benefits admissible under the provisions of the Income Tax Act, 1961.
Deferred tax resulting from Âtiming differences between taxable and
accounting income is accounted for using the tax rates and laws that
are enacted or substantively enacted as on the balance sheet date. The
deferred tax asset is recognised and carried forward only to the extent
that there is a virtual certainty that the asset will be realised in
future.
S. Premium on Redemption of Bonds / Debentures
Premium on redemption of Bonds / Debentures, net of tax impact, are
adjusted against the Securities Premium Account.
T. Provision, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognised but are disclosed in the
notes. Contingent Assets are neither recognised nor disclosed in the
financial statements.