2. Material Accounting Policy Information
2.1. Property, Plant and Equipment
2.1.1. Freehold lands are carried at cost. All other items of Property, Plant and Equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any;
2.1.2. Technical know-how / licence fee relating to plants / facilities are capitalized as part of cost of the underlying asset;
2.1.3. Spare parts which are meeting the requirement of Property, Plant and Equipment are capitalized as Property, Plant and
Equipment in case the unit value of the spare part is above the threshold limit (*). In other cases, the spare parts are inventorised on procurement and charged to Statement of Profit and Loss on consumption;
2.1.4. Gas distribution systems are treated as commissioned when supply of gas reaches to the individual points.
2.1.5. An item of Property, Plant and Equipment and any significant part initially recognised separately as part of Property, Plant and
Equipment is de-recognised upon disposal; or when no future economic benefits are expected from its use or disposal; or when the Property, Plant and Equipment has been re-classified as ready for disposal. Any gain or loss arising on de-recognition of the asset is included in the Statement of Profit and Loss when the asset is de-recognised;
2.1.6. The residual values and useful lives of Property, Plant and Equipment are reviewed during each financial year and changes, if any, are accounted for as change in accounting estimates on a prospective basis;
2.1.7. The Corporation has chosen the carrying value of Property, Plant and Equipment existing as per previous GAAP as on date of transition to Ind AS i.e. 1st April, 2015 as deemed cost.
2.2. Depreciation / amortization
2.2.1. Depreciation on Property, Plant and Equipment is provided on straight line method. In accordance with requirements prescribed under Schedule II of Companies Act, 2013, the Corporation has assessed the estimated useful lives of its Property, Plant and Equipment, and has adopted the useful lives and residual value as prescribed in Schedule II, except for the following:
b) In case of assets covered under specific arrangements e.g. agreements entered into with Railways Consumer Depots, useful life as per agreement or Schedule II to the Act, whichever is lower, is considered.
c) In case, the useful life of an item of Property, Plant and Equipment is provided separately under an Act/Regulation which is at variance with the useful life provided in Schedule II to the Companies Act 2013, the lower of useful life as provided is considered.
2.2.2. The Corporation identifies and depreciates significant components of the main asset (which have different useful lives as compared to the main asset) based on the individual useful life of those components. Useful life for such components is assessed by considering historical experience, internal technical inputs and any other relevant factor;
2.2.3. Items of Property, Plant and Equipment costing not more than the threshold limit (*) are depreciated at 100 percent in the year of acquisition except LPG Cylinders and Pressure Regulators (excluding cylinders held for sale) which are depreciated over a useful life of 15 years based on the technical assessment;
2.2.4. Depreciation on spare parts specific to an item of Property, Plant and Equipment is based on life of the related Property, Plant and Equipment. In other cases, the spare parts are depreciated over their estimated useful life based on the technical assessment;
2.2.5. Depreciation / amortization is charged on additions / deletions on pro-rata monthly basis including the month of addition / deletion.
2.3. Intangible assets
2.3.1. Intangible assets are carried at cost net of accumulated amortization and accumulated impairment losses, if any.
2.3.2. Assets, where entire output generated is committed to be sold to a public service entity (including Government body) for almost the entire useful life of the asset, are classified as intangible assets as per the requirements of Ind AS and are amortised (after retaining the residual value, if applicable) over their useful life.
2.3.3. The useful lives of intangible assets are assessed as either finite or indefinite.
2.3.4. Intangible assets with finite lives are amortised on straight line basis over their useful life and tested for impairment annually at the Cash Generating Unit (CGU) level.
2.3.5. Intangible assets with indefinite useful lives, such as 'right of way' which is perpetual and absolute in nature, are not amortised, but are tested for impairment annually at the CGU level.
2.3.6. Technical know-how / license fee relating to production process and process design are recognized as Intangible Assets.
2.3.7. Estimated lives of intangible assets (acquired) are as follows:
• Software: 2 to 4 years
• Technical know-how/license fees: 2 to 25 years
• Right to use - wind mills: 22 years
2.3.8. The Corporation has chosen the carrying value of Intangible Assets existing as per previous GAAP as on date of transition to Ind AS i.e., 1st April 2015 as deemed cost.
2.4. Capital Work in Progress / Intangible Assets under Development
Expenditure, including eligible borrowing cost, net of income earned, during the construction/development period of Property, Plant and Equipment, and Intangible Assets respectively is included under capital work-in-progress or intangible assets under development, as the case be, and the same is attributed to the respective assets when they are ready for intended use.
2.5. Borrowing Cost
2.5.1 Borrowing costs directly attributable to the acquisition or construction of a qualifying asset are capitalised as part of the cost of the asset till the month in which the asset is ready for intended use. Capitalisation of borrowing costs is suspended when active development on the qualifying assets is interrupted except when temporary and charged to the Statement of Profit and Loss during such periods. All other borrowing costs are expensed in the period in which they are incurred;
2.5.2. Borrowing cost, if any, incurred on General Borrowings used for projects is capitalised at the rate computed on weighted average basis.
2.6. Non-current assets held for sale
2.6.1. Non-current assets are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met, only when the sale is highly probable and the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sale of such assets;
2.6.2. Non-current assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell;
2.7. Leases
2.7.1 As Lessee
At the commencement of the lease, the Corporation recognises right-of-use asset and lease liability, with an exception of short-term leases or lease of low-value underlying assets. The right-of-use asset is measured at cost, less any accumulated depreciation and impairment loss, if any, and adjusted for any remeasurement of lease liabilities.
The lease liability is measured at Present Value of the lease payments to be made during the course of the lease by using incremental borrowing rate that prevail at the beginning of each reporting period for a similar tenure (such as, AAA Corporate Bond rates for varying tenures of 5, 10 & 15 years) for all of the contracts executed in that period. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made.
The Corporation has elected not to separate non-lease components in a contract and account as one unified lease contract covering all underlying assets by using the practical expedient prescribed in the Standard.
2.7.2 As Lessor
Rental income from operating lease is recognised on a straight-line basis over the term of the relevant lease except where another systematic basis is more representative of the time pattern of the benefit derived from the asset given on lease.
2.8. Impairment of Non-Financial Assets
Non-financial assets other than inventories, deferred tax assets, and non-current assets classified as held for sale are reviewed at each Balance Sheet date to determine whether there is any indication of impairment;
During annual impairment testing, the Corporation estimates the asset's recoverable amount. The recoverable amount is the higher of the asset's or Cash-Generating Unit's (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets;
The impairment testing is based on detailed budget and forecast which is prepared separately for each of the CGUs to which the individual assets are allocated and generally covers a period of 15 years. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, the Company extrapolates cash flow projections in the budget using a steady growth rate for the subsequent years, unless a higher rate can be justified.
An impairment loss is recognised whenever the carrying amount of asset or assets of cash generating unit (CGU) exceeds their recoverable amount.
2.9. Inventories
2.9.1. Valuation of inventories (including in transit) of different categories is as under: -
a) Crude oil is valued at the lower of cost [on First in First Out (FIFO) basis] and net realisable value. Crude oil is not written down below cost except in cases where their prices have declined subsequently and it is estimated that the cost of the finished goods will exceed their net realisable value;
b) Raw materials other than 'a)' above are valued at the lower of cost (on weighted average basis) and net realisable value;
c) Stock-in process is valued at the lower of raw material cost plus cost of conversion and net realisable value;
d) Empty packages are valued at weighted average cost;
e) Stores and spares which do not meet the recognition criteria under Property, Plant and Equipment are valued at weighted average cost. Surplus, obsolete and slow moving stores and spares, if any, are valued at the lower of cost and net realizable value. Surplus items, when transferred from completed projects are valued at cost / estimated value, pending periodic assessment / ascertainment of condition. Stores and Spares in transit are valued at cost;
f) Finished products other than Lubricants and petrochemicals are valued at the lower of cost (on FIFO basis month-wise) and net realisable value;
g) Finished products (lubricants and petrochemicals) are valued at the lower of cost (on weighted average basis) and net realisable value;
2.9.2. Customs duty on Raw materials/Finished goods lying in bonded warehouse are provided for at the applicable rates except where liability to pay duty is transferred to consignee;
2.9.3. Excise duty on finished stocks lying at manufacturing locations is provided for at the assessable value applicable at each of the locations based on applicable duty;
2.9.4. The net realisable value of finished goods and stock in trade are final selling prices for sales to oil marketing companies and depot prices applicable to the locations. For the purpose of inventory valuation, the proportion of sales to oil marketing companies and consumer sales are determined on location wise and product wise sales of subsequent period.
2.10. Revenue recognition
2.10.1. Sale of goods
Revenue is recognised at transaction price when:
a) the Corporation satisfies a performance obligation by transferring control of a promised goods / services to a customer; and
b) it is probable that the Corporation will collect the consideration to which it will be entitled to in exchange for the goods or services that will be transferred to the customer.
The transaction price is the amount of consideration to which the Corporation expects to be entitled in exchange for transferring promised goods or services to a customer including excise duties, as applicable and is measured at the consideration received or receivable, net of returns, taxes or duties collected on behalf of the government and trade discounts or rebates, as applicable;
Transaction price is allocated on each performance obligation and is recognised as and when the particular performance obligation is satisfied either at a point in time or over a period of time;
Revenue is allocated between Loyalty Programs and other components of the sale. The amount allocated to the Loyalty Program is deferred, and is recognised as Revenue when the Corporation has fulfilled its obligation to supply the products under the terms of the Program or when it is no longer probable that the points under the Program will be redeemed.
Claims, including subsidy on Liquified Petroleum Gas (LPG) and Superior Kerosene Oil (SKO), from Government of India, are booked on in-principle acceptance thereof on the basis of available instructions / clarifications, subject to final adjustments as stipulated.
2.10.2 Interest income is recognised taking into account the amount outstanding and the applicable effective interest rate;
2.10.3 Dividend is recognised when right to receive the payment is established;
2.10.4 Income from sale of scrap is accounted for on realization.
2.11. Accounting / classification of expenditure and income
2.11.1. Income / expenditure in aggregate pertaining to prior year(s) above the threshold limit (*) are corrected retrospectively;
2.11.2. Prepaid expenses upto threshold limit (*) in each case, are charged to revenue as and when incurred;
2.11.3. Insurance claims are accounted on acceptance basis;
2.11.4. All other claims / entitlements are accounted on the merits of each case.
2.12. Employee benefits
2.12.1. Short-term employee benefit
Short term employee benefits are recognized as an expense at undiscounted amount in the Statement of Profit & Loss of the year in which the related services are rendered by the employees.
2.12.2. Post-employment benefits Defined Contribution Plans
Obligations for contributions to defined contribution plans are expensed in the Statement of Profit & Loss of the year in which the related services are rendered by the employees.
Defined Benefit Plans
Post-employment benefits and Other Long Term Employee Benefits
The Corporation operates defined benefit plans for gratuity, pension, post-retirement medical benefits, ex-gratia and resettlement allowance. The obligation towards such defined benefits is determined on actuarial valuation by independent actuaries at the year-end by using Projected Unit Credit method;
The Corporation's contribution to the Provident Fund is remitted to a separate Trust established for this purpose based on a fixed percentage of the eligible employee's salary and charged to the Statement of Profit and Loss.
Liability towards other long term employee benefits (leave encashment and death benefits) are determined on actuarial valuation by independent actuaries using Projected Unit Credit method;
Re-measurement of the net defined benefit liability, which comprises of actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised in Other Comprehensive Income. Re-measurements gains and losses in respect of other long-term benefits are recognized in the Statement of Profit and Loss in the period in which they arise;
Prepaid contributions are recognized as an asset to the extent that a cash refund or a set-off in future payments is available.
2.13. Foreign currency transactions
2.13.1. Monetary items
Transactions in foreign currencies are initially recorded at the respective exchange rates prevailing at the date of transaction;
Monetary assets and liabilities denominated in foreign currencies are translated at spot 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 either as 'Exchange Rate Variation' or as 'Finance Costs' (to the extent regarded as an adjustment to borrowing costs), as the case maybe.
2.13.2. Non-Monetary items
Non-monetary items, other than those measured at fair value, denominated in foreign currency, are valued at the exchange rate prevailing on the date of transaction.
2.14. Investment in Subsidiary, associates and joint ventures
Investments in equity shares of Subsidiaries, Joint Ventures & Associates are recorded at cost and reviewed for impairment in case of any indication;
The Corporation has chosen the carrying value of the investment in Subsidiaries, associates and joint ventures existing as per previous GAAP as on date of transition to Ind AS i.e. 1st April 2015 as deemed cost.
2.15. Government Grants
2.15.1. Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with;
2.15.2. When the grant relates to an expense item, it is recognized in Statement of Profit and Loss on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed;
2.15.3. When the grant relates to property, plant and equipment, the cost of property, plant and equipment is shown at gross value and grant thereon is treated as liability (deferred income) and are credited to statement of profit and loss on a systematic basis over the useful life of the asset.
2.16. Exploration and Production expenditure
"Successful Efforts Method" of accounting is followed for Oil & Gas exploration and production activities, as stated below:
2.16.1. Cost of surveys, studies, carrying and retaining undeveloped properties is expensed out in the year of incurrence;
2.16.2. Cost of acquisition, drilling and development is treated as Capital Work-in-Progress when incurred, and the same is capitalised when the well is ready to commence commercial production. Depletion is calculated and charged as Depreciation using the Unit of Production method;
2.16.3. Accumulated costs on exploratory wells in progress are expensed out in the year in which these are determined to be dry or are of no further use, as the case may be;
2.16.4. The proportionate share in the assets, liabilities, income and expenditure of joint operations are accounted as per the participating interest in such joint operations.
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