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Accounting Policies of Chennai Petroleum Corporation Ltd. Company

Mar 31, 2015

BASIS OF PREPARATION

1.1 The financial statements are prepared under historical cost convention in accordance with the mandatory accounting standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014.

1.2 The preparation of financial statements requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities and disclosure of contingent liabilities as at the date of the financial statements. Management believes that these estimates and assumptions are reasonable and prudent However, actual results could differ from estimates.

2. FIXED ASSETS

2.1 Tangible Assets

2.1.1 Fixed assets are stated at cost of acquisition less accumulated depreciation / amortization.

2.1.2 Land acquired on perpetual lease as well as on lease for over 99 years is treated as free hold land

2.1.3 Land acquired on lease for 99 years or less is treated as leasehold land

2.1.4 Technical know-how / license fee relating to plants/facilities are capitalised as part of cost of the underlying asset.

2.2 Capitalisation of Construction Period Expenses

2.2.1 Revenue expenses exclusively attributable to projects incurred during construction period are capitalised

2.2.2 Financing cost incurred during construction period on loans specifically borrowed and utilised for projects is capitalised on quarterly basis up to the date of capitalisation.

2.2.3 Financing cost, if any, incurred on general borrowings used for projects is capitalised at the weighted average cost.

2.3 Capital Stores

2.3.1 Capital stores are valued at cost Specific provision is made for likely diminution in value, wherever required.

2.4 Intangible Assets

2.4.1 Technical know -how / license fee relating to production process and process design are accounted for as intangible assets and amortized on a straight line basis over a period of ten years or life of the said plant/facility, whichever is earlier.

2.4.2 Expenditure incurred on Research and Development, other than on capital account, is charged to revenue.

2.4.3 Costs incurred on computer software purchased/developed on or after 1st April 2003, resulting in future economic benefits are capitalized as Intangible Asset and amortised over a period of three years beginning from the quarter in which such software is capitalized However, where such computer software is still in development stage, costs incurred during the development stage of such software are accounted as 'Intangible Assets Under Development'.

2.4.4 Cost of Right of way for laying pipelines is capitalised and amortised on a straight line basis over the period of such Right of way or 99 years whichever is less.

2.5 Depreciation / Amortisation

2.5.1 Cost of tangible fixed assets (net of residual value) is depreciated on straight-line method on the useful life prescribed in Schedule II to the Companies Act, 2013. Depreciation is charged pro-rata on quarterly basis on assets, from/upto the quarter of capitalisation/sale, disposal / dismantled during the year. Residual value is considered between 1% to 5% of cost of assets.

2.5.2 Assets costing upto Rs. 5000/- per item are depreciated fully in the year of capitalisation. Insurance spares are depreciated fully over the remaining useful life of the main asset.

2.5.3 Capital expenditure on assets on which the ownership and control does not vest with the company are charged to revenue in the year in which it is incurred.

2.5.4 Cost of leasehold land (including premium) for 99 years or less is amortised over the lease period

2.6 Impairment of Assets

As at each balance sheet date, the carrying amount of Cash Generating Units/Assets is tested for impairment so as to determine:

(a) the provision for impairment loss, if any, required; or

(b) the reversal, if any, required of impairment loss recognized in previous periods.

Impairment loss is recognised where the carrying amount of an asset exceeds recoverable amount

3. OPERATING LEASES (Other than Land leases)

Lease rentals are recognised as expense or income on a straight line basis with reference to lease terms except where another systematic basis is more representative of the time pattern of the benefit derived from the asset taken or given on lease.

4. BORROWING COST

Borrowing costs that are attributable to the acquisition and construction of the qualifying asset 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 intended use. All other borrowing costs are charged to revenue.

5. FOREIGN CURRENCY TRANSLATION

5.1 Transactions in foreign currency are initially recorded at exchange rates prevailing on the date of transactions.

5.2 Monetary items denominated in foreign currencies (such as cash, receivables, payables etc) outstanding at the end of reporting period are translated at exchange rates prevailing as at the end of reporting period

5.3 Non-monetary items denominated in foreign currency (such as investments, fixed assets etc) are valued at the exchange rate prevailing on the date of transaction.

5.4 (a) Any gains or losses arising due to differences in exchange rates at the time of translation or settlement are accounted for in the Statement of Profit & Loss either under the head foreign exchange fluctuation or interest cost, as the case may be, except those relating to long-term foreign currency monetary items relating to acquisition of depreciable assets.

(b) Exchange differences on long-term foreign currency monetary items relating to acquisition of depreciable assets are adjusted to the carrying cost of the assets and fully depreciated over the balance life of the assets.

5.5 Premium/discount arising at the inception of the forward exchange contracts entered into to hedge foreign currency risks are amortised as expense/income over the life of the contract Outstanding forward contracts as at the reporting date are restated at the exchange rate prevailing on that date.

6. INVESTMENTS

6.1 Long-term investments are carried at cost and provision for diminution in the value thereof other than temporary in nature, is accounted

6.2 Current investments are carried at lower of cost or market value.

7. INVENTORIES

7.1 Raw Materials

7.1.1 Crude oil is valued at cost determined on weighted average basis or net realisable value, whichever is lower.

7.1.2 Crude oil in-transit is valued at cost or net realisable value, whichever is lower.

7.2 Stock-in-process

Stock-in-process is valued at raw material cost plus fifty percent of the cost of conversion or net realisable value, whichever is lower.

7.3 Finished Products

7.3.1 Finished products are valued at cost determined on 'First-in-First-out' basis or net realisable value, whichever is lower. Cost of finished products is determined based on crude cost and processing cost.

7.3.2 Imported products in-transit is valued at CIF cost or net realisable value, whichever is lower.

7.4 Stores and Spares

7.4.1 Stores and Spares are valued at weighted average cost In case of declared surplus/obsolete stores and spares, provision is made for likely loss on sale/disposal and charged to revenue. Necessary provisions are also made in respect of non-moving stores and spares after review.

7.4.2 Stores and Spares in transit are valued at cost.

8. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS

8.1 Contingent Liabilities

8.1.1 Show Cause Notices issued by various Government Authorities are not considered as obligations.

8.1.2 When the demand notices are raised against such show cause notices and are disputed by the Company, then these are classified as disputed obligations.

8.1.3 The treatment in respect of disputed obligations, in each case above Rs. 5 lakhs, is as under:

a) A provision is recognized in respect of present obligations where the outflow of resources is probable.

b) All other cases are disclosed as contingent liabilities unless the possibility of outflow of resources is remote.

8.2 Capital Commitments

Estimated amount of contracts remaining to be executed on capital account above Rs. 5 lakhs in each case are considered for disclosure.

9. STATEMENT OF PROFIT AND LOSS

9.1 Revenue from sale of goods is recognised when significant risks and rewards are transferred to customers in accordance with the terms of sale.

9.2 Claims on Petroleum Planning and Analysis Cell (Formerly known as Oil Coordination Committee)/ Government arising on account of erstwhile Administered Pricing Mechanism / notified schemes are booked on acceptance in principle thereof. Such claims and provisions are booked on the basis of available instructions/clarifications subject to final adjustment as per separate audit.

9.3 Other claims (including interest on outstandings) are accounted:

a) When there is certainty that the claims are realizable

b) Generally at cost

9.4 Income and expenditure are disclosed as prior period items only when the value exceeds Rs. 5 lakhs in each case.

9.5 Prepaid Expenses upto Rs. 5 lakhs in each case are charged to revenue.

10. TAXES ON INCOME

Provision for current tax is made as per the provisions of the Income Tax Act, 1961. Deferred Tax Liability / Asset resulting from 'timing difference' between book and taxable profit is accounted for considering the tax rate and laws that have been enacted or substantively enacted as on the Balance Sheet date. Deferred Tax Asset is recognized and carried forward only to the extent that there is virtual certainty that the asset will be realized in future.

11. EMPLOYEE BENEFITS

11.1 Short Term Benefits:

Short Term Employee Benefits are accounted in the period during which the services have been rendered.

11.2 Post-Employment Benefits and Other Long Term Employee Benefits:

11.2.1 The Company's contribution to the Provident Fund is remitted to separate trust established for this purpose based on a fixed percentage of the eligible employee's salary and charged to Statement of Profit and Loss. Shortfall, if any, in the fund assets, based on the Government specified minimum rate of return, will be made good by the Company and charged to Statement of Profit and Loss.

11.2.2 The Company operates defined benefit plans for Gratuity. The cost of providing such defined benefits is determined using the projected unit credit method of actuarial valuation made at the end of the year and are administered through a fund maintained by Insurance Company. Actuarial gains/losses are charged to Statement of Profit and Loss.

11.2.3 The liability of the Company in respect of superannuation scheme is restricted to the fixed contribution paid by the Company on a monthly basis towards the defined contribution scheme maintained by Insurance Company, which is charged off to revenue.

11.2.4 Obligations on Compensated Absences, Post Retirement Medical Benefits and Long Service Awards are provided using the projected unit credit method of actuarial valuation made at the end of the year.

11.3 Termination Benefits:

Payments made under Voluntary Retirement Scheme are charged to Statement of Profit and Loss.

12. COMMODITY HEDGING

The realized gain or loss in respect of commodity hedging contracts, the pricing period of which has expired during the year are recognised in the Statement of Profit and Loss. However, in respect of those contracts the pricing period of which extends beyond the balance sheet date suitable provision for likely loss, if any, is made.


Mar 31, 2014

1. BASIS OF PREPARATION

1.1 The financial statements are prepared under historical cost convention in accordance with the accounting standards notified by the Companies (Accounting Standards) Rules, 2006 and the provisions of the Companies Act, 1956.

1.2 The preparation of financial statements requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities and disclosure of contingent liabilities as at the date of the financial statements. Management believes that these estimates and assumptions are reasonable and prudent. However, actual results could differ from estimates.

2. FIXED ASSETS

2.1 Tangible Assets

2.1.1 Fixed assets are stated at cost of acquisition less accumulated depreciation / amortization.

2.1.2 Land acquired on perpetual lease as well as on lease for over 99 years is treated as free hold land.

2.1.3 Land acquired on lease for 99 years or less is treated as leasehold land.

2.1.4 Technical know-how / license fee relating to plants/facilities are capitalised as part of cost of the underlying asset.

2.2 Capitalisation of Construction Period Expenses

2.2.1 Revenue expenses exclusively attributable to projects incurred during construction period are capitalised.

2.2.2 Financing cost incurred during construction period on loans specifically borrowed and utilised for projects is capitalised on quarterly basis up to the date of capitalisation.

2.2.3 Financing cost, if any, incurred on general borrowings used for projects is capitalised at the weighted average cost.

2.3 Capital Stores

2.3.1 Capital stores are valued at cost. Specific provision is made for likely diminution in value, wherever required.

2.4 Intangible Assets

2.4.1 Technical know -how / license fee relating to production process and process design are accounted for as intangible assets and amortized on a straight line basis over a period of ten years or life of the said plant/facility, whichever is earlier.

2.4.2 Expenditure incurred on Research and Development, other than on capital account, is charged to revenue.

2.4.3 Costs incurred on computer software purchased/developed on or after 1st April 2003, resulting in future economic benefits are capitalised as Intangible Asset and amortised over a period of three years beginning from the quarter in which such software is capitalised. However, where such computer software is still in development stage, costs incurred during the development stage of such software are accounted as ‘Intangible Assets Under Development''.

2.4.4 Cost of Right of Way for laying pipelines is capitalized and amortised on a straight line basis over the period of such Right of way or 99 years whichever is less.

2.5 Depreciation / Amortisation

2.5.1 Depreciation on fixed assets is provided in accordance with the rates as specified in Schedule XIV to the Companies Act, 1956, on straight-line method, up to 95% of the cost of the asset other than Insurance Spares which are depreciated up to 100%. Depreciation is charged pro-rata on quarterly basis on assets, from/up to the quarter of capitalisation/sale, disposal/ dismantled during the year.

2.5.2 Assets costing up to Rs.5000/- per item are depreciated fully in the year of capitalisation.

2.5.3 Capital expenditure on assets on which the ownership and control that does not vest with the company are charged to revenue in the year in which it is incurred.

2.5.4 Cost of leasehold land (including premium) for 99 years or less is amortised over the lease period.

2.6 Impairment of Assets

As at each balance sheet date, the carrying amount of Cash Generating Units/Assets is tested for impairment so as to determine:

(a) the provision for impairment loss, if any, required; or

(b) the reversal, if any, required of impairment loss recognized in previous periods. Impairment loss is recognised where the carrying amount of an asset exceeds recoverable amount.

3. BORROWING COST

Borrowing costs that are attributable to the acquisition and construction of the qualifying asset 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 intended use. All other borrowing costs are charged to revenue.

4. FOREIGN CURRENCY TRANSLATION

4.1 Transactions in foreign currency are initially recorded at exchange rates prevailing on the date of transactions.

4.2 Monetary items denominated in foreign currencies (such as cash, receivables, payables etc) outstanding at the end of reporting period are translated at exchange rates prevailing as at the end of reporting period.

4.3 Non-monetary items denominated in foreign currency (such as investments, fixed assets etc) are valued at the exchange rate prevailing on the date of transaction.

4.4 (a) Any gains or losses arising due to differences in exchange rates at the time of translation or settlement are accounted for in the Statement of Profit & Loss either under the head foreign exchange fluctuation or interest cost, as the case may be, except those relating to long-term foreign currency monetary items relating to acquisition of depreciable assets.

(b) Exchange differences on long-term foreign currency monetary items relating to acquisition of depreciable assets are adjusted to the carrying cost of the assets and fully depreciated over the balance life of the assets.

4.5 Premium/discount arising at the inception of the forward exchange contracts entered into to hedge foreign currency risks are amortised as expense/income over the life of the contract. Outstanding forward contracts as at the reporting date are restated at the exchange rate prevailing on that date.

5. INVESTMENTS

5.1 Long-term investments are carried at cost and provision for diminution in the value thereof other than temporary in nature, is accounted.

5.2 Current investments are carried at lower of cost or market value.

6. INVENTORIES

6.1 Raw Materials

6.1.1 Crude oil is valued at cost determined on weighted average basis or net realisable value, whichever is lo w e r.

6.1.2 Crude oil in-transit is valued at cost or net realisable value, whichever is lower.

6.2 Stock-in-process

Stock-in-process is valued at raw material cost plus fifty percent of the cost of conversion as applicable or net realisable value, whichever is lower.

6.3 Finished Products

6.3.1 Finished products are valued at cost determined on ‘First-in-First-out'' basis or net realisable value, whichever is lower. Cost of finished products is determined based on crude cost and processing cost.

6.3.2 Imported products in-transit is valued at CIF cost or net realisable value, whichever is lower.

6.4 Stores and Spares

6.4.1 Stores and Spares are valued at weighted average cost. In case of declared surplus/obsolete stores and spares, provision is made for likely loss on sale/disposal and charged to revenue. Necessary provisions are also made in respect of non-moving stores and spares after review.

6.4.2 Stores and Spares in transit are valued at cost.

7. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS

7.1 Contingent Liabilities

7.1.1 Show Cause Notices issued by various Government Authorities are not considered as Obligation.

7.1.2 When the demand notices are raised against such show cause notices and are disputed by the Company, then these are classified as disputed obligations.

7.1.3 The treatment in respect of disputed obligations, in each case above Rs.5 lakhs, is as under:

a) A provision is recognized in respect of present obligations where the outflow of resources is probable.

b) All other cases are disclosed as contingent liabilities unless the possibility of outflow of resources is remote.

7.2 Capital Commitments

Estimated amount of contracts remaining to be executed on capital account above Rs.5 lakhs in each case are considered for disclosure.

8. STATEMENT OF PROFIT AND LOSS

8.1 Revenue from sale of goods is recognised when significant risks and rewards are transferred to customers in accordance with the terms of sale.

8.2 Claims on Petroleum Planning and Analysis Cell (Formerly known as Oil Coordination Committee)/ Government arising on account of erstwhile Administered Pricing Mechanism / notified schemes are booked on acceptance in principle thereof. Such claims and provisions are booked on the basis of available instructions/clarifications subject to final adjustment as per separate audit.

8.3 Other claims (including interest on out standings) are accounted:

a) When there is certainty that the claims are realizable

b) Generally at cost

8.4 Income and expenditure are disclosed as prior period items only when the value exceeds Rs.5 lakhs in each case.

8.5 Prepaid Expenses upto Rs.5 lakhs in each case are charged to revenue.

9. TAXES ON INCOME

Provision for current tax is made as per the provisions of the Income Tax Act, 1961. Deferred Tax Liability / Asset resulting from ''timing difference'' between book and taxable profit is accounted for considering the tax rate and laws that have been enacted or substantively enacted as on the Balance Sheet date. Deferred Tax Asset is recognized and carried forward only to the extent that there is virtual certainty that the asset will be realized in future.

10. EMPLOYEE BENEFITS

10.1 Short Term Benefits:

Short Term Employee Benefits are accounted in the period during which the services have been rendered.

10.2 Post-Employment Benefits and Other Long Term Employee Benefits:

10.2.1 The Company''s contribution to the Provident Fund is remitted to separate trust established for this purpose based on a fixed percentage of the eligible employee''s salary and charged to Statement of Profit and Loss. Shortfall, if any, in the fund assets, based on the Government specified minimum rate of return, will be made good by the Company and charged to Statement of Profit and Loss.

10.2.2 The Company operates defined benefit plans for Gratuity. The cost of providing such defined benefits is determined using the projected unit credit method of actuarial valuation made at the end of the year and are administered through a fund maintained by Insurance Company. Actuarial gains/losses are charged to Statement of Profit and Loss.

10.2.3 The liability of the Company in respect of superannuation scheme is restricted to the fixed contribution paid by the Company on a monthly basis towards the defined contribution scheme maintained by Insurance Company, which is charged off to revenue.

10.2.4 Obligations on Compensated Absences, Post Retirement Medical Benefits and Long Service Awards are provided using the projected unit credit method of actuarial valuation made at the end of the year.

10.3 Termination Benefits:

Payments made under Voluntary Retirement Scheme are charged to Statement of Profit and Loss.

11. COMMODITY HEDGING

The realized gain or loss in respect of commodity hedging contracts, the pricing period of which has expired during the year are recognised in the Statement of Profit and Loss. However, in respect of those contracts the pricing period of which extends beyond the balance sheet date, suitable provision for likely loss, if any, is made.

(i) Disclosure required under the provisions of Section 22 of Micro, Small and Medium Enterprises Development Act, 2006.

The company sought written confirmation from its suppliers to identify Micro, Small and Medium enterprises.

No interest amount remains unpaid to such Micro and Small enterprises as on 31.03.2014 and no payments were made to such enterprises beyond the "appointed day" during the year. Also, the company has not paid any interest in terms of Section 16 of the above mentioned act or otherwise.

The above has been determined to the extent, such parties could be identified on the basis of information made available to the company.

(ii) Represents due to Indian Oil Corporation Ltd., the holding company.


Mar 31, 2013

1. BASIS OF PREPARATION

1.1 The financial statements are prepared under historical cost convention in accordance with the accounting standards notified by the Companies (Accounting Standards) Rules, 2006 and the provisions of the Companies Act, 1956.

1.2 The preparation of financial statements requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities and disclosure of contingent liabilities as at the date of the financial statements. Management believes that these estimates and assumptions are reasonable and prudent However, actual results could differ from these estimates.

2. FIXED ASSETS

2.1 Land

Land acquired on lease for over 99 years and on perpetual lease is treated as freehold land

2.2 Technical know-how / license fee

Technical know-how / license fee relating to plants/facilities are capitalised as part of cost of the underlying asset

2.3 Capitalisation of construction period expenses

(a) Revenue expenses exclusively attributable to projects incurred during the year of construction period are capitalised.

(b) Financing cost incurred during the construction period on loans specifically borrowed and utilised for projects is capitalised on quarterly basis upto the date of capitalisation.

Financing cost, if any, incurred on general borrowings used for projects is capitalised at the weighted average cost

(c) Capital stores are valued at cost Specific provision is made for likely diminution in value, wherever required.

2.4 Depreciation / Amortisation

(a) Depreciation on fixed assets is provided in accordance with the rates as specified in Schedule XIV to the Companies Act, 1956, on straight-line method, upto 95% of the cost of the asset other than Insurance Spares which are depreciated upto 100%. Depreciation is charged pro-rata on quarterly basis on assets, from/upto the quarter of capitalisation/sale, disposal and dismantled during the year.

(b) Assets costing not more than Rs. 5000/- each are depreciated in full in the year of addition.

(c) Capital expenditure on assets, on which the ownership and control that does not vest with the company are charged to revenue in the year in which it is incurred.

(d) Cost of leasehold land (including premium) for 99 years or less is amortised during the lease period

3. IMPAIRMENT OF ASSETS

Carrying amount of cash generating units/assets is reviewed for impairment. Impairment, if any, is recognised where the carrying amount exceeds the recoverable amount

4. INTANGIBLE ASSETS

(a) Technical know -how / license fee relating to production process and process design are accounted for as intangible assets and amortized on a straight line basis over a period of ten years or life of the said plant/facility, whichever is earlier.

(b) Expenditure incurred on Research and Development, other than on capital account, is charged to revenue.

(c) Costs incurred on computer software purchased/developed on or after 1st April 2003, resulting in future economic benefits are capitalised as Intangible Asset and amortised over a period of three years beginning from the quarter in which such software is capitalised. However, where such computer software is still in development stage, costs incurred during the development stage of such software are accounted as Work-in Progress - Intangible Assets.

(d) Cost of Right of Way for laying pipelines is capitalised and where Right of Way is of perpetual nature, not amortised.

5. BORROWING COST

Borrowing costs that are attributable to the acquisition and construction of the qualifying asset 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 intended use. All other borrowing costs are charged to revenue.

6. INVESTMENTS

Long-term investments are carried at cost and provision for diminution in the value thereof, other than temporary in nature, is accounted.

Current investments are carried at lower of cost or market value.

7. CURRENT ASSETS, LOANS AND ADVANCES

7.1 Valuation oflnventories

(a) Raw materials

Crude oil - At cost (on weighted average basis) or net realisable value whichever is lower.

(b) Stock-in-process

At raw material cost plus fifty percent of the cost of conversion, as applicable or net realisable value, whichever is lower.

(c) Finished products

Finished products are valued at cost on First in First out basis or net realisable value, whichever is lower. Cost of finished products is determined based on crude cost and processing cost

(d) Stores and Spares

Stores and Spares are valued at weighted average cost In case of declared surplus/obsolete stores and spares, provision is made for likely loss on sale/disposal and charged to revenue. Necessary provisions are also made in respect of non-moving stores and spares after review.

Stores and Spares in transit are valued at cost

(e) Imported Products in-transit and Crude Oil in-transit

Imported products in-transit and crude oil in-transit are valued at CIF cost or net realisable value, whichever is lower.

8. FOREIGN CURRENCY TRANSLATION

(a) Transactions in foreign currency are recorded at exchange rates prevailing on the date of transactions.

(b) Monetary items denominated in foreign currencies (such as cash, receivables, payables etc) outstanding at the year-end, are translated at exchange rates applicable as of that date.

(c) Non-monetary items denominated in foreign currency (such as investments, fixed assets etc) are valued at the exchange rate prevailing on the date of transaction.

(d) Any gains or losses arising due to exchange differences at the time of translation or settlement are recognized as income or as expense in the period in which, they arise.

(e) Premium/discount arising at the inception of the forward exchange contracts entered into to hedge foreign currency risks are amortised as expense/income over the life of the contract. Outstanding forward contracts as at the reporting date are restated at the exchange rate prevailing on that date.

9. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS

9.1 CONTINGENT LIABILITIES

(a) Show Cause Notices issued by various Government Authorities are not considered as Obligation.

(b) When the demand notices are raised against such show cause notices and are disputed by the Corporation, then these are classified as disputed obligations.

(c) The treatment in respect of disputed obligations, in each case above Rs. 5 Lakhs, is as under:

i) A provision is recognized in respect of present obligations where the outflow of resources is probable.

ii) All other cases are disclosed as contingent liabilities unless the possibility of outflow of resources is remote.

9.2 CAPITAL COMMITMENTS

Estimated amount of contracts remaining to be executed on capital accounts are disclosed in each case above Rs. 5 Lakhs.

10. PROFIT AND LOSS ACCOUNT

(a) Claims on Petroleum Planning and Analysis Cell (Formerly known as Oil Coordination Committee)/ Government arising on account of erstwhile Administered Pricing Mechanism / notified schemes are booked on acceptance in principle thereof. Such claims and provisions are booked on the basis of available instructions/clarifications subject to final adjustment as per separate audit.

(b) Other claims (including interest on outstanding) are accounted:

i) When there is certainty that the claims are realizable

ii) Generally at cost

(c) Prepaid Expenses upto Rs. 5,00,000/- in each case is charged to revenue.

(d) Income and expenditure are disclosed as prior period items only when the value exceeds Rs. 5,00,000/- in each case.

11. TAXES ON INCOME

Provision for current tax is made as per the provisions of the Income Tax Act, 1961. Deferred Tax Liability / Asset resulting from ''timing difference'' between book and taxable profit is accounted for considering the tax rate and laws that have been enacted or substantively enacted as on the Balance Sheet date. Deferred Tax Asset is recognized and carried forward only to the extent that there is virtual certainty that the asset will be realized in future.

12. EMPLOYEE BENEFITS

12.1 SHORT TERM BENEFITS:

Short Term Employee Benefits are accounted in the period during which the services have been rendered

12.2 POST-EMPLOYMENT BENEFITS AND OTHER LONG TERM EMPLOYEE BENEFITS:

(a) The Company''s contribution to the Provident Fund is remitted to separate trust established for this purpose based on a fixed percentage of the eligible employee''s salary and charged to Profit and Loss Account. Shortfall, if any, in the fund assets, based on the Government specified minimum rate of return, will be made good by the Company and charged to profit and loss account.

(b) The company operates defined benefit plans for gratuity. The cost of providing such defined benefits is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Insurance Company. Actuarial gains/losses are charged to profit and Loss account

(c) The liability of the company in respect of superannuation scheme is restricted to the fixed contribution paid by the corporation on a monthly basis towards the defined contribution scheme maintained by Insurance Company, which is charged off to revenue.

(d) Obligations on compensated absences, Post Retirement Medical Benefits and Long Service Awards are provided using the projected unit credit method of actuarial valuation made at the end of the year.

12.3 TERMINATION BENEFITS:

Payments made under Voluntary Retirement Scheme are charged to Profit and Loss Account

13. COMMODITY HEDGING

The realized gain or loss in respect of commodity hedging contracts, the pricing period of which has expired during the year, are recognised in the profit&loss account However in respect of those contracts, the pricing period of which extends beyond the balance sheet date, suitable provision for likely loss, if any, is provided.


Mar 31, 2012

1. BASIS OF PREPARATION

1.1 The financial statements are prepared under historical cost convention in accordance with the accounting standards notified by the Companies (Accounting Standards) Rules, 2006 and the provisions of the Companies Act, 1956.

1.2 The preparation of financial statements requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities and disclosure of contingent liabilities as at the date of the financial statements. Management believes that these estimates and assumptions are reasonable and prudent However, actual results could differ from these estimates.

2. FIXED ASSETS

2.1 Land

Land acquired on lease for over 99 years and on perpetual lease is treated as freehold land

2.2 Technical know-how / license fee

Technical know-how / license fee relating to plants/facilities are capitalised as part of cost of the underlying asset

2.3 Capitalisation of construction period expenses

(a) Revenue expenses exclusively attributable to projects incurred during the year of construction period are capitalised.

(b) Financing cost incurred during the construction period on loans specifically borrowed and utilised for projects is capitalised on quarterly basis upto the date of capitalisation.

Financing cost, if any, incurred on general borrowings used for projects is capitalised at the weighted average cost

(c) Capital stores are valued at cost Specific provision is made for likely diminution in value, wherever required.

2.4 Depreciation / Amortisation

(a) Depreciation on fixed assets is provided in accordance with the rates as specified in Schedule XIV to the Companies Act, 1956, on straight-line method, upto 95% of the cost of the asset other than Insurance Spares which are depreciated upto 100%. Depreciation is charged pro-rata on quarterly basis on assets, from/upto the quarter of capitalisation/sale, disposal and dismantled during the year.

(b) Assets costing not more than Rs. 5000/- each are depreciated in full in the year of addition.

(c) Capital expenditure on assets, on which the ownership and control that does not vest with the company are charged to revenue in the year in which it is incurred.

(d) Cost of leasehold land (including premium) for 99 years or less is amortised during the lease period

3. IMPAIRMENT OF ASSETS

Carrying amount of cash generating units/assets is reviewed for impairment. Impairment, if any, is recognised where the carrying amount exceeds the recoverable amount

4. INTANGIBLE ASSETS

(a) Technical know -how / license fee relating to production process and process design are accounted for as intangible assets and amortized on a straight line basis over a period of ten years or life of the said plant/facility, whichever is earlier.

(b) Expenditure incurred on Research and Development, other than on capital account, is charged to revenue.

(c) Costs incurred on computer software purchased/developed on or after 1st April 2003, resulting in future economic benefits are capitalised as Intangible Asset and amortised over a period of three years beginning from the quarter in which such software is capitalised. However, where such computer software is still in development stage, costs incurred during the development stage of such software are accounted as Work-in Progress - Intangible Assets.

(d) Cost of Right of Way for laying pipelines is capitalised and where Right of Way is of perpetual nature, not amortised.

5. BORROWING COST

Borrowing costs that are attributable to the acquisition and construction of the qualifying asset 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 intended use. All other borrowing costs are charged to revenue.

6. INVESTMENTS

Long-term investments are carried at cost and provision for diminution in the value thereof, other than temporary in nature, is accounted.

Current investments are carried at lower of cost or market value.

7. CURRENT ASSETS, LOANS AND ADVANCES

7.1 Valuation oflnventories

(a) Raw materials

Crude oil - At cost (on weighted average basis) or net realisable value whichever is lower.

(b) Stock-in-process

At raw material cost plus fifty percent of the cost of conversion, as applicable or net realisable value, whichever is lower.

(c) Finished products

Finished products are valued at cost on First in First out basis or net realisable value, whichever is lower. Cost of finished products is determined based on crude cost and processing cost

(d) Stores and Spares

Stores and Spares are valued at weighted average cost In case of declared surplus/obsolete stores and spares, provision is made for likely loss on sale/disposal and charged to revenue. Necessary provisions are also made in respect of non-moving stores and spares after review.

Stores and Spares in transit are valued at cost

(e) Imported Products in-transit and Crude Oil in-transit

Imported products in-transit and crude oil in-transit are valued at CIF cost or net realisable value, whichever is lower.

8. FOREIGN CURRENCY TRANSLATION

(a) Transactions in foreign currency are recorded at exchange rates prevailing on the date of transactions.

(b) Monetary items denominated in foreign currencies (such as cash, receivables, payables etc) outstanding at the year-end, are translated at exchange rates applicable as of that date.

(c) Non-monetary items denominated in foreign currency (such as investments, fixed assets etc) are valued at the exchange rate prevailing on the date of transaction.

(d) Any gains or losses arising due to exchange differences at the time of translation or settlement are recognized as income or as expense in the period in which, they arise.

(e) Premium/discount arising at the inception of the forward exchange contracts entered into to hedge foreign currency risks are amortised as expense/income over the life of the contract. Outstanding forward contracts as at the reporting date are restated at the exchange rate prevailing on that date.

9. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS

9.1 CONTINGENT LIABILITIES

(a) Show Cause Notices issued by various Government Authorities are not considered as Obligation.

(b) When the demand notices are raised against such show cause notices and are disputed by the Corporation, then these are classified as disputed obligations.

(c) The treatment in respect of disputed obligations, in each case above Rs. 5 Lakhs, is as under:

i) A provision is recognized in respect of present obligations where the outflow of resources is probable.

ii) All other cases are disclosed as contingent liabilities unless the possibility of outflow of resources is remote.

9.2 CAPITAL COMMITMENTS

Estimated amount of contracts remaining to be executed on capital accounts are disclosed in each case above Rs. 5 Lakhs.

10. PROFIT AND LOSS ACCOUNT

(a) Claims on Petroleum Planning and Analysis Cell (Formerly known as Oil Coordination Committee)/ Government arising on account of erstwhile Administered Pricing Mechanism / notified schemes are booked on acceptance in principle thereof. Such claims and provisions are booked on the basis of available instructions/clarifications subject to final adjustment as per separate audit.

(b) Other claims (including interest on outstanding) are accounted:

i) When there is certainty that the claims are realizable

ii) Generally at cost

(c) Prepaid Expenses upto Rs. 5,00,000/- in each case is charged to revenue.

(d) Income and expenditure are disclosed as prior period items only when the value exceeds Rs. 5,00,000/- in each case.

11. TAXES ON INCOME

Provision for current tax is made as per the provisions of the Income Tax Act, 1961. Deferred Tax Liability / Asset resulting from 'timing difference' between book and taxable profit is accounted for considering the tax rate and laws that have been enacted or substantively enacted as on the Balance Sheet date. Deferred Tax Asset is recognized and carried forward only to the extent that there is virtual certainty that the asset will be realized in future.

12. EMPLOYEE BENEFITS

12.1 SHORT TERM BENEFITS:

Short Term Employee Benefits are accounted in the period during which the services have been rendered

12.2 POST-EMPLOYMENT BENEFITS AND OTHER LONG TERM EMPLOYEE BENEFITS:

(a) The Company's contribution to the Provident Fund is remitted to separate trust established for this purpose based on a fixed percentage of the eligible employee's salary and charged to Profit and Loss Account. Shortfall, if any, in the fund assets, based on the Government specified minimum rate of return, will be made good by the Company and charged to profit and loss account.

(b) The company operates defined benefit plans for gratuity. The cost of providing such defined benefits is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Insurance Company. Actuarial gains/losses are charged to profit and Loss account

(c) The liability of the company in respect of superannuation scheme is restricted to the fixed contribution paid by the corporation on a monthly basis towards the defined contribution scheme maintained by Insurance Company, which is charged off to revenue.

(d) Obligations on compensated absences, Post Retirement Medical Benefits and Long Service Awards are provided using the projected unit credit method of actuarial valuation made at the end of the year.

12.3 TERMINATION BENEFITS:

Payments made under Voluntary Retirement Scheme are charged to Profit and Loss Account

13. COMMODITY HEDGING

The realized gain or loss in respect of commodity hedging contracts, the pricing period of which has expired during the year, are recognised in the profit&loss account However in respect of those contracts, the pricing period of which extends beyond the balance sheet date, suitable provision for likely loss, if any, is provided.


Mar 31, 2010

1. BASIS OF PREPARATION

1.1 The financial statements are prepared under historical cost convention in accordance with the accounting standards notified by the Companies (Accounting Standards) Rules, 2006 and the provisions of the Companies Act, 1956.

1.2 The preparation of financial statements requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities and disclosure of contingent liabilities as at the date of the financial statements. Management believes that these estimates and assumptions are reasonable and prudent. However, actual results could differ from estimates.

2. FIXED ASSETS

2.1 Land

Land acquired on lease for over 99 years and on perpetual lease is treated as freehold land.

2.2 Technical know-how / license fee

Technical know-how / license fee relating to plants/facilities are capitalised as part of cost of the underlying asset.

2.3 Capitalisation of construction period expenses

(a) Revenue expenses exclusively attributable to projects incurred during the year of construction period are capitalised.

(b) Financing cost incurred during the construction period on loans specifically borrowed and utilised for projects is capitalised on quarterly basis at the actual borrowing rates.

Financing cost, if any, incurred on general borrowings used for projects is capitalised at the weighted average cost.

(c) Capital stores are valued at cost. Specific provision is made for likely diminution in value, wherever required.

2.4 Depreciation / Amortisation

(a) Depreciation on fixed assets is provided in accordance with the rates as specified in Schedule XIV to the Companies Act, 1956, on straight-line method, upto 95% of the cost of the asset other than Insurance Spares which are depreciated upto 100%. Depreciation is charged pro-rata on quarterly basis on assets, from/upto the quarter of capitalisation/sale, disposal and dismantled during the year.

(b) Assets costing not more than Rs.5000/- each are depreciated in full in the year of addition.

(c) Capital expenditure on assets, the ownership of which does not vest with the Company, incurred during the construction period of the projects is accounted as unallocated capital expenditure and is charged to revenue in the year of capitalisation of such projects.

(d) Cost of leasehold land (including premium) for 99 years or less is amortised during the lease period.

3. IMPAIRMENT OF ASSETS

Carrying amount of cash generating units/assets is reviewed for impairment. Impairment, if any, is recognised where the carrying amount exceeds the recoverable amount.

4. INTANGIBLE ASSETS

(a) Technical know -how / license fee relating to production process and process design are accounted for as intangible assets and amortized on a straight line basis over a period of ten years or life of the said plant/ facility, whichever is earlier.

(b) Expenditure incurred on Research and Development, other than on capita! account, is charged to revenue.

(c) Costs incurred on computer software purchased/developed on or after 1st April 2003, resulting in future economic benefits are capitalised as Intangible Asset and amortised over a period of three years beginning from the quarter in which such software is capitalised. However, where such computer software is still in development stage, costs incurred during the development stage of such software are accounted as Work- in Progress - Intangible Assets.

(d) Cost of Right of Way for laying pipelines is capitalised and where Right of Way is of perpetual nature, not amortised.

5. BORROWING COST

Borrowing costs that are attributable to the acquisition and construction of the qualifying asset 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 intended use. All other borrowing costs are charged to revenue.

6. INVESTMENTS

Long-term investments are carried at cost and provision for diminution in the value thereof, other than temporary in nature, is accounted.

Current investments are carried at lower of cost or market value.

7. CURRENT ASSETS, LOANS AND ADVANCES 7.1 Valuation of Inventories

(a) Raw materials

Crude oil - At cost (on weighted average basis) or net realisable value whichever is lower.

(b) Stock-in-process

At raw material cost plus fifty percent of the cost of conversion, as applicable or net realisable value, whichever is lower.

(c) Finished products

Finished products are valued at cost on First in First out basis or net realisable value, whichever is lower. Cost of finished products is determined based on crude cost and processing cost.

(d) Stores and Spares

Stores and Spares are valued at weighted average cost. In case of declared surplus/obsolete stores and spares, provision is made for likely loss on sale/disposal and charged to revenue. Necessary provisions are also made in respect of non-moving stores and spares after review.

Stores and Spares in transit are valued at cost.

(e) Imported Products in-transit and Crude Oil in-transit

Imported products in-transit and crude oil in-transit are valued at CIF cost or net realisable value, whichever is lower.

8. FOREIGN CURRENCY TRANSLATION

(a) Transactions in foreign currency are recorded at exchange rates prevailing on the date of transactions.

(b) Monetary items denominated in foreign currencies (such as cash, receivables, payables etc) outstanding at the year-end, are translated at exchange rates applicable as of that date.

(c) Non-monetary items denominated in foreign currency, (such as investments, fixed assets etc) are valued at the exchange rate prevailing on the date of transaction.

(d) Any gains or losses arising due to exchange differences at the time of translation or settlement are recognized as income or as expense in the period in which, they arise.

(e) Premium/discount arising at the inception of the forward exchange contracts entered into to hedge foreign currency risks are amortised as expense/income over the life of the contract. Outstanding forward contracts as at the reporting date are restated at the exchange rate prevailing on that date.

9. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS 9.1 CONTINGENT LIABILITIES

(a) Show Cause Notices issued by various Government Authorities are not considered as Obligation.

(b) When the demand notices are raised against such show cause notices and are disputed by the Corporation, then these are classified as disputed obligations.

(c) The treatment in respect of disputed obligations, in each case above Rs.5 lakhs, is as under:

i) A provision is recognized in respect of present obligations where the outflow of resources is probable.

ii) All other cases are disclosed as contingent liabilities unless the possibility of outflow of resources is remote.

9.2 CAPITAL COMMITMENTS

Estimated amount of contracts remaining to be executed on capital accounts are disclosed in each case above Rs.5 lakhs.

10. PROFIT AND LOSS ACCOUNT

(a) Claims on Petroleum Planning and Analysis Cell (Formerly known as Oil Coordination Committee)/ Government arising on account of erstwhile Administered Pricing Mechanism / notified schemes are booked on acceptance in principle thereof. Such claims and provisions are booked on the basis of available instructions/clarifications subject to final adjustment as per separate audit.

(b) Other claims (including interest on outstanding) are accounted: i) When there is certainty that the claims are realizable

ii) Generally at cost

(c) Prepaid Expenses upto Rs.5,00,000/- in each case is charged to revenue.

(d) Income and expenditure are disclosed as prior period items only when the value exceeds Rs.5,00,000/- in each case.

11. TAXES ON INCOME

Provision for current tax is made as per the provisions of the Income Tax Act, 1961. Deferred Tax Liability /Asset resulting from timing difference between book and taxable profit is accounted for considering the tax rate and laws that have been enacted or substantively enacted as on the Balance Sheet date. Deferred Tax Asset is recognized and carried forward only to the extent that there is virtual certainty that the asset will be realized in future.

12. EMPLOYEE BENEFITS

12.1 SHORT TERM BENEFITS:

Short Term Employee Benefits are accounted in the period during which the services have been rendered.

12.2 POST-EMPLOYMENT BENEFITS AND OTHER LONG TERM EMPLOYEE BENEFITS:

(a) The Companys contribution to the Provident Fund is remitted to separate trust established for this purpose based on a fixed percentage of the eligible employees salary and charged to Profit and Loss Account. Shortfall, if any, in the fund assets, based on the Government specified minimum rate of return, will be made good by the Company and charged to profit and loss account.

(b) The company operates defined benefit plans for gratuity and compensated absences. The cost of providing such defined benefits is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Insurance Company. Actuarial gains/ losses are charged to profit and Loss account.

(c) The liability of the company in respect of superannuation scheme is restricted to the fixed contribution paid by the corporation on a monthly basis towards the defined contribution scheme maintained by Insurance Company, which is charged off to revenue.

(d) Obligations on Post Retirement Medical Benefits and Long Service Awards are provided using the projected unit credit method of actuarial valuation made at the end of the year.

12.3 TERMINATION BENEFITS:

Payments made under Voluntary Retirement Scheme are charged to Profit and Loss Account.



 
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