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Accounting Policies of Hindustan Oil Exploration Company Ltd. Company

Mar 31, 2015

I. Basis of Preparation

The financial statements of the Company have been prepared in accordance with the generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014. The financial statements have been prepared under the historical cost convention on an accrual basis. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year. The financial statements of the Company reflect its share of assets, liabilities, income and expenditure of the Unincorporated Joint Ventures which are accounted on the basis of available information in the audited / unaudited financial statements of the Unincorporated Joint Ventures on line by line basis with similar items in the Company's accounts to the extent of the participating interest of the Company as per the various "Production Sharing Contracts". The financial statements of the Unincorporated Joint Ventures are prepared by the respective Operators in accordance with the requirements prescribed by the respective Production Sharing Contracts of the Unincorporated Joint Ventures. Hence, in respect of these Unincorporated Joint Ventures, certain disclosures required under the accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014, other pronouncements of The Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 2013 have been made in the financial statement of the Company based on audited/unaudited financial statement of the unincorporated Joint Venture.

ii. Use of Estimates

The preparation of the financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period like depletion of Producing Properties, estimate of Site Restoration Liability, expensing of the estimated Site Restoration Liability, provision for employee benefits, useful lives of fixed assets, provision for doubtful advances, provision for tax, recognition of MAT Credit, recognition of deferred tax asset etc. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results may vary from these estimates. Any revisions to accounting estimates are recognized prospectively.

iii. Fixed Assets and Depreciation, Depletion and Amortization

Fixed assets comprise of the following:

* Tangible assets:

Fixed assets are stated at cost less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets which take a substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use.

Depreciation on fixed assets is calculated on a Written Down Value basis using the rates arrived at based on the useful lives estimated by the management.

Till the year ended 31 March 2014, depreciation rates prescribed under Schedule XIV were treated as minimum rates and the Company was not allowed to charge depreciation at lower rates even if such lower rates were justified by the estimated useful life of the asset. Schedule II to the Companies Act 2013 prescribes useful lives for fixed assets which, in many cases, are different from lives prescribed under the erstwhile Schedule XIV However, Schedule II allows companies to use higher/ lower useful lives and residual values if such useful lives and residual values can be technically supported and justification for difference is disclosed in the financial statements.

Considering the applicability of Schedule II, the management has re-estimated useful lives and residual values of all its fixed assets. The management believes that depreciation rates currently used fairly reflect its estimate of the useful lives and residual values of fixed assets. In view of this change the opening written down balance is being depreciated over the revised remaining useful life. Had the Company continued to use the earlier basis of providing depreciation, the charge to the statement of profit and loss before taxation for the current year would have been lower by INR 1,512,388 and the net block of fixed assets would correspondingly be higher by the same amount. In accordance with the transitional provision of Schedule II, the Company has charged off the written down value of assets of INR 1,131,612 where there is no revised remaining useful life as at April 01, 2014, to the statement of profit and loss.

Till year ended 31 March 2014, to comply with the requirements of Schedule XIV to the Companies Act, 1956, the Company was charging 100% depreciation on assets costing less than INR 5,000/- in the year of purchase. However, Schedule II to the Companies Act 2013, applicable from the current year, does not recognize such practice. Hence, to comply with the requirement of Schedule II to the Companies Act, 2013, the Company has changed its accounting policy for depreciations of assets costing less than INR 5,000/-. As per the revised policy, the Company is depreciating such assets over their useful life as assessed by the management. The management has decided to apply the revised accounting policy prospectively from accounting periods commencing on or after 1 April 2014. The change in accounting for depreciation of assets costing less than INR 5,000/- did not have any material impact on financial statements of the Company for the current year

Improvements to Leasehold premises are amortised over the remaining primary lease period.

* Intangible assets:

Intangible assets comprising computer software is amortised over the license period or 10 years, whichever is lower.

* Producing property and Exploration/ Development work-in-progress:

The Company generally follows the "Successful Efforts Method" of accounting for its exploration and production activities as explained below:

(a) Acquisition costs cover all costs incurred to purchase, lease or otherwise acquire a property or mineral right. These are costs incurred in acquiring the right to explore, drill and produce oil and gas including the initial costs incurred for obtaining the Petroleum Exploration License / Letter of Authority and Mining Lease. Acquisition costs are carried in books as Capital - Work in Progress and transferred to Producing Property on attainment of commercial production. Depletion on Acquisition cost is provided on "Unit of Production" method based on the related reserves as recommended by the Guidance Note issued by the Institute of Chartered Accountants of India.

(b) Cost of surveys and studies relating to exploration activities are expensed when the same are incurred (also see Note 38).

(c) Cost of exploratory well(s) are expensed when the well(s) are conclusively determined to be dry / permanently abandoned or are transferred to Producing Properties on attainment of commercial production.

(d) Cost of all appraisal programmes ("appraisal costs") related to a Discovery are initially capitalised as "Exploration Expenditure". If a Discovery is determined to be commercial pursuant to the appraisal programme, all appraisal costs, including the cost of unsuccessful appraisal wells, if any, are capitalised as Producing Properties on attainment of commercial production. If at the end of the appraisal programme, the Discovery is relinquished, then all appraisal costs related to the Discovery are charged to the Statement of Profit and Loss.

(e) Cost of temporary occupation of land, successful exploratory wells, appraisal wells, development wells and all related development costs, including depreciation on support equipment and facilities, are considered as development expenditure. These expenses are capitalised as Producing Properties on attainment of commercial production.

(f) Producing Properties, including the cost incurred on dry/abandoned wells in development areas, are depleted using " Unit of Production" method based on the related reserves as recommended by the Guidance Note issued by the Institute of Chartered Accountants of India. Any changes in Reserves and/or Cost are dealt with prospectively from the beginning of the year of such change. Hydrocarbon reserves are estimated and/or approved by the Management Committees of the Unincorporated Joint Ventures, which follow the International Reservoir Engineering Principles.

(g) If the Company/Unincorporated Joint Venture were to relinquish a block or part thereof, the accumulated acquisition and exploration costs carried in the books related to the block or part thereof, as the case may be, are written off as a charge to the Statement of Profit and Loss in the year of relinquishment.

Explanatory Note

1. Save the costs referred to in note (b) herein above, all exploration costs are initially capitalized as "Exploration Expenditure", and are retained in exploration expenditure-work-in-progress if the exploration well(s) in first drilling campaign is determined to be successful, or such costs are written off consistent with para 2 below, if is determined to be unsuccessful.

2. Exploration costs associated with drilling, testing and equipping exploratory well(s) are initially capitalized as "Exploration Expenditure", and retained in exploration expenditure-work-in-progress so long as:

(a) such well has found potential commercial reserves; or

(b) such well test result is inconclusive and is subject to further exploration or appraisal activity like acquisition of seismic, or re-entry of such well, or drilling of additional exploratory/step out well in the area of interest

* until such time as such costs are transferred to "Producing Properties" on attainment of commercial production; or

* else charged to the Statement of Profit and Loss.

Management makes quarterly assessment of the amounts included in "Exploration Expenditure-work-in-progress" to determine whether capitalization is appropriate and can continue. Exploration well(s) capitalized beyond 2 years are subject to additional judgment as to whether facts and circumstances have changed and therefore the conditions described in 2(a) and (b) above no longer apply.

iv. Site Restoration

Estimated future liability relating to dismantling and abandoning producing well sites and facilities is recognised when the installation of the production facilities is completed based on the estimated future expenditure determined by the Management in accordance with the local conditions and requirements. The corresponding amount is added to the cost of the Producing Property and is expensed in proportion to the production for the year and the estimated proved developed reserves of hydrocarbons based on latest technical assessment available with the Company. Any change in the value of the estimated liability is dealt with prospectively and reflected as an adjustment to the provision and the corresponding Producing Property.

v. Impairment

The carrying amounts of assets are reviewed annually or if there is any indication of impairment based on internal/external factors during the year An impairment loss is recognized wherever the carrying amount of an asset or Cash Generating Unit (CGU) exceeds its recoverable amount. The recoverable amount is the greater of the asset's or CGU's net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

After impairment, depreciation/depletion is provided in subsequent periods on the revised carrying amount of the asset over its remaining useful life.

A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

vi. Investments

Investments are capitalised at cost plus brokerage and stamp charges. Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are valued at lower of cost and fair value determined on an individual investment basis. Long term investments are valued at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments.

vii. Inventories

(i) Closing stock of crude oil, condensate and natural gas in saleable condition is valued at Estimated Net Realisable Value. Estimated Net Realisable Value is the estimated selling price in the ordinary course of business, less estimated costs necessary to make the sale.

(ii) Stores, spares, capital stock and drilling tangibles are valued at cost on first in first out basis/ weighted average basis, as applicable, or estimated net realisable value, whichever is lower.

viii. Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

(i) Revenue from the sale of crude oil, condensate and natural gas, net of Government's share of Profit Petroleum (calculated as per the provisions of the respective Production Sharing Contracts), where applicable, and Value Added Tax, is recognised on transfer of custody.

(ii) Service Income is recognised on accrual basis as per the contractual terms and is net of Service Tax.

(iii) Delayed Payment charges, retrospective revision in prices, interest on delayed payments and interest on income tax refunds are recognised as and when there is no uncertainty in the determination/receipt of the amount, on grounds of prudence.

(iv) Interest Revenue is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

(v) Dividend Income is recognised when the right to receive the dividend is unconditional.

ix Employee Benefits

(a) Defined Contribution Plan

(i) Provident Fund: Contributions towards Employees' Provident Fund are made to the Employees Provident Fund Scheme in accordance with the statutory provisions. Contributions towards Employees' Provident Fund are recognized as an expense in the year incurred. There are no obligations other than the contribution payable to the respective fund.

(ii) Superannuation Fund: The Company contributes a sum equivalent to 15% of eligible Employees' basic salary to a Superannuation Fund administered by trustees. The Company has no liability for future Superannuation Fund benefits other than its annual contribution and recognizes such contributions as an expense in the year incurred.

(b) Defined Benefit Plan

The Company makes annual contribution to a Gratuity Fund administered by trustees and managed by the Life Insurance Corporation of India. The Company accounts its liability for future gratuity benefits based on actuarial valuation, as at the Balance Sheet date, determined every year by an Actuary appointed by the Company, using the Projected Unit Credit method. Actuarial gains/losses are recognised in the Statement of Profit and Loss. Obligation under the defined benefit plan is measured at the present value of estimated future cash flows. The estimate of future salary increase takes into account inflation, likely increments, promotions and other relevant factors.

(c) Compensated Absences

The liability for long term compensated absences carried forward on the Balance Sheet date is provided for based on actuarial valuation done by an independent Actuary using the Projected Unit Credit method at the end of each accounting period. Short term compensated absences is recognized based on the eligible leave at credit on the Balance Sheet date and is estimated based on the terms of the employment contract.

(d) Other Employee Benefits

Other employee benefits, including allowances, incentives etc. are recognised based on the terms of the employment contract.

x. Borrowing Cost

Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Eligible borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur

xi. Foreign Currency Transactions

The Company translates foreign currency transactions into Indian Rupees at the rate of exchange prevailing at the transaction date. Monetary assets and liabilities denominated in foreign currency are translated into Indian Rupees at the rate of exchange prevailing at the Balance Sheet date. Exchange differences arising on the settlement of monetary items or on reporting the Company's monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, excluding long term foreign currency monetary items (see below), are recognised as income or as expenses in the period in which they arise.

Exchange differences, both realised and unrealised, arising on reporting of long term foreign currency monetary items (as defined in the Accounting Standard-11 notified by the Government of India) relating to the acquisition of a depreciable capital asset are added to/deducted from the cost of the asset and in other cases unrealised exchange differences are accumulated in a "Foreign Currency Monetary Item Translation Difference Account" in the Company's Balance Sheet and amortized over the balance period of such long term asset/liability by recognition as income or expense in each of such periods.

In accordance with MCA circular dated 09 August 2012, exchange differences for this purpose, are total differences arising on long-term foreign currency monetary items for the period. In other words, the company does not differentiate between exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost and other exchange difference.

xii. Taxation

Income Tax: Current tax is the amount of tax payable on the taxable income for the year and is provided with reference to the provisions of the Income Tax Act, 1961.

Deferred Tax: Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax assets and deferred tax liabilities offset and relate to the taxes on income levied by same governing taxation laws. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits.

At each Balance Sheet date the Company re-assesses unrecognised deferred tax assets. It recognises unrecognised deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realised.

MAT Credit: Minimum Alternate Tax (MAT) Credit is recognised as an asset, only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period, in accordance with the Guidance Note on "Accounting for Credit Available in respect of Minimum Alternate Tax under Income Tax Act, 1961". In the year in which the MAT Credit becomes eligible to be recognised as an asset, the said asset is created by way of a credit to the Statement of Profit and Loss and shown as MAT Credit Entitlement. The Company reviews the same at each Balance Sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that the Company will pay normal income tax during the specified period.

xiii. Cash and Cash Equivalents

Cash and cash equivalents for the purposes of cash flow statement comprise cash and deposits at bank, cash in hand and short-term investments with an original maturity of three months or less.

xiv. Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognised only when the Company has present or legal obligations as a result of past events for which it is probable that an outflow of economic benefit will be required to settle the transaction and when a reliable estimate of the amount of obligation can be made. Contingent liability is disclosed for (i) possible obligations which will be confirmed only by future events not wholly within the control of the Company or (ii) present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent assets are not recognised in the financial statements since this may result in the recognition of income that may never be realised.


Mar 31, 2014

(i) Basis of preparation

Te financial statements have been prepared to comply in all material respects with the Accounting Standards notifed by Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956, read with General Circular 8/2014 dated April 4, 2014 issued by the Ministry of Corporate Afairs. Te financial statements have been prepared under the historical cost convention on an accrual basis. Te accounting policies have been consistently applied by the Company and are consistent with those used in the previous year, except for treatment of survey costs as referred to in Note 40. Te financial statements of the Company refect its share of assets, liabilities, income and expenditure of the Unincorporated Joint Ventures which are accounted on the basis of available information in the audited / unaudited financial statements of the Unincorporated Joint Ventures on line by line basis with similar items in the Company''s accounts to the extent of the participating interest of the Company as per the various "Production Sharing Contracts". Te financial statements of the Unincorporated Joint Ventures are prepared by the respective Operators in accordance with the requirements prescribed by the respective Production Sharing Contracts of the Unincorporated Joint Ventures. Hence, in respect of these Unincorporated Joint Ventures, certain disclosures required under the Accounting Standards notifed by Companies (Accounting Standards) Rules, 2006, (as amended), other pronouncements of Te Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956 have been made in the financial statements of the Company based on audited / unaudited financial statement of the unincorporated Joint Venture.

(ii) Use of Estimates

Te preparation of the financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period like depletion of Producing Properties, estimate of Site Restoration Liability, expensing of the estimated Site Restoration Liability, provision for employee benefits, useful lives of fixed assets, provision for doubtful advances, provision for tax, recognition of MAT Credit, recognition of deferred tax asset etc. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results may vary from these estimates. Any revisions to accounting estimates are recognized prospectively.

(iii) Fixed Assets and depreciation, depletion and amortization

Fixed assets comprises of the following:

- Tangible assets:

Fixed assets are stated at cost less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets which take a substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use.

Depreciation is provided on the "Written Down Value'''' method at the rates specified in Schedule XIV of the Companies Act, 1956. Assets individually costing less than or equal to INR 5,000 are fully depreciated in the year of acquisition.

Improvements to Leasehold premises are amortised over the remaining primary lease period.

- Intangible assets:

Intangible assets comprising computer software is amortised over the license period or 10 years, whichever is lower.

- Producing properties and Exploration / Development work-in-progress:

Te Company generally follows the "Successful Eforts Method" of accounting for its exploration and production activities as explained below:

(a) Acquisition costs cover all costs incurred to purchase, lease or otherwise acquire a property or mineral right. Tese are costs incurred in acquiring the right to explore, drill and produce oil and gas including the initial costs incurred for obtaining the Petroleum Exploration License / Letter of Authority and Mining Lease. Acquisition costs are carried in books as Capital – Work in Progress and transferred to Producing Properties on attainment of commercial production. Depletion on Acquisition cost is provided on "Unit of production" method based on the related reserves as recommended by the Guidance Note issued by the Institute of Chartered Accountants of India.

NOTES TO FINANcIAl STATEMENTS FOR ThE YEAR ENDED MARch 31, 2014

(All amounts are in Indian Rupees, unless otherwise stated)

(b) Cost of surveys and studies relating to exploration activities are expensed when the same are incurred (also refer Note 40).

(c) Cost of exploratory well(s) are expensed when the well(s) are conclusively determined to be dry / permanently abandoned or are transferred to Producing Properties on attainment of commercial production.

(d) Cost of all appraisal programmes ("appraisal costs") related to a Discovery are initially capitalised as "Exploration Expenditure". If a Discovery is determined to be commercial pursuant to the appraisal programme, all appraisal costs, including the cost of unsuccessful appraisal wells, if any, are capitalised as Producing Properties on attainment of commercial production. If at the end of the appraisal programme, the Discovery is relinquished, then all appraisal costs related to the Discovery are charged to the Statement of Profit and Loss.

(e) Cost of temporary occupation of land, successful exploratory wells, appraisal wells, development wells and all related development costs, including depreciation on support equipment and facilities, are considered as development expenditure. Tese expenses are capitalised as Producing Properties on attainment of commercial production.

(f ) Producing Properties, including the cost incurred on dry / abandoned wells in development areas, are depleted using "Unit of Production'''' method based on the related reserves as recommended by the Guidance Note issued by the Institute of Chartered Accountants of India. Company provides minimum depreciation as prescribed under Schedule XIV of the Companies Act, 1956, wherever required. Any changes in Reserves and / or Cost are dealt with prospectively from the beginning of the year of such change. Hydrocarbon reserves are estimated and / or approved by the Management Committees of the Unincorporated Joint Ventures, which follow the International Reservoir Engineering Principles.

(g) If the Company / Unincorporated Joint Venture were to relinquish a block or part thereof, the accumulated acquisition and exploration costs carried in the books related to the block or part thereof, as the case may be, are written of as a charge to the Statement of Profit and Loss in the year of relinquishment.

Explanatory Note

1. Save the costs referred to in note (b) herein above, all exploration costs are initially capitalized as "Exploration Expenditure", and are retained in exploration expenditure-work-in-progress if the exploration well(s) in frst drilling campaign is determined to be successful, or such costs are written of consistent with para 2 below, if is determined to be unsuccessful.

2. Exploration costs associated with drilling, testing and equipping exploratory well(s) are initially capitalized as "Exploration Expenditure" and retained in exploration expenditure-work-in-progress so long as:

(a) such well has found potential commercial reserves; or

(b) such well test result is inconclusive and is subject to further exploration or appraisal activity like acquisition of seismic, or re-entry of such well, or drilling of additional exploratory / step out well in the area of interest

— until such time as such costs are transferred to "Producing Properties" on attainment of commercial production; or

— else charged to the Statement of Profit and Loss.

Management makes quarterly assessment of the amounts included in "Exploration Expenditure-work-in-progress" to determine whether capitalization is appropriate and can continue. Exploration well(s) capitalized beyond 2 years are subject to additional judgment as to whether facts and circumstances have changed and therefore the conditions described in 2(a) and (b) above no longer apply.

(iv) Site Restoration

Estimated future liability relating to dismantling and abandoning producing well sites and facilities is recognised when the installation of the production facilities is completed based on the estimated future expenditure determined by the Management in accordance with the local conditions and requirements. Te corresponding amount is added to the cost of the Producing Properties and is expensed in proportion to the production for the year and the estimated proved developed reserves of hydrocarbons based on latest technical assessment available with the Company. Any change in the value of the estimated liability is dealt with prospectively and refected as an adjustment to the provision and the corresponding Producing Properties.

(v) Impairment

Te carrying amounts of assets are reviewed annually or if there is any indication of impairment based on internal / external factors during the year. An impairment loss is recognized wherever the carrying amount of an asset or Cash Generating Unit (CGU) exceeds its recoverable amount. Te recoverable amount is the greater of the asset''s or CGU''s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

After impairment, depreciation / depletion is provided in subsequent periods on the revised carrying amount of the asset over its remaining useful life.

A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

(vi) Investments

Investments are capitalised at cost plus brokerage and stamp charges. Investments that are readily realisable and intended to be held for not more than a year are classifed as current investments. All other investments are classifed as long-term investments. Current investments are valued at lower of cost and fair value determined on an individual investment basis. Long term investments are valued at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments.

(vii) Inventories

(a) Closing stock of crude oil, condensate and natural gas in saleable condition is valued at Estimated Net Realisable Value. Estimated Net Realisable Value is the estimated selling price in the ordinary course of business, less estimated costs necessary to make the sale.

(b) Stores, spares, capital stock and drilling tangibles are valued at cost on frst in frst out basis / weighted average basis, as applicable, or estimated net realisable value, whichever is lower.

(viii) Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will fow to the Company and the revenue can be reliably measured.

(a) Revenue from the sale of crude oil, condensate and natural gas, net of Government''s share of Profit Petroleum (calculated as per the provisions of the respective Production Sharing Contracts), where applicable, and Value Added Tax, is recognised on transfer of custody.

(b) Service Income is recognised on accrual basis as per the contractual terms and is net of Service Tax.

(c) Delayed Payment charges, retrospective revision in prices, interest on delayed payments and interest on income tax refunds are recognised as and when there is no uncertainty in the determination / receipt of the amount, on grounds of prudence.

(d) Interest Revenue is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

(e) Dividend Income is recognised when the right to receive the dividend is unconditional.

(ix) Employee benefits

(a) Defined Contribution Plan

(i) Provident Fund: Contributions towards Employees'' Provident Fund are made to the Employees Provident Fund Scheme in accordance with the statutory provisions. Contributions towards Employees'' Provident Fund are recognized as an expense in the year incurred. Tere are no obligations other than the contribution payable to the respective fund.

(ii) Superannuation Fund: Te Company contributes a sum equivalent to 15% of eligible Employees'' basic salary to a Superannuation Fund administered by trustees. Te Company has no liability for future Superannuation Fund benefits other than its annual contribution and recognizes such contributions as an expense in the year incurred.

(b) Defined benefit Plan

Te Company makes annual contribution to a Gratuity Fund administered by trustees and managed by the Life Insurance Corporation of India. Te Company accounts its liability for future gratuity benefits based on actuarial valuation, as at the Balance Sheet date, determined every year by an Actuary appointed by the Company, using the Projected Unit Credit method. Actuarial gains / losses are recognised in the Statement of Profit and Loss. Obligation under the Defined benefit plan is measured at the present value of estimated future cash flows. Te estimate of future salary increase takes into account infation, likely increments, promotions and other relevant factors.

(c) Compensated Absences

Te liability for long term compensated absences carried forward on the Balance Sheet date is provided for based on actuarial valuation done by an independent Actuary using the Projected Unit Credit method at the end of each accounting period. Short term compensated absences is recognized based on the eligible leave at credit on the Balance Sheet date and is estimated based on the terms of the employment contract.

(d) Other Employee benefits

Other employee benefits, including allowances, incentives etc. are recognised based on the terms of the employment contract.

(x) Borrowing Cost

Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Eligible borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period the y occ u r.

(xi) Foreign Currency Transactions

Te Company translates foreign currency transactions into Indian Rupees at the rate of exchange prevailing at the transaction date. Monetary assets and liabilities denominated in foreign currency are translated into Indian Rupees at the rate of exchange prevailing at the Balance Sheet date. Exchange diferences arising on the settlement of monetary items or on reporting the Company''s monetary items at rates diferent from those at which they were initially recorded during the period, or reported in previous financial statements, excluding long term foreign currency monetary items (see below), are recognised as income or as expenses in the period in which they arise.

Exchange diferences, both realised and unrealised, arising on reporting of long term foreign currency monetary items (as Defined in the Accounting Standard - 11 notifed by the Government of India) relating to the acquisition of a depreciable capital asset are added to / deducted from the cost of the asset and in other cases unrealised exchange diferences are accumulated in a "Foreign Currency Monetary Item Translation Diference Account" in the Company''s Balance Sheet and amortized over the balance period of such long term asset / liability by recognition as income or expense in each of such periods.

In accordance with MCA circular dated 09 August 2012, exchange diferences for this purpose, are total diferences arising on long-term foreign currency monetary items for the period. In other words, the company does not diferentiate between exchange diferences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost and other exchange diference.

(xii) Taxation

Income Tax: Current tax is the amount of tax payable on the taxable income for the year and is provided with reference to the provisions of the Income Tax Act, 1961.

Deferred Tax: Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax assets and deferred tax liabilities ofset and relate to the taxes on income levied by same governing taxation laws. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufcient future taxable income will be available against which such deferred tax assets can be realised. In situations where the company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable Profits.

At each Balance Sheet date the Company re-assesses unrecognised deferred tax assets. It recognises unrecognised deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufcient future taxable income will be available against which such deferred tax assets can be realised.

MAT Credit: Minimum Alternate Tax (MAT) Credit is recognised as an asset, only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period, in accordance with the Guidance Note on "Accounting for Credit Available in respect of Minimum Alternate Ta x under Income Ta x Act, 1961". In the year in which the MAT Credit becomes eligible to be recognised as an asset, the said asset is created by way of a credit to the Statement of Profit and Loss and shown as MAT Credit Entitlement. Te Company reviews the same at each Balance Sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the efect that the Company will pay normal income tax during the specified period.

(xiii) Cash and cash equivalents

Cash and cash equivalents for the purposes of cash fow statement comprise cash and deposits at bank, cash in hand and short-term investments with an original maturity of three months or less.

(xiv) Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognised only when the Company has present or legal obligations as a result of past events for which it is probable that an outflow of economic benefit will be required to settle the transaction and when a reliable estimate of the amount of obligation can be made. Contingent liability is disclosed for (i) possible obligations which will be confirmed only by future events not wholly within the control of the Company or (ii) present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent assets are not recognised in the financial statements since this may result in the recognition of income that may never be realised.

(a) Reconciliation of equity shares outstanding at the beginning and at the end of the reporting period

(b) Terms / rights attached to equity shares

The Company has only one class of equity shares having par value of INR 10 per share. Each holder of equity shares is entitled to one vote per share.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive assets of the Company remaining after settlement of all liabilities. The distribution will be in proportion to the number of equity shares held by the shareholders.

(c) Details of shareholders holding more than 5% shares in the company

As per records of the Company, including its register of shareholders / members, the above shareholding represents legal ownerships of shares.

Notes:

a. The term loans from banks (Foreign currency) include loans from Axis Bank Limited INR 92,175,630 (Previous Year: INR 167,009,795). Term loan is secured by way of charge on all movable properties pertaining to PY-1 Gas Project, the Company''s Participating Interest in PY-1 Field and on the PY-1 Trust and Retention Accounts. The Loan is to be paid in variable installments over a period upto Financial Year 2014-2015.

b. The term loans from banks (Rupee) includes loan from HDFC Bank Limited and Axis Bank Limited INR Nil (Previous Year INR 59,900,000) which are secured by way of charge on the Company''s Participating Interest in PY-3 and Palej Fields, frst charge on the Company''s share of Crude Oil Receivables from PY-3 and Palej Fields and charge on the Debt Service Reserve Account. These loans have been repaid during the year.

c. Loan from Related Party (Unsecured) includes (Total INR 9,375,950,000):

a. Unsecured loan of INR 5,746,550,000 (Previous Year: INR 5,343,000,000) is to be paid in variable installments over a period upto Financial Year 2015-2016.

b. During the previous year, Company had raised funds through External Commercial Borrowing (ECB) from ENI Finance International of USD 60 Million : INR equivalent 3,629,400,000 (Previous year: INR 3,288,000,000) to be paid in variable installments over a period up to 2018-2019 starting from June 2014.

All payments due to Micro, Small & Medium enterprises have been made within the prescribed time limits and / or date agreed upon under the contract.

b. There are no amounts due and outstanding to be credited to the Investor Education and Protection Fund.

c. Includes Security Deposit of INR 8,500,000 (Previous Year: INR 8,500,000) received from HOEC Bardahl India Ltd., the Wholly Owned Subsidiary of the Company.

Notes:

a. The Hon''ble Mumbai ITAT has, vide its order dated September 17, 2013, passed a favorable order in relation to the Company''s Income Tax Assessment Cases for the Financial Years 2004-05 and 2005-06 primarily relating to deduction under Section 80IB(9) of the Income Tax Act, 1961. Since the deduction had been decided in favour of the Company (consistent with Financial Years 2002-03 and 2003-04), the excess Income Tax provision made for the Financial Years 2004-05 to 2006-07 amounting to INR 5,650 lacs has been written back during the current year.

b. Pursuant to a demand raised by Directorate General of Hydrocarbons with respect to the block CY-OS-97/1 in the previous year, the Company had paid amounts aggregating to INR 47,630,122 under protest. The matter is under arbitration and the Company had provided for the entire amount in books of account.

Notes:

a. Current accounts include lien marked amount of INR Nil (Previous Year: INR 1,176,472).

b. Deposits (with original maturity of less than 3 months) include lien marked deposits of INR Nil (Previous Year: INR 8,469,476).

c. Deposits (with original maturity of more than 12 months) include (i) lien marked deposits of INR 64,414,019 (Previous Year: INR 52,026,986), and (ii) deposits of INR 410,979,383 (Previous Year: INR 321,033,323) placed as "Site Restoration Fund" under Section 33ABA of Income Tax Act, 1961.

Notes:

a. PY-1 Field was shut in for a period of 102 days in the FY 2014 primarily on account of non evacuation of gas by GAIL (Buyer). Following the Amendment to the Gas Sales Contract which had been executed in July 2013, GAIL has been evacuating gas through the low pressure pipeline connecting PY-1 Gas Terminal to alternate consumers on a nearly continuous basis.

b. PY-3 Field, operated by Hardy Exploration & Production (India) Inc., remains shut since July 31, 2011. The Full Field Development Plan submitted by the Operator during May 2013 has been technically reviewed by all the JV Partners. Discussions are ongoing amongst the Joint Venture Partners with respect to the proposal to proportionately share cess and royalty on a cost recoverable basis.

Notes:

a. Previous year income includes dividend of INR 35,001,400 received from wholly owned subsidiary HOEC Bardahl India Limited.

b. Excess provision written back for the year ended March 31, 2013 represents provision of INR 4,249,904 relating to Long Term Incentive Plan, being provision no longer required.

Note:

a. Exceptional item in the previous year represents additional depletion and impairment loss charged to the statement of Profit and loss pursuant to an independent third party certification of PY-1 Field reserves based on information available subsequent to the drilling of Surya Well in PY-1 Field, the estimate of Proved Reserves of PY-1 Field had been revised to 120.2 billion cubic feet.

The Company had carried out an impairment assessment as at December 31, 2012, based on procedures consistent with Accounting Standard 28 (AS 28) and recognised an impairment loss to the extent of INR 4,593,886,734 and additional depletion amounting to INR 1,125,857,269 for the production upto the date of assessment of impairment. The aggregate amount of INR 5,719,744,003 had been disclosed under exceptional items.

The following key assumptions had been used for determining the value-in-use of PY-1 Asset:

i. Pre-tax cash flows had been projected for the life of the PY-1 Field based on the estimate of Proved Reserves as certified by the independent third party and considering cash flows necessary to maintain originally assessed standard of performance.

ii. Discount rate of 10% had been considered refecting market assessment based on transactions for similar assets.

25. Long Term Incentive Plan, Scheme 2005

Under the HOEC Limited Employee Stock Option Scheme – 2005 (ESOS Scheme) approved by the Shareholders, and as amended from time to time, the Board had granted options in the prior years to the eligible Employees and eligible Directors at Nil exercise price as part of the Long Term Incentive Plan (LTIP). In terms of the ESOS Scheme, the options would vest at the third anniversary of the end of the financial year for which the grant corresponds to. During the previous year, the Company has written back excess provision towards cash and ESOS (deferred bonus) amounting to INR 4,249,904 based on the approval / ratifcation of the Board of Directors of the Company.

Method Used for Accounting for Share Based Payment Plan:

Under the LTIP Scheme 2005, the eligible employees are granted options in the succeeding year after adoption of the Annual Audited Accounts for the given year. Te Company charges the entire amount provided towards performance bonus and stock options to the Statement of Profit and Loss for the year for which the grant corresponds to. Any upward variation in the market price / acquisition price of the ESOS stocks, as may be applicable, as on the date of Balance Sheet, is charged to the Statement of Profit and Loss for the period as per LTIP.

Fair Value Methodology:

Te fair value of the options granted under LTIP Scheme 2005 approximates the intrinsic value of the options on the date of the grant.

26. Employee benefits

a. Gratuity

Te Company''s obligation towards the Gratuity Fund is a Defined benefit Plan. Every employee who has completed a continuous period of five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. Te scheme is funded with Life Insurance Corporation of India in the form of a qualifying insurance policy.

Te following tables summarize the components of net benefit expense recognised in the Statement of Profit and Loss and the funded status and amounts recognised in the Balance Sheet.

Te estimates of future salary increases, considered in actuarial valuation, take account of infation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

Te overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

Amounts for the current and previous four periods are as follows:

b. Compensated Absences

Te key assumptions used in computation of provision for long term compensated absences are as given below:

Discount Rate (% p.a.) 9.10%

Future Salary Increase (% p.a.) 9.00%

Mortality Rate Indian Assured Lives Mortality (2006-08) Ult.

Attrition (% p.a.) 1% to 5%

27. Segmental Reporting

Te Company is primarily engaged in a single business segment of "Hydrocarbons and other incidental services". All the activities of the Company revolve around the main business. Further, the Company does not have any separate geographic segments other than India. Hence, there are no separate reportable segments as per AS-17 "Segmental Reporting".

28. Unincorporated Joint Venture Operations

Te Company has entered into Production Sharing Contracts (PSCs) and Unincorporated Joint Ventures (UJVs) in respect of certain properties with the Government of India and some bodies corporate. Details of these UJVs and participating interest of venture partners are as follows:

Notes:

All the Unincorporated Joint Ventures are for the blocks awarded within the territorial limits of India. * Pursuant to the Settlement Agreement entered into during 2012, the Participating Interest (PI) of the Company has been revised to 100%. ** On account of non-submission of Financial and Performance Guarantee to the Government of India, JPL has been declared "Defaulting Party"

by the Management Committee. Te non defaulting parties i.e HOEC, BPRL and IMC have assumed the PI of the defaulting party (JPL)

on interim basis with onward assignment of 25% PI to HPCL so that the efective Participating Interest of each of the parties remain at 25%.

Necessary Government approvals for the aforesaid assignment in favour of Hindustan Petroleum Corporation Limited (HPCL) are awaited.

30. Related Party Disclosures

(i) Te related parties of the Company as at March 31, 2014 are as follows:

(A) Wholly Owned Subsidiary Company: 1. HOEC Bardahl India Limited

(B) Promoter Group:

1. ENI UK Holding plc (Wholly Owned Subsidiary of ENI S.p.A, Italy)

2. Burren Shakti Limited (Wholly Owned Indirect Subsidiary of ENI UK Holding plc.)

3. Burren Energy India Limited (Wholly Owned Indirect Subsidiary of ENI UK Holding plc.)

(C) Other Group Entities

1. ENI Finance International S.A., Belgium

2. ENI India Limited, United Kingdom

3. Banque ENI, Belgium

4. Saipem (Portugal) Comercio Maritimo Su Lda

(D) Unincorporated Joint Ventures:

As per details given in Note 28 above

(E) Key Management Personnel:

Mr. Manish Maheshwari – Managing Director (ii) Te nature and volume of transactions of the Company during the year with the above parties were as follows:


Mar 31, 2013

(i) Basis of preparation

Te fnancial statements have been prepared to comply in all material respects with the Accounting Standards notifed by Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956. Te fnancial statements have been prepared under the historical cost convention on an accrual basis. Te accounting policies have been consistently applied by the Company and are consistent with those used in the previous year. Te fnancial statements of the Company refect its share of assets, liabilities, income and expenditure of the Unincorporated Joint Ventures which are accounted on the basis of available information in the audited / unaudited fnancial statements of the Unincorporated Joint Ventures on line by line basis with similar items in the Company''s accounts to the extent of the participating interest of the Company as per the various "Production Sharing Contracts". Te fnancial statements of the Unincorporated Joint Ventures are prepared by the respective Operators in accordance with the requirements prescribed by the respective Production Sharing Contracts of the Unincorporated Joint Ventures. Hence, in respect of these Unincorporated Joint Ventures, certain disclosures required under the Accounting Standards notifed by Companies (Accounting Standards) Rules, 2006, (as amended), other pronouncements of Te Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956 have been made in the fnancial statements of the Company based on audited / unaudited fnancial statement of the unincorporated Joint Venture.

(ii) Use of Estimates

Te preparation of the fnancial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the fnancial statements and the reported income and expenses during the reporting period like depletion of Producing Properties, estimate of Site Restoration Liability, expensing of the estimated Site Restoration Liability, provision for employee benefts, useful lives of fxed assets, provision for doubtful advances, provision for tax, recognition of MAT Credit, recognition of deferred tax asset etc. Management believes that the estimates used in the preparation of the fnancial statements are prudent and reasonable. Future results may vary from these estimates. Any revisions to accounting estimates are recognized prospectively.

(iii) Fixed Assets and depreciation, depletion and amortization

Fixed assets comprises the following:

- Tangible assets:

Fixed assets are stated at cost less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fxed assets which take a substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use.

Depreciation is provided on the "Written Down Value'''' method at the rates specifed in Schedule XIV of the Companies Act, 1956. Assets individually costing less than or equal to INR 5,000 are fully depreciated in the year of acquisition.

Improvements to Leasehold premises are amortised over the remaining primary lease period.

- Intangible assets:

Intangible assets comprising computer software is amortised over the license period or 10 years, whichever is lower.

- Producing properties and Exploration / Development work-in-progress:

Te Company generally follows the "Successful Eforts Method" of accounting for its exploration and production activities as explained below:

(a) Acquisition costs cover all costs incurred to purchase, lease or otherwise acquire a property or mineral right. Tese are costs incurred in acquiring the right to explore, drill and produce oil and gas including the initial costs incurred for obtaining the Petroleum Exploration License / Letter of Authority and Mining Lease. Acquisition costs are carried in books as Capital – Work in Progress and transferred to Producing Properties on attainment of commercial production. Depletion on Acquisition cost is provided on "Unit of production" method based on the related reserves as recommended by the Guidance Note issued by the Institute of Chartered Accountants of India.

(b) Cost of exploratory wells, including survey costs, is expensed in the year when the well is determined to be dry / abandoned or is transferred to Producing Properties on attainment of commercial production.

(c) Cost of all appraisal programmes related to a Discovery are initially capitalised as "Exploration Expenditure". If a Discovery is determined to be commercial pursuant to the appraisal programme, all appraisal costs, including the cost of unsuccessful appraisal wells, if any, are capitalised as Producing Properties on attainment of commercial production. If at the end of the appraisal programme, the Discovery is relinquished, then all appraisal costs related to the Discovery are charged to the Statement of Proft and Loss.

(d) Cost of temporary occupation of land, successful exploratory wells, appraisal wells, development wells and all related development costs, including depreciation on support equipment and facilities, are considered as development expenditure. Tese expenses are capitalised as Producing Properties on attainment of commercial production.

(e) Producing Properties, including the cost incurred on dry / abandoned wells in development areas, are depleted using "Unit of Production'''' method based on the related reserves as recommended by the Guidance Note issued by the Institute of Chartered Accountants of India. Company provides minimum depreciation as prescribed under Schedule XIV of the Companies Act, 1956, wherever required. Any changes in Reserves and / or Cost are dealt with prospectively from the beginning of the year of such change. Hydrocarbon reserves are estimated and / or approved by the Management Committees of the Unincorporated Joint Ventures, which follow the International Reservoir Engineering Principles.

(f ) If the Company / Unincorporated Joint Venture were to relinquish a block or part thereof, the accumulated acquisition and exploration costs carried in the books related to the block or part thereof, as the case may be, are written of as a charge to the Statement of Proft and Loss in the year of relinquishment.

Explanatory Note

1. All exploration costs including acquisition of geological and geophysical seismic information, license, depreciation on support equipment and facilities and acquisition costs are initially capitalized as "Exploration Expenditure", and are retained in exploration expenditure-work-in-progress if the exploration well(s) in frst drilling campaign is determined to be successful, or such costs are written of consistent with para 2 below, if is determined to be unsuccessful.

2. Exploration costs associated with drilling, testing and equipping exploratory well(s) are initially capitalized as "Exploration Expenditure" and retained in exploration expenditure-work-in-progress so long as:

(a) such well has found potential commercial reserves; or

(b) such well test result is inconclusive and is subject to further exploration or appraisal activity like acquisition of seismic, or re-entry of such well, or drilling of additional exploratory / step out well in the area of interest, such activity to be carried out no later than 2 years from the date of completion of such well testing

— until such time as such costs are transferred to "Producing Properties" on attainment of commercial production; or

— else charged to the Statement of Proft and Loss.

Management makes quarterly assessment of the amounts included in "Exploration Expenditure-work-in-progress" to determine whether capitalization is appropriate and can continue. Exploration well(s) capitalized beyond 2 years are subject to additional judgment as to whether facts and circumstances have changed and therefore the conditions described in 2(a) and (b) above no longer apply.

(iv) Site Restoration

Estimated future liability relating to dismantling and abandoning producing well sites and facilities is recognised when the installation of the production facilities is completed based on the estimated future expenditure determined by the Management in accordance with the local conditions and requirements. Te corresponding amount is added to the cost of the Producing Properties and is expensed in proportion to the production for the year and the estimated proved developed reserves of hydrocarbons based on latest technical assessment available with the Company. Any change in the value of the estimated liability is dealt with prospectively and refected as an adjustment to the provision and the corresponding Producing Properties.

(v) Impairment

Te carrying amounts of assets are reviewed annually or if there is any indication of impairment based on internal/external factors during the year. An impairment loss is recognized wherever the carrying amount of an asset or Cash Generating Unit (CGU) exceeds its recoverable amount. Te recoverable amount is the greater of the asset''s or CGU''s net selling price and value in use. In assessing value in use, the estimated future cash fows are discounted to their present value at the weighted average cost of capital.

After impairment, depreciation/depletion is provided in subsequent periods on the revised carrying amount of the asset over its remaining useful life.

A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

(vi) Investments

Investments are capitalised at cost plus brokerage and stamp charges. Investments that are readily realisable and intended to be held for not more than a year are classifed as current investments. All other investments are classifed as long-term investments. Current investments are valued at lower of cost and fair value determined on an individual investment basis. Long term investments are valued at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments.

(vii) Inventories

(i) Closing stock of crude oil, condensate and natural gas in saleable condition is valued at Estimated Net Realisable Value. Estimated Net Realisable Value is the estimated selling price in the ordinary course of business, less estimated costs necessary to make the sale.

(ii) Stores, spares, capital stock and drilling tangibles are valued at cost on frst in frst out basis / weighted average basis, as applicable, or estimated net realisable value, whichever is lower.

(viii) Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefts will fow to the Company and the revenue can be reliably measured.

(i) Revenue from the sale of crude oil, condensate and natural gas, net of Government''s share of Proft Petroleum (calculated as per the provisions of the respective Production Sharing Contracts), where applicable, and Value Added Tax, is recognised on transfer of custody. (ii) Service Income is recognised on accrual basis as per the contractual terms and is net of Service Tax. (iii) Delayed Payment charges, retrospective revision in prices, interest on delayed payments and interest on income tax refunds are recognised as and when there is no uncertainty in the determination / receipt of the amount, on grounds of prudence.

(iv) Interest Revenue is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

(v) Dividend Income is recognised when the right to receive the dividend is unconditional.

(ix) Employee Benefts

(a) Defned Contribution Plan

(i) Provident Fund: Contributions towards Employees'' Provident Fund are made to the Employees Provident Fund Scheme in accordance with the statutory provisions. Contributions towards Employees'' Provident Fund are recognized as an expense in the year incurred. Tere are no obligations other than the contribution payable to the respective fund.

(ii) Superannuation Fund: Te Company contributes a sum equivalent to 15% of eligible Employees'' basic salary to a Superannuation Fund administered by trustees. Te Company has no liability for future Superannuation Fund benefts other than its annual contribution and recognizes such contributions as an expense in the year incurred.

(b) Defned Beneft Plan

Te Company makes annual contribution to a Gratuity Fund administered by trustees and managed by the Life Insurance Corporation of India. Te Company accounts its liability for future gratuity benefts based on actuarial valuation, as at the Balance Sheet date, determined every year by an Actuary appointed by the Company, using the Projected Unit Credit method. Actuarial gains / losses are recognised in the Statement of Proft and Loss. Obligation under the defned beneft plan is measured at the present value of estimated future cash fows. Te estimate of future salary increase takes into account infation, likely increments, promotions and other relevant factors.

(c) Compensated Absences

Te liability for long term compensated absences carried forward on the Balance Sheet date is provided for based on actuarial valuation done by an independent Actuary using the Projected Unit Credit method at the end of each accounting period. Short term compensated absences is recognized based on the eligible leave at credit on the Balance Sheet date and is estimated based on the terms of the employment contract.

(d) Other Employee Benefts

Other employee benefts, including allowances, incentives etc. are recognised based on the terms of the employment contract.

(x) Borrowing Cost

Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Eligible borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period the y occ u r.

(xi) Foreign Currency Transactions

Te Company translates foreign currency transactions into Indian Rupees at the rate of exchange prevailing at the transaction date. Monetary assets and liabilities denominated in foreign currency are translated into Indian Rupees at the rate of exchange prevailing at the Balance Sheet date. Exchange diferences arising on the settlement of monetary items or on reporting the Company''s monetary items at rates diferent from those at which they were initially recorded during the period, or reported in previous fnancial statements, excluding long term foreign currency monetary items (see below), are recognised as income or as expenses in the period in which they arise.

Exchange diferences, both realised and unrealised, arising on reporting of long term foreign currency monetary items (as defned in the Accounting Standard - 11 notifed by the Government of India) relating to the acquisition of a depreciable capital asset are added to / deducted from the cost of the asset and in other cases unrealised exchange diferences are accumulated in a "Foreign Currency Monetary Item Translation Diference Account" in the Company''s Balance Sheet and amortized over the balance period of such long term asset / liability by recognition as income or expense in each of such periods.

In accordance with MCA circular dated 09 August 2012, exchange diferences for this purpose, are total diferences arising on long-term foreign currency monetary items for the period. In other words, the company does not diferentiate between exchange diferences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost and other exchange diference.

(xii) Taxation

Income Tax: Current tax is the amount of tax payable on the taxable income for the year and is provided with reference to the provisions of the Income Tax Act, 1961.

Deferred Tax: Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax assets and deferred tax liabilities ofset and relate to the taxes on income levied by same governing taxation laws. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufcient future taxable income will be available against which such deferred tax assets can be realised. In situations where the company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profts.

At each Balance Sheet date the Company re-assesses unrecognised deferred tax assets. It recognises unrecognised deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufcient future taxable income will be available against which such deferred tax assets can be realised.

MAT Credit: Minimum Alternate Tax (MAT) Credit is recognised as an asset, only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specifed period, in accordance with the Guidance Note on "Accounting for Credit Available in respect of Minimum Alternate Ta x under Income Ta x Act, 1961". In the year in which the MAT Credit becomes eligible to be recognised as an asset, the said asset is created by way of a credit to the Statement of Proft and Loss and shown as MAT Credit Entitlement. Te Company reviews the same at each Balance Sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the efect that the Company will pay normal income tax during the specifed period.

(xiii) Cash and cash equivalents

Cash and cash equivalents for the purposes of cash fow statement comprise cash and deposits at bank, cash in hand and short-term investments with an original maturity of three months or less.

(xiv) Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognised only when the Company has present or legal obligations as a result of past events for which it is probable that an outfow of economic beneft will be required to settle the transaction and when a reliable estimate of the amount of obligation can be made. Contingent liability is disclosed for (i) possible obligations which will be confrmed only by future events not wholly within the control of the Company or (ii) present obligations arising from past events where it is not probable that an outfow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent assets are not recognised in the fnancial statements since this may result in the recognition of income that may never be realised.

 
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