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Accounting Policies of Oil India Ltd. Company

Mar 31, 2015

1 ACCOUNTING CONVENTION:

The Financial Statements are prepared under the historical cost convention on accrual method of accounting, in accordance with the Generally Accepted Accounting Principles and complying with the mandatory Accounting Standards notified by the Government of India under the Companies (Accounting Standards) Rules, 2006 and the relevant provisions and presentational requirement of the Companies Act, 2013.

2 CLASSIFICATION OF ASSETS & LIABILITIES:

All the Assets and Liabilities of the Company are segregated into Current & Non-current based on the principles and definitions as set out in the Schedule III to the Companies Act, 2013 as amended. The Company has adopted a period of 12 months as its Operating Cycle.

3 PRE-ACQUISITION COSTS, ACQUISITION

COSTS, EXPLORATION COSTS,

DEVELOPMENT COSTS AND ABANDONMENT COSTS :

The Company follows the "Successful Efforts Method" (SEM) of Accounting in respect of its oil and gas exploration and production activities in accordance with the "Guidance Note on Accounting for Oil & Gas Producing Activities" issued by the Institute of Chartered Accountants of India.

3.1 PRE-ACQUISITION COSTS:

Costs of revenue nature incurred prior to obtaining the rights to explore, develop and produce Oil & Gas like data collection & analysis cost etc. are expensed to the Statement of Profit and Loss in the year of incidence.

3.2 GEOLOGICAL & GEOPHYSICAL COSTS:

Geological and Geophysical expenditure are charged as expense when incurred.

.3 ACQUISITION COSTS:

i) Acquisition costs include land acquired for drilling operations including cost of temporary occupation of the land, crop compensation paid to farmers, registration fee, legal cost, signature

bonus, brokers' fees, consideration for farm-in arrangements and other costs incurred in acquiring mineral rights.

ii) Cost for retaining the mineral interest in properties like lease carrying cost, license fees & other cost are charged as expense when incurred.

iii) Acquisition costs are initially recorded under Capital work in progress-Tangible & Intangible as the case may be.

iv) On determination of proved developed reserves, associated acquisition costs are transferred to Fixed Assets- Producing Properties.

v) Acquisition cost of Producing Properties is capitalized under Fixed Asset-Producing Properties.

vi) Acquisition cost relating to an exploratory well that is determined to have no proved reserves and its status is decided as dry or of no further use for exploration purpose, is charged as expenses. In such cases, for land value forming part of acquisition cost, a nominal amount of Rs.100 per bigha is transferred to Freehold land under Fixed Assets.

3.4 EXPLORATION COSTS:

i) All exploration costs including allocated depreciation on support equipment and facilities involved in drilling and equipping exploratory and appraisal wells and cost of exploratory-type drilling stratigraphic test wells are initially shown as Intangible assets under Capital Work in Progress as exploration cost till the time these are either transferred to Fixed Assets as Producing Properties on determination of Proved Developed Reserves or charged as expense when determined to be dry or of no further use.

ii) Cost of exploratory wells are not carried over unless it could be reasonably demonstrated that there are indications

of sufficient quantity of reserves and activities are firmly planned in near future for further assessing the reserves and economic & operating viability of the project. Costs of written off exploratory wells are not reinstated in the book even if they start producing subsequently.

3.5 DEVELOPMENT COSTS:

Costs that are attributable to development activities including production and processing plant & facilities, service wells including allocated depreciation on support equipment and facilities are initially shown as Tangible Assets under Capital Work in Progress as Development Cost till such time they are capitalized as Producing Properties upon determination of Proved Developed Reserves.

3.6 PRODUCTION COSTS:

Production Cost consist of direct and indirect costs incurred to operate and maintain wells and related equipments and facilities, including depreciation and applicable operating cost of support equipment and facilities.

3.7 SIDE-TRACKING EXPENDITURE:

In case of exploratory wells, the cost of abandoned portion of side tracked well is charged off to Profit and Loss statement. In case of development wells, the entire cost of abandoned portion and side-tracking is capitalized. In case of existing producing wells the cost of side - tracking is capitalized if it increases the proved developed reserves, otherwise is charged off to Profit and loss statement.

3.8 ABANDONMENT COSTS:-

i. Estimated full eventual liability towards costs relating to dismantling, abandoning and restoring well sites and associated Production Facilities are recognized at the commencement of drilling a well or when facilities are installed, as the case may be. Liability for abandonment cost is updated annually based on the technical assessment available at current costs.

ii. The actual cost incurred on abandonment is adjusted against the liability and the ultimate gain or loss is recognized in the Statement of Profit and Loss, when the designated oil/gas field or a group of oil/ gas fields ceases to produce.

4 FIXED ASSETS, DEPRECIATION & DEPLETION

4.1 TANGIBLE ASSETS:

i) Cost of Freehold & Leasehold land which are perpetual in nature used for other than exploration and development activity are not amortized. Leasehold land other than perpetual lease is amortized over the lease period.

ii) All successful exploratory well cost, development well cost and other development cost viz. Production Facilities are capitalized when the same is ready to commence commercial production.

iii) Costs relating to acquisition/ construction of tangible assets other than producing properties are capitalized on commissioning.

iv) Land acquired on perpetual lease as well as on lease over 99 years is treated as free hold land and not amortized.

v) Land acquired on lease for 99 years or less is treated as leasehold land and amortised over the lease period.

vi) Any Tangible asset, when determined of no further use, is deleted from the Gross Block of assets. The deleted assets are carried as 'Assets awaiting disposal' under Inventories at lower of Rs.1000 or 5% of the original cost and the balance Written down Value, is charged off.

vii) Physical verification of the fixed assets is carried out by the Company in a phased manner to cover all the items over a period of five years. The discrepancies, if any, noticed are accounted for after reconciliation of the same.

4.2 INTANGIBLE ASSETS:

i) Costs of intangible assets are capitalized when the asset is ready for its intended use.

ii) Cost of right of use/right of way for laying pipelines is capitalized and amortized on a straight line basis over the period of such right of use / right of way or 99 years whichever is lower, as per industry practice.

iii) Cost incurred on computer software purchased /developed are capitalized as intangible asset and amortized over the useful life not exceeding five years from the date of capitalization.

iv) Any intangible asset, when determined of no further use, is written off.

4.3 DEPRECIATION:

i) Depreciation on Tangible Assets other than Producing Properties is provided for under the "Written down Value Method", in the manner specified in Schedule II to the Companies Act, 2013.

ii) Capital assets costing up to Rs. 5000 each are fully depreciated in the year of acquisition.

4.4 DEPLETION:

i) Acquisition Costs are depleted using the "Unit of Production Method" with reference to the ratio of production and related Proved reserves.

ii) Producing Wells and Production Facilities are depleted using the "Unit of Production Method", with reference to ratio of production and the related Proved Developed Reserves.

iii) Rate of depletion is determined based on production from the Oil/Gas field or a group of Oil/Gas fields identified with reference to the related reserves having common geological feature.

5 FOREIGN CURRENCY TRANSLATION

(i) Foreign currency transactions are initially recognised and accounted for at the exchange rates prevailing at the dates of transactions.

(a) Foreign Currency monetary assets &

liabilities outstanding at the close of the

year are translated at the rates of exchange prevailing at the date of Balance Sheet. Resultant gains or loss is accounted for during the year, except those relating to long-term foreign currency monetary items.

(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 depreciated over the balance life of the assets in line with para 46A of Accounting Standard-11. In other cases, exchange differences are accumulated in a "Foreign Currency Monetary Item Translation Difference Account" and amortised over the balance period of such long term foreign currency monetary item by recognition as income or expense in each of such periods.

(ii) Foreign currency transactions in relation to Joint Venture (Overseas) are treated in the following manner:

(a) Foreign currency transactions are initially recognised and accounted for at the exchange rates prevailing at the dates of transactions. However, the average exchange rate of relevant month is taken for the transactions of that month, where actual rate of transaction is not available or at the rate as agreed otherwise.

(b) Foreign Currency monetary assets & liabilities outstanding at the close of the year are translated at the rates of exchange prevailing at the date of Balance Sheet. Resultant gains or loss is accounted for during the year.

6 IMPAIRMENT OF ASSETS:

(i) Acquisition costs, pending capitalization to Producing Properties and exploration costs under Intangible Assets-Capital Work in Progress are reviewed for indicators of impairment and if events and circumstances suggest, impairment loss is provided for and carrying amount is reduced accordingly.

(ii) Producing fields, LPG Plant, Transportation Pipeline and Power Generating Units (other than Captive Power Plants) are considered as Cash Generating Units. A "Cash Generating Unit" is reviewed for impairment at each Balance Sheet date. An impairment loss is recognized, whenever the carrying amount of assets exceeds the recoverable amount by writing down such assets to their recoverable amount.

An impairment loss is reversed if there is change in the recoverable amount and such loss either no longer exists or has decreased. Impairment loss/reversal thereof is adjusted to the carrying value of the respective assets. Impairment testing is normally carried out at the year-end unless compelling circumstances exist for review during the course of the year.

7 JOINT VENTURES:

Production Sharing Contracts (PSCs) executed with the Government of India / Government of Foreign Countries by the company along with other entities to undertake exploration, development and production of Oil and/or Gas activities under a joint venture in various concessions/block/area are accounted as under:

(i) The financial statements reflect the share of the Company's assets, liabilities and also the income and expenditure of the Joint Venture in proportion to the participating interest of the Company as per the terms of the PSCs, on a line by line basis. Depreciation, depletion and impairment and value of Stock of Crude Oil are accounted for as per the relevant accounting policies of the Company whereas provision for abandonment is created as per terms of PSC. Proved Developed Reserve of Oil & Gas in such concessions/block/area are also considered in proportion to participating interest of the Company.

(ii) Consideration recoverable from new Joint Venture Partners for the right to participate in operations are:

a) Reduced from respective assets and/or expenditure to the extent of the new partners contribution towards past cost,

b) Balance is considered as miscellaneous receipts/expenses.

8 INCOME TAX:

i) The tax expense for the year comprises current tax and deferred tax.

ii) Provision for current tax is made using the applicable tax rates on the taxable income for the relevant period determined in accordance with the provisions of the Income Tax Act'1961. Deferred tax resulting from "timing difference" between taxable income and accounting income is accounted for using the tax rates and tax laws applicable for the relevant financial year. Deferred Tax Asset is reassessed and recognized only to the extent that there is virtual certainty that sufficient future taxable income will be available against which the deferred tax asset will be realized in future.

9 INVESTMENTS:

i) Non Current investments are valued at cost. However, provision for diminution in value is made to recognise a decline in the value, other than temporary.

ii) Current investments are valued at lower of cost or fair value.

10 INVENTORY:

(i) Finished goods of Crude Oil, Liquefied Petroleum Gas and LPG condensate are valued at cost or net realizable value, whichever is lower. Cost of finished goods is determined based on direct cost and directly attributable services cost including depreciation & depletion.

(ii) Crude oil in unfinished condition in the flow line up to Group Gathering Station and Natural Gas in Pipeline are not valued, as these pipeline fills are necessary to the operation of the facility.

(iii) Stores and spare are valued at weighted average cost or net realizable value whichever is lower. Obsolete / unserviceable items, as and when identified, are written off. Any item of stores and spares not moved for last four years as on date of Balance Sheet are identified as slow moving items for which a provision of 95% of the value is made in the accounts.

11 EMPLOYEE BENEFITS

i) All short-term employee benefits are recognised as an expense at the undiscounted amount in the accounting period in which the related service is rendered.

ii) Employee benefits under defined contribution

plan such as provident fund is recognised based on the undiscounted obligations of the company to contribute to the plan.

iii) Employee benefits under defined benefit plans such as gratuity, leave encashment, post retirement medical benefits, pension are recognised based on the present value of defined benefit obligation, which is computed on the basis of actuarial valuation using the projected unit credit method. Actuarial liability in excess of respective plan assets is recognised during the year and in case the plan assets exceed the Actuarial Liability, no further provision is considered. Actuarial gain and losses in respect of post employment and other long-term benefits are recognised during the year.

12 REVENUE RECOGNITION

(i) Revenue from sale of products is recognized on custody transfer to customers.

(ii) Sale of crude oil and gas produced from exploratory wells is deducted from expenditure on such wells.

(iii) Sales are inclusive of statutory levies but excluding Value Added Tax (VAT) & Central Sales Tax (CST) and net of discounts & companies share of profit petroleum paid to GOI. Any retrospective revision in prices is accounted for in the year of such revision.

(iv) Claims on Government / Petroleum Planning & Analysis Cell (PPAC) are booked on acceptance in principle by the authority.

(v) Dividend Income is recognized when the right to receive the dividend is established.

(vi) Revenue in respect of the following is recognized when there is reasonable certainty regarding ultimate realization:

(a) Short lifted quantity of Crude Oil & Natural Gas, if any.

(b) Interest on delayed realization from customers.

(vii) Insurance claim other than for transit loss of stores items are accounted for on final acceptance by the Insurance Company.

(viii) Recovery/Refund of Liquidated Damages are recognised in the Statement of Profit and Loss in the year of occurrence as income or expenditure as the case may be except in case of JVC which are governed by the respective PSC.

(ix) Revenue from sale of other services is recognised when service is rendered in line with contracts executed there with.

13 GRANTS

Grants are recognised when there is reasonable assurance that the same would be realized. Grants related to specific assets are deducted from the gross value of the concerned assets.

14 BORROWING COSTS

i) Borrowing costs during the construction period that are attributable to qualifying assets are capitalized and also includes exchange difference arising from Foreign Currency borrowings to the extent that they are regarded as an adjustment to interest cost.

ii) Other borrowing costs are recognised as expenses when incurred.

15 SEGMENT ACCOUNTING

i) Considering the nature and associated risks and return of products & services, the company has adopted its products & services (viz. Crude Oil, Natural Gas, LPG and Pipeline Transportation) as the primary reporting segments. There are no reportable geographical segments.

ii) Segment assets, liabilities, income and expenses have been either directly identified or allocated to the segments on the basis usually followed for allocation of cost adopted for preparing and presenting the financial statements of the Company.

16 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

i) Provisions in respect of which a reliable estimate can be made are recognised where there is a present obligation as a result of past events and it is probable that there will be an outflow of resource.

ii) Contingent liabilities, if material, are disclosed by way of notes to the accounts.

iii) Contingent assets are neither recognised nor disclosed in the financial statements.

17 EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, the net profit for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

18 GENERAL

i) All revenue expenditure, incurred for Research & Development Projects / Schemes, net of grants- in-aid, if any, are charged to the Statement of Profit & Loss.

ii) Assets given on finance lease are accounted as per Accounting Standard 19 "Leases". Such assets are included as a receivable at an amount equal to the net investment in the lease. Initial direct costs incurred in respect of finance leases are recognized in the statement of profit and loss in the year in which such costs are incurred.

iii) Prior period items/Prepaid expenses having value in each case up to Rs. 5 lacs are booked under natural head of accounts.


Mar 31, 2014

The Financial Statements are prepared under the historical cost convention on accrual method of accounting, in accordance with the Generally Accepted Accounting Principles and complying with the mandatory Accounting Standards notified by the Government of India under the Companies (Accounting Standards) Rules, 2006 and the relevant provisions and presentational requirement of the Companies Act, 1956.

32.2 Classification of Assets & Liabilities

All the Assets and Liabilities of the Company are segregated into Current & Non-current based on the principles and definitions as set out in the Schedule VI to the Companies Act, 1956 as amended. The Company has adopted a period of 12 months as its Operating Cycle.

32.3 PRE-ACQUISITION COSTS, ACQUISITION COSTS, EXPLORATION COSTS, DEVELOPMENT COSTS AND ABANDONMENT COSTS :

The Company follows the "Successful Efforts Method" (SEM) of Accounting in respect of its Oil and Gas exploration and production activities in accordance with the "Guidance Note on Accounting for Oil & Gas Producing Activities" issued by the Institute of Chartered Accountants of India.

32.3.1 PRE-ACQUISITION COSTS:-

Costs of revenue nature incurred prior to obtaining the rights to explore, develop and produce Oil & Gas like data collection & analysis cost etc. are expensed to the Statement of Profit and Loss in the year of incidence.

32.3.2 GEOLOGICAL & GEOPHYSICAL COSTS:-

Geological and Geophysical expenditure are charged as expense when incurred.

32.3.3 ACQUISITION COSTS:-

i) Acquisition costs include land acquired for drilling operations including cost of temporary occupation of the land, crop compensation paid to farmers, registration fee, legal cost, signature bonus, brokers'' fees, consideration for farm-in arrangements and other costs incurred in acquiring mineral rights.

ii) Cost for retaining the mineral interest in properties like lease carrying cost, license fees & other cost are charged as expense when incurred.

iii) Acquisition costs are initially recorded under Capital work in progress-Tangible & Intangible as the case may be.

iv) On determination of proved developed reserves, associated acquisition costs are transferred to Fixed Assets-Producing Properties.

v) Acquisition cost of Producing Properties is capitalized under Fixed Asset-Producing Properties.

vi) Acquisition cost relating to exploratory well that is determined to have no proved reserves and its status is decided as dry or of no further use for exploration purpose, is charged as expenses. In such cases, for land value forming part of acquisition cost, a nominal amount of Rs.100 per bigha is transferred to Freehold land under Fixed Assets.

32.3.4 EXPLORATION COSTS:-

i) All exploration costs including allocated depreciation on support equipment and facilities involved in drilling and equipping exploratory and appraisal wells and cost of exploratory-type drilling stratigraphic test wells are initially shown as Intangible assets under Capital Work in Progress as exploration cost till the time these are either transferred to Fixed Assets as Producing Properties on determination of Proved Developed Reserves or charged as expense when determined to be dry or of no further use.

ii) Cost of exploratory wells are not carried over unless it could be reasonably demonstrated that there are indications of sufficient quantity of reserves and activities are firmly planned in near future for further assessing the reserves and economic & operating viability of the project. Costs of written off exploratory wells are not reinstated in the book even if they start producing subsequently.

32.3.5 DEVELOPMENT COSTS:-

Costs that are attributable to development activities including production and processing plant & facilities, service wells including allocated depreciation on support equipment and facilities are initially shown as Tangible Assets under Capital Work in Progress as Development Cost till such time they are capitalized as Producing Properties upon determination of Proved Developed Reserves.

32.3.6 PRODUCTION COSTS:-

Production Cost consist of direct and indirect costs incurred to operate and maintain wells and related equipments and facilities, including depreciation and applicable operating cost of support equipment and facilities.

32.3.7 SIDE-TRACKING EXPENDITURE:-

In case of exploratory wells, the cost of abandoned portion of side tracked well is charged off to Profit and loss statement. In case of development wells, the entire cost of abandoned portion and side- tracking is capitalized. In case of existing producing wells the cost of side – tracking is capitalized if it increases the proved developed reserves, otherwise is charged off to Profit and loss statement.

32.3.8 ABANDONMENT COSTS:-

i) Estimated full eventual liability towards costs relating to dismantling, abandoning and restoring well sites and associated Production Facilities are recognized at the commencement of drilling a well/when facilities are installed. Liability for abandonment cost is updated annually based on the technical assessment available at current costs.

ii) The actual cost incurred on abandonment is adjusted against the liability and the ultimate gain or loss is recognized in the Statement of Profit and Loss, when the designated oil/gas field or a group of oil/gas fields ceases to produce.

32.4 FIXED ASSETS, DEPRECIATION & DEPLETION

32.4.1 Tangible Assets:-

i) Cost of Freehold & Leasehold land which are perpetual in nature used for other than exploration and development activity are not amortized. Leasehold land other than perpetual lease is amortized over the lease period.

ii) All successful exploratory well cost, development well cost and other development cost viz. Production Facilities are capitalized when the same is ready to commence commercial production.

iii) Costs relating to acquisition/ construction of tangible assets other than producing properties are capitalized on commissioning.

iv) Land acquired on perpetual lease as well as on lease over 99 years is treated as free hold land and not amortized.

v) Land acquired on lease for 99 years or less is treated as leasehold land and amortised over the lease period.

vi) Any Tangible asset, when determined of no further use, is deleted from the Gross Block of assets. The deleted assets are carried as ''Assets awaiting disposal'' under Inventories at lower of Rs.1000 or 5% of the original cost and the balance Written down Value, is charged off.

32.4.2 Intangible Assets:-

i) Costs of intangible assets are capitalized when the asset is ready for its intended use.

ii) Cost of right of use/right of way for laying pipelines is capitalized and amortized on a straight line basis over the period of such right of use / right of way or 99 years whichever is lower, as per industry practice.

iii) Cost incurred on computer software purchased / developed are capitalized as intangible asset and amortized over the useful life not exceeding five years from the date of capitalization.

iv) Any intangible asset, when determined of no further use, is written off.

32.4.3 DEPRECIATION

i) Depreciation on Tangible Assets other than Acquisition cost & cost of producing well is provided for under the "Written down Value Method", at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956.

ii) Capital assets costing up to Rs 5000 each are fully depreciated in the year of acquisition.

32.4.4 DEPLETION

i) Acquisition costs are depleted using the "Unit of Production Method" with reference to the ratio of production and related Proved reserves.

ii) Producing Wells are depleted using the "Unit of Production Method", with reference to ratio of production and the related Proved Developed Reserves.

iii) Rate of depletion is determined based on production from the Oil/Gas field or a group of Oil/Gas fields identified with reference to the related reserves having common geological feature.

32.5 FOREIGN CURRENCY TRANSLATION

i) Foreign currency transactions are initially recognised and accounted for at the exchange rates prevailing at the dates of transactions.

ii) a) Foreign Currency monetary assets & liabilities outstanding at the close of the year, are translated at the rates of exchange prevailing at the date of Balance Sheet. Resultant gains or loss is accounted for during the year, except those relating to long-term foreign currency monetary items.

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 depreciated over the balance life of the assets in line with para 46A of Accounting Standard-11. In other cases, exchange differences are accumulated in a "Foreign Currency Monetary Item Translation Difference Account" and amortised over the balance period of such long term foreign currency monetary item by recognition as income or expense in each of such periods.

iii) Foreign currency transactions in relation to Joint Venture (Overseas) are treated in the following manner:- a) Foreign currency transactions are initially recognised and accounted for at the exchange rates prevailing at the dates of transactions. However, the average exchange rate of relevant month is taken for the transactions of that month, where actual rate of transaction is not available or at the rate as agreed otherwise.

b) Foreign Currency monetary assets & liabilities outstanding at the close of the year are translated at the rates of exchange prevailing at the date of Balance Sheet. Resultant gains or loss is accounted for during the year.

32.6 IMPAIRMENT OF ASSETS

Acquisition costs, pending capitalization to Producing Properties and exploration costs under Intangible Assets- Capital Work in Progress are reviewed for indicators of impairment and if events and circumstances suggest, impairment loss is provided for and carrying amount is reduced accordingly.

Producing fields, LPG Plant, Transportation Pipeline and Power Generating Units (other than Captive Power Plants) are considered as Cash Generating Units. A "Cash Generating Unit" is reviewed for impairment at each Balance Sheet date. An impairment loss is recognized, whenever the carrying amount of assets exceeds the recoverable amount by writing down such assets to their recoverable amount.

An impairment loss is reversed if there is change in the recoverable amount and such loss either no longer exists or has decreased. Impairment loss/ reversal thereof is adjusted to the carrying value of the respective assets. Impairment testing is normally carried out at the year-end unless compelling circumstances exist for review during the course of the year.

32.7 JOINT VENTURES

Production Sharing Contracts (PSCs) executed with the Government of India / Government of Foreign Countries by the company along with other entities to undertake exploration, development and production of Oil and / or Gas activities under a joint venture in various concessions/block/area are accounted as under:- i) The financial statements reflect the share of the Company''s assets, liabilities and also the income and expenditure of the Joint Venture in proportion to the participating interest of the Company as per the terms of the PSCs, on a line by line basis. Depreciation, depletion and impairment and value of Stock of Crude Oil are accounted for as per the relevant accounting policies of the Company whereas provision for abandonment is created as per terms of PSC. Proved Developed Reserve of Oil & Gas in such concessions/block/area are also considered in proportion to participating interest of the Company.

ii) Consideration recoverable from new Joint Venture Partners for the right to participate in operations are:

a) Reduced from respective assets and/or expenditure to the extent of the new partners contribution towards past cost,

b) Balance is considered as miscellaneous receipts/ expenses.

32.8 INCOME TAX

i) The tax expense for the year comprises current tax and deferred tax.

ii) Provision for current tax is made after taking into consideration benefits admissible on conservative basis under the provisions of the Income Tax Act, 1961 as are applicable to the company. Deferred Tax resulting from ''timing difference'' between taxable incomes and accounting income is accounted for using the tax rates and tax laws applicable for the relevant Financial Year. Deferred Tax Asset is reassessed and recognised only to the extent that there is a virtual certainty that the asset will be realized in future.

32.9 INVESTMENTS

i) Non Current investments are valued at cost. However, provision for diminution in value is made to recognise a decline in the value, other than temporary.

ii) Current investments are valued at lower of cost or fair value.

32.10 INVENTORY

i) Finished goods of Crude Oil, Liquefied Petroleum Gas and LPG condensate are valued at cost or net realizable value, whichever is lower. Cost of finished goods is determined based on direct cost and directly attributable services cost including depreciation & depletion.

ii) Crude oil in unfinished condition in the flow line up to Group Gathering Station and Natural Gas in Pipeline are not valued, as these pipeline fills are necessary to the operation of the facility.

(iii) Stores and spare are valued at weighted average cost or net realizable value whichever is lower. Obsolete / unserviceable items, as and when identified, are written off. Any item of stores and spares not moved for last four years as on date of Balance Sheet are identified as slow moving items for which a provision of 95% of the value is made in the accounts.

32.11 EMPLOYEE BENEFITS

i) All short-term employee benefits are recognised as an expense at the undiscounted amount in the accounting period in which the related service is rendered.

ii) Employee benefits under defined contribution plan such as provident fund is recognised based on the undiscounted obligations of the company to contribute to the plan.

iii) Employee benefits under defined benefit plans such as gratuity, leave encashment, post retirement medical benefits, pension are recognised based on the present value of defined benefit obligation, which is computed on the basis of actuarial valuation using the projected unit credit method. Actuarial liability in excess of respective plan assets is recognised during the year and in case the plan assets exceed the Actuarial Liability, no further provision is considered. Actuarial gain and losses in respect of post employment and other long-term benefits are recognised during the year.

32.12 REVENUE RECOGNITION

i) Revenue from sale of products is recognized on custody transfer to customers.

ii) Sale of crude oil and gas produced from exploratory wells is deducted from expenditure on such wells.

iii) Sales are inclusive of statutory levies but excluding Value Added Tax (VAT) & Central Sales Tax (CST) and net of discounts. Any retrospective revision in prices is accounted for in the year of such revision.

iv) Claims on Government / Petroleum Planning & Analysis Cell (PPAC) are booked on acceptance in principle by the authority.

v) Dividend Income is recognized when the right to receive the dividend is established.

vi) Revenue in respect of the following is recognized when there is reasonable certainty regarding ultimate realization:

a) Short lifted quantity of Crude Oil & Natural Gas, if any.

b) Interest on delayed realization from customers.

vii) Insurance claim other than for transit loss of stores items are accounted for on final acceptance by the Insurance Company.

viii) Recovery/Refund of Liquidated Damages are recognised in the Statement of Profit and Loss in the year of occurrence as income or expenditure as the case may be except in case of JVC which are governed by the respective PSC.

ix) Revenue from sale of other services is recognised when service is rendered in line with contracts executed there with.

32.13 GRANTS

Grants are recognised when there is reasonable assurance that the same would be realized. Grants related to specific assets are deducted from the gross value of the concerned assets.

32.14 BORROWING COSTS

i) Borrowing costs during the construction period that are attributable to qualifying assets are capitalized and also includes exchange difference arising from Foreign Currency borrowings to the extent that they are regarded as an adjustment to interest cost.

ii) Other borrowing costs are recognised as expenses when incurred.

32.15 SEGMENT ACCOUNTING

i) The Company has adopted its products & services (viz. Crude Oil, Natural Gas, LPG and Pipeline Transportation) as the primary reporting segments. There are no reportable geographical segments.

ii) Segment assets, liabilities, income and expenses have been either directly identified or allocated to the segments on the basis usually followed for allocation of cost adopted for preparing and presenting the financial statements of the Company.

32.16 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

i) Provisions in respect of which a reliable estimate can be made are recognised where there is a present obligation as a result of past events and it is probable that there will be an outflow of resource.

ii) Contingent liabilities, if material, are disclosed by way of notes to the accounts.

iii) Contingent assets are neither recognised nor disclosed in the financial statements.

32.17 EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, the net profit for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

32.18 GENERAL

i) All revenue expenditure, incurred for Research & Development Projects / Schemes, net of grants-in-aid if any, are charged to the Statement of Profit & Loss.

ii) Assets given on finance lease are accounted as per Accounting Standard 19 "Leases". Such assets are included as a receivable at an amount equal to the net investment in the lease. Initial direct costs incurred in respect of finance leases are recognized in the statement of profit and loss in the year in which such costs are incurred.

iii) Prior period items/Prepaid expenses having value in each case up to Rs. 5 lacs are booked under natural head of accounts.


Mar 31, 2013

1.1 Accounting Convention

The Financial Statements are prepared under the historical cost convention on accrual method of accounting, in accordance with the Generally Accepted Accounting Principles and complying with the mandatory Accounting Standards notified by the Central Government of India under the Companies (Accounting Standards) Rules, 2006 and the relevant provisions and presentational requirement of the Companies Act, 1956.

1.2 Classification of Assets & Liabilities

All the Assets and Liabilities of the Company are segregated into Current & Non-current based on the principles and definitions as set out in the Schedule VI to the Companies Act, 1956 as amended. The Company has adopted a period of 12 months as its Operating Cycle.

1.3 Exploration Costs, Development Expenditure And Abandonment Costs

The Company follows the accepted "Successful Efforts Method" (SEM) of Accounting in respect of its Oil and Gas exploration and production activities in accordance with the "Guidance Note on Accounting for Oil & Gas Producing Activities" issued by the Institute of Chartered Accountants of India (ICAI).

1.3.1 Exploration Costs And Development Expenditure

a) Geological and Geophysical expenditure, including the depreciation on the cost of Tangible Assets deployed in relation thereto, charged as expense when incurred.

b) Lease carrying costs including license fees are charged as expense when incurred.

c) Cost of unsuccessful/dry exploratory wells or parts thereof including allocated depreciation on support equipment and facilities, which do not lead to discovery of/accretion to hydrocarbon reserves, are charged as expense on determination.

d) All Acquisition costs, exploration costs involved in drilling and equipping exploratory and appraisal wells and cost of exploratory-type drilling stratigraphic test wells are initially shown as pre-producing property under capital-work-in- progress till the time these are either transferred to Tangible Assets as producing properties or charged as expense in the year when determined to be dry or of no further use.

e) Cost of incomplete wells/wells under production testing/completed exploratory wells pending determination of commercial viability including allocated depreciation on support equipment and facilities, are classified as pre-producing properties.

f) Cost of exploratory wells included in pre-producing Properties are not carried over for more than two years from the date of completion of the drilling of the well and written off, unless it is reasonably determined that the well has proved reserves and development of the field in which the well is located has been planned.

g) Cost of successful exploratory wells and completed development wells including allocated depreciation on support equipment and facilities after completion of production testing are capitalized as producing properties.

1.3.2 Abandonment Costs

a) Estimated liability towards costs relating to dismantling, abandoning and restoring well sites in respect of complete wells (net of salvage value), other than those relating to Joint Ventures, are recognised as cost of Producing property/ Pre-producing property. The abandonment cost on exploratory dry well is charged as expense when incurred. Liability for abandonment cost is updated annually based on the technical assessment available at current costs.

b) The actual cost incurred on abandonment is adjusted against the liability and the ultimate gain or loss is recognised in the Statement of Profit and Loss, when the designated oil/gas field or a group of oil/gas fields ceases to produce.

c) In respect of Joint Ventures, the recognition of abandonment cost is specified in Policy No 31.8 (a).

1.4 Fixed Assets :

a) All costs relating to acquisition of tangible assets till the time of commissioning are capitalized.

b) Cost of Freehold & Leasehold land used for project including the Right of Use (ROU) which are perpetual in nature are not amortized.

c) Cost of land acquired for drilling wells are booked under pre-producing/producing properties depending on the status of the wells.

d) Any Tangible asset, when determined of no further use, is deleted from the Block. The deleted assets are carried as Inventories at lower of Rs. 1000 or 5% of the original cost and the balance Written down Value, is charged off.

1.5 Depreciation/Depletion/Amortisation/Write off

1.5.1 Depreciation

a) Depreciation on Tangible Assets other than "Producing Properties" is provided for under the "Written Down Value Method", at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956.

b) Depreciation on Tangible Assets deployed in exploration and development drilling activities is capitalized with the cost of well.

c) Capital assets costing up to Rs. 5000 each are fully depreciated in the year of acquisition.

1.5.2 Depletion

a) Producing Properties are depleted using the "Unit of Production Method", with reference to ratio of production and the related Proved Developed Reserves.

b) Proved Developed Reserves of oil and gas are technically assessed and reviewed in-house at the end of each year by following International practices. Rate of depletion is computed on a consistent basis with reference to designated Oil / Gas field or a group of Oil/Gas fields, which are aggregated either based on a common geological feature or for operational purpose.

c) Cost of land forming part of the Pre-producing/ producing properties are either charged off or carried forward depending on the status of the wells as per Accounting Policy No: 31.3.1(d).

d) Costs of land forming part of the producing properties are depleted on Units of Production Method (UOP).

1.5.3 Amortisation

Depreciation rate under W.D.V method as prescribed under Schedule XIV to the Companies Act, 1956 for Computer is adopted for amortization of software.

1.5.4 Write off

a) Any Intangible assets when determined of no further use, is written off.

b) The discrepancies, when noticed on physical verification are adjusted in the accounts.

1.6 Foreign Currency Translation

(a) Foreign currency transactions are initially recognised and accounted for at the exchange rates prevailing at the dates of transactions.

(b) Foreign Currency monetary assets & liabilities outstanding at the close of the year, are translated at the rates of exchange prevailing at the date of Balance Sheet. Resultant gains or loss is accounted for during the year.

(c) Foreign currency transactions in relation to Joint Venture (Overseas) are treated in the following manner:-

(i) Foreign currency transactions are initially recognised and accounted for at the exchange rates prevailing at the dates of transactions. However, the average exchange rate of relevant month is taken for the transactions of that month, where actual rate of transaction is not available or at the rate as agreed otherwise.

(ii) Foreign Currency monetary assets & liabilities outstanding at the close of the year, are translated at the rates of exchange prevailing at the date of Balance Sheet. Resultant gains or loss is accounted for during the year.

1.7 Impairment of Assets

At the end of each balance sheet date, the carrying amount of assets are assessed so as to calculate there is any indication of impairment. Tangible Assets forming part of a "Cash Generating Unit" are reviewed for impairment at each Balance Sheet date. In case events and circumstances indicate any impairment, recoverable amount of these assets is determined. An impairment loss is recognized, whenever the carrying amount of such assets exceeds the recoverable amount by writing down such assets to their recoverable amount. The recoverable amount is its ''value in use''. In assessing the value in use, the estimated future cash flows from the use of assets are discounted to their present value at appropriate rate. An impairment loss is reversed if there is change in the recoverable amount and such loss either no longer exists or has decreased. Impairment loss/reversal thereof is adjusted to the carrying value of the respective assets. Subsequent to Impairment, depletion/ depreciation is provided on the revised carrying value of the assets.

1.8 Joint Ventures

Production Sharing Contracts (PSCs) executed with the Government of India / Government of Foreign Countries by the company along with other entities to undertake exploration, development and production of Oil and / or Gas activities under a joint venture in various concessions are accounted as under:-

(a) The financial statements reflect the share of the Company''s assets, liabilities and also the income and expenditure of the Joint Venture in proportion to the participating interest of the Company as per the terms of the PSCs, on a line by line basis. Depreciation, depletion and impairment and value of Stock of Crude Oil are accounted for as per the relevant accounting policies of the Company whereas provision for abandonment is created as per terms of PSC. Proved Developed Reserve of Oil & Gas in such concessions are also considered in proportion to participating interest of the Company.

(b) Consideration recoverable from new Joint Venture Partners for the right to participate in operations are:

I) Reduced from respective assets and/or expenditure to the extent of the new partners contribution towards past cost,

ii) Balance is considered as miscellaneous receipts/expenses.

1.9 Income Tax

a) The tax expense for the year comprises current tax and deferred tax.

b) Provision for current tax is made after taking into consideration benefits admissible on conservative basis under the provisions of the Income Tax Act, 1961 as are applicable to the company. Deferred Tax resulting from ''timing difference'' between taxable income and accounting income is accounted for using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred Tax Asset is reassessed and recognised only to the extent that there is a virtual certainty that the asset will be realized in future.

1.10 Investments

a) Non Current investments are valued at cost. However, provision for diminution in value is made to recognise a decline in the value, other than temporary.

b) Current investments are valued at lower of cost or fair value.

1.11 Inventory

(a) Finished goods of Crude Oil, Liquefied Petroleum Gas and LPG condensate are valued at cost or net realizable value, whichever is lower. Cost of finished goods is determined on absorption costing method.

(b) Crude oil in unfinished condition in the flow line up to Group Gathering Station and Natural Gas in Pipeline are not valued, as quantity of the same is not determinable.

(c) Stores and spare are valued at weighted average cost or net realizable value whichever is lower. Obsolete / unserviceable items, as and when identified, are written off. Any item of stores and spares not moved for last four years as on date of Balance Sheet are identified as slow moving items for which a provision of 95% of the value is made in the accounts.

1.12 Employee Benefits

a) All short-term employee benefits are recognised as an expense at the undiscounted amount in the accounting period in which the related service is rendered.

b) Employee benefits under defined contribution plan such as provident fund is recognised based on the undiscounted obligations of the company to contribute to the plan.

c) Employee benefits under defined benefit plans such as gratuity, leave encashment, post retirement medical benefits, pension are recognised based on the present value of defined benefit obligation, which is computed on the basis of actuarial valuation using the projected unit credit method. Actuarial liability in excess of respective plan assets is recognised during the year and in case the plan assets exceed the Actuarial Liability, no further provision is considered. Actuarial gain and losses in respect of post employment and other long-term benefits are recognised during the year.

1.13 Revenue Recognition

(a) Revenue from sale of products is recognized on custody transfer to customers.

(b) Sale of crude oil and gas produced from exploratory wells is deducted from expenditure on such wells.

(c) Sales are inclusive of statutory levies but excluding Value Added Tax (VAT) & Central Sales Tax (CST) and net of discounts. Any retrospective revision in prices is accounted for in the year of such revision.

(d) Claims on Government / Petroleum Planning & Analysis Cell (PPAC) are booked on acceptance in principle by the authority.

(e) Dividend Income is recognized when the right to receive the dividend is established.

(f) Revenue in respect of the following is recognized when there is reasonable certainty regarding ultimate realization:

(i) Short lifted quantity of Crude Oil & Natural Gas, if any.

(ii)Interest on delayed realization from customers.

(g) Insurance claim other than for transit loss of stores items are accounted for on final acceptance by the Insurance Company.

(h) Recovery/Refund of Liquidated Damages are recognised in the Statement of Profit and Loss in the year of occurrence as income or expenditure as the case may be except in case of JVC which are governed by the respective PSC.

(i) Revenue from sale of other services is recognised when service is rendered in line with contracts executed therewith.

1.14 Grants

Grants are recognised when there is reasonable assurance that the same would be realized. Grants related to specific assets are deducted from the gross value of the concerned assets.

1.15 Borrowing Costs

a) Borrowing costs during the construction period that are attributable to qualifying assets are capitalized and also includes exchange difference arising from Foreign Currency borrowings to the extent that they are regarded as an adjustment to interest cost.

b) Other borrowing costs are recognised as expenses when incurred.

1.16 Segment Accounting

(a) The Company has adopted its products & services (viz. Crude Oil, Natural Gas, LPG and Pipeline Transportation) as the primary reporting segments. There are no reportable geographical segments.

(b) Segment assets, liabilities, income and expenses have been either directly identified or allocated to the segments on the basis usually followed for allocation of cost adopted for preparing and presenting the financial statements of the Company.

1.17 Provisions, Contingent Liabilities and Contingent Assets

(a) Provisions in respect of which a reliable estimate can be made, are recognised where there is a present obligation as a result of past events and it is probable that there will be an outflow of resource.

(b) Contingent assets are neither recognised nor disclosed in the financial statements.

1.18 Earnings Per Share

Basic earnings per share are calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, the net profit for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

1.19 General

a) All revenue expenditure, incurred for Research & Development Projects / Schemes, net of grants- in-aid if any, are charged to the Statement of Profit & Loss.

b) Assets given on finance lease are accounted as per Accounting Standard 19 "Leases". Such assets are included as a receivable at an amount equal to the net investment in the lease. Initial direct costs incurred in respect of finance leases are recognized in the statement of profit and loss in the year in which such costs are incurred.


Mar 31, 2012

1.1 ACCOUNTING CONVENTION

The Financial Statements are prepared under historical cost convention, in accordance with the Generally Accepted Accounting Prin- ciples and materially complying with the mandatory Accounting Standards notified by the Central Government of India under the Companies (Accounting Standards) Rules, 2006 and the relevant provisions and presentational requirement of the Companies Act, 1956.

1.2 Classification of Assets & Liabilities

All the Assets and Liabilities of the Company are segregated into Current & Non-current based on the principles and definitions as set out in the Schedule VI to the Companies Act, 1956 as amended. The Company has adopted a period of 12 months as its Operating Cycle.

1.3 EXPLORATION COSTS, DEVELOPMENT EXPENDITURE AND ABANDONMENT COSTS

The Company follows the internationally accepted "Successful Efforts Method" (SEM) of Accounting in respect of its Oil and Gas exploration and production activities read with the "Guidance Note on Accounting for Oil & Gas Producing Activities" issued by the Institute of Chartered Accountants of India (ICAI).

1.3.1 EXPLORATION COSTS AND DEVELOPMENT EXPENDITURE

(a) Geological and Geophysical expenditure, including the depreciation on the cost of Fixed Assets deployed in relation thereto, are expensed in the year of incidence.

(b) Lease carrying costs including license fees are expensed in the year of incidence.

(c) All Acquisition costs, exploration costs involved in drilling and equipping exploratory and appraisal wells and cost of drilling stratigraphic test wells are initially capitalized as pre-producing property till the time these are either transferred to Fixed Assets as Producing Properties or expensed in the year when determined to be dry or of no further use.

(d) Cost of successful exploratory wells and completed development wells including allocated depreciation on support equipments and facilities are capitalized as Producing Properties. Wells are treated as completed only after completion of production testing.

(e) Cost of unsuccessful/dry exploratory wells or parts thereof including allocated depreciation on support equipments and facilities, which do not lead to discovery of/accretion to hydrocarbon reserves, are expensed on determination.

(f) Cost of incomplete wells/wells under production testing/completed exploratory wells pending determination of commercial viability including allocated depreciation on support equipments and facilities, are classified as Pre-Producing Properties.

(g) Cost of exploratory wells in progress lying in Pre-Producing Properties are not carried over for more than two years from the date of completion of the drilling of the well, unless it is reasonably determined that the well has proved reserves and development of the field in which the well is located has been planned.

1.3.2 ABANDONMENT COSTS

(a) The liability towards costs relating to dismantling, abandoning and restoring well sites (net of salvage value), other than those relating to Joint Ventures, are capitalized as additional cost when the well is complete and is reasonably estimated. The abandonment cost on exploratory dry well is expensed during the year. Liability for abandonment cost is updated annually based on the technical assessment available at current costs.

(b) The actual cost incurred on abandonment is adjusted against the liability and the ultimate gain or loss is recognised in the profit/loss, when the designated oil/gas field or a group of oil/gas fields ceases to produce.

(c) In respect of Joint Ventures, the recognition of abandonment cost is specified in Policy No 32.8 (a).

1.4 FIXED ASSETS :

(a) All costs relating to acquisition of tangible assets till the time of commissioning are capitalized.

(b) Cost of Leasehold land including the Right of Use (ROU) which are perpetual in nature are not amortized.

(c) Any Tangible asset, when of no further use, is deleted from the Block. The deleted assets are carried as Current Assets at lower of Rs. 1000 or 5% of the original cost and the balance Written down Value, if any is charged off.

(d) Any Intangible assets when of no further use, is written off.

(e) The discrepancies, if any, noticed on physical verification are accounted for.

1.5 DEPRECIATION/DEPLETION/AMORTISATION

1.5.1 DEPRECIATION

(a) Depreciation on Tangible Assets other than "Producing Properties" is provided for under the "Written Down Value Method", at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956.

(b) Depreciation on Tangible Assets deployed in exploration and development drilling activities is capitalized with the cost of well.

(c) Assets costing up to Rs. 5000 each are fully depreciated in the year of acquisition.

1.5.2 DEPLETION

(a) Producing Properties including acquisition costs are depleted using the "Unit of Production Method", with reference to ratio of production and the related Proved Developed Reserves.

(b) Proved Developed Reserves of oil and gas are technically assessed and reviewed in-house at the end of each year by following International practices.

(c) Rate of depletion is computed on a consistent basis with reference to designated Oil / Gas field or a group of Oil/Gas fields, which are aggregated either based on a common geological feature or for operational purpose.

1.5.3 AMORTISATION

Depreciation rate under W.D.V method as prescribed under Schedule XIV to the Companies Act, 1956 for Computer is adopted for amortization of software.

1.6 FOREIGN CURRENCY TRANSLATION

(a) All non-monetary transactions in foreign currency are recorded at the rates of exchange prevailing at the dates when the relevant transactions take place.

(b) Monetary items in the form of Loan, Current Assets and Current Liabilities in foreign currency, outstanding at the close of the year, are translated in Indian Currency at the appropriate rates of exchange prevailing at the date of Balance Sheet. Resultant gains or loss is accounted for during the year.

(c) Foreign currency transactions in relation to Joint Venture (Overseas) are treated in the following manner:-

(i) Foreign currency transactions is initially recognised and accounted for in Indian currency at the exchange rates prevailing at the date of transactions. The average exchange rate of relevant month is taken for the transactions of that month in respect of such Joint Venture, where actual rate of transaction is not available or at the rate as agreed otherwise.

(ii) Foreign currency monetary items are translated using the average of the exchange rates prevailing at the Balance Sheet date.

1.7 IMPAIRMENT OF ASSETS

Tangible Assets forming part of a "Cash Generating Unit" are reviewed for impairment at each Balance Sheet date. In case events and circumstances indicate any impairment, recoverable amount of these assets is determined. An impairment loss is recognized, when- ever the carrying amount of such assets exceeds the recoverable amount by writing down such assets to their recoverable amount. The recoverable amount is its 'value in use'. In assessing the value in use, the estimated future cash flows from the use of assets are discounted to their present value at appropriate rate. An impairment loss is reversed if there is change in the recoverable amount and such loss either no longer exists or has decreased. Impairment loss/reversal thereof is adjusted to the carrying value of the respective assets. Subsequent to Impairment, depletion/ depreciation is provided on the revised carrying value of the assets.

1.8 JOINT VENTURES

Production Sharing Contracts (PSCs) executed with the Government of India / Government of Foreign Countries by the company along with other entities to undertake exploration, development and production of Oil and / or Gas activities under a joint venture in various concessions are accounted as under:-

(a) The financial statements reflect the share of the Company's assets, liabilities and also the income and expenditure of the Joint Venture in proportion to the participating interest of the Company as per the terms of the PSCs, on a line by line basis. Depreciation, depletion and impairment and value of Stock of Crude Oil are accounted for as per the relevant accounting policies of the Company whereas provision for abandonment is created as per terms of PSC. Proved Developed Reserve of Oil & Gas in such concessions are also considered in proportion to participating interest of the Company.

(b) Consideration recoverable from new Joint Venture Partners for the right to participate in operations are:

i. Reduced from respective capitalized cost wherever applicable,

ii. Reduced from current expenditure (net of income, if any) to the extent it relates to current year,

iii. Balance is considered as miscellaneous receipts.

1.9 INCOME TAX

(a) The tax expense for the year comprises current tax and deferred tax.

(b) Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961 as are applicable to the company. Deferred Tax resulting from 'timing difference' between taxable income and accounting income is accounted for using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred Tax Asset is reassessed and recognised only to the extent that there is a virtual certainty that the asset will be realized in future.

1.10 INVESTMENTS

(a) Non Current investments are valued at cost. However, provision for diminution in value is made to recognise a decline in the value, other than temporary.

(b) Current investments are valued at lower of cost or fair value.

1.11 INVENTORY

(a) Finished goods of Crude Oil and Liquefied Petroleum Gas are valued at cost or net realizable value, whichever is lower. Cost of finished goods is determined on absorption costing method.

(b) Crude oil in unfinished condition in the flow line up to Group Gathering Station and Natural Gas in Pipeline are not valued, as quantity of the same is not determinable.

(c) Stores and spare are valued at weighted average cost or net realizable value whichever is lower. Obsolete / unserviceable items, as and when identified, are written off. Any item of stores and spares not moved for last four years as on date of Balance Sheet are identified as slow moving items for which a provision of 95% of the value is made in the accounts.

1.12 EMPLOYEE BENEFITS

a) All short-term employee benefits are recognised as an expense at the undiscounted amount in the accounting period in which the related service is rendered.

b) Employee benefits under defined contribution plan such as provident fund is recognised based on the undiscounted obligations of the company to contribute to the plan.

c) Employee benefits under defined benefit plans such as gratuity, leave encashment, post retirement medical benefits, pension are recognised based on the present value of defined benefit obligation, which is computed on the basis of actuarial valuation using the projected unit credit method. Actuarial liability in excess of respective plan assets is recognised during the year and in case the plan assets exceed the Actuarial Liability, no further provision is considered. Actuarial gain and losses in respect of post employment and other long-term benefits are recognised during the year.

1.13 REVENUE RECOGNITION

(a) Revenue from sale of products is recognized on custody transfer to customers.

(b) Sale of crude oil and gas produced from exploratory wells-in-progress in exploratory areas is deducted from expenditure on such wells.

(c) Sales are inclusive of statutory levies but excluding Value Added Tax (VAT) & Central Sales Tax (CST) and net of discounts. Any retrospective revision in prices is accounted for in the year of such revision.

(d) Claims on Government / Petroleum Planning & Analysis Cell (PPAC) are booked on acceptance in principle by the authority.

(e) Dividend Income is recognized when the right to receive the dividend is established.

(f) Revenue in respect of the following is recognized when there is reasonable certainty regarding ultimate realization:

(i) Short lifted quantity of Crude Oil & Natural Gas, if any.

(ii) Interest on delayed realization from customers.

(g) Insurance claim other than for transit loss of stores items are accounted for on final acceptance by the Insurance Company.

(h) Liquidated Damages for delay in execution of contracts/supplies are accounted for as per the terms of the contracts and are recognised as income in the year of deduction. In case the same is refunded due to reconsideration of the waiver request, the same is accounted for as expense in the year of acceptance.

(i) Revenue from sale of other services is recognised when service is rendered in line with contracts executed therewith.

1.14 GRANTS

Grants are recognised when there is reasonable assurance that the same would be realized. Grants related to specific assets are deducted from the gross value of the concerned assets.

1.15 BORROWING COSTS

Borrowing costs during the construction period that are attributable to qualifying assets are capitalized and also includes exchange difference arising from Foreign Currency borrowings to the extent that they are regarded as an adjustment to interest cost.

1.16 SEGMENT ACCOUNTING

(a) The Company has adopted its products & services (viz. Crude Oil, Natural Gas, LPG and Pipeline Transportation) as the primary reporting segments and the geographical segments viz. Assam & Arunachal Pradesh and Rajasthan as the secondary reporting segments.

(b) Segment assets, liabilities, income and expenses have been either directly identified or allocated to the segments on the basis usually followed for allocation of cost adopted for preparing and presenting the financial statements of the Company.

1.17 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

(a) Provisions in respect of which a reliable estimate can be made, are recognised where there is a present obligation as a result of past events and it is probable that there will be an outflow of resource.

(b) Contingent Liabilities exceeding rupees Fifty Lakhs in each case are disclosed by ways of notes.

(c) Contingent assets are neither recognised nor disclosed in the financial statements.

1.18 EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, the net profit for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

1.19 GENERAL

a) All revenue expenditure, incurred for Research & Development Projects / Schemes, net of grants-in-aid if any, are charged to the Statement of Profit & Loss.

b) Assets given on finance lease are accounted as per Accounting Standard 19 "Leases". Such assets are included as a receivable at an amount equal to the net investment in the lease. Initial direct costs incurred in respect of finance leases are recognized in the statement of profit and loss in the year in which such costs are incurred.


Mar 31, 2003

1. ACCOUNTING CONVENTION

The financial statements are prepared under the historical cost concept. Generally, revenues are recognised on accrual basis with provision made for known losses and expenses.

2. EXPLORATION AND DEVELOPMENT EXPENDITURE

The Company generally follows the internationally accepted "Successful Efforts Method" (SEM) of Accounting in respect of its Oil and Gas exploration and production activities as explained below :-

(a) Geological and Geophysical expenditure, other than cost of tangible assets, equipment and facilities deployed in relation thereto on which usual depreciation allowance is admissible, are expensed in the year of incidence.

(b) Lease carrying costs including license fees are expensed in the year of incidence.

(c) Cost of successful exploratory wells, and completed development wells, including allocated depreciation on support equipment and facilities are capitalized as producing properties.

(d) Cost of unsuccessful/dry exploratory wells, including allocated depreciation on support equipment and facilities, which do not lead to discovery of/ accretion to hydrocarbon reserves, are expensed.

(e) Cost of incomplete wells / wells under production testing / completed exploratory wells pending determination of commercial viability including allocated depreciation on support equipment and facilities, are classified as Pre- producing Properties.

(f) Abandonment costs relating to dismantling and restoration of well sites (net of salvage value), if any, are accounted for in the year in which the same are incurred.

(g) Adjustments arising out of refunds/claims from or to Customs/Revenue Authorities for earlier years are considered as per Para 14(d) of Significant Accounting Policies and treated appropriately/prospectively.

3. FIXED ASSETS/DEPRECIATION ON EQUIPMENT AND FACILITIES PRODUCING PROPERTIES/DEPLETION OF WASTING ASSETS

(a) Depreciation on all Fixed Assets is computed on "Straight Line Method" (SLM), at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956 and the fixed assets are stated at cost less depreciation.

(b) Depreciation as computed above on Fixed Assets deployed in exploration and development drilling activities is charged to the cost of each well.

(c) Assets costing up to Rs. 5000.00 per unit are depreciated fully in the year of capitalisation.

(d) Any assets when certified by the User Department as of no further use are deleted from the Block and Written Down Value, if any are charged to Profit and Loss Account. The deleted assets are accumulated and disposed off through normal tendering procedure. The sale proceeds are accounted for as Miscellaneous income when realized.

(e) (i) The producing properties are depleted using the "Unit of Production Method", based on the related Proved, Developed and Producing (PDP) reserves.

(ii) Proved and Developed Reserves of oil and gas are technically assessed regularly and are finally reviewed and estimated at the end of each year by the Company.

(iii) The rate of depletion is computed with reference to an area designated as Oil/Gas field.

4. FOREIGN CURRENCY TRANSACTIONS

4.1 FOREIGN CURRENCY LOANS

The outstanding balances against foreign currency loans/credits are converted at the rates of exchange prevailing on the date of the Balance Sheet and in case of non-availability of such rates, the rates on the date nearest to the Balance Sheet date are considered. Loss/gain due to exchange rate fluctuations, in respect of foreign currency loans is dealt with in the following manner :-

(a) Exchange rate fluctuations in respect of foreign currency loans which were raised for specific projects, are charged/credited to the respective project accounts and amortised/depreciated in the manner the related project expenditure is being treated as per accounting policy.

(b) Exchange rate fluctuations in respect of other general purpose foreign currency loans not raised for any specific project or for acquisition of any specific asset, are adjusted/booked in the Profit & Loss Account.

4.2 OTHER TRANSACTIONS

Foreign currency transactions in relation to purchase of goods and services are recorded and treated in the following manner :-

(a) In respect of transactions involving purchase of equipment and facilities and procurement of services in relation thereto, in the nature of fixed assets, and for purchase of stores for eventual use in jobs, which are capitalised as per the accounting policies, are recorded on the basis of the exchange rate on the settlement date or the year end date, whichever is earlier.

(b) In respect of transactions involving purchase of stores, spares for consumption in revenue accounts and payment for related services, the transactions are recorded on the basis of the exchange rate on the transaction date, and the exchange rate difference between the transaction and the settlement date or the year end date, as the case may be, is recognised as income or as expense in the period in which they arise.

5. JOINT VENTURES

In respect of production sharing contracts (PSCs) executed by the Company with other companies and the Government of India to undertake development and production activities under a joint venture in its concessions:-

i) The financial statements reflect the share of the Companys assets and liabilities as also the income and expenditure of the joint venture operations in proportion to the participating interest of the Company as per the terms of the PSCs, on a line by line basis.

ii) The reserves of hydrocarbons in such concessions are also stated as per the terms of the PSCs.

iii) The unamortised balance in the producing property accounts and/or the written down values of the fixed assets installed therein in respect of such concessions, are netted off by the consideration due from the other participating companies.

6. INCOME TAX

(a) Current Tax

Income tax is computed as per provisions of the Income Tax Act, 1961, read with the terms of the Agreement entered into by the Company with the Government of India under Section 42 of the Income Tax Act, 1961 and accordingly in addition to other items of allowances :-

i) All intangible expenditure on exploration/prospecting/drilling in Petroleum Exploration License areas, excluding expenditure on assets for which usual depreciation allowance is admissible, whether abortive or not, is allowed as a deduction equally over a period of three years commencing from the year in which it is incurred;

ii) All intangible expenditure on exploration/prospecting/drilling in Mining Lease areas, excluding expenditure on assets for which usual depreciation allowance is admissible, is allowed as a deduction in the year in which it is incurred; and

iii) Depreciation on tangible drilling expenditures and fixed assets is allowed in accordance with rates prescribed under the Income Tax Rules,1962 under the Written Down Value (WDV) method.

(b) Deferred Tax

Deferred Tax is recognised, subject to the consideration of prudence in respect of deferred tax assets, on timing differences being the difference between taxable income and accounting income that originate in one period and are capable to reversal in one or more subsequent periods and is measured using tax rates and laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are reviewed at each Balance Sheet date to reassess realisation.

7. LONG TERM INVESTMENTS

Long term investments are valued at cost unless there is a permanent diminution in value.

8. INVENTORY

(a) Stocks of Crude Oil and Liquefied Petroleum Gas are valued at cost, or realisable value, whichever is lower, excluding applicable excise duty recoverable from the customers.

(b) Natural Gas in pipeline is not valued, since not measurable.

(c) The stores and spare parts are valued at weighted average cost. Obsolete/unserviceable items, as and when identified, are written off. Slow moving items (excluding Insurance Spares, items related to deferred projects/drilling wells and accessories of plant & equipment) are valued at residual value at 5% of the aforesaid cost. The stores and spare parts also include goods-in-transit which represents items pending arrival and/or acceptance at stipulated destinations.

9. RETIREMENT AND OTHER BENEFITS

(a) Contributions to approved Gratuity and Pension Funds are based on an Actuarial valuation of the Funds carried out every three years, unless a revision in the valuation is necessitated due to a revision in emoluments or the benefits.

(b) Provision in respect of leave encashment liability is based on an annual Actuarial valuation at the year end.

(c) Compensation paid/payable to the employees under the Voluntary Retirement Scheme are expensed in the year of acceptance of the same by the Company.

10. CLAIMS

Claims on Oil Co-ordination Committee (OCC) / Petroleum Planning & Analysis Cell (PPAC) are booked on acceptance in principle thereof.

11. GRANTS & SUBSIDIES

Grants and Subsidies are accounted in revenue or capital account according to the nature, when there is reasonable assurance that the same would be realised. Grants related to specific assets are presented in the Balance Sheet by showing the grant as a deduction from the gross value of the assets concerned while arriving at their book value.

12. BORROWING COSTS

Borrowing cost during the construction period, net of Income if any, that are attributable to qualifying assets are capitalised.

13. SEGMENT ACCOUNTING

(a) In accordance with the existing management reporting system, the company has adopted its products and services (viz. Crude Oil, Natural Gas, LPG and Pipeline transportation) as the primary reporting segments and the geographical segments viz. Assam & Arunachal Pradesh, Rajasthan etc. as the secondary reporting segments.

(b) Segment assets, liabilities, income and expenses have been either directly identified or allocated to the segments on the basis usually followed for allocation of cost adopted for preparing and presenting the financial statements of the Company.

14. GENERAL

(a) Adjustments pertaining to earlier years, each transaction not exceeding 0.25 per cent of the total expenditure of the Company, are not considered material and hence not separately disclosed in the Profit & Loss Accounts.

(b) All expenditure, other than assets, on which usual depreciation allowance is admissible, incurred for Research & Development Projects/Schemes, net of grants-in-aid, is charged to the Profit & Loss Account.

(c) Joint cost of Production relating to crude oil and natural gas is apportioned on thermal equivalence basis.

(d) Refunds/Duty drawbacks, Demands from/in relation to Revenue Authorities are accounted for on the basis of acceptance considering information available up to the date of finalisation of Accounts.

(e) All the accounting standards prescribed by the Institute of Chartered Accountants of India as mandatory and as applicable to the Company have been complied with while preparing the Accounts.

 
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