Accounting Policies of Shipping Corporation of India Ltd. Company
Mar 31, 2023
Corporate Information
The Shipping Corporation of India Limited (âSCIâ / âthe Companyâ) is the largest Indian Shipping company limited by shares, incorporated in 1961. The equity shares of the Company are listed on the Bombay Stock Exchange and National Stock Exchange in India. SCI is involved in the business of transporting goods. SCIâs owned fleet includes Bulk Carriers, Crude Oil Tankers, Product Tankers, Container Vessels, LPG Carrier and Offshore Supply Vessels. In addition, SCI manages a large number of vessels on behalf of various government departments and other organizations.
The registered office of the Company is located at Shipping House, 245, Madame Cama Road, Nariman Point, Mumbai - 400 021. Authorisation of Financial Statements: The Standalone Financial Statements were authorized for issue in accordance with a resolution of the Board of Directors in its meeting held on 09th May, 2023.
Note 1: Significant Accounting Policies
The principal accounting policies applied in the preparation of these
Standalone Financial Statements are set out below. The accounting
policies applied are consistent with those of the previous financial
years.
(a) Compliance with the Indian Accounting Standards
The Standalone Financial Statements of the Company have been prepared in accordance with the Indian Accounting Standards (âInd ASâ) notified under Section 133 of the Companies Act, 2013 (âthe Actâ) read with the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) to the extent applicable and current accounting practices prevailing within the Shipping Industry in India. The policies set out below have been consistently applied during the years presented.
(b) Historical Cost Convention
The Standalone Financial Statements have been prepared on a historical cost basis, except for the following assets and liabilities, which have been measured at fair value:
⢠Certain financial assets and financial liabilities;
⢠Defined Benefit Plans - Plan assets
Fair value is the price that would be received on sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that
is significant to the fair value measurement as a whole:
⢠Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
⢠Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
⢠Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level of input that is significant to the fair value measurement as a whole) at the end of each reporting period.
(c) Current/Non-Current Classification:
The assets and liabilities reported in the balance sheet are classified as âcurrent/non-currentâ as per the Companyâs normal operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Current assets are assets that are intended to be realized, sold or consumed during the normal operating cycle of the Company or within the 12 months following the balance sheet date; current liabilities are liabilities that are expected to be settled during the normal operating cycle of the Company or within the 12 months following the balance sheet date.
(d) All material prior period errors are adjusted retrospectively in the first set of financial statements approved for issue after their discovery by:
(i) Restating the comparative amounts for the prior period(s) presented in which the error occurred; or
(ii) If the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented.
(e) The Standalone Financial Statements are presented in âIndian Rupeesâ (INR), which is also the Companyâs functional currency and all amounts are rounded to the nearest lakhs, unless otherwise stated
(f) Amended Ind AS - Standards issued but not Effective: On March 31 2023, the Ministry of Corporate Affairs (MCA) has notified Companies (Indian Accounting Standards) Amendment Rules 2023. The notification has resulted into amendments in the following existing accounting standards. The effective date for adoption of this amendment is annual periods beginning from or after 01.04.2023. The Company has evaluated the amendment and adoption of amendments does not have any effect on financial statements
i) Ind AS 102- Share Based Payments
ii) Ind AS 103- Business Combination
iii) Ind AS 1- Presentation of Financial Statements
iv) Ind AS 109- Financial Instruments
v) Ind AS 115- Revenue from Contracts with Customers
vi) Ind AS 8- Accounting Policies, Changes in Accounting Estimates and Errors
vii) Ind AS 12- Income Taxes
viii) Ind AS 34- Interim Financial Reporting
1.2 Foreign currency translation
(a) Functional and Presentational Currency
Items included in the Standalone Financial Statements of the Company are measured using the currency of the primary economic environment in which the entity operates (âthe functional currencyâ). The Standalone Financial Statements are presented in âIndian Rupeesâ (INR), which is the Companyâs functional and presentation currency.
(b) Transactions and Balances
All foreign currency transactions are recorded at the previous dayâs available RBI reference rate/exchange rate published through FBIL (Financial Benchmarks India Private Limited). Since the RBI reference rate published through FBIL is available for four major currencies only i.e. USD, GBP EUR, YEN, exchange rates of other currencies are taken from xe.com website.
The foreign currency balances in US Dollars, UK Pounds, Euro and Japanese YEN appearing in the books of account at the period end are translated into Indian Rupees at the available RBI reference rate/exchange rate published through FBIL at the period end. The foreign currency balances other than US Dollars, UK Pounds, Euro and Japanese YEN appearing in the books of account at the period end are translated into Indian Rupees at the rate available on xe.com website at the period end. Thereafter, the monetary assets and monetary liabilities as well as the Long Term Loans are translated into rupees at rate prevailing at the period end.
Exchange difference arising on repayment of liabilities and conversion of foreign currency closing balances pertaining to long term loans for acquiring ships / containers / other depreciable assets and asset under construction is recognised as follows:
a) In respect of long term loans outstanding as on 31.03.2016, exchange difference is adjusted in the carrying cost of respective assets.
b) In respect of long term loans taken after 31.03.2016, the exchange difference is charged / credited to Statement of Profit & Loss.
The exchange differences arising on translation of other monetary assets and liabilities are recognised in the Statement of profit and loss.
Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value is determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
1.3 Property, Plant and Equipment
Items of property, plant and equipment acquired or constructed are stated at historical cost net of recoverable taxes, less accumulated depreciation and accumulated impairment of loss, if any. The cost of tangible assets comprises of its purchase price, borrowing costs and adjustment arising for exchange rate variations attributable to the assets, wherever applicable including any cost directly attributable till completion of maiden voyage for bringing the asset to the condition of its intended use.
Expenditure incurred on assets which are not ready for their intended use as on Balance Sheet date comprising direct cost, related incidental expenses and attributable borrowing cost (net of revenues during constructions) are disclosed under Capital Work-in-Progress.
Subsequent costs like expenditure on major maintenance refits or repairs including planned drydock are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repair and maintenance costs are recognised in Statement of Profit and Loss as incurred.
Transition to Ind AS:
On transition to Ind AS -
a) a certain items of fleet have been measured at fair value and that fair value is used as deemed cost as on transition date.
b) All other assets which are not fair valued have been measured in accordance with Ind AS 16 retrospectively.
Depreciation:
Depreciation on all vessels is charged on âStraight Line Methodâ less residual value. In the case of Liner and Bulk Carrier vessels, the company has adopted useful life of 25 years as mentioned in Schedule II to the Companies Act, 2013. In case of Tankers & Offshore Vessels, the company has adopted a useful life of 25 years based on the technical parameters including design life and the past record. In case of VLGC vessel, the company has adopted a useful life of 30 years as mentioned in Schedule II to the Companies Act, 2013. Second hand vessels are depreciated over their remaining useful lives as determined by technical evaluation not exceeding 25 or 30 years from the date of original built.
Capitalised expenditures on dry-dock are depreciated until the next planned dry-docking and derecognised on recognition of new dry dock asset.
Depreciation on other tangible assets is provided on the straight line basis, over the estimated useful lives of assets as prescribed in the Schedule II of the Act, except in following cases:
1) Assets costing individually '' 5,000/- and below are fully depreciated in the year of acquisition.
2) Furnishing allowances given to Senior Executives are depreciated over a period of 3 years.
Depreciation on additions / deductions to PPE made during the year is provided on pro-rata basis from / up to the date of such additions / deductions, as the case may be.
Estimated useful lives, residual values and depreciation methods are reviewed annually, taking into account commercial and technological obsolescence as well as normal wear and tear and adjusted prospectively, if appropriate.
Retirement and Disposal of Assets
a) Assets which have been retired from operations for eventual disposal are exhibited separately -as Assets classified as held for sale.
b) Anticipated loss, if any, in the disposal of such assets is provided in the accounts for the year in which these have been retired from active use. For the purpose of determining the loss, the sale price is recognised, if contract for sale is concluded. In other cases, assessment of the realisable value is made on the basis of the prevailing market conditions. Losses on such assets are provided for after taking into account the expenses such as customs duty, sales tax / value added tax, GST etc. in connection with the disposal, as well as estimated expenses in maintaining the asset, till its sale. Wherever the exact amount under each item of expenses is not known, an assessment is done on the best estimate basis.
c) Profits on sale of assets are accounted for only upon completion of sale thereof.
Intangible assets acquired are stated at cost less accumulated amortization and accumulated impairment losses, if any. The cost comprises of purchase price, borrowing costs and directly attributable costs for bringing the asset to the condition of its intended use.
On transition to Ind AS, the company has elected to continue with the carrying value of all of intangible assets recognised as at April 1, 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of intangible assets.
Amortisation
Amortization is charged on a straight-line basis over the estimated useful lives. The useful lives of intangible assets are either finite or indefinite. Finite-life intangible assets are amortised on a straight line basis over the period of their estimated useful lives. An intangible asset having indefinite useful life is not amortised but is tested for impairment annually. The estimated useful life and amortization method are reviewed at the end of each annual reporting period, with the effect of any changes in the estimate being accounted for on a prospective basis.
Intangible assets including software is amortised over the useful life not exceeding five years.
1.5 Borrowing Costs
Borrowing costs include interest, ancillary cost incurred in connection with the arrangement of borrowings, interest on lease liability and exchange differences arising from foreign currency borrowings availed on or after April 1, 2016, to the extent they are regarded as an adjustment to the interest cost as per Ind AS 23. Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are charged to the Statement of Profit and Loss in the period in which they are incurred.
1.6 Impairment of non-financial assets
Non-financial assets that are subject to depreciation or amortisation are reviewed for impairment as on 31 March of every year or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The impairment loss, if any, is recognised in the Statement of Profit and Loss to the extent, assetâs carrying amount exceeds its recoverable amount. The Company estimates assetâs recoverable amount, which is higher of an assetâs fair value less cost of disposal and its value in use. Value in use is based on the estimated future cash flows, discounted to their present value using pre-tax discount rate that reflects current market assessment of the time value of money and risk specific to the assets.
1.7 Inventories
Inventories are valued at cost (Moving average method / Weighted Average method) or net realisable value, whichever is lower, unless otherwise stated. Net realisable value is the estimated selling price in the ordinary course of business.
Fuel oil purchases are initially booked as stock. The value of year-end stock is arrived at after charging consumption on âmoving average /weighted averageâ method.
Store / Spares including paints, etc. are charged to revenue as consumed when delivered to ships.
1.8 Non-current assets held-for-sale
Non-current assets are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell. Property, plant and equipment classified as held for sale are not depreciated.
Trade receivables are amounts due from customers for sale of goods or services performed in the ordinary course of business. Trade receivables are recognized initially at fair value. They are subsequently measured at amortised cost using the effective interest method, net of provision for impairment. The carrying value less impairment provision of trade receivables, are assumed to be approximate to their fair values.
1.10 Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand, deposits with banks, other short-term highly liquid investments with original maturities of three months or less.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above. Cash and Cash Equivalents consists of Balances with Banks which are restricted for withdrawl and usage.
1.11 Investments and other financial assets
i. Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
ii. Subsequent measurement
For the purposes of subsequent measurement, the company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
⢠those measured at amortised cost.
The classification depends on the Companyâs business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income. The company reclassifies debt instruments when and only when its business model for managing those assets changes.
Subsequent measurement of debt instruments depends on the Companyâs business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the company classifies its debt instruments:
Financial Assets measured at Amortised Cost:
Financial assets such as trade receivables, security deposits and loans given are measured at the amortised cost if both the following conditions are met:
⢠The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
⢠Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using effective interest (EIR) method. Gain or loss on a debt instrument that is subsequently measured at amortised cost is recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
Financial Assets measured at Fair Value through Other Comprehensive Income (FVTOCI):
A financial asset is classified as at the FVTOCI if both the following criteria met:
⢠The asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and
⢠The contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss. Interest income from these financial assets is included in other income using the effective interest rate method.
Financial Assets measured at Fair Value through Profit or Loss (FVTPL): Assets that do not meet the criteria for amortised cost or FVTOCI are measured at fair value through profit or loss. A gain or loss on a financial asset that is subsequently measured at fair value through profit or loss is recognised in profit or loss in the period in which it arises. Interest income from these financial assets is included in other income.
a) Subsidiary and Joint Ventures
Investments in equity instruments of subsidiary and joint ventures are carried at cost less impairment, if any.
b) Others
The company subsequently measures all equity instruments at fair value. Equity instruments which are held for trading are classified as FVTPL. For all other equity instruments, the Company decides to classify the same either as at FVTOCI or FVTPL. Changes in the fair value of financial assets at fair value through profit or loss are recognised in the statement of profit and loss.
iii. Derecognition
A financial asset is derecognised only when:
i. the rights to receive cash flows from the asset have expired, or
ii. the company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows to one or more recipient
Where the Company has transferred an asset, the company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the Company has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the company has not retained control of the financial asset. Where the company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
iv. Impairment of Financial Assets
The company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVTOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
The impairment methodology for each class of financial assets stated above is as follows:
Debt instruments measured at amortised cost and FVTOCI:
Debt instruments at amortised cost and those at FVTOCI where there has been a significant increase in credit risk, lifetime expected credit loss provision method is used and in all other cases, the impairment provision is determined as 12 months expected credit losses.
Trade receivables from customers: The Company applies the simplified approach for providing expected credit losses prescribed by Ind AS 109, which requires the use of the lifetime expected loss provision for all trade receivables.
1.12 Offsetting Financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
i. Classification as debt or equity
Debt and equity instruments issued by the company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
ii. Initial recognition and measurement
All financial liabilities are recognised initially at fair value and, in the case of borrowings and payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts.
iii. Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Borrowings: Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of profit and loss over the period of the borrowings using the effective interest method.
Trade and other payable: These amounts represent obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. They are recognized initially at fair value and subsequently measured at amortised cost using the effective interest method.
iv. Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Provision for income tax liability is made as per special provisions relating to income of shipping companies under the Income Tax Act, 1961 on the basis of deemed tonnage income of the Company. Provision for income-tax on non-shipping income is made as per the normal provisions of the Income-Tax Act 1961. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Deferred income tax is provided in full, using the liability method, on temporary differences (other than those which are covered in tonnage tax scheme) arising between the tax bases of assets and liabilities and their carrying amounts in the Standalone Financial Statements. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised.
Deferred tax assets and liabilities are measured based on the tax rates that are expected to apply in the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.
a) Short-term / long term obligations
All employee benefits payable wholly within twelve months of rendering the service including performance incentives and compensated absences are classified as short term employee benefits. The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are charged off to the Statement of Profit and Loss. The employee benefits which are not expected to occur within twelve months are classified as long term benefits and are recognised as liability at the net present value.
b) Defined contribution plan
Employee benefits under defined contribution plans comprising of post-retirement medical benefits (w.e.f 01.01.2007), provident fund and pension contribution are recognized based on the undiscounted amount of obligations of the company to contribute to the plan. This contribution is recognised based on its undiscounted amount and paid to a fund administered through a separate trust except post-retirement medical benefit for employeeâs retired w.e.f 01.01.2007. The Company has taken Group Medishield Insurance policy for Employees who have retired after 01.01.2007 under PRMS Scheme.
Employee benefits under defined benefit plans comprising of gratuity, leave encashment and post-retirement medical benefits for employees retired before 01.01.2007 are recognized based on the present value of defined benefit obligation, which is computed on the basis of actuarial valuation The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset.
1.17 Provisions, contingent liabilities and contingent assets Provisions
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Contingent liabilities
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. A present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or reliable estimate of the amount cannot be made is treated as contingent liability.
Contingent Assets
A contingent assets are not recognised but disclosed, where an inflow of economic benefits is probable.
Revenue Income is recognised in the Statement of Profit and Loss when:
⢠The income generating activities have been carried out on the basis of a binding agreement
⢠The income can be measured reliably
⢠It is probable that the economic benefits associated with the transaction will flow to the Company
⢠Costs relating to the transaction can be measured reliably
Revenue for all businesses is recognised when the performance obligation has been satisfied, which happens upon the transfer of control to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for the goods and services.
Revenue is recognised when or as performance obligations are satisfied by transferring the promised goods or services to the customer, i.e. at a point in time or over time provided that the stage of completion can be measured reliably.
Revenue mainly comprises freight, charter hire and demurrage revenues from the vessels.
Freight - The Company generates revenue from shipping activities. Revenues from vessels are mainly derived from a combination of time charters and voyage charters. Revenue from a voyage charter is recognised over time, which is determined on a percentage of voyage completion method.
Charter-hire - Revenue from a time charter is recognised on a straight-line basis over the period of the charter.
Demurrage revenue - Freight contracts contain conditions regarding the amount of time available for loading and discharging of the vessel. If these conditions are breached, the Company is compensated for the additional time incurred in the form of demurrage revenue. Demurrage revenue is recognised upon delivery of services in accordance with the terms and conditions of the contract. Upon completion of the voyage, the Company assesses the time spent in port, and a demurrage claim based on the relevant contractual conditions is submitted to the charterers. (Further, refer Note No 2 (g) - Demurrage).
Profit from sale of vessels - Revenue from the sale of vessel is recognised upon the transfer of control to the buyer.
O&M contracts - The Company has entered into contracts with its customers for Operation & Management of vessels owned by them. These are cost plus contracts and the Company is entitled for reimbursement of all costs incurred on these vessels plus a fixed percentage of remuneration on these costs. The Company accounts for the remuneration earned as and when the costs are incurred and booked in the accounts. The reimbursement of costs is netted off against the relevant expense head to which the cost was originally debited.
Interest income - Interest income from debt instruments is recognised using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash flows through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
Dividends - Dividends are recognised in profit or loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the company, and the amount of the dividend can be measured reliably. Cost of services rendered includes port expenses, bunkers (Fuel Oil), commissions, hire of chartered steamers, stores, spares, repair and maintenance expenses, Insurance expenses etc.
Employee Benefit Expenses - Operating expenses, which comprise of shore staff & floating staff expenses.
Financial expenses - Financial expenses comprise interest expenses. Other expenses - Other expenses which comprise office expenses, provisions, managements cost and other expenses relating to administration.
1.19 Insurance, P&I And Other Claims
(a) Provision in respect of claims against the Company is made as under:-
i. In respect of collision claims and P & I claims (other than crew & cargo claims), to the extent of deductible limit based on the assessment provided by the surveyors.
ii. In case of Cargo claims, actual claims registered and/ or paid pertaining to the relevant yearâs voyages as ascertained at the period end or the P&I deductible limit whichever is lower.
(b) No provision is made in respect of claims by the Company covered under Hull & Machinery insurance and treatment of such claims is as under:-
i. Expenses on account of particular and general average claims/ damages to ships are charged off in the period in which they are incurred.
ii. Claims against the underwriters are initially accounted for based on the admission of the claims liability by the underwriters. The final adjustment in the recoverable amount is done on submission of the Adjusterâs report to the underwriters which reflect the exact recoverable amount from the underwriters.
(c) Claims made by the Company against other parties not covered under insurance including ship repair yards, ship-owners, ship charterers, customs and others, etc. are recognised on realisation, due to uncertainty in the amounts of their ultimate recovery.
A contract or parts of contracts that conveys the right to control the use of an identified asset for a period of time in exchange for payments to be made to the owners (lessors) are accounted for as leases. Contracts are assessed to determine whether a contract is, or contains, a lease at the inception of a contract or when the terms and conditions of a contract are significantly changed.
Where the Company is the lessee in a lease arrangement at inception, the lease contracts are recognized as rights-of use assets and lease liabilities are measured at present value of lease payments at initial recognition except for short-term leases and leases of low value. The rights of use assets are depreciated on a straight line basis over a lease term. Lease payments are discounted using the interest rate implicit in the lease. If that rate is not readily available, the incremental borrowing rate is applied. The incremental borrowing rate reflects the rate of interest that the lessee would have to pay to borrow over a similar term, with a similar security, the funds necessary to obtain an asset of a similar nature and value to the right-of-use asset in a similar economic environment. Payments associated with short-term leases and leases of low-value assets are recognised as an expense in profit & loss Account.
Where the Company is the lessor in a lease arrangement at inception, the lease arrangement will be classified as a finance lease or an operating lease. Classification is based on the extent to which the risks and rewards incidental to ownership of the underlying asset lie with the lessor or the lessee. Under operating lease, where the Company is the lessor, the assets are included in the balance sheet and, where applicable, are depreciated in accordance with the Companyâs depreciation policies as set out in Note 1.3 Property, plant and equipment. Revenue arising from assets leased out under operating leases is recognised on overtime basis.
1.21 Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision-Maker (CODM). The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions.
1.22 Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to the equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating Diluted Earnings per share, the net profit or loss for the period attributable to the equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
1.23 Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions. Government grants relating to duty scrips on export of services (Served from India Scheme) are related to income and are recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate and presented within other income. Government grants are recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grants are intended to compensate.
Note 2: Critical Accounting Estimates and Judgements
Preparing the Standalone Financial Statements under Ind AS requires management to take decisions and make estimates and assumptions that may impact the value of revenues, costs, assets and liabilities and the related disclosures concerning the items involved as well as contingent assets and liabilities at the balance sheet date. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
a) Useful lives of vessels
Management of the Company decided the estimated useful lives of vessels and respective depreciation. The accounting estimate is based on the expected wears and tears. Wears and tears can be significantly different following renovation each time. When the useful lives differ from the original estimated useful lives, management will adjust the estimated useful lives accordingly. It is possible that the estimates made based on existing experience are different to the actual outcomes within the next financial period and could cause a material adjustment to the carrying amount of fixed assets.
b) Residual Value
Residual value is considered as 5% of original cost of Vessel. In case of other assets, the residual value, being negligible, has been considered as nil. The residual value of vessels is reviewed every year on 31st March.
The recoverable amount of an asset or a cash-generating unit is determined based on value-in-use calculations prepared on the basis of managementâs assumptions and estimates
An impairment loss is recognised for the amount by which the assetâs or cash generating unitâs carrying amount exceeds its recoverable amount and is recognised in the Statement of Profit and Loss. Recoverable amount is higher of an assetâs net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
d) Defined benefit obligations
The present value of the defined benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for post employments plans include the discount rate. Any changes in these assumptions will impact the carrying amount of such obligations.
Discount Rate for the valuation is determined by reference to market yields at the balance sheet date on Government Bonds. This is the rate that is used to determine the present value of estimated future cash outflows expected to be required to settle the defined benefit obligations.
e) Provision
Estimates of the amounts of provisions recognised are based on current legal and constructive requirements, technology and price levels. Because actual outflows can differ from estimates due to changes in laws, regulations, public expectations, technology, prices and conditions, and can take place many years in the future, the carrying amounts of provisions are regularly reviewed and adjusted to take account of such changes.
f) Impairment of Trade Receivable
The methodology followed by the Company is the use of a provision matrix as a practical expedient to measure expected credit losses on its portfolio of trade receivables. The model uses historical credit loss experience for trade receivables i.e. this model uses ageing analysis of trade receivables as at the reporting date.
Considering the different services provided by the company, provisioning is done segment wise basis analysis and computation of expected credit loss for trade receivables of different segments.
Impairment loss allowance on trade receivables during the year is recognised in the Statement of Profit and Loss.
Vessel Demurrage income due as per contractual terms is recognized. A provision on estimated basis is made towards deduction from demurrage based on past experience of settlements.
h) Income Tax
Due to Tonnage tax regime applicable on the main part of the company''s activities, resulting in a lower income tax payable in the future, the amount of deferred tax to be recognised is limited. Considering the tonnage tax regime applicable to shipping activities, difference between taxable and book values of assets and liabilities are generally of permanent nature. This is due to the fact that the taxable result for tonnage tax eligible activities has no correlation with either carrying value or the generally applicable tax value of assets and liabilities. As a consequence, temporary differences are limited to those arising from other activities which are subject to normal Income tax provisions.
i) Leases
Lease contracts contain extension or termination options. Assessment of the exercise or non-exercise of such options impacts the value of right-of-use asset recognised. Such assessments are reviewed whenever a significant event or change in circumstances occurs.
For the purpose of calculating the present value, the interest rate implicit in the lease or an incremental borrowing rate is used as discount factor. Where the rate implicit in the lease is not readily available, an incremental borrowing rate is applied. This incremental borrowing rate reflects the rate of interest that the lessee would have to pay to borrow over a similar term, with a similar security, the funds necessary to obtain an asset of a similar nature and value to the right-of-use asset. Determination of the incremental borrowing rate requires estimation.
Management has applied judgement and formed assumptions in relation to assessment of incremental borrowing rate, service components and extension options of leasing arrangements. Management has formed its judgements and assumptions based on historical experience, internal and external information and data available.
Mar 31, 2022
Corporate Information
The Shipping Corporation of India Limited (âSCIâ / âthe Companyâ) is the largest Indian Shipping company limited by shares, incorporated in 1961. The equity shares of the Company are listed on the Bombay Stock Exchange and National Stock Exchange in India. SCI is involved in the business of transporting goods. SCIâs owned fleet includes Bulk Carriers, Crude Oil Tankers, Product Tankers, Container Vessels, Passenger-cum-Cargo Vessels, LPG Carrier and Offshore Supply Vessels. In addition, SCI manages a large number of vessels on behalf of various government departments and other organizations.
The registered office of the Company is located at Shipping House, 245, Madame Cama Road, Nariman Point, Mumbai - 400 021. Authorisation of Financial Statements: The Standalone Financial Statements were authorized for issue in accordance with a resolution of the Board of Directors in its meeting held on 6th May, 2022.
Note 1: Significant Accounting Policies
The principal accounting policies applied in the preparation of these Standalone Financial Statements are set out below. The accounting policies applied are consistent with those of the previous financial years.
(a) Compliance with the Indian Accounting Standards
The Standalone Financial Statements of the Company have been prepared in accordance with the Indian Accounting Standards (âInd ASâ) notified under Section133 of the Companies Act, 2013 (âthe Actâ) read with the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) to the extent applicable and current accounting practices prevailing within the Shipping Industry in India. The policies set out below have been consistently applied during the years presented.
(b) Historical Cost Convention
The Standalone Financial Statements have been prepared on a historical cost basis, except for the following assets and liabilities, which have been measured at fair value:
⢠Certain financial assets and financial liabilities;
⢠Defined Benefit Plans - Plan assets
Fair value is the price that would be received on sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
⢠Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
⢠Level 2âValuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
⢠Level 3âValuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level of input that is significant to the fair value measurement as a whole) at the end of each reporting period.
(c) Current/Non-Current Classification:
The assets and liabilities reported in the balance sheet are classified as âcurrent/non-currentâ as per the Companyâs normal operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Current assets are assets that are intended to be realized, sold or consumed during the normal operating cycle of the Company or within the 12 months following the balance sheet date; current liabilities are liabilities that are expected to be settled during the normal operating cycle of the Company or within the 12 months following the balance sheet date.
(d) All material prior period errors are adjusted retrospectively in the first set of financial statements approved for issue after their discovery by:
(i) Restating the comparative amounts for the prior period(s) presented in which the error occurred; or
(ii) If the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented.
(e) The Standalone Financial Statements are presented in âIndian Rupeesâ (INR), which is also the Companyâs functional currency and all amounts are rounded to the nearest lakhs, unless otherwise stated
(f) Amended standards adopted by the Company
(i) Amendment in Ind AS 107 (Financial Instruments: Recognition, Presentation and Disclosure)
The amendment clarifies the certain additional disclosures to be made on account of Interest Rate Benchmark Reform like -
A. the nature and extent of risks to which the entity is exposed arising from financial instruments subject to interest rate benchmark reform, and how the entity manages these risks; and
B. the entityâs progress in completing the transition to alternative benchmark rates, and how the entity is managing the transition.
The Company has applied the above amendment w.e.f. 01.04.2021. However, adoption of above Ind AS does not have any effect on financial statements.
(ii) Amendments in IND AS 109 (Financial Instruments)
The amendment provides a practical expedient for assessment of contractual cash flow test, which is one of the criteria for being eligible to measure a financial asset at amortized cost, for the changes in the financial assets that may arise as a result of Interest Rate Benchmark Reform. An additional temporary exception from applying hedge accounting is also added for Interest Rate Benchmark Reform. The Company has applied the above amendment w.e.f. 01.04.2021. However, adoption of above Ind AS does not have any effect on financial statements.
(iii) Amendments in Ind AS 116 (Leases)
The amendments extend the benefits of the COVID 19 related rent concession that were introduced last year (which allowed lessees to recognize COVID 19 related rent concessions as income rather than as lease modification) from 30 June 2021 to 30 June 2022.
The Company has applied the above amendment w.e.f. 01.04.2021. However, adoption of above Ind AS does not have any effect on financial statements.
(iv) Ind AS amendment with respect to issuance of Conceptual Framework.
Ind AS 32, Ind AS 103, Ind AS 106, Ind AS 114, Ind AS 1, Ind AS 8, Ind AS 34, Ind AS 37 and Ind AS 38 have been amended consequent to issuance of Conceptual Framework for financial reporting under Ind AS. The Company has applied the above amendment w.e.f. 01.04.2021. However, adoption of above Ind AS does not have any effect on financial statements.
1.2 Foreign currency translation
(a) Functional and Presentational Currency
Items included in the Standalone Financial Statements of the Company are measured using the currency of the primary economic environment in which the entity operates (âthe functional currencyâ). The Standalone Financial Statements are presented in âIndian Rupeesâ (INR), which is the Companyâs functional and presentation currency.
(b) Transactions and Balances
All foreign currency transactions are recorded at the previous dayâs available RBI reference rate/exchange rate published through FBIL (Financial Benchmarks India Private Limited). Since the RBI reference rate published through FBIL is available for four major currencies only i.e. USD, GBP EUR, YEN, exchange rates of other currencies are taken from xe.com website.
The foreign currency balances in US Dollars, UK Pounds, Euro and Japanese Yen appearing in the books of account at the period end are translated into Indian Rupees at the available RBI reference rate/exchange rate published through FBIL at the period end. The foreign currency balances other than US Dollars, UK Pounds, Euro and Japanese YEN appearing in the books of account at the period end are translated into Indian Rupees at the rate available on xe.com website at the period end. Thereafter, the monetary assets and monetary liabilities as well as the Long Term Loans are translated into rupees at rate prevailing at the period end. Exchange difference arising on repayment of liabilities and conversion of foreign currency closing balances pertaining to long term loans for acquiring ships / containers / other depreciable assets and asset under construction is recognised as follows:
a) In respect of long term loans outstanding as on 31.03.2016, exchange difference is adjusted in the carrying cost of respective assets.
b) In respect of long term loans taken after 31.03.2016, the exchange difference is charged / credited to Statement of Profit & Loss.
The exchange differences arising on translation of other monetary assets and liabilities are recognised in the Statement of profit and loss.
Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value is determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
1.3 Property, Plant and Equipment
Items of property, plant and equipment acquired or constructed are stated at historical cost net of recoverable taxes, less accumulated depreciation and accumulated impairment of loss, if any. The cost of tangible assets comprises of its purchase price, borrowing costs and adjustment arising for exchange rate variations attributable to the assets, wherever applicable including any cost directly attributable till completion of maiden voyage for bringing the asset to the condition of its intended use.
Expenditure incurred on assets which are not ready for their intended use as on Balance Sheet date comprising direct cost, related incidental expenses and attributable borrowing cost (net of revenues during constructions) are disclosed under Capital Work-in-Progress.
Subsequent costs like expenditure on major maintenance refits or repairs including planned drydock are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised.
All other repair and maintenance costs are recognised in Statement of Profit and Loss as incurred.
Transition to Ind AS:
On transition to Ind AS -
a) Freehold land has been measured at fair value on transition date and that fair value is used as the deemed cost;
b) Certain items of fleet have been measured at fair value and that fair value is used as deemed cost as on transition date.
c) All other assets which are not fair valued have been measured in accordance with Ind AS 16 retrospectively.
Depreciation:
Depreciation on all vessels is charged on âStraight Line Methodâ less residual value. In the case of Liner and Bulk Carrier vessels, the company has adopted useful life of 25 years as mentioned in Schedule II to the Companies Act, 2013. In case of Tankers & Offshore Vessels, the company has adopted a useful life of 25 years based on the technical parameters including design life and the past record. In case of VLGC vessel, the company has adopted a useful life of 30 years as mentioned in Schedule II to the Companies Act, 2013. Second hand vessels are depreciated over their remaining useful lives as determined by technical evaluation not exceeding 25 or 30 years from the date of original built.
Capitalised expenditures on dry-dock are depreciated until the next planned dry-docking and derecognised on recognition of new dry dock asset.
Depreciation on other tangible assets is provided on the straight line basis, over the estimated useful lives of assets as prescribed in the Schedule II of the Act, except in following cases:
1) Solar Plants are depreciated over a period of 25 years based on the technical assessment of useful life.
2) Assets costing individually Rs. 5,000/- and below are fully depreciated in the year of acquisition.
3) Furnishing allowances given to Senior Executives are depreciated over a period of 3 years.
Depreciation on additions / deductions to PPE made during the year is provided on pro-rata basis from / up to the date of such additions / deductions, as the case may be.
Estimated useful lives, residual values and depreciation methods are reviewed annually, taking into account commercial and technological obsolescence as well as normal wear and tear and adjusted prospectively, if appropriate.
Retirement and Disposal of Assets
a) Assets which have been retired from operations for eventual disposal are exhibited separately in the Note No. 11 - Assets classified as held for sale.
b) Anticipated loss, if any, in the disposal of such assets is provided in the accounts for the year in which these have been retired from active use. For the purpose of determining the loss, the sale price is recognised, if contract for sale is concluded. In other cases, assessment of the realisable value is made on the basis of the prevailing market conditions. Losses on such assets are provided for after taking into account the expenses such as customs duty, sales tax / value added tax, GST etc. in connection with the disposal, as well as estimated expenses in maintaining the asset, till its sale. Wherever the exact amount under each item of expenses is not known, an assessment is done on the best estimate basis.
c) Profits on sale of assets are accounted for only upon completion of sale thereof.
Intangible assets acquired are stated at cost less accumulated amortization and accumulated impairment losses, if any. The cost comprises of purchase price, borrowing costs and directly attributable costs for bringing the asset to the condition of its intended use.
Transition to Ind AS:
On transition to Ind AS, the company has elected to continue with the carrying value of all of intangible assets recognised as at April 1,2015 measured as per the previous GAAP and use that carrying value as the deemed cost of intangible assets.
Amortisation
Amortization is charged on a straight-line basis over the estimated useful lives. The useful lives of intangible assets are either finite or indefinite. Finite-life intangible assets are amortised on a straight line basis over the period of their estimated useful lives. An intangible asset having indefinite useful life is not amortised but is tested for impairment annually. The estimated useful life and amortization method are reviewed at the end of each annual reporting period, with the effect of any changes in the estimate being accounted for on a prospective basis.
Intangible assets including software is amortised over the useful life not exceeding five years.
Borrowing costs include interest, ancillary cost incurred in connection with the arrangement of borrowings and exchange differences arising from foreign currency borrowings availed on or after April 1, 2016, to the extent they are regarded as an adjustment to the interest cost as per Ind AS 23. Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs
are charged to the Statement of Profit and Loss in the period in which they are incurred
1.6 Impairment of non-financial assets
Non-financial assets that are subject to depreciation or amortisation are reviewed for impairment as on 31st March of every year or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The impairment loss, if any, is recognised in the Statement of Profit and Loss to the extent, assetâs carrying amount exceeds its recoverable amount. The Company estimates assetâs recoverable amount, which is higher of an assetâs fair value less cost of disposal and its value in use. Value in use is based on the estimated future cash flows, discounted to their present value using pre-tax discount rate that reflects current market assessment of the time value of money and risk specific to the assets.
Inventories are valued at cost (Moving average method / Weighted Average method) or net realisable value, whichever is lower, unless otherwise stated. Net realisable value is the estimated selling price in the ordinary course of business. Fuel oil purchases are initially booked as stock. The value of year-end stock is arrived at after charging consumption on âmoving average /weighted averageâ method.
Store / Spares including paints, etc. are charged to revenue as consumed when delivered to ships.
1.8 Non-current assets held-for-sale
Non-current assets are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell. Property, plant and equipment classified as held for sale are not depreciated.
Trade receivables are amounts due from customers for sale of goods or services performed in the ordinary course of business. Trade receivables are recognized initially at fair value. They are subsequently measured at amortised cost using the effective interest method, net of provision for impairment. The carrying value less impairment provision of trade receivables, are assumed to be approximate to their fair values.
1.10 Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand, deposits with banks, other short-term highly liquid investments with original maturities of three months or less. For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above.
1.11 Investments and other financial assets
i. Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
ii. Subsequent measurement
For the purposes of subsequent measurement, the company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
⢠those measured at amortised cost.
The classification depends on the Companyâs business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
The company reclassifies debt instruments when and only when its business model for managing those assets changes.
ii(a) Debt instruments
Subsequent measurement of debt instruments depends on the Companyâs business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the company classifies its debt instruments:
Financial Assets measured at Amortised Cost:
Financial assets such as trade receivables, security deposits and loans given are measured at the amortised cost if both the following conditions are met:
⢠The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
⢠Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using effective interest (EIR) method.
Gain or loss on a debt instrument that is subsequently measured at amortised cost is recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
Financial Assets measured at Fair Value through Other
Comprehensive Income (FVTOCI):
A financial asset is classified as at the FVTOCI if both the following criteria met:
⢠The asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and
⢠The contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss. Interest income from these financial assets is included in other income using the effective interest rate method.
Financial Assets measured at Fair Value through Profit or Loss (FVTPL): Assets that do not meet the criteria for amortised cost or FVTOCI are measured at fair value through profit or loss. A gain or loss on a financial asset that is subsequently measured at fair value through profit or loss is recognised in profit or loss in the period in which it arises. Interest income from these financial assets is included in other income. ii(b) Equity Instruments
a) Subsidiary and Joint Ventures
Investments in equity instruments of subsidiary and joint ventures are carried at cost less impairment, if any.
b) Others
The company subsequently measures all equity instruments at fair value. Equity instruments which are held for trading are classified as FVTPL. For all other equity instruments, the Company decides to classify the same either as at FVTOCI or FVTPL. Changes in the fair value of financial assets at fair value through profit or loss are recognised in the statement of profit and loss.
iii. Derecognition
A financial asset is derecognised only when:
i. the rights to receive cash flows from the asset have expired, or
ii. the company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows to one or more recipient
Where the Company has transferred an asset, the company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the Company has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the company has not retained control of the financial asset. Where the company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
iv. Impairment of Financial Assets
The company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVTOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
The impairment methodology for each class of financial assets stated above is as follows:
Debt instruments measured at amortised cost and FVTOCI: Debt instruments at amortised cost and those at FVTOCI where there has been a significant increase in credit risk, lifetime expected credit loss provision method is used and in all other cases, the impairment provision is determined as 12 months expected credit losses. Trade receivables from customers: The Company applies the simplified approach for providing expected credit losses prescribed by Ind AS 109, which requires the use of the lifetime expected loss provision for all trade receivables.
1.12 Offsetting Financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
i. Classification as debt or equity
Debt and equity instruments issued by the company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
ii. Initial recognition and measurement
All financial liabilities are recognised initially at fair value and, in the case of borrowings and payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts.
iii. Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Borrowings: Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of profit and loss over the period of the borrowings using the effective interest rate method.
Trade and other payable: These amounts represent obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. They are recognized initially at fair value and subsequently measured at amortised cost using the effective interest rate method.
iv. Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Provision for income tax liability is made as per special provisions relating to income of shipping companies under the Income Tax Act, 1961 on the basis of deemed tonnage income of the Company. Provision for income- tax on nonshipping income is made as per the normal provisions of the Income- Tax Act 1961. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Deferred income tax is provided in full, using the liability method, on temporary differences (other than those which are covered in tonnage tax scheme) arising between the tax bases of assets and liabilities and their carrying amounts in the Standalone Financial Statements. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised.
Deferred tax assets and liabilities are measured based on the tax rates that are expected to apply in the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.
a) Short-term / long term obligations
All employee benefits payable wholly within twelve months of rendering the service including performance incentives and compensated absences are classified as short term employee benefits. The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are charged off to the Statement of Profit and Loss. The employee benefits which are not expected to occur within twelve months are classified as long term benefits and are recognised as liability at the net present value.
b) Defined contribution plan
Employee benefits under defined contribution plans comprising of post-retirement medical benefits (w.e.f 01.01.2007), provident fund and pension contribution are recognized based on the undiscounted amount of obligations of the company to contribute to the plan. This contribution is recognised based on its undiscounted amount and paid to a fund administered through a separate trust except post-retirement medical benefit for employeeâs retired w.e.f 01.01.2007. The Company has taken Group Medishield Insurance policy for Employees who have retired after 01.01.2007 under PRMS Scheme.
c) Defined benefit plan
Employee benefits under defined benefit plans comprising of gratuity, leave encashment and post-retirement medical benefits for employees retired before 01.01.2007 are recognized based on the present value of defined benefit obligation, which is computed on the basis of actuarial valuation
The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset.
1.17 Provisions, contingent liabilities and contingent assets Provisions
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events;
it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.
Contingent liabilities
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. A present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or reliable estimate of the amount cannot be made is treated as contingent liability. Contingent Assets
A contingent assets are not recognised but disclosed, where an inflow of economic benefits is probable.
Revenue Income is recognised in the Statement of Profit and Loss when:
⢠The income generating activities have been carried out on the basis of a binding agreement
⢠The income can be measured reliably
⢠It is probable that the economic benefits associated with the transaction will flow to the Company
⢠Costs relating to the transaction can be measured reliably
Revenue for all businesses is recognised when the performance obligation has been satisfied, which happens upon the transfer of control to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for the goods and services. Revenue is recognised when or as performance obligations are satisfied by transferring the promised goods or services to the customer, i.e. at a point in time or over time provided that the stage of completion can be measured reliably. Revenue mainly comprises freight, charter hire and demurrage revenues from the vessels.
Freight - The Company generates revenue from shipping activities. Revenues from vessels are mainly derived from a combination of time charters and voyage charters. Revenue from a voyage charter is recognised over time, which is determined on a percentage of voyage completion method. Charter-hire - Revenue from a time charter is recognised on a straight-line basis over the period of the charter. Demurrage revenue - Freight contracts contain conditions regarding the amount of time available for loading and discharging of the vessel. If these conditions are breached, the Company is compensated for the additional time incurred in the form of demurrage revenue. Demurrage revenue is recognised upon delivery of services in accordance with the terms and conditions of the contract. Upon completion of the voyage, the Company assesses the time spent in port, and a demurrage claim based on the relevant contractual
conditions is submitted to the charterers. (Further, refer Note No 2 (g) - Demurrage).
Training fees included in other operating income are accounted on accrual basis.
Profit from sale of vessels - Revenue from the sale of vessel is recognised upon the transfer of control to the buyer.
O&M contracts - The Company has entered into contracts with its customers for Operation & Management of vessels owned by them. These are cost plus contracts and the Company is entitled for reimbursement of all costs incurred on these vessels plus a fixed percentage of remuneration on these costs. The Company accounts for the remuneration earned as and when the costs are incurred and booked in the accounts. The reimbursement of costs is netted off against the relevant expense head to which the cost was originally debited.
Interest income - Interest income from debt instruments is recognised using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash flows through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
Dividends - Dividends are recognised in profit or loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the company, and the amount of the dividend can be measured reliably.
Cost of services rendered includes port expenses, bunkers (Fuel Oil), commissions, hire of chartered steamers, stores, spares, repair and maintenance expenses, Insurance expenses etc.
Employee Benefit Expenses - Operating expenses, which comprise of shore staff & floating staff expenses.
Financial expenses - Financial expenses comprise interest expenses.
Other expenses - Other expenses which comprise office expenses, provisions, managements cost and other expenses relating to administration.
1.19 Insurance, P&I And Other Claims
(a) Provision in respect of claims against the Company is made as under:-
i. In respect of collision claims and P & I claims (other than crew & cargo claims), to the extent of deductible limit based on the assessment provided by the surveyors.
ii. In case of Cargo claims, actual claims registered and/or paid pertaining to the relevant yearâs voyages
as ascertained at the period end or the P&I deductible limit whichever is lower.
(b) No provision is made in respect of claims by the Company covered under Hull & Machinery insurance and treatment of such claims is as under:-
i. Expenses on account of particular and general average
claims/ damages to ships are charged off in the period in which they are incurred.
ii. Claims against the underwriters are initially accounted
for based on the admission of the claims liability by the underwriters. The final adjustment in the recoverable amount is done on submission of the Adjusterâs report to the underwriters which reflect the exact recoverable amount from the underwriters
(c) Claims made by the Company against other parties not covered under insurance including ship repair yards, ship-owners, ship charterers, customs and others, etc. are recognised on realisation, due to uncertainty in the amounts of their ultimate recovery.
A contract or parts of contracts that conveys the right to control the use of an identified asset for a period of time in exchange for payments to be made to the owners (lessors) are accounted for as leases. Contracts are assessed to determine whether a contract is, or contains, a lease at the inception of a contract or when the terms and conditions of a contract are significantly changed.
Where the Company is the lessee in a lease arrangement at inception, the lease contracts are recognized as rights-of use assets and lease liabilities are measured at present value of lease payments at initial recognition except for short-term leases and leases of low value. The rights of use assets are depreciated on a straight line basis over a lease term. Lease payments are discounted using the interest rate implicit in the lease. If that rate is not readily available, the incremental borrowing rate is applied. The incremental borrowing rate reflects the rate of interest that the lessee would have to pay to borrow over a similar term, with a similar security, the funds necessary to obtain an asset of a similar nature and value to the right-of-use asset in a similar economic environment. Payments associated with short-term leases and leases of low-value assets are recognised as an expense in profit & loss Account.
Where the Company is the lessor in a lease arrangement at inception, the lease arrangement will be classified as a finance lease or an operating lease. Classification is based on the extent to which the risks and rewards incidental to ownership of the underlying asset lie with the lessor or the lessee. Under operating lease, where the Company is the lessor, the assets are included in the balance sheet and, where applicable, are depreciated in accordance with the Companyâs depreciation policies as set out in Note 1.3 Property, plant and equipment. Revenue arising from assets
leased out under operating leases is recognised on overtime basis.
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision-Maker (CODM). The chief operating decisionmaker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions.
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to the equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating Diluted Earnings per share, the net profit or loss for the period attributable to the equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions. Government grants relating to duty scrips on export of services (Served from India Scheme) are related to income and are recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate and presented within other income.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grants are intended to compensate.
Note 2: Critical Accounting Estimates and Judgements Preparing the Standalone Financial Statements under Ind AS requires management to take decisions and make estimates and assumptions that may impact the value of revenues, costs, assets and liabilities and the related disclosures concerning the items involved as well as contingent assets and liabilities at the balance sheet date. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
a) Useful lives of vessels
Management of the Company decided the estimated useful lives of vessels and respective depreciation. The accounting estimate is based on the expected wears and tears. Wears and tears can be significantly different following renovation each time. When the useful lives differ from the original estimated useful lives, management will adjust the estimated useful lives accordingly. It is possible that the estimates made based on existing experience are different to the actual outcomes within the next financial period and could cause a material adjustment to the carrying amount of fixed assets.
b) Residual Value
Residual value is considered as 5% of original cost of Vessel. In case of other assets, the residual value, being negligible, has been considered as nil. The residual value of vessels is reviewed every year on 31st March.
c) Impairment of assets
The recoverable amount of an asset or a cash-generating unit is determined based on value-in-use calculations prepared on the basis of managementâs assumptions and estimates An impairment loss is recognised for the amount by which the assetâs or cash generating unitâs carrying amount exceeds its recoverable amount and is recognised in the Statement of Profit and Loss. Recoverable amount is higher of an assetâs net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
d) Defined benefit obligations
The present value of the defined benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for post employments plans include the discount rate. Any changes in these assumptions will impact the carrying amount of such obligations.
Discount Rate for the valuation is determined by reference to market yields at the balance sheet date on Government Bonds. This is the rate that is used to determine the present value of estimated future cash outflows expected to be required to settle the defined benefit obligations.
e) Provision
Estimates of the amounts of provisions recognised are based on current legal and constructive requirements, technology and price levels. Because actual outflows can differ from estimates due to changes in laws, regulations, public expectations, technology, prices and conditions, and can take place many years in the future, the carrying amounts of provisions are regularly reviewed and adjusted to take account of such changes.
f) Impairment of Trade Receivable
The methodology followed by the Company is the use of a provision matrix as a practical expedient to measure expected credit losses on its portfolio of trade receivables. The model uses historical credit loss experience for trade receivables i.e. this model uses ageing analysis of trade receivables as at the reporting date.
Considering the different services provided by the company, provisioning is done segment wise basis analysis and computation of expected credit loss for trade receivables of different segments.
Impairment loss allowance on trade receivables during the year is recognised in the Statement of Profit and Loss.
g) Demurrage
Vessel Demurrage income due as per contractual terms is recognized. A provision on estimated basis is made towards deduction from demurrage based on past experience of settlements.
h) Income Tax
Due to Tonnage tax regime applicable on the main part of the companyâs activities, resulting in a lower income tax payable in the future, the amount of deferred tax to be recognised is limited. Considering the tonnage tax regime applicable to shipping activities, difference between taxable and book values of assets and liabilities are generally of permanent nature. This is due to the fact that the taxable result for tonnage tax eligible activities has no correlation with either carrying value or the generally applicable tax value of assets and liabilities. As a consequence, temporary differences are limited to those arising from other activities which are subject to normal Income tax provisions.
i) Leases
Lease contracts contain extension or termination options. Assessment of the exercise or non-exercise of such options impacts the value of right-of-use asset recognised. Such assessments are reviewed whenever a significant event or change in circumstances occurs.
For the purpose of calculating the present value, the interest rate implicit in the lease or an incremental borrowing rate is used as discount factor. Where the rate implicit in the lease is not readily available, an incremental borrowing rate is applied. This incremental borrowing rate reflects the rate of interest that the lessee would have to pay to borrow over a similar term, with a similar security, the funds necessary to obtain an asset of a similar nature and value to the right-of-use asset. Determination of the incremental borrowing rate requires estimation.
Management has applied judgement and formed assumptions in relation to assessment of incremental borrowing rate, service components and extension options of leasing arrangements. Management has formed its judgements and assumptions based on historical experience, internal and external information and data available.
Mar 31, 2018
Corporate Information
Shipping Corporation of India Limited is the largest Indian Shipping company limited by shares, incorporated in 1961. SCI is involved in business of transporting goods and passengers. SCIâs owned fleet includes Bulk carriers, Crude oil tankers, Product tankers, Container vessels, Passenger-cum-Cargo vessels, Phosphoric Acid / Chemical carriers, LPG / Ammonia carriers and Offshore Supply Vessels. In addition, SCI manages a large number of vessels on behalf of various government departments and organizations.
The registered office of the Company is located at Shipping House, 245, Madame Cama Road, Nariman Point, Mumbai - 400 021. These financial statements are approved for issue by the board of directors on 23rd May 2018.
Note 1: Significant Accounting Policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
1.1 Basis of Preparation
(a) Compliance with Indian Accounting Standards
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (âInd ASâ) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) read with Section133 of the Companies Act, 2013 (âthe Actâ) to the extent applicable and current practices prevailing within the Shipping Industries in India. The policies set out below have been consistently applied during the years presented.
(b) Historical cost convention
The financial statements have been prepared under the historical cost convention, as modified by the following:
- Certain financial asset and financial liabilities at fair value;
- Defined benefit plans - plan assets that are measured at fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
- Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
- Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
(c) The assets and liabilities reported in the balance sheet are classified on a âcurrent/non-current basisâ, with separate reporting of assets held for sale. Current assets, which include cash and cash equivalents(includes earmarked balances, margin money for bank guarantee) are assets that are intended to be realized, sold or consumed during the normal operating cycle of the Company or in the 12 months following the balance sheet date; current liabilities are liabilities that are expected to be settled during the normal operating cycle of the Company or within the 12 months following the close of the financial year.
(d) The financial statements are presented in âIndian Rupeesâ (INR), which is also the Companyâs functional currency and all amounts are rounded to the nearest lakhs, unless otherwise stated.
(e) Amended standard adopted by the Company
The amendments to Ind AS 7 require disclosure of changes in liabilities arising from financing activities are provided in the Note no. 13(C).
(f) Recent accounting pronouncements Standard issued but not yet effective
Ind AS 115 ''Revenue from Contracts with Customers'':
The Ministry of Corporate Affairs (MCA) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 on 28 March 2018 notifying Ind AS 115 ''Revenue from Contracts with Customers''.
Ind AS 115 replaces Ind AS 18 which covers contracts for goods and services and Ind AS 11 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer - so the notion of control replaces the existing notion of risks and rewards. It establishes a five-step model to account for revenue arising from contracts with customer. Under Ind AS 115, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The Company is evaluating the requirements of the Standard and the effect on the financial statements is being evaluated. This standard will be applied by the Company from its effective date i.e. from accounting period commencing on or after April l, 2018.
There are no other standards, changes in standards and interpretations that are not in force that the Company expects to have a material impact arising from its application in its financial statements.
1.2 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (âthe functional currencyâ). The financial statements are presented in âIndian Rupeesâ (INR), which is the Companyâs functional and the Companyâs presentation currency.
(b) Transactions and balances
All foreign currency transactions are recorded at the previous dayâs available RBI reference rate/exchange rate. Since the RBI reference rate is available for four major currencies only
i.e, USD, UKP EUR, YEN, exchange rates of other currencies are taken from xe.com website.
The foreign currency balances in US Dollars, UK Pounds, Euro and Japanese YEN appearing in the books of account at the period end are translated into US Dollars at the available RBI reference rate/exchange rate at the period end. The foreign currency balances other than US Dollars, UK Pounds, Euro and Japanese YEN appearing in the books of account at the period end are translated into US Dollars at the rate available on xe.com website at the period end. Thereafter, the monetary assets and monetary liabilities as well as the Long Term Loans are translated into rupees at RBI reference rate/exchange rate prevailing at the period end.
Exchange difference arising on repayment of liabilities and conversion of foreign currency closing balances pertaining to long term loans for acquiring ships / containers / other depreciable assets and asset under construction is recognised as follows:
a) In respect of long term loans as on 31.03.2016, exchange difference is adjusted in the carrying cost of respective assets.
b) In respect of long term loans after 31.03.2016, the exchange difference is charged / credited to Statement of Profit & Loss. The exchange differences arising on translation of other monetary assets and liabilities are recognised in the Statement of profit and loss.
1.3 Property, plant and equipment
Items of property, plant and equipment acquired or constructed are stated at historical cost net of recoverable taxes, less accumulated depreciation and impairment of loss, if any. The cost of tangible assets comprises of its purchase price, borrowing costs and adjustment arising for exchange rate variations attributable to the assets, wherever applicable including any cost directly attributable till completion of maiden voyage.
Expenditure incurred on assets which are not ready for their intended use comprising direct cost, related incidental expenses and attributable borrowing cost (net of revenues during constructions) are disclosed under Capital Work-in-Progress. Subsequent costs like expenditure on major maintenance refits or repairs including planned dry-dock are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised.
Transition to Ind AS:
On transition to Ind AS -
a) Freehold land has been measured at fair value on transition date and that fair value is used as the deemed cost;
b) Certain items of fleet have been measured at fair value and that fair value is used as deemed cost as on transition date.
c) All other assets which are not fair valued have been measured in accordance with Ind AS 16 retrospectively.
Depreciation:
Depreciation on all vessels is charged on âStraight Line Methodâ less residual value. In the case of Liner and Bulk Carrier vessels, the company has adopted useful life of 25 years as mentioned in Schedule II to the Companies Act, 2013. In case of Tankers & Offshore Vessels, the company has adopted a useful life of 25 years based on the technical parameters including design life and the past record. In case of VLGC vessel, the company has adopted a useful life of 30 years as mentioned in Schedule II to the Companies Act, 2013. Second hand vessels are depreciated over their remaining useful lives as determined by technical evaluation not exceeding 25/30 years from the date of original built. Capitalised expenditure on dry-dock are depreciated until the next planned dry-docking.
Depreciation on other tangible assets is charged on âStraight Line Methodâ at rates mentioned in Schedule II of Companies Act, 2013
Assets costing individually Rs. 5000/- and below are fully depreciated in the year of acquisition.
Leasehold land is amortised over the period of lease. Estimated useful lives, residual values and depreciation methods are reviewed annually, taking into account commercial and technological obsolescence as well as normal wear and tear and adjusted prospectively, if appropriate.
RETIREMENT AND DISPOSAL OF ASSETS
a) Assets which have been retired from operations for eventual disposal are exhibited separately in the Note No. 10 - Assets classified as held for sale.
b) Anticipated loss, if any, in the disposal of such assets is provided in the accounts for the year in which these have been retired from active use. For the purpose of determining the loss, the sale price is recognised, if contract for sale is concluded. In other cases, assessment of the realisable value is made on the basis of the prevailing market conditions. Losses on such assets are provided for after taking into account the expenses such as customs duty, sales tax / value added tax, GST etc. in connection with the disposal, as well as estimated expenses in maintaining the asset, till its sale. Wherever the exact amount under each item of expenses is not known, an assessment is done on the best estimate basis.
c) Profits on sale of assets are accounted for only upon completion of sale thereof.
1.4 Intangible assets
Intangible assets acquired are stated at cost less accumulated amortization and accumulated impairment losses, if any. The cost comprises of purchase price, borrowing costs and directly attributable costs.
Transition to Ind AS:
On transition to Ind AS, the company has elected to continue with the carrying value of all of intangible assets recognised as at April 1, 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of intangible assets.
Amortisation
Amortization is charged on a straight-line basis over the estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each annual reporting period, with the effect of any changes in the estimate being accounted for on a prospective basis.
Intangible assets including software is amortised over the useful life not exceeding five years.
1.5 Borrowing costs
Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are charged to the Statement of Profit and Loss in the period in which they are incurred.
1.6 Impairment of non-financial assets
Assets that are subject to depreciation or amortisation are reviewed for impairment 31st March every year or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The impairment loss, if any, is recognised in the Statement of Profit and Loss in the period in which impairment takes place.
1.7 Inventories
Inventories are valued at cost (as determined on Moving Average/Weighted Average method) or net realisable value, whichever is lower, unless otherwise stated.
Fuel oil purchases are initially booked as stock. The value of year-end stock is arrived at after charging consumption on âmoving average /weighted averageâ method.
Store/Spares including paints, etc. are charged to revenue as consumed when delivered to ships.
1.8 Non-current assets held-for-sale
Non-current assets are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use.
1.9 Trade Receivable
Trade receivables are amounts due from customers for sale of goods or services performed in the ordinary course of business. Trade receivables are recognized initially at fair value. They are subsequently measured at amortised cost using the effective interest method, net of provision for impairment. The carrying value less impairment provision of trade receivables, are assumed to be approximate to their fair values.
1.10 Cash and cash equivalents
Cash and cash equivalents includes cash at bank and in hand, deposits with banks, other short-term highly liquid investments with original maturities of three months or less from date of acquisition.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above.
1.11 Investments and other financial assets
i. Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
ii. Subsequent measurement
For the purposes of subsequent measurement, the company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
- those measured at amortised cost.
The classification depends on the entityâs business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
The company reclassifies debt instruments when and only when its business model for managing those assets changes. Debt instruments
Subsequent measurement of debt instruments depends on the companyâs business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the company classifies its debt instruments:
Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt instrument that is subsequently measured at amortised cost is recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
Fair value through other comprehensive income (FVTOCI):
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assetsâ cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVTOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss. Interest income from these financial assets is included in other income using the effective interest rate method.
Fair value through profit or loss (FVTPL): Assets that do not meet the criteria for amortised cost or FVTOCI are measured at fair value through profit or loss. A gain or loss on a debt instrument that is subsequently measured at fair value through profit or loss is recognised in profit or loss in the period in which it arises. Interest income from these financial assets is included in other income.
Equity Instruments
a) Subsidiary and Joint Ventures
Investments in equity instruments of subsidiary and joint ventures are carried at cost less impairment, if any.
b) Others
The company subsequently measures all equity instruments at fair value. Changes in the fair value of financial assets at fair value through profit or loss are recognised in the statement of profit and loss.
iii. Derecognition
A financial asset is derecognised only when:
i. the rights to receive cash flows from the asset have expired, or
ii. the company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows to one or more recipient
Where the entity has transferred an asset, the company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised. Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the company has not retained control of the financial asset. Where the company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
iv. Impairment of Financial Assets
The company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVTOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
The impairment methodology for each class of financial assets stated above is as follows:
Debt instruments measured at amortised cost and FVTOCI: Debt instruments at amortised cost and those at FVTOCI where there has been a significant increase in credit risk, lifetime expected credit loss provision method is used and in all other cases, the impairment provision is determined as 12 months expected credit losses.
Trade receivables from customers: The Company applies the simplified approach for providing expected credit losses prescribed by Ind AS 109, which requires the use of the lifetime expected loss provision for all trade receivables.
v. Income recognition Interest income
Interest income from debt instruments is recognised using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash flows through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
Dividend
Dividends are recognised in profit or loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the company, and the amount of the dividend can be measured reliably.
1.12 Offsetting Financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
1.13 Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
1.14 Financial liabilities
i. Classification as debt or equity
Debt and equity instruments issued by the company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definition of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
ii. Initial recognition and measurement
All financial liabilities are recognised initially at fair value and, in the case of borrowings and payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts.
iii. Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Borrowings: Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of profit and loss over the period of the borrowings using the effective interest method.
Trade and other payable: These amounts represent obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. They are recognized initially at fair value and subsequently measured at amortised cost using the effective interest method.
iv. Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
1.15 Income tax
Provision for income tax liability is made as per special provisions relating to income of shipping companies under the Income Tax Act, 1961 on the basis of deemed tonnage income of the Company. Provision for income- tax on no shipping income is made as per the normal provisions of the Income- Tax Act 1961. Minimum alternate tax (MAT) paid in accordance with the tax laws in previous years is recognised as an asset and adjusted against provision for income tax liability of the year in which there is a reasonable certainty which give rise to future economic benefits in the form of tax credit against future income tax liability.
Deferred income tax is provided in full, using the liability method, on temporary differences (other than those which are covered in tonnage tax scheme) arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets are recognized to the extent that it is probable that future taxable income will be available against which the deductible temporary differences. Deferred tax assets and liabilities are measured based on the tax rates that are expected to apply in the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.
1.16 Employee Benefits
a) Short-term / long term obligations
All employee benefits payable wholly within twelve months of rendering the service including performance incentives and compensated absences are classified as short term employee benefits. The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are charged off to the Statement of Profit and Loss. The employee benefits which are not expected to occur within twelve months are classified as long term benefits and are recognised as liability at the net present value.
b) Defined contribution plan
Employee benefits under defined contribution plans comprising of post- retirement medical benefits (w.e.f 01.01.2007), provident fund and pension contribution are recognized based on the undiscounted amount of obligations of the company to contribute to the plan. This contribution is recognised based on its undiscounted amount and paid to a fund administered through a separate trust except post- retirement medical benefit for employeeâs retired w.e.f 01.01.2007.
c) Defined benefit plan
Employee benefits under defined benefit plans comprising of gratuity, leave encashment and post- retirement medical benefits for employees retired before 01.01.2007 are recognized based on the present value of defined benefit obligation, which is computed on the basis of actuarial valuation.
The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset.
1.17 Prior period items
All material prior period errors are adjusted retrospectively in the first set of financial statements approved for issue after their discovery by:
(a) Restating the comparative amounts for the
the prior period(s) presented in which the error occurred; or
(b) If the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented.
1.18 Provisions, contingent liabilities and contingent assets Provisions
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Contingent liabilities
Contingent liabilities are disclosed when there is a possible obligation arising from past events,the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. A present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or reliable estimate of the amount cannot be made is treated as contingent liability. Contingent Assets
A contingent asset is disclosed, where an inflow of economic benefits is probable.
1.19 Revenue Recognition
The company recognises revenue in Statement of Profit & Loss when
- The income can be measured reliably,
- It is probable that the economic benefits associated with the transaction will flow to the Company,
- The stage of completion of the transaction at the balance sheet date can be measured reliably, and
- Costs relating to the transaction can be measured reliably.
The Statement of Profit & Loss reflects,
i. Freight revenues and costs directly attributable to the transport of cargo are recognized on a percentage of voyage completion basis.
ii. In respect of time charter arrangements, income and expenses are booked on accrual basis.
iii. Demurrage income as revenue when it can be measured reliably as per contractual terms.
iv. Standing Charges (Vessel related Fixed Costs) for all the vessels on accrual basis.
v. Administrative expenses which comprises of administrative staff cost, management cost, office expenses and other expenses relating to administration are recognized on accrual basis.
1.20 INSURANCE, P&I AND OTHER CLAIMS
(a) Provision in respect of claims against the Company is made as under:-
i. In respect of collision claims and P & I claims (other than crew & cargo claims), to the extent of deductible limit based on the assessment provided by the surveyors.
ii. In case of Cargo claims, actual claims registered and/or paid pertaining to the relevant yearâs voyages as ascertained at the period end or the P&I deductible limit whichever is lower.
(b) No provision is made in respect of claims by the company covered under Hull & Machinery insurance and treatment of such claims is as under:-
i. Expenses on account of particular and general average claims/ damages to ships are charged off in the period in which they are incurred.
ii. Claims against the underwriters are accounted on submission of the Adjusterâs report to the underwriters.
(c) Claims made by the Company against other parties not covered under insurance including ship repair yards, ship-owners, ship charterers, customs and others, etc. are recognised on realisation, due to uncertainty in the amounts of their ultimate recovery.
1.21 Leases Operating lease
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Payments & Receipts under operating leases are charged/credited to statement of profit and loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the Lessorâs expected inflationary cost increases.
1.22 Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions.
1.23 Earnings per share
Basic is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share are computed by dividing the net profit attributable to the equity holders of the Company by the weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares.
1.24 Cash flow statement
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
1.25 Government Grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions. Government grants relating to duty scrips on export of services (Served from India Scheme) are related to income and are recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate and presented within other income. Government grants are recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grants are intended to compensate.
Mar 31, 2017
Corporate Information
Shipping Corporation of India Limited is the largest Indian Shipping company limited by shares, incorporated in 1961. SCI is involved in business of transporting goods and passengers. SCIâs owned fleet includes Bulk carriers, Crude oil tankers, Product tankers, Container vessels, Passenger-cum-Cargo vessels, Phosphoric Acid / Chemical carriers, LPG / Ammonia carriers and Offshore Supply Vessels. In addition, SCI manages a large number of vessels on behalf of various government departments and organizations.
The registered office of the Company is located at Shipping House, 245, Madame Cama Road, Nariman Point, Mumbai - 400 021. These Financial Statements are approved for issue by the board of directors on 27th May 2017.
Note 1: Significant Accounting Policies
1. Basis of preparation, measurement and significant accounting policies
The principal accounting policies applied in the preparation of these Financial Statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
1.1 Basis of Preparation
(a) Compliance with Indian Accounting Standards
The Financial Statements of the Company have been prepared in accordance with Indian Accounting Standards (âInd ASâ) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended) read with Section 133 of the Companies Act, 2013 (âthe Actâ) to the extent applicable and current practices prevailing within the Shipping Industries in India. These are the Companyâs first Ind AS Financial Statements and Ind AS 101, âFirst-time Adoption of Indian Accounting Standardsâ has been applied. The policies set out below have been consistently applied during the years presented.
For all periods up to and including the year ended 31 March 2016, the Company has prepared its Financial Statements in accordance with the accounting standards notified under Companies (Accounting Standard) Rules, 2006 (as amended) and other relevant provisions of the Act (âPrevious GAAPâ). These Financial Statements for the year ended 31 March
2017 are the first Financial Statements the Company has prepared in accordance with Ind AS. An explanation of how the transition from previous GAAP to Ind AS has affected the Companyâs financial position, financial performance and cash flows including reconciliations and descriptions of the effect of the transition are provided in Note 3.
(b) Historical cost convention
The Financial Statements have been prepared under the historical cost convention, as modified by the following:
- Certain financial asset and financial liabilities at fair value;
- Defined benefit plans - plan assets that are measured at fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the Financial Statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
- Level 2âValuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
- Level 3âValuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
(c) The assets and liabilities reported in the Balance Sheet are classified on a âcurrent/non-current basisâ, with separate reporting of assets held for sale. Current assets, which include cash and cash equivalents (includes earmarked balances, margin money for bank guarantee) are assets that are intended to be realized, sold or consumed during the normal operating cycle of the Company or in the 12 months following the Balance Sheet date; current liabilities are liabilities that are expected to be settled during the normal operating cycle of the Company or within the 12 months following the close of the financial year.
(d) The Financial Statements are presented in âIndian Rupeesâ (INR), which is also the Companyâs functional currency and all amounts are rounded to the nearest lakhs, unless otherwise stated.
(e) Recent accounting pronouncements Standard issued but not yet effective
In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, âStatement of cash flowsâ. The amendments are applicable to the Company from 1 April, 2017.
Amendment to Ind AS 7
The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of Financial Statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the Balance Sheet for liabilities arising from financing activities, to meet the disclosure requirement.
The Company is evaluating the requirements of the amendment and the effect on the Financial Statements is being evaluated.
1.2 Foreign currency translation
(a) Functional and presentation currency
Items included in the Financial Statements of the Company are measured using the currency of the primary economic environment in which the entity operates (âthe functional currencyâ). The Financial Statements are presented in âIndian Rupeesâ (INR), which is the Companyâs functional and the Companyâs presentation currency.
(b) Transactions and balances
All foreign currency transactions for each month are recorded at the closing exchange rate of the second last Friday of the preceding month published on xe.com website.
The foreign currency balances other than in US Dollars appearing in the books of account at the period end are translated into US Dollars at the closing exchange rate of the second last Friday of preceding month published on xe.com website. Thereafter, the monetary assets and monetary liabilities as well as the Long Term Loans are translated into rupees at SBI Mean Rate prevailing at the period end. Exchange difference arising on repayment of liabilities and conversion of foreign currency closing balances pertaining to long term loans as on 31.03.2016 for acquiring ships / containers / other depreciable assets and asset under construction is adjusted in the carrying cost of respective assets. In case of long term loans taken after 31.03.2016, the exchange difference on repayment of liabilities and conversion of foreign currency closing balances pertaining to the loans is charged/credited to Statement of Profit & Loss.
The exchange differences arising on translation of other monetary assets and liabilities are recognized in the Statement of profit and loss.
Transition to Ind AS:
On transition to Ind AS, the Company has elected to continue the policy adopted for accounting for exchange differences arising from translation of long-term foreign currency monetary items outstanding as on 31.03.2016 as described above.
1.3 Property, plant and equipment
Items of property, plant and equipment acquired or constructed are stated at historical cost net of recoverable taxes, less accumulated depreciation and impairment of loss, if any. The cost of tangible assets comprises of its purchase price, borrowing costs and adjustment arising for exchange rate variations attributable to the assets, wherever applicable including any cost directly attributable till completion of maiden voyage.
Expenditure incurred on assets which are not ready for their intended use comprising direct cost, related incidental expenses and attributable borrowing cost (net of revenues during constructions) are disclosed under Capital Work-in-Progress.
Subsequent costs like expenditure on major maintenance refits or repairs including planned dry-dock are included in the assetâs carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized.
Transition to Ind AS:
On transition to Ind AS -
a) Freehold land has been measured at fair value on transition date and that fair value is used as the deemed cost;
b) Certain items of fleet have been measured at fair value and that fair value is used as deemed cost as on transition date.
c) All other assets which are not fair valued have been measured in accordance with Ind AS 16 retrospectively.
Depreciation:
Depreciation on all vessels is charged on âStraight Line Methodâ less residual value .In the case of Liner and Bulk Carrier vessels, the Company has adopted useful life of 25 years as mentioned in Schedule II to the Companies Act, 2013. In case of Tankers & Offshore Vessels, the Company has adopted a useful life of 25 years based on the technical parameters including design life and the past record. Second hand vessels are depreciated over their remaining useful lives as determined by technical evaluation not exceeding 25 years from the date of original build.
Capitalized expenditure on drydock are depreciated until the next planned dry-docking.
Depreciation on other tangible assets is charged on âStraight Line Methodâ at rates mentioned in Schedule II of Companies Act, 2013.
Assets costing individually ''5000/- and below are fully depreciated in the year of acquisition.
Leasehold land is Amortized over the period of lease. Estimated useful lives, residual values and depreciation methods are reviewed annually, taking into account commercial and technological obsolescence as well as normal wear and tear and adjusted prospectively, if appropriate.
RETIREMENT AND DISPOSAL OF ASSETS
a) Assets which have been retired from operations for eventual disposal are exhibited separately in the Note No. 11- Assets classified as held for sale.
b) Anticipated loss, if any, in the disposal of such assets is provided in the accounts for the year in which these have been retired from active use. For the purpose of determining the loss, the sale price is recognized, if contract for sale is concluded. In other cases, assessment of the realizable value is made on the basis of the prevailing market conditions. Losses on such assets are provided for after taking into account the expenses such as customs duty, sales tax / value added tax, etc. in connection with the disposal, as well as estimated expenses in maintaining the asset, till its sale. Wherever the exact amount under each item of expenses is not known, an assessment is done on the best estimate basis.
c) Profits on sale of assets are accounted for only upon completion of sale thereof.
1.4 Intangible assets
Intangible assets acquired are stated at cost less accumulated amortization and accumulated impairment losses, if any. The cost comprises of purchase price, borrowing costs and directly attributable costs.
Transition to Ind AS:
On transition to Ind AS, the Company has elected to continue with the carrying value of all of intangible assets recognized as at April 1, 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of intangible assets.
Amortization
Amortization is charged on a straight-line basis over the estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each annual reporting period, with the effect of any changes in the estimate being accounted for on a prospective basis.
Intangible assets including software is amortized over the useful life not exceeding five years.
1.5 Borrowing costs
Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are charged to the Statement of Profit and Loss in the period in which they are incurred.
1.6 Impairment of non-financial assets
Assets that are subject to depreciation or amortization are reviewed for impairment 31st March every year or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The impairment loss, if any, is recognized in the Statement of Profit and Loss in the period in which impairment takes place.
1.7 Inventories
Inventories are valued at cost as determined on âMoving Average Priceâ method or net realizable value, whichever is lower, unless otherwise stated.
Fuel oil purchases are initially booked as stock. The value of year-end stock is arrived at after charging consumption on âmoving average priceâ method.
Store/Spares including paints, etc. are charged to revenue as consumed when delivered to ships.
1.8 Non-current assets held-for-sale
Non-current assets are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use.
1.9 Trade Receivable
Trade receivables are amounts due from customers for sale of goods or services performed in the ordinary course of business. Trade receivables are recognized initially at fair value. They are subsequently measured at amortized cost using the effective interest method, net of provision for impairment. The carrying value less impairment provision of trade receivables, are assumed to be approximate to their fair values.
1.10 Cash and cash equivalents
Cash and cash equivalents includes cash at bank and in hand, deposits with banks, other short-term highly liquid investments with original maturities of three months or less from date of acquisition.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above.
1.11 Investments and other financial assets
i. Initial recognition and measurement
All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
ii. Subsequent measurement
For the purposes of subsequent measurement, the Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
- those measured at Amortized cost.
The classification depends on the entityâs business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
The Company reclassifies debt instruments when and only when its business model for managing those assets changes Debt instruments
Subsequent measurement of debt instruments depends on the Companyâs business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:
Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at Amortized cost. A gain or loss on a debt instrument that is subsequently measured at Amortized cost is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
Fair value through other comprehensive income (FVTOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assetsâ cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVTOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognized in profit and loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss. Interest income from these financial assets is included in other income using the effective interest rate method.
Fair value through profit or loss (FVTPL): Assets that do not meet the criteria for Amortized cost or FVTOCI are measured at fair value through profit or loss. A gain or loss on a debt instrument that is subsequently measured at fair value through profit or loss is recognized in profit or loss in the period in which it arises. Interest income from these financial assets is included in other income.
Equity Instruments
a) Subsidiary and Joint Ventures
Investments in equity instruments of subsidiary and joint ventures are carried at cost less impairment, if any.
b) Others
The Company subsequently measures all equity instruments at fair value. Changes in the fair value of financial assets at fair value through profit or loss are recognized in the statement of profit and loss.
iii. Derecognition
A financial asset is derecognized only when:
i. The rights to receive cash flows from the asset have expired, or
ii. The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows to one or more recipient
Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognized. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognized. Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognized if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognized to the extent of continuing involvement in the financial asset.
iv. Impairment of Financial Assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at Amortized cost and FVTOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
The impairment methodology for each class of financial assets stated above is as follows:
Debt instruments measured at Amortized cost and FVTOCI: Debt instruments at Amortized cost and those at FVTOCI where there has been a significant increase in credit risk, lifetime expected credit loss provision method is used and in all other cases, the impairment provision is determined as 12 months expected credit losses.
Trade receivables from customers: The Company applies the simplified approach to providing for expected credit losses prescribed by Ind AS 109, which requires the use of the lifetime expected loss provision for all trade receivables.
v. Income recognition Interest income
Interest income from debt instruments is recognized using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash flows through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
Dividend
Dividends are recognized in profit or loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the Company, and the amount of the dividend can be measured reliably.
1.12 Offsetting Financial instruments
Financial assets and liabilities are offset and the net amount reported in the Balance Sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
1.13 Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
1.14 Financial liabilities
i. Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definition of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
ii. Initial recognition and measurement
All financial liabilities are recognized initially at fair value and, in the case of borrowings and payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts.
iii. Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Borrowings: Borrowings are subsequently carried at Amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the statement of profit and loss over the period of the borrowings using the effective interest method.
Trade and other payable: These amounts represent obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. They are recognized initially at fair value and subsequently measured at Amortized cost using the effective interest method.
iv. Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of profit or loss.
1.15 Income tax
Provision for income tax liability is made as per special provisions relating to income of shipping companies under the Income Tax Act, 1961 on the basis of deemed tonnage income of the Company. Provision for income- tax on no shipping income is made as per the normal provisions of the Income- Tax Act 1961. Minimum alternate tax (MAT) paid in accordance with the tax laws in previous years is recognized as an asset and adjusted against provision for income tax liability of the year in which there is a reasonable certainty which give rise to future economic benefits in the form of tax credit against future income tax liability.
Deferred income tax is provided in full, using the liability method, on temporary differences (other than those which are covered in tonnage tax scheme) arising between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements. Deferred tax assets are recognized to the extent that it is probable that future taxable income will be available against which the deductible temporary differences. Deferred tax assets and liabilities are measured based on the tax rates that are expected to apply in the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date.
Current and deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity.
1.16 Employee Benefits
a) Short-term / long term obligations All employee benefits payable wholly within twelve months of rendering the service including performance incentives and compensated absences are classified as short term employee benefits. The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are charged off to the Statement of Profit and Loss. The employee benefits which are not expected to occur within twelve months are classified as long term benefits and are recognized as liability at the net present value.
b) Defined contribution plan
Employee benefits under defined contribution plans comprising of post- retirement medical benefits (w.e.f 01.01.2007), provident fund and pension contribution are recognized based on the undiscounted amount of obligations of the Company to contribute to the plan. This contribution is recognized based on its undiscounted amount and paid to a fund administered through a separate trust except post- retirement medical benefit for employees retired w.e.f 01.01.2007.
c) Defined benefit plan
Employee benefits under defined benefit plans comprising of gratuity, leave encashment and post- retirement medical benefits for employees retired before 01.01.2007.are recognized based on the present value of defined benefit obligation, which is computed on the basis of actuarial valuation.
The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognized immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset.
1.17 Prior period items
All material prior period errors are adjusted retrospectively in the first set of Financial Statements approved for issue after their discovery by:
(a) Restating the comparative amounts for the prior period(s) presented in which the error occurred; or
(b) If the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented.
1.18 Provisions, contingent liabilities and contingent assets Provisions
Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.
Contingent liabilities
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. A present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or reliable estimate of the amount cannot be made, is treated as contingent liability.
Contingent Assets
A contingent asset is disclosed, where an inflow of economic benefits is probable.
1.19 Revenue Recognition
The Company recognizes revenue in Statement of Profit & Loss when
- The income can be measured reliably,
- It is probable that the economic benefits associated with the transaction will flow to the Company,
- The stage of completion of the transaction at the balance sheet date can be measured reliably, and
- Costs relating to the transaction can be measured reliably.
The Statement of Profit & Loss reflects,
i. Freight revenues and costs directly attributable to the transport of cargo are recognized on a percentage of voyage completion basis.
ii. In respect of time charter arrangements, income and expenses are booked on accrual basis.
iii. Demurrage income as revenue when it can be measured reliably as per contractual terms.
iv. Standing Charges (Vessel related Fixed Costs) for all the vessels on accrual basis.
v. Administrative expenses which comprises of administrative staff cost, management cost, office expenses and other expenses relating to administration are recognized on accrual basis.
1.20 INSURANCE, P&I AND OTHER CLAIMS
a) Provision in respect of claims against the Company and covered by Hull and P&I insurance is made as under:-
i. In respect of collision claims and P & I claims (other than crew & cargo claims), to the extent of deductible limit based on the assessment provided by the surveyors.
ii. In case of Cargo claims, actual claims registered and/ or paid pertaining to the relevant yearâs voyages as ascertained at the period end or the P&I deductible limit whichever is lower.
iii. Expenses on account of general average claims/ damages to ships are charged off in the period in which they are incurred. Claims against the underwriters are accounted on submission of the Adjusterâs report to the underwriters.
b) Claims made by the Company against other parties not covered under insurance including ship repair yards, ship-owners, ship charterers, customs and others, etc. are accounted for on realization, due to uncertainty in the amounts of their ultimate recovery.
1 .21 Leases
Operating lease
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Payments & Receipts under operating leases are charged / credited to statement of profit and loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the Less orâs expected inflationary cost increases.
1.22 Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions.
1.23 Earnings per share
Basic is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share are computed by dividing the net profit attributable to the equity holders of the Company by the weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares.
1.24 Cash flow statement
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
1.25 Government Grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the group will comply with all attached conditions. Government grants relating to duty scrips on export of services (Served from India Scheme) are related to income and are recognized in the profit or loss over the period necessary to match them with the costs that they are intended to compensate and presented within other income. Government grants are recognized in profit or loss on a systematic basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate.
Note 2: Critical Accounting Estimates and Judgments
Preparing the Financial Statements under Ind AS requires management to take decisions and make estimates and assumptions that may impact the value of revenues, costs, assets and liabilities and the related disclosures concerning the items involved as well as contingent assets and liabilities at the Balance Sheet date. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Company make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
a) Useful lives of vessels
Management of the Company decided the estimated useful lives of vessels and respective depreciation. The accounting estimate is based on the expected wears and tears. Wears and tears can be significantly different following renovation each time. When the useful lives differ from the original estimated useful lives, management will adjust the estimated useful lives accordingly. It is possible that the estimates made based on existing experience are different to the actual outcomes within the next financial period and could cause a material adjustment to the carrying amount of fixed assets.
b) Residual Value
Residual value is considered as 5% of original cost of Vessel. The residual value is reviewed every year on 31st March.
c) Impairment of assets
The recoverable amount of an asset or a cash-generating unit is determined based on value-in-use calculations prepared on the basis of managementâs assumptions and estimates An impairment loss is recognized for the amount by which the assetâs or cash generating unitâs carrying amount exceeds its recoverable amount and is recognized in the Statement of Profit and Loss. Recoverable amount is higher of an assetâs net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
d) Defined benefit obligations
The present value of the defined benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for post employments plans include the discount rate. Any changes in these assumptions will impact the carrying amount of such obligations.
The Company determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the defined benefit obligations.
e) Provision
Estimates of the amounts of provisions recognized are based on current legal and constructive requirements, technology and price levels. Because actual outflows can differ from estimates due to changes in laws, regulations, public expectations, technology, prices and conditions, and can take place many years in the future, the carrying amounts of provisions are regularly reviewed and adjusted to take account of such changes.
f) Impairment of Trade Receivable
The methodology followed by SCI is the use of a provision matrix as a practical expedient to measure expected credit losses on its portfolio of trade receivables. The model uses historical credit loss experience for trade receivables i.e. this model uses aging analysis of trade receivables as at the reporting date.
Considering the different services provided by our company and provisioning made segment wise in SCI, analysis and computation of expected credit loss for trade receivables is done for different segments.
g) Demurrage
Vessel Demurrage income due as per contractual terms is recognized. A provision on estimated basis is made towards deduction from demurrage based on past experience of settlements.
h) Income Tax
Due to Tonnage tax regime applicable on the main part of the Companyâs activities, resulting in a lower income tax payable in the future, the amount of deferred tax to be recognized is limited. Considering the tonnage tax regime applicable to shipping activities, difference between taxable and book values of assets and liabilities are generally of permanent nature. This is due to the fact that the taxable result for tonnage tax eligible activities has no correlation with either carrying value or the generally applicable tax value of assets and liabilities. As a consequence, temporary differences are limited to those arising from other activities which are subject to normal Income tax provisions.
Mar 31, 2016
1. (a) ACCOUNTING CONVENTION
The financial statements are prepared to comply in all material aspects under the historical cost convention and in accordance with generally accepted accounting principles in India and the mandatory Accounting Standards prescribed under Section 133 of the Companies Act 2013 (âActâ) read with Rule- 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act and current practices prevailing within the Shipping Industries in India.
(b) USE OF ESTIMATES
The preparation of financial statements requires estimates and assumptions that affect the reported amount of assets and liabilities, and disclosure of contingent liabilities at that date of the financial statements and the result of operations during the reporting period. Although such estimates and assumptions are made on reasonable and prudent basis taking into account all available information, actual results could differ from these estimates and assumptions and such differences are recognized in the period in which results are crystallized.
2. FIXED ASSETS
a) Tangible Assets
Fixed Assets are stated at historical cost net of recoverable taxes less accumulated depreciation. Cost includes acquisition cost and directly attributable cost of bringing the assets to its working condition for its intended use and in case of vessels, acquisition cost and directly attributable cost till completion of maiden voyage.
b) Intangible Assets
Intangible Assets are stated at cost of acquisition net of recoverable taxes less accumulated amortization. The cost comprises purchase price, borrowing costs and directly attributable costs of bringing the asset to its working condition for the intended use.
3. DEPRECIATION/ AMORTISATION
a) Depreciation on all tangible assets is charged on âStraight Line Methodâ less residual value of 5% as mentioned in Schedule II to the Companies Act, 2013. Residual value is the 5% of original cost of the asset. However, in case of Tankers & Offshore Vessels, the company has adopted a useful life of 25 years based on the technical parameters including design life and the past record. Second hand vessels are depreciated over their remaining useful lives as determined by technical evaluation not exceeding 25 years from the date of original build.
b) Intangible assets including software is amortized over the useful life not exceeding five years.
c) Assets costing individually Rs. 5000/- and below are fully depreciated in the year of addition.
d) Leasehold land is amortized over the period of lease.
4. IMPAIRMENT
The carrying amounts of the Companyâs assets are reviewed at each Balance Sheet date to determine whether there is any indication of impairment. If any such indication exists, the assetâs recoverable amounts are estimated in order to determine the extent of impairment loss, if any. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount. Recoverable amount is higher of an assetâs net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
For the purpose of computing value in use of bulk carrier & tanker vessels, the revenues for the next 5 years have been projected based on external evidence i.e, report given by Drewery which is a reputed research and advisory organization for the maritime sector. For the remaining useful life of the asset, the revenues have been extrapolated based on the historic data of last 15 years for similar vessels published by Drewery and represents the managementâs best estimate of the set of economic conditions that will exist over the remaining useful life of the asset.
In case of container vessels, the revenue projections for the next 2 years are based on actual freight earned in the current year. The revenue projections for remaining useful life of the vessel are based on an average increase in freight ignoring abnormal freight increases or steep declines.
In case of AHTSVâs & PSVâs, Revenue per day had been considered based on current charter party contracts for the charter period. The revenues thereafter are based on a normal rate of increase every 3 -10 years depending on the type & size of the vessel.
The impairment loss, if any, is recognized in the Statement of Profit and Loss in the period in which impairment takes place. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, however subject to the increased carrying amount not exceeding the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior accounting periods.
5. RETIREMENT AND DISPOSAL OF ASSETS
a) Assets which have been retired from operations for eventual disposal are exhibited separately in the Note No. 10- Tangible Assets under the head âAssets held for disposalâ.
b) Anticipated loss, if any, in the disposal of such assets is provided in the accounts for the year in which these have been retired from active use. For the purpose of determining the loss, the sale price is recognized, if contract for sale is concluded. In other cases, assessment of the realizable value is made on the basis of the prevailing market conditions. Losses on such assets are provided for after taking into account the expenses such as customs duty, sales tax / value added tax, etc. in connection with the disposal, as well as estimated expenses in maintaining the asset, till its sale. Wherever the exact amount under each item of expenses is not known, an assessment is done on the best estimate basis.
c) Profits on sale of assets are accounted for only upon completion of sale thereof.
6. MAJOR REPAIRS AND RENEWALS OF SHIP
Dry-dock expenditure is recognized in the Statement of Profit and Loss to the extent of percentage completion, based on technical assessment.
7. BORROWING COSTS
Borrowing costs attributable to the acquisition or construction of a qualifying asset are capitalized as part of the cost of that asset. Other borrowing costs are recognized as expense in the period in which these are incurred.
8. INVENTORIES
a) Inventories are valued at cost as determined on âMoving Average Priceâ method or net realizable value, whichever is lower, unless otherwise stated.
b) Fuel oil purchases are initially booked as stock. The value of year-end stock is arrived at after charging consumption on âmoving average priceâ method.
c) Store/Spares including paints, etc. are charged to revenue as consumed when delivered to ships.
9. ACCOUNTING OF FOREIGN CURRENCY TRANSACTIONS
a) All foreign currency transactions for each month are recorded at the closing exchange rate of the second last Friday of the preceding month published on xe.com website.
b) The foreign currency balances other than in US Dollars appearing in the books of account at the period end are translated into US Dollars at the closing exchange rate of the second last Friday of preceding month published on xe.com website. Thereafter, the monetary assets and monetary liabilities as well as the Long Term Loans are translated into rupees at SBI Mean Rate prevailing at the period end.
c) Exchange difference arising on repayment of liabilities and conversion of foreign currency closing balances pertaining to long term loans for acquiring ships / containers / other depreciable assets and asset under construction is adjusted in the carrying cost of respective assets.
d) The exchange differences arising on translation of other monetary assets and liabilities are recognized in the Statement of profit and loss.
10. RECOGNITION OF REVENUE AND EXPENDITURE
a) The Statement of Profit & Loss reflects,
i) The Earnings and Direct Operating Expenses (Voyage related variable costs) in respect of all Finished Voyages on accrual basis.
ii) Standing Charges (Vessel related Fixed Costs) for all the vessels for the year on accrual basis.
iii) Income and Expenditure in respect of the customs penalty claims and container demurrage & detention income which are accounted for on payment/ realization.
iv) In respect of slot sharing agreement with other shipping lines, the earnings and expenses are accounted for on accrual basis based on completed voyage cycle during the year.
v) In respect of time charter arrangements, income and expenses are booked on accrual basis.
vi) Vessel Demurrage income due as per contractual terms is recognized after deduction on estimated basis, based on past experience of settlements.
b) The criteria followed for the purpose of determining the
Finished Voyages are as under:
(i) Passenger cum Cargo Vessels: - Disembarkation of passengers and discharge of cargo should be completed on or before the last date of the period.
(ii) Cargo Vessels (other than those serviced by Feeder or Daughter Vessels): - Discharge of cargo should be completed on or before the last date of the period.
(iii) Cargo vessels serviced by Daughter vessels: - The ultimate discharge of cargo by all daughter vessels should be completed on or before the last date of the period.
(iv) Cargo vessels serviced by feeder vessels: - The discharge of cargo at the transshipment port by the mainline and own feeder vessels should be completed on or before the last date of the period. Transshipment port is the point of commencement and completion of both the services. The completion of the mainline and feeder voyage is determined independent of each other.
(v) Cellular Liner Service: - On completion of round voyage
c) Unfinished Voyages:
Any voyage, which does not fulfill the above mentioned criteria, is treated as an unfinished voyage. Amount received on account of freight earning and other charges in respect of such voyages are carried forward as Unfinished Voyage Earnings. Direct operating expenses incurred for such voyages including hire and freight for vessels chartered-in are carried forward as Unfinished Voyage Expenses except in case of time charter.
d) Allocation of Container Expenses:
Expenses relating to container activities such as stevedoring, stuffing and destuffing, transportation, etc. are identified with the relevant voyage and classified as direct operating expenses. Expenses such as container hire, kobi charges, ground rent and handling of empty containers, etc., which are not directly identifiable with any particular voyage are allocated to all voyages on the basis of unit days for each voyage. The sum so allocated to unfinished voyages is carried forward as Unfinished Voyage Expenses.
11. EMPLOYEE BENEFITS
a) All short- term employee benefits are recognized at their undiscounted amount in the accounting period in which they are incurred.
b) Employee benefits under defined contribution plans comprising of post- retirement medical benefits (w.e.f 01.01.2007) and pension contribution are recognized based on the undiscounted amount of obligations of the company to contribute to the plan. The contribution to fund in the nature of defined contribution is a defined benefit plan due to the requirement of the employer making good deficiency, if any, in the interest rate earned vis-a-vis statutory rate. This contribution is recognised based on its undiscounted amount and paid to a fund administered through a separate trust.
c) Employee benefits under defined benefit plans comprising of gratuity, leave encashment and post- retirement medical benefits are recognized based on the present value of defined benefit obligation, which is computed on the basis of actuarial valuation. Actuarial Liability in excess of fair value of respective plan assets is recognized during the year. Actuarial gains and losses are recognized in the Statement of Profit & Loss during the period in which they occur.
12. ADJUSTMENTS PERTAINING TO EARLIER YEARS
Income / Expenditure relating to prior period which do not exceed Rs.5 lakhs in each case, are treated as income/ expenditure of current year.
13. INSURANCE, P&I AND OTHER CLAIMS
a) Provision in respect of claims against the Company and covered by Hull and P&I insurance is made as under:-
i) In respect of collision claims and P & I claims (other than cargo claims), to the extent of deductible limit based on the assessment provided by the surveyors.
ii) In case of Cargo claims, on the basis of the actual claims registered and/or paid pertaining to the relevant yearâs voyages as ascertained at the period end as reduced by the amounts recoverable from the insurers.
iii) Expenses on account of general average claims/ damages to ships are charged off in the period in which they are incurred. Claims against the underwriters are accounted on submission of the Adjusterâs report to the underwriters.
b) Claims made by the Company against other parties not covered under insurance including ship repair yards, ship-owners, ship charterers, customs and others, etc. are accounted for on realization, due to uncertainty in the amounts of their ultimate recovery.
14. INVESTMENTS
a) Long Term Investments are stated at cost. Provision for diminution is made to recognize a decline, other than temporary, in the value of such investments.
b) Current Investments are stated at lower of cost and fair value.
15. TAXES ON INCOME
Provision for income tax liability is made as per special
provisions relating to income of shipping companies under the Income Tax Act, 1961 on the basis of deemed tonnage income of the Company. Provision for income- tax on non- shipping income is made as per the provisions of the Income- Tax Act 1961. Minimum alternate tax (MAT) paid in accordance with the tax laws in previous years has been recognized as an asset and adjusted against provision for income tax liability as and when there is a reasonable certainty which give rise to future economic benefits in the form of tax credit against future income tax liability.
16. EARNINGS PER SHARE
Basic and Diluted earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the period.
17.LEASES
In respect of assets acquired on lease prior to 1st April 2001, lease rentals are accounted on accrual basis over the period of the lease and in respect of assets acquired on or after 1st April 2001, lease rentals are accounted in accordance with AS-19 âAccounting for Leasesâ.
18. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources embodying economic benefits.
Contingent liability is a possible obligation arising from past events and the existence of which will be confirmed only by the occurrence or non- occurrence of one or more uncertain future events not wholly within the control of the company or a present obligation that arises from past events but is not recognized because it is not possible that an outflow of resources embodying economic benefit will be required to settle the obligations or reliable estimate of the amount of the obligations cannot be made. The company discloses the existence of contingent liabilities in financial statements.
Contingent Assets are neither recognized nor disclosed in the financial statements
Mar 31, 2014
1. (a) ACCOUNTING CONVENTION
The financial statements are prepared to comply in all material aspects
under the Historical Cost convention and in accordance with generally
accepted Accounting principles in India and the relevant provisions of
the Companies Act, 1956, notified Accounting Standards by Companies
(Accounting Standards) Rules, 2006 (as amended) to the extent
applicable and current practices prevailing within the Shipping
Industries in India.
(b) USE OF ESTIMATES
The preparation of financial statements requires estimates and
assumptions that affect the reported amount of assets and liabilities,
and disclosure of contingent liabilities at that date of the financial
statements and the result of operations during the reporting period.
Although such estimates and assumptions are made on reasonable and
prudent basis taking into account all available information, actual
results could differ from these estimates and assumptions and such
differences are recognised in the period in which results are
crystallised.
2. RECOGNITION OF REVENUE AND EXPENDITURE
(a) The Profit & Loss Account reflects,
(i) The Earnings and Direct Operating Expenses (Voyage related variable
costs) in respect of all Finished Voyages on accrual basis.
(ii) Standing Charges (Vessel related Fixed Costs) for all the vessels
for the entire period of operation during the year on accrual basis.
(iii) Income and Expenditure in respect of the customs penalty claims
and container detention charges which are accounted for on realisation.
(iv) In respect of slot sharing agreement with other shipping lines,
the earnings and expenses on accrual basis based on completed voyage
cycle during the year.
(v) In respect of time charter arrangements, income and expenses are
booked on accrual basis.
(vi) Demurrage income is recognised on estimated basis, based on past
experience of settlements.
(b) The criteria followed for the purpose of determining the Finished
Voyages are as under:
(i) Passenger cum Cargo Vessels: - Disembarkation of passengers and
discharge of cargo should be completed on or before the last date of
the financial year.
(ii) Cargo Vessels (other than those serviced by Feeder or Daughter
Vessels): - Discharge of cargo should be completed on or before the
last date of the financial year.
(iii) Cargo vessels serviced by Daughter vessels: - The ultimate
discharge of cargo by all daughter vessels should be completed on or
before the last date of the financial year.
(iv) Cargo vessels serviced by feeder vessels: - The discharge of cargo
at the transhipment port by the mainline and own feeder vessels should
be completed on or before the last date of financial year. Transhipment
port is the point of commencement and completion of both the services.
The completion of the mainline and feeder voyage is determined
independent of each other.
(v) Cellular Liner Service: - On completion of round voyage
(c) Unfinished Voyages:
Any voyage, which does not fulfil the above mentioned criteria, is
treated as an unfinished voyage. Amount received on account of freight
earning and other charges in respect of such voyages are carried
forward as Unfinished Voyage Earnings. Direct operating expenses
incurred for such voyages including hire and freight for vessels
chartered-in are carried forward as Unfinished Voyage Expenses except
in case of time charter.
(d) Allocation of Container Expenses:
Expenses relating to container activities such as stevedoring, stuffing
and destuffing, transportation, etc. are identified with the relevant
voyage and classified as direct operating expenses. Expenses such as
container hire, kobi charges, ground rent and handling of empty
containers, etc., which are not directly identifiable with any
particular voyage are allocated to all voyages on the basis of unit
days for each voyage. The sum so allocated to unfinished voyages is
carried forward as Unfinished Voyage Expenses.
3. FIXED ASSETS AND DEPRECIATION
a) Fixed Assets are stated at historical cost less accumulated
depreciation. Cost includes acquisition cost and directly attributable
cost of bringing the assets to its working condition for its intended
use.
b) Depreciation on ships is charged on "Straight Line Method" at the
rates prescribed in Schedule XIV to the Companies Act, 1956. Second
hand vessels are written off over their respective useful lives as
determined by technical evaluation subject to minimum value as
prescribed in Schedule XIV of the Companies Act, 1956.
Additions made to ships which have completed their useful life,
involving structural changes and resulting in the extension of the
useful life based on the technical evaluation, the depreciation is
provided over the extended useful life/ remaining useful life subject
to minimum rates as prescribed in Schedule XIV to the Companies Act,
1956.
c) Assets other than ships and Intangible assets, depreciation is
charged on the "Written Down Value Method" as per the rates prescribed
in Schedule XIV to the Companies Act, 1956.
d) Intangible assets including software is amortised over the useful
life not exceeding five years.
e) Assets costing individually Rs. 5,000/- and below are fully
depreciated in the year of addition.
f) The carrying amounts of assets are reviewed at each Balance Sheet
date for impairment so as to determine the provision for impairment
loss, if any, required, or the reversal, if any, required of impairment
loss recognised in previous periods.
4. CAPITALISATION OF EXPENSES
Interest and other expenses, incurred till the date of first loading,
on amounts borrowed for acquisition/improvement of assets, is
capitalised to the cost of respective assets. In addition, operating
costs including initial stores and spares of newly acquired ships till
the port of first loading are added to the cost of the respective ship.
5. RETIREMENT AND DISPOSAL OF SHIP
(a) Ships which have been retired from operations for eventual disposal
are withdrawn from the fixed assets and exhibited separately at Net
block in the Balance Sheet under "Ships Retired From Operation".
Anticipated loss, if any, in the disposal of such ships is recognised
immediately and provision for the same is made in the accounts for the
year in which these have been retired. For the purpose of determining
the loss, the sale price is recognised, if contract for sale is
concluded. In other cases, assessment of the realisable value is made
on the basis of the prevailing market conditions. Losses on such ships
are provided for after taking into account the expenses such as customs
duty, sales tax / value added tax, etc. in connection with the
disposal, as well as estimated expenses in maintaining the ship, till
its sale. Wherever the exact amount under each item of expenses is not
known, an assessment is done on the best estimate basis.
(b) Profits on sale of ships are accounted for only upon completion of
sale thereof.
6. MAJOR REPAIRS AND RENEWALS OF SHIP
(a) Advances given towards repairs/renewals of capital/revenue nature,
are adjusted only on completion of the entire work duly certified by
the concerned Authority.
(b) Dry-dock expenditure is recognised in the Profit & Loss account to
the extent work is done, based on technical evaluation.
7. VALUATION OF STOCK
(a) Inventories are valued at lower of cost as determined on ''Moving
Average Price'' method or net realisable value unless otherwise stated.
(b) Fuel oil purchases are initially booked as stock. The value of
year-end stock is arrived at after charging consumption on the basis of
method as stated above.
(c) As regards provisions purchased for victualling on board the ships,
where catering is under departmental catering system, all purchases are
treated as consumed.
(d) The Company maintain godowns for keeping certain limited items of
stores pending issue to the ships. Store/Spares including paints, etc.
are charged to revenue as consumed when delivered to ships. The
valuation of items of Store/ Spares is done as mentioned 7 (a) above.
8. ACCOUNTING OF FOREIGN CURRENCY TRANSACTIONS
(a) All foreign currency transactions are recorded at the exchange rate
of the second last Friday of the preceding month published in Financial
Times, London.
(b) Liner freight is booked at rates referred to in (a) above relevant
to the months in which the dates of sailing fall.
(c) The foreign currency balances other than in US Dollars appearing in
the books of account are translated into US Dollars at the closing
exchange rate of the last Friday of March published in the Financial
Times, London and thereafter, the monetary assets and monetary
liabilities as well as the Long Term Loans are translated into rupees
at SBI Mean Rate prevailing at the end of the period.
(d) Exchange difference arising on repayment of liabilities and
conversion of closing foreign currency balances pertaining to long term
loans for acquiring ships / containers / other depreciable assets and
asset under construction is adjusted in the carrying cost of respective
assets.
(e) The exchange difference in translation arising on other monetary
assets and liabilities are recognised in profit and loss account.
9. EMPLOYEE BENEFITS
(a) Defined Contribution Plan - Provident fund contribution are
accounted for on accrual basis.
(b) Defined Benefit Plans- In case of shore staff, officers afloat, and
crew on Company''s roster, the cost of Gratuity, Leave encashment, &
post retirement medical benefit is determined using the projected unit
credit method, with actuarial valuations being carried out at each
reporting date.
Actuarial gains and losses are recognised in full in the profit and
loss account for the period in which they occur.
The retirement benefit obligation recognised in the financial statement
represents the present value of defined benefit obligation net of past
service cost and reduced by the fair value of the plan assets. Any
asset resulting from this calculation is limited to the present value
in the form of refunds or reduction in the future contribution to the
plan.
(c) In case of crew on the general roster, gratuity, which is
insignificant in value, is accounted on cash basis.
10. INSURANCE, P&I AND OTHER CLAIMS
(a) Provision in respect of claims against the Company and covered by
Hull and P&I insurance is made as under:-
(i) In respect of collision claims and P & I claims (other than cargo
claims), to the extent of deductible limit based on the assessment
provided by the surveyors.
(ii) In case of Cargo claims, on the basis of the actual claims
registered and/or paid pertaining to the relevant year''s voyages as
ascertained at the year-end as reduced by the amounts recoverable from
the insurers.
(iii) Expenses on account of general average claims/ damages to ships
are written off in the year in which they are incurred. Claims against
the underwriters are accounted on submission of the Adjuster''s report
to the underwriters.
(b) Claims made by the Company against other parties including ship
repair yards, ship-owners, ship charterers, customs and others, etc.
are accounted for on realisation, due to uncertainty in the amounts of
their ultimate recovery.
11. INVESTMENTS
(a) Long Term Investments are stated at cost. Provision for diminution
is made to recognize a decline, other than temporary, in the value of
such investments.
(b) Current Investments are stated at lower of cost and fair value.
12. TAXES ON INCOME
Provision for income tax liability is made as per special provisions
relating to income of shipping companies under the Income Tax Act, 1961
on the basis of deemed tonnage income of the Company.
13. LEASES
In respect of assets acquired on lease prior to 1st April 2001, lease
rentals are accounted on accrual basis over the period of the lease and
in respect of assets acquired on or after 1st April 2001, lease rentals
are accounted in accordance with AS-19 "Accounting for Leases".
14. PROVISIONS
Provisions are recognised when the company has a present obligation as
a result of past events, for which it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate of the amount can be made.
Mar 31, 2013
1. (a) ACCOUNTING CONVENTION
The financial statements are prepared to comply in all material aspects
under the Historical Cost convention and in accordance with generally
accepted Accounting principles in India and the relevant provisions of
the Companies Act, 1956, notified Accounting Standards by Companies
(Accounting Standards) Rules, 2006 (as amended) to the extent
applicable and current practices prevailing within the Shipping
Industries in India.
(b) USE OF ESTIMATES
The preparation of financial statements requires estimates and
assumptions that affect the reported amount of assets and liabilities,
and disclosure of contingent liabilities at that date of the financial
statements and the result of operations during the reporting period.
Although such estimates and assumptions are made on reasonable and
prudent basis taking into account all available information, actual
results could differ from these estimates and assumptions and such
differences are recognised in the period in which results are
crystallised.
2. RECOGNITION OF REVENUE AND EXPENDITURE
(a) The Profit & Loss Account reflects,
(i) The Earnings and Direct Operating Expenses (Voyage related variable
costs) in respect of all Finished Voyages on accrual basis.
(ii) Standing Charges (Vessel related Fixed Costs) for all the vessels
for the entire period of operation during the year on accrual basis.
(iii) Income and Expenditure in respect of the customs penalty claims
and container detention charges which are accounted for on realisation.
(iv) In respect of slot sharing agreement with other shipping lines,
the earnings and expenses on accrual basis based on completed voyage
cycle during the year.
(v) In respect of time charter arrangements, income and expenses are
booked on accrual basis.
(vi) Demurrage income is recognised on estimated basis, based on past
experience of settlements.
(b) The criteria followed for the purpose of determining the Finished
Voyages are as under:
(i) Passenger cum Cargo Vessels:- Disembarkation of passengers and
discharge of cargo should be completed on or before the last date of
the financial year.
(ii) Cargo Vessels (other than those serviced by Feeder or Daughter
Vessels):- Discharge of cargo should be completed on or before the last
date of the financial year.
(iii) Cargo vessels serviced by Daughter vessels:- The ultimate
discharge of cargo by all daughter vessels should be completed on or
before the last date of the financial year.
(iv) Cargo vessels serviced by feeder vessels:- The discharge of cargo
at the transhipment port by the mainline and own feeder vessels should
be completed on or before the last date of financial year.
Transhipment port is the point of commencement and completion of both
the services. The completion of the mainline and feeder voyage is
determined independent of each other.
(v) Cellular Liner Service:- On completion of round voyage.
(c) Unfinished Voyages:
Any voyage, which does not fulfil the above mentioned criteria, is
treated as an unfinished voyage. Amount received on account of freight
earning and other charges in respect of such voyages are carried
forward as Unfinished Voyage Earnings. Direct operating expenses
incurred for such voyages including hire and freight for vessels
chartered-in are carried forward as Unfinished Voyage Expenses except
in case of time charter.
(d) Allocation of Container Expenses:
Expenses relating to container activities such as stevedoring, stuffing
and destuffing, transportation, etc. are identified with the relevant
voyage and classified as direct operating expenses. Expenses such as
container hire, kobi charges, ground rent and handling of empty
containers, etc., which are not directly identifiable with any
particular voyage are allocated to all voyages on the basis of unit
days for each voyage. The sum so allocated to unfinished voyages is
carried forward as Unfinished Voyage Expenses.
3. FIXED ASSETS AND DEPRECIATION
(a) Fixed Assets are stated at historical cost less accumulated
depreciation. Cost includes acquisition cost and directly attributable
cost of bringing the assets to its working condition for its intended
use.
(b) Depreciation on ships is charged on "Straight Line Method" at the
rates prescribed in Schedule XIV to the Companies Act, 1956. Second
hand vessels are written off over their respective useful lives as
determined by technical evaluation subject to minimum value as
prescribed in Schedule XIV of the Companies Act, 1956.
Additions made to ships which have completed their useful life,
involving structural changes and resulting in the extension of the
useful life based on the technical evaluation, the depreciation is
provided over the extended useful life / remaining useful life subject
to minimum rates as prescribed in Schedule XIV to the Companies Act,
1956.
(c) Assets other than ships and Intangible assets, depreciation is
charged on the "Written Down Value Method" as per the rates prescribed
in Schedule XIV to the Companies Act, 1956.
(d) Intangible assets including software is amortised over the useful
life not exceeding five years.
(e) Assets costing individually Rs. 5,000/- and below are fully
depreciated in the year of addition.
(f) The carrying amounts of assets are reviewed at each Balance Sheet
date for impairment so as to determine the provision for impairment
loss, if any, required, or the reversal, if any, required of impairment
loss recognised in previous periods.
4. CAPITALISATION OF EXPENSES
Interest and other expenses, incurred till the date of first loading,
on amounts borrowed for acquisition/ improvement of assets, is
capitalised to the cost of respective assets. In addition, operating
costs including initial stores and spares of newly acquired ships till
the port of first loading are added to the cost of the respective ship.
5. RETIREMENT AND DISPOSAL OF SHIP
(a) Ships which have been retired from operations for eventual disposal
are withdrawn from the fixed assets and exhibited separately at Net
block in the Balance Sheet under "Ships Retired From Operation'';
Anticipated loss, if any, in the disposal of such ships is recognised
immediately and provision for the same is made in the accounts for the
year in which these have been retired. For the purpose of determining
the loss, the sale price is recognised, if contract for sale is
concluded. In other cases, assessment of the realisable value is made
on the basis of the prevailing market conditions. Losses on such ships
are provided for after taking into account the expenses such as customs
duty, sales tax / value added tax, etc. in connection with the
disposal, as well as estimated expenses in maintaining the ship, till
its sale. Wherever the exact amount under each item of expenses is not
known, an assessment is done on the best estimate basis.
(b) Profits on sale of ships are accounted for only upon completion of
sale thereof.
6. MAJOR REPAIRS AND RENEWALS OF SHIP
(a) Advances given towards repairs / renewals of capital / revenue
nature, are adjusted only on completion of the entire work duly
certified by the concerned Authority.
(b) Dry-dock expenditure is recognised in the Profit & Loss account to
the extent work is done, based on technical evaluation.
7. VALUATION OF STOCK
(a) Inventories are valued at lower of cost as determined on ''Moving
Average Price'' method or net realisable value unless otherwise stated.
(b) Fuel oil purchases are initially booked as stock. The value of
year-end stock is arrived at after charging consumption on the basis of
method as stated above.
(c) As regards provisions purchased for victualling on board the ships,
where catering is under departmental catering system, all purchases are
treated as consumed.
(d) The Company maintain godowns for keeping certain limited items of
stores pending issue to the ships. Store / Spares including paints,
etc. are charged to revenue as consumed when delivered to ships. The
valuation of items of Store / Spares is done as mentioned 7 (a) above.
8. ACCOUNTING OF FOREIGN CURRENCY TRANSACTIONS
(a) All foreign currency transactions are recorded at the exchange rate
of the second last Friday of the preceding month published in Financial
Times, London.
(b) Liner freight is booked at rates referred to in (a) above relevant
to the months in which the dates of sailing fall.
(c) The foreign currency balances other than in US Dollars appearing in
the books of account are translated into US Dollars at the closing
exchange rate of the last Friday of March published in the Financial
Times, London and thereafter, the monetary assets and monetary
liabilities as well as the Long Term Loans are translated into rupees
at SBI Mean Rate prevailing at the end of the period.
(d) Exchange difference arising on repayment of liabilities and
conversion of closing foreign currency balances pertaining to long term
loans for acquiring ships / containers / other depreciable assets and
asset under construction is adjusted in the carrying cost of respective
assets.
(e) The exchange difference in translation arising on other monetary
assets and liabilities are recognised in profit and loss account.
9. EMPLOYEE BENEFITS
(a) Defined Contribution Plan - Provident fund contribution are
accounted for on accrual basis.
(b) Defined Benefit Plans - In case of shore staff, officers afloat,
and crew on Company''s roster, the cost of Gratuity, Leave encashment, &
post retirement medical benefit is determined using the projected unit
credit method, with actuarial valuations being carried out at each
reporting date.
Actuarial gains and losses are recognised in full in the profit and
loss account for the period in which they occur.
The retirement benefit obligation recognised in the financial statement
represents the present value of defined benefit obligation net of past
service cost and reduced by the fair value of the plan assets. Any
asset resulting from this calculation is limited to the present value
in the form of refunds or reduction in the future contribution to the
plan.
(c) In case of crew on the general roster, gratuity, which is
insignificant in value, is accounted on cash basis.
10. INSURANCE, P&I AND OTHER CLAIMS
(a) Provision in respect of claims against the Company and covered by
Insurance and P&I risks is made as under:-
(i) In respect of claims falling under Hull & Machinery Insurance,
which are estimated to be above the deductible limit, to the extent of
deductible limit.
(ii) In case of Cargo claims, on the basis of the actual claims
registered and / or paid pertaining to the relevant year''s voyages as
ascertained at the year-end as reduced by the amounts recoverable from
the insurers.
(b) All types of claims settled and paid above the deductible limits
are shown as recoverable from Hull Underwriters / P&I Clubs until these
are finally accepted by them as per the conditions of insurance policy
and / or P&I cover. Adjustments, if any of revenue nature are made
after statement of claims are received from the Average Adjusters.
(c) Claims made by the Company against other parties including ship
repair yards, ship-owners, ship charterers, customs and others, etc.
are accounted for on realisation, due to uncertainty in the amounts of
their ultimate recovery.
11. INVESTMENTS
(a) Long Term Investments are stated at cost. Provision for diminution
is made to recognize a decline, other than temporary, in the value of
such investments.
(b) Current Investments are stated at lower of cost and fair value.
12. TAXES ON INCOME
Provision for income tax liability is made as per special provisions
relating to income of shipping companies under the Income Tax Act, 1961
on the basis of deemed tonnage income of the Company.
13. LEASES
In respect of assets acquired on lease prior to 1st April, 2001, lease
rentals are accounted on accrual basis over the period of the lease and
in respect of assets acquired on or after 1st April, 2001, lease
rentals are accounted in accordance with AS-19 "Accounting for Leases''.
14. PROVISIONS
Provisions are recognised when the company has a present obligation as
a result of past events, for which it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate of the amount can be made.
Mar 31, 2012
1. (a) ACCOUNTING CONVENTION
The financial statements are prepared to comply in all material aspects
under the Historical Cost convention and in accordance with generally
accepted Accounting principles in India and the relevant provisions of
the Companies Act, 1956, notified Accounting Standards by Companies
(Accounting Standards) Rules, 2006 (as amended) to the extent
applicable and current practices prevailing within the Shipping
Industries in India.
(b) USE OF ESTIMATES
The preparation of financial statements requires estimates and
assumptions that affect the reported amount of assets and liabilities,
and disclosure of contingent liabilities at that date of the financial
statements and the result of operations during the reporting period.
Although such estimates and assumptions are made on reasonable and
prudent basis taking into account all available information, actual
results could differ from these estimates and assumptions and such
differences are recognised in the period in which results are
crystallised.
2. RECOGNITION OF REVENUE AND EXPENDITURE
(a) The Profit & Loss Account reflects,
(i) The Earnings and Direct Operating Expenses (Voyage related variable
costs) in respect of all Finished Voyages on accrual basis.
(ii) Standing Charges (Vessel related Fixed Costs) for all the vessels
for the entire period of operation during the year on accrual basis.
(iii)Income and Expenditure in respect of the customs penalty claims
and container detention charges which are accounted for on realisation.
(iv)In respect of slot sharing agreement with other shipping lines, the
earnings and expenses on accrual basis based on completed voyage cycle
during the year.
(v) In respect of time charter arrangements, income and expenses are
booked on accrual basis.
(vi)Demurrage income is recognised on estimated basis, based on past
experience of settlements.
(b) The criteria followed for the purpose of determining the Finished
Voyages are as under :
(i) Passenger cum Cargo Vessels :- Disembarkation of passengers and
discharge of cargo should be completed on or before the last date of
the financial year.
(ii) Cargo Vessels (other than those serviced by Feeder or Daughter
Vessels) :- Discharge of cargo should be completed on or before the
last date of the financial year.
(iii)Cargo vessels serviced by Daughter vessels :- The ultimate
discharge of cargo by all daughter vessels should be completed on or
before the last date of the financial year.
(iv)Cargo vessels serviced by feeder vessels :- The discharge of cargo
at the transhipment port by the mainline and own feeder vessels should
be completed on or before the last date of financial year. Transhipment
port is the point of commencement and completion of both the services.
The completion of the mainline and feeder voyage is determined
independent of each other.
(v) Cellular Liner Service :- On completion of round voyage
(c) Unfinished Voyages :
Any voyage, which does not fulfil the above mentioned criteria, is
treated as an unfinished voyage. Amount received on account of freight
earning and other charges in respect of such voyages are carried
forward as Unfinished Voyage Earnings. Direct operating expenses
incurred for such voyages including hire and freight for vessels
chartered-in are carried forward as Unfinished Voyage Expenses except
in case of time charter.
(d) Allocation of Container Expenses :
Expenses relating to container activities such as stevedoring, stuffing
and destuffing, transportation, etc. are identified with the relevant
voyage and classified as direct operating expenses. Expenses such as
container hire, kobi charges, ground rent and handling of empty
containers, etc., which are not directly identifiable with any
particular voyage are allocated to all voyages on the basis of unit
days for each voyage. The sum so allocated to unfinished voyages is
carried forward as Unfinished Voyage Expenses.
3. FIXED ASSETS AND DEPRECIATION
a) Fixed Assets are stated at historical cost less accumulated
depreciation. Cost includes acquisition cost and directly attributable
cost of bringing the assets to its working condition for its intended
use.
b) Depreciation on ships is charged on "Straight Line Method" at the
rates prescribed in Schedule XIV to the Companies Act, 1956. Second
hand vessels are written off over their respective useful lives as
determined by technical evaluation subject to minimum value as
prescribed in Schedule XIV of the Companies Act, 1956.
Additions made to ships which have completed their useful life,
involving structural changes and resulting in the extension of the
useful life based on the technical evaluation, the depreciation is
provided over the extended useful life / remaining useful life subject
to minimum rates as prescribed in Schedule XIV to the Companies Act,
1956.
c) Assets other than ships and Intangible assets, depreciation is
charged on the "Written Down Value Method" as per the rates prescribed
in Schedule XIV to the Companies Act, 1956.
d) Intangible assets including software is amortised over the useful
life not exceeding five years.
e) Assets costing individually Rs. 5,000/- and below are fully
depreciated in the year of addition.
f) The carrying amounts of assets are reviewed at each Balance Sheet
date for impairment so as to determine the provision for impairment
loss, if any, required, or the reversal, if any, required of impairment
loss recognised in previous periods.
4. CAPITALISATION OF EXPENSES
Interest and other expenses, incurred till the date of first loading,
on amounts borrowed for acquisition / improvement of assets, is
capitalised to the cost of respective assets. In addition, operating
costs including initial stores and spares of newly acquired ships till
the port of first loading are added to the cost of the respective ship.
5. RETIREMENT AND DISPOSAL OF SHIP
(a) Ships which have been retired from operations for eventual disposal
are withdrawn from the fixed assets and exhibited separately at Net
block in the Balance Sheet under "Ships Retired From Operation".
Anticipated loss, if any, in the disposal of such ships is recognised
immediately and provision for the same is made in the accounts for the
year in which these have been retired. For the purpose of determining
the loss, the sale price is recognised, if contract for sale is
concluded. In other cases, assessment of the realisable value is made
on the basis of the prevailing market conditions. Losses on such ships
are provided for after taking into account the expenses such as customs
duty, sales tax / value added tax, etc. in connection with the
disposal, as well as estimated expenses in maintaining the ship, till
its sale. Wherever the exact amount under each item of expenses is not
known, an assessment is done on the best estimate basis.
(b) Profits on sale of ships are accounted for only upon completion of
sale thereof.
6. MAJOR REPAIRS AND RENEWALS OF SHIP
(a) Advances given towards repairs / renewals of capital / revenue
nature, are adjusted only on completion of the entire work duly
certified by the concerned Authority.
(b) Dry-dock expenditure is recognised in the Profit & Loss account to
the extent work is done, based on technical evaluation.
7. VALUATION OF STOCK
(a) Inventories are valued at lower of cost as determined on 'Moving
Average Price' method or net realisable value unless otherwise stated.
(b) Fuel oil purchases are initially booked as stock. The value of
year-end stock is arrived at after charging consumption on the basis of
method as stated above.
(c) As regards provisions purchased for victualling on board the ships,
where catering is under departmental catering system, all purchases are
treated as consumed.
(d) The Company maintain godowns for keeping certain limited items of
stores pending issue to the ships. Store / Spares including paints,
etc. are charged to revenue as consumed when delivered to ships. The
valuation of items of Store / Spares is done as mentioned 7 (a) above.
8. ACCOUNTING OF FOREIGN CURRENCY TRANSACTIONS
(a) All foreign currency transactions are recorded at the exchange rate
of the second last Friday of the preceding month published in Financial
Times, London.
(b) Liner freight is booked at rates referred to in (a) above relevant
to the months in which the dates of sailing fall.
(c) The foreign currency balances other than in US Dollars appearing in
the books of account are translated into US Dollars at the closing
exchange rate of the last Friday of March published in the Financial
Times, London and thereafter, the monetary assets and monetary
liabilities as well as the Long Term Loans are translated into rupees
at SBI Mean Rate prevailing at the end of the period.
(d) Exchange difference arising on repayment of liabilities and
conversion of closing foreign currency balances pertaining to long term
loans for acquiring ships / ownership containers / other depreciable
assets and asset under construction is adjusted in the carrying cost of
respective assets other than those regarded as borrowing cost.
(e) The exchange difference in translation arising on other monetary
assets and liabilities are recognised in profit and loss account.
9. EMPLOYEE BENEFITS
(a) Defined Contribution Plan - Provident fund contribution are
accounted for on accrual basis.
(b) Defined Benefit Plans - In case of shore staff, officers afloat,
and crew on Company's roster, the cost of Gratuity, Leave encashment, &
post retirement medical benefit is determined using the projected unit
credit method, with actuarial valuations being carried out at each
reporting date.
Actuarial gains and losses are recognised in full in the profit and
loss account for the period in which they occur.
The retirement benefit obligation recognised in the financial statement
represents the present value of defined benefit obligation net of past
service cost and reduced by the fair value of the plan assets. Any
asset resulting from this calculation is limited to the present value
in the form of refunds or reduction in the future contribution to the
plan.
(c) In case of crew on the general roster, gratuity, which is
insignificant in value, is accounted on cash basis.
10. INSURANCE, P&I AND OTHER CLAIMS
(a) Provision in respect of claims against the Company and covered by
Insurance and P&I risks is made as under :- (i) In respect of claims
falling under Hull & Machinery Insurance, which are estimated to be
above the deductible limit, to the extent of deductible limit.
(ii) In case of Cargo claims, on the basis of the actual claims
registered and / or paid pertaining to the relevant year's voyages as
ascertained at the year-end as reduced by the amounts recoverable from
the insurers.
(b) All types of claims settled and paid above the deductible limits
are shown as recoverable from Hull Underwriters / P&I Clubs until these
are finally accepted by them as per the conditions of insurance policy
and / or P&I cover. Adjustments, if any of revenue nature are made
after statement of claims are received from the Average Adjusters.
(c) Claims made by the Company against other parties including ship
repair yards, ship-owners, ship charterers, customs and others, etc.
are accounted for on realisation, due to uncertainty in the amounts of
their ultimate recovery.
11. INVESTMENTS
(a) Long Term Investments are stated at cost. Provision for diminution
is made to recognize a decline, other than temporary, in the value of
such investments.
(b) Current Investments are stated at lower of cost and fair value.
12. TAXES ON INCOME
Provision for income tax liability is made as per special provisions
relating to income of shipping companies under the Income Tax Act, 1961
on the basis of deemed tonnage income of the Company.
13. LEASES
In respect of assets acquired on lease prior to 1st April 2001, lease
rentals are accounted on accrual basis over the period of the lease and
in respect of assets acquired on or after 1st April 2001, lease rentals
are accounted in accordance with AS-19 "Accounting for Leases".
14. PROVISIONS
Provisions are recognised when the company has a present obligation as
a result of past events, for which it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate of the amount can be made.
Mar 31, 2011
1. (a) ACCOUNTING CONVENTION
The financial statements are prepared to comply in all material aspects
under the Historical Cost convention and in accordance with generally
accepted Accounting principles in India and the relevant provisions of
the Companies Act, 1956, notified Accounting Standards by Companies
(Accounting Standards) Rules, 2006 (as amended) to the extent
applicable and current practices prevailing within the Shipping
Industries in India.
(b) USE OF ESTIMATES
The preparation of financial statements requires estimates and
assumptions that affect the reported amount of assets and liabilities,
and disclosure of contingent liabilities at that date of the financial
statements and the result of operations during the reporting period.
Although such estimates and assumptions are made on reasonable and
prudent basis taking into account all available information, actual
results could differ from these estimates and assumptions and such
differences are recognised in the period in which results are
crystallised.
2. RECOGNITION OF REVENUE AND EXPENDITURE
(a) The Profit & Loss Account reflects,
(i) The Earnings and Direct Operating Expenses (Voyage related variable
costs) in respect of all Finished Voyages on accrual basis.
(ii) Standing Charges (Vessel related Fixed Costs) for all the vessels
for the entire period of operation during the year on accrual basis.
(iii) Income and Expenditure in respect of the customs penalty claims
and container detention charges which are accounted for on realisation.
(iv) In respect of slot sharing agreement with other shipping lines,
the earnings and expenses on accrual basis based on completed voyage
cycle during the year.
(v) In respect of time charter arrangements, income and expenses are
booked on accrual basis.
(vi) Demurrage income is recognised on estimated basis, based on past
experience of settlements.
(b) The criteria followed for the purpose of determining the Finished
Voyages are as under:
(i) Passenger cum Cargo Vessels :- Disembarkation of passengers and
discharge of cargo should be completed on or before the last date of
the financial year.
(ii) Cargo Vessels (other than those serviced by Feeder or Daughter
Vessels) - Discharge of cargo should be completed on or before the last
date of the financial year.
(iii) Cargo vessels serviced by Daughter vessels :- The ultimate
discharge of cargo by all daughter vessels should be completed on or
before the last date of the financial year.
(iv) Cargo vessels serviced by feeder vessels :- The discharge of cargo
at the transhipment port by the mainline and own feeder vessels should
be completed on or before the last date of financial year.
Transhipment port is the point of commencement and completion of both
the services. The completion of the mainline and feeder voyage is
determined independent of each other.
(v) Cellular Liner Service :- On completion of round voyage
(c) Unfinished Voyages:
Any voyage, which does not fulfil the above mentioned criteria, is
treated as an unfinished voyage. Amount received on account of freight
earning and other charges in respect of such voyages are carried
forward as Unfinished Voyage Earnings. Direct operating expenses
incurred for such voyages including hire and freight for vessels
chartered-in are carried forward as Unfinished Voyage Expenses except
in case of time charter.
(d) Allocation of Container Expenses:
Expenses relating to container activities such as stevedoring, stuffing
and destuffing, transportation, etc. are identified with the relevant
voyage and classified as direct operating expenses. Expenses such as
container hire, kobi charges, ground rent and handling of empty
containers, etc., which are not directly identifiable with any
particular voyage are allocated to all voyages on the basis of unit
days for each voyage. The sum so allocated to unfinished voyages is
carried forward as Unfinished Voyage Expenses.
3. FIXED ASSETS AND DEPRECIATION
a) Fixed Assets are stated at historical cost less accumulated
depreciation. Cost includes acquisition cost and directly attributable
cost of bringing the assets to its working condition for its intended
use.
b) Depreciation on ships is charged on "Straight Line Method" at the
rates prescribed in Schedule XIV to the Companies Act, 1956 except in
cases of Offshore Vessels, which are written off over a period of 12
years and second hand vessels, which are written off over their
respective useful lives as determined by technical evaluation subject
to minimum rates as prescribed in Schedule XIV to the Companies Act,
1956.
Additions made to ships which have completed their useful life,
involving structural changes and resulting in the extension of the
useful life based on the technical evaluation, the depreciation is
provided over the extended useful life / remaining useful life subject
to minimum rates as prescribed in Schedule XIV to the Companies Act,
1956.
c) Assets other than ships and Intangible assets, depreciation is
charged on the "Written Down Value Method" as per the rates prescribed
in Schedule XIV to the Companies Act, 1956.
d) Intangible assets including software is amortised over the useful
life not exceeding five years.
e) Assets costing individually Rs. 5,000/- and below are fully
depreciated in the year of addition.
f) The carrying amounts of assets are reviewed at each Balance Sheet
date for impairment so as to determine the provision for impairment
loss, if any, required, or the reversal, if any, required of impairment
loss recognised in previous periods.
4. CAPITALISATION OF EXPENSES
Interest and other expenses, incurred till the date of first loading,
on amounts borrowed for acquisition / improvement of assets, is
capitalised to the cost of respective assets. In addition, operating
costs including initial stores and spares of newly acquired ships till
the port of first loading are added to the cost of the respective ship.
5. RETIREMENT AND DISPOSAL OF SHIP
(a) Ships which have been retired from operations for eventual disposal
are withdrawn from the fixed assets and exhibited separately at Net
block in the Balance Sheet under "Ships Retired From Operation".
Anticipated loss, if any, in the disposal of such ships is recognised
immediately and provision for the same is made in the accounts for the
year in which these have been retired. For the purpose of determining
the loss, the sale price is recognised, if contract for sale is
concluded. In other cases, assessment of the realisable value is made
on the basis of the prevailing market conditions. Losses on such ships
are provided for after taking into account the expenses such as customs
duty, sales tax / value added tax, etc. in connection with the
disposal, as well as estimated expenses in maintaining the ship, till
its sale. Wherever the exact amount under each item of expenses is not
known, an assessment is done on the best estimate basis.
(b) Profits on sale of ships are accounted for only upon completion of
sale thereof.
6. MAJOR REPAIRS AND RENEWALS OF SHIP
(a) Advances given towards repairs / renewals of capital/revenue
nature, are adjusted only on completion of the entire work duly
certified by the concerned Authority.
(b) Dry-dock expenditure is recognised in the Profit & Loss account to
the extent work is done, based on technical evaluation.
7. VALUATION OF STOCK
(a) Inventories are valued at lower of cost as determined on
'First-in-First-out' method or net realisable value unless otherwise
stated.
(b) Fuel oil purchases are initially booked as stock. The value of
year-end stock is arrived at after charging consumption on the basis of
method as stated above.
(c) As regards provisions purchased for victualling on board the ships,
where catering is under departmental catering system, all purchases are
treated as consumed.
(d) The Company maintain godowns for keeping certain limited items of
stores pending issue to the ships. Store / Spares including paints,
etc. are charged to revenue as consumed when delivered to ships,
however at the end of the financial year, provision for consumption is
made for items which remain as stores / spares in transit for more then
three months. The valuation of items of Store / Spares is done as
mentioned 7 (a) above.
8. ACCOUNTING OF FOREIGN CURRENCY TRANSACTIONS
(a) All foreign currency transactions are recorded at the exchange rate
of the last Friday of the preceding month published in Financial Times,
London.
(b) Liner freight is booked at rates referred to in (a) above relevant
to the months in which the dates of sailing fall.
(c) The foreign currency balances other than in US Dollars appearing in
the books of account are translated into US Dollars at the closing
exchange rate of the last Friday of March published in the Financial
Times, London and thereafter, the monetary assets and monetary
liabilities as well as the Long Term Loans are translated into rupees
at SBI Mean Rate prevailing at the end of the period.
(d) Exchange difference arising on repayment of liabilities and
conversion of closing foreign currency balances pertaining to long term
loans for acquiring ships / ownership containers / other depreciable
assets and asset under construction is adjusted in the carrying cost of
respective assets.
(e) The exchange difference in translation arising on other monetary
assets and liabilities are recognised in profit and loss account.
9. EMPLOYEE BENEFITS
(a) Defined Contribution Plan-Provident fund contribution are accounted
for on accrual basis.
(b) Defined Benefit Plans-In case of shore staff, officers afloat, and
crew on Company's roster, the cost of Gratuity, Leave encashment, &
post retirement medical benefit is determined using the projected unit
credit method, with actuarial valuations being carried out at each
reporting date.
Actuarial gains and losses are recognised in full in the profit and
loss account for the period in which they occur.
The retirement benefit obligation recognised in the financial statement
represents the present value of defined benefit obligation net of past
service cost and reduced by the fair value of the plan assets. Any
asset resulting from this calculation is limited to the present value
in the form of refunds or reduction in the future contribution to the
plan.
(c) In case of crew on the general roster, gratuity, which is
insignificant in value, is accounted on cash basis.
10. INSURANCE, P&I AND OTHER CLAIMS
(a) Provision in respect of claims against the Company and covered by
Insurance and P&I risks is made as under:-
(i) In respect of claims falling under Hull & Machinery Insurance,
which are estimated to be above the deductible limit, to the extent of
deductible limit.
(ii) In case of Cargo claims, on the basis of the actual claims
registered and / or paid pertaining to the relevant year's voyages as
ascertained at the year-end as reduced by the amounts recoverable from
the insurers.
(b) All types of claims settled and paid above the deductible limits
are shown as recoverable from Hull Underwriters / P&I Clubs until these
are finally accepted by them as per the conditions of insurance policy
and / or P&I cover. Adjustments, if any of revenue nature are made
after statement of claims are received from the Average Adjusters.
(c) Claims made by the Company against other parties including ship
repair yards, ship-owners, ship charterers, customs and others, etc.
are accounted for on realisation, due to uncertainty in the amounts of
their ultimate recovery.
11. INVESTMENTS
(a) Long Term Investments are stated at cost. Provision for diminution
is made to recognize a decline, other than temporary, in the value of
such investments.
(b) Current Investments are stated at lower of cost and fair value.
12. TAXES ON INCOME
Provision for income tax liability is made as per special provisions
relating to income of shipping companies under the Income Tax Act, 1961
on the basis of deemed tonnage income of the Company.
13. LEASES
In respect of assets acquired on lease prior to 1st April 2001, lease
rentals are accounted on accrual basis over the period of the lease and
in respect of assets acquired on or after 1st April 2001, lease rentals
are accounted in accordance with AS-19 "Accounting for Leases".
14. PROVISIONS
Provisions are recognised when the company has a present obligation as
a result of past events, for which it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate of the amount can be made.
Mar 31, 2010
1. ACCOUNTING CONVENTION :-
The financial statements are prepared to comply in all material aspects
under the Historical Cost convention and in accordance with generally
accepted Accounting practices in India, the Accounting Standards issued
by the Institute of Chartered Accountants of India and the relevant
provisions of "the Companies Act, 1956.
2. RECOGNITION OF REVENUE AND EXPENDITURE :-
(a) The Profit & Loss Account reflects,
(i) The Earnings and Direct Operating Expenses (Voyage related variable
costs) in respect of all Finished Voyages on accrual basis.
(ii) Standing Charges (Vessel related Fixed Costs) for all the vessels
for the entire period of operation during the year on accrual basis.
(iii) Income and Expenditure in respect of adhoc slot operations, the
customs penalty claims, and container detention charges which are
accounted for on realisation.
(iv) In respect of slot sharing agreement with other shipping lines,
the earnings and expenses on an accrual basis based on voyages
completed during the year.
(v) In respect of time charter arrangements, incomes and expenses are
booked on accrual basis.
(vi) Demurrage income is recognised on estimated basis, based on past
experience of settlements.
(b) The criteria followed for the purpose of determining the Finished
Voyages are as under:-
(i) Passenger cum Cargo Vessels:- Disembarkation of passengers and
discharge of cargo should be completed on or before the last date of
the financial year. -
(ii) Cargo Vessels (other than those serviced by Feeder or Daughter
Vessels):- Discharge of cargo should be completed on or before the last
date of the financial year.
(iii) Cargo vessels serviced by Daughter vessels:- The ultimate
discharge of cargo by all daughter vessels should be completed on or
before the last date of the financial year.
(iv) Cargo vessels serviced by feeder vessels: - The discharge of cargo
at the transhipment port by the mainline and feeder vessels should be
completed on or before the last date of financial year. Transhipment
port is the point of commencement and completion of both the services.
The completion of the mainline and feeder voyage is determined
independent of each other.
(c) Unfinished Voyages:-
Any voyage, which does not fulfil the above mentioned criteria, is
treated as an unfinished voyage. Collections made on account of
freight and other charges in respect of such voyages are carried *
forward as Unfinished Voyage Earnings. Direct operating expenses booked
for such voyages including hire and freight for vessels chartered-in
are carried forward as Unfinished Voyage Expenses.
(d) Allocation of Container Expenses:-
Expenses relating to container activities such as stevedoring, stuffing
and destuffing, transportation, etc. are identified with the relevant
voyage and classified as direct operating expenses. Expenses such as
container hire, kobi charges, ground rent and handling of empty
containers, etc., which are not directly identifiable with any
particular voyage are allocated to all voyages on the basis of unit
days for each voyage. The sum so allocated to unfinished voyages is
carried forward as Unfinished Voyage Expenses.
3. FIXED ASSETS AND DEPRECIATION:-
a) Fixed Assets are stated at cost of acquisition less accumulated
depreciation. Cost includes borrowing cost, duties and other expenses
relating to acquisition of assets.
b) Depreciation on ships is charged on "Straight Line Method" at the
rates prescribed in Schedule XIV to The Companies Act, 1956 except in
cases of Offshore Vessels, which are written off over a period of 12
years and second hand vessels, which are written off over their
respective useful lives (not less than rates prescribed in Schedule
XIV) as determined by Technical evaluation.
On additions made to the existing ships (including adjustments
resulting on account of exchange rate fluctuation) depreciation is
provided for the full year irrespective of the date of addition and
balance over the remaining useful life of the ships.
Additions made to the ships which have completed their useful life are
fully depreciated in the year of addition. However, in respect of
additions made involving structural changes, on or after 1st April
2007, resulting in extension of useful life based on the technical
evaluation, the depreciation is provided over the extended remaining
useful life (not less than rates prescribed in schedule XIV).
c) On assets other than ships, depreciation is charged on the "Written
Down Value Method" as per the rates prescribed in Schedule XIV to the
Companies Act, 1956 for the full year irrespective of the dates of
additions and no depreciation is being charged on assets sold/discarded
during the year.
d) Computer software is amortised over the useful life not exceeding
five years.
e) Assets costing individually Rs.5,000/- and below are fully
depreciated in the year of addition.
f) The carrying amounts of assets are reviewed at each Balance Sheet
date for impairment so as to determine the provision for impairment
loss, if any, required, or the reversal, if any, required of impairment
loss recognised in previous periods.
4. CAPITALISATION OF EXPENSES
Interest and other expenses, incurred till the date of first loading,
on amounts borrowed for acquisition/ improvement of assets, are charged
to the cost of respective assets acquired/improved. In addition,
operating costs including initial stores and spares of newly acquired
ships till the port of first loading are added to the cost of the
respective ship.
5. RETIREMENT AND DISPOSAL OF SHIPS
(a) Ships which have been retired from operations for eventual disposal
are withdrawn from the fixed assets and exhibited separately at book
value in the Balance Sheet under "Ships Retired From Operation".
(b) Anticipated loss, if any, in the disposal of such ships is
recognised immediately and provision for the same is made in the
accounts for the year in which these have been retired. For the purpose
of determining the loss, the sale price is recognised, if contract for
sale is concluded. In other cases, assessment of the realisable value
is made on the basis of the prevailing market conditions. Losses on
such ships are provided for after taking into account the expenses such
as customs duty, sales tax. / value added tax, etc. in connection with
the disposal, as well as estimated expenses in maintaining the ship,
till its sale. Wherever the exact amount under each item of expenses is
not known, an assessment is done on the best estimate basis
(c) Profits on sale of ships are accounted for only upon completion of
sale thereof.
6. MAJOR REPAIRS AND RENEWALS OF SHIPS
(i) Advances given towards repairs/renewals of capital/revenue nature,
are adjusted only on completion of the entire work duly certified by
the concerned Authority.
(ii) Drydock repair expenditure are recognised in the Profit & Loss
account to the extent work is done, based on technical evaluation.
7. VALUATION OF STOCKS:-
(a) Inventories are valued at lower of cost and net realisable value
unless otherwise stated.
(b) Fuel oil purchases are initially booked as stock. The value of
year-end stock is arrived at after charging consumption on
ÃFirst-in-First-outà method.
(c) As regards provisions purchased for victualling on board the ships,
where catering is under departmental catering system, all purchases are
treated as consumed.
(d) Corporation maintains godowns for keeping certain limited items of
stores pending issue to the ships. Stock of stores lying in the
godowns at the year end are valued at lower of cost or net realisable
value.
(e) Store/Spares including paints, etc. are charged to revenue as
consumed when delivered to ships. Items of Stores/Spares, which are
not delivered to ships are shown under Stores/Spares-in-Transit and are
treated as stock. Such stocks are valued at lower of cost and net
realizable value. However, at the end of the financial year, provision
for consumption is made for items which remain as Stores/Spares in
transit for more than three months.
8. ACCOUNTING OF FOREIGN CURRENCY TRANSACTIONS:-
(a) All transactions during the year are booked at rate of the last
Friday of the preceding month published in Financial Times, London.
(b) Liner freight is booked at rates referred to in (a) above relevant
to the months in which the dates of sailing fall.
(c) The year-end foreign currency balances other than in US Dollars
appearing in the books of account are converted into US Dollars at the
rate of the last Friday of March published in the Financial Times,
London and thereafter, the monetary assets and monetary liabilities as
well as the Long Term Loans are converted into rupees at SBI Mean Rate
prevailing at the end of the financial year.
(d) Exchange difference arising on repayment of liabilities and
conversion of year-end foreign currency balances pertaining to long
term loans for acquiring ships/ownership containers/other assets and
asset under construction is adjusted in the carrying cost of
ships/ownership containers/other assets and asset under construction.
(e) The exchange difference arising on revenue and other account except
as stated under (d) above is adjusted in the Profit & Loss Account.
9. EMPLOYEE BENEFITS:-
(a) Liabilities towards provident fund are accounted for on accrual
basis.
(b) For defined benefit plans, in case of shore staff, officers afloat,
and crew on Companys roster, the cost of providing benefits is
determined using the projected unit credit method, with actuarial
valuations being carried out at each balance sheet date. Actuarial
gains and losses are recognised in full in the profit and loss account
for the period in which they occur. The retirement benefit obligation
recognised in the balance sheet represents the present value of defined
benefit obligation as reduced by the fair value of the plan assets. Any
asset resulting from this calculation is limited to the present value
of available refunds and reduction in the future contribution to the
plan.
(c) In case of crew on the general roster, gratuity, which is
insignificant in value, is accounted on cash basis.
10. INSURANCE, P&I AND OTHER CLAIMS:-
(a) Provision in respect of claims against the Corporation and covered
by Insurance and P&I risks is made as under:-
i. In respect of claims falling under Hull & Machinery Insurance, which
are estimated to be above the deductible limit, to the extent of
deductible limit.
ii. In case of Cargo claims, on the basis of the actual claims
registered and/or paid pertaining to the relevant yearÃs voyages as
ascertained at the year-end as reduced by the amounts recoverable from
the insurers.
(b) All types of claims settled and paid above the deductible limits
are shown as recoverable from Hull Underwriters / P&I Clubs until these
are finally accepted by them as per the conditions of insurance policy
and/or P&I cover. Adjustments, if any of revenue nature are made after
statement of claims are received from the Average Adjusters.
(c) Claims made by the Corporation against other parties including ship
repair yards, ship-owners, ship charterers, customs and others, etc.
are accounted for on realisation, due to uncertainty in the amounts of
their ultimate recovery.
11. INVESTMENTS:-
(a) Long Term Investments are stated at cost. Provision for diminution
is made to recognize a decline, other than temporary, in the value of
such investments.
(b) Current Investments are stated at lower of cost and fair value.
12. TAXES ON INCOME:-
In view of opting for Tonnage Tax scheme, provision for income tax
liability is made as per special provisions relating to income of
shipping companies under Income Tax Act, 1961 from financial year
2004-05.
13. LEASES:-
In respect of assets acquired on lease prior to 1st April 2001, lease
rentals are accounted on accrual basis over the period of the lease and
in respect of assets acquired on or after 1st April 2001, lease rentals
are accounted in accordance with AS-19 "Accounting for Leases".
14. PROVISIONS:-
Provisions are recognised when the company has a present obligation as
a result of past events, for which it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate of the amount can be made.
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More Information on Shipping Corporation of India Ltd.
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Shipping Corporation of India Ltd. Tools
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Shipping Corporation of India Ltd. Company Details
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Company History
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Shipping Corporation of India Ltd. Key Financial Ratios
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Shipping Corporation of India Ltd. Results
- Quarterly Results
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- Annual Results
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Shipping Corporation of India Ltd. Financial Data
- Audited Results
- Cash Flow
- Balance Sheet
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Shipping Corporation of India Ltd. Reports
- Accounting Policies
- Auditors Report
- Directors Report
- Notes To Account
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Shipping Corporation of India Ltd. Corporate Announcements
- Book Closure
- Dividend
- Board Meetings
