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Accounting Policies of Mahanagar Telephone Nigam Ltd. Company

Mar 31, 2023

SIGNIFICANT ACCOUNTING POLICY

b) In case of contracts involving multiples promises, which involve delivery or
performance of multiple products, services or right to use assets, evaluation is done
for all deliverables in an arrangement to determine whether they represent separate
performance obligations at the inception of arrangement. Total consideration related
to the bundled contract is allocated among the different performance obligations based
on their standalone selling prices. In case the relative value of different performance
obligations cannot be determined on a reasonable basis, the total consideration is
allocated to the different performance obligations based on residual value.

c) For sale of prepaid products, processing fee on recharge coupons is recognized over
the customer relationship period or coupon validity period, whichever is lower.

d) Activation &installation revenue and related costs (including subscriber acquisition
cost), not exceeding the respective revenue, are to be deferred and amortized over the
estimated customer relationship period. The excess of costs over revenue, if any, are to
be expensed as incurred.

e) Income from sale of prepaid calling cards, virtual calling cards (VCC) and prepaid
internet connection cards is recognised basis the usage or expiry of cards, whichever
is earlier.

f) Interest income/expenditure is to be recognized based on effective interest rate [EIR] i.e.
the rate that exactly discounts estimated future cash payments or receipts through the
expected life of the financial asset to the net carrying amount of the financial assets. The
future cash flows include all other transaction costs fees paid or received, premiums
or discounts if any etc. The difference between the actual interest rate and effective
interest rate will be routed through statement of profit or loss.

g) Income from services includes income from leasing of infrastructure to other service
providers. Cost of related stores and materials consumed in execution is charged to
project or revenue job at the time of issue. However, spill over items at the end of the
year lying at various stores are valued at weighted average cost.

h) Sale proceeds of scrap arising from maintenance & project works are taken into
miscellaneous income in the year of sale.

Contract assets are recognised when there is excess of revenue earned over billings on
contracts. Contract assets are classified as unbilled receivables (only act of invoicing is
pending) when there is unconditional right to receive cash, and only passage of time is
required, as per contractual terms.

Unearned and deferred revenue ("contract liability") is recognised when there is billing in
excess of revenues or advances received form the customer.

b) Post-employment benefits

a) Defined contribution plan

A defined contribution plan is a plan under which the Company pays fixed contributions
into an independent fund administered by the government. The Company has no legal
or constructive obligations to pay further contributions after its payment of the fixed
contribution. Company''s defined contribution plans include provident fund, pension
contribution and leave salary.

(i) In respect of absorbed combined service pension optees in MTNL, provision for
pension contribution is payable to the Govt. of India as per FR-116 as in Bharat Sanchar
Nigam Limited (''BSNL'') with equivalent BSNL pay scales and it is expensed off in the
relevant year.

(ii) In respect of officials who are on deemed deputation from Department of
Telecommunications (DoT) and other Government department, the provision for
pension contribution is payable to the Government of India at the rates specified in
Appendix 2(A) to FR 116 and 117 of FR. & SR and it is expensed off in the relevant
year. Further, provision for leave encashment is payable @ 11% of pay as specified in
appendix 2(B) of F.R.116 and 117 of F.R. & S.R. and it is expensed off in the relevant
year.

b) Defined benefit plan

The defined benefit plans sponsored by the Company defines the amount of the benefit that

an employee will receive on completion of services by reference to length of service and

last drawn salary. The legal obligation for any benefits remains with the Company. The

Company''s defined benefit plans include amounts provided for gratuity.

(i) For Absorbed CPF optees and direct recruits of MTNL, the Company made contribution
to provident fund Trust administered by the Company, which was recognised by the
income tax authorities. Following the withdrawal of the Company''s exemption from
the provident fund, all accumulations in the employees'' accounts on the employer''s
accounts, as well as employee contribution and interest thereon, have been transferred
to the Recognised Provident Fund, and with effect from July 2020 the Company has
no legal or constructive obligations to pay further contributions after paying the fixed
contribution to Recognised Provident Fund.

(ii) For Absorbed CPF optees and direct recruits of MTNL, the liability for gratuity
is estimated using; actuarial valuation as the present value of the defined benefit
obligation (DBO) at the reporting date less the fair value of plan assets, together with
adjustments for unrecognised actuarial gains or losses and past service costs. Actuarial
gains and losses arising from past experience and changes in actuarial assumptions are
credited or charged to the statement of OCI in the year in which such gains or losses
are determined.

(iii) For absorbed combined service pension optee employees in MTNL, no provision is
made for the pensionary benefits viz pension and gratuity.

c) Other long-term employee benefits

(i) Liability for leave encashment for all employees of MTNL is accounted for on actuarial
valuation basis, performed by an independent actuary using the projected unit credit
method as on the reporting date. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are recorded in the standalone
statement of profit and loss in the year in which such gains or losses arise.

(ii) For post-retirement medical benefits, no provision is made since insurance policy is
taken periodically and the premium is expensed off in the relevant year.

d) Short-term benefits comprise of employee costs such as salaries, bonus, ex-gratia, short¬
term compensated absences are accrued in the year in which the associated services are
rendered by employees of the Company.

e) Bonus/Ex-gratia is paid based on the productivity linked parameters and it is to be provided
accordingly subject to the profitability of the company.

c) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an
asset that necessarily takes a substantial period of time, which is generally considered
as one year, to get ready for its intended use or sale are capitalised as part of the cost of
the asset. Further, projects with estimated cost up to Rs 30 crores generally take a year to
complete. All other borrowing costs are expensed in the period in which they occur and
reported in finance cost. Borrowing costs consist of interest and other costs that an entity
incurs in connection with the borrowing of funds. Transaction costs in respect of long-term
borrowings are amortized over the tenor of respective loans using effective interest rate.

d) Property, plant and equipment

Recognition and initial measurement

Freehold land is carried at historical cost. All other items of property, plant and equipment are
stated at cost less accumulated depreciation. The cost comprises purchase price, borrowing
cost if capitalization criteria are met and directly attributable cost of bringing the asset to
its working condition for the intended use. Any trade discount and rebates are deducted in
arriving at the purchase price. Assets are capitalized, as per the practices described below,
to the extent completion certificates have been issued, wherever applicable.

i. Land is capitalized when possession of land is taken.

ii. Building is capitalized to the extent it is ready for use.

iii. Apparatus & plants principally consisting of telephone exchange equipment and air
conditioning plants are capitalised on commissioning of the exchange. Subscriber''s
installations are capitalized as and when the exchange is commissioned and put to
use either in full or in part. Identifiable components in Apparatus &plants having
significant cost and/or separate useful life than the main asset i.e. ADSL, VDSL & MES
CPES, UPS/Batteries and Subscriber Telephone Instruments are capitalised separately
on commissioning and put to use.

iv. Lines &wires are capitalised as and when laid or erected to the extent completion
certificates have been issued.

v. Cables are capitalised as and when ready for connection with the main system.

vi. Vehicles and other assets are capitalized as and when purchased.

(a) Property, plant and equipment are being verified by the management at reasonable intervals
i.e. once in every three years by rotation. The physical verification of underground cables
is done on the basis of working of network and based on records available together with a
certificate from the technical officers.

(b) Expenditure on replacement of assets, equipment, instruments and rehabilitation work is
capitalized if it is expected to generate future economic benefits for more than one year.

(c) Upon scrapping/decommissioning of assets, these continue to be classified in property,
plant and equipment unless they are classified as ''held for sale'' and carried at the lower
of carrying value or fair value less costs of disposal. Resultant loss, if any, is charged to
standalone statement of profit and loss.

(d) Cost of major inspection is recognized in the carrying amount of plant and equipment if it
is expected to generate economic benefits and its life is more than one year.

(e) On replacement of significant components of plant and equipment, recognition is made
for such replacement of components as individual assets with specific useful life and
depreciated as if these components are initially recognised as separate asset.

(f) In case an item of property, plant and equipment is acquired on deferred payment basis,
interest expenses included in deferred payment is recognised as interest expense and not
included in cost of asset.

(g) The present value of expected cost for decommissioning of the asset on expiry of its useful
life is included in the cost of respective asset. A provision for decommissioning is also
created with equivalent amount.

(h) Gains or losses arising on the disposal of property, plant and equipment are determined as
the difference between the disposal proceeds and the carrying amount of the assets and are
recognised in the statement of profit or loss as ''other income'' or ''other expenses'', as the case
may be, on the date of disposal.

Subsequent measurement

(a) Depreciation is provided by the Company using straight-line method on the basis of the
useful lives prescribed in Schedule II of the Companies Act, 2013 except in respect of
Apparatus & Plant (including Towers, Transceivers, switching centres, transmission & other
network equipment) and identifiable components in Apparatus & plant having significant
cost and/or separate useful life than the main asset, mobile handsets for service connection,
low cost aerial optical fibre cable and major structural repairs of the building which are
depreciated at the rates based on technical evaluation of useful life of these assets, which
are lower than the lives prescribed in Schedule II of the Companies Act 2013. The estimated
useful lives and residual value are reviewed at the end of each reporting period.

Intangible assets are stated at their cost of acquisition and/or development less accumulated
amortisation. Intangible assets including application software are capitalised when ready
for use. All intangible assets with definite useful life are amortized on a straight line basis
over the estimated useful lives and a possible impairment is assessed if there is an indication
that the intangible asset may be impaired.

(a) Intangible assets represented by one-time upfront payment for 3G spectrum is
amortized on straight-line basis over the period of license i.e. 20 years.

(b) Application software is amortised on straight-line basis over the useful life of the assets
which is considered as 10 years.

Transition to Ind AS

On transition to Ind AS, the Company has elected to continue with the carrying value of all
its intangible assets recognised as at 1 April 2015 measured as per the provisions of previous
GAAP and use that carrying value as the deemed cost of intangible assets.

f) Leases

The Company as a lessee

The Company''s lease asset classes primarily consist of leases for land, vehicles, BTS sites,
towers and buildings. The Company assesses whether a contract contains a lease, at
inception of a contract. A contract is, or contains, a lease if the contract conveys the right
to control the use of an identified asset for a period of time in exchange for consideration.
To assess whether a contract conveys the right to control the use of an identified asset, the
Company assesses whether:

(i) the contract involves the use of an identified asset;

(ii) the Company has substantially all of the economic benefits from use of the asset
through the period of the lease; and

(iii) the Company has the right to direct the use of the asset.

At the date of commencement of the lease, the Company recognises a right-of-use asset
("ROU") and a corresponding lease liability for all lease arrangements in which it is a
lessee, except for leases with a term of twelve months or less (short-term leases) and low
value leases. For these short-term and low value leases, the Company recognizes the lease
payments as an operating expense on a straight-line basis over the term of the lease.

Certain lease arrangements includes the options to extend or terminate the lease before
the end of the lease term. ROU assets and lease liabilities includes these options when it is
reasonably certain that they will be exercised.

The right-of-use assets are initially recognized at cost, which comprises the initial amount
of the lease liability adjusted for any lease payments made at or prior to the commencement
date of the lease plus any initial direct costs less any lease incentives. They are subsequently
measured at cost less accumulated depreciation and impairment losses.

Right-of-use assets are depreciated from the commencement date on a straight-line basis
over the shorter of the lease term and useful life of the underlying asset.

The lease liability is initially measured at amortized cost at the present value of the future
lease payments. The lease payments are discounted using the interest rate implicit in the
lease or, if not readily determinable, using the incremental borrowing rates in the country of
domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment
to the related right of use asset if the Company changes its assessment if whether it will
exercise an extension or a termination option

The Company as a lessor

Leases for which the Company is a lessor is classified as a finance or operating lease.
Whenever the terms of the lease transfer substantially all the risks and rewards of ownership
to the lessee, the contract is classified as a finance lease. All other leases are classified as
operating leases.

When the Company is an intermediate lessor, it accounts for its interests in the head lease
and the sublease separately. The sublease is classified as a finance or operating lease by
reference to the right-of-use asset arising from the head lease.

For operating leases, rental income is recognized on a straight-line basis over the term of
the relevant lease.

g) Non-current assets held for sale and discontinued operations

An entity shall classify a non-current asset (or disposal group) as held for sale if its carrying
amount will be recovered principally through a sale transaction rather than through
continuing use. This condition is regarded as met only when the asset is available for
immediate sale in its present condition subject only to terms that are usual and customary
for sale of such asset and its sale is highly probable. Management must be committed to
sale, which should be expected to qualify for recognition as a completed sale within one
year from the date of classification.

Non-current assets classified as held for sale are presented separately and measured at the
lower of their carrying amounts immediately prior to their classification as held for sale and
their fair value less costs of disposal. However, some held for sale assets such as financial
assets or deferred tax assets, continue to be measured in accordance with the Company''s
relevant accounting policy for those assets. Once classified as held for sale, the assets are not
subject to depreciation or amortisation.

Discontinued operations are excluded from the results of continuing operations and are
presented as a single amount as profit or loss after tax from discontinued operations in the
standalone statement of profit and loss.

h) Investment property

Investment properties are properties held to earn rentals and/or for capital appreciation
(including property under construction for such purposes). Investment properties are
measured initially at cost including transaction costs. Subsequent to initial recognition the
investment properties are stated at cost less accumulated depreciation.

Depreciation is recognized on a straight-line basis to write down tire cost less estimated
residual value of investment properties other than land.

An investment property is derecognised upon disposal or when the investment property
is permanently withdrawn from use and no future economic benefits are expected from
the disposal. Any gain or loss arising on de-recognition of the property (calculated as
the difference between the net disposal proceeds and the carrying amount of the asset) is
included in statement of profit or loss in the period in which the property is derecognized.

Transition to Ind AS

On transition to Ind AS, the Company has elected to continue with the carrying value of all
its investment properties recognised as at 1 April 2015 measured as per the provisions of
previous GAAP and use that carrying value as the deemed cost of investment properties.

i) Inventories

Inventories being stores and spares are stated at the lower of cost and net realisable value.
However, inventories held for capital consumption are stated at cost.

Cost of inventories:

Cost of stores and spares is determined on weighted average basis.

Net realisable value is the estimated selling price in the ordinary course of business less any
applicable selling expenses.

Provision for obsolescence and slow moving inventory is made based on management''s
best estimates of net realisable value of such inventories.

j) Foreign currency translation

Functional and presentation currency

The financial statements are presented in Indian Rupee (''INR'') which is the functional
currency of the Company, since substantially the entire funding of the Company and its
operational income is denominated in Indian Rupee.

Foreign currency transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains
and losses resulting from the settlement of such transactions and from the re-measurement
of monetary items denominated in foreign currency at period-end exchange rates are
recognized in the statement of profit or loss.

Non-monetary items are not retranslated at period-end and are measured at historical cost
(translated using the exchange rates at the transaction date), except for non-monetary items
measured at fair value which are translated using the exchange rates at the date when fair
value was determined.

k) Financial instruments

Recognition, initial measurement and de-recognition

Financial assets and financial liabilities are recognised when the Company becomes a party
to the contractual provisions of the financial instrument and are measured initially at fair
value adjusted by transactions costs, except for those carried at fair value through profit or
loss which are measured initially at fair value. Subsequent measurement of financial assets
and financial liabilities is described below.

Financial assets are derecognized when the contractual rights to the cash flows from the
financial asset expires, or when the financial asset and all substantial risks and rewards
are transferred. A financial liability is derecognized when it is extinguished, discharged,
cancelled or expires.

Classification and subsequent measurement of financial assets

For the purpose of subsequent measurement, financial assets are classified into the following
categories upon initial recognition:

> Amortised cost

> financial assets at fair value through profit or loss (FVTPL)

> financial assets at fair value through other comprehensive income (FVOCI)

All financial assets except for those at FVTPL are subject to review for impairment at least
at each reporting date to identify whether there is any objective evidence that a financial
asset or a group of financial assets is impaired. Different criteria to determine impairment
are applied for each category of financial assets, which are described below.

All income and expenses relating to financial assets that are recognised in the statement
profit or loss are presented within finance costs or finance income, except for impairment of
trade receivables which is presented within ''other expenses''.

> Amortised cost

A financial asset shall be measured at amortised cost using effective interest rates if both of
the following conditions are met:

a) financial asset is held within a business model whose objective is to hold financial
assets in order to collect contractual cash flows; and

b) contractual terms of the financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding.

Company''s cash and cash equivalents, trade and certain other receivables fall into this category
of financial instruments.

A loss allowance for expected credit losses is recognised on financial assets carried at amortised
cost.

(i) For debtors that are not past due - In respect of trade receivables, the Company applies
the simplified approach of Ind AS 109, which requires measurement of loss allowance at
an amount equal to lifetime expected credit losses. Lifetime expected credit losses are the
expected credit losses that result from all possible default events over the expected life of a
financial instrument.

(II) For debtors considered past due - any enhancement in the accrual done for expected credit
loss on individually significant receivables is made as follows -

- Provision is made for wrong billing, disputed claims from subscribers (excluding
operators covered under the agreements related to IUC/Roaming/MOU) and cases
involving suspension of revenue realization due to proceedings in Court.

- For landline services - 100% provision is made for debtors outstanding for more than
3 years.

- For closed connections, provision is made in respect of outstanding for more than 3
years along with spill over amount for up to 3 years.

- For wireless services (GSM & CDMA) - 100% provision is made for debtors outstanding
for more than 180 days.

(III) For other financial assets - In respect of its other financial assets, the Company assesses if
the credit risk on those financial assets has increased significantly since initial recognition.
If the credit risk has not increased significantly since initial recognition, the Company
measures the loss allowance at an amount equal to 12-month expected credit losses, else at
an amount equal to the lifetime expected credit losses.

When making this assessment, the Company uses the change in the risk of a default
occurring over the expected life of the financial asset. To make that assessment, the Company
compares the risk of a default occurring on the financial asset as at the balance sheet date
with the risk of a default occurring on the financial asset as at the date of initial recognition
and considers reasonable and supportable information, that is available without undue cost
or effort, that is indicative of significant increases in credit risk since initial recognition. The
Company assumes that the credit risk on a financial asset has not increased significantly
since initial recognition if the financial asset is determined to have low credit risk at the
balance sheet date.

> Financial assets at FVTPL

Financial assets at FVTPL include financial assets that either do not meet the criteria for
amortised cost classification or are equity instruments held for trading or that meet certain
conditions and are designated at FVTPL upon initial recognition. Assets in this category are
measured at fair value with gains or losses recognised in the statement of profit or loss. The
fair values of financial assets in this category are determined by reference to active market
transactions or using a valuation technique where no active market exists.

> Financial assets at FVOCI

FVOCI financial assets are either debt instruments that are managed under hold to collect
and sell business model or are non-trading equity instruments that are designated to this
category. FVOCI financial assets are measured at fair value. Gains and losses are recognized
in other comprehensive income and reported within FVOCI reserve within equity, except
for interest and dividend income, impairment losses and foreign exchange differences on
monetary assets, which are recognized in the statement of profit or loss.

Classification and subsequent measurement of financial liabilities

Financial liabilities are measured subsequently at amortized cost using the effective interest
rate, except for financial liabilities held for trading or designated as FVTPL, that are carried
subsequently at fair value with gains or losses recognised in the statement of profit or loss.

All interest-related charges and, if applicable, changes in an instrument''s fair value that are
reported in the statement of profit or loss and are included within finance costs or finance
income.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the
balance sheet if there is a currently enforceable legal right to offset the recognised amounts
and there is an intention to settle on a net basis, to realise the assets and settle the liabilities
simultaneously.

l) Investment in subsidiaries, joint ventures and associates

Investment in equity instruments of subsidiaries, joint ventures and associates are stated at
cost as per Ind AS 27 ''Separate Financial Statements''.

m) Income taxes

Tax expense recognised in the statement of profit or loss comprises the sum of deferred tax
and current tax not recognized in other comprehensive income or directly in equity.

Provision for current tax is made after taking into consideration benefits admissible under
the provisions of Income Tax Act, 1961and in the overseas branches/companies as per the
respective tax laws.

Deferred income taxes are calculated using the liability method on temporary differences
between the carrying amounts of assets and liabilities and their tax bases. However, deferred
tax is not provided on the initial recognition of an asset or liability unless the related
transaction is a business combination or affects tax or accounting profit. Deferred tax assets
and liabilities are calculated, without discounting, at tax rates that are expected to apply
to their respective period of realisation, provided those rates are enacted or substantively
enacted by the end of the reporting period.

Deferred tax asset (''DTA'') is recognized for all deductible temporary differences, carry
forward of unused tax credit and unused tax losses, to the extent that it is probable that
taxable profit will be available against which deductible temporary difference, and the
carry forward of unused tax credits and unused tax losses can be utilised or to the extent of
taxable temporary differences.

Minimum Alternate Tax (MAT) credit is recognised, as an asset only when and to the extent
there is convincing evidence that the company will pay normal income tax during the
specified period. In the year in which the MAT credit becomes eligible to be recognised as
an asset, the said asset is created by way of a credit to the standalone statement of profit and
loss and classified under ''deferred tax asset''.

n) Impairment testing of intangible assets and property, plant and equipment

For impairment assessment purposes, assets are grouped at the lowest levels for which
there are largely independent cash inflows (cash generating units). As a result, some assets
are tested individually for impairment and some are tested at cash-generating unit level.

For intangible assets with indefinite useful life that are tested at least annually. For other
assets, the Company assesses at each balance sheet date whether there is any indication that
any asset, may be impaired. If any such indication exists, the carrying value of such assets
is reduced to its estimated recoverable amount and the amount of such impairment loss is
charged to the standalone statement of profit and loss. If, at the balance sheet date there is
an indication that a previously assessed impairment loss no longer exists, the recoverable
amount is reassessed, which is the higher of fair value less costs of disposal and value-in-use
and the asset is reflected at the recoverable amount subject to a maximum of depreciated
historical cost.

To determine the value-in-use, management estimates expected future cash flows from
each cash-generating unit and determines a suitable interest rate in order to calculate the
present value of those cash flows. The data used for impairment testing procedures are
directly linked to the Company''s latest approved budget, adjusted as necessary to exclude
the effects of future re-organisations and asset enhancements. Discount factor reflects
current market assessment of the time value of money and asset-specific risks factors.


Mar 31, 2021

1 Corporate information

Mahanagar Telephone Nigam Limited (''MTNL'' or ''Company''), a public sector enterprise, is engaged in providing telecom services in the geographical area of Mumbai and Delhi. The registered office of the company is located at Mahanagar Doorsanchar Sadan, 5th Floor, 9, CGO Complex, Lodhi Road, New Delhi - 110003.The company''s shares are listed with Bombay Stock Exchange, National Stock Exchange and Delhi Stock Exchange.

2 Basis ofpreparation

These standalone financial statements have been prepared in accordance with the Indian Accounting Standards (hereinafter referred to as the ''Ind AS'') as notified by Ministry of Corporate Affairs pursuant to section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 as amended and other relevant provisionsof the Act.

These financial statements are separate financial statements of the Company. The Company has also prepared consolidated financial statements for the year ended 31 March 2021 in accordance with Ind AS 110 and the Board of Directors approved the same for issue on 29th June 2021.

The financial statements have been prepared on accrual and going concern basis. All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria as set out in the Division II of Schedule III to the Companies Act, 2013. Based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.

The financial statements have been prepared under the historical cost convention except for the following -

• Certain financial assets and liabilities which are measured at fair value;

• Defined benefit plans - plan assets measured at fair value; and

• Assets held for sale - measured at fair value less costs of disposal

3 Summary of significant accounting policies

a) Revenue recognition

Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those products or services. Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, credits, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers. Revenue is recognized on accrual basis, including income from subscribers whose disputes are pending resolution, and closure of the subscribers'' line.

a) In the case of contracts involving single performance obligation, accounting for revenue is done on accrual basis and revenue is recognized over the period in which services are rendered.

b) In case of contracts involving multiples promises, which involve delivery or performance of multiple products, services or right to use assets, evaluation is donefor all deliverables in an arrangement to determine whether they represent separate performance obligations at the inception of arrangement. Total consideration related to the bundled contract is allocated among the different performance obligations based on their standalone selling prices. In case the relative value of different performance obligations cannot be determined on a reasonable basis, the total consideration is allocated to the different performance obligations based on residualvalue.

c) For sale of prepaid products, processing fee on recharge coupons is recognized over the customer relationship period or coupon validity period, whichever is lower.

d) Activation &installation revenue and related costs (including subscriber acquisition cost), not exceeding the respective revenue, are to be deferred and amortized over the estimated customer relationship period. The excess of costs over revenue,if anyareto be expensed as incurred.

e) Income from sale of prepaid calling cards, virtual calling cards (VCC) and prepaid internet connection cards is recognised basis the usage or expiry of cards, whichever is earlier.

f) Interest income/expenditure is to be recognized based on effective interest rate [EIR] i.e. the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset to the net carrying amount of the financial assets. The future cash flows include all other transaction costs fees paid or received, premiums or discounts if any etc. The difference between the actual interest rate and effective interest ratewill be routed through statement of profit or loss.

g) Income from services includes income from leasing of infrastructure to other service providers. Cost of related stores and materials consumed in execution is charged to project or revenue job at the time of issue. However, spillover itemsat tire end of the year lying at various stores are valued at weighted average cost.

h) Sale proceeds of scrap arising from maintenance & project works are taken into miscellaneous income in the year of sale.

Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is pending) when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms.

Unearned and deferred revenue ("contract liability") is recognised when there is billing in excess of revenues or advances received form the customer.

b) Post-employment benefits

a) Defined contribution plan

A defined contribution plan is a plan under which the Company pays fixed contributions into an independent fund administered by the government. The Company has no legal or constructive obligations to pay further contributions after its payment of the fixed contribution. Company''s defined contribution plans include provident fund, pension contribution and leave salary.

(i) In respect of absorbed combined service pension optees in MTNL, provision for pension contribution is payable to the Govt. of India as per FR-116 as in Bharat Sanchar Nigam Limited (''BSNL'') with equivalent BSNL pay scales and it is expensed off in the relevant year.

(ii) In respect of officials who are on deemed deputation from Department of Telecommunications (DoT) and other Government department, the provision for pension contribution is payable to the Government of India at the rates specified in Appendix 2(A) to FR 116 and 117 of FR. & SR and it is expensed off in the relevant year. Further, provision for leave encashment is payable @ 11% of pay as specified in appendix 2(B) of F.R.116 and 117 of F.R. & S.R. and it is expensed off in the relevant year.

b) Defined benefit plan

The defined benefit plans sponsored by the Company defines the amount of the benefit that an employee will receive on completion of services by reference to length of service and last drawn salary. The legal obligation for any benefits remains with the Company. The Company''s defined benefit plans include amounts provided for gratuity.

(i) For Absorbed CPF optees and direct recruits of MTNL, the Company made contribution to provident fund Trust administered by the Company, which was recognised by the income tax authorities. Following the withdrawal of the Company''s exemption from the provident fund, all accumulations in the employees'' accounts on the employer''s accounts, as well as employee contribution and interest thereon, have been transferred to the Recognised Provident Fund, and with effect from July 2020 the Company has no legal or constructive obligations to pay further contributions after paying the fixed contribution to Recognised Provident Fund.

(ii) For Absorbed CPF optees and direct recruits of MTNL, the liability for gratuity is estimated using; actuarial valuation as the present value of the defined benefit obligation (DBO) at the reporting date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains or losses and past service costs.Actuarial gains and losses arising from past experience and changes in actuarial assumptions are credited or charged to the statement of OCI in the year in which such gains or losses are determined.

(iii) For absorbed combined service pension optee employees in MTNL, no provision is made for the pensionary benefits viz pension and gratuity, except for the amounts due to difference in pay scales of MTNL and BSNL which is payable by MTNL to the Government of India till next wage revision by which time MTNL and BSNL shall achieve pay scale parity. Long-term provisions in this respect have been discounted using the applicable discount rates.

c) Other long-term employee benefits

(i) Liability for leave encashment for all employees of MTNL is accounted for on actuarial valuation basis, performed by an independent actuary using the projected unit credit method as on the reporting date. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recorded in the standalone statement of profit and loss in the year in which such gains or losses arise.

(ii) For post-retirement medical benefits, no provision is made since insurance policy is taken periodically and the premium is expensed off in the relevant year.

d) Short-term benefits comprise of employee costs such as salaries, bonus, ex-gratia, shortterm compensated absences are accrued in the year in which the associated services are rendered by employees of the Company.

e) Bonus/Ex-gratia is paid based on the productivity linked parameters and it is to be provided accordingly subject to the profitability of the company.

c) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes asubstantial periodof time, which is generally considered as one year, to get ready for its intended use or sale are capitalised as part of the cost of the asset. Further, projects with estimated cost up to ''30 crores generally take a year to complete. Allother borrowing costs are expensed in the period in which they occur and reported in finance cost. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.Transaction costs in respect of long-term borrowings are amortized over the tenor of respective loans using effective interest rate.

d) Property, plant and equipment

Recognition and initial measurement

Freehold land is carried at historical cost. All other items of property, plant and equipment are statedat cost less accumulated depreciation. The cost comprises purchase price, borrowing cost if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discount and rebates are deducted in arriving at the purchase price. Assets are capitalized, as per the practices described below, to the extent completion certificates have been issued, wherever applicable.

i. Land is capitalized when possession of land is taken.

ii. Building is capitalized to the extent it is ready for use.

iii. Apparatus &plants principally consisting of telephone exchange equipment and air conditioning plants are capitalised on commissioning of the exchange. Subscriber''s installations are capitalized as and when the exchange is commissioned and put to use either in full or in part. Identifiable components in Apparatus &plants having significant cost and/or separate useful life than the main asset i.e. ADSL, VDSL & MES CPES, UPS/Batteries and Subscriber Telephone Instruments are capitalised separately on commissioning and put to use.

iv. Lines &wires are capitalised as and when laid or erected to the extent completion certificates have been issued.

v. Cables are capitalised as and when ready for connection with the main system.

vi. Vehicles and other assets are capitalized as and when purchased.

(a) Property, plant and equipment are being verified by the management at reasonable intervals i.e. once in every three years by rotation. The physical verification of underground cables is done on the basis of working of network and based on records available together with a certificate from the technical officers.

(b) Expenditure on replacement of assets, equipment, instruments and rehabilitation work is capitalized if it is expected to generate future economic benefits for more than one year.

(c) Upon scrapping/decommissioning of assets, these continue to be classified in property, plant and equipment unless they are classified as ''held for sale'' and carried at the lower of carrying value or fair value less costs of disposal. Resultant loss, if any, is charged to standalone statement of profit and loss.

(d) Costofmajor inspection is recognized in the carrying amount of plant and equipment if it is expected to generate economic benefits and its life is more than one year.

(e) On replacement of significant components of plant and equipment, recognition is made for such replacement of components as individual assets with specific useful life and depreciated as if these components are initially recognised as separate asset.

(f) In case an item of property, plant and equipment is acquired on deferred payment basis, interest expenses included in deferred payment is recognised as interest expense and not included in cost of asset.

(g) The present value of expected cost for decommissioning of the asset on expiry of its useful life is included in the cost of respective asset. A provision for decommissioning is also created with equivalent amount.

(h) Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognised in the statement of profit or loss as ''other income'' or ''other expenses'', as the case may be, on the date of disposal.

Subsequent measurement

(a) Depreciation is provided by the Company using straight-line method on the basis of the useful lives prescribed in Schedule II of the Companies Act, 2013 except in respect of Apparatus & Plant (including Towers,Transceivers, switching centres, transmission & other network equipment) and identifiable components in Apparatus &plant having significant cost and/ or separate useful life than the main asset, mobile handsets for service connection,low cost aerial optical fibre cableand major structural repairs of the building which are depreciated at the rates based on technical evaluation of useful life of these assets, which are lower than the lives prescribed in Schedule II of the Companies Act 2013.The estimated useful lives and residual value are reviewed at the end of each reporting period.

For Apparatus &plant (including Towers, Transceivers, switching centres, transmission & other network equipment), Office equipment&Cable having useful life of 10 years other than following assets/components with shorter useful lives -

Name of assets

Useful life (years)

1. UPS/Battery up to 300AH capacity

4

2. UPS/Battery more than 300AH capacity

7

3. ADSL, VDSL & MES CPES

5

4. Subscribers telephone instruments

5

For Office Equipment having useful life of 5 Years other than following assets/components with shorter useful lives -

Name of assets

Useful life (years)

5. Mobile handset for service connection

3

For Cable having useful life of 18 years other than following assets/components with shorter useful lives -

Name of assets

Useful life (years)

6. Low cost aerial optical fibre cable

3

For Office Building & exchange having useful life of 60 and 30 years respectively other than following assets/ components with shorter useful lives -

Name of assets

Useful life (years)

7. Others (Major structural repair of building)

7

(b) 100 % depreciation is provided on assets immaterial invalueup to ''0.05 lakh, in the year of purchase itself,other than those forming part of project, the cost of which is below ''0.10 lakh in case of Apparatus &plants, Training equipment &testing equipment and ''2.00 lakh for partitions, which is not considered to be material.

(c) Where, during any financial year, any addition has been made to any asset, or where any asset has been sold, discarded, demolished or destroyed, or significant components replaced; depreciation on such assets is calculated on a pro rata basis as individual assets with specific useful life from the date of such addition or, as the case may be, up to the date on which such asset has been sold, discarded, demolished or destroyed or replaced.

Transition to Ind AS

On transition to Ind AS, the Company has elected to continue with the carrying value of all its property, plant and equipment recognised as at 1 April 2015 measured as per the provisions of previous GAAP and use that carrying value as the deemed cost of property, plant and equipment.

e) Intangible assets

Intangible assets are stated at their cost of acquisition and/or development less accumulated amortisation. Intangible assets including application software are capitalised when ready for use.All intangible assets with definite useful life are amortized on a straight line basis over the estimated useful lives and a possible impairment is assessed if there is an indication that the intangible asset may be impaired.

(a) Intangible assets represented by one-time upfront payment for 3G spectrum is amortizedon straight-line basis over the period of license i.e. 20 years.

(b) Application software is amortised on straight-line basis over the useful life of the assets which is considered as 10 years.

Transition to Ind AS

On transition to Ind AS, the Company has elected to continue with the carrying value of all its intangible assets recognised as at 1 April 2015 measured as per the provisions of previous GAAP and use that carrying value as the deemed cost of intangible assets.

f) Leases

The Company as a lessee

The Company''s lease asset classes primarily consist of leases for land, vehicles, BTS sites, towers and buildings. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:

(i) the contractinvolves the use of an identified asset;

(ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease; and

(iii) the Company has the right to direct the use of the asset.

Atthedateofcommencement of the lease, the Company recognises a right-of-use asset ("ROU") and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.

Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.

The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.

The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option

The Company as a lessor

Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.

When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.

For operating leases, rental income is recognized on a straight-line basis over the term of the relevant lease.

g) Non-current assets held for sale and discontinued operations

An entity shall classify a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sale of such asset and its sale is highly probable. Management must be committed to sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets classified as held for sale are presented separately and measured at the lower of their carrying amounts immediately prior to their classification as held for sale and their fair value less costs of disposal. However, some held for sale assets such as financial assets or deferred tax assets, continue to be measured in accordance with the Company''s relevant accounting policy for those assets. Once classified as held for sale, the assets are not subject to depreciation or amortisation.

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the standalonestatement of profit and loss.

h) Investment property

Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes). Investment properties are measured initially at cost including transaction costs. Subsequent to initial recognition the investment properties are stated at cost less accumulated depreciation.

Depreciation is recognized on a straight-line basis to write down the cost less estimated residual value of investment properties other than land.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on de-recognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in statement of profit or loss in the period in which the property is derecognized.

Transition to Ind AS

On transition to Ind AS, the Company has elected to continue with the carrying value of all its investment properties recognised as at 1 April 2015 measured as per the provisions of previous GAAP and use that carrying value as the deemed cost of investment properties.

i) Inventories

Inventories being stores and spares are stated at the lower of cost and net realisable value. However, inventories held for capital consumption are stated at cost.

Cost of inventories:

Cost of stores and spares is determined on weighted average basis.

Net realisable value:

Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling expenses.

Provision for obsolescence and slow moving inventory is made based on management''s best estimates of net realisable value of such inventories.

j) Foreign currency translation

Functional and presentation currency

The financial statements are presented in Indian Rupee (''INR'') which is the functional currency of the Company, since substantially the entire funding of the Company and its operational income is denominated in Indian Rupee.

Foreign currency transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items denominated in foreign currency at period-end exchange rates are recognized in the statement of profit or loss.

Non-monetary items are not retranslated at period-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.

k) Financial instruments

Recognition, initial measurement and de-recognition

Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through profit or loss which are measured initially at fair value. Subsequent measurement of financial assets and financial liabilities is described below.

Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expires, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled or expires.

Classification and subsequent measurement of financial assets

For the purpose of subsequent measurement, financial assets are classified into the following categories upon initial recognition:

> Amortised cost

> financial assets at fair value through profit or loss (FVTPL)

> financial assets at fair value through other comprehensive income (FVOCI)

All financial assets except for those at FVTPL are subject to review for impairment at least at each reporting date to identify whether there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets, which are described below.

All income and expenses relating to financial assets that are recognised in the statement profit

or loss are presented within finance costs or finance income, except for impairment of trade receivables which is presented within ''other expenses''.

> Amortised cost

A financial asset shall be measured at amortised cost using effective interest rates if both of the following conditions are met:

a) financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

b) contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amountoutstanding.

Company''s cash and cash equivalents, trade and certain other receivables fall into this category of financial instruments.

A loss allowance for expected credit losses is recognised on financial assets carried at amortised cost.

(i) For debtors that are not past due - In respect of trade receivables, the Company appliesthe simplified approach of Ind AS 109, which requires measurement of loss allowance at an amount equal to lifetime expected credit losses. Lifetime expected credit losses arethe expected credit losses that result from all possible default events over the expected life of a financial instrument.

(II) For debtors considered past due - any enhancement in the accrual done for expected credit loss on individually significant receivables is made as follows -

- Provision is made for wrong billing, disputed claims from subscribers (excluding operators covered under the agreements related to IUC/Roaming/MOU) and cases involving suspension of revenue realization due to proceedings in Court.

- For landline services - 100% provision is made for debtors outstanding for more than 3 years.

- For closed connections, provision is made in respect of outstanding for more than 3 years along with spill over amount for up to 3 years.

- For wireless services (GSM & CDMA) - 100% provision is made for debtors outstanding for more than 180 days.

(III) For other financial assets - In respect of its other financial assets, the Company assesses if the credit risk on those financial assets has increased significantly since initial recognition. If the credit risk has not increased significantly since initial recognition, the Company measures the loss allowance at an amount equal to 12-month expected credit losses, else at an amount equal to the lifetime expected credit losses.

When making this assessment, the Company uses the change in the risk of a default occurring over the expected life of the financial asset. To make that assessment, the Company compares the risk of a default occurring onthe financial asset as at the balance sheet date with therisk of a default occurring on the financial asset as at thedate of initial recognition and considers reasonable andsupportable information, that is available without unduecost or effort, that is indicative of significant increasesin credit risk since initial recognition. The

Companyassumes that the credit risk on a financial asset hasnot increased significantly since initial recognition if thefinancial asset is determined to have low credit risk at thebalance sheet date.

> Financial assets at FVTPL

Financial assets at FVTPL include financial assets that either do not meet the criteria for amortised cost classification or are equity instruments held for trading or that meet certain conditionsandare designated at FVTPL upon initial recognition. Assets in this category are measured at fair value with gains or losses recognised in the statement of profit or loss. The fair values of financial assets in this category are determined by reference to active market transactionsorusing a valuation technique where no active market exists.

> Financial assets at FVOCI

FVOCI financial assets are either debt instruments that are managed under hold to collect and sell business model or are non-trading equity instruments that are designated to this category. FVOCI financial assets are measured at fair value. Gains and losses are recognized in other comprehensive income and reported within FVOCI reserve within equity, except for interest and dividend income, impairment losses and foreign exchange differences on monetary assets, which are recognized in the statement of profit or loss.

Classification and subsequent measurement of financial liabilities

Financial liabilities are measured subsequently at amortized cost using the effective interest rate, except for financial liabilities held for trading or designated as FVTPL, that are carried subsequently at fair value with gains or losses recognised in the statement of profit or loss.

All interest-related charges and, if applicable, changes in an instrument''s fair value that are reported in the statement of profit or loss and are included within finance costs or finance income.

Offsetting offinancialinstruments

Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

l) Investment in subsidiaries, joint ventures and associates

Investment in equity instruments of subsidiaries, joint ventures and associates are stated at cost as per Ind AS 27 ''Separate Financial Statements''.

m) Income taxes

Tax expense recognised in the statement of profit or loss comprises the sum of deferred tax and current tax not recognized in other comprehensive income or directly in equity.

Provision for current tax is made after taking into consideration benefits admissible under the provisions of Income Tax Act, 1961and in the overseas branches/companies as per the respective tax laws.

Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit.Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided those rates are enacted or substantively enacted by the end of the reporting period.

Deferred tax asset (''DTA'') is recognized for all deductible temporary differences, carry forward of unused tax credit and unused tax losses, to the extent that it is probable that taxable profit will be available against which deductible temporary difference, and the carry forward of unused tax credits and unused tax losses can be utilised or to the extent of taxable temporary differences.

Minimum Alternate Tax (MAT) credit is recognised, as an asset only whenand totheextent there is convincing evidence that the company will pay normal income tax during the specified period. In the year in which the MAT credit becomes eligible to be recognised as an asset, the said asset is created by way of a credit to the standalonestatement of profit and loss and classified under ''deferred tax asset''.

n) Impairment testing of intangible assets and property, plant and equipment

For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.

For intangible assets with indefinite useful life that are tested at least annually. For other assets, the Companyassesses at each balance sheet date whether there is any indication that any asset, may be impaired. If any such indication exists, the carrying value of such assets is reduced to its estimated recoverable amount and the amount of such impairment loss is charged to the standalonestatement of profit and loss. If, at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed, which is the higher of fair value less costs of disposal and value-in-use and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.

To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Company''s latest approved budget, adjusted as necessary to exclude the effects of future re-organisations and asset enhancements. Discount factor reflects current market assessment of the time value of money and asset-specific risks factors.

o) Provisions, contingent liabilities and contingent assets

A provision is recognised when the Company has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic resources will be required from the Company and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted

to their present values, where the time value of money is material.

In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognized or disclosure is made.

Contingent liabilities are disclosed in case of present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation or the amountcannot be estimated reliably.

Contingent assets are notrecognised. However, when inflow of economic benefit is probable, related asset is disclosed.

p) Government grants

Government grants are recognised if it is sufficiently certain that the assistance will be granted and the conditions attached to assistance are satisfied. Where the grant relates to specified asset, it is recognised as deferred income, and amortized over the expected useful life of the asset. Other grants are recognised in the statement of profit and loss concurrent to the expenses to which such grants relate/ are intended to cover.

Where the Company receives non-monetary grants, the asset and the grant are recorded gross at fair amounts and released to the statement of profit and loss over the expected useful life and pattern of consumption of the benefit of the underlying asset.

q) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments(original maturity less than 3 months) that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

r) Adjustmentpertainingto earlier years

Income from services and other income pertaining to prior years is not disclosed as prior period itemfor each individual transaction not exceeding ''1.00 lakh and similarly items of expenditure for each individual transaction not exceeding '' 1.00 lakh are considered as expenditure of current year.

In respect of other itemsof income (including operatingincome and other income) and expenditure relating to prior periods, the net effect of which on retained earning does not exceed 1% of turnover is treated as income/expenditure of current year.

s) Equity, reserves and dividend payments

Share capital represents the nominal value of shares that have been issued. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with issuing of shares are deducted from share premium account, net of any related income tax benefits.

Other components of equity include the following:

• Re-measurement of defined benefit liability - comprises the actuarial gain or loss from changes in demographic and financial assumptions and return on plan assets

• Reserve for contingencies

• Reserve for research and development

• Reserve for debenture redemption

• General reserve

• Other transactions recorded directly in other comprehensive income.

Retained earnings include all current and prior period retained profits. All transactions with owners of the parent are recorded separately within equity. Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have beenapproved in a general meeting prior to the reporting date.

Standards issued but not yet effective:

Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards. There are no new standards or amendments to existing standards, whichare applicable to the Company and will be effective from 1 April 2021.

Significant management judgement in applying accounting policies and estimation uncertainty

The preparation of the Company''s standalone financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the assets or liabilities in future periods.

Significant management judgements

The following are significant management judgements in applying the accountingpolicies of the Company that have significant effect on the financial statements.

Recognition of deferred tax assets - The extent to which deferred tax assets can be recognized is based on an assessment of the probability of the Company''s future taxable income against which the deferred tax assets can be utilized. In addition, significant judgement is required in assessing the impact of any legal or economic limits or uncertainties in various tax jurisdictions

Evaluation of indicators for impairment of assets - The evaluation of applicability of indicators of impairment of assets requires assessment of several external and internal factors which could result in deterioration of recoverable amount of the assets.

Assessment lease term -Lease term includes non-cancellable periods of lease along with extension options reasonably certain to be exercised and termination options reasonably certain not to be exercised. The assessment of whether extension options and termination options are reasonably certain to be exercised or not to be exercised, involve significant management judgement based upon economic incentives to extend or terminate the lease.

Activation and installation fees - The Company receives activation and installation fees from new customers. These fees together with directly attributable costs are amortised over the estimated duration of customer relationship period. The customer relationship period is reviewed periodically. The estimated relationship periodprincipally reflects management''s view of the average economic relationship periodof the customer base and is assessed by reference to key performance indicators (KPIs) which are linked to establishment/ ascertainment of customer relationship period. A change in such KPIs may lead to a change in the estimated useful life and an increase/ decrease in the amortisation income/charge. The Company believes that the change in such KPIs will not have any material effect on the financial statements.

Recoverability of advances/receivables - At each balance sheet date, based on discussions with the respective counter-parties and internal assessment of their credit worthiness, the management assesses the recoverability of outstanding receivables and advances. Such assessment requires significant management judgement based on financial position of the counter-parties, market information and other relevant factor.

Classification of assets and liabilities into current and non-current - The management classifies the assets and liabilities into current and non-current categories based on management''s expectation of the timing of realisation of the assets or timing of contractual settlement of liabilities.

Impairment of assets - In assessing impairment, management estimates the recoverable amounts of each asset or cash-generating unit (in case of non-financial assets) based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future cash flows and the determination of a suitable discount rate

Useful lives of depreciable/amortisable assets (tangible and intangible) - Management reviews its estimate of the useful lives of depreciable/amortisable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical and economic obsolescence that may change the utility of certain software, customer relationships, IT equipment and other plant and equipment. During the current year, the Company has changed its estimate of useful live for mobile handsets used for service connection from 4 years to 3 years. The impact of such change in useful live is immaterial on the Company''s financial statements.

Inventories - Management estimates the cost of inventories including cost of materials and overheads considered attributable to the production of such inventories, taking into account the most reliable evidence available including actual cost of production, etc. Management also estimates the net realisable values of inventories, taking into account the most reliable evidence available at each reporting date. The future realisation of these inventories may be affected by future technology or other market-driven changes that may reduce future selling prices.

Defined benefit obligation (DBO) - Management''s estimate of the DBO is based on a number of critical underlying assumptions such as standard rates of inflation, medical cost trends, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses

Fair value measurements - Management applies valuation techniques to determine the fair value of financial instruments (where active market quotes are not available) and non-financial assets. This involves developing estimates and assumptions consistent with how market participants would price the instrument. Management bases its assumptions on observable data as far as possible but this is not always available. In that case management uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm''s length transaction at the reporting date.


Mar 31, 2018

1. Summary of significant accounting policies

a) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received/receivable net of discounts, process waivers, and VAT, service tax/GST or duty. Revenue is recognized on accrual basis, including income from subscribers whose disputes are pending resolution, and closure of the subscribers’ line.

a) In the case of contracts involving delivery of single service element, accounting for revenue would be done on accrual basis and revenue would be recognized over the period in which services are rendered.

b) In case of multi-element revenue arrangements, which involve delivery or performance of multiple products, services or right to use assets, evaluation will be done of all deliverables in an arrangement to determine whether they represent separate units of accounting at the inception of arrangement. Total arrangement consideration related to the bundled contract is allocated among the different elements based on their relative fair values (i.e., ratio of the fair value of each element to the aggregated fair value of the bundled deliverables). In case the relative fair value of different components cannot be determined on a reasonable basis, the total consideration is allocated to the different components based on residual value method.

c) For sale of prepaid products, processing fee on recharge coupons is recognized over the customer relationship period or coupon validity period, whichever is lower

d) Activation &installation revenue and related costs, not exceeding the respective revenue, are to be deferred and amortized over the estimated customer relationship period. The excess of costs over revenue, if any, are to be expensed as incurred. Subscriber acquisition costs are to be expensed as incurred.

e) Income from sale of prepaid calling cards, virtual calling cards (VCC) and prepaid internet connection cards is recognised basis the usage or expiry of cards, whichever is earlier.

f) Interest income/expenditure is to be recognized based on effective interest rate [EIR] i.e. the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset to the net carrying amount of the financial assets. The future cash flows include all other transaction costs fees paid or received, premiums or discounts if any etc. The difference between the actual interest rate and effective interest will be routed through statement of profit or loss.

g) Income from services includes income from leasing of infrastructure to other service providers. Cost of related stores and materials consumed in execution is charged to project or revenue job at the time of issue. However, spill over items at the end of the year lying at various stores are valued at weighted average cost.

h) Sale proceeds of scrap arising from maintenance & project works are taken into miscellaneous income in the year of sale.

b) Post-employment benefits

a) Defined contribution plan

A defined contribution plan is a plan under which the Company pays fixed contributions into an independent fund administered by the government. The Company has no legal or constructive obligations to pay further contributions after its payment of the fixed contribution. Company’s defined contribution plans include provident fund, pension contribution and leave salary.

(i) In respect of absorbed combined service pension optees in MTNL, provision for pension contribution is payable to the Govt. of India as per FR-116 as in Bharat Sanchar Nigam Limited (‘BSNL’) with equivalent BSNL pay scales and it is expensed off in the relevant year

(ii) In respect of officials who are on deemed deputation from Department of Telecommunications (DoT) and other Government departments, the provision for pension contribution is payable to the Government of India at the rates specified in Appendix 2(A) to FR 116 and 117 of FR. & SR and it is expensed off in the relevant year. Further, provision for leave encashment is payable @ 11% of pay as specified in appendix 2(B) of F.R.116 and 117 of F.R. & S.R. and it is expensed off in the relevant year

b) Defined benefit plan

The defined benefit plans sponsored by the Company defines the amount of the benefit that an employee will receive on completion of services by reference to length of service and last drawn salary. The legal obligation for any benefits remains with the Company. The Company’s defined benefit plans include amounts provided for gratuity and provident fund.

(i) For Absorbed CPF optees and direct recruits of MTNL, the Company makes contribution to provident fund Trust administered by the Company, which is recognised by the income tax authorities. Both the employer and employee contribute to this Fund and such contributions together with interest accumulated thereon are payable to employees at the time of their separation from the Company or retirement, whichever is earlier. The interest rate payable to the members of the Trust is not lower than the rate of interest declared annually by the Government under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, on account of interest is to be made good by the Company. Accordingly, this is accounted for a defined benefit plan and any shortfall in the Fund is accounted as expense in the books of the company.

(ii) For Absorbed CPF optees and direct recruits of MTNL, the liability for gratuity is estimated using actuarial valuation as the present value of the defined benefit obligation (DBO) at the reporting date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains or losses and past service costs. Actuarial gains and losses arising from past experience and changes in actuarial assumptions are credited or charged to the statement of OCI in the year in which such gains or losses are determined.

(iii) For absorbed combined service pension optee employees in MTNL, no provision is made for the pensionary benefits viz pension and gratuity, except for the amounts due to difference in pay scales of MTNL and BSNL which is payable by MTNL to the Government of India till next wage revision by which time MTNL and BSNL shall achieve pay scale parity. Long-term provisions in this respect have been discounted using the applicable discount rates.

c) Other long-term employee benefits

(i) Liability for leave encashment for all employees of MTNL is accounted for on actuarial valuation basis, performed by an independent actuary using the projected unit credit method as on the reporting date. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recorded in the standalone statement of profit and loss in the year in which such gains or losses arise.

(ii) For post-retirement medical benefits, no provision is made since insurance policy is taken periodically and the premium is expensed off in the relevant year.

d) Short-term benefits comprise of employee costs such as salaries, bonus, ex-gratia, short-term compensated absences are accrued in the year in which the associated services are rendered by employees of the Company.

e) Bonus/Ex-gratia is paid based on the productivity linked parameters and it is to be provided accordingly subject to the profitability of the company.

c) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time, which is generally considered as one year, to get ready for its intended use or sale are capitalised as part of the cost of the asset. Further, projects with estimated cost up to ‘30 crores generally take a year to complete. All other borrowing costs are expensed in the period in which they occur and reported in finance cost. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Transaction costs in respect of long-term borrowings are amortized over the tenor of respective loans using effective interest method.

d) Property, plant and equipment

Recognition and initial measurement

Freehold land is carried at historical cost. All other items of property, plant and equipment are statedat cost less accumulated depreciation. The cost comprises purchase price, borrowing cost if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discount and rebates are deducted in arriving at the purchase price. Assets are capitalized, as per the practices described below, to the extent completion certificates have been issued, wherever applicable.

i. Land is capitalized when possession of land is taken.

ii. Building is capitalized to the extent it is ready for use.

iii. Apparatus &plants principally consisting of telephone exchange equipment and air conditioning plants are capitalised on commissioning of the exchange. Subscriber’s installations are capitalized as and when the exchange is commissioned and put to use either in full or in part. Identifiable components in Apparatus &plants having significant cost and/or separate useful life than the main asset i.e. ADSL, VDSL & MES CPES, UPS/Batteries and Subscriber Telephone Instruments are capitalised separately on commissioning and put to use.

iv. Lines &wires are capitalised as and when laid or erected to the extent completion certificates have been issued.

v. Cables are capitalised as and when ready for connection with the main system.

vi. Vehicles and other assets are capitalized as and when purchased.

(a) Property, plant and equipment are being verified by the management at reasonable intervals i.e. once in every three years by rotation. The physical verification of underground cables is done on the basis of working of network and based on records available together with a certificate from the technical officers.

(b) Expenditure on replacement of assets, equipment, instruments and rehabilitation work is capitalized if it is expected to generate future economic benefits for more than one year.

(c) Upon scrapping/decommissioning of assets, these continue to be classified in property, plant and equipment unless they are classified as ‘held for sale’ and carried at the lower of carrying value or fair value less costs to sell. Resultant loss, if any, is charged to standalone statement of profit and loss.

(d) Cost of major inspection is recognized in the carrying amount of plant and equipment if it is expected to generate economic benefits and its life is more than one year

(e) On replacement of significant components of plant and equipment, recognition is made for such replacement of components as individual assets with specific useful life and depreciated as if these components are initially recognised as separate asset.

(f) In case an item of property, plant and equipment is acquired on deferred payment basis, interest expenses included in deferred payment is recognised as interest expense and not included in cost of asset.

(g) The present value of expected cost for decommissioning of the asset on expiry of its useful life is included in the cost of respective asset. A provision for decommissioning is also created with equivalent amount.

(h) Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognised in the statement of profit or loss as ‘other income’ or ‘other expenses’, as the case may be, on the date of disposal.

Subsequent measurement

(a) Depreciation is provided by Parent using straight-line method on the basis of the useful lives prescribed in Schedule II of the Companies Act, 2013 except in respect of Apparatus & Plant (including Towers, Transceivers, switching centers, transmission & other network equipment) and identifiable components in Apparatus &plant having significant cost and/or separate useful life than the main asset, mobile handsets for service connection and low cost aerial optical fibre cable which are depreciated at the rates based on technical evaluation of useful life of these assets, which are lower than the lives prescribed in Schedule II of the Companies Act 2013. The estimated useful lives and residual value are reviewed at the end of each reporting period.

For Apparatus & plant (including Towers, Transceivers, switching centres, transmission & other network equipment), Office equipment & Cable having useful life of 10 Years other than following assets/ components with shorter useful lives -

For Office Equipment having useful life of 5 Years other than following assets/components with shorter useful lives -

(b) 100 % depreciation is provided on assets immaterial in value up to Rs. 0.05 lakh, in the year of purchase itself,other than those forming part of project, the cost of which is below Rs. 0.10 lakh in case of Apparatus & plants, Training equipment & testing equipment and Rs. 2.00 lakh for partitions, which is not considered to be material.

(c) Value of leasehold Land is amortized over the period of lease.

(d) Where, during any financial year, any addition has been made to any asset, or where any asset has been sold, discarded, demolished or destroyed, or significant components replaced; depreciation on such assets is calculated on a pro rata basis as individual assets with specific useful life from the date of such addition or, as the case may be, up to the date on which such asset has been sold, discarded, demolished or destroyed or replaced.

Transition to Ind AS

On transition to Ind AS, the Company has elected to continue with the carrying value of all its property, plant and equipment recognised as at 1 April 2015 measured as per the provisions of previous GAAP and use that carrying value as the deemed cost of property, plant and equipment.

e) Intangible assets

Intangible assets are stated at their cost of acquisition and/or development less accumulated amortisation. Intangible assets including application software are capitalised when ready for use. All intangible assets with definite useful life are amortized on a straight line basis over the estimated useful lives and a possible impairment is assessed if there is an indication that the intangible asset may be impaired.

(a) Intangible assets represented by one-time upfront payment for 3G spectrum is amortized on straight-line basis over the period of license i.e. 20 years.

(b) Application software is amortised on straight-line basis over the useful life of the assets which is considered as 10 years.

Transition to Ind AS

On transition to Ind AS, the Company has elected to continue with the carrying value of all its intangible assets recognised as at 1 April 2015 measured as per the provisions of previous GAAP and use that carrying value as the deemed cost of intangible assets.

f) Leased assets Company as a lessee

Finance leases

Management applies judgment in considering the substance of a lease agreement and whether it transfers substantially all the risks and rewards incidental to ownership of the leased asset. Key factors considered include the length of the lease term in relation to the economic life of the asset, the present value of the minimum lease payments in relation to the asset’s fair value, and whether the Company obtains ownership of the asset at the end of the lease term. Where the Company is a lessee in this type of arrangement, the related asset is recognised at the inception of the lease at the fair value of the leased asset or, if lower, the present value of the lease payments plus incidental payments, if any A corresponding amount is recognized as a finance lease liability

Assets held under finance leases (including land) are depreciated over their estimated useful lives. The corresponding finance lease liability is reduced by lease payments net of finance charges. The interest element of lease payments represents a constant proportion of the outstanding capital balance and is charged to statement of profit and loss, as finance costs over the period of the lease.

Operating leases

Assets acquired on leases where a significant portion of risk and rewards of ownership are retained by the lessor are classified as operating leases. Lease rental are charged to standalonestatement of profit and loss on straight-line basis except where scheduled increase in rent compensate the lessor for expected inflationary costs.Associated costs, such as maintenance and insurance, are expensed as incurred.

Company as a lessor

Operating leases

Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. The respective leased assets are included in the balance sheet based on their nature. Rental income is recognized on straight-line basis over the lease term except where scheduled increase in rent compensates the Company with expected inflationary costs.

Indefeasible right to use (IRU)

As a part of operations, the Company enters into agreement for leasing assets under“Indefeasible right to use” with third parties. Under the arrangement, the assets are given on lease over the substantial part of the asset life but the title to the assets and significant risk associated with the operation andmaintenance of these assets remain with the lessor. Hence, such arrangements are recognised as operating lease and revenue is recognised over the tenure of the agreement.

g) Non-current assets held for sale and discontinued operations

An entity shall classify a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sale of such asset and its sale is highly probable. Management must be committed to sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets classified as held for sale are presented separately and measured at the lower of their carrying amounts immediately prior to their classification as held for sale and their fair value less costs to sell. However, some held for sale assets such as financial assets or deferred tax assets, continue to be measured in accordance with the Company’s relevant accounting policy for those assets. Once classified as held for sale, the assets are not subject to depreciation or amortisation.

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the standalonestatement of profit and loss.

h) Investment property

Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes). Investment properties are measured initially at cost including transaction costs. Subsequent to initial recognition the investment properties are stated at cost less accumulated depreciation.

Depreciation is recognized on a straight-line basis to write down the cost less estimated residual value of investment properties other than land.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on de-recognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in statement of profit or loss in the period in which the property is derecognized.

Transition to Ind /AS

On transition to Ind AS, the Company has elected to continue with the carrying value of all its investment properties recognised as at 1 April 2015 measured as per the provisions of previous GAAP and use that carrying value as the deemed cost of investment properties.

i) Inventories

Inventories being stores and spares are stated at the lower of cost and net realisable value. However, inventories held for capital consumption are stated at cost.

Cost of inventories:

Cost of stores and spares is determined on weighted average basis.

Net realisable value:

Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling expenses.

Provision for obsolescence and slow moving inventory is made based on management’s best estimates of net realisable value of such inventories.

j) Foreign currency translation

Foreign currency transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items denominated in foreign currency at period-end exchange rates are recognized in the statement of profit or loss.

Non-monetary items are not retranslated at period-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.

Foreign operations

In the Company’s financial statements, all assets, liabilities and transactions of the Company entities with functional currency other than the Indian Rupee are translated into Indian Rupee upon consolidation. The functional currency of the entities in the Company has remained unchanged during the reporting period. On consolidation, assets and liabilities have been translated into Indian Rupee at the closing rate at the reporting date. Fair value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities of the foreign entity and translated into Indian Rupee at the closing rate. Income and expenses have been translated into Indian Rupee at the average rate over the reporting period. Exchange differences are charged/ credited to other comprehensive income and recognized in the currency translation reserve in equity. On disposal of a foreign operation, the related cumulative translation differences recognized in equity are reclassified to the statement of profit or loss and are recognized as part of the gain or loss on disposal.

k) Financial instruments

Recognition, initial measurement and de-recognition

Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through profit or loss which are measured initially at fair value. Subsequent measurement of financial assets and financial liabilities is described below.

Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expires, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled or expires.

Classification and subsequent measurement of financial assets

For the purpose of subsequent measurement, financial assets are classified into the following categories upon initial recognition:

- Amortised cost

- financial assets at fair value through profit or loss (FVTPL)

- financial assets at fair value through other comprehensive income (FVOCI)

All financial assets except for those at FVTPL are subject to review for impairment at least at each reporting date to identify whether there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets, which are described below.

All income and expenses relating to financial assets that are recognised in the statement profit or loss are presented within finance costs or finance income, except for impairment of trade receivables which is presented within ‘other expenses’.

- Amortised cost

A financial asset shall be measured at amortised cost using effective interest rates if both of the following conditions are met:

a) financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

b) contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Company’s cash and cash equivalents, trade and certain other receivables fall into this category of financial instruments.

A loss allowance for expected credit losses is recognised on financial assets carried at amortised cost.

(i) For debtors that are not past due - Life time expected credit losses are assessed and accounted based on company’s historical counterparty default rates and forecast of macro-economic factors, by dividing receivables that are not considered to be individually significant by reference to the segment of the counterparty and other shared credit risk characteristics to evaluate the expected credit loss. The expected credit loss estimate is then based on recent historical counterparty default rates for each identified segment.

(ii) For debtors considered past due - any enhancement in the accrual done for expected credit loss on individually significant receivables is made as follows -

- Provision is made for wrong billing, disputed claims from subscribers (excluding operators covered under the agreements related to IUC/Roaming/MOU) and cases involving suspension of revenue realization due to proceedings in Court.

- For landline services - 100% provision is made for debtors outstanding for more than 3 years.

- For closed connections, provision is made in respect of outstanding for more than 3 years along with spill over amount for up to 3 years.

- For wireless services (GSM & CDMA) - 100% provision is made for debtors outstanding for more than 180 days.

- Financial assets at FVTPL

Financial assets at FVTPL include financial assets that either do not meet the criteria for amortised cost classification or are equity instruments held for trading or that meet certain conditions and are designated at FVTPL upon initial recognition. Assets in this category are measured at fair value with gains or losses recognised in the statement of profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists.

- Financial assets at FVOCI

FVOCI financial assets are either debt instruments that are managed under hold to collect and sell business model or are non-trading equity instruments that are designated to this category.FVOCI financial assets are measured at fair value. Gains and losses are recognized in other comprehensive income and reported within FVOCI reserve within equity, except for interest and dividend income, impairment losses and foreign exchange differences on monetary assets, which are recognized in the statement of profit or loss.

Classification and subsequent measurement of financial liabilities

Financial liabilities are measured subsequently at amortized cost using the effective interest method, except for financial liabilities held for trading or designated as FVTPL, that are carried subsequently at fair value with gains or losses recognised in the statement of profit or loss.

All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in the statement of profit or loss and are included within finance costs or finance income.

l) Income taxes

Tax expense recognised in the statement of profit or loss comprises the sum of deferred tax and current tax not recognized in other comprehensive income or directly in equity

Provision for current tax is made after taking into consideration benefits admissible under the provisions of Income Tax Act, 1961 and in the overseas branches/companies as per the respective tax laws.

Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with investments in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Company and it is probable that reversal will not occur in the foreseeable future. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided those rates are enacted or substantively enacted by the end of the reporting period.

Deferred tax asset (‘DTA’) is recognized for all deductible temporary differences, carry forward of unused tax credit and unused tax losses, to the extent that it is probable that taxable profit will be available against which deductible temporary difference, and the carry forward of unused tax credits and unused tax losses can be utilised or to the extent of taxable temporary differences.

In respect of deductible temporary differences arising from investments in subsidiaries, branches and associates, and interests in joint arrangements, to the extent that, and only to the extent that, it is probable that the temporary difference will reverse in the foreseeable future; and taxable profit will be available against which the temporary difference can be utilised.

Minimum Alternate Tax (MAT) credit is recognised, as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the specified period. In the year in which the MAT credit becomes eligible to be recognised as an asset, the said asset is created by way of a credit to the standalone statement of profit and loss and classified under ‘deferred tax asset’.

m) Impairment testing of intangible assets and property, plant and equipment

For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.

For intangible assets with indefinite useful life that are tested at least annually. For other assets, the Company assesses at each balance sheet date whether there is any indication that any asset, may be impaired. If any such indication exists, the carrying value of such assets is reduced to its estimated recoverable amount and the amount of such impairment loss is charged to the standalone statement of profit and loss. If, at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed, which is the higher of fair value less costs of disposal and value-in-use and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.

To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Company’s latest approved budget, adjusted as necessary to exclude the effects of future re-organisations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect current market assessment of the time value of money and asset-specific risks factors.

n) Provisions, contingent liabilities and contingent assets

A provision is recognised when the Company has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic resources will be required from the Company and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material.

In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognized or disclosure is made.

Contingent liabilities are disclosed in case of present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation or the amount cannot be estimated reliably.

Contingent assets are not recognised. However, when inflow of economic benefit is probable, related asset is disclosed.

o) Government grants

Government grants are recognised if it is sufficiently certain that the assistance will be granted and the conditions attached to assistance are satisfied. Where the grant relates to specified asset, it is recognised as deferred income, and amortized over the expected useful life of the asset. Other grants are recognised in the standalone statement of comprehensive income concurrent to the expenses to which such grants relate/ are intended to cover

Where the Company receives non-monetary grants, the asset and the grant are recorded gross at fair amounts and released to the standalone statement of profit and loss over the expected useful life and pattern of consumption of the benefit of the underlying asset.

p) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, together with other shortterm, highly liquid investments(original maturity less than 3 months) that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

q) Adjustment pertaining to Earlier Years

Income from services pertaining to prior years is not disclosed as prior period item. In respect of other income/expenditure individual transaction not exceeding Rs.1.00 Lakh are treated as income/ expenditure of current year.In respect of Other Income/Expenditure relating to a prior period, which do not exceed 0.5% of Turnover in each case, are treated as income/expenditure of current year

r) Equity, reserves and dividend payments

Share capital represents the nominal value of shares that have been issued. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with issuing of shares are deducted from share premium account, net of any related income tax benefits.

Other components of equity include the following:

- Re-measurement of defined benefit liability - comprises the actuarial gain or loss from changes in demographic and financial assumptions and return on plan assets

- Reserve for contingencies

- Reserve for research and development

- Reserve for debenture redemption

- General reserve

- Other transactions recorded directly in other comprehensive income.

Retained earnings include all current and prior period retained profits. All transactions with owners of the parent are recorded separately within equity. Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been approved in a general meeting prior to the reporting date.

Standard issued but not yet effective:

i. Appendix B to Ind AS 21, Foreign currency transactions and advance consideration:

On 28 March 2018, Ministry of Corporate Affairs (“MCA”) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment will come into force from 1 April 2018. The effect on adoption of Ind AS 115 is expected to be insignificant.

ii. Ind AS 115- Revenue from Contract with Customers:

On 28 March 2018, Ministry of Corporate Affairs (“MCA”) has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers.

The standard permits two possible methods of transition:

- Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8- Accounting Policies, Changes in Accounting Estimates and Errors;

- Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach) The effective date for adoption of Ind AS 115 is financial periods beginning on or after 1 April 2018.

- The effective date for adoption of Ind-AS 115 is financial period beginning on or after 1 April, 2018. The Company is evaluating the requirement of this new standard and their impact on the financial statements.

Significant management judgement in applying accounting policies and estimation uncertainty

The preparation of the Company’s standalone financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the assets or liabilities in future periods.

Significant management judgements

The following are significant management judgements in applying the accounting policies of the Company that have significant effect on the financial statements.

Recognition of deferred tax assets - The extent to which deferred tax assets can be recognized is based on an assessment of the probability of the Company’s future taxable income against which the deferred tax assets can be utilized. In addition, significant judgement is required in assessing the impact of any legal or economic limits or uncertainties in various tax jurisdictions.

Recognition of deferred tax liability on undistributed profits - The extent to which the Company can control the timing of reversal of deferred tax liability on undistributed profits of its subsidiaries, associate and joint venture requires judgement.

Evaluation of indicators for impairment of assets - The evaluation of applicability of indicators of impairment of assets requires assessment of several external and internal factors which could result in deterioration of recoverable amount of the assets.

Classification of leases - The Company enters into leasing arrangements for various assets. The classification of the leasing arrangement as a finance lease or operating lease is based on an assessment of several factors, including, but not limited to, transfer of ownership of leased asset at end of lease term, lessee’s option to purchase and estimated certainty of exercise of such option, proportion of lease term to the asset’s economic life, proportion of present value of minimum lease payments to fair value of leased asset and extent of specialized nature of the leased asset.

Arrangements containing lease - The Company applies Appendix C of Ind AS 17 ‘Leases’, “Determining whether an arrangement contains a lease”, to contracts entered with telecom operators/passive infrastructure services providers to share tower infrastructure services. Appendix C deals with the method of identifying and recognising service, purchase and sale contracts that do not take the legal form of a lease but convey a right to use an asset in return for a payment or series of payments.

The Company has determined, based on an evaluation of the terms and conditions of the arrangements that such contracts are in the nature of operating leases.

Estimation uncertainty

Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different.

Asset retirement obligations (ARO) - In measuring the provision for ARO the Company uses technical estimates to determine the expected cost to dismantle and remove the infrastructure equipment from the site and the expected timing of these costs. Discount rates are determined based on the government bond rate of a similar period as the liability.

Activation and installation fees - The Company receives activation and installation fees from new customers. These fees together with directly attributable costs are amortised over the estimated duration of customer relationship period. The customer relationship period is reviewed periodically. The estimated relationship periodprincipally reflects management’s view of the average economic relationship periodof the customer base and is assessed by reference to key performance indicators (KPIs) which are linked to establishment/ ascertainment of customer relationship period. A change in such KPIs may lead to a change in the estimated useful life and an increase/ decrease in the amortisation income/charge. The Company believes that the change in such KPIs will not have any material effect on the financial statements.

Recoverability of advances/receivables - At each balance sheet date, based on discussions with the respective counter-parties and internal assessment of their credit worthiness, the management assesses the recoverability of outstanding receivables and advances. Such assessment requires significant management judgement based on financial position of the counter-parties, market information and other relevant factor

Classification of assets and liabilities into current and non-current - The management classifies the assets and liabilities into current and non-current categories based on management’s expectation of the timing of realisation of the assets or timing of contractual settlement of liabilities.

Impairment of assets - In assessing impairment, management estimates the recoverable amounts of each asset or cash-generating unit (in case of non-financial assets) based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future cash flows and the determination of a suitable discount rate

Useful lives of depreciable/amortisable assets (tangible and intangible) - Management reviews its estimate of the useful lives of depreciable/amortisable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical and economic obsolescence that may change the utility of certain software, customer relationships, IT equipment and other plant and equipment.

Inventories - Management estimates the cost of inventories including cost of materials and overheads considered attributable to the production of such inventories, taking into account the most reliable evidence available including actual cost of production, etc. Management also estimates the net realisable values of inventories, taking into account the most reliable evidence available at each reporting date. The future realisation of these inventories may be affected by future technology or other market-driven changes that may reduce future selling prices.

Defined benefit obligation (DBO) - Management’s estimate of the DBO is based on a number of critical underlying assumptions such as standard rates of inflation, medical cost trends, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses

Fair value measurements - Management applies valuation techniques to determine the fair value of financial instruments (where active market quotes are not available) and non-financial assets. This involves developing estimates and assumptions consistent with how market participants would price the instrument. Management bases its assumptions on observable data as far as possible but this is not always available. In that case management uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date


Mar 31, 2017

Corporate Information

Mahanagar Telephone Nigam Limited (MTNL), a public sector enterprise, is engaged in providing telecom services in the geographical area of Mumbai and Delhi.

Basis of preparation

The financial statements have been prepared on going concern basis under the historical cost convention except for the following -

- Certain financial assets and liabilities which are measured at fair value;

- Defined benefit plans - plan assets measured at fair value; and

- Assets held for sale - measured at fair value less cost to sell Note 1 : SIGNIFICANT ACCOUNTING POLICIES

a) Overall consideration

The consolidated financial statements have been prepared using the significant accounting policies and measurement bases that are in effect as at the reporting date and summarised below, other than certain annual recurring charges of up to Rupees 1 lakh each for overlapping periods, which are not considered to be material and accounted for on cash basis. These were used throughout all periods presented in the financial statements, except where the MTNL has applied certain accounting policies and exemptions upon transition to Ind AS.

b) Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the MTNL and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received/ receivable net of discounts, process waivers, and VAT, service tax or duty. Revenue is recognized on accrual basis, including income from subscribers whose disputes are pending resolution, and closure of the subscribers’ line.

a) In the case of contracts involving delivery of single service element, accounting for revenue would be done on accrual basis and revenue would be recognized over the period in which services are rendered.

b) In case of multi-element revenue arrangements, which involve delivery or performance of multiple products, services or right to use assets, evaluation will be done of all deliverables in an arrangement to determine whether they represent separate units of accounting at the inception of arrangement. Total arrangement consideration related to the bundled contract is allocated among the different elements based on their relative fair values (i.e., ratio of the fair value of each element to the aggregated fair value of the bundled deliverables). In case the relative fair value of different components cannot be determined on a reasonable basis, the total consideration is allocated to the different components based on residual value method.

c) For sale of prepaid products, processing fee on recharge coupons is recognized over the customer relationship period or coupon validity period, whichever is lower.

d) Activation & installation revenue and related costs, not exceeding the respective revenue, are to be deferred and amortized over the estimated customer relationship period. The excess of costs over revenue, if any, are to be expensed as incurred. Subscriber acquisition costs are to be expensed as incurred.

e) Income from sale of prepaid calling cards, virtual calling cards (VCC) and prepaid internet connection cards is recognized basis the usage or expiry of cards, whichever is earlier.

f) Interest income/expenditure is to be recognized based on effective interest rate [EIR] i.e. the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset to the net carrying amount of the financial assets. The future cash flows include all other transaction costs fees paid or received, premiums or discounts if any etc. The difference between the actual interest rate and effective interest will be routed through statement of profit or loss.

g) Income from services includes income from leasing of infrastructure to other service providers. Cost of related stores and materials consumed in execution is charged to project or revenue job at the time of issue. However, spill over items at the end of the year lying at various stores are valued at weighted average cost.

h) Sale proceeds of scrap arising from maintenance & project works are taken into miscellaneous income in the year of sale.

c) Post-employment benefits

a) Defined contribution plan

A defined contribution plan is a plan under which the MTNL pays fixed contributions into an independent fund administered by the government. The MTNL has no legal or constructive obligations to pay further contributions after its payment of the fixed contribution. MTNL''s defined contribution plans include provident fund, pension contribution and leave salary.

(i) In respect of absorbed combined service pension optees in MTNL, provision for pension contribution is payable to the Govt. of India as per FR-116 as in Bharat Sanchar Nigam Limited (''BSNL'') with equivalent BSNL pay scales and it is expensed off in the relevant year.

(ii) In respect of officials who are on deemed deputation from Department of Telecommunications (DoT) and other Government departments, the provision for pension contribution is payable to the Government of India at the rates specified in Appendix 2(A) to FR 116 and 117 of FR. & SR and it is expensed off in the relevant year. Further, provision for leave encashment is payable @ 11% of pay as specified in appendix 2(B) of F.R.116 and 117 of F.R. & S.R. and it is expensed off in the relevant year.

b) Defined benefit plan

The defined benefit plans sponsored by the MTNL defines the amount of the benefit that an employee will receive on completion of services by reference to length of service and last drawn salary. The legal obligation for any benefits remains with the MTNL. The MTNL''s defined benefit plans include amounts provided for gratuity and provident fund.

(i) For Absorbed CPF optees and direct recruits of MTNL, the Company makes contribution to provident fund Trust administered by the Company, which is recognized by the income tax authorities. Both the employer and employee contribute to this Fund and such contributions together with interest accumulated thereon are payable to employees at the time of their separation from the Company or retirement, whichever is earlier. The interest rate payable to the members of the Trust is not lower than the rate of interest declared annually by the Government under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, on account of interest is to be made good by the Company. Accordingly, this is accounted for a defined benefit plan and any shortfall in the Fund is accounted as expense in the books of the company.

(ii) For Absorbed CPF optees and direct recruits of MTNL, the liability for gratuity is estimated using actuarial valuation as the present value of the defined benefit obligation (DBO) at the reporting date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. Actuarial gains and losses arising from past experience and changes in actuarial assumptions are credited or charged to the statement of OCI in the year in which such gains or losses are determined.

(iii) For absorbed combined service pension optee employees in MTNL, no provision is made for the pensioner benefits viz pension and gratuity, except for the amounts due to difference in pay scales of MTNL and BSNL which is payable by MTNL to the Government of India till next wage revision by which time MTNL and BSNL shall achieve pay scale parity. Long-term provisions in this respect have been discounted using the applicable discount rates.

c) Other long-term employee benefits

(i) Liability for leave encashment for all employees of MTNL is accounted for on actuarial valuation basis, performed by an independent actuary using the projected unit credit method as on the reporting date. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recorded in the consolidated statement of profit and loss in the year in which such gains or losses arise.

(ii) For post-retirement medical benefits, no provision is made since insurance policy is taken periodically and the premium is expensed off in the relevant year.

d) Short-term benefits comprise of employee costs such as salaries, bonus, ex-gratia, short-term compensated absences are accrued in the year in which the associated services are rendered by employees of the MTNL.

e) Bonus/Ex-gratia is paid based on the productivity linked parameters and it is to be provided accordingly subject to the profitability of the company.

d) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time, which is generally considered as one year, to get ready for its intended use or sale are capitalized as part of the cost of the asset. Further, projects with estimated cost up to Rs,30 crores generally take a year to complete. All other borrowing costs are expensed in the period in which they occur and reported in finance cost. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Transaction costs in respect of long-term borrowings are amortized over the tenor of respective loans using effective interest method.

e) Property, plant and equipment

Recognition and initial measurement

Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at cost less accumulated depreciation. The cost comprises purchase price, borrowing cost if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discount and rebates are deducted in arriving at the purchase price. Assets are capitalized, as per the practices described below, to the extent completion certificates have been issued, wherever applicable.

i. Land is capitalized when possession of land is taken.

ii. Building is capitalized to the extent it is ready for use.

iii. Apparatus &plants principally consisting of telephone exchange equipment and air conditioning plants are capitalized on commissioning of the exchange. Subscriber''s installations are capitalized as and when the exchange is commissioned and put to use either in full or in part. Identifiable components in Apparatus &plants having significant cost and/or separate useful life than the main asset i.e. ADSL, VDSL & MES CPES, UPS/Batteries and Subscriber Telephone Instruments are capitalized separately on commissioning and put to use.

iv. Lines & wires are capitalized as and when laid or erected to the extent completion certificates have been issued.

v. Cables are capitalized as and when ready for connection with the main system.

vi. Vehicles and other assets are capitalized as and when purchased.

(a) Property, plant and equipment are being verified by the management at reasonable intervals i.e. once in every three years by rotation. The physical verification of underground cables is done on the basis of working of network and based on records available together with a certificate from the technical officers.

(b) Expenditure on replacement of assets, equipment, instruments and rehabilitation work is capitalized if it is expected to generate future economic benefits for more than one year.

(c) Upon scrapping/decommissioning of assets, these continue to be classified in property, plant and equipment unless they are classified as ''held for sale'' and carried at the lower of carrying value or fair value less costs to sell. Resultant loss, if any, is charged to consolidated statement of profit and loss.

(d) Cost of major inspection is recognized in the carrying amount of plant and equipment if it is expected to generate economic benefits and its life is more than one year.

(e) On replacement of significant components of plant and equipment, recognition is made for such replacement of components as individual assets with specific useful life and depreciated as if these components are initially recognized as separate asset.

(f) In case an item of property, plant and equipment is acquired on deferred payment basis, interest expenses included in deferred payment is recognized as interest expense and not included in cost of asset.

(g) The present value of expected cost for decommissioning of the asset on expiry of its useful life is included in the cost of respective asset. A provision for decommissioning is also created with equivalent amount.

(h) Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognized in the statement of profit or loss as ''other income'' or ''other expenses'', as the case may be, on the date of disposal.

Subsequent measurement

(a) Depreciation is provided using straight-line method on the basis of the useful lives prescribed in Schedule II of the Companies Act, 2013 except in respect of Apparatus & Plant (including Towers, Transceivers, switching centers, transmission & other network equipment) and identifiable components in Apparatus & plant having significant cost and/or separate useful life than the main asset, mobile handsets for service connection and low cost aerial optical fibre cable which are depreciated at the rates based on technical evaluation of useful life of these assets, which are lower than the lives prescribed in Schedule II of the Companies Act 2013. The estimated useful lives and residual value are reviewed at the end of each reporting period.

For Apparatus &plant (including Towers, Transceivers, switching centers, transmission & other network equipment), Office equipment & Cable having useful life of 10 Years other than following assets/components with shorter useful lives -

(b) 100 % depreciation is provided on assets immaterial in value up to Rs,0.05 lakh, in the year of purchase itself, other than those forming part of project, the cost of which is below Rs,0.10 lakh in case of Apparatus &plants, Training equipment & testing equipment and Rs,2.00 lakh for partitions, which is not considered to be material.

(c) Value of leasehold Land is amortized over the period of lease.

(d) Where, during any financial year, any addition has been made to any asset, or where any asset has been sold, discarded, demolished or destroyed, or significant components replaced; depreciation on such assets is calculated on a pro rata basis as individual assets with specific useful life from the date of such addition or, as the case

may be, up to the date on which such asset has been sold, discarded, demolished or destroyed or replaced. Transition to Ind AS

On transition to Ind AS, the MTNL has elected to continue with the carrying value of all its property, plant and equipment recognized as at 1 April 2015 measured as per the provisions of previous GAAP and use that carrying value as the deemed cost of property, plant and equipment.

f) Intangible assets

Intangible assets are stated at their cost of acquisition and/or development less accumulated amortisation. Intangible assets including application software are capitalized when ready for use. All intangible assets with definite useful life are amortized on a straight line basis over the estimated useful lives and a possible impairment is assessed if there is an indication that the intangible asset may be impaired.

(a) Intangible assets represented by one-time upfront payment for 3G spectrum is amortized on straight-line basis over the period of license i.e. 20 years.

(b) Application software is amortised on straight-line basis over the useful life of the assets which is considered as 10 years.

Transition to Ind AS

On transition to Ind AS, the MTNL has elected to continue with the carrying value of all its intangible assets recognized as at 1 April 2015 measured as per the provisions of previous GAAP and use that carrying value as the deemed cost of intangible assets.

g) Leased assets

MTNL as a lessee

Finance leases

Management applies judgment in considering the substance of a lease agreement and whether it transfers substantially all the risks and rewards incidental to ownership of the leased asset. Key factors considered include the length of the lease term in relation to the economic life of the asset, the present value of the minimum lease payments in relation to the asset''s fair value, and whether the MTNL obtains ownership of the asset at the end of the lease term. Where the MTNL is a lessee in this type of arrangement, the related asset is recognized at the inception of the lease at the fair value of the leased asset or, if lower, the present value of the lease payments plus incidental payments, if any. A corresponding amount is recognized as a finance lease liability.

Assets held under finance leases (including land) are depreciated over their estimated useful lives. The corresponding finance lease liability is reduced by lease payments net of finance charges. The interest element of lease payments represents a constant proportion of the outstanding capital balance and is charged to statement of profit and loss, as finance costs over the period of the lease.

Operating leases

Assets acquired on leases where a significant portion of risk and rewards of ownership are retained by the less or are classified as operating leases. Lease rental are charged to consolidated statement of profit and loss on straight-line basis except where scheduled increase in rent compensate the less or for expected inflationary costs. Associated costs, such as maintenance and insurance, are expensed as incurred.

MTNL as a less or

Operating leases

Leases in which the MTNL does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. The respective leased assets are included in the balance sheet based on their nature. Rental income is recognized on straight-line basis over the lease term except where scheduled increase in rent compensates the MTNL with expected inflationary costs.

Indefeasible right to use (IRU)

As a part of operations, the Company enters into agreement for leasing assets under “Indefeasible right to use” with third parties. Under the arrangement, the assets are given on lease over the substantial part of the asset life but the title to the assets and significant risk associated with the operation and maintenance of these assets remain with the less or. Hence, such arrangements are recognized as operating lease and revenue is recognized over the tenure of the agreement.

h) Non-current assets held for sale and discontinued operations

An entity shall classify a non-current asset (or disposal MTNL) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sale of such asset and its sale is highly probable. Management must be committed to sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets classified as held for sale are presented separately and measured at the lower of their carrying amounts immediately prior to their classification as held for sale and their fair value less costs to sell. However, some held for sale assets such as financial assets or deferred tax assets, continue to be measured in accordance with the MTNL''s relevant accounting policy for those assets. Once classified as held for sale, the assets are not subject to depreciation or amortization.

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the consolidated statement of profit and loss.

i) Investment property

Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes). Investment properties are measured initially at cost including transaction costs. Subsequent to initial recognition the investment properties are stated at cost less accumulated depreciation.

Depreciation is recognized on a straight-line basis to write down the cost less estimated residual value of investment properties other than land.

An investment property is derecognized upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on de-recognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in statement of profit or loss in the period in which the property is derecognized.

Transition to Ind AS

On transition to Ind AS, the MTNL has elected to continue with the carrying value of all its investment properties recognized as at 1 April 2015 measured as per the provisions of previous GAAP and use that carrying value as the deemed cost of investment properties.

j) Inventories

Inventories being stores and spares are stated at the lower of cost and net realizable value. However, inventories held for capital consumption are stated at cost.

Cost of inventories:

Cost of stores and spares is determined on weighted average basis.

Net realizable value:

Net realizable value is the estimated selling price in the ordinary course of business less any applicable selling expenses.

Provision for obsolescence and slow moving inventory is made based on management''s best estimates of net realizable value of such inventories.

k) Foreign currency translation

Functional and presentation currency

The consolidated financial statements are presented in Indian Rupee (''INR'') which is also the functional currency of the Company, since substantially the entire funding of the Company and its operational income is denominated in Indian Rupee. The functional currency of the subsidiaries, associate and joint venture is local currency applicable in respective jurisdictions.

Foreign currency transactions and balances

Foreign currency transactions are translated into the functional currency of the respective MTNL entity using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items denominated in foreign currency at period-end exchange rates are recognized in the statement of profit or loss.

Non-monetary items are not retranslated at period-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.

Foreign operations

In the MTNL''s financial statements, all assets, liabilities and transactions of the MTNL entities with functional currency other than the Indian Rupee are translated into Indian Rupee upon consolidation. The functional currency of the entities in the MTNL has remained unchanged during the reporting period. On consolidation, assets and liabilities have been translated into Indian Rupee at the closing rate at the reporting date. Fair value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities of the foreign entity and translated into Indian Rupee at the closing rate. Income and expenses have been translated into Indian Rupee at the average rate over the reporting period. Exchange differences are charged/ credited to other comprehensive income and recognized in the currency translation reserve in equity. On disposal of a foreign operation, the related cumulative translation differences recognized in equity are reclassified to the statement of profit or loss and are recognized as part of the gain or loss on disposal.

l) Financial instruments

Recognition, initial measurement and de-recognition

Financial assets and financial liabilities are recognized when the MTNL becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through profit or loss which are measured initially at fair value. Subsequent measurement of financial assets and financial liabilities is described below.

Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expires, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled or expires.

Classification and subsequent measurement of financial assets

For the purpose of subsequent measurement, financial assets are classified into the following categories upon initial recognition:

- Amortized cost

- financial assets at fair value through profit or loss (FVTPL)

- financial assets at fair value through other comprehensive income (FVOCI)

All financial assets except for those at FVTPL are subject to review for impairment at least at each reporting date to identify whether there is any objective evidence that a financial asset or a MTNL of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets, which are described below.

All income and expenses relating to financial assets that are recognized in the statement profit or loss are presented within finance costs or finance income, except for impairment of trade receivables which is presented within ''other expenses''.

- Amortized cost

A financial asset shall be measured at amortized cost using effective interest rates if both of the following conditions are met:

a) financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

b) contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

MTNL''s cash and cash equivalents, trade and certain other receivables fall into this category of financial instruments.

A loss allowance for expected credit losses is recognized on financial assets carried at amortized cost.

(i) For debtors that are not past due - Life time expected credit losses are assessed and accounted based on company''s historical counter party default rates and forecast of macro-economic factors, by dividing receivables that are not considered to be individually significant by reference to the segment of the counter party and other shared credit risk characteristics to evaluate the expected credit loss. The expected credit loss estimate is then based on recent historical counter party default rates for each identified segment.

(ii) For debtors considered past due - any enhancement in the accrual done for expected credit loss on individually significant receivables is made as follows -

- Provision is made for wrong billing, disputed claims from subscribers (excluding operators covered under the agreements related to IUC/Roaming/MOU) and cases involving suspension of revenue realization due to proceedings in Court.

- For landline services - 50% provision is made for debtors outstanding for more than 1 year but up to 3 years and 100% in respect of for more than 3 years.

- For closed connections, provision is made in respect of outstanding for more than 3 years along with spill over amount for up to 3 years.

- For wireless services (GSM & CDMA) - 100% provision is made for debtors outstanding for more than 180 days.

- Financial assets at FVTPL

Financial assets at FVTPL include financial assets that either do not meet the criteria for amortized cost classification or are equity instruments held for trading or that meet certain conditions and are designated at FVTPL upon initial recognition. Assets in this category are measured at fair value with gains or losses recognized in the statement of profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists.

- Financial assets at FVOCI

FVOCI financial assets are either debt instruments that are managed under hold to collect and sell business model or are non-trading equity instruments that are designated to this category. FVOCI financial assets are measured at fair value. Gains and losses are recognized in other comprehensive income and reported within FVOCI reserve within equity, except for interest and dividend income, impairment losses and foreign exchange differences on monetary assets, which are recognized in the statement of profit or loss.

Classification and subsequent measurement of financial liabilities

Financial liabilities are measured subsequently at amortized cost using the effective interest method, except for financial liabilities held for trading or designated as FVTPL, that are carried subsequently at fair value with gains or losses recognized in the statement of profit or loss.

All interest-related charges and, if applicable, changes in an instrument''s fair value that are reported in the statement of profit or loss and are included within finance costs or finance income.

m) Income taxes

Tax expense recognized in the statement of profit or loss comprises the sum of deferred tax and current tax not recognized in other comprehensive income or directly in equity.

Provision for current tax is made after taking into consideration benefits admissible under the provisions of Income Tax Act, 1961and in the overseas branches/companies as per the respective tax laws.

Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with investments in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the MTNL and it is probable that reversal will not occur in the foreseeable future. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realization, provided those rates are enacted or substantively enacted by the end of the reporting period.

Deferred tax asset (''DTA'') is recognized for all deductible temporary differences, carry forward of unused tax credit and unused tax losses, to the extent that it is probable that taxable profit will be available against which deductible temporary difference, and the carry forward of unused tax credits and unused tax losses can be utilized or to the extent of taxable temporary differences.

In respect of deductible temporary differences arising from investments in subsidiaries, branches and associates, and interests in joint arrangements, to the extent that, and only to the extent that, it is probable that the temporary difference will reverse in the foreseeable future; and taxable profit will be available against which the temporary difference can be utilized.

Minimum Alternate Tax (MAT) credit is recognized , as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the specified period. In the year in which the MAT credit becomes eligible to be recognized as an asset, the said asset is created by way of a credit to the consolidated statement of profit and loss and classified under ''deferred tax asset''.

n) Impairment testing of intangible assets and property, plant and equipment

For impairment assessment purposes, assets are MTNLed at the lowest levels for which there are largely independent cash inflows (cash generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.

For intangible assets with indefinite useful life that are tested at least annually. For other assets, the MTNL assesses at each balance sheet date whether there is any indication that any asset, may be impaired. If any such indication exists, the carrying value of such assets is reduced to its estimated recoverable amount and the amount of such impairment loss is charged to the consolidated statement of profit and loss. If, at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed, which is the higher of fair value less costs of disposal and value-in-use and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.

To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the MTNL''s latest approved budget, adjusted as necessary to exclude the effects of future re-organizations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect current market assessment of the time value of money and asset-specific risks factors.

o) Provisions, contingent liabilities and contingent assets

A provision is recognized when the MTNL has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic resources will be required from the MTNL and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material.

In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognized or disclosure is made.

Contingent liabilities are disclosed in case of present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation or the amount cannot be estimated reliably.

Contingent assets are not recognized . However, when inflow of economic benefit is probable, related asset is disclosed.

p) Government grants

Government grants are recognized if it is sufficiently certain that the assistance will be granted and the conditions attached to assistance are satisfied. Where the grant relates to specified asset, it is recognized as deferred income, and amortized over the expected useful life of the asset. Other grants are recognizsd in the consolidated statement of comprehensive income concurrent to the expenses to which such grants relate/ are intended to cover.

Where the MTNL receives non-monetary grants, the asset and the grant are recorded gross at fair amounts and released to the consolidated statement of profit and loss over the expected useful life and pattern of consumption of the benefit of the underlying asset.

q) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments (original maturity less than 3 months) that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

r) Equity, reserves and dividend payments

Share capital represents the nominal value of shares that have been issued. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with issuing of shares are deducted from share premium account, net of any related income tax benefits.

Other components of equity include the following:

- Re-measurement of defined benefit liability - comprises the actuarial gain or loss from changes in demographic and financial assumptions and return on plan assets

- Reserve for contingencies

- Reserve for research and development

- Reserve for debenture redemption

- General reserve

- Other transactions recorded directly in other comprehensive income.

Retained earnings include all current and prior period retained profits. All transactions with owners of the parent are recorded separately within equity. Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been approved in a general meeting prior to the reporting date.

Management is already in the process to sale switches and BTS-batteries originally acquired for GSM Services in Mumbai. There are several interested parties and the sale is expected to be completed before the end of Financial Year 2017-18. A tender was floated for auction of the asset held for sale, which failed due to technical reasons. Another tender is under process for auction of the asset. The asset is presented within total assets of WS Service-Mumbai segment.

Non-recurring fair value measurements

Asset classified as held for sale during the reporting period was measured at the lower of its carrying amount and fair value less costs to sell at the time of re-classification, resulting in the recognition of a write down of 0.45 crores as impairment loss in the statement of Profit and Loss . This is Level 3 measurement as per fair value hierarchy set out in fair value measurement disclosure (Note 43).

*Debentures-Series 1A

The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 8.57 % Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 28 March 2023. The coupon payment frequency is semiannual interest payment. There was no installment due as on the reporting date.

*Debentures-Series 2A

The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 9.38 % Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 05 December 2023. The coupon payment frequency is semiannual interest payment. There was no installment due as on the reporting date.

Rate of interest- The Company''s total borrowings from banks and others have a effective weighted average rate of 9.99% per annum calculated using the interest rate effective as on 31 March 2017.

*Debentures-Series 1A

Refer details in the above note (c)(i)

*Debentures-Series 2A

Refer details in the above note (c)(i)

Rate of interest- The Company''s entities total borrowings from banks and others have a effective weighted average rate of 11.42% per annum calculated using the interest rate effective as on 31 March 2015.

(d) Government of India approved the financial support to the Company in the year 2014 and on surrender of Broadband Wireless Access (BWA) Spectrum by MTNL, upfront charges paid by the Company in the year 2011 for such spectrum amounting to '' 4,533.97 crores were agreed to be funded by way of issuance of debentures by the Company on behalf of Government of India (GOI) and for which GOI provided sovereign guarantee with attendant condition for repayment of principal on maturity as well as the interest payments through DOT. Accordingly, the Company does not have any liability towards repayment of principal and interest on the bonds issued and has been offset against the amount recoverable from DoT of equivalent amount.

(e) For details on repayment schedule of finance lease obligations, refer note 50(B).

(i) Information about individual provisions and significant estimates

Provision for asset retirement obligations

The Company as part of its business installs wireless telecommunication towers and other equipments for facilitating telecommunication services to its customers and is under an obligation to decommission the tower and replenish the site at end of useful life of the tower and other equipment. For the purpose of same Appendix A to Ind AS 16, “Property, Plant and Equipment” states measurement of Property, plant and equipment to include initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. The Company has estimated the cost of dismantling based on independent bids received from open market and the same have been escalated using the expected inflation rate (6% per annum) and discounted at the rates prevailing at each period end date.

Disclosures required related to provision for employee benefits, refer note 46- Employee benefit obligations


Mar 31, 2015

1. Basis of preparation of financial statements

The financial statements have been prepared in accordance with Generally Accepted Accounting Principles (GAAP), Accounting Standards specified under section 133 of Companies Act, 2013 read with Rule-7 of Companies (Accounts) Rules, 2014 & as amended time to time and the relevant provisions of the Companies Act, 2013.

The financial statements are prepared on accrual basis under the historical cost convention, except the following items, which are accounted for on cash basis:

- Interest income/liquidated damages, where reliability is uncertain.

- Annual recurring charges of amount up to Rs. 1.00 lakh each for overlapping period.

2. Use of Estimates

The preparation of the financial statements in conformity with GAAP requires judgments, estimates and assumptions to be made that affect the reported amount of assets and liabilities, disclosures relating to contingent liabilities as at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Difference between the actual result and estimates are recognized in the period in which the results are known/ materialized.

3. Revenue Recognition

(a) Revenue is recognized on accrual basis, including income from subscribers whose disputes are pending resolution, and closure of the subscribers'' line. Revenue in respect of service connection is recognized when recoverability is established.

(b) (i) Provision is made for wrong billing, disputed claims from subscribers (excluding operators covered under the agreements related to IUC/Roaming/MOU) and cases involving suspension of revenue realization due to proceedings in Court.

(ii) In case of landline services provision is made for debtors outstanding for more than 1 year but up to 3 years to the extent of 50 % and 100% in respect of more than 3 years.

(iii) In respect of closed connections, provision is made in respect of outstanding for more than 3 years along with spillover amount for upto 3 years.

(iv) In case of wireless services (GSM & CDMA), provision is made for dues, which are more than 180 days.

(c) Activation charges, in case of Landline, are recognized as income in the year of connection.

(d) Activation charges, in case of Mobile Services (GSM), are recognized as revenue on connection.

(e) Income from services includes income from leasing of infrastructure to other service providers.

(f) The cost of stores and materials is charged to project or revenue job at the time of issue. However, spill over items at the end of the year lying at various stores are valued at weighted average method.

(g) The sale proceeds of scrap arising from maintenance & project works are taken into miscellaneous income in the year of sale.

(h) Bonus/ Excreta is paid based on the productivity linked parameters and it is to be provided accordingly subject to the profitability of the company.

(i) Income from services pertaining to prior years is not disclosed as prior period item. In respect of other income/expenditure, only cases involving sums exceeding Rs. 1.00 lakh are disclosed as prior period items.

4. Employee Retirement Benefits

(a) In respect of officials who are on deemed deputation from DOT and other Govt. Departments, the provision for pension contribution is provided at the rates specified in Appendix 2(A) to FR 116 and 117 of FR. & SR. and provision for leave encashment is made @ 11% of pay as specified in appendix 2(B) of F.R.116 and 117 of F.R. & S.R. Provision of gratuity, in respect of these officers, is not required to be made.

(b) (i) For absorbed combined service pension opted employees in MTNL, no provision is made for the pensioner benefits viz pension and gratuity, except for the amounts due to difference in pay scales of MTNL and BSNL which is payable by MTNL to the Government of India till next wage revision by which time MTNL and BSNL shall achieve pay scale parity.

(ii) Annual pension contribution in respect of absorbed combined service pension optee employees in MTNL is payable to the Govt. of India as per FR-116 as in BSNL with equivalent BSNL pay scales and it is expensed off in the relevant year.

(iii) Liability for leave encashment for all employees of MTNL is accounted for on Actuarial valuation basis.

(iv) For absorbed CPF opted and direct recruits of MTNL, actuarial valuation is made for gratuity.

(c) For post retirement medical benefits, no provision is made since insurance policy is taken periodically and the premium is expensed off in the relevant year.

5. Fixed Assets

(a) Fixed Assets are carried at cost less accumulated depreciation. Cost includes directly related establishment expenses including employee remuneration and benefits and other administrative expenses. Establishment overheads and expenses incurred in units where project work is also undertaken are allocated to capital and revenue based either on time allocated or other attributable basis. Assets are capitalized, as per the practices described below, to the extent completion certificates have been issued, wherever applicable.

(i) Land is capitalized when possession of the land is taken.

(ii) Building is capitalized to the extent it is ready for use.

(iii) Apparatus & Plants principally consisting of Telephone Exchange Equipments and Air Conditioning Plants are capitalized on commissioning of the exchange. Subscribers Installations are capitalized as and when the exchange is commissioned and put to use either in full or in part.

(iv) Lines & Wires are capitalized as and when laid or erected to the extent completion certificates have been issued.

(v) Cables are capitalized as and when ready for connection with the main system.

(vi) Vehicles and Other Assets are capitalized as and when purchased.

(vii) Intangible assets including application software are capitalized when ready for use. Entry fee for onetime payment for 3G spectrum is also capitalized.

(b) The fixed assets of the company are being verified by the management at reasonable intervals i.e. once in every three years by rotation. The physical verification of underground cables is done on the basis of working of network and based on records available together with a certificate from the technical officers.

(c) Expenditure on replacement of assets, equipments, instruments and rehabilitation work is capitalized if it results in enhancement of revenue earning capacity.

(d) Upon scrapping / decommissioning of assets, these are classified in fixed assets at the lower of Net Book Value and Net Realizable Value and the resultant loss, if any, is charged to Statement of Profit and Loss.

6. Depreciation & Amortization

(a) Depreciation is provided on Straight Line Method on the basis of the useful lives prescribed in Schedule II of the Companies Act 2013 except in respect of Apparatus & Plant (including Towers, Transceivers, switching centres, transmission & other network equipments), which are depreciated at the rates based on technical evaluation of useful life of these assets i.e. 10 years, which is lower than the lives prescribed in Schedule II of the Companies Act 2013.

(b) 100 % depreciation is provided on assets of small value in the year of purchase, other than those forming part of project, the cost of which is below Rs.0.10 lakh in case of Apparatus & Plants, Training Equipment & Testing Equipment and Rs.2.00 lakh for partitions.

(c) Intangible assets represented by one-time upfront payment for 3G spectrum is amortized over the period of license i.e. 20 years.

(d) Application software is amortized over the useful life of the assets which is considered as 10 years.

(e) Value of Leasehold Land is amortized over the period of lease.

7. Inventories

Inventories being stores and spares are valued at cost or net realizable value, whichever is lower and the cost is determined on weighted average basis. However, inventories held for capital consumption are valued at cost.

8. Foreign Currency Transactions

Transactions in foreign currency are stated at the exchange rate prevailing on the transaction date. Year- end balances of current assets and liabilities are restated at the closing exchange rates and the difference adjusted to Statement of Profit & Loss.

9. Investments

Current investments are carried at the lower of cost & fair market value. Long term investments are stated at cost. Provision for diminution in the value of long term investments is made only if such a decline is other than temporary in the opinion of the management.

10. Taxes on Income:

Provision for current tax is made after taking into consideration benefits admissible under the provisions of Income Tax Act, 1961.

Deferred Tax resulting from "timing differences" between book and taxable profit is accounted for using the tax rates and laws that have been enacted or substantially enacted as on balance sheet date. The deferred tax asset is recognized and carried forward only to the extent that there is a reasonable certainty that the asset will be realized in the future. In situations where the company has unabsorbed depreciation or carry forward tax losses, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.

Minimum Alternate Tax (MAT) credit is recognized, as an asset only when and to the extent there is convincing evidence that the company will pay normal Income Tax during the specified period. In the year in which the MAT credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in Guidance Note issued by The Institute of Chartered Accountants of India, the said asset is created by way of a credit to the Statement of Profit and Loss and shown as MAT Credit

Entitlement.

11. Impairment of assets:

The company assesses at each balance sheet date whether there is any indication that any asset, may be impaired. If any such indication exists, the carrying value of such assets is reduced to its estimated recoverable amount and the amount of such impairment loss is charged to the Statement of Profit and Loss. If, at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.

12. Provisions and contingent liabilities:

A provision is recognized when the company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation and also in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Where there is a possible obligation or a present obligation for which the likelihood of outflow of resources is remote, no provision or disclosure is made.

Contingent liabilities are disclosed in case of present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation.


Mar 31, 2014

1. Basis of preparation of financial statements

The financial statements have been prepared in accordance with Generally Accepted Accounting Principles (GAAP), Accounting Standards as per Companies (Accounting Standards) Rules, 2006 & as amended time to time and the relevant provisions of the Companies Act, 1956.

The financial statements are prepared on accrual basis under the historical cost convention, except the following items, which are accounted for on cash basis:

1 Interest income/liquidated damages, where realisability is uncertain.

2 Annual recurring charges of amount up to Rs. 0.10 Million each for overlapping period.

2. Use of Estimates

The preparation of the financial statements inconformity with GAAP requires judgements, estimates and assumptions to be made that affect the reported amount of assets and liabilities, disclosures relating to contingent liabilities as at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Difference between the actual result and estimates are recognized in the period in which the results are known/materialized.

3. Revenue Recognition

(a) Revenue is recognized on accrual basis, including income from subscribers whose disputes are pending resolution, and closure of the subscribers'' line. Revenue in respect of service connection is recognized when recoverability is established.

(b) (i) Provision is made for wrong billing, disputed claims from subscribers (excluding operators covered under the agreements related to IUC/Roaming/MOU) and cases involving suspension of revenue realization due to proceedings in Court.

(ii) In case of landline services provision is made for debtors outstanding for more than 1 year but upto 3 years to the extent of 50 % and 100% in respect of more than 3 years.

(iii) In respect of closed connections, provision is made in respect of outstanding for more than 3 years along with spillover amount for upto 3 years.

(iv) In case of wireless services (GSM & CDMA), provision is made for dues, which are more than 180 days.

(c) Activation charges, in case of Landline, are recognized as income in the year of connection.

(d) Activation charges, in case of Mobile Services (GSM), are recognized as revenue on connection.

(e) Income from services includes income from leasing of infrastructure to other service providers.

(f) The cost of stores and materials is charged to project or revenue job at the time of issue. However, spill over items at the end of the year lying at various stores are valued at weighted average method.

(g) The sale proceeds of scrap arising from maintenance & project works are taken into miscellaneous income in the year of sale.

(h) Bonus/ Exgratia is paid based on the productivity linked parameters and it is to be provided accordingly subject to the profitability of the company.

(i) Income from services pertaining to prior years is not disclosed as prior period item. In respect of other income/expenditure, only cases involving sums exceeding Rs. 0.10 Million are disclosed as prior period items.

4. Employee Retirement Benefits

(a) In respect of officials who are on deemed deputation from DOT and other Govt. Departments, the provision for pension contribution is provided at the rates specified in Appendix 2(A) to FR 116 and 117 of FR. & SR. and provision for leave encashment is made @ 11% of pay as specified in appendix 2(B) of F.R.116 and 117 of F.R. & S.R. Provision of gratuity, in respect of these officers, is not required to be made.

(b) (i) For absorbed combined service pension optee employees in MTNL, no provision is made for the pensionary benefits viz pension and gratuity, except for the amounts due to difference in pay scales of MTNL and BSNL which is payable by MTNL to the Government of India till next wage revision by which time MTNL and BSNL shall achieve pay scale parity.

(ii) Annual pension contribution in respect of absorbed combined service pension optee employees in MTNL is payable to the Govt. of India as per FR-116 as in BSNL with equivalent BSNL pay scales and it is expensed off in the relevant year.

(iii) Liability for leave encashment for all employees of MTNL is accounted for on Actuarial valuation basis.

(iv) For absorbed CPF optees and direct recruits of MTNL, actuarial valuation is made for gratuity.

(c) For post retirement medical benefits, no provision is made since insurance policy is taken periodically and the premium is expensed off in the relevant year.

5. Fixed Assets

(a) Fixed Assets are carried at cost less accumulated depreciation. Cost includes directly related establishment expenses including employee remuneration and benefits and other administrative expenses. Establishment overheads and expenses incurred in units where project work is also undertaken are allocated to capital and revenue based either on time allocated or other attributable basis. Assets are capitalized, as per the practices described below, to the extent completion certificates have been issued, wherever applicable.

(i) Land is capitalized when possession of the land is taken.

(ii) Building is capitalized to the extent it is ready for use.

(iii) Apparatus & Plants principally consisting of Telephone Exchange Equipments and Air Conditioning Plants are capitalized on commissioning of the exchange. Subscribers Installations are capitalized as and when the exchange is commissioned and put to use either in full or in part.

(iv) Lines & Wires are capitalized as and when laid or erected to the extent completion certificates have been issued.

(v) Cables are capitalized as and when ready for connection with the main system.

(vi) Vehicles and Other Assets are capitalized as and when purchased.

(vii) Intangible assets including application software are capitalized when ready for use. Entry fee for onetime payment for 3G spectrum is also capitalized.

(b) The fixed assets of the company are being verified by the management at reasonable intervals i.e. once in every three years by rotation. The physical verification of underground cables is done on the basis of working of network and based on records available together with a certificate from the technical officers.

(c) Expenditure on replacement of assets, equipments, instruments and rehabilitation work is capitalized if it results in enhancement of revenue earning capacity.

(d) Upon scrapping / decommissioning of assets, these are classified in fixed assets at the lower of Net Book Value and Net Realisable Value and the resultant loss, if any, is charged to Statement of Profit and Loss.

6. Depreciation & Amortisation

(a) Depreciation is provided on Straight Line Method at the rates prescribed in Schedule XIV to the Companies Act, 1956 except in respect of Apparatus & Plant (including Air Conditioning System attached to exchanges), which is depreciated at the rates based on technical evaluation of useful life of these assets i.e. 9.5%, which is higher than the rates prescribed in Schedule XIV to the Companies Act, 1956.

(b) 100 % depreciation is provided on assets of small value in the year of purchase, other than those forming part of project, the cost of which is below Rs. 0.01 Million in case of Apparatus & Plants, Training Equipment & Testing Equipment and Rs. 0.20 Million for partitions.

(c) Intangible assets represented by one-time upfront payment for 3G spectrum is amortized over the period of license i.e. 20 years.

(d) Application software is amortised over the useful life of the assets which is considered as 10 years.

(e) Value of Leasehold Land is amortized over the period of lease.

7. Inventories

Inventories being stores and spares are valued at cost or net realizable value, whichever is lower and the cost is determined on weighted average basis. However, inventories held for capital consumption are valued at cost.

8. Foreign Currency Transactions

Transactions in foreign currency are stated at the exchange rate prevailing on the transaction date. Year-end balances of current assets and liabilities are restated at the closing exchange rates and the difference adjusted to Statement of Profit & Loss.

9. Investments

Current investments are carried at the lower of cost & fair market value. Long term investments are stated at cost. Provision for diminution in the value of long term investments is made only if such a decline is other than temporary in the opinion of the management.

10. Taxes on Income:

Provision for current tax is made after taking into consideration benefits admissible under the provisions of Income Tax Act, 1961.

Deferred Tax resulting from "timing differences" between book and taxable profit is accounted for using the tax rates and laws that have been enacted or substantially enacted as on balance sheet date. The deferred tax asset is recognized and carried forward only to the extent that there is a reasonable certainty that the asset will be realized in the future. In situations where the company has unabsorbed depreciation or carry forward tax losses, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.

Minimum Alternate Tax (MAT) credit is recognized, as an asset only when and to the extent there is convincing evidence that the company will pay normal Income Tax during the specified period. In the year in which the MAT credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in Guidance Note issued by The Institute of Chartered Accountants of India, the said asset is created by way of a credit to the Statement of Profit and Loss and shown as MAT Credit Entitlement.

11. Impairment of assets:

The company assesses at each balance sheet date whether there is any indication that any asset, may be impaired. If any such indication exists, the carrying value of such assets is reduced to its estimated recoverable amount and the amount of such impairment loss is charged to the Statement of Profit and Loss. If, at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.

12. Provisions and contingent liabilities:

A provision is recognized when the company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation and also in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Where there is a possible obligation or a present obligation for which the likelihood of outflow of resources is remote, no provision or disclosure is made.

Contingent liabilities are disclosed in case of present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation.


Mar 31, 2013

1. Basis of preparation of financial statements

i. The accounts are prepared under the historical cost convention on accrual method of accounting except the following items, which are accounted for on cash basis:

(a) Interest income/liquidated damages, where realisability is uncertain.

(b) Annual recurring charges of amount up to Rs. 0.10 Millions each for overlapping period.

ii. Revenue Recognition

(a) Revenue is recognized on accrual basis, including income from subscribers whose disputes are pending resolution, and closure of the subscribers'' line. Revenue in respect of service connection is recognized when recoverability is established.

(b) Provision is made for wrong billing, disputed claims from subscribers (excluding operators covered under the agreements related to IUC/Roaming/MOU), cases involving suspension of revenue realization due to proceedings in Court and debtors outstanding for more than 3 years. In respect of closed connections provision is made for outstanding for more than 3 years along with spillover amount less than 3 years. In case of Wireless Services (GSM & CDMA), the provision is made for dues, which are more than 180 days.

(c) Activation charges recovered from the subscribers at the time of new telephone connection is recognized as income in the year of connection.

(d) Activation charges in case of Mobile Services (GSM) is recognized as revenue on connection.

(e) Income from services includes income from leasing of infrastructure to other service providers.

iii. The cost of stores and materials is charged to project or revenue job at the time of issue. However, spill over items at the end of the year lying at various stores are valued at weighted average method.

iv. The sale proceeds of scrap arising from maintenance & project works are taken into miscellaneous income in the year of sale.

v. Bonus/ Exgratia is paid based on the productivity linked parameters and it is to be provided accordingly subject to the profitability of the company.

vi. Income from services pertaining to prior years is not disclosed as prior period item. In respect of other income/expenditure, only cases involving sums exceeding Rs. 0.10 Millions are disclosed as prior period items.

1.1 Employee Retirement Benefits

a) In respect of officials who are on deemed deputation from DOT and other Govt. Departments, the provision for pension contribution is provided at the rates specified in Appendix 2(A) to FR 116 and 117 of FR. & SR. and provision for leave encashment is made @ 11% of pay as specified in appendix 2(B) of F.R.116 and 117 of F.R. & S.R. Provision of gratuity, in respect of these officers, is not required to be made.

b) In respect of others, provision is made as per Actuarial Valuation except for post retirement medical benefits for which insurance policy is taken periodically.

2. Fixed Assets & Depreciation

i. Fixed Assets are carried at cost less accumulated depreciation. Cost includes directly related establishment expenses including employee remuneration and benefits and other administrative expenses. Establishment overheads and expenses incurred in units where project work is also undertaken are allocated to capital and revenue based either on time allocated or other attributable basis. Assets are capitalized, as per the practices described below, to the extent completion certificates have been issued, wherever applicable.

(a) Land is capitalized when possession of the land is taken. Value of Leasehold Land is amortized over the period of lease.

(b) Building is capitalized to the extent it is ready for use.

(c) Apparatus & Plants principally consisting of Telephone Exchange Equipments and Air Conditioning Plants are capitalized on commissioning of the exchange. Subscribers Installations are capitalized as and when the exchange is commissioned and put to use either in full or in part.

(d) Lines & Wires are capitalized as and when laid or erected to the extent completion certificates have been issued.

(e) Cables are capitalized as and when ready for connection with the main system.

(f) Vehicles and Other Assets are capitalized as and when purchased.

(g) Intangible assets include application software are capitalized when ready for use, entry fees for one-time payment for 3G and BWA spectrum are capitalized when the liability for the same is known and are amortized over the period for which the spectrum is provided.

ii. The fixed assets of the company are being verified by the management at reasonable intervals i.e. once in every three years by rotation. The physical verification of underground cables is done on the basis of working of network and based on records available together with a certificate from the technical officers.

iii. Expenditure on replacement of assets, equipments, instruments and rehabilitation work is capitalized if it results in enhancement of revenue earning capacity.

iv. Upon scrapping / decommissioning of assets, these are classified in fixed assets at the lower of Net Book Value and Net Realisable Value and the estimated loss, if any, is charged to Profit and Loss A/c.

v. Depreciation

(a) Depreciation is provided on Straight Line Method at the rates prescribed in Schedule XIV to the Companies Act, 1956 except in respect of Apparatus & Plant (including Air Conditioning System attached to exchanges), which is depreciated at the rates based on technical evaluation of useful life of these assets i.e. 9.5%, which is higher than the rates prescribed in Schedule XIV to the Companies Act, 1956.

(b) 100 % depreciation is charged on assets of small value in the year of purchase, other than those forming part of project, the cost of which is below Rs. 0.01 Millions in case of Apparatus & Plants, Training Equipment & Testing Equipment and Rs. 0.20 Millions for partitions.

(c) Intangible assets of entry fees for one time payment for 3G and BWA Spectrum are depreciated over the period of license respectively i.e. 20/15 years. Application software is depreciated over the useful life of the assets considered as 10 years and amortization is charged on depreciable amount accordingly. There will be no residual value at the end of the life of the assets.

3. Inventories

Inventories being stores and spares are valued at cost or net realizable value, whichever is lower and the cost is determined on weighted average basis. However, inventories held for capital consumption are valued at cost.

4. Foreign Currency Transactions

Transactions in foreign currency are stated at the exchange rate prevailing on the transaction date. Year-end balances of current assets and liabilities are restated at the closing exchange rates and the difference adjusted to Profit & Loss Account.

5. Investments

Current investments are carried at the lower of cost & fair market value. Long term Investments are stated at cost. Provision for diminution in the value of long-term investments is made only if such a decline is other than temporary in the opinion of the management.


Mar 31, 2012

1. Basis of preparation of financial statements

i. The accounts are prepared under the historical cost convention adopting the accrual method of accounting except the following items, which are accounted for on cash basis:

(a) Interest income/liquidated damages, where realisability is uncertain.

(b) Annual recurring charges of amount up to Rs. 0.10 Millions each for overlapping period.

ii. Revenue Recognition

(a) Revenue is recognized on accrual basis, including income from subscribers whose disputes are pending resolution, and closure of the subscribers' line. Revenue in respect of service connection is recognized when recoverability is established.

(b) Provision is made for wrong billing, disputed claims from subscribers excluding operators covered under the agreements related to IUC/Roaming/MOU, cases involving suspension of revenue realization due to proceedings in Court and debtors outstanding for more than 3 years. In respect of closed connections provision is made for outstanding for more than 3 years along with spillover amount less than 3 years. In case of Wireless Services (GSM & CDMA), the provision is made for dues, which are more than 180 days.

(c) Activation charges recovered from the subscribers at the time of new telephone connection is recognized as income in the year of connection.

(d) Activation charges in case of Mobile Services (GSM) is recognized as revenue on connection.

(e) Income from services includes income from leasing of infrastructure to other service providers.

iii. The cost of stores and materials is charged to project or revenue job at the time of issue. However, spill over items at the end of the year lying at various stores are valued at weighted average method.

iv. The sale proceeds of scrap arising from maintenance & project works are taken into miscellaneous income in the year of sale.

v. Bonus/ Exgratia is paid based on the productivity linked parameters and it is to be provided accordingly subject to the profitability of the company.

vi. Income from services pertaining to prior years is not disclosed as prior period item. In respect of other income/expenditure, only cases involving sums exceeding Rs. 0.10 Millions are disclosed as prior period items.

1.1 Employee Retirement Benefits

a) In respect of officials who are on deemed deputation from DOT and other Govt. Departments, the provision for pension contribution is provided at the rates specified in Appendix 2(A) to FR 116 and 117 of FR. & SR. and provision for leave encashment is made @ 11% of pay as specified in appendix 2(B) of F.R.116 and 117 of F.R. & S.R. Provision of gratuity, in respect of these officers, is not required to be made.

b) In respect of others, provision is made as per Actuarial Valuation.

2. Fixed Assets

i. Fixed Assets are carried at cost less accumulated depreciation. Cost includes directly related establishment expenses including employee remuneration and benefits and other administrative expenses. Establishment overheads and expenses incurred in units where project work is also undertaken are allocated to capital and revenue based either on time allocated or other attributable basis. Assets are capitalized, as per the practices described below, to the extent completion certificates have been issued, wherever applicable.

(a) Land is capitalized when possession of the land is taken. Value of Leasehold Land is amortized over the period of lease.

(b) Building is capitalized to the extent it is ready for use.

(c) Apparatus & Plants principally consisting of Telephone Exchange Equipments and Air Conditioning Plants are capitalized on commissioning of the exchange. Subscribers Installations are capitalized as and when the exchange is commissioned and put to use either in full or in part.

(d) Lines & Wires are capitalized as and when laid or erected to the extent completion certificates have been issued.

(e) Cables are capitalized as and when ready for connection with the main system.

(f) Vehicles and Other Assets are capitalized as and when purchased.

(g) Intangible assets include application software are capitalized when ready for use, entry fees for one-time payment for 3G and BWA spectrum are capitalized when the liability for the same is known.

ii. The fixed assets of the company are being verified by the management at reasonable intervals i.e. once in every three years by rotation. The physical verification of underground cables is done on the basis of working of network and based on records available together with a certificate from the technical officers.

iii. Expenditure on replacement of assets, equipments, instruments and rehabilitation work is capitalized if it results in enhancement of revenue earning capacity.

iv. Upon scrapping / decommissioning of assets, these are classified in fixed assets at the lower of Net Book Value and Net Realisable Value and the estimated loss, if any, is charged to Profit and Loss A/c.

v. Depreciation

(a) Depreciation is provided on Straight Line Method at the rates prescribed in Schedule XIV to the Companies Act, 1956 except in respect of Apparatus & Plant (including Air Conditioning System attached to exchanges), which is depreciated at the rates based on technical evaluation of useful life of these assets i.e. 9.5%, which is higher than the rates prescribed in Schedule XIV to the Companies Act, 1956.

(b) 100 % depreciation is charged on assets of small value in the year of purchase, other than those forming part of project, the cost of which is below Rs..0.01 Millions in case of Apparatus & Plants, Training Equipment & Testing Equipment and Rs..0.20 Millions for partitions.

(c) Intangible assets of entry fees for one time payment for 3G and BWA Spectrum are depreciated over the period of license respectively i.e. 20/15 years. Application software is depreciated over the useful life of the assets considered as 10 years and amortization is charged on depreciable amount accordingly. There will be no residual value at the end of the life of the assets.

3. Inventories

Inventories being stores and spares are valued at cost or net realizable value, whichever is lower. However, inventories held for capital consumption are valued at cost.

4. Foreign Currency Transactions

Transactions in foreign currency are stated at the exchange rate prevailing on the transaction date. Year-end balances of current assets and liabilities are restated at the closing exchange rates and the difference adjusted to Profit & Loss Account

5. Investments

Current investments are carried at the lower of cost & fair market value. Long term Investments are stated at cost. Provision for diminution in the value of long-term investments is made only if such a decline is other than temporary in the opinion of the management.


Mar 31, 2011

1. Basis of preparation of financial statements

i. The accounts are prepared under the historical cost convention adopting the accrual method of accounting except the following items, which are accounted for on cash basis:

(a) Interest income/liquidated damages, where realisability is uncertain.

(b) Annual recurring charges of amount up to Rs. 0.10 Millions each for overlapping period. ii. Revenue Recognition

(a) Revenue is recognized on accrual basis, including income from subscribers whose disputes are pending resolution, and closure of the subscribers' line. Revenuein respect of service connection is recognized when recoverability is established.

(b) Provision is made for wrong billing, disputed claims from subscribers excluding operators covered under the agreements related to lUC/Roaming/MOU, cases involving suspension of revenue realisation due to proceedings in Court and debtors outstanding for more than 3 years. In respect of closed connections provision is made for outstanding for more than 3 years along with spillover amount less than 3 years. In case of Mobile Services (GSM), the provision is made for dues, which are more than 180 days.

(c) Activation charges recovered from the subscribers at the time of new telephone connection is recognized as income in the year of connection.

(d) Activation charges in case of Mobile Services (GSM) is recognized as revenue on connection.

(e) Income from services includes income from leasing of infrastructure to other service providers.

iii. The cost of stores and materials is charged to project or revenue job at the time of issue. However, spill over items at the end of the year lying at various stores are valued at weighted average method.

iv. The sale proceeds of scrap arising from maintenance & project works are taken into miscellaneous income in the year of sale.

v. Bonus/ Exgratia is paid based on the productivity linked parameters and it is to be provided accordingly subject to the profitability of the company.

vi. Income from services pertaining to prior years is not disclosed as prior period item. In respect of other income/expenditure, only cases involving sums exceeding Rs. 0.10 Millions are disclosed as prior period items.

1.1 Employee Retirement Benefits

a) In respect of officials who are on deemed deputation from DOT and other Govt. Departments, the provision for pension contribution is provided at the rates specified in Appendix 2(A) to FR 116 and 117 of FR. & SR. and provision for leave encashment is made @ 11 % of pay as specified in appendix 2(B) of F.R.116 and 117 of F.R. & S.R. Provision of gratuity, in respect of these officers, is not required to be made.

b) In respect of others, provision is made as per Actuarial Valuation.

2. Fixed Assets

i. Fixed Assets are carried at cost less accumulated depreciation. Cost includes directly related establishment expenses including employee remuneration and benefits and other administrative expenses. Establishment overheads and expenses incurred in units where project work is also undertaken are allocated to capital and revenue based either on time allocated or other attributable basis. Assets are capitalized, as per the practices described below, to the extent completion certificates have been issued, wherever applicable.

(a) Land is capitalized when possession of the land is taken. Value of Leasehold Land is amortized over the period of lease.

(b) Building is capitalized to the extent it is ready for use.

(c) Apparatus & Plants principally consisting of Telephone Exchange Equipments and Air Conditioning Plants are capitalized on commissioning of the exchange. Subscribers Installations are capitalized as and when the exchange is commissioned and put to use either in full or in part.

(d) Lines & Wires are capitalized as and when laid or erected to the extent completion certificates have been issued.

(e) Cables are capitalized as and when ready for connection with the main system.

(f) Vehicles and Other Assets are capitalized as and when purchased.

(g) Intangible assets include application software are capitalized when ready for use, entry fees for one-time payment for 3G and BWA spectrum are capitalized when the liability for the same is known.

ii. The fixed assets of the company are being verified by the management at reasonable intervals i.e. once in every three years by rotation. The physical verification of underground cables is done on the basis of working of network and based on records available together with a certificate from the technical officers.

iii. Expenditure on replacement of assets, equipments, instruments and rehabilitation work is capitalized if it results in enhancement of revenue earning capacity.

iv. Upon scrapping / decommissioning of assets, these are classified in fixed assets at the lower of Net Book Value and Net Realisable Value and the estimated loss, if any, is charged to Profit and Loss A/c.

v. Depreciation

(a) Depreciation is provided on Straight Line Method at the rates prescribed in Schedule XIV to the Companies Act, 1956 except in respect of Apparatus & Plant (including Air Conditioning System attached to exchanges), which is depreciated at the rates based on technical evaluation of useful life of these assets i.e. 9.5%, which is higher than the rates prescribed in Schedule XIV to the Companies Act 1956.

(b) 100 % depreciation is charged on assets of small value in the year of purchase, other than those forming part of project, the cost of which is below Rs.0.01 Millions in case of Apparatus & Plants, Training Equipment & Testing Equipment and Rs.0.20 Millions for partitions.

(c) Intangible assets of entry fees for one time payment for 3G and BWA Spectrum are depreciated over the period of license respectively i.e. 20/15 years. Application software is depreciated over the useful life of the assets considered as 10 years and amortization is charged on depreciable amount accordingly. There will be no Tesidual value at the end of the life of the assets.

3. Inventories

Inventories being stores and spares are valued at cost or net realizable value, whichever is lower. However, inventories held for capital consumption are valued at cost.

4. Foreign Currency Transactions

Transactions in foreign currency are stated at the exchange rate prevailing on the transaction date. Year-end balances of current assets and liabilities are restated at the closing exchange rates and the difference adjusted to Profit & Loss Account

5. Investments

Current investments are carried at the lower of cost & fair market value. Long term Investments are stated at cost. Provision for diminution in the value of long-term investments is made only if such a decline is other than temporary in the opinion of the management.


Mar 31, 2010

1. Basis of preparation of financial statements

i. The accounts are prepared under the historical cost convention adopting the accrual method of accounting except the following items, which are accounted for on cash basis:

(a) Interest income/liquidated damages, where realisability is uncertain.

(b) Annual recurring charges of amount up to Rs. 0.10 Millions each for overlapping period.

ii. Revenue Recognition

(a) Revenue is recognized on accrual basis, including income from subscribers whose disputes are pending resolution, and closure of the subscribers line. Revenue in respect of service connection is recognized when recoverability is established.

(b) Provision is made for wrong billing, disputed claims from subscribers excluding operators covered under the agreements related to IUC/Roaming/MOU, cases involving suspension of revenue realisation due to proceedings in Court and debtors outstanding for more than 3 years. In respect of closed connections provision is made for outstanding for more than 3 years along with spillover amount less than 3 years. In case of Mobile Services (GSM), the provision is made for dues, which are more than 180 days.

(c) Activation charges recovered from the subscribers at the time of new telephone connection is recognized as income in the year of connection.

(d) Activation charges in case of Mobile Services (GSM) is recognized as revenue on connection.

(e) Income from services includes income from leasing of infrastructure to other service providers.

iii. The cost of stores and materials is charged to project or revenue job at the time of issue. However, spill over items at the end of the year lying at various stores are valued at weighted average method.

iv. The sale proceeds of scrap arising from maintenance & project works are taken into miscellaneous income in the year of sale.

v. Bonus / Ex - Gratia is paid based on the productivity - linked parameters and it is provided accordingly.

vi. Income from services pertaining to prior years is not disclosed as prior period item. In respect of other income/expenditure, only cases involving sums exceeding Rs. 0.10 Millions are disclosed as prior period items.

1.1 Employee Retirement Benefits

a) In respect of officials who are on deemed deputation from DOT and other Govt. Departments, the provision for pension contribution is provided at the rates specified in Appendix 2(A) to FR 116 and 117 of FR. & SR. and provision for leave encashment is made @ 11% of pay as specified in appendix 2(B) of F.R.116 and 117 of F.R. & S.R. Provision of gratuity, in respect of these officers, is not required to be made.

b) In respect of others, provision is made as per Actuarial Valuation.

2. Fixed Assets

i. Fixed Assets are carried at cost less accumulated depreciation. Cost includes directly related establishment expenses including employee remuneration and benefits and other administrative expenses. Establishment overheads and expenses incurred in units where project work is also undertaken are allocated to capital and revenue based either on time allocated or other attributable basis. Assets are capitalized, as per the practices described below, to the extent completion certificates have been issued, wherever applicable.

(a) Land is capitalized when possession of the land is taken. Value of Leasehold Land is amortized over the period of lease.

(b) Building is capitalized to the extent it is ready for use.

(c) Apparatus & Plants principally consisting of Telephone Exchange Equipments and Air Conditioning Plants are capitalized on commissioning of the exchange. Subscribers Installations are capitalized as and when the exchange is commissioned and put to use either in full or in part.

(d) Lines & Wires are capitalized as and when laid or erected to the extent completion certificates have been issued.

(e) Cables are capitalized as and when ready for connection with the main system.

(f) Vehicles and Other Assets are capitalized as and when purchased.

(g) Intangible assets include application software, are capitalized when ready for use.

ii. The fixed assets of the company are being verified by the management at reasonable intervals i.e. once in every three years by rotation. The physical verification of underground cables is done on the basis of working of network and based on records available together with a certificate from the technical officers.

iii. Expenditure on replacement of assets, equipments, instruments and rehabilitation work is capitalized if it results in enhancement of revenue earning capacity.

iv. Upon scrapping / decommissioning of assets, these are classified in fixed assets at the lower of Net Book Value and Net Realisable Value and the estimated loss, if any, is charged to Profit and Loss A/c.

v. Depreciation

(a) Depreciation is provided on Straight Line Method at the rates prescribed in Schedule XIV to the Companies Act, 1956 except in respect of Apparatus & Plant (including Air Conditioning System attached to exchanges), which is depreciated at the rates based on technical evaluation of useful life of these assets i.e. 9.5%, which is higher than the rates prescribed in Schedule XIV to the Companies Act, 1956.

(b) 100 % depreciation is charged on assets of small value in the year of purchase, other than those forming part of project, the cost of which is below Rs.0.01 Millions in case of Apparatus & Plants, Training Equipment & Testing Equipment and Rs.0.20 Millions for partitions.

(c) In case of intangible assets, the useful life of the assets is considered as 10 years and amortization is charged on depreciable amount accordingly. There will be no residual value at the end of the life of the assets.

3. Inventories

Inventories being stores and spares are valued at cost or net realizable value, whichever is lower. However, inventories held for capital consumption are valued at cost.

4. Foreign Currency Transactions

Transactions in foreign currency are stated at the exchange rate prevailing on the transaction date. Year-end balances of current assets and liabilities are restated at the closing exchange rates and the difference adjusted to Profit & Loss Account

5. Investments

Current investments are carried at the lower of cost & fair market value. Long term Investments are stated at cost. Provision for diminution in the value of long-term investments is made only if such a decline is other than temporary in the opinion of the management.

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