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Accounting Policies of National Aluminium Company Ltd. Company

Mar 31, 2017

Note .1 General Information

National Aluminums Company Limited is a Navaratna Company a Central Public Sector Enterprise (CPSE) under Ministry of Mines, Government of India, incorporated under the relevant provisions of the Companies Act and is listed in the stock exchanges in India. The Company is engaged in the business of manufacturing and selling of Alumina and Aluminums. The Company is operating a 22.75 lakh TPA Alumina Refinery plant located at Damanjodi in Koraput district of Odisha and 4.60 lakh TPA Aluminums Smelter located at Angul, Odisha. The Company has a captive bauxite mines adjacent to refinery plant to feed the bauxite requirement of Alumina Refinery and also a 1200 MW captive thermal power plant adjacent to Smelter plant to meet the power consumption of Smelter. Besides, the Company is also operating four wind power plants with total capacity of 198.40 MW located in the state of Andhra Pradesh (Gandikota), Rajasthan (Jaisalmer& Devikot) and Maharashtra (Sangli)to harness the renewable energy and to comply with its Renewable Purchase Obligation.

Note.2 Statement of Compliance:

In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted Indian Accounting Standards (referred to as “Ind AS”)notified under the Companies (Indian Accounting Standards) Rules, 2015 with effect from I April, 2016, with a transition date of 1st April 2015.All the notified accounting standards which are applicable to the Company have been taken into consideration and complied without any exception while preparing the first Ind AS compliant financial statements of the Company.

Note.3 Significant Accounting Policies:

3.1 Basis of preparation

The financial statements of the Company have been prepared in accordance with Ind AS and relevant provisions of the Companies Act, 2013.

The financial statements have been prepared on historical cost basis, except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.

All assets and liabilities have been classified as current or non-current as per Company''s operating cycle and other criteria set out in Schedule-III of the Companies Act 2013. Based on the nature of business, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.

3.2 Use of estimates:

These financial statements have been prepared based on estimates and assumptions in conformity with the recognition and measurement principles of Ind AS.

Estimates and underlying assumptions are reviewed on an ongoing basis and revisions if any in such estimates are accounted appropriately in the year of revision.

Key sources of estimation uncertainty at the reporting date, which may cause a material adjustment to the carrying amounts of assets and liabilities for future years are stated in Note No.4.

3.3 Investments in associates and joint ventures

An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

Investment in associate and joint ventures are measured at cost in accordance with Ind AS 109 - Financial Instruments.

Investment in associate and joint ventures are subject to impairment wherever there is indication of negative reserve in the accounts of associates/ JV Companies. However, such impairment is limited to the value of investment.

3.4 Property, Plant and Equipment

Property, plant and equipment, other than freehold lands, held for use in the production and/or supply of goods or services, or for administrative purposes, are stated at cost, less accumulated depreciation and accumulated impairment losses. Freehold lands, unless impaired, are stated at cost.

3.5 Initial Measurement

The initial cost comprises purchase price, non-refundable purchase taxes, other directly expenditure attributable to acquisition, borrowing cost, if any, incurred for bringing the assets to its location and condition necessary for it to be capable of operating in the manner intended by Management, and the initial estimates of the present value of any asset restoration obligation or obligatory decommissioning and dismantling costs.

Expenditure incurred on development of freehold land is capitalized as part of the cost of the land.

In case of self-constructed assets, cost includes the costs of all materials used in construction, direct labour, allocation of overheads and directly attributable borrowing costs, if any.

Spare parts having unit value of more than Rs.5 lakh that meets the criteria for recognition as Property Plant and Equipment are recognized as Property, Plant and Equipment. Besides, spares of critical nature and irregular in use, which can be identified to a particular equipment and having unit value more than Rs.l lakh is also recognized as Property, Plant and Equipment.

3.6 Subsequent expenditure

Expenditure on major inspection/maintenance or repairs including cost of replacing the parts of assets and overhaul costs where it is probable that future economic benefits associated with the expenditure will be available to the Company over a period of more than one year, are capitalized and the carrying amount of the identifiable parts so replaced is derecognized.

3.7 Capital work-in-progress

Assets in the course of construction for production and/or supply of goods or services or administrative purposes, or for which classification is not yet determined, are included under capital work in progress and are carried at cost, less any recognized impairment loss. Such capital work in progress, on completion, is transferred to the appropriate category of property, plant and equipment.

Expenses for assessment of new potential projects incurred till investment decision are charged to revenue. Expenditure incurred for projects after investment decisions are accounted for under capital work in progress and capitalized subsequently.

3.8 Depreciation and amortization

Depreciation on assets are provided on a straight line basis over their useful life of the asset, which has been determined considering the useful lives prescribed under Schedule II of the Companies Act, 2013 and technical estimations carried out by the Management.

Component of an item of property Plant and Equipment with a cost that is significant in relation to the total cost of that item is depreciated separately if its useful life differs from the others components of the asset. The Company has chosen a benchmark of Rs. I Crore as significant value for identification of a separate component except Pot relining which is considered as a component of each electrolytic pot due to its inherent nature and useful life.

The residual value of plant and machinery, vehicles, mobile equipment and earth moving equipments, railway facilities, rolling stock, and residential quarters are maintained at 5% of the original cost and for all other assets, the residual value is considered as Nil. The estimated useful lives are reviewed at each year end and the effect of change, if any, is accounted for prospectively.

Useful lives of the assets considered for depreciation are described hereunder:

(a) Useful life of immovable property, plant and equipment at bauxite mines if exceeds the period up to which bauxite reserve is available at respective mines is limited to that period. Such assets are depreciated over the period up to which bauxite reserve is available.

(b) Useful life of captive thermal power generation plant at Angul is considered as 30 years.

(c) Useful life of Steam Power Plant (SPP) at Damanjodi is considered as 25 years.

(d) Useful life of Red mud pond and Ash pond at Alumina Refinery and Ash ponds at captive power plant are based on their estimated remaining useful lives, evaluated on the basis of technical estimates made periodically.

(e) Useful life of assets laid on leasehold land excluding assets of Bauxite mines are considered to be lower of balance lease period or the useful life of the asset and are depreciated accordingly

(f) Assets laid on land not owned by the Company are depreciated over a period of five years from the date on which the asset is capable of operating in the manner intended by the management unless a longer / shorter life can be justified.

(g) Individual Assets costing Rs.10,000/- or less are depreciated fully in the year in which they are put to use.

(h) Property plant and equipment other than mentioned above are subject to the following useful lives.

3.9 Disposal of assets

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal is recognized in the statement of profit and loss.

3.10 Stripping costs:

Stripping costs in surface mining is recognized as an asset when they represent significantly improved access to ore provided all the following conditions are met:

(a) it is probable that the future economic benefit associated with the stripping activity will be realised;

(b) the component of the ore body for which access has been improved can be identified; and

(c) the costs relating to the stripping activity associated with the improved access can be reliably measured.

The stripping cost incurred during the production phase is added to the existing “stripping cost” asset to the extent the current period stripping ratio exceeds the planned stripping ratio.

The stripping activity asset is subsequently depreciated on a unit of production basis over the life of the identified component of the ore body that became more accessible as a result of the stripping activity and is then stated at cost less accumulated depreciation and any accumulated impairment losses.

3.11 Intangible Assets

3.11.1 Intangible assets acquired separately

Intangible assets acquired are reported at cost less accumulated amortization and accumulated impairment losses, if any. Intangible assets having finite useful life are amortized over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each annual reporting period, and the effect of any changes in estimate is accounted for on a prospective basis.

3.11.2 Internally-generated intangible assets - research and development expenditure

Expenditure on research activities, except capital expenditure considered as Property, plant and equipment, is recognized as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development is recognized if, and only if, all the conditions stipulated in Ind AS 38 - Intangible Asset are met.

3.11.3 Mining Rights

The costs of mining rights include amounts paid towards Net Present Value (NPV) and upfront money as determined by the regulatory authorities.

Cost of mining rights are amortized over the total estimated remaining commercial reserves of mining property and are subject to

I impairment review.

3.11.4 Mines Development Expenses

Expenditure incurred for mines development prior to commercial production i.e., primary development expenditure other than land, buildings, plant and equipment is capitalized until the mining property is capable of commercial production.

3.11.5 User Rights:

Amount of expenditure incurred in a cluster project having future economic benefits, with exclusive use of co-beneficiaries but without physical control on the assets are capitalized as user rights.

3.11.6 Software

Operating software acquired separately (RDBMS, Sybase, ERP/SAP) are capitalized as software.

3.11.7 License and Franchise

Amount of expenditure incurred for obtaining license for use of technology is capitalized as Intangibles under the head “License and

3.11.8 Derecognition of intangible assets

An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, are recognized in the statement of profit and loss when the asset is derecognized.

3.11.9 Amortization

The basis of amortization of intangible assets, based on useful life is as follows:

(a) Licenses in the nature of technical know-how for processing plants which are available for the useful life of the respective processing plants are amortized over a period of ten years.

(b) Software classified as intangible assets carries a useful life of 3 years.

(c) Mining Rights and Mines Development Expenses are amortized over the period of availability of reserves.

(d) User Right for cluster projects is amortized over a period of 10 years from the date of commissioning.

3.12 Impairment of tangible and intangible assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss, if any. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use) of the asset is estimated to determine the extent of impairment loss, if any When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit (CGU) to which the asset belongs. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount and the difference between the carrying amount and recoverable amount is recognized as impairment loss in the statement of profit or loss.

3.13 Functional & Foreign Currencies

Items included in the financial statements are measured using the currency of the primary economic environment i.e Indian Rupee in which the Company operates. The Company''s functional and reporting currency is Indian Rupees (INR). The financial statements are presented in Indian Rupees.

In preparing the financial statements, transactions in foreign currencies i.e currencies other than the entity''s functional currency are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at that date.

Exchange differences on monetary items are recognized in the statement of profit and loss in the period in which they arise.

3.14 Provisions and contingencies

3.14.1 Provisions

Provisions are recognized when there is a present obligation (legal or constructive) as a result of a past event and it is probable (“more likely than not”) that it is required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the estimated cash outflows to settle the present obligation, its carrying amount is the present value of those cash outflows. The discount rate used is a pre tax risk free return that reflects current market assessments of the time value of money in that jurisdiction and the risks specific to the liability.

(a) Restoration, rehabilitation and decommissioning

An obligation to incur restoration, rehabilitation and environmental costs arises when environmental disturbance is caused by the development or ongoing production of a mine and other manufacturing facilities. The Company has recognized the obligated restoration, rehabilitation and decommissioning liability as per statutory mandate.

Net present value of such costs are provided for and a corresponding amount is capitalized at the commencement of each project. These costs are charged to the statement of profit or loss over the life of the asset by way of depreciation and unwinding of the discounted liability The cost estimates are reviewed periodically and are adjusted to reflect known developments which may have an impact on the cost estimates or life of operations. The cost of the related asset is adjusted for changes in the provision due to factors such as updated cost estimates, changes in lives of operations, new disturbance and revisions of discount rates. The adjusted cost of the asset is depreciated prospectively over the lives of the assets to which they relate. The unwinding of the discount is shown as finance and other cost in the statement of profit or loss.

(b) Environmental liabilities

Environment liabilities are recognized when the Company becomes obliged, legally or constructively to rectify environmental damage or perform remediation work.

(c) Litigation

Provision is recognized once it has been established that the Company has a present obligation based on consideration of the information which becomes available up to the date of reporting.

3.14.2 Contingent Liabilities

Contingent liabilities are possible obligations that arises from past events, the existence of which would be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company Contingent liabilities are disclosed in the financial statements unless the possibility of any outflow in settlement is remote.

3.14.3 Contingent Assets

Contingent assets are not recognized in the financial statement, but are disclosed where inflow of economic benefits is probable.

3.15 Leases

At the inception of a lease, the lease arrangement is classified as either a finance lease or an operating lease, based on the substance of the lease arrangement.

3.15.1 Assets taken on finance lease

Financial leases are those that transfer substantially all the risks and rewards incidental to ownership to the lessee.

Finance leases are capitalized at the commencement of lease, at the lower of the fair value of the property or the present value of the minimum lease payments. The corresponding liability to the less or is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income over the period of the lease.

3.15.2 Assets taken on operating lease

Leases other than finance leases are operating leases, and the leased assets are not recognized in the Company''s balance sheet. Upfront lease payments, if any, made under operating leases are recognized in the statement of profit and loss over the term of the lease. Rent and maintenance charges paid for assets/facilities taken on operating leases are charged to revenue in the period in which

3.16 Inventories

Inventory of raw material, including bulk material such as coal and fuel oil are valued at cost net of tax credit wherever applicable. Stores and spares other than those meeting the criteria for recognition as Property, Plant and Equipment are valued at cost net of tax credit wherever applicable.

Stores and spares (other than major spares considered as Property, Plant and Equipment) held but not issued for more than 5 years are valued at 5% of the cost.

Materials and other supplies held for use in the production (other than considered as non-moving) are not written down below cost, if the finished products in which they will be incorporated are expected to be sold at or above cost. These are stated below the cost at net realizable value if the finished products in which they are to be incorporated are sold below cost.

Cost of raw materials, stores and spares as stated above are determined on moving weighted average price.

Inventories of finished goods, semi-finished goods, intermediary products and work in process including process scrap are valued at lower of cost and net realizable value. Cost is generally determined at moving weighted average price of materials, appropriate share of labor and related overheads. Net realizable value is the estimated selling price in the ordinary course of business available on the reporting date less estimated cost necessary to make the sale.

Inventory of scraps internally generated are valued at net realizable value.

3.17 Trade receivable

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. If collection is expected to be collected within a period of 12 months or less from the reporting date, they are classified as current assets otherwise as non-current assets.

Trade receivables are measured at their transaction price unless it contains a significant financing component or pricing adjustments embedded in the contract.

3.18 Financial Instruments

Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are initially measured at fair value. Transaction cost that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value measured on initial recognition of financial asset or financial liabilities.

3.18.1 Financial assets

a) Cash or Cash Equivalent:

The Company considers all short term Bank deposits having a maturity period of three months or less as cash & cash equivalent. Term deposits in Bank with a maturity period of more than 3 months are considered as other Bank Balance.

b) Financial assets at amortized cost:

Financial assets are subsequently measured at amortized costs if the financial assets are held within a business model whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

c) Financial assets at Fair value through Other Comprehensive Income (OCI)

Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

d) Financial assets at Fair value through Profit or loss

Financial assets are measured at fair value through profit or loss unless it is measured at amortized cost or at fair value through other comprehensive item on initial recognition. The transaction cost directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognized in the statement of profit or loss.

3.19 Financial liabilities

Trade and other payables are initially measured at transaction costs. Other financial liabilities are measured at amortized cost using the effective interest method.

3.20 De-recognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

3.2 1 Impairment of financial assets

At each reporting date, the Company assess whether the credit risk on a financial instrument has increased significantly since initial recognition.

If, at the reporting date, the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. If, the credit risk on that financial instrument has increased significantly since initial recognition, the Company measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses.

The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date is recognized as an impairment gain or loss in the statement of profit and loss.

3.22 Derecognition of financial liability

The Company derecognizes financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or expired.

3.23 Offsetting financial instruments

Financial assets and liabilities of the Company are offset and the net amount reported in the balance sheet, when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business.

3.24 Derivatives

Derivative instruments such as forward foreign exchange contracts are recognized at fair value at the date the derivative contracts are entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in statement of profit or loss immediately

3.25 Borrowing cost

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. All other borrowing cost is recognized in profit or loss in the period in which they are incurred.

3.25a Accounting for government grants

Government grants are recognized when there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognized in the statement of profit and loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate. Government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are recognized in the balance sheet by setting up the grant as deferred income and are transferred to profit or loss on a systematic basis over the useful life of the related assets.

Other government grants (grants related to income) are recognized as income over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis. Grants related to income are presented under other income in the statement of profit and loss.

3.26 Employee Benefits

3.26.1 Short-term employee benefits

A liability is recognized for benefits accruing to employees in respect of wages and salaries, short term compensated absences etc. in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid.

3.26.2 Post-employment and long term employee benefits

a) Defined contribution plans

A defined contribution plan is plan under which the Company pays fixed contributions to a separate entity. Contributions to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them for such contributions.

b) Defined benefit plans

For defined benefit plans, the cost of providing benefits is determined through actuarial valuation using the Projected Unit Credit Method, carried out at each balance sheet date. Re-measurement gains and losses of the net defined benefit liability are recognized immediately in other comprehensive income. The service cost, net of interest on the net defined benefit liability is treated as a net expense within employment costs.

Past service cost is recognized as an expense when the plan amendment or curtailment occurs or when any related restructuring costs or termination benefits are recognized,

The retirement benefit obligation recognized in the balance sheet represents the present value of the defined-benefit obligation as reduced by the fair value of plan assets.

c) Other long-term employee benefits

Liabilities recognized in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date. The expected costs of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit retirement plans. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to the statement of profit and loss in the period in which they arise. These obligations are valued annually by independent actuaries.

3.27 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenues are reduced by the estimated rebates and other similar allowances.

3.27.1 Sales of Goods

The Company derives revenue primarily from sale of alumina and aluminum products.

The Company recognizes revenue when all the following criteria are satisfied:

(i) significant risks and rewards of ownership has been transferred to the customer;

(ii) there is no continuing management involvement with the goods usually associated with ownership, nor effective control over the goods sold has been retained;

(iii) the amount of revenue can be measured reliably;

(iv) It is probable that the economic benefits associated with the transaction will flow to the Company

(v) recovery of the consideration is assured reasonably.

3.27.2 Sale of Energy

Sale of wind power is recognized on the basis of energy transmitted to DISCOMs at the price notified by respective authorities. Sale of power from captive power plant is considered on the basis of quantity injected to state GRID excluding wheeling to Refinery but including inadvertent energy injection, at the price notified by appropriate authority.

Revenue from sale of energy is recognized if

i. the amount of revenue can be measured reliably;

ii. It is probable that the economic benefits associated with the transaction will flow to the Company

iii. recovery of the consideration is assured reasonably

3.27.3 Income from dividend and interest

a) Dividend

Dividends income from investments is recognized when the right to receive the dividend is established.

b) Interest

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably Interest income is accrued on a time proportion basis, by reference to the principal outstanding and effective interest rate.

c) Income from Incentives from Government Agencies

Incentives from government agencies in the nature of duty draw back and merchandise export incentive (MEIS) on exports and incentives on generation of renewable sources of energy are recognized as per the relevant statute on compliance of the conditions provided there under.

3.28 Income Taxes

Tax expense represents the sum of current tax and deferred tax.

3.28.1 Current taxes

Current tax expense is based on taxable profit for the year as per the Income Tax Act,I96I. Current tax liabilities (assets) for the current and prior period are measured at amounts expected to be paid (or recovered) using the tax rates and tax laws that have been enacted or substantively enacted by the end of reporting period and includes any adjustment to tax payable in respect of previous years.

3.28.2 Deferred taxes

Deferred tax expense or income is recognized on temporary difference between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base used in computation of taxable profits.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Tax relating to items recognized directly in other comprehensive income forms part of the statement of comprehensive income.

Deferred tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and adjusted to the extent it has become probable that sufficient taxable profits will be available to allow the asset to be recovered

3.29 Exceptional items

Exceptional items are items of income and expenses within profit or loss from ordinary activities but of such size, nature or incidence whose disclosure is felt necessary for better explanation of the performance of the Company.

3.30 Restatement of material error / omissions

The value of errors and omissions is construed to be material for restating the opening balances of assets and liabilities and equity for the earliest prior period presented, if the sum total effect of earlier period income / expenses exceeds Rs.50 crore.

Note No. 4 Critical accounting judgments and key sources of estimation uncertainty

The preparation of the financial statements requires management to make complex and/or subjective judgments, estimates and assumptions about matters that are inherently uncertain. These estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent liabilities and assets at the date of the financial statements and also revenues and expenses during the reported period.

The estimates and associated assumptions are based on past experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised.

4.1 Critical judgments in applying accounting polices:

The following is the critical judgment, apart from those involving estimations that the management have made in the process of applying the Company''s accounting policies and that have the most significant effect on the amounts recognized in the financial statements:

The management has decided that reporting of Company''s financial assets at amortized cost would be appropriate in the light of its business model and have confirmed the Company''s positive intention and ability to hold these financial assets to collect contractual

4.2 Key sources of estimation of uncertainty:

The following are the key assumptions concerning the future, and other key sources of estimation of uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:

4.2.1 Impairment

Investments in Associates and other investments, loans and advances, property, plant and equipment and intangible assets are reviewed for impairment whenever events and changes in circumstances indicate that the carrying value may not be fully recoverable or at least annually.

Future cash flow estimates of Cash Generating Units which are used to calculate the asset''s fair value are based on expectations about future operations primarily comprising estimates about production and sales volumes, commodity prices, reserves and resources, operating rehabilitations and restoration costs and capital expenditure.

4.2.2 Useful lives of property, plant and equipment

The Company reviews the useful life of property, plant and equipment at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.

4.2.3 Assessment of Mining Reserve:

Changes in the estimation of mineral reserves where useful lives of assets are limited to the life of the project ,which in turn is limited to the life of the probable and economic feasibility of reserve, could impact the useful lives of the assets for charging depreciation. Bauxite reserves at Mines is estimated by experts in extraction, geology and reserve determination and based on approved mining plan submitted to Indian Beuro of Mines (IBM).

4.2.4 Obligation for post employment benefit Liability

Liability for post employment benefit and long term employee benefit is based on valuation by the actuary which is in turn based on realistic actuarial assumptions.

4.2.5 Provisions & Contingent Liabilities:

The amount recognized as a provision, including tax, legal, restoration and rehabilitation, contractual and other exposures or obligations is the best estimate of the consideration required to settle the related liability, including any interest charges, taking into account the risks and uncertainties surrounding the obligation. The Company assess its liabilities and contingent liabilities based upon the best information available, relevant tax and other laws, contingencies involved and other appropriate requirements.

4.2.6 Fair value measurements and valuation processes:

For financial reporting purposes, fair value measurements are categorized into Level I, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

- Level I inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date;

- Level 2 inputs are inputs, other than quoted prices included within Level I, that are observable for the asset or liability either directly or indirectly; and

- Level 3 inputs are unobservable inputs for the asset or liability.

Note 5. First time adoption- mandatory exceptions, optional exemptions

The Company has adopted all the applicable accounting standards (Ind AS) in accordance with Ind AS I0I - First Time Adoption of Indian Accounting Standards. The Company has transited from Indian GAAP which is its previous GAAP as defined in Ind AS I0I with necessary disclosures relating to reconciliation of Shareholders'' equity and the comprehensive net income as per Previous GAAP to Ind AS.

The financial statements for the year ended 3Ist March 20I7 are the Company''s first financial statements prepared in accordance with Ind AS. Prior to adoption of Ind AS, the Company had been preparing its financial statements in accordance with Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 and other generally accepted accounting principles in India (‘together referred to as “Indian GAAP”) for all periods up to and including the year ended 3I March 20I6.

5.1 Overall principle

The Company has prepared the opening balance sheet as per Ind AS as on I April, 20I5 (the transition date) by recognizing all assets and liabilities whose recognition is required by Ind AS, not recognizing items of assets and liabilities which are not permitted by Ind AS, by reclassifying items from previous GAAP to Ind AS as required under Ind AS, and applying Ind AS in measurement of recognized assets and liabilities. However, this principle is subject to certain exception and certain optional exemptions availed by the Company as detailed below:

5.1.1 Derecognition of finial assets and financial liabilities

The Company has applied the derecognition requirements of financial assets and financial liabilities prospectively for transactions occurring on or after I April, 20I5 (the transition date).

5.1.2 Classification of debt instruments

The Company has determined the classification of its debt instruments in terms of whether they meet the amortized cost criteria or the fair value through other comprehensive income (FVTOCI) criteria based on the facts and circumstances that existed as of the transition date.

5.1.3 Impairment of financial assets

The Company has applied the impairment requirements of Ind AS I09 retrospectively; however, as permitted by Ind AS I0I, it has used reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date that financial instruments were initially recognized in order to compare it with the credit risk at the transition date. Further, the Company has not undertaken an exhaustive search for information when determining at the date of transition to Ind ASs, whether there have been significant increases in credit risk since initial recognition, as permitted by Ind AS I0I.

5.1.4 Assessment of embedded derivatives

The Company has assessed whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative on the basis of the conditions that existed at the later of the date it first became a party to the contract and the date when there has been a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract.

5.1.5 Past Business combinations

The Company has elected not to apply Ind AS I03 Business Combinations retrospectively to past business combinations that occurred before the transition date of I April, 20I5. Consequently,

- The Company has kept the same classification for the past business combinations as in its previous GAAP financial statements;

- The Company has not recognized assets and liabilities that were not recognized in accordance with previous GAAP in the balance sheet of the acquirer and would also not qualify for recognition in accordance with Ind AS in the separate balance sheet of the acquire;

- The Company has excluded from its opening balance sheet those items recognized in accordance with previous GAAP that do not qualify for recognition as an asset or liability under Ind AS;

The above exemption in respect of business combinations has also been applied to past acquisitions of investments in associates and interest in joint ventures, as defined in Ind AS I03.

5.1.6 Deemed cost for property, plant and equipment and intangible assets

The Company has elected to continue with the carrying value of all of its plant and equipment and intangible assets recognized as of I April, 20I5 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.

5.1.7 Deemed cost for investment in subsidiaries, associates and joint ventures

The Company has elected to continue with the carrying value of all of its investment in associates and joint venture recognized as if I April, 20I5 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.

11.1 The sale of goods (Alumina and Aluminums) is made against either advances received from customer or letter of credit . The advance received from customer is adjusted on supply of material. There is no credit period allowed for such sales and accordingly no interest is charged. The average credit period for sale of wind power is 30 days from the date of metering which is considered as collection period. There is no commercial arrangement for sale of inadvertent thermal power generated at captive power plant. It is linked to the wheeling arrangement in view of the plant requirement. The amount of receivable on account of such inadvertent power sale (net of payable for power purchase) takes a longer period for collection. There is no net receivable for such sale as the purchases are at substantially higher rate compared to sale. Since there is no commercial arrangement for sale of wind and thermal power, no interest is recognized.

11.2 Out of the trade receivable as at March 3I, 20I7, Rs.23.2I crores is due from Jodhpur DISCOM for sale of wind power and Rs. 82.I7 crore is outstanding from M/s Glencore International on account of export of metal. There is no other customers who represent more than 5% of the total balance of trade receivables.

11.3 The company has used a practical approach by computing the expected credit loss allowance for trade receivable based on a case to case basis. Since there is no credit period for sale of alumina and aluminum and the sale is either made against an advance or secured backed by letter of credit (LC) given by the customer, no provision is made against such receivables. For sale of wind power, although there is no credit arrangement, the Company makes provision for allowances based on the industrial credit loss experience and adjusted for forward looking information.

16.1 The cost of inventories recognized as an expense during the year is Rs. 3487.46 crore ( during 20I5-I6 : Rs. 3I23.34 crore)

16.2 The cost of inventories recognized as an expense includes Rs. I3.02 crore ( during 20I5-I6 Rs. I0.84 crore) in respect of write-downs of inventory for non moving items.

16.3 The inventories are hypothecated/pledged against cash credit facility.

16.4 The method of valuation of inventories has been stated in note 3.I6 - Significant accounting policy.

I7.B.I Earmarked balance with scheduled banks represents amount deposited in scheduled banks towards unclaimed dividends.

I7.B.2 Amount due for credit to Investor''s Education and Protetion Fund at the end of the current year Rs. Nil. (previous year Rs. Nil)

(i) Fully paid equity shares, which have a par value of Rs. 5 each, carry one vote per share and carry a right to dividends.

(ii) The Company has bought back 64,43,09,628 no. of equity shares of Rs. 5 each during the year which has led to decrease in the equity share capital from Rs. 1,288.62 Crores to Rs. 966.46 Crores (from 2,57,72,38,5I2 no. of equity shares to I,93,29,28,884 no. of equity shares of Rs. 5 each).

(iii) The shares bought back during the year were extinguished on September 26, 20I6.

19.3 The amount in the general reserve that can be distributed by the Company as dividends to its equity shareholders is determined based upon the Company''s financial statements and also considering the requirements of the Companies Act, 20I3. Thus, the amount reported above under retained earnings are not distributable in its entirety.

19.4 The liability for post retirement medical benefits based on actuarial valuation as on 3I.03.20I5 under previous GAAP was revised from Rs. 6.82 crore to Rs.72.32 crore due to error of omission. The differential amount was recognized as a change to the retained earnings as on the transition date. Accordingly an amount of Rs.42.83 crore and Rs. 22.66 crore has been adjusted with retained earning account and deferred tax liability respectively.

19.5 “As per the earlier GAAR the Company has provided an amount of Rs.I93.29 crore as final dividend for financial year 20I5-I6 and dividend distribution tax of Rs.39.35 crore . After adoption of Ind AS, the said amount has been taken to retained earnings from which an amount of Rs.I44.97 crore and Rs.29.5I crore has been released towards final dividend and dividend distribution tax as approved by share holders in 36th AGM held on 30th Sept''20I6. Reduction in the amount of final dividend for 20I5-I6 and dividend distribution tax is due to reduction of share capital on account of buyback of shares of the Company prior to distribution of dividend."

19.6 During the year the Company has paid interim dividend of Rs.2.80 per equity share amounting in total Rs. 54I.22 crore. For financial year 20I5-I6, the Company paid interim dividend of Rs. 322.I6 crore and final dividend of Rs. I44.97 crore.


Mar 31, 2016

1. BASIS OF ACCOUNTING.

The financial statements are prepared under historical cost convention on accrual basis of accounting, in accordance with the generally accepted accounting principles in India,relevant provisions of the Companies Act, 2013 and applicable accounting standards prescribed under Sec. 133 of Companies Act, 2013.

2. USE OF ESTIMATES.

In preparing the financial statements, the estimates and assumptions that may have bearing on the amount of assets or liabilities or contingent liabilities reported as at the date of financial statements and/or the amount of income or expenses declared during the period, have been made. Variation with the actual is recognized in the year in which the same is crystallized.

3. CLASSIFICATION OF ASSETS AND LIABILITIES.

Based on the nature of business, operating cycle of 12 months has been taken for the purpose of current and non-current classification of assets and liabilities. Accordingly, all assets and liabilities have been classified as current or non-current as per Company''s operating cycle and other criteria set out in Schedule-III of the Companies Act 2013.

4. FIXED ASSETS.

4.1 All tangible fixed assets are stated at historical cost net of accumulated depreciation and accumulated impairment loss, if any. Cost includes all direct expenditure of acquisition net of CENVAT/VAT credit, attributable indirect expenses and borrowing cost, wherever applicable.

4.2 Expenditure on existing tangible assets towards renovation and modernization resulting in increased life and/or efficiency is added to the cost of related assets.

4.3 Expenditure on development of land including leasehold land is capitalized as part of cost of land.

4.4 Intangible Assets are stated at acquisition cost less accumulated amortization.

Mining Rights (including payments made to Government Authority towards restoration of land, forest, wildlife etc. in relation to the bauxite mines), User Right for Jointly Controlled Asset, ERP& RDBMS and other Software User Rights, License & Franchise (Technical Knowhow Right) and R&D knowhow are treated as intangible assets.

4.5 Machinery spares (insurance spares) that are specific to a fixed asset valuing more than Rs.1 lakh per unit are capitalized along with the fixed asset.

4.6 Fixed assets retired from active use and held for disposal are stated at net book value less provision for doubtful realization, if any, and considered as other current asset till the time of its disposal.

4.7 Components of Plant & Machinery having different useful lives are separately recognized. The cut-off value of each component for such separate recognition is Rs.1 Crore. Value of component with different useful life crossing the threshold limit when replaced is recognized as a separate component.

5. DEPRECIATION.

5.1 Depreciation on tangible fixed assets is provided on straight-line method over the useful life of the asset as prescribed in Schedule II of the Companies Act 2013 or life assessed by the Management whichever is lower.

5.2 In respect of the following assets, a higher rate of depreciation is considered based on the lower useful life ascertained by the Management. Depreciation and amortization method, useful life and residual value are reviewed periodically including at each financial year end:

a) Life of immovable fixed assets at Bauxite Mines is limited to the period up to which Bauxite reserve is available at respective block of mines.

b) Life of thermal power generation plant at CPP and Steam Power plant at Refinery is considered as 30 years and 25 years respectively.

c) Lives of Red Mud Pond & Ash Pond at Alumina Refinery and Ash Ponds at Captive Power Plant are based on their estimated remaining useful life, evaluated on the basis of technical estimates made periodically.

5.3 Fixed assets which are subject to componentization, comprises of main assets, componentized assets and remainders if any. Main assets have the life as prescribed under Schedule-II of the Companies Act 2013 or life assessed by the technical committee whichever is lower. Componentized assets having value of Rs.1 crore or above have the life as assessed by the Technical Committee whereas the remainders, if any, carry the life of main assets.

5.4 The residual values of plant & machinery, vehicles, mobile equipments, earth moving equipments, railway facilities, rolling stock and residential quarters are considered to be 5% of the original cost. For all other assets, the residual value is considered to be Nil as per technical estimation.

5.5 Intangible assets are amortized on a straight-line basis as follows

a) Software classified as intangible assets are amortized over a period of 3 years.

b) Mining Rights (i.e NPV and other incidental payments) is amortized over the period for which the mining right is available. Other incidental payments in connection thereto are amortized over a period of 20 years from the date of payment.

c) License for Technical Knowhow is amortized over 10 years from the date of capitalization of corresponding process plant.

d) User Right for cluster projects is amortized over 10 years from the date of commissioning.

5.6 Imbedded Assets at Port Facilities are depreciated at rates calculated on the basis of balance lease period of land belonging to the Port Authority on which these assets are installed.

5.7 Assets costing Rs.10,000/- or less individually are depreciated fully in the year in which they are put to use.

5.8 Subsequent expenditure related to an item of fixed asset is prospectively depreciated over the revised useful life of related asset.

5.9 Assets laid on land not owned by the Company are depreciated over a period of five years from the date on which the asset is ready for use.

5.10 Depreciation on value adjustment is provided prospectively.

6. BORROWING COST.

6.1 General and specific borrowing costs attributable to the acquisition or construction of a qualifying asset are capitalized as part of the cost of that asset until such time the assets are ready for their intended use.

6.2 Other borrowing costs are recognized as expenses in the period in which these are incurred.

7. IMPAIRMENT.

Carrying amount of cash generating units is reviewed at each Balance sheet date where there is any indication of impairment based on internal/external sources of information. An impairment loss is recognized in the statement of profit and loss where the carrying amount exceeds the recoverable amount of the cash generating units.Impairment loss is reversed if there is change in the recoverable amount and such loss either no longer exists or has decreased.

8. INVESTMENTS.

Investments that are readily realizable and are intended to be held for not more than one year from the date on which such investments are made are classified as current investments. All other investments are classified as long-term investments. Current investments are stated at cost or market value whichever is lower. Long-term investments are carried at cost, after providing for permanent diminution, if any, in the value of such investments.

9. INVENTORY.

9.1 Raw-materials, stores and spares are valued at cost net of CENVAT / VAT credit wherever applicable or net realizable value whichever is lower. Cost is determined by using moving weighted average price method on real time basis.

9.2 Stores and spares other than insurance spares held but not issued for more than 5 years are valued at 5% of the cost.

9.3 Shortage of coal up to 1% of the receipt quantity is treated as normal loss and beyond 1% is treated as abnormal loss.

9.4 Materials and other supplies held for use in the production (other than considered as non-moving) are valued at cost, if the finished products in which they are used are sold at or above cost.

9.5 Finished goods, semi-finished goods,intermediary products and work in process including process scrap except anode butts and rejects are valued at lower of cost and net realizable value. Cost is generally determined by using moving weighted average price on real time basis, appropriate share of labour and related overheads. Net realizable value is the estimated selling price in the ordinary course of business less estimated cost necessary to make the sale.

9.6 Scrap of various nature internally generated is valued at estimated net realizable value.

10. GOVERNMENT GRANTS.

10.1 Fixed assets acquired out of financial grant from Government are shown at cost.The grant-in-aid received is credited to subsidy reserve account. Depreciation on the corresponding asset is adjusted against subsidy reserve.

10.2 Revenue grants are recognized as income over the period to which these are related.

11. FOREIGN CURRENCY TRANSACTIONS.

11.1 All foreign currency transactions are recorded by applying the exchange rate as on the date of transaction.

11.2 Monetary assets and liabilities in foreign currency are restated at Year-end exchange rates. Exchange difference on restatement is recognized in the statement of profit and loss.

12. FORWARD EXCHANGE CONTRACT.

Forward exchange contracts outstanding at the year-end relating to firm commitment and highly probable forecast transactions, loss due to exchange difference or arising on marking to market is recognized in the statement of profit & loss whereas gains are ignored.

13. REVENUE RECOGNITION.

13.1 Sales:

a) Alumina &Alumnium :Sales in the domestic market are recognized at the time of dispatch of materials to the buyers. Export sales are recognized on issue of Bill of Lading. Domestic Sales include excise duty and are net of rebate and price concessions and do not include value added tax (VAT).

b) Renewable Power: Sale of wind power is recognized on the basis of power transmitted to power distribution companies (DISCOMs) at the price notified by respective authorities. Solar power generated is consumed for captive use in office and township and hence not recognized as income as well as expenditure.

c) Thermal Power : Sale of power from CPP is considered on the basis of quantity supplied to state grids less wheeling to refinery at the price notified by appropriate authority.

13.2 Receivables/ Incentives:

a) Claims receivables are accounted for in the statement of profit and loss based on certainty of their realization.

b) Interest income on term deposits is recognized on a time proportion basis taking in to account the amount outstanding and the rate applicable.

c) Export incentives i.e.duty draw back and MEIS are recognized on accrual basis on the shipping quantity as per Bill of Lading / export invoice.

d) Income from Renewable Energy Certificates (REC) is recognized on the basis of power billed to DISCOMs at the weighted average of quoted prices of recognized power exchanges on the last trading day of the reporting period.

e) Generation Based Incentive (GBI) is recognized on the invoiced quantity at the applicable rate as per scheme.

f) If there is uncertainty in realization, revenue recognition is postponed.

14. LONG TERM EMPLOYEE BENEFITS.

14.1 Defined Contribution Plan: Contributions towards Provident Funds & Pension Scheme are charged to the statement of profit and loss of the period for which the contributions to the Funds are due.

14.2 Defined Benefit Plan: Liabilities towards gratuity, accrued leave, long service awards, post retirement medical and settling-in benefits, future payments to the legal heirs of deceased employees under the NEFFARS scheme, contribution towards welfare on superannuation (NRWS), benevolent contribution and expenditure on superannuation gift are made based on the actuarial valuation as at the end of the year and charged to statement of profit and loss after considering actuarial gains/losses.

14.3 Expenditure on voluntary retirement compensation is charged off in the year in which it is incurred.

15. PRIOR PERIOD /PREPAID ITEMS.

Income/ Expenditure relating to prior period and prepaid expenses not exceeding Rs.5 lakh in each case is treated as income/expenditure of the current period.

16. EXPENDITURE ON NEW PROJECTS.

Expenses for assessment of new potential projects incurred till and for the purpose of making investment decision are charged to revenue. Expenditure incurred for projects after investment decisions are accounted for under capital-work-in progress and capitalized subsequently.

17. EXPENDITURE ON RESEARCH AND DEVELOPMENT.

Expenditure incurred during research phase is charged to revenue when no intangible asset arises from such research.

Development expenditure except of capital nature is charged to statement of Profit and Loss in the year incurred after setting of incidental income, if any.

18. EXCEPTIONAL ITEMS.

Exceptional items are items of income and expenses within profit or loss from ordinary activities but of such size, nature or incidence whose disclosure is felt necessary for better explanation of the performance of the Company.

19. TAX EXPENSES.

Tax expenses for the period, comprising of current tax and deferred tax are included in the determination of net profit or loss for the period.

19.1 Current tax is measured at the amount expected to be paid to tax authorities in accordance with the prevailing taxation laws.

19.2 Deferred Tax expense or benefit is recognized on timing difference being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred Tax Assets (DTA) are recognized only if there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such DTA can be realized.

19.3 Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date.

20. JOINT VENTURES.

Interest in a jointly controlled entity is accounted for as investment in accordance with Accounting Standard (AS) 13, "Accounting for Investments" with disclosures in line with Accounting Standard (AS) 27, "Financial Reporting of Interests in Joint Ventures".

21. PROVISIONS AGAINST DOUBTFUL DEBTS AND RECOVERABLES.

Provision for doubtful debts and receivables are made where sums receivable from parties other than Govt. Dept. / Govt. Companies are not realized for more than 3 years. In the case of Government Departments / Government Companies, the same is made on case-to-case basis depending upon the merit of the case.

22. PROVISIONS, CONTINGENT LIABILITIES & CONTINGENT ASSETS.

22.1 Provision for contingent liability is recognized when there is present obligation and it is probable that an out flow of resources will be required to settle the obligation and in respect of which reliable estimate can be made. These are reviewed at end of each year and adjusted to reflect the best current estimate.

22.2 Liabilities of contingent nature are disclosed in the financial statement as contingent liabilities when there is a possible obligation or a present obligation that may, but probably will not, require any outflow of resources. No disclosure is made where likelihood of outflow of resources is remote.

22.3 Contingent assets are neither recognized nor disclosed in the financial statements.


Mar 31, 2015

1. BASIS OF ACCOUNTING.

The fnancial statements are prepared under historical cost convention on accrual basis of accounting, in accordance with the generally accepted accounting principles in India, relevant provisions of the Companies Act, 2013 and applicable accounting standards.

2. USE OF ESTIMATES.

In preparing the fnancial statements in conformity with accounting principles generally accepted in India, the company makes estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent liabilities as at the date of fnancial statements and the amount of revenues and expenses during the reported period. Actual result in some cases could differ from those estimates. Any revision of such estimates is recognized in the period in which the result is crystallized.

3. CLASSIFICATION OF ASSETS AND LIABILITIES

All assets and liabilities have been classified as current or noncurrent as per Company''s operating cycle and other criteria set out in Schedule-III of the Companies Act 2013. Based on the nature of business, the Company has ascertained its operating cycle as 12 months for the purpose of Current-noncurrent classification of assets and liabilities.

4. FIXED ASSETS.

4.1 All tangible fxed assets are stated at historical cost net of accumulated depreciation and accumulated impairment loss, if any. Cost includes all direct expenditure of acquisition, attributable borrowing cost and net of CENVAT/VAT credit, wherever applicable.

4.2 Expenditure on existing tangible assets towards renovation and modernization resulting in increased life and / or efficiency of an existing asset is added to the cost of related assets.

4.3 Expenditure on development of land including leasehold land is capitalized as part of cost of land.

4.4 Intangible Assets are stated at acquisition cost less accumulated amortization.

Mining rights (NPV and related payments made to Govt. authorities for bauxite mines), User Right (Jointly controlled asset), Software (Application Software packages like ERP and application development tools like RDBMS), License& Franchise (Technical know-how right) and R&D knowhow are treated as intangible assets.

4.5 Machinery spares (insurance spares) that are specific to a fxed asset valuing more than Rs.1.00 lakh per unit are capitalized along with the fxed asset.

4.6 Fixed assets retired from active use and held for disposal are stated at net book value less provision for doubtful realization if any and considered as other current asset till the time of its disposal.

4.7 In pursuant to Schedule-II of the Companies Act 2013, the fxed assets (Plant & machinery) of significant value are componentized with separate useful life. The cut off limit of Component value to capitalize separately with different useful life is considered as Rs. 1 Crore.

5. DEPRECIATION.

5.1 Depreciation on tangible fxed assets is provided on straight-line method over the useful life of the asset in the manner prescribed under Schedule II of the Companies Act 2013. The asset life is considered as prescribed under Schedule-II of the Companies Act 2013 or life assessed by the technical committee whichever is lower.

5.2 Fixed assets which are subject to componentization, comprises of main assets, componentized assets and remainders if any. Main assets have the life as prescribed under Schedule-II of the Companies Act 2013 or life assessed by the technical committee whichever is lower. Componentized assets having value of Rs.1 crore or above have the life as assessed by the Technical Committee whereas the remainders if any carry the life of main assets as explained above.

5.3 The residual value of Plant & Machineries, vehicles, mobile equipments, and earth moving equipments, Railway facilities, Rolling stock and residential quarters are maintained at 5% of the original cost and for all other assets the residual value is considered as Nil.

5.4 For the following assets a higher rate of depreciation is considered based on the lower useful life ascertained through technical estimation which is further subject to lower component life:

a) Life of immovable fxed assets at Bauxite Mines is limited to the period up to which Bauxite reserve is available at respective block of mines.

b) Life of thermal power generation plant at CPP and Steam Power plant at Refinery is considered as 30 years and 25 years respectively.

c) Depreciation at higher rate is provided on Red mud pond &Ash Pond at Alumina Refinery and Ash ponds at Captive power plant based on their estimated remaining useful life, evaluated on the basis of technical estimates made periodically.

5.5 Intangible assets are amortized on a straight line basis as follows

a) Software classified as intangible assets are amortized over a period of 3 years.

b) Mining Rights is amortized over 20 years from the date of payment or date of renewal / deemed renewal of mining lease whichever is earlier.

c) License (Technical knowhow) is amortized over 10 years from the date of capitalization of corresponding process plant.

d) User Right (jointly controlled assets) is amortized over 10 years from the date of commissioning.

5.6 Certain assets at Port Facilities are depreciated at rates calculated on the basis of balance lease period of land belonging to the Port Authority on which these assets are installed.

5.7 Assets costing Rs.10,000/- or less individually are depreciated fully in the year in which they are put to use.

5.8 Subsequent expenditure related to an item of fxed asset is prospectively depreciated over the revised useful life of related plant & machinery.

5.9 Assets laid on land not owned by the Company are depreciated over a period of fve years from the date on which the asset is ready for put to use.

5.10 Depreciation on value adjustment is provided prospectively.

6. BORROWING COST.

6.1 General and specific borrowing costs attributable to the acquisition or construction of a qualifying asset are capitalized as part of the cost of that asset until such time the assets are ready for their intended use.

6.2 Other borrowing costs are recognized as expenses in the period in which these are incurred.

7. IMPAIRMENT.

The carrying amount of cash generating units is reviewed at each Balance sheet date where there is any indication of impairment based on internal/external indicators. An impairment loss is recognized in the statement of profit and loss where the carrying amount exceeds the recoverable amount of the cash generating units.

An impairment loss is reversed if there is change in the recoverable amount and such loss either no longer exists or has decreased.

8. INVESTMENTS.

Investments that are readily realizable and are intended to be held for not more than one year from that date, on which such investments are made are classified as current investments. All other investments are classified as long term investments.

Current investments are stated at cost or market value whichever is lower. Long-term investments are carried at cost, after providing for diminution in value, if it is of a permanent nature.

9. INVENTORY.

9.1 Inventory of raw material, stores and spares are valued at cost net of CENVAT/VAT credit wherever applicable. Cost is determined on moving weighted average price on real time basis.

9.2 Stores and spares other than insurance spares held but not issued for more than 5 years are valued at 5% of the cost.

9.3 Shortage of coal up to 1% of the receipt quantity is treated as normal loss and beyond 1% is treated as abnormal loss.

9.4 Materials and other supplies held for use in the production (other than considered as non-moving) are not written down below cost, if the fnished products in which they will be incorporated are expected to be sold at or above cost.

9.5 Inventories of fnished goods, semi-finished goods, intermediary products and work in process including process scrap except anode butts and rejects are valued at lower of cost and net realizable value. Cost is generally determined at moving weighted average price of materials on real time basis, appropriate share of labour and related overheads. Net realizable value is the estimated selling price in the ordinary course of business less estimated cost necessary to make the sale.

9.6 Scrap of various nature internally generated is valued at estimated net realizable value.

10. GOVERNMENT GRANTS.

10.1 Fixed assets acquired out of fnancial grant from Government are shown at cost by crediting the grant-in-aid received to Subsidy Reserve.

10.2 Grants related to revenue are recognized as revenue over the period to which these are related.

11. FOREIGN CURRENCY TRANSACTIONS.

11.1 All foreign currency transactions are recorded by applying the exchange rate as on the date of transactions

11.2 Monetary assets and liabilities in foreign currency are restated at year-end exchange rates. Exchange difference on restatement is recognized in the statement of Profit & Loss.

12. FORWARD EXCHANGE CONTRACT.

In respect of forward exchange contracts relating to frm commitment and highly probable forecast transactions, loss due to exchange difference is recognized in the statement of profit & loss in the reporting period in which the exchange rate changes.

Forward exchange contracts outstanding at the year end on account of frm commitment/ highly probable forecast transactions are marked to market and the losses if any are recognized in the statement of profit & loss and gains are ignored.

13. REVENUE RECOGNITION.

13.1 Sales:

a) Alumina & Aluminium : Sales in the domestic market are recognized at the time of dispatch of materials to the buyers. Export sales are recognized on issue of Bill of Lading. Domestic Sales include excise duty and are net of rebate and price concessions.

b) Renewable Power: Sale of wind power is recognized on the basis of power transmitted to DISCOMs at the price notified by respective authorities. Solar power generated is consumed for captive use in office & townships and hence not recognized as separate item of income.

c) Sale of Thermal Power: Sale of power from CPP is considered on the basis of quantity injected to state GRID excluding wheeling to refinery but including inadvertent power sale at the price notified by appropriate authority.

13.2 Receivables/ Incentives:

a) Claims and interest receivables are accounted for in the statement of Profit and Loss based on certainty of their realization.

Interest income on term deposits is recognized on a time proportion basis taking in to account the amount outstanding and the rate applicable.

b) Export incentives i.e Duty draw back & Focus marketing license are recognized on accrual basis on the shipping quantity as per BOL/ export invoice.

c) Income from Renewable Energy Certificates (REC) is recognized on the basis of power billed to DISCOMs at the weighted average of quoted price of recognized power exchanges on the last trading day of the reporting period.

d) Generation Based Incentive (GBI) is recognized on the invoiced quantity at the applicable rate as per scheme.

e) If there is uncertainty in realization, revenue recognition is postponed.

14. LONG TERM EMPLOYEE BENEFITS.

14.1 Defined Contribution Plan: Contributions towards Provident Funds & Pension Scheme are charged to the statement of Profit and Loss for the period as and when the contributions to the Funds are due.

14.2 Defined Benefit Plan: The provisions/liabilities towards gratuity, accrued leave, long service awards, post retirement medical and settling- in benefits, future payments to the legal heirs of deceased employees under the NEFFARS scheme, are made based on the actuarial valuation as at the end of the year and charged to statement of Profit and loss after considering actuarial gains/losses.

14.3 Expenditure on voluntary retirement compensation is charged off in the year in which it is incurred.

15. PRIOR PERIOD /PREPAID ITEMS.

Income/ Expenditure relating to prior period and prepaid expenses not exceeding Rs. 5 lakh in each case is treated as income/ expenditure for the current year.

16. EXPENDITURE ON NEW PROJECTS.

Expenses on account of new potential projects incurred till investment decision, are charged to revenue. Expenditure incurred thereafter in case of successful projects are accounted for under capital-work-in progress and capitalized subsequently.

17. EXPENDITURE ON RESEARCH AND DEVELOPMENT.

Expenditure incurred during research phase is charged to revenue when no intangible asset arises from such research.

Development expenditure except capital nature is charged to statement of Profit and Loss in the year incurred after setting of incidental income, if any.

18. EXCEPTIONAL ITEMS.

Exceptional items are the items of income and expenses within profit or loss from ordinary activities of such size, nature or incidence whose disclosure is felt necessary.

19. TAX EXPENSES.

Tax expenses for the period, comprising of current tax and deferred tax are included in the determination of net profit or loss for the period.

19.1 Current tax is measured at the amount expected to be paid to tax authorities in accordance with the prevailing taxation laws.

19.2 Deferred Tax expense or benefit is recognized on timing difference being the difference between taxable incomes and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date.

20. JOINT VENTURES.

20.1 Interest in a jointly controlled entity has been accounted for as an investment in accordance with Accounting Standard (AS) 13, Accounting for investments. However necessary disclosure is made in line with Accounting Standard (AS) 27, Financial Reporting of interests in Joint ventures.

20.2 Interest in a jointly controlled asset is classified and disclosed separately.

21. PROVISIONS AND CONTINGENT LIABILITIES & CONTINGENT ASSETS.

21.1 A provision is recognized when there is present obligation as a result of a past event and it is probable that an out fow of resources will be required to settle the obligation and in respect of which reliable estimate can be made. These are reviewed at end of each year and adjusted to reflect the best current estimate.

21.2 Provision is made /written back in respect of balances on account of sums payable/receivable for more than 3 years, in respect of parties other than Govt. Dept./ Govt. Companies. In case of Govt. Dept./ Govt. Companies, the same is made on case to case basis depending upon the merit of the case.

21.3 Disclosure for contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require any outflow of resources.

21.4 No provision is recognized or disclosure for contingent liability is made, when there is a possible obligation or a present obligation and the likelihood of outflow of resources is remote.

21.5 Contingent assets are neither recognized nor disclosed in the fnancial statements.


Mar 31, 2014

1. BASIS OF ACCOUNTING.

The financial statements are prepared under historical cost convention on accrual basis of accounting, in accordance with the generally accepted accounting principles in India, relevant provisions of the Companies Act, 1956 and accounting standards notified there under.

2. USE OF ESTIMATES.

In preparing the financial statements in conformity with accounting principles generally accepted in India, the company makes estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent liabilities as at the date of financial statements and the amount of revenues and expenses during the reported period. Actual result in some cases could differ from those estimates. Any revision of such estimates is recognized in the period in which the result is crystallized.

3. FIXED ASSETS.

3.1 All tangible fixed assets are stated at historical cost net of accumulated depreciation and accumulated impairment loss, if any. Cost includes all direct expenditure of acquisition, attributable borrowing cost and net of CENVAT/VAT credit, wherever applicable.

3.2 Expenditure on existing tangible assets towards renovation and modernization resulting in increased life and/or efficiency of an existing asset is added to the cost of related assets.

3.3 Expenditure on development of land including leasehold land is capitalized as part of cost of land.

3.4 IntangibleAssets are stated at acquisition cost less accumulated amortization. Mining rights (NPV and related payments made to Govt. authorities for bauxite mines), Software (Application Software packages like ERP and application development tools like RDBMS), License& Franchise (Technical know-how right) and R&Dknowhow are treated as intangible assets.

3.5 Capital expenditure on jointly controlled assets having exclusive user right is reflected as CWIP to the extent of Company''s share in the asset and on completion considered as tangible fixed assets.

3.6 Machinery spares (insurance spares) that are specific to a fixed asset valuing more than Rs.1.00 lakh per unit are capitalized along with the fixed asset.

3.7 Fixed assets retired from active use and held for disposal are stated at net book value less provision for doubtful realization if any and considered as other current asset till the time of its disposal.

4. DEPRECIATION.

4.1 Depreciation on tangible assets is provided on straight-line method at the rates and in the manner prescribed under Schedule XIV to the Companies Act, 1956 except in respect of the following assets, where depreciation at higher rate is provided based on their estimated remaining useful life, evaluated on the basis of technical estimate made periodically. Earth work portion of:

a) Red mudpond atAlumina Refinery;

b) Ash pond atAlumina Refinery;

c) Ash ponds at CaptivePower Plant.

4.2 Intangible assets:

a) Software classified as intangible assets are amortized over a period of 3 years.

b) Mining Rights is amortized over 20 years from the date of payment or date of renewal / deemed renewal of mining lease whichever is earlier.

License (Technical knowhow) is valid for the full life of the related plant & machinery. Accordingly, the useful life of intangible asset "Technical knowhow right – RTAlicense" is amortized over the useful life of related plant & machinery.

4.3 Depreciation in respect of railway sidings and wagons are provided at the rate of 5.28% in line with continuous process plant.

4.4 Certain assets at Port Facilities are depreciated at rates calculated on the basis of balance lease period of land belonging to the PortAuthority on which these assets are installed.

4.5 Assets costing Rs. 5,000/- or less individually are depreciated fully in the year in which they are put to use.

4.6 Where the life and/or efficiency of an asset is increased due to renovation, modernization or major replacement the depreciable value is prospectively amortized over the revised useful life of related plant & machinery.

4.7 Assets laid on land not owned by the Company are depreciated over a period of five years from the date on which the asset is ready for put to use.

4.8 Classification of plant and machinery into continuous and non-continuous is made on the basis of technical opinion and depreciation is provided accordingly.

4.9 Depreciation on value adjustment is provided prospectively.

5. BORROWING COST.

5.1 General and specific borrowing costs attributable to the acquisition or construction of a qualifying asset are capitalized as part of the cost of that asset until such time the assets are ready for their intended use.

5.2 Other borrowing costs are recognized as expenses in the period in which these are incurred.

6. IMPAIRMENT.

The carrying amount of cash generating units is reviewed at each Balance sheet date where there is any indication of impairment based on internal/external indicators. An impairment loss is recognized in the statement of profit and loss where the carrying amount exceeds the recoverable amount of the cash generating units.

An impairment loss is reversed if there is change in the recoverable amount and such loss either no longer exists or has decreased.

7. INVESTMENTS.

7.1 Investments intended to be held for not more than one year from the date of such investment, are classified as current investments. All other investments are classified as long term investments. Long-term investments ( including investment in Joint ventures) are carried at cost, after providing for diminution in value, if it is of a permanent nature.

7.2 Current investments are stated at cost or market value whichever is lower.

8. INVENTORY.

8.1 Inventory of raw material, stores and spares are valued at cost net of CENVAT / VAT credit wherever applicable. Cost is determined on moving weighted average price on real time basis.

8.2 Stores and spares other than insurance spares held but not issued for more than 5 years are valued at 5% of the cost.

8.3 Shortage of coal up to 1% of the receipt quantity is treated as normal loss and beyond 1% is treated as abnormal loss.

8.4 Materials and other supplies held for use in the production (other than considered as non-moving) are not written down below cost, if the finished products in which they will be incorporated are expected to be sold at or above cost.

8.5 Inventories of finished goods, semi-finished goods, intermediary products and work in process including process scrap except anode butts and rejects are valued at lower of cost and net realizable value. Cost is generally determined at moving weighted average price of materials on real time basis, appropriate share of labour and related overheads. Net realizable value is the estimated selling price in the ordinary course of business less estimated cost necessary to make the sale.

8.6 Scrap of various nature internally generated is valued at estimated net realizable value.

9. GOVERNMENT GRANTS.

9.1 Fixed assets acquired out of financial grant from Government are shown at cost by crediting the grant-in-aid received to Subsidy Reserve.

9.2 Grants related to revenue are recognized as revenue over the period to which these are related.

10. FOREIGN CURRENCY TRANSACTIONS.

10.1 All foreign currency transactions are recorded by applying the exchange rate as on the date of transactions.

10.2 Monetary assets and liabilities in foreign currency are restated at year-end exchange rates. Exchange difference on restatement is recognized in the statement of Profit & Loss.

10.3 In respect of forward contracts relating to firm commitments and highly probable forecast transactions, loss due to exchange difference is recognized in the profit and loss account in the reporting period in which the exchange rate changes.

11. REVENUE RECOGNITION.

11.1 Sales:

a) Sale of Alumina & Alumnium : Sales in the domestic market are recognized at the time of dispatch of materials to the buyers. Export sales are recognized on issue of Bill of Lading. Domestic Sales include excise duty and are net of rebate and price concessions.

b) Sale of Wind Power: Sale of wind power is recognized on the basis of power transmitted to DISCOMs at the price notified by respective authorities.

c) Sale of Thermal Power : Sale of power from CPP is considered on the basis of quantity injected to state GRID excluding wheeling to refinery but including inadvertent power sale at the price notified by appropriate authority.

11.2 Receivables/ Incentives:

a) Claims and interest receivables are accounted for in the statement of Profit and Loss based on certainty of their realization.

Interest income on term deposits is recognized on a time proportion basis taking in to account the amount outstanding and the rate applicable.

b) Export incentives i.e Duty draw back & Focuss marketing license are recognized on accrual basis on the shipping quantity as per BOL/ export invoice.

c) Income from Renewable Energy Certificates (REC) is recognized on the basis of power billed to DISCOMs at the weighted average of quoted price of recognized power exchanges on the last trading day of the reporting period.

d) Generation Based Incentive (GBI) is recognized on the invoiced quantity at the applicable rate as per scheme.

e) If there is uncertainty in realization, revenue recognition is postponed.

12. LONG TERM EMPLOYEE BENEFITS.

12.1 Defined Contribution Plan: Contributions towards Provident Funds & Pension Scheme are charged to the statement of Profit and Loss for the period as and when the contributions to the Funds are due.

12.2 Defined Benefit Plan: The provisions/liabilities towards gratuity, accrued leave, long service awards, post retirement medical and settling- in benefits, future payments to the legal heirs of deceased employees under the NEFFARS scheme, are made based on the actuarial valuation as at the end of the year and charged to statement of Profit and loss after considering actuarial gains/losses.

12.3 Expenditure on voluntary retirement compensation is charged off in the year in which it is incurred.

13. PRIORPERIOD/PREPAIDITEMS.

Income/ Expenditure relating to prior period and prepaid expenses not exceeding Rs.5 lakh in each case is treated as income/expenditure for the current year.

14. EXPENDITURE ON NEW PROJECTS.

Expenses on account of new potential projects incurred till investment approval, are charged to revenue. Expenditure incurred thereafter in case of successful projects are accounted for under capital-work-in progress and capitalized subsequently.

15. EXPENDITURE ON RESEARCH AND DEVELOPMENT.

Expenditure incurred during research phase is charged to revenue when no intangible asset arises from such research.

Development expenditure except capital nature is charged to statement of Profit and Loss in the year incurred after setting of incidental income, if any.

16. EXCEPTIONAL ITEMS.

Exceptional items are the items of income and expenses within profit or loss from ordinary activities of such size, nature or incidence whose disclosure is necessary.

17.DEFERRED TAX.

17.1 Deferred Tax expense or benefit is recognized on timing difference being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

17.2 Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date.

18. JOINT VENTURES.

18.1 Interest in a jointly controlled entity has been accounted for as an investment in accordance with Accounting Standard (AS) 13, Accounting for investments. However necessary disclosure is made in line with Accounting Standard (AS) 27, Financial Reporting of interests in Joint ventures.

18.2 Interest in a jointly controlled asset is classified and disclosed according to the nature of assets.

19. PROVISIONS AND CONTINGENT LIABILITIES & CONTINGENT ASSETS.

19.1 A provision is recognized when there is present obligation as a result of a past event and it is probable that an out flow of resources will be required to settle the obligation and in respect of which reliable estimate can be made. These are reviewed at end of each year and adjusted to reflect the best current estimate.

19.2 Provision is made /written back in respect of balances on account of sums payable/receivable for more than 3 years, in respect of parties other than Govt. Dept./ Govt. Companies. In case of Govt. Dept./ Govt. Companies, the same is made on case to case basis depending upon the merit of the case.

19.3 Disclosure for contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require any outflow of resources.

19.4 No provision is recognized or disclosure for contingent liability is made, when there is a possible obligation or a present obligation and the likelihood of outflow of resources is remote.

19.5 Contingent assets are neither recognized nor disclosed in the financial statement.


Mar 31, 2013

1. BASIS OF ACCOUNTING

The financial statements are prepared under historical cost convention on accrual basis of accounting, in accordance with the generally accepted accounting principles, accounting standards issued by the Institute of Chartered Accountants of India, and the relevant provisions of the Companies Act, 1956.

2. USE OF ESTIMATES

In preparing the financial statements in conformity with accounting principles generally accepted in India, the company makes estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent liabilities as at the date of financial statements and the amount of revenues and expenses during the reported period. Actual result in some cases could differ from those estimates. Any revision of such estimates is recognized in the period in which the same is determined.

3. COMPLIANCE TO REQUIREMENT OF REVISED SCHEDULE-VI TO THE COMPANIES ACT, 1956

The Financial Statements are prepared in compliance with the provisions of revised Schedule VI to the Companies Act 1956.

All assets and liabilities have been classified as current and/ or non-current as per the Company''s normal operating cycle and other criteria set out in the revised Schedule VI to the Companies Act, 1956.

4. (A) FIXED ASSETS

4.1 All fixed assets are stated at historical cost net of accumulated depreciation and accumulated impairment loss, if any. Cost includes all direct expenditure of acquisition, attributable borrowing cost and net of CENVAT/VAT credit, wherever applicable.

4.2 Expenditure on development of land including leasehold land is capitalized as part of cost of land.

4.3 Intangible Assets are stated at acquisition cost, net of accumulated amortization and are amortized on a straight line basis over their estimated useful lives.

NPV and related payments made to Govt. authorities for bauxite mines, Application Software packages like ERP and application development tools like RDBMS and Technical know-how right are treated as intangible assets.

4.4 Insurance spares valuing more than Rs. 1 lakh per unit are capitalized .

4.5 Fixed assets retired from active use and held for disposal are stated at net book value less provision for doubtful realization if any and considered as other current asset till the time of its disposal.

4. (B) DEPRECIATION

4.1 Depreciation on tangible assets is provided on straight-line method at the rates and in the manner prescribed under Schedule XIV to the Companies Act, 1956 except in respect of the following assets, where depreciation at higher rate is provided based on their estimated remaining useful life, evaluated on the basis of technical estimate made periodically. Earth work portion of :

a) Red mud pond at Alumina Refinery;

b) Ash pond at Alumina Refinery;

c) Ash ponds at Captive Power Plant.

4.2 Intangible assets for application software is amortized over a period of 3 years and intangible assets for Mining Rights is amortized over 20 years from the date of payment or date of renewal / deemed renewal whichever is earlier based on respective lease life.

Technical know-how right is amortized over the useful life of related plant and machinery. As per the license agreement with M/s. Rio Tinto Alcan, the license is valid for the full life of related plant i.e Smelter and Alumina Refinery. Both the asset groups are continuous process plants. Accordingly, the useful life of intangible asset "Technical know-how right - RTA license" is amortized over the useful life of related plant & machinery.

4.3 Depreciation in respect of railway sidings and wagons are provided at the rate of 5.28% in line with continuous process plant.

4.4 Certain assets at Port Facilities are depreciated at rates calculated on the basis of balance lease period of land belonging to the Port Authority on which these assets are installed.

4.5 Assets costing Rs. 5,000/- or less individually are depreciated fully in the year in which they are put to use.

4.6 Assets laid on land not owned by the Company are depreciated over a period of five years.

4.7 Classification of plant and machinery into continuous and non-continuous is made on the basis of technical opinion and depreciation provided accordingly.

4.8 Depreciation on value adjustment is provided prospectively.

5. BORROWING COST

5.1 General and specific borrowing costs attributable to the acquisition or construction of a qualifying asset are capitalized as part of the cost of that asset until such time the assets are ready for their intended use.

5.2 Other borrowing costs are recognized as expenses in the period in which these are incurred.

6. IMPAIREMENT

The Company reviews the carrying amount of its fixed assets, whenever circumstances indicate that the carrying amount of the asset may not be recoverable. If the estimated discounted future cash flow expected to result from use of the asset is less than its carrying amount, the asset is deemed to be impaired. The impairment loss is measured as the difference between the carrying amount and recoverable amount.

7. INVESTMENTS

7.1 Investments intended to be held for not more than one year from the date of such investment, are classified as current investments. All other investments are classified as long term investments. Long-term investments are carried at cost, after providing for diminution in value, if it is of a permanent nature.

7.2 Current investments are stated at cost or fair value whichever is lower.

8. INVENTORY

8.1 Inventory of stores and spares are valued at cost net of CENVAT / VAT credit wherever applicable. Cost is determined on moving weighted average price on real time basis.

8.2 Stores and spares other than insurance spares held but not issued for more than 5 years are valued at 5% of the cost.

8.3 Shortage of coal up to 1% of the receipt quantity is treated as normal loss and beyond 1% is treated as abnormal loss.

8.4 Materials and other supplies held for use in the production (other than considered as non-moving) are not written down below cost, if the finished products in which they will be incorporated are expected to be sold at or above cost.

8.5 Inventories of finished goods, semi-finished goods, intermediary products and work in process except anode butts and rejects are valued at lower of cost and net realizable value. Cost is generally determined at moving weighted average price of materials on real time basis, appropriate share of labour and related overheads. Net realizable value is the estimated selling price in the ordinary course of business less estimated cost necessary to make the sale.

Anode rejects and butts are valued at lower of past realized value or 45% of direct material cost.

8.6 Scrap of various nature internally generated is valued at estimated net realizable value.

9. GOVERNMENT GRANTS

9.1 Fixed assets acquired out of financial grant from Government are shown at cost by crediting the grant-in-aid received to Subsidy Reserve.

9.2 Export incentives/Duty drawback on exports made during the year, are accounted for on accrual basis and shown as other operating income.

9.3 The saving on account of application of concessional rate of customs duty against EPCG licenses is disclosed as commitments towards its Export Obligation.

10. FOREIGN CURRENCY TRANSACTIONS

10.1 All foreign currency transactions are recorded by applying the exchange rate as on the date of transactions.

10.2 Monetary assets and liabilities in foreign currency are restated at year-end exchange rates. Exchange difference on restatement is recognized in the statement of Profit & Loss.

10.3 In respect of forward contracts relating to firm commitments and highly probable forecast transactions, loss due to exchange difference is recognized in the profit and loss account in the reporting period in which the exchange rate changes. Any profit or loss arising on renewal or cancellation of such contracts is recognized as income or expense for the period.

11. REVENUE RECOGNITION

11.1 Sales in the domestic market are recognized at the time of dispatch of materials to the buyers. Export sales are recognized on issue of Bill of Lading. Domestic Sales include excise duty and are net of rebate and price concessions.

11.2 If there is uncertainty in realization, revenue recognition is postponed.

11.3 Claims and interest receivables are accounted for in the statement of Profit & Loss based on certainty of their realization.

11.4 Interest income on term deposits is recognized on a time proportion basis taking in to account the amount outstanding and the rate applicable.

12. LONG TERM EMPLOYEE BENEFITS

12.1 Contributions towards Provident Funds & Pension Scheme are charged to the Profit and Loss Account for the period as and when the contributions to the Funds are due.

12.2 The provisions/liabilities towards gratuity, accrued leave, long service awards, post retirement medical and settling-in benefits, future payments to the legal heirs of deceased employees under the NEFFARS scheme, are made based on the actuarial valuation as at the end of the year and charged to statement of Profit & Loss after considering actuarial gains/losses.

12.3 Expenditure on voluntary retirement compensation is charged off in the year in which it is incurred.

13. PRIOR PERIOD /PREPAID ITEMS

Income/Expenditure relating to prior period and prepaid expenses not exceeding Rs. 5 lakh in each case is treated as income/expenditure for the current year.

14. EXPENDITURE ON NEW PROJECTS

Expenses on account of new potential projects incurred till investment approval, are charged to revenue. Expenditure incurred thereafter in case of successful projects are accounted for under capital-work-in progress and capitalized subsequently.

15. EXPENDITURE ON RESEARCH AND DEVELOPMENT

Expenditure incurred during research phase is charged to revenue when no intangible asset arises from such research. Development expenditure except capital nature is charged to statement of Profit & Loss in the year incurred after setting of incidental income, if any.

16. EXCEPTIONAL ITEMS

Exceptional items are the items of income and expenses within profit or loss from ordinary activities of such size, nature or incidence whose disclosure is necessary.

17. DEFERRED TAX

17.1 Deferred Tax expense or benefit is recognized on timing difference being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

17.2 Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date.

18. SEGMENT REPORTING

18.1 The Company has considered Chemicals, Aluminium and Electricity as the three primary business segments. Chemicals include Calcined Alumina, Alumina Hydrate and other related products. Aluminium includes aluminium ingots, wire rods, billets, strips, rolled and other related products. Bauxite produced for captive consumption for production of alumina is included under chemicals. Wind Power Plant commissioned primarily to harness the potential renewable energy sources is included in the unallocated Common segment.

18.2 India and outside India are the two geographical segments. Since all production and other facilities are located in India, segment assets except export debtors are shown under one geographic segment i.e. India.

18.3 Inter-unit transfer of Calcined Alumina is considered at lower of average price from export sales during the period less freight and cost plus 15.50% return on investment on gross fixed assets. For electricity, lower of the average sales price to GRIDCO and cost plus 15.50% return on investment on gross fixed assets (as per CERC guidelines), has been considered for transfer pricing.

18.4 Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities. Revenue, expenses, assets and liabilities, which relate to the enterprise as a whole and are not allocable on a reasonable basis, have been included under Unallocated Common segment.

19. JOINT VENTURES

19.1 Interest in a jointly controlled entity has been accounted for as an investment in accordance with Accounting Standard (AS) 13, Accounting for investments.

19.2 Interest in a jointly controlled asset is classified and disclosed according to the nature of assets.

20. PROVISIONS AND CONTINGENT LIABILITIES & CONTINGENT ASSETS

20.1 A provision is recognized when there is present obligation as a result of a past event and it is probable that an out flow of resources will be required to settle the obligation and in respect of which reliable estimate can be made. These are reviewed at end of each year and adjusted to reflect the best current estimate.

20.2 Provision is made/written back in respect of balances on account of sums payable/receivable for more than 3 years, in respect of parties other than Govt. Dept./ Govt. Companies. In case of Govt. Dept./ Govt. Companies, the same is made on case to case basis depending upon the merit of the case.

20.3 Disclosure for contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require any out flow of resources.

20.4 No provision is recognized or disclosure for contingent liability is made, when there is a possible obligation or a present obligation and the likelihood of out flow of resources is remote.

20.5 Contingent assets are neither recognized nor disclosed in the financial statement.


Mar 31, 2012

1.1 The Company is providing education faculties through its sponsored schools at plan sites for the children of employees as 'well as children from peripheral areas as a part of Corporate Social Responsibility. Proportionate expenditure Incurred tor students from peripheral areas amounting to Rs. 10.93 crore (previous year Rs. 10.12 crore) has been classified as CSR expanses which was included under employee benefits expenses up to last year.

1.2 Mining Rights represent amount pari towards Net Present Value (NPV) and other related payments in connection with renewal of mining lease which was earlier grouped under Lease hold land (Rs. 104.67 crore) now classified under Intangible assets in compliance with revised Schedule VI to the Companies Act 1956. Depredation on the said assets has been re-grouped accordingly.

1.3 Technological license represent payment of Rs 14.70 crore made to Rio Tinto Alcan (RTA) towards license right for use of technology for Alumina and Aluminium production (which includes Rs. 0.72 crore capitalized as plant and equipment in earlier years). There is no impact on the Profit of the Company due to above change in Accounting Policies/Practices.


Mar 31, 2011

1.1 BASIS OF ACCOUNTING:

1.1.1 The financial statements are prepared under historical cost convention on accrual basis of according, in accordance with the generally accepted accounting principles, accounting standards issued by the institute of Chartered Accountants of india, and the relevant provisions of the companies Act, 1956.

1.2 USE OF ESTIMATES:

1.2.1 In preparing the financial statements in conformity with accounting principles generally accepted in India, the Company makes estimates and assumptions that affect the reported amount of assets and "abilities and the disclosure of contingent liabilities as at the date of financial statements and the amount of expenses during the reported period. Actual result in some cases could differ from those estimates. Any revision of such estimates is recognized in the period in which the same is determined.

1.3 FIXED ASSETS:

1.3.1 All fixed assets are stated at historical cost less depreciation. Cost includes all direct expenditure of acquisition, attributable borrowing cost and net of CENVAT/VAT credit, wherever applicable.

1.3.2 Expenditure on development of land including leasehold land is capitalized as part of cost of land. NPV and related payments made to Govt, authorities for bauxite mines are capitalized.

1.3.4 Insurance spares valuing more than Rs. 1 lakh per unit are capitalized with the related fixed assets.

1.3.5 Application Software package like ERP and application development tools like RDBMS are treated as intangible assets and amortized over a period of three years or the period of license whichever is earlier.

1.3.6 Fixed assets retired from active use and held for disposal are stated at net book value and considered as current asset till the time of its disposal.

1.4 INVESTMENTS:

1.4.1 Long-term investments are carried at cost, after providing for diminution in value, if it is of a permanent nature. Current investments are carried at lower of cost and market value.

1.5 INVENTORIES:

1.5.1 Whenever the sale price of finished goods is more than the cost of materials, and other supplies incorporated in it, in line with Accounting Standard - 2 (Para 24), raw materials, stores and spares are valued at moving weighted average price on real time basis net of CENVAT/ VAT credit wherever applicable. Shortage of coal up to 1% of receipt quantity is treated as normal loss and beyond 1% is treated as abnormal loss.

1.5.2 Work in process is valued at moving weighted average cost. Cost is ascertained at moving average price of material on real time basis, appropriate share of labour and related overheads.

1.5.4 Semi-finished goods and intermediary products are valued at moving average price determined on moving average based on monthly production confirmation except for anode butts and rejects which are valued at lower of past realized value or 45% of direct material cost.

1.5.5 Scraps of various nature internally generated is valued at estimated net realizable value and inventorised periodically.

1.5.6 Stores and spares, other than insurance spares held not issued for more than 5 years are valued at 5% of the cost.

1.5.7 Unabsorbed purchase overheads lying at the end of the year are charged to Profit & Loss Account at the year end.

1.6 PROVISIONS:

1.6.1 A provision is recognized when there is present obligation as a result of a past event and it is probable that an out flow of resources will be required to settle the obligation and in respect of which reliable estimate can be made. These are reviewed at end of each year

1.6.2 Provision is made /written bTckTnTespect'ofValances on account of sums payable/receivable for more than 3 years, in respect of parties other than Govt. Dept./Companies. In case of Govt. Dept./ Companies the same is made on case to case basis depending upon the merit of the case.

1.7.1 Monetary assets and liabilities related to foreign currency transactions remaining unsettled are translated at year-end exchange rates.

1.7.2 The difference in translation of monetary assets and liabilities and realised gains and losses in foreign exchange transactions are recognised in the profit and loss account. In respect of transactions covered by forward exchange contracts, the difference between the contract rate and spot rate on the date of the transaction is recognised in the profit and loss account over the period of the contract.

1.7.3 In all import cases, Bill of Lading/ Bill of Entry is considered as the date of transaction based on which Foreign Exchange liability is created in the books. Date on which amount is debited by Bank is considered as the settlement date. The exchange variation between sums of liability and settlement is charged to Profit & Loss Account.

1.8 DEPRECIATION AND AMORTISATION:

1.8.1 Depreciation on fixed assets is provided on straight-line method at the rates and in the manner prescribed under Schedule XIV to the Companies Act, 1956 except in case of certain assets where depreciation at higher rates is provided based on their estimated remaining useful life, evaluated on the basis of technical estimate made annually in respect of the following assets.

Earth work portion of:

a) Red mud pond at Alumina Refinery

b) Ash pond at Alumina Refinery

c) Ash ponds at Captive Power Plant

1.8.2 Certain assets at Port Facilities are depreciated at rates calculated on the basis of balance lease period of land belonging to the Port Authority on which these assets are installed.

1.8.3 Assets costing Rs. 5,000/- or less individually are depreciated fully in the year in which they are put to use.

1.8.4 Assets on land not owned by the Company are depreciated over a period of five years.

1.8.5 Cost of leasehold land including development expenses thereon is amortized over the period of lease. However, where lease agreement is yet to be signed, such expenses are amortized over a period of 20 years commencing from the year of commercial operation.

The NPV and related payments to Govt, authorities at the time of renewal of mining lease is amortized over a period of 20 years from the date of payment or due date of renewal which ever is earlier on the basis of probable use.

1.8.6 Classification of plant and machinery into continuous and non-continuous is made on the basis of technical opinion and depreciation provided accordingly.

1.9 IMPAIRMENT

1.9.1 The Company reviews the carrying amount of its fixed assets, whenever circumstances indicate that the carrying amount of the asset may not be recoverable. The company then estimates the future estimated discounted future cash flows expected to result from the CGU. If the estimated discounted future cash flow expected to result from use of the asset is less than its carrying amount, the asset is deemed to be impaired. The impairment loss is measured as the difference between the carrying amount and recoverable amount.

1.10 PRIOR PERIOD INCOME/ EXPENDITURE & PRE-PAID EXPENSES:

1.10.1 Income/ Expenditure relating to prior period and pre-paid expenses not exceeding Rs. 1 lakh in each case is treated as income/ expenditure for the current year.

1.11 RECOGNITION OF REVENUE:

1.11.1 Sales include excise duty and are net of rebates and price concessions. Sales in the domestic market are recognised at the time of despatch of materials to the buyers. Export sales are recognized on issue of bill of lading.

1.11.2 Claims and interest receivables are accounted for in the Profit and Loss Account based on certainty of their realisation.

1.11.3 Export incentives in the form of duty credit on exports made during the year, under Duty Entitlement Pass Book (DEPB) scheme, are accounted for on accrual basis after providing for expected shortfall in realization based on last sale.

1.12 REPAIRS AND REPLACEMENTS:

1.12.1 Pot relining expenses are charged to Profit & Loss Account as and when incurred.

1.13 EMPLOYEE BENEFITS:

1.13.1 Contribution to Provident Fund and Pension Scheme, defined contribution schemes, are charged to Profit & Loss Account on the basis of actual liability.

1.13.2 Liabilities towards Gratuity, leave encashment, post retirement medical facilities, retirement benefits, leave travel benefits (for non executives only), family rehabilitation scheme and long service reward are provided for on the basis of actuarial valuation.

1.14 RESEARCH & DEVELOPMENT EXPENDITURE:

1.14.1 Research expenditure is charged to Profit & Loss Account in the year in which incurred. Development expenditure except of capital nature is charged to Profit & Loss Account in the year incurred after setting off of incidental income, if any

1.15 BORROWING COST:

1.15.1 Borrowing costs attributable to the acquisition or construction of a qualifying asset are capitalised as part of the cost of that asset. Other borrowing costs are recognised as expenses in the period in which these are incurred

1.16 DEFFERED TAXATION:

1.16.1 Deferred Tax expense or benefit is recognized on timing difference being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date.

1.17 BUSINESS DEVELOPMENT EXPENSES:

1.17.1 Expenses on account of new potential projects incurred till investment approval are charged to revenue. Expenditure incurred thereafter in case of successful projects are accounted for under Capital Work-in-Progress and capitalized subsequently.


Mar 31, 2010

1.1 BASIS OF ACCOUNTING:

1.1.1 The financial statements are prepared under historical cost convention on accrual basis of accounting, in accordance with the generally accepted accounting principles, accounting standards issued by the Institute of Chartered Accountants of India, and the relevant provisions of the Companies Act, 1956.

1.2 USE OF ESTIMATES:

1.2.1 In preparing the financial statements in conformity with accounting principles generally accepted in India, the company makes estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent liabilities as at the date of financial statements and the amount of expenses during the reported period. Actual result in some cases could differ from those estimates. Any revision of such estimates is recognized in the period in which the same is determined.

1.3 FIXED ASSETS:

1.3.1 All fixed assets are stated at historical cost less depreciation. Cost includes all direct expenditure of acquisition, attributable borrowing cost and net of CENVAT/VAT credit, wherever applicable.

1.3.2 Expenditure on development of land including leasehold land are capitalised as part of cost of land. Expenditure of capital nature incurred on assets on land not owned by the company is capitalised under appropriate asset head.

1.3.3 Fixed assets acquired out of financial grant from Government are shown at cost by crediting the grant-in-aid received to Capital Reserve. Equivalent amount of depreciation provided on such assets each year is transferred from Capital Reserve to Profit & Loss Account.

1.3.4 Insurance spares valuing more than ? 1 lakh per unit are capitalized with the related fixed assets.

1.3.5 Application Software package like ERP and application development tools like RDBMS are treated as intangible assets and amortized over a period of three years or the period of license whichever is earlier.

1.3.6 Fixed assets retired from active use and held for disposal are stated at net book value and considered as current asset till the time of its disposal.

1.4 INVESTMENTS:

1.4.1 Long-term investments are carried at cost, after providing for diminution in value, if it is of a permanent nature. Current investments are carried at lower of cost and market value.

1.5 INVENTORIES:

1.5.1 Raw materials, stores and spares are valued at lower of weighted moving average price on real time basis net of CENVAT/ VAT credit wherever applicable. Shortage of coal up to 1 % of receipt quantity is treated as normal loss and beyond 1% is treated as abnormal loss.

1.5.2 Work in process is valued at lower of cost and net realizable value. Cost is ascertained at moving average price of material on real time basis, appropriate share of labour and related overheads.

1.5.3 Finished goods are valued at lower of cost and net realizable value. Cost is determined at moving average price of materials on real time basis, apportioned share of labour and related overheads.

1.5.4 Semi-finished goods and intermediary products are valued at moving average price determined on monthly basis based on production confirmation, except for anode butts and rejects which are valued at 45% of direct material cost.

1.5.5 Scrap of various nature is valued at estimated net realisable value and inventorised periodically.

1.5.6 Stores and spares, other than insurance spares not moved for more than 5 years is valued at 5% of the cost.

1.5.7 Unabsorbed purchase overheads lying at the end of the year are charged to Profit & Loss Account at the year end.

1.6 PROVISIONS:

1.6.1 A provision is recognized when there is present obligation as a result of a past event and it is probable that an out flow of resources will be required to settle the obligation and in respect of which reliable estimate can be made. These are reviewed at end of each year and adjusted to reflect the best current estimate.

1.6.2 Provision is made /written back in respect of balances on account of sums payable/receivable for more than 3 years, in respect of parties other than Govt. Dept./Companies. In case of Govt. Dept./ Companies the same is made on case to case basis depending upon the merit of the case.

1.7 FOREIGN CURRENCY TRANSACTIONS :

1.7.1 Monetary assets and liabilities related to foreign currency transactions remaining unsettled are translated at year-end exchange rates.

1.7.2 The difference in translation of monetary assets and liabilities and realised gains and losses in foreign exchange transactions are recognised in the profit and loss account. In respect of transactions covered by forward exchange contracts, the difference between the contract rate and spot rate on the date of the transaction is recognised in the profit and loss account over the period of the contract.

1.7.3 In all import cases. Bill of Lading/ Bill of Entry is considered as the date of transaction based on which Foreign Exchange liability is created in the books. Date on which amount is debited by Bank is considered as the settlement date. The exchange variation between sums of liability and settlement is charged to Profit & Loss Account.

1.8 DEPRECIATION AND AMORTISATION:

1.8.1 Depreciation on fixed assets is provided on straight-line method at the rates and in the manner prescribed under Schedule XIV to the Companies Act, 1 956 except in case of certain assets where depreciation at higher rates is provided based on their estimated remaining useful life, evaluated on the basis of technical estimate made annually in respect of the following assets.

Earth work portion of:

a) Red mud pond at Alumina Refinery

b) Ash pond at Alumina Refinery

c) Ash ponds at Captive Power Plant

1.8.2 Certain assets at Port Facilities are depreciated at rates calculated on the basis of balance lease period of land belonging to the Port Authority on which these assets are installed.

1.8.3 Assets costing ? 5,000 or less individually are depreciated fully in the year in which they are put to use.

1.8.4 Assets on land not owned by the Company are depreciated over a period of five years.

1.8.5 Cost of leasehold land including development expenses thereon is amortised over the period of lease. However, where lease agreement is yet to be signed, such expenses is amortised over a period of 20 years commencing from the year of commercial operation.

1.8.6 Classification of plant and machinery into continuous and non-continuous is made on the basis of technical opinion and depreciation provided accordingly.

1.9 PRIOR PERIOD INCOME/ EXPENDITURE & PRE-PAID EXPENSES:

1.9.1 Income/ Expenditure relating to prior period and pre-paid expenses not exceeding Rs. 1 lakh in each case is treated as income/ expenditure for the current year.

1.10 RECOGNITION OF REVENUE:

1.10.1 Sales include excise duty and are net of rebates and price concessions. Sales in the domestic market are recognised at the time of

despatch of materials to the buyers. Export sales are recognized on issue of bill of lading 1.1 0.2 Claims and interest receivables are accounted for in the Profit and Loss Account based on certainty of their realisation. 1.10.3 Export incentives in the form of duty credit on exports made during the year, under Duty Entitlement Pass Book (DEPB) scheme, are

accounted for on accrual basis after providing for expected shortfall in realization based on last sale.

1.11 REPAIRS AND REPLACEMENTS:

1.11.1 Pot relining expenses are charged to Profit & Loss Account as and when incurred.

1.12 EMPLOYEE BENEFITS:

1.1 2.1 Contribution to Provident Fund and Pension Scheme, defined contribution schemes, are charged to Profit & Loss Account on the basis of actual liability.

1.12.2 Liabilities towards Gratuity, leave encashment, post retirement medical facilities, retirement benefits, leave travel benefits, family rehabilitation scheme and long service reward are provided for on the basis of actuarial valuation.

1.13 RESEARCH & DEVELOPMENT EXPENDITURE:

1.1 3.1 Research expenditure is charged to Profit & Loss Account in the year in which incurred. Development expenditure except of capital nature is charged to Profit & Loss Account in the year incurred after setting off of incidental income, if any.

1.14 BORROWING COST:

1.14.1 Borrowing costs attributable to the acquisition or construction of a qualifying asset are capitalised as part of the cost of that asset. Other borrowing costs are recognised as expenses in the period in which these are incurred.

1.15 DEFFERED TAXATION:

1.1 5.1 Deferred Tax expense or benefit is recognized on timing difference being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date.

1.16 BUSINESS DEVELOPMENT EXPENSES:

1.1 6.1 Expenses on account of new potential projects incurred till investment approval are charged to revenue. Expenditure incurred thereafter in case of successful projects are accounted for under Capital Work-in-Progress and capitalized subsequently.

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