Accounting Policies of Oil India Ltd. Company
Mar 31, 2023
1.1.0 Company Overview
The Financial Statements of "Oil India Limited" ("the Company" or "OIL") are for the year ended 31st March, 2023.
The Company is engaged in exploration, development and production of crude oil & natural gas, production of LPG, transportation of crude oil & natural gas and generation of renewable energy. The Company is a public limited Company incorporated in India having its registered office at Duliajan, District Dibrugarh, Assam, Pin-786602. The Company''s shares are listed and traded in BSE Limited and National Stock Exchange of India Limited.
1.1.1 New Standards/ amendments and other changes effective from April 1, 2022
Amendments and other changes issued under section 133 of the Companies Act notified by Ministry of Corporate Affairs (MCA) under the Companies (Indian Accounting Standards) Rules, 2015 are appropriately applied in preparation of the Financial Statements.
1.1.2 New Standards/ amendments and other changes effective April 1,2023
Ministry of Corporate Affairs notifies new standard or amendments to the existing standards. During the year, vide Notification G.S.R. 242 (E) dated 31st March 2023, minor modifications in existing standards has been notified which will be applicable from April 1, 2023. The effect of those amendments is not material.
1.2.0 Significant accounting policies
1.2.1 Statement of compliance
The financial statements have been prepared in accordance with the provisions of Companies Act, 2013 and in compliance with the Indian Accounting Standards (Ind AS) issued by the Ministry of Corporate Affairs notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended. The Ind ASs prescribed under section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016 as amended from time to time.
1.2.2 Basis of preparation
The financial statements are prepared under the historical cost convention on the accrual basis except for certain financial assets and financial liabilities which are measured at fair values as per the respective para
included hereinafter.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date on such basis as provided under Ind AS 113.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
As the operating cycle cannot be identified in normal course due to the special nature of industry, the same has been assumed to have duration of 12 months. Accordingly, all assets and liabilities have been classified as current or non- current as per the Company''s operating cycle and other criteria set out in Ind AS 1 "Presentation of Financial Statements" and Schedule III to the Companies Act, 2013.
The Financial Statements are presented in Indian Rupees and all values are rounded off to the nearest two decimal crore except otherwise stated.
1.2.3 Use of estimates
In preparing the Standalone Financial Statements, in conformity with the accounting policies of the Company, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of the contingent liabilities as at the date of the financial statements, the amount of revenues and expenditures during the reported period and notes to the financial statements. Actual results could differ from those estimates, any revision to such estimates is recognized in such period in which the same is determined and if material, their effects are disclosed in the notes to the financial statements.
1.2.4 Major judgments, assumptions and accounting estimates
a. Estimation of oil and gas reserves
The estimation of oil and gas reserves is key factor in the accounting for oil and gas producing activities. Oil and gas reserves are estimated by analysis of geosciences
and engineering data using Deterministic Method. Production pattern analysis, number of additional wells to be completed, application of recovery techniques, validity of mining lease agreements, agreements/MOU for sales etc. influence the estimation of reserves. Unit-of-production depreciation, depletion and amortization charges are principally measured based on management''s estimates of proved developed oil and gas reserves. Also, exploration drilling costs are categorized as Exploration and Evaluation Assets pending the results of further exploration or appraisal activity, which may take several years to complete and before any related proved reserves can be booked.
b. Impairment of assets
As part of the determination of the recoverable value of assets of cash generating units for impairment, the estimates, assumptions and judgments mainly concern oil and gas prices scenarios, operating costs, production volumes and oil and gas proved & probable reserves. The discount rate used for estimating the value in use is reviewed annually. Changes in assumptions could affect the carrying amounts of assets, and any impairment losses and reversals will affect the revenues.
c. Employee benefits
The benefit obligations and plan assets can be subject to significant volatility due to changes in market values and actuarial assumptions. These assumptions vary between different pension plans and thus take into account market conditions. They are determined following actuarial valuation method certified by external independent actuarial valuer. The assumptions for each plan are reviewed half-yearly and annually and adjusted if necessary.
d. Asset retirement obligations
Asset retirement obligations, which result from a legal or constructive obligation, are recognized based on a reasonable estimate in the period in which the obligation arises. This estimate is based on information available in terms of costs and work program. It is regularly reviewed to take into account the changes in laws and regulations, the estimated useful life of fields based on proved and probable oil and gas reserves and current production off-take, the analysis of site conditions and technologies. Decommissioning Liability provision may differ due to changes in the aforesaid factors. The risk adjusted discount rate used for estimating the present value of obligation is reviewed annually.
e. Taxation
Tax liabilities are recognized when it is considered probable that there will be a future outflow of funds to a taxing authority. In such cases, provision is made for the amount that is expected to be settled, where this can be reasonably estimated. This requires the application of
judgment as to the ultimate outcome, which can change over time depending on facts and circumstances. A change in estimate of the likelihood of a future outflow and/or in the expected amount to be settled would be recognized in income in the period in which the change occurs. Deferred tax assets are recognized only to the extent it is considered probable that those assets will be recoverable. This involves an assessment of when those assets are likely to reverse, and a judgment as to whether or not there will be sufficient taxable profits available to offset the assets when they do reverse. This requires assumptions regarding future profitability and is therefore inherently uncertain. To the extent assumptions regarding future profitability change, there can be an increase or decrease in the amounts recognized in respect of deferred tax assets as well as in the amounts recognized in income in the period in which the change occurs.
1.3.0 Revenue recognition
1.3.1 Revenue from contracts with customers
The Company derives revenues primarily from sale of products such as Crude Oil, Natural Gas, Liquefied Petroleum Gas (LPG), Condensate, Renewable Energy and sale of services such as Pipeline Transportation Services.
Revenue from contracts with customers is recognized at the point in time the Company satisfies a performance obligation by transferring control of a promised product or service to a customer and is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation. Discount, taxes & duties (other than excise duty) and Company''s share of profit petroleum payable to Government of India (GOI) are excluded from revenue.
The transfer of control on sale of Crude Oil, Natural Gas and Liquefied Petroleum Gas (LPG) and Condensate occurs either at the point of delivery or the point of receipt, where usually the title is passed and the customer takes physical possession, depending upon the contractual conditions. Any retrospective revision in prices is accounted for in the year of such revision.
Revenue in respect of contractual short lifted quantity of gas is recognized when the customer''s right to such quantity is expired and there is reasonable certainty regarding its ultimate collection.
Sale and transportation of crude oil and natural gas are based on mutually agreed terms between the parties/ governed by the Government directives issued from time to time. Subsequent changes in terms, if any, are recognized in the period of change. Such retrospective
revision in prices is not determinable at the time of sale.
1.3.2 Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer or in case of dispute, penalties have been raised on the entity by the contracting party. If a customer pays consideration before the Company transfers promised goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier).
The Company recognises contract liability for consideration received for short lifted quantity of gas under take or pay arrangements for which the customer has right to take related volume in future (i.e. unsatisfied performance obligations) and for the penalties that maybe raised by the contracting party in case of a dispute and reports these amounts as advances from customers or as penalties that maybe payable in future in the balance sheet. The un-accrued amounts are not recognised as revenue till all related performance obligations are fulfilled or the customer''s right to such quantities is expired.
1.3.3 Other operating revenue
(i) Claims on Central Government / Petroleum Planning & Analysis Cell (PPAC) towards gas pool revenue are accrued based on quantity delivered to the customers at discounted price, in respect of which revenue is recognized when collectability of the receivable is reasonably certain.
(ii) Revenue from sale of Renewable Energy Certificates (REC) is recognized on sale of the certificates through the Exchange i.e., when the receivable is reasonably certain.
(iii) Other claims are recognized when there is a reasonable certainty of recovery.
1.3.4 Other income
(i) Dividend income from investments is recognized when the Company''s right to receive payment is established.
(ii) Interest income is recognized on a time proportion basis taking into account the amount outstanding and at the effective interest rate applicable, which is the rate that equalises discounted estimated future cash receipts through expected life of the financial asset to that asset''s net carrying amount on initial recognition. Interest on income tax refund is accounted for upon finalisation of assessments.
(iii) Insurance claim other than that for transit loss of stores items are accounted for on final acceptance by the Insurance Company.
(iv) Revenue on account of reimbursable subsidies/ grants and interest on delayed realization from customers are recognized when there is certainty of ultimate realization.
(v) Recovery of liquidated damages is recognized in the Statement of Profit & Loss as income at the time of occurrence except in case of Joint Venture Contracts (JVC) which are governed by the respective Production Sharing/Revenue Sharing Contracts. In case of return/refund of the liquidated damages, the same is accounted for as other expenses. In case of any dispute over the liquidated damages, provision is created in the accounts.
1.4.1 The Company as lessor
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized as expense on a straight-line basis over the lease term on the same basis as lease income.
1.4.2 The Company as lessee
The Company has applied Ind AS 116 "Leases" to service contracts of equipments, land, buildings, vehicles, etc. to evaluate whether these contracts contains lease or not. Based on evaluation of the terms and conditions of the arrangements, the Company has evaluated such arrangements to be leases. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contact involves the use of an identified asset (ii) the Company has right to obtain substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
The Company has exercised the option not to apply Ind AS 116 to intangible assets.
Lease term
The Company determines the lease term as the noncancellable period of a lease, together with both periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. In assessing whether the Company is reasonably certain to exercise an option to extend a lease, or not to exercise an option to terminate a lease, it considers all relevant facts and circumstances that create an economic incentive for the Company to exercise the option to extend the lease, or not to exercise the option to terminate the lease.
Recognition
Right of use asset:
The right-of-use assets are initially recognized at cost, which comprises the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the inception date of the lease along with any initial direct costs, restoration obligations and lease incentives received.
Lease liability:
The lease liability is initially measured at present value of the future lease payments over the reasonably certain lease term. The lease payments are discounted using the interest rate implicit in the lease, if it is not readily determinable, using the incremental borrowing rate.
Depreciation:
The right-of-use assets is measured at cost less any accumulated depreciation. The right-of-use assets is depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use assets.
If ownership of the underlying asset is transferred or the purchase option is exercised by the Company, it shall depreciate over the remaining useful life of the asset.
Finance cost on lease liability:
Interest on the lease liability in each period during the lease term is the amount that produces a constant periodic rate of interest on the remaining balance of the lease liability. The interest cost on lease liability (computed using effective interest method), is expensed in the statement of profit and loss, unless eligible for capitalization as per accounting policy on "Borrowing costs".
Non lease component:
The Company''s contracts involve a number of additional services and components including personnel cost, maintenance, drilling related activities, consumables and other items. In most of such contracts, the additional services/non-lease components constitute significant portion of the overall contract value. Where the additional services/non-lease components are not separately priced, the consideration paid has been allocated based on the relative stand-alone prices of the lease and non-lease components. These non - lease components are not included in the measurement of lease liability.
Reassessment of lease liability:
The Company shall re-measure the lease liability by discounting the revised lease payments using a revised discount rate, if either:
i. There is a change in the lease term. The Company shall determine the revised lease payments on the basis of the revised lease term; or
ii. There is a change in the assessment of an option to purchase the underlying asset.
Impairment loss of the underlying asset:
The Company follows Ind AS 36 Impairment of Assets to determine whether the right-of-use asset is impaired and to account for any impairment loss identified.
Short term lease and low value asset leases:
Leases for which lease term ends within 12 months is classified as short-term leases. The Company has elected short term leases and low value asset leases for recognition exemption in terms of Ind AS 116. The Company recognizes the lease rental payment associated with short term lease and low-value asset leases as expense in the Statement of Profit & Loss.
1.5.0 Foreign currency transactions and translations
The functional currency of the Company is the Indian Rupee. The financial statements are presented in Indian Rupees.
i. In preparing the financial statements of the Company, transactions in currencies other than the entity''s functional currency (foreign currencies) 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 retranslated at the closing rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign
currencies are translated at the rate prevailing at the date when the fair value was measured. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
ii. Transaction gains and losses realized upon settlement of foreign currency transactions are included in determining net profit / loss for the period in which the transaction is settled. Revenue, expense and cash-flow items denominated in foreign currencies are translated into the relevant functional currency using the exchange rate in effect on the date of the transaction.
iii. Exchange differences on monetary items are recognized in the statement of profit and loss in the period in which they arise except for:
(a) Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, cost of which are included in the cost of those assets are regarded as an adjustment to interest costs on those foreign currency borrowings;
(b) In accordance with para D13AA of Ind AS 101, first-time adoption of Indian Accounting Standards the Company continues to exercise policy adopted under previous IGAAP and accordingly exchange differences on longterm foreign currency monetary items relating to acquisition of depreciable and other assets were adjusted to the carrying cost of the assets and depreciated over the balance life of the assets and in other cases, exchange differences were accumulated in a "Foreign Currency Monetary Item Translation Difference Account" and amortized over the balance period of such long term foreign currency monetary item by recognition as income or expense in each of such periods in respect of items recognized in the financial statement for the period ending immediately before the beginning of the first Ind AS financial reporting period as per previous GAAP i,e., 31 March 2016 as reported date.
Borrowing cost consists of interest and other cost incurred in connection with borrowing of funds and includes exchange difference arising from Foreign Currency borrowings to the extent that they are regarded as an adjustment to interest cost. Borrowing cost also include finance cost on Lease Liability.
i. Borrowing costs directly attributable to the acquisition or construction of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use, are capitalized to the cost of those assets, until such time as the assets are substantially ready for their intended use.
ii. Capitalisation of borrowing costs is suspended when active development activity on the qualifying assets is interrupted other than on temporary basis and charged to the Statement of Profit and Loss.
iii. All other borrowing costs are recognized in the statement of profit and loss in the period in which they are incurred.
Government grants are recognized when there is reasonable assurance that the Company will comply with the conditions attached to them and that the grants will be received.
(i) Grant related to Income (Revenue Grants)
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.
(ii) Grant relating to Assets (Capital Grants)
Government grants with the primary condition that the Company should purchase construct or otherwise acquire non-current assets are recognized as deferred income in the balance sheet and transferred to the statement of profit and loss on a systematic and rational basis over the useful life of the related assets.
1.8.1 Retirement benefit costs and termination benefits:
Payments to defined contribution retirement benefit plans are charged to the statement of profit and loss (other than expenses to be capitalised), when employees have rendered service entitling them to the contributions.
The cost of providing benefits under defined benefit plans (such as gratuity, leave encashment, postretirement medical benefits, defined benefit pension schemes) is determined separately for each plan using the projected unit credit method, with actuarial valuations being carried out half-yearly and annually. This attributes the increase in present value of the defined benefit obligation resulting from employee service in the current period to determine current service cost. The
current service cost as stated above and past service costs, resulting from a plan amendment (a reduction in future obligations as a result of a material reduction in the number of employees covered by the plan), are recognized in the statement of profit and loss under ''employee benefits expense''.
Net interest which is recognized in the statement of profit and loss under ''employee benefits expense'' represents the net change in present value of plan obligations and the value of plan assets resulting from the passage of time, and is determined by applying the discount rate to the present value of the benefit obligation at the start of the year, and to the fair value of plan assets at the beginning of the year, taking into account expected changes in the obligation or plan assets during the year.
Re-measurement of the defined benefit liability and asset, comprising actuarial gains and losses, and the return on plan assets (excluding amounts included in net interest described above) other than capitalised portion are recognized in other comprehensive income in the period in which they occur and are not subsequently reclassified to the statement of profit and loss.
The defined benefit pension plan surplus or deficit recognized in the balance sheet for each plan comprises the difference between the present value of the defined benefit obligation and the fair value of plan assets out of which the obligations are to be settled directly. Defined benefit pension plan surpluses are only recognized to the extent they are recoverable, naturally by way of refund or reductions in future contributions to the plans.
Payments made under Voluntary Retirement Scheme or any other early separation scheme are charged to the Statement of Profit and Loss on incurrence.
1.8.2 Short-term and other long-term employee benefits
A liability is recognized for benefits accruing to employees in respect of wages and salaries (including performance related pay), annual leave, sick leave and social security contribution in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
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.
1.9.0 Taxation
Income tax expense represents the aggregate of current tax and deferred tax.
1.9.1 Current tax
Current tax is the amount of income tax payable/ paid based on taxable profit as per the provisions of The Income Tax Act,1961 and Rules thereto, for the reporting period. Taxable profit differs from ''profit before tax'' as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company''s current tax is calculated using tax rates and the tax laws that have been enacted or substantively enacted by the end of the reporting period.
After an appeal is decided by appellate authority, the corresponding appeal effect is given in the accounts only after receipt of appellate order from the concerned Department/ Authority.
1.9.2 Deferred tax
i. Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.
ii. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the benefits of all or part of the deferred tax asset to be utilized. Any such reduction shall be reversed to the extent when it becomes probable that sufficient taxable profit will be available.
iii. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is to be settled or the asset to be realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
1.9.3 Current and deferred tax expenses for the year
Current and deferred tax are recognized in the statement of profit and loss, except when they relate to items that
are recognized in other comprehensive income, in which case, the current and deferred tax are also recognized in other comprehensive income.
1.10.0 Oil and gas exploration, evaluation and development expenditure
The Company follows the Successful Efforts Method (SEM) of accounting in respect of its oil and gas exploration and production activities which is in accordance with Ind AS 106 and the "Guidance Note on Accounting for Oil & Gas Producing Activities (Ind AS)" issued by the Institute of Chartered Accountants of India.
1.10.1 Pre-Acquisition, Acquisition, Exploration & Evaluation Costs
(i) Pre-Acquisition costs: Pre-Acquisition costs of revenue nature incurred prior to obtaining the rights to explore, develop and produce Oil & Gas like data collection & analysis cost etc. are expensed to the Statement of Profit and Loss in the year of incurrence.
(ii) Acquisition costs:
(a) Acquisition costs include cost of land
acquired for drilling operations including cost of temporary occupation of the land, crop compensation paid to farmers, registration fee, legal cost, signature
bonus, brokers'' fees, consideration for farm-in arrangements and other costs incurred in acquiring mineral rights.
(b) These costs are initially recorded
under Exploration & Evaluation Assets
(Intangible) except cost of land acquired for drilling operations which are shown as Acquisition cost-land under capital work in progress.
(c) On determination of proved developed
reserves, associated acquisition costs are transferred to Property, Plant & Equipment as Oil & Gas assets.
(d) Acquisition cost relating to an exploratory well that is determined to have no proved reserves and its status is decided as dry or of no further use for exploration purpose, is charged as expenses. In such cases land value forming part of acquisition cost, a nominal amount of '' 100 per bigha is transferred to Freehold land under Property, Plant & Equipment.
(e) Cost for retaining the mineral interest in properties like lease carrying cost, license fees & other cost are charged as expense when incurred.
(iii) Exploration & Evaluation Cost (E&E cost):
(a) Geological and geophysical costs, including seismic surveys for exploration purposes are expensed as incurred.
(b) Costs including allocated depreciation on support equipment and facilities involved in drilling and equipping exploratory and appraisal wells and cost of exploratory-type drilling stratigraphic test wells are initially shown as Exploration& Evaluation Assets (Intangible) till the time these are either transferred to Property, Plant & Equipment as Oil & Gas assets on establishment of Proved Developed Reserves or charged as expense when determined to be dry or of no further use.
(c) E&E costs related to each exploratory well are not carried over unless it could be reasonably demonstrated that there are indications of sufficient quantity of reserves and activities are firmly planned in near future for further assessing the reserves and economic & operating viability of the project. Costs of written off exploratory wells are not reinstated in the books even if they start producing subsequently.
1.10.2 Development Cost
Costs that are attributable to development activities including production and processing plant & facilities, service wells including allocated depreciation on support equipment and facilities are initially shown under Capital Work in Progress as Development Cost till such time they are capitalized as Oil & Gas Asset under Property, Plant & Equipment on establishment of Proved Developed Reserves. Cost of dry development well, if any is also capitalized as Oil & Gas Asset under Property, Plant & Equipment upon completion of the well.
1.10.3 Production Cost
Production Cost consists of direct and indirect costs incurred to operate and maintain wells and related equipment and facilities, including depreciation and applicable operating cost of support equipment and facilities.
1.10.4 Side-Tracking Expenditure
In case of exploratory wells, the cost of abandoned portion of side tracked well is charged off to the Statement of Profit and Loss statement. In case of
development wells, the entire cost of abandoned portion and side- tracking is capitalized. In case of existing producing wells, the cost of side - tracking is capitalized if it increases the proved developed reserves, otherwise is charged off to Statement of Profit and loss.
1.11.0 Research & Development Expenditure
All revenue expenditure incurred for Research & Development Projects /Schemes, net of grants-in-aid (other than those related to asset) if any, are charged to the Statement of Profit and Loss.
1.12.0 Property, plant and equipment (PPE)
i. An item of property, plant and equipment is recognized by the Company as an asset if it is probable that future economic benefits associated with the items will flow to the entity and the cost of the items can be measured reliably.
ii. Property, plant and equipment are stated at cost, less accumulated depreciation, depletion and impairment losses. The initial cost of an asset comprises its purchase price including import duties and non-refundable purchase taxes or construction cost, any costs directly attributable to bringing the asset into the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of any decommissioning obligation wherever applicable and eligible borrowing costs. The purchase price or construction cost is the aggregate amount paid / payable and the fair value of any other consideration given to acquire the asset. Assets in the course of construction are initially kept under assets under construction and capitalized when the assets are available for use in the manner as intended by the management.
iii. Items such as spare parts, stand-by equipment and servicing equipment which meet the definition of Property, Plant and Equipment are capitalised. Other spare parts are carried as inventory and recognized in the Statement of Profit and Loss on consumption. Cost of day-to-day servicing of property, plant and equipment are recognized in the Statement of Profit and Loss as incurred. Major shut-down and overhaul expenditure is capitalized as the activities undertaken to improve the future economic benefits expected to arise from the asset. Where an asset or part of an asset that was separately depreciated is replaced and it is probable that future economic benefits associated with the item will flow to the Company, the expenditure is capitalized and the carrying amount of the replaced asset is derecognized. Inspection costs associated with major maintenance programs from which future
economic benefits are expected to flow, are capitalized and amortized over the period to the next inspection.
iv. Technical know-how / license fee relating to plants/ facilities and specific software that are integral part of the related hardware are capitalised as part of cost of the underlying asset.
v. Oil and gas assets which comprise of producing wells, related acquisition cost and production facilities are depleted using a unit-of-production method. The cost of producing wells and production facilities net of salvage value are depleted over proved developed reserves. Acquisition cost is depleted over proved reserves. Rate of depletion is determined based on production from the Oil /Gas field or a group of Oil/ Gas fields identified to the related reserves having homogeneous geological feature. Estimation of oil and natural gas reserves are done annually at the year end and the impact of changes in the estimated proved reserves are dealt with prospectively by depleting the remaining carrying value of the asset.
vi. Other property, plant and equipment excluding ''Land-freehold'' and ''Right of use (ROU) assets are depreciated based on useful life of the asset under "Written down value method" as specified in Schedule II to the Companies Act, 2013. When any part of an item of property, plant and equipment, has different useful life and cost is significant in relation to the total cost of the asset, they are accounted for and depreciated separately. Depreciation on additions / deletions during the year is provided on pro rata basis with reference to the date of additions / deletions except low value items not exceeding '' 5,000 which are fully depreciated at the time of addition. Residual value of property plant and equipments other than well asset is determined considering past experience and is upto 5% of the original cost till such asset is disposed. The residual value of well assets are determined at current cost on the basis of available technical assessment. The typical useful life of other major property, plant and equipment are as follows:
|
Buildings |
30 to 60 years |
|
Plant & Machinery |
10 to 40 years |
|
Furniture and fixtures |
8 to 10 years |
|
Office equipments |
3 to 10 years |
|
Vehicles |
8 to 10 years |
|
Railway siding |
15 years |
Depreciation on subsequent expenditure on PPE (other than of Oil and Gas Assets) arising on account of capital improvement or other factors is provided for prospectively over the remaining useful life. Depreciation on furbished / revamped PPE (other than of Oil and Gas Assets) which are capitalized separately is provided for over the reassessed useful life.
vii. The expected useful life of property, plant and equipment other than Oil and gas assets are reviewed on an annual basis and, if necessary, impact arising out the changes in useful life are accounted for prospectively.
viii. An item of property, plant and equipment other than Oil & Gas assets 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 de- recognition of the asset is included in the statement of Profit & Loss in the period in which the item is derecognized. Any Tangible asset other than Oil & Gas assets, when determined of no further use, is deleted from the Gross Block of assets. The deleted assets are carried as ''Assets awaiting disposal'' under Inventories at lower of '' 1000 or 5% of the original cost and the balance written down value, is charged off. Any gain or loss arising on actual sale of the asset is included in the income statement in the period in which the item is actually sold as scrap.
ix. Oil & gas assets other than production facilities asset is derecognized when the designated oil / gas field or a group of oil/gas fields ceases to produce. Production facilities asset is derecognized either on disposal/when no future economic benefits are expected to arise from the continued use of the asset or when the designated oil/gas field or a group of oil / gas fields ceases to produce, whichever is earlier. Any gain or loss arising on derecognition of the asset including sale of salvage is included in the statement of profit and loss.
x. Assets provided to employees as per the Company''s internal scheme are also classified as property, plant and equipment (PPE) and recognised as an asset. Such assets are depreciated based on the useful life as defined in the internal scheme of the Company under written down value method. The useful life of such assets is different than as specified in Schedule II of the Company''s Act. The assets provided to the employees and its useful life are as follows:
Mobile Phone - 3 years
Furniture and household goods - 6 years
Soft Furniture - Fully in the year of purchase
xi. Physical verification of the property, plant and equipment (other than PPE items given to employees as per the policy of the Company) is carried out by the Company in a phased manner to cover all the items over a period of three years. The discrepancies noticed, if any, are accounted for in the year in which such differences are found.
1.12.1 Capital Work in Progress (CWIP)
i. Expenses exclusively attributable to capital projects and incurred during construction period are considered as capital work in progress.
ii. Borrowing cost incurred during construction period on loans borrowed and utilised for capital projects upto the date of capitalization is considered as capital work in progress.
1.12.2 Intangible assets
Cost of intangible assets are capitalised when it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity, the cost of the asset can be measured reliably and the asset is ready for its intended use. The Company follows cost model for recognition and measurement of intangible assets
Intangible assets are stated at the amount initially recognized less accumulated amortization and accumulated impairment losses.
Cost of right of way of land with indefinite useful lives are not amortized but tested for impairment annually at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues or not. If not, the change is useful life from indefinite to finite is made on a prospective basis.
Cost of computer software is amortized over the useful life not exceeding five years from the date of capitalization.
Any intangible asset, when determined obsolete and of no further use, is written off.
1.12.3 Impairment of Property, Plant & Equipment (PPE), E&E assets, Intangible assets other than goodwill
At the end of each reporting period, the Company reviews the carrying amounts of its property, plant & equipment (including capital work in progress) to determine whether
there is any indication that those assets have suffered an impairment loss. For this purpose, Producing fields, LPG plant, Transportation Pipeline and Renewable Energy Units (other than captive power plants) are considered as Cash Generating Units (CGU).
If any such indication exists, the recoverable amount of the CGU is estimated in order to determine the extent of the impairment loss (if any). Corporate assets and common service assets are also allocated to individual cash- generating units on a reasonable and consistent basis.
Intangible assets are tested for impairment annually. Whenever there is an indication that the asset may be impaired, the recoverable amount of the asset wherever feasible is estimated in order to determine the extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of a CGU is estimated to be less than its carrying amount, the carrying amount of the asset or group of assets covered under the CGU is reduced to its recoverable amount. An impairment loss is recognized in the statement of profit and loss.
E&E assets are reviewed for indicators of impairment as per Ind AS 106 and if events and circumstances suggest, impairment loss is provided for and carrying amount is reduced accordingly.
When an impairment loss is subsequently reversed, the carrying amount of the asset or group of assets covered under the CGU is increased to the revised estimate of its recoverable amount, up to the carrying amount that would have been determined had no impairment loss been recognized for the asset or group of assets covered under the CGU in prior years. A reversal of an impairment loss is recognized in the Statement of Profit and Loss.
Inventory of finished goods of Crude Oil, Liquefied Petroleum Gas (LPG) and LPG condensate are valued at cost determined on absorption costing method basis or net realizable value, whichever is lower, as per Ind AS 2. Cost of finished goods is determined based on direct cost and directly attributable services cost including depreciation & depletion. The value of such inventories includes excise duty and royalty (wherever applicable). Net realizable value represents the estimated selling price for inventories less all costs necessary to affect the sale.
Crude oil in unfinished condition in the flow line up to Group Gathering Station and Natural Gas in Pipeline are not valued, as these pipeline fills are necessary for the operation of the facility. Crude oil in semi-finished condition in group gathering station are not valued as the same is not measurable.
Inventory of stores and spares including capital stores are valued at weighted average cost or net realizable value whichever is lower, as per Ind AS 2. Obsolete / unserviceable items, as and when identified, are written off. Any item of stores and spares including those in Storage Locations which have not moved for last four years as on date of Balance Sheet are identified as slow-moving items for which a provision of 95% of the cost is made.
Renewable Energy Certificates (REC) received based on generation of renewable energy certified by the competent authority, held for trading are not valued.
Physical verification of inventory including store and spare items (excluding materials in-transit) is carried out by the Company in a phased manner to cover all the items. Stores and spare items of high and medium value are physically verified every year whereas items carrying low value are physically verified over a period of 3 years. The discrepancies noticed, if any, are accounted for in the year in which such differences are found.
1.14.0 Provisions
Provisions are recognized when the Company has a present obligation as a result of a past event and it is probable that the Company will be 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 end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value as on the reporting date of those cash flows (when the effect of the time value of money is material).
Provisions towards cost of unfinished Minimum Work Program (MWP) committed by the Company for all joint venture blocks are made when there is a present obligation on the basis of available facts as at the end of the reporting period.
1.14.1 Decommissioning and restoration obligations
Full eventual liabilities towards costs relating to assets retirement obligations are recognized when the
financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as is appropriate, on initial recognition.
1.16.1 Financial assets
1.16.1.1 Investment / Disinvestment in Securities
All regular purchases or sales of financial assets are recognized and de-recognized on a trade date basis or investment date as the case may be.
All recognized financial assets are subsequently measured in their entirety either at amortized cost or fair value, depending on the classification of the financial assets.
1.16.1.1.1 Classification of financial assets
i. Debt instruments that meet the following conditions are subsequently measured at amortized cost less impairment loss (except for debt investments that are designated as at Fair Value Through Profit or Loss (FVTPL) on initial recognition):
a The asset is held within a business model whose objective is to hold assets till maturity in order to collect contractual cash flows; and
b. The contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
ii. Debt instruments that meet the following conditions are subsequently measured at Fair Value Through Other Comprehensive Income (except for debt investments that are designated as at FVTPL on initial recognition):
a. the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and
b. The contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
iii. Debt instruments that do not meet the criteria of amortized cost or Fair Value through Other Comprehensive Income (FVTOCI) are measured at FVTPL.
iv. All other financial assets are subsequently measured at fair value through Profit or Loss.
Company has an obligation to plug and abandon a well, dismantle and remove a facility or an item of plant and to restore the site on which it is located, and when a reliable estimate of that liability can be made. Liabilities towards costs relating to dismantling, abandoning and restoring well sites and associated Production Facilities are recognized at the commencement of drilling a well or when facilities are installed, as the case may be. The amount recognized is the present value of the estimated future expenditure determined in accordance with local conditions and requirements at current prices and escalated using appropriate inflation rate till the expected date of decommissioning and discounted using appropriate risk-free discount rate.
An amount equivalent to the decommissioning liability provision is recognized as part of the corresponding PPE, CWIP or Exploration & Evaluation Asset (E&E) as the case may be.
Liability for decommissioning cost is updated annually based on the technical assessment available at current costs. The unwinding of the discount is included as a finance cost. Any change in the present value of the estimated decommissioning provision other than unwinding of discount is adjusted to decommissioning provision and added to or deducted from the cost of the asset in the current period and is considered for depreciation (depletion) prospectively. In case, reversal of decommissioning provision exceeds the corresponding carrying value of the related assets, the excess amount is recognized in the Statement of Profit & Loss.
The actual cost incurred on settlement of the obligation is adjusted against the liability and the ultimate gain or loss is recognized in the Statement of Profit and Loss, when the designated oil / gas field or a group of oil/gas fields ceases to produce.
1.15.0 Investments in Subsidiaries, Associates and Joint Ventures
The Company measures its investments in subsidiaries, associates and joint ventures at cost and the same are tested for impairment in case of any indication of impairment.
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
1.16.1.1.2 Amortized cost and Effective interest method
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that equates by discounting estimated future cash flows (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognized in the statement of profit & loss under investment income on an effective interest basis for debt instruments other than those financial assets classified as FVTPL.
1.16.1.1.3 Investments in equity instruments at Fair Value Through Other Comprehensive Income (FVTOCI)
On initial recognition, the Company can make an irrevocable election (on an instrument-by-instrument basis) to present the subsequent changes in fair value in other comprehensive income for equity instruments that are not held for trading. These elected investments are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity under subhead Equity instruments through other comprehensive income. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
Dividends on these investments in equity instruments are recognized in the Statement of Profit and Loss when the Company''s right to receive the dividends is established and it does not represent a recovery of part of cost of the investment.
1.16.1.2 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, including offsetting bank overdrafts, and shortterm highly liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in fair value and have a maturity of three months or less from the acquisition date.
1.16.1.3 Trade receivables
Trade receivables are recognized initially at their transaction price unless those contain a significant financing component in accordance with Ind AS 115.
1.16.1.4 Impairment of financial assets
The Company measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since its initial recognition. If the credit risk on a financial instrument has not increased significantly since its initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12 month expected credit losses.
However, for trade receivables or contract assets that result in relation to revenue from contracts with customers, the Company measures the loss allowance at an amount equal to lifetime expected credit losses.
1.16.1.5 De-recognition of financial assets
The Company de-recognizes a financial asset 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 party.
On de-recognition of a financial asset in its entirety, the difference between the asset''s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of that financial asset.
1.16.2 Financial liabilities and equity instruments
1.16.2.1 Equity instruments
An equity instrument is any contract that evidences a residual interest in th
Mar 31, 2022
1.1.0 Company Overview
The Financial Statements of "Oil India Limited" ("the Company "or" OIL" ) are for the year ended 31st March, 2022.
The Company is engaged in exploration, development and production of crude oil & natural gas, production of LPG, transportation of crude oil & natural gas and generation of renewable energy. The Company is a public limited Company incorporated in India having its registered office at Duliajan, District Dibrugarh, Assam, Pin-786602. The Company''s shares are listed and traded in BSE Limited and National Stock Exchange of India Limited.
1.1.1 New Standards/ amendments and other changes effective from April 1, 2021
Amendments and other changes issued under section 133 of the Companies Act notified by Ministry of Corporate Affairs (MCA) under the Companies (Indian Accounting Standards) Rules, 2015 are appropriately applied in preparation of the Financial Statements.
1.2.0 Significant accounting policies
1.2.1 Statement of compliance
The financial statements have been prepared in accordance with the provisions of Companies Act, 2013 and in compliance with the Indian Accounting Standards (Ind AS) issued by the Ministry of Corporate Affairs notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended. The Ind ASs prescribed under section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016 as amended from time to time.
1.2.2 Basis of preparation
The financial statements are prepared under the historical cost convention on the accrual basis except for certain financial assets and financial liabilities which are measured at fair values as per the respective para included hereinafter.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the
Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date on such basis as provided under Ind AS 113.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
As the operating cycle cannot be identified in normal course due to the special nature of industry, the same has been assumed to have duration of 12 months. Accordingly, all assets and liabilities have been classified as current or non- current as per the Company''s operating cycle and other criteria set out in Ind AS-1 "Presentation of Financial Statements" and Schedule III to the Companies Act, 2013.
The Financial Statements are presented in Indian Rupees and all values are rounded off to the nearest two decimal crore except otherwise stated.
1.2.3 Use of estimates
In preparing the Standalone Financial Statements, in conformity with the accounting policies of the Company, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of the contingent liabilities as at the date of the financial statements, the amount of revenues and expenditures during the reported period and notes to the financial statements. Actual results could differ from those estimates, any revision to such estimates is recognized in such period in which the same is determined and if material, their effects are disclosed in the notes to the financial statements.
1.2.4 Major judgments, assumptions and accounting estimates
a. Estimation of oil and gas reserves
The estimation of oil and gas reserves is key factor in the accounting for oil and gas producing activities. Oil and gas reserves are estimated by analysis of geosciences and engineering data using Deterministic Method. Production pattern analysis, number of additional wells to be completed, application of recovery techniques, validity of mining lease agreements, agreements/MOU for sales etc. influence the estimation of reserves. Unit-of-production depreciation, depletion and amortization charges are principally measured based on
management''s estimates of proved developed oil and gas reserves. Also, exploration drilling costs are categorized as Exploration and Evaluation Assets pending the results of further exploration or appraisal activity, which may take several years to complete and before any related proved reserves can be booked.
b. Impairment of assets
As part of the determination of the recoverable value of assets of cash generating units for impairment, the estimates, assumptions and judgments mainly concern oil and gas prices scenarios, operating costs, production volumes and oil and gas proved & probable reserves. The discount rate used for estimating the value in use is reviewed annually. Changes in assumptions could affect the carrying amounts of assets, and any impairment losses and reversals will affect the revenues.
c. Employee benefits
The benefit obligations and plan assets can be subject to significant volatility due to changes in market values and actuarial assumptions. These assumptions vary between different pension plans and thus take into account market conditions. They are determined following actuarial valuation method certified by external independent actuarial valuer. The assumptions for each plan are reviewed half-yearly and annually and adjusted if necessary.
d. Asset retirement obligations
Asset retirement obligations, which result from a legal or constructive obligation, are recognized based on a reasonable estimate in the period in which the obligation arises. This estimate is based on information available in terms of costs and work program. It is regularly reviewed to take into account the changes in laws and regulations, the estimated useful life of fields based on proved and probable oil and gas reserves and current production off-take, the analysis of site conditions and technologies. Decommissioning Liability provision may differ due to changes in the aforesaid factors. The risk adjusted discount rate used for estimating the present value of obligation is reviewed annually.
e. Taxation
Tax liabilities are recognized when it is considered probable that there will be a future outflow of funds to a taxing authority. In such cases, provision is made for the amount that is expected to be settled, where this can be reasonably estimated. This requires the application of judgment as to the ultimate outcome, which can change over time depending on facts and circumstances. A change in estimate of the likelihood of a future outflow and/or in the expected amount to be settled would be recognized in income in the period in which the change occurs.
Deferred tax assets are recognized only to the extent it is considered probable that those assets will be recoverable. This involves an assessment of when those assets are likely to reverse, and a judgment as to whether or not there will be sufficient taxable profits available to offset the assets when they do reverse. This requires assumptions regarding future profitability and is therefore inherently uncertain. To the extent assumptions regarding future profitability change, there can be an increase or decrease in the amounts recognized in respect of deferred tax assets as well as in the amounts recognized in income in the period in which the change occurs.
1.3.1 Revenue from contracts with customers
The Company derives revenues primarily from sale of products such as Crude Oil, Natural Gas, Liquefied Petroleum Gas (LPG), Condensate, Renewable Energy and sale of services such as Pipeline Transportation Services.
Revenue from contracts with customers is recognized at the point in time the Company satisfies a performance obligation by transferring control of a promised product or service to a customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for the sale of products and service, net of discount, taxes & duties (other than excise duty) and Company''s share of profit petroleum payable to Government of India (GOI).
The transfer of control on sale of Crude Oil, Natural Gas and Liquefied Petroleum Gas (LPG) and Condensate occurs either at the point of delivery or the point of receipt, where usually the title is passed and the customer takes physical possession, depending upon the contractual conditions. Any retrospective revision in prices is accounted for in the year of such revision.
Revenue in respect of contractual short lifted quantity of gas is recognized when the customer''s right to such quantity is expired and there is reasonable certainty regarding its ultimate collection.
Sale and transportation of crude oil and natural gas are based on mutually agreed terms between the parties/ governed by the Government directives issued from time to time. Subsequent changes in terms, if any, are recognized in the period of change. Such retrospective revision in prices is not determinable at the time of sale.
1.3.2 Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is
due) from the customer or in case of dispute, penalties have been raised on the entity by the contracting party. If a customer pays consideration before the Company transfers promised goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier).
The company recognises contract liability for consideration received for short lifted quantity of gas under take or pay arrangements for which the customer has right to take related volume in future (i.e. unsatisfied performance obligations) and for the penalties that maybe raised by the contracting party in case of a dispute and reports these amounts as advances from customers or as penalties that maybe payable in future in the balance sheet. The un-accrued amounts are not recognised as revenue till all related performance obligations are fulfilled or the customer''s right to such quantities is expired.
1.3.3 Other operating revenue
(i) Claims on Central Government / Petroleum Planning & Analysis Cell (PPAC) towards gas pool revenue are accrued based on quantity delivered to the customers at discounted price, in respect of which revenue is recognized when collectability of the receivable is reasonably certain
(ii) Revenue from sale of Renewable Energy Certificates (REC) is recognized on sale of the certificates through the Exchange i.e., when the receivable is reasonably certain.
(iii) Other claims are recognized when there is a reasonable certainty of recovery.
1.3.4 Other income
(i) Dividend income from investments is recognized when the Company''s right to receive payment is established.
(ii) Interest income is recognized on a time proportion basis taking into account the amount outstanding and at the effective interest rate applicable, which is the rate that equalises discounted estimated future cash receipts through expected life of the financial asset to that asset''s net carrying amount on initial recognition. Interest on income tax refund is accounted for upon finalisation of assessments.
(iii) Insurance claim other than that for transit loss of stores items are accounted for on final acceptance by the Insurance Company.
(iv) Revenue on account of reimbursable subsidies/
grants and interest on delayed realization from customers are recognized when there is certainty of ultimate realization.
(v) Recovery of liquidated damages is recognized in the Statement of Profit & Loss as income at the time of occurrence except in case of Joint Venture Contracts (JVC) which are governed by the respective Production Sharing/Revenue Sharing Contracts. In case of return/refund of the liquidated damages, the same is accounted for as other expenses. In case of any dispute over the liquidated damages, provision is created in the accounts.
1.4.0 Leases
1.4.1 The Company as lessor
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized as expense on a straight-line basis over the lease term on the same basis as lease income.
1.4.2 The Company as lessee
The company has applied Ind AS 116 "Leases" to service contracts of equipments, land, buildings, vehicles, etc. to evaluate whether these contracts contains lease or not. Based on evaluation of the terms and conditions of the arrangements, the Company has evaluated such arrangements to be leases.
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contact involves the use of an identified asset (ii) the Company has right to obtain substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
Lease term
The Company determines the lease term as the noncancellable period of a lease, together with both periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option; and
periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. In assessing whether the Company is reasonably certain to exercise an option to extend a lease, or not to exercise an option to terminate a lease, it considers all relevant facts and circumstances that create an economic incentive for the Company to exercise the option to extend the lease, or not to exercise the option to terminate the lease.
Recognition
Right of use asset:
The right-of-use assets are initially recognized at cost, which comprises the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the inception date of the lease along with any initial direct costs, restoration obligations and lease incentives received.
Lease liability:
The lease liability is initially measured at present value of the future lease payments over the reasonably certain lease term. The lease payments are discounted using the interest rate implicit in the lease, if it is not readily determinable, using the incremental borrowing rate.
Depreciation:
The right-of-use assets is measured at cost less any accumulated depreciation. The right-of-use assets is depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use assets.
If ownership of the underlying asset is transferred or the purchase option is exercised by the company, it shall depreciate over the remaining useful life of the asset.
Finance cost on lease liability:
Interest on the lease liability in each period during the lease term is the amount that produces a constant periodic rate of interest on the remaining balance of the lease liability. The interest cost on lease liability (computed using effective interest method), is expensed in the statement of profit and loss, unless eligible for capitalization as per accounting policy on "Borrowing costs".
Non lease component:
The Company''s contracts involve a number of additional services and components including personnel cost, maintenance, drilling related activities, consumables and other items. In most of such contracts, the additional services/non-lease components constitute
significant portion of the overall contract value. Where the additional services/non-lease components are not separately priced, the consideration paid has been allocated based on the relative stand-alone prices of the lease and non-lease components. These non - lease components are not included in the measurement of lease liability.
Reassessment of lease liability:
The Company shall re-measure the lease liability by discounting the revised lease payments using a revised discount rate, if either:
(i) There is a change in the lease term. The Company shall determine the revised lease payments on the basis of the revised lease term; or
(ii) There is a change in the assessment of an option to purchase the underlying asset.
Impairment loss of the underlying asset:
The Company follows Ind AS 36 Impairment of Assets to determine whether the right-of-use asset is impaired and to account for any impairment loss identified.
Short term lease and low value asset leases:
Leases for which lease term ends within 12 months is classified as short-term leases. The Company has elected short term leases and low value asset leases for recognition exemption in terms of Ind AS 116. The Company recognizes the lease rental payment associated with short term lease and low-value asset leases as expense in the Statement of Profit & Loss.
1.5.0 Foreign currency transactions and translations
The functional currency of the Company is the Indian Rupee. The financial statements are presented in Indian Rupees.
(i) In preparing the financial statements of the Company, transactions in currencies other than the entity''s functional currency (foreign currencies) 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 retranslated at the closing rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rate prevailing at the date when the fair value was measured. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
(ii) Transaction gains and losses realized upon settlement of foreign currency transactions are
included in determining net profit / loss for the period in which the transaction is settled. Revenue, expense and cash-flow items denominated in foreign currencies are translated into the relevant functional currency using the exchange rate in effect on the date of the transaction.
(iii) Exchange differences on monetary items are recognized in the statement of profit and loss in the period in which they arise except for:
(a) Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, cost of which are included in the cost of those assets are regarded as an adjustment to interest costs on those foreign currency borrowings;
(b) In accordance with para D13AA of Ind AS 101, First-time Adoption of Indian Accounting Standards the Company continues to exercise policy adopted under previous IGAAP and accordingly exchange differences on long-term foreign currency monetary items relating to acquisition of depreciable and other assets were adjusted to the carrying cost of the assets and depreciated over the balance life of the assets and in other cases, exchange differences were accumulated in a "Foreign Currency Monetary Item Translation Difference Account" and amortized over the balance period of such long term foreign currency monetary item by recognition as income or expense in each of such periods in respect of items recognized in the financial statement for the period ending immediately before the beginning of the first Ind AS financial reporting period as per previous GAAP i,e., 31 March, 2016 as reported date.
Borrowing cost consists of interest and other cost incurred in connection with borrowing of funds and includes exchange difference arising from Foreign Currency borrowings to the extent that they are regarded as an adjustment to interest cost.
(i) Borrowing costs directly attributable to the acquisition or construction of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use, are capitalized to the cost of those assets, until such time as the assets are substantially ready for their intended use.
(ii) Capitalisation of borrowing costs is suspended when active development activity on the qualifying assets is interrupted other than on temporary
basis and charged to the Statement of Profit and Loss.
(iii) All other borrowing costs are recognized in the statement of profit and loss in the period in which they are incurred.
Government grants are recognized when there is reasonable assurance that the Company will comply with the conditions attached to them and that the grants will be received.
(i) Grant related to Income (Revenue Grants)
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.
(ii) Grant relating to Assets (Capital Grants)
Government grants with the primary condition that the Company should purchase construct or otherwise acquire non-current assets are recognized as deferred income in the balance sheet and transferred to the statement of profit and loss on a systematic and rational basis over the useful life of the related assets.
1.8.1 Retirement benefit costs and termination benefits:
Payments to defined contribution retirement benefit plans are charged to the statement of profit and loss (other than expenses to be capitalised), when employees have rendered service entitling them to the contributions.
The cost of providing benefits under defined benefit plans (such as gratuity, leave encashment, postretirement medical benefits, defined benefit pension schemes) is determined separately for each plan using the projected unit credit method, with actuarial valuations being carried out half-yearly and annually. This attributes the increase in present value of the defined benefit obligation resulting from employee service in the current period to determine current service cost. The current service cost as stated above and past service costs, resulting from a plan amendment (a reduction in future obligations as a result of a material reduction in the number of employees covered by the plan), are recognized in the statement of profit and loss under ''employee benefits expense''.
Net interest which is recognized in the statement of profit and loss under ''employee benefits expense'' represents the net change in present value of plan obligations and the value of plan assets resulting from the passage of
time, and is determined by applying the discount rate to the present value of the benefit obligation at the start of the year, and to the fair value of plan assets at the beginning of the year, taking into account expected changes in the obligation or plan assets during the year.
Re-measurement of the defined benefit liability and asset, comprising actuarial gains and losses, and the return on plan assets (excluding amounts included in net interest described above) are recognized in other comprehensive income in the period in which they occur and are not subsequently reclassified to the statement of profit and loss.
The defined benefit pension plan surplus or deficit recognized in the balance sheet for each plan comprises the difference between the present value of the defined benefit obligation and the fair value of plan assets out of which the obligations are to be settled directly. Defined benefit pension plan surpluses are only recognized to the extent they are recoverable, naturally by way of refund or reductions in future contributions to the plans.
Payments made under Voluntary Retirement Scheme or any other early separation scheme are charged to the Statement of Profit and Loss on incurrence.
1.8.2 Short-term and other long-term employee benefits
A liability is recognized for benefits accruing to employees in respect of wages and salaries (including performance related pay), annual leave, sick leave and social security contribution in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
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.
1.9.0 Taxation
Income tax expense represents the aggregate of current tax and deferred tax.
1.9.1 Current tax
Current tax is the amount of income tax payable/ paid based on taxable profit as per the provisions of The Income Tax Act, 1961 and Rules thereto, for the reporting period. Taxable profit differs from ''profit before tax'' as reported in the statement of profit and loss because of items of income or expense that are
taxable or deductible in other years and items that are never taxable or deductible. The Company''s current tax is calculated using tax rates and the tax laws that have been enacted or substantively enacted by the end of the reporting period.
After an appeal is decided by appellate authority, the corresponding appeal effect is given in the accounts only after receipt of appellate order from the concerned Department/ Authority.
1.9.2 Deferred tax
(i) Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.
(ii) The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the benefits of all or part of the deferred tax asset to be utilized. Any such reduction shall be reversed to the extent when it becomes probable that sufficient taxable profit will be available.
(iii) Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is to be settled or the asset to be realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
1.9.3 Current and deferred tax expenses for the year
Current and deferred tax are recognized in the statement of profit and loss, except when they relate to items that are recognized in other comprehensive income, in which case, the current and deferred tax are also recognized in other comprehensive income.
1.10.0 Oil and gas exploration, evaluation and development expenditure
The Company follows the Successful Efforts Method (SEM) of accounting in respect of its oil and gas exploration and production activities which is in accordance with Ind AS 106 and the "Guidance Note on Accounting for Oil & Gas Producing Activities (Ind AS)" issued by the Institute of
Chartered Accountants of India.
1.10.1 Pre-Acquisition, Acquisition, Exploration & Evaluation Costs
(i) Pre-Acquisition costs: Pre-Acquisition costs of revenue nature incurred prior to obtaining the rights to explore, develop and produce Oil & Gas like data collection & analysis cost etc. are expensed to the Statement of Profit and Loss in the year of incurrence.
(ii) Acquisition costs:
(a) Acquisition costs include cost of land acquired for drilling operations including cost of temporary occupation of the land, crop compensation paid to farmers, registration fee, legal cost, signature bonus, brokers'' fees, consideration for farm-in arrangements and other costs incurred in acquiring mineral rights.
(b) These costs are initially recorded under Exploration & Evaluation Assets (Intangible) except cost of land acquired for drilling operations which are shown as Acquisition cost-land under capital work in progress.
(c) On determination of proved developed reserves, associated acquisition costs are transferred to Property, Plant & Equipment as Oil & Gas assets.
(d) Acquisition cost relating to an exploratory well that is determined to have no proved reserves and its status is decided as dry or of no further use for exploration purpose, is charged as expenses. In such cases land value forming part of acquisition cost, a nominal amount of '' 100 per bigha is transferred to Freehold land under Property, Plant & Equipment.
(e) Cost for retaining the mineral interest in properties like lease carrying cost, license fees & other cost are charged as expense when incurred.
(iii) Exploration & Evaluation Cost (E&E cost):
(a) Geological and geophysical costs, including seismic surveys for exploration purposes are expensed as incurred.
(b) Costs including allocated depreciation on support equipment and facilities involved in drilling and equipping exploratory and appraisal wells and cost of exploratory-type
drilling stratigraphic test wells are initially shown as Exploration & Evaluation Assets (Intangible) till the time these are either transferred to Property, Plant & Equipment as Oil & Gas assets on establishment of Proved Developed Reserves or charged as expense when determined to be dry or of no further use.
(c) E&E costs related to each exploratory well are not carried over unless it could be reasonably demonstrated that there are indications of sufficient quantity of reserves and activities are firmly planned in near future for further assessing the reserves and economic & operating viability of the project. Costs of written off exploratory wells are not reinstated in the books even if they start producing subsequently.
1.10.2 Development Cost
Costs that are attributable to development activities including production and processing plant & facilities, service wells including allocated depreciation on support equipment and facilities are initially shown under Capital Work in Progress as Development Cost till such time they are capitalized as Oil & Gas Asset under Property, Plant & Equipment on establishment of Proved Developed Reserves. Cost of dry development well, if any is also capitalized as Oil & Gas Asset under Property, Plant & Equipment upon completion of the well.
1.10.3 Production Cost
Production Cost consists of direct and indirect costs incurred to operate and maintain wells and related equipment and facilities, including depreciation and applicable operating cost of support equipment and facilities.
1.10.4 Side-Tracking Expenditure
In case of exploratory wells, the cost of abandoned portion of side tracked well is charged off to the Statement of Profit and Loss statement. In case of development wells, the entire cost of abandoned portion and side- tracking is capitalized. In case of existing producing wells, the cost of side - tracking is capitalized if it increases the proved developed reserves, otherwise is charged off to Statement of Profit and loss.
1.11.0 Research & Development Expenditure
All revenue expenditure incurred for Research & Development Projects / Schemes, net of grants-in-aid
(other than those related to asset) if any, are charged to
the Statement of Profit and Loss.
1.12.0 Property, plant and equipment (PPE)
(i) An item of property, plant and equipment is recognized by the company as an asset if it is probable that future economic benefits associated with the items will flow to the entity and the cost of the items can be measured reliably.
(ii) Property, plant and equipment are stated at cost, less accumulated depreciation, depletion and impairment losses. The initial cost of an asset comprises its purchase price including import duties and non-refundable purchase taxes or construction cost, any costs directly attributable to bringing the asset into the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of any decommissioning obligation wherever applicable and eligible borrowing costs. The purchase price or construction cost is the aggregate amount paid / payable and the fair value of any other consideration given to acquire the asset. Assets in the course of construction are initially kept under assets under construction and capitalized when the assets are available for use in the manner as intended by the management.
(iii) Items such as spare parts, stand-by equipment and servicing equipment which meet the definition of Property, Plant and Equipment are capitalised. Other spare parts are carried as inventory and recognized in the Statement of Profit and Loss on consumption. Cost of day-to-day servicing of property, plant and equipment are recognized in the Statement of Profit and Loss as incurred. Major shut-down and overhaul expenditure is capitalized as the activities undertaken to improve the future economic benefits expected to arise from the asset. Where an asset or part of an asset that was separately depreciated is replaced and it is probable that future economic benefits associated with the item will flow to the Company, the expenditure is capitalized and the carrying amount of the replaced asset is derecognized. Inspection costs associated with major maintenance programs from which future economic benefits are expected to flow, are capitalized and amortized over the period to the next inspection.
(iv) Technical know-how / license fee relating to plants/ facilities and specific software that are integral part of the related hardware are capitalised as part of cost of the underlying asset.
(v) Oil and gas assets which comprise of producing wells, related acquisition cost and production facilities are depleted using a unit-of-production method. The cost of producing wells andproduction facilities net of salvage value are depleted over proved developed reserves. Acquisition cost is depleted over proved reserves. Rate of depletion is determined based on production from the Oil / Gas field or a group of Oil / Gas fields identified to the related reserves having homogeneous geological feature. Estimation of oil and natural gas reserves are done annually at the yearend and the impact of changes in the estimated proved reserves are dealt with prospectively by depleting the remaining carrying value of the asset.
(vi) Other property, plant and equipment excluding ''Land-freehold'' and ''Right of use (ROU) assets are depreciated based on useful life of the asset under "Written down value method" as specified in Schedule II to the Companies Act., 2013. When any part of an item of property, plant and equipment, has different useful life and cost is significant in relation to the total cost of the asset, they are accounted for and depreciated separately. Depreciation on additions / deletions during the year is provided on pro rata basis with reference to the date of additions / deletions except low value items not exceeding '' 5,000 which are fully depreciated at the time of addition. Residual value of property plant and equipments other than well asset is determined considering past experience and is upto 5% of the original cost till such asset is disposed. The residual value of well assets are determined at current cost on the basis of available technical assessment. The typical useful life of other major property, plant and equipment are as follows:
|
Buildings |
30 to 60 years |
|
Plant & Machinery |
10 to 40 years |
|
Furniture and fixtures |
8 to 10 years |
|
Office equipments |
3 to 10 years |
|
Vehicles |
8 to 10 years |
|
Railway siding |
15 years |
Depreciation on subsequent expenditure on PPE (other than of Oil and Gas Assets) arising on account of capital improvement or other factors is provided for prospectively over the remaining useful life. Depreciation on furbished/revamped PPE (other than of Oil and Gas Assets) which are capitalized separately is provided for over the reassessed useful life.
(vii) The expected useful life of property, plant and equipment other than Oil and gas assets are reviewed on an annual basis and, if necessary, impact arising out the changes in useful life are accounted for prospectively.
(viii) An item of property, plant and equipment other than Oil & Gas assets 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 de- recognition of the asset is included in the statement of Profit & Loss in the period in which the item is derecognized. Any Tangible asset other than Oil & Gas assets, when determined of no further use, is deleted from the Gross Block of assets. The deleted assets are carried as ''Assets awaiting disposal'' under Inventories at lower of '' 1000 or 5% of the original cost and the balance written down value, is charged off. Any gain or loss arising on actual sale of the asset is included in the income statement in the period in which the item is actually sold as scrap.
Oil & gas assets other than production facilities asset is derecognized when the designated oil/gas field or a group of oil/gas fields ceases to produce. Production facilities asset is derecognized either on disposal/when no future economic benefits are expected to arise from the continued use of the asset or when the designated oil/gas field or a group of oil/gas fields ceases to produce, whichever is earlier. Any gain or loss arising on derecognition of the asset including sale of salvage is included in the statement of profit and loss.
(ix) Assets provided to employees as per the Company''s internal scheme are also classified as property, plant and equipment (PPE) and recognised as an asset. Such assets are depreciated based on the useful life as defined in the internal scheme of the Company under written down value method. The useful life of such assets is different than as specified in Schedule II of the Company''s Act. The assets provided to the employees and its useful life are as follows:
Mobile Phone - 3 years
Furniture and household goods - 6 years
Soft Furniture - Fully in the year of purchase
(x) Physical verification of the property, plant and equipment (other than PPE items given to employees as per the policy of the Company) is carried out by the Company in a phased manner to cover all the items over a period of three years.
The discrepancies noticed, if any, are accounted for in the year in which such differences are found.
1.12.1 Capital Work in Progress (CWIP)
(i) Expenses exclusively attributable to capital projects and incurred during construction period are considered as capital work in progress.
(ii) Borrowing cost incurred during construction period on loans borrowed and utilised for capital projects upto the date of capitalization is considered as capital work in progress.
1.12.2 Intangible assets
Cost of intangible assets are capitalised when it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity, the cost of the asset can be measured reliably and the asset is ready for its intended use.
Intangible assets are stated at the amount initially recognized less accumulated amortization and accumulated impairment losses.
The Company follows cost model for recognition and measurement of intangible assets. Cost of right of way of land is amortized on a straight-line basis over the lower of period of such rights or useful life of the related asset for which right of way is taken. Cost of computer software is amortized over the useful life not exceeding five years from the date of capitalization.
Any intangible asset, when determined obsolete and of no further use, is written off.
1.12.3 Impairment of property, plant & equipment (PPE), E&E assets, Intangible assets other than goodwill
At the end of each reporting period, the Company reviews the carrying amounts of its property, plant & equipment (including capital work in progress) to determine whether there is any indication that those assets have suffered an impairment loss. For this purpose, Producing fields, LPG plant, Transportation Pipeline and Renewable Energy Units (other than captive power plants) are considered as Cash Generating Units (CGU). If any such indication exists, the recoverable amount of the CGU is estimated in order to determine the extent of the impairment loss (if any). Corporate assets and common service assets are also allocated to individual cash- generating units on a reasonable and consistent basis.
Intangible assets are tested for impairment annually. Whenever there is an indication that the asset may be impaired, the recoverable amount of the asset wherever feasible is estimated in order to determine the extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of a CGU is estimated to be less than its carrying amount, the carrying amount of the asset or group of assets covered under the CGU is reduced to its recoverable amount. An impairment loss is recognized in the statement of profit and loss.
E&E Assets are reviewed for indicators of impairment as per Ind AS 106 and if events and circumstances suggest, impairment loss is provided for and carrying amount is reduced accordingly.
When an impairment loss is subsequently reversed, the carrying amount of the asset or group of assets covered under the CGU is increased to the revised estimate of its recoverable amount, up to the carrying amount that would have been determined had no impairment loss been recognized for the asset or group of assets covered under the CGU in prior years. A reversal of an impairment loss is recognized in the Statement of Profit and Loss.
Inventory of Finished goods of Crude Oil, Liquefied Petroleum Gas (LPG) and LPG condensate are valued at cost determined on absorption costing method basis or net realizable value, whichever is lower, as per Ind AS2. Cost of finished goods is determined based on direct cost and directly attributable services cost including depreciation & depletion. The value of such inventories includes excise duty and royalty (wherever applicable). Net realizable value represents the estimated selling price for inventories less all costs necessary to affect the sale.
Crude oil in unfinished condition in the flow line up to Group Gathering Station and Natural Gas in Pipeline are not valued, as these pipeline fills are necessary for the operation of the facility. Crude oil in semi-finished condition in group gathering station are not valued as the same is not measurable.
Inventory of stores and spares including capital stores are valued at weighted average cost or net realizable value whichever is lower, as per Ind AS 2. Obsolete / unserviceable items, as and when identified, are written off. Any item of stores and spares including those in Storage Locations which have not moved for last four years as on date of Balance Sheet are identified as slow-moving items for which a provision of 95% of the cost is made.
Renewable Energy Certificates (REC) received based on generation of renewable energy certified by the competent authority, held for trading are not valued.
1.14.1 Provisions
Provisions are recognized when the Company has a present obligation as a result of a past event and it is probable that the Company will be 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 end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value as on the reporting date of those cash flows (when the effect of the time value of money is material).
1.14.2 Decommissioning and restoration obligations
Full eventual liabilities towards costs relating to assets retirement obligations are recognized when the Company has an obligation to plug and abandon a well, dismantle and remove a facility or an item of plant and to restore the site on which it is located, and when a reliable estimate of that liability can be made. Liabilities towards costs relating to dismantling, abandoning and restoring well sites and associated Production Facilities are recognized at the commencement of drilling a well or when facilities are installed, as the case may be. The amount recognized is the present value of the estimated future expenditure determined in accordance with local conditions and requirements at current prices and escalated using appropriate inflation rate till the expected date of decommissioning and discounted using appropriate risk-free discount rate.
An amount equivalent to the decommissioning liability provision is recognized as part of the corresponding PPE, CWIP or Exploration & Evaluation Asset (E&E) as the case may be.
Liability for decommissioning cost is updated annually based on the technical assessment available at current costs. The unwinding of the discount is included as a finance cost. Any change in the present value of the estimated decommissioning provision other than unwinding of discount is adjusted to decommissioning provision and added to or deducted from the cost of the asset in the current period and is considered for depreciation (depletion) prospectively. In case, reversal of decommissioning provision exceeds the
corresponding carrying value of the related assets, the excess amount is recognized in the Statement of Profit & Loss.
The actual cost incurred on settlement of the obligation is adjusted against the liability and the ultimate gain or loss is recognized in the Statement of Profit and Loss, when the designated oil/gas field or a group of oil/gas fields ceases to produce.
1.15.0 Investments in subsidiaries, associates and joint ventures
The Company measures its investments in subsidiaries, associates and joint ventures at cost less impairment.
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs 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 of the financial assets or financial liabilities, as is appropriate, on initial recognition.
1.16.1 Financial assets
1.16.1.1 Investment/Disinvestment in Securities
All regular purchases or sales of financial assets are recognized and de-recognized on a trade date basis or investment date as the case may be.
All recognized financial assets are subsequently measured in their entirety either at amortized cost or fair value, depending on the classification of the financial assets
1.16.1.1.1 Classification of financial assets
(i) Debt instruments that meet the following conditions are subsequently measured at amortized cost less impairment loss (except for debt investments that are designated as at Fair Value Through Profit or Loss (FVTPL) on initial recognition):
a) the asset is held within a business model whose objective is to hold assets till maturity in order to collect contractual cash flows; and
b) The contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(ii) Debt instruments that meet the following conditions are subsequently measured at Fair Value Through Other Comprehensive Income (except for debt investments that are designated as at FVTPL on initial recognition):
a) the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and
b) The contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(iii) Debt instruments that do not meet the criteria of amortized cost or Fair Value through Other Comprehensive Income (FVTOCI) are measured at FVTPL.
(iv) All other financial assets are subsequently measured at fair value through Profit or Loss.
1.16.1.1.2 Amortized cost and Effective interest method
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that equates by discounting estimated future cash flows (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognized in the statement of profit & loss under investment income on an effective interest basis for debt instruments other than those financial assets classified as FVTPL.
1.16.1.1.3 Investments in equity instruments at Fair Value Through Other Comprehensive Income (FVTOCI)
On initial recognition, the Company can make an irrevocable election (on an instrument-by-instrument basis) to present the subsequent changes in fair value in other comprehensive income for equity instruments that are not held for trading. These elected investments are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity under subhead Equity instruments through other comprehensive income. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
Dividends on these investments in equity instruments are recognized in the Statement of Profit and Loss when the Company''s right to receive the dividends is established and it does not represent a recovery of part of cost of the investment.
1.16.1.2 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, including offsetting bank overdrafts, and short-term highly liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in fair value and have a maturity of three months or less from the acquisition date.
1.16.1.3 Trade receivables
Trade receivables are recognized initially at fair value based on transaction price and subsequently at the amortized cost less any impairment.
1.16.1.4 Impairment of financial assets
The Company measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since its initial recognition. If the credit risk on a financial instrument has not increased significantly since its initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12- month expected credit losses.
However, for trade receivables or contract assets that result in relation to revenue from contracts with customers, the Company measures the loss allowance at an amount equal to lifetime expected credit losses.
1.16.1.5 De-recognition of financial assets
The Company de-recognizes a financial asset 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 party.
On de-recognition of a financial asset in its entirety, the difference between the asset''s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of that financial asset.
1.16.2 Financial liabilities and equity instruments
1.16.2.1 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.
1.16.2.2 Financial liabilities
All financial liabilities are subsequently measured at amortized cost using the effective interest method or at FVTPL. However, financial guarantee contracts issued by the Company, and commitments issued by the Company to provide a loan at below-market interest rate are measured in accordance with the specific accounting policies set out below.
1.16.2.2.1 Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL.
1.16.2.2.2 Financial liabilities subsequently measured at amortized cost
Financial liabilities that are not held-for-trading and not designated as at FVTPL are measured at amortized cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortized cost are determined based on the effective interest method. Interest expense that is not capitalized as part of costs of an asset is included in the ''finance costs'' line item.
The effective interest me
Mar 31, 2021
NOTE-1: Significant accounting policies
1.1.0 Company Overview
Oil India Limited (''OIL'' or ''the Company'') is engaged in exploration, development and production of crude oil & natural gas, production of LPG, transportation of crude oil & natural gas and generation of renewable energy. The Company is a public limited Company incorporated in India having its registered office at Duliajan, District Dibrugarh, Assam, Pin-786602. The Company''s shares are listed and traded in BSE and National Stock Exchange of India Limited.
1.1.1 Application of new Indian Accounting Standards
New accounting standards issued under section 133 of the Companies Act notified by the Ministry of Corporate Affairs (MCA) under the Companies (Indian Accounting Standards) Rules, 2015 are appropriately applied in preparation of Financial Statements.
1.1.2 Statement of compliance
The financial statements have been prepared in accordance with the provisions of Companies Act, 2013 and in compliance with the Indian Accounting Standards (Ind AS) issued by the Ministry of Corporate Affairs notified under the Companies (Indian Accounting Standards) Rules,2015 as amended. The Ind ASs prescribed under section 133 of the Companies Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting standards)Amendment Rules, 2016.
1.1.3 Basis of preparation
The financial statements are prepared under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fairvalues.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable orestimated using anothervaluation technigue. In estimating the fair value of an asset or a liability, the Company takes into account the
characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date on such basis as provided under Ind AS 113.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard reguires a change in the accounting policy hitherto in use.
As the operating cycle cannot be identified in normal course due to the special nature of industry, the same has been assumed to have duration of 12 months. Accordingly, all assets and liabilities have been classified as current or non- current as per the Company''s operating cycle and other criteria set out in Ind AS-1 "Presentation of Financial Statements" and Schedule III to the Companies Act, 2013.
The Financial Statements are presented in Indian Rupees and all values are rounded off to the nearest two decimal crore except otherwise stated.
1.1.4 Use of estimates
In preparing the Standalone Financial Statements, in conformity with the accounting policies of the Company, management is reguired to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of the contingent liabilities as at the date of the financial statements, the amount of revenues and expenditures during the reported period and notes to the financial statements. Actual results could differ from those estimates, any revision to such estimates is recognized in such period in which the same is determined and if material, their effects are disclosed in the notes to the financial statements.
1.1.5 Major judgments, assumptions and accounting estimates
a. Estimation of oil and gas reserves
The estimation of oil and gas reserves is key factor in the in accounting for oil and gas producing activities. Oil and gas reserves are estimated by analysis of geosciences
and engineering data using Deterministic Method. Production pattern analysis, number of additional wells to be completed, application of recovery technigues, validity of mining lease agreements, agreements/MOU for sales etc. influence the estimation of reserves. Unit-of-production depreciation, depletion and amortization charges are principally measured based on management''s estimates of proved developed oil and gas reserves. Also, exploration drilling costs are categorized as Exploration and Evaluation Assets pending the results of further exploration or appraisal activity, which may take several years to complete and before any related proved reserves can be booked.
b. Impairment of assets
As part of the determination of the recoverable value of assets of cash generating units for impairment, the estimates, assumptions and judgments mainly concern oil and gas pricesscenarios, operating costs, production volumes and oil and gas proved & probable reserves. The discount rate used for estimating the value in use is reviewed annually. Changes in assumptions could affect the carrying amounts of assets, and any impairment losses and reversals will affect the revenues.
c. Employee benefits
The benefit obligations and plan assets can be subject to significant volatility due to changes in market values and actuarial assumptions. These assumptions vary between different pension plans and thus take into account market conditions. They are determined following actuarial valuation method certified by external independent actuarial valuer. The assumptions for each plan are reviewed half-yearly and annually and adjusted if necessary to reflect changes from the experience and actuarial advices.
d. Asset retirement obligations
Asset retirement obligations, which resultfromalegal or constructive obligation, are recognized based on a reasonable estimate in the period in which the obligation arises. This estimate is based on information available in terms of costs and work program. It is regularly reviewed to take into account the changes in laws and regulations, the estimated useful life of fields based on proved and probable oil and gas reserves and current production off-take, the analysis of site conditions and technologies. Decommissioning Liability provision may differ due to changes in the aforesaid factors. The risk
adjusted discount rate used for estimating the present value of obligation is reviewed annually.
e. Taxation
Tax liabilities are recognized when it is considered probable that there will be a future outflow of funds to a taxing authority. In such cases, provision is made for the amount that is expected to be settled, where this can be reasonably estimated. This reguires the application of judgment as to the ultimate outcome, which can change over time depending on facts and circumstances. A change in estimate of the likelihood of a future outflow and/or in the expected amount to be settled would be recognized in income in the period in which the change occurs.
Deferred tax assets are recognized only to the extent it is considered probable that those assets will be recoverable. This involves an assessment of when those assets are likely to reverse, and a judgment as to whether or not there will be sufficient taxable profits available to offset the assets when they do reverse. This reguires assumptions regarding future profitability and is therefore inherently uncertain. To the extent assumptions regarding future profitability change, there can be an increase or decrease in the amounts recognized in respect of deferred tax assets as well as in the amounts recognized in income in the period in which thechangeoccurs.
1.2.0 Revenue recognition
1.2.1 Revenue from contracts with customers
The Company derives revenues primarily from sale of products such as Crude Oil, Natural Gas, Liguefied Petroleum Gas (LPG), Condensate, Renewable Energy and sale of services such as Pipeline Transportation Services.
Revenue from contracts with customers is recognized at the point in time the Company satisfies a performance obligation by transferring control of a promised product or service to a customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for the sale of products and service, net of discount, taxes or duties collected on behalf of government and Company''s share of profit petroleum paid to Government of India(GOI).
The transfer of control on sale of Crude Oil, Natural Gas and Liguefied Petroleum Gas (LPG) and Condensate
occurs either at the point of delivery or the point of receipt, where usually the title is passed and the customer takes physical possession, depending upon the contractual conditions. Any retrospective revision in prices is accounted for in the year of such revision.
Revenue in respect of contractual short lifted quantity of gas is recognized when there is reasonable certainty regarding its ultimate collection i.e. when the customer''s right to volumes is expired.
Sale and transportation of crude oil and natural gas are based on mutually agreed terms between the parties/governed by the Government directives issued from time to time. Subsequent changes in terms, if any, are recognized in the period of change. Such retrospective revision in prices is not determinable at thetimeof sale.
1.2.2 Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer or in case of dispute, penalties have been raised on the entity by the contracting party. If a customer pays consideration before the Company transfers promised goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due(whichever is earlier).
The company recognises contract liability for consideration received for short lifted quantity of gas under take or pay arrangements for which the customer has right to take related volume in future (i.e. unsatisfied performance obligations) and for the penalties that maybe raised by the contracting party in case of a dispute and reports these amounts as advances from customers or penalties that maybe payable in future in the balance sheet. The un-accrued amounts are not recognised as revenue till all related performance obligations are fulfilled or the customer''s right to the volumes isexpired.
1.2.3 Other operating revenue
(i) Claims on Central Government / Petroleum Planning & Analysis Cell (PPAC) towards gas pool revenue are accrued based on quantity delivered to the customers at discounted price, in respect of which revenue is recognized when collectability of the receivable is reasonably certain
(ii) Revenue from sale of Renewable Energy Certificates (REC) is recognized on sale of the certificates through the Exchange i.e. when the receivable is reasonably certain.
1.2.4 Other income
(i) Dividend income from investments is recognized when the Company''s right to receive payment is established.
(ii) Interest income is recognized on a time proportion basis taking into account the amount outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through expected life of the financial asset to that asset''s net carrying amount on initial recognition. Interest on income tax refund is accounted for upon finalisation of assessments.
(iii) Insurance claim other than that for transit loss of stores items are accounted for on final acceptance bythe Insurance Company.
(iv) Revenue on account of reimbursable subsidies/ grants and interest on delayed realization from customers are recognized when there is certainty of ultimaterealization.
(v) Recovery of liquidated damages is recognized in the Statement of Profit & Loss as income at the time of occurrence except in case of Joint Venture Contracts (JVC) which are governed by the respective Production Sharing/Revenue Sharing Contracts. In case of return/refund of the liquidated damages, the same is accounted for as other expenses. In case of any dispute over the liquidated damages, provision is created in the accounts.
1.3.0 Leases
1.3.1 The Company as lessor
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized as expense on a
straight-line basis over the lease term on the same basis asleaseincome.
1.3.2 The Company as lessee
The company has applied Ind AS 116 "Leases" to service contracts of equipments, land, buildings, vehicles, etc. to evaluate whether these contracts contains lease or not. Based on evaluation of the terms and conditions of the arrangements, the Company has evaluated such arrangements to be leases.
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:
(i) the contact involves the use of an identified asset
(ii) the Company has right to obtain substantially all of the economic benefits from use of the asset through the period of the lease and (iii)the Company has the right to direct the use of the asset.
Leaseterm
The Company determines the lease term as the noncancellable period of a lease, togetherwith both periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. In assessing whether the Company is reasonably certain to exercise an option to extend a lease, or not to exercise an option to terminate a lease, it considers all relevant facts and circumstances that create an economic incentive for the Company to exercise the option to extend the lease, or not to exercise the option to terminate the lease.
Recognition
Right of use asset:
The right-of-use assets are initially recognized at cost, which comprises the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the inception date of the lease along with any initial direct costs, restoration obligations and lease incentives received.
Lease liability:
The lease liability is initially measured at present value of
the future lease payments over the reasonably certain lease term. The lease payments are discounted using the interest rate implicit in the lease, if it is not readily determinable, using the incremental borrowing rate.
Depreciation:
The right-of-use assets is measured at cost less any accumulated depreciation. The right-of-use assets is depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use assets.
If ownership of the underlying asset is transferred or the purchase option is exercised by the company, it shall depreciate over the useful life of the asset.
Finance cost on lease liability:
Interest on the lease liability in each period during the lease term is the amount that produces a constant periodic rate of interest on the remaining balance of the lease liability. The interest cost on lease liability (computed using effective interest method), is expensed in the statement of profit and loss, unless eligible for capitalization as per accounting policy on "Borrowing costs".
Non lease component:
The Company''s contracts involve a number of additional services and components including personnel cost, maintenance, drilling related activities, consumables and other items. In most of such contracts, the additional services/non-lease components constitute significant portion of the overall contract value. Where the additional services/non-lease components are not separately priced, the consideration paid has been allocated based on the relative stand-alone prices of the lease and non-lease components. These non - lease components are not included in the measurement of lease liability.
Reassessment of lease liability:
The Company shall re-measure the lease liability by discounting the revised lease payments using a revised discountrate, if either:
(i) There is a change in the lease term. The Company shall determine the revised lease payments on the basis of therevised leaseterm; or
(ii) There is a change in the assessment of an option to purchase the underlying asset.
Impairment loss of the underlying asset:
The Companyfollows Ind AS 36 Impairment of Assets to determine whether the right-of-use asset is impaired and to account for any impairment loss identified.
Short term lease:
Leases for which lease term ends within 12 months is classified as short-term leases. The Company recognizes the lease rental payment associated with short term lease as expense in the Statement of Profit & Loss.
1.4.0 Foreign currency transactions and translations
The functional currency of the Company is the Indian Rupee. The financial statements are presented in Indian Rupees.
(i) In preparing the financial statements of the Company, transactions in currencies other than the entity''s functional currency (foreign currencies) 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 retranslated at the closing rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rate prevailing at the date when the fair value was measured. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
(ii) Transaction gains and losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled. Revenue, expense and cash-how items denominated in foreign currencies are translated into the relevant functional currencies using the exchange rate in effect on the date of the transaction.
(iii) Exchange differences on monetary items are recognized in the statement of profit and loss in the period in which they arise except for:
(a) Exchange differences on foreign currency borrowings relating to assets under construction
for future productive use, cost of which are included in the cost of those assets are regarded as an adjustment to interest costs on those foreign currency borrowings;
(b) In accordance with paraD13AAof IndASIOI, Firsttime Adoption of Indian Accounting Standards the Company continues to exercise policy adopted under previous IGAAP and accordingly exchange differences on long-term foreign currency monetary items relating to acguisition of depreciable and other assets were adjusted to the carrying cost of the assets and depreciated over the balance life of the assets and in other cases, exchange differences were accumulated in a "Foreign Currency Monetary Item Translation Difference Account" and amortized over the balance period of such long term foreign currency monetary item by recognition as income or expense in each of such periods in respect of items recognized in the financial statement for the period ending immediately before the beginning of the first Ind AS financial reporting period as per previous GAAP i,e; 31 March 2016 as reported date.
1.5.0 Borrowing costs
(i) Borrowing costs directly attributable to the acguisition or construction of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use and also includes exchange difference arising from Foreign Currency borrowings to the extent that they are regarded as an adjustment to interest cost.
(ii) All other borrowing costs are recognized in the statement of profit and loss in the period in which theyareincurred.
1.6.0 Government grants
(i) Government grants are recognized when there is reasonable assurance that the Company will comply with the conditions attached to them and that the grantswill bereceived.
(ii) Government grants are recognized in profit or 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 with the primary condition that the Company should purchase construct or otherwise acguire non-current assets are recognized as deferred revenue in the balance sheet and transferred to the statement of profit and loss on a systematic and rational basis over the useful life of the related assets.
1.7.0 Employee benefits
1.7.1 Retirement benefit costs and termination benefits:
Payments to defined contribution retirement benefit plans are recognized as expenses when employees have rendered service entitling them to the contributions.
The cost of providing benefits under defined benefit plans (such as gratuity, leave encashment, postretirement medical benefits, defined benefit pension schemes) is determined separately for each plan using the projected unit credit method, with actuarial valuations being carried out half-yearly and annually. This attributes the increase in present value of the defined benefit obligation resulting from employee service in the current period to determine current service cost. The current service cost as stated above and past service costs, resulting from either a plan amendment (a reduction in future obligations as a result of a material reduction in the number of employees covered by the plan), are recognized in the statement of profit and loss under''employee benefits expense''.
Net interest which is recognized in the statement of profit and loss under ''employee benefits expense'' represents the net change in present value of plan obligations and the value of plan assets resulting from the passage of time, and is determined by applying the discount rate to the present value of the benefit obligation at the start of the year, and to the fair value of plan assets at the beginning of the year, taking into account expected changes in the obligation or plan assets during theyear.
Re-measurement of the defined benefit liability and asset, comprising actuarial gains and losses, and the return on plan assets(excluding amounts included in net interest described above) are recognized in other comprehensive income in the period in which they occur and are not subseguently reclassified to the statement of profitand loss.
The defined benefit pension plan surplus or deficit recognized in the balance sheet for each plan comprises the difference between the present value of the defined benefit obligation and thefairvalue of plan assets out of which the obligations are to be settled directly. Defined benefit pension plan surpluses are only recognized to the extent they are recoverable, naturally by way of refund or reductions in future contributions to the plans.
1.7.2 Short-term and other long-term employee benefits
A liability is recognized for benefits accruing to employees in respect of wages and salaries (including performance related pay), annual leave, sick leave and social security contribution in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
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.
1.8.0 Taxation
Income tax expense represents the aggregate of current taxand deferred tax.
1.8.1 Current tax
Current tax is the amount of income tax payable based on taxable profit for the period. Taxable profit differs from ''profit before tax'' as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company''s current tax is calculated using tax rates and the tax laws that have been enacted or substantively enacted by the end of the reporting period.
After an appeal is decided by appellate authority, the corresponding appeal effect is given in the accounts only after receipt of appeal effect order from the Income TaxDepartment.
1.8.2 Deferred tax
(i) Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differencescan be utilized.
(ii) The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the benefits of all or part of the deferred tax asset to be utilized. Any such reduction shall be reversed to the extent when it becomes probable thatsufficienttaxable profitwill beavailable.
(iii) Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
(iv) Minimum Alternate Tax(''MAT'') under the provisions of the Income Tax Act, 1961 is recognized as current tax in the statement of profit and loss. The credit available under the Income Tax Act, 1961 in respect of MAT paid is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the period for which the MAT credit recognized as an asset is reviewed at each balance sheet date and written down to the extent the aforesaid convincing evidence no longer exists.
1.8.3 Current and deferred tax expenses for the year
Current and deferred tax are recognized in the statement of profit and loss, except when they relate to items that are recognized in other comprehensive income, in which case, the current and deferred tax are also recognized in other comprehensive income.
1.9.0 Oil and gas exploration, evaluation and development expenditure
The Company follows the Successful Efforts Method (SEM) of accounting in respect of its oil and gas exploration and production activities which is in accordance with Ind AS 106 and the "Guidance Note on Accounting for Oil & Gas Producing Activities (Ind AS)" issued by the Institute of Chartered Accountants of India.
1.9.1 Pre-Acquisition, Acquisition, Exploration & Evaluation Costs
(i) Pre-Acguisition costs: Pre-Acguisition costs of revenue nature incurred prior to obtaining the rights to explore, develop and produce Oil & Gas like data collection & analysis cost etc. are expensed to the Statement of Profit and Loss in the year of incidence.
(ii) Acquisition costs:
(a) Acguisition costs include cost of land acguired for drilling operations including cost of temporary occupation of the land, crop compensation paid to farmers, registration fee, legal cost, signature bonus, brokers'' fees, consideration for farm-in arrangements and other costs incurred in acguiring mineral rights.
(b) These costs are initially recorded under Exploration & Evaluation Assets (Intangible) except cost of land acguired for drilling operations which are shown as Acguisition cost-landundercapitalworkin progress.
(c) On determination of proved developed reserves, associated acguisition costs are transferred to Property, Plant & Eguipment as Oil & Gas assets.
(d) Acguisition cost relating to an exploratory well that is determined to have no proved reserves and its status is decided as dry or of no further use for exploration purpose, is charged as expenses. In such cases land value forming part of acguisition cost, a nominal amount of 100 per bigha is transferred to Freehold land under Property, Plant& Eguipment.
(e) Cost for retaining the mineral interest in properties like lease carrying cost, license fees & other cost are charged as expense when incurred.
(iii) Exploration & Evaluation Cost (E&E cost):
(a) Geological and geophysical costs, including seismic surveys for exploration purposes are expensed as incurred.
(b) Costs including allocated depreciation on support eguipment and facilities involved in drilling and eguipping exploratory and appraisal wells and cost of exploratory-type drilling stratigraphic test wells are initially shown as Exploration& Evaluation Assets (Intangible) till the time these are either transferred to Property, Plant & Eguipment as Oil & Gas assets on establishment of Proved Developed Reserves or charged as expense when determined to be dry or of nofurtheruse.
(c) E&E costs related to each exploratory well are not carried over unless it could be reasonably demonstrated that there are indications of sufficient guantity of reserves and activities are firmly planned in near future for further assessing the reserves and economic & operating viability of the project. Costs of written off exploratory wells are not reinstated in the books even if they start producing subseguently.
1.9.2 Development Cost
Costs that are attributable to development activities including production and processing plant & facilities, service wells including allocated depreciation on support eguipment and facilities are initially shown under Capital Work in Progress as Development Cost till such time they are capitalized as Oil & Gas Asset under Property, Plant &Eguipment on establishment of Proved Developed Reserves. Cost of dry development well, if any is also capitalized as Oil & Gas Asset under Property, Plant & Eguipment upon completion of the well.
1.9.3 Production Cost
Production Cost consists of direct and indirect costs incurred to operate and maintain wells and related eguipment and facilities, including depreciation and applicable operating cost of support eguipment and facilities.
1.9.4 Side-Tracking Expenditure
In case of exploratory wells, the cost of abandoned
portion of side tracked well is charged off to the Statement of Profit and Loss statement. In case of development wells, the entire cost of abandoned portion and side- tracking is capitalized. In case of existing producing wells, the cost of side-tracking is capitalized if it increases the proved developed reserves, otherwise is charged off to Statement of Profit and loss.
1.10.0 Research & Development Expenditure
All revenue expenditure incurred for Research & Development Projects/Schemes, net of grants-in-aid (other than those related to asset) if any, are charged to theStatement of Profitand Loss.
1.11.1 Property, plant and equipment (PPE)
(i) An item of property, plant and eguipment is recognized by the company as an asset if it is probable that future economic benefits associated with the items will how to the entity and the cost of the items can be measured reliably.
(ii) Property, plant and eguipment are stated at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of an asset comprises its purchase price including import duties and non-refundable purchase taxes or construction cost, any costs directly attributable to bringing the asset into the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of any decommissioning obligation wherever applicable and eligible borrowing costs. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acguire the asset. Assets in the course of construction are initially kept under assets under construction and capitalized when the assets are available for use in the manner as intended by the management.
(iii) Items such as spare parts, stand-by eguipment and servicing eguipment which meet the definition of Property, Plant and Eguipment are capitalised. Other spare parts are carried as inventory and recognized in the Statement of Profit and Loss on consumption. Cost of day-to-day servicing of property, plant and eguipment are recognized in the Statement of Profit and Loss as incurred. Major shut-down and overhaul expenditure is capitalized as the activities
|
Vehicles |
8 to 10 years |
|
Railwaysliding''s |
15years |
undertaken to improve the future economic benefits expected to arise from the asset. Where an asset or part of an asset that was separately depreciated is replaced and it is probable that future economic benefits associated with the item will how to the Company, the expenditure is capitalized and the carrying amount of the replaced asset is derecognized. Inspection costs associated with major maintenance programs from which future economic benefits are expected to how, are capitalized and amortized over the period to the next inspection.
(iv) Oil and gas assets which comprise of producing wells, related acguisition cost and production facilities are depleted using a unit-of-production method. The cost of producing wells and production facilities are depleted over proved developed reserves. Acguisition cost is depleted over proved reserves. Rate of depletion is determined based on production from the Oil/Gas held ora group of Oil/Gas fields identified to the related reserves having homogeneous geological feature. Estimation of oil and natural gas reserves are done annually at the yearend and the impact of changes in the estimated proved reserves are dealt with prospectively by depleting the remaining carrying value of the asset.
(v) Other property, plant and eguipment are depreciated based on useful life of the asset under "Written down value method" as specified in Schedule II to the Companies Act., 2013. When any part of an item of property, plant and eguipment, has different useful life and cost is significant in relation to the total cost of the asset, they are accounted for and depreciated separately. Depreciation on additions / deletions during the year is provided on pro rata basis with reference to the date of additions / deletions except low value items not exceeding ? 5,000 which are fully depreciated at the time of addition. The typical useful life of other major property, plant and eguipment are as follows:
|
Buildings |
30 to 60 years |
|
Plant& Machinery |
10 to AOyears |
|
Furniture and fixtures |
8to10years |
|
Office eguipments |
3to10years |
(vi) The expected useful life of property, plant and eguipment other than Oil and gas assets are reviewed on an annual basis and, if necessary, impact arising out the changes in useful life are accounted for prospectively.
(vii) An item of property, plant and eguipment 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 de- recognition of the asset is included in the income statement in the period in which the item is derecognized. Any Tangible asset, when determined of no further use, is deleted from the Gross Block of assets. The deleted assets are carried as Assets awaiting disposal''under Inventories at lower of ?1000 or 5% of the original cost and the balance written down value, ischarged off.
(viii) Assets provided to employees as per the Company''s internal schemearealso classified as Property, plant and eguipment (PPE) and recognised as an assets. Such assets are depreciated based on the useful life as defined in the internal scheme of the Company under written down value method. The useful life of such assets are different than as specified in Schedule II of the Company''s Act. The assets provided to the employees and its useful life are as follows:
Mobile Phone-3 years
Furniture and household goods-6 years
Soft Furniture - Fully in the year of purchase
(ix) Physical verification of the property, plant and eguipment is carried out by the Company in a phased manner to cover all the items over a period of three years. The discrepancies noticed, if any, are accounted for in the year in which such differences arefound.
1.11.2 Intangible assets
Cost of intangible assets are capitalised when it is probable that the expected future economic benefits that are attributable to the asset will how to the entity,
the cost of the asset can be measured reliably and the asset is ready for its intended use.
Intangible assets include expenditure on computer software, and right to way/right of use of land and are stated at the amount initially recognized less accumulated amortization and accumulated impairmentlosses.
The Company follows cost model for recognition and measurement of intangible assets. Cost of right of use / right of way of land is amortized on a straight line basis over the lower of period of such rights or useful life of the related asset for which right of use / right of way is taken. Cost of computer software is amortized over the useful life not exceeding five years from the date of capitalization.
Any intangible asset, when determined of no further use, iswritten off.
1.11.3 Impairment of property, plant & equipment (PPE), E&E assets, Intangible assets other than goodwill.
At the end of each reporting period, the Company reviews the carrying amounts of its property, plant & eguipment (including capital work in progress) to determine whether there is any indication that those assets have suffered an impairment loss. For this purpose Producing fields, LPG plant, Transportation Pipeline and Renewable Energy Units (other than captive power plants) are considered as Cash Generating Units (CGU). If any such indication exists, the recoverable amount of the CGU is estimated in order to determine the extent of the impairment loss (if any). Corporate assets and common service assets are also allocated to individual cash- generating units on a reasonable and consistent basis.
Intangible assets are tested for impairment annually. Whenever there is an indication that the asset may be impaired, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash hows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset for which the estimates of future cash hows have not been adjusted. If the recoverable amount of a CGU is estimated to be less than its carrying amount, the carrying amount of the asset or group of assets covered under the CGU is reduced to its recoverable amount. An impairment loss is recognized in the statement of profit and loss.
E&E Assets are reviewed for indicators of impairment as per Ind AS 106 and if events and circumstances suggest, impairment loss is provided for and carrying amount is reduced accordingly.
When an impairment loss is subseguently reversed, the carrying amount of the asset or group of assets covered undertheCGU is increased to the revised estimate of its recoverable amount, upto the carrying amount that would have been determined had no impairment loss been recognized for the asset or group of assets covered under the CGU in prior years. A reversal of an impairment loss is recognized in the Statement of Profit and Loss.
1.12.0 Inventories
Inventory of Finished goods of Crude Oil, Liguehed Petroleum Gas (LPG) and LPG condensate are valued at cost or net realizable value, whichever is lower, as per Ind AS 2. Cost of finished goods is determined based on direct cost and directly attributable services cost including depreciation & depletion. The value of such inventories includes excise duty and royalty (wherever applicable). Net realizable value represents the estimated selling price for inventories less all costs necessary to effect the sale.
Crude oil in unfinished condition in the how line up to Group Gathering Station and Natural Gas in Pipeline are not valued, as these pipeline fills are necessary for the operation of the facility. Crude oil in semi-finished condition in group gathering station are not valued as the same is not measurable.
Inventory of stores and spares are valued at weighted average cost or net realizable value whichever is lower, as per Ind AS 2. Obsolete / unserviceable items, as and when identified, are written off. Any item of stores and spares including those in Storage Locations which have not moved for last fouryearsas on date of Balance Sheet are identified as slow-moving items for which a provision of 95% of the value is made in the accounts.
Renewable Energy Certificates (REC) received based on generation of renewable energy certified by the competent authority, held for trading are not valued.
1.13.1 Provisions
Provisions are recognized when the Company has a present obligation as a result of a past event and it is probable that the Company will be reguired 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 reguired to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash hows estimated to settle the present obligation, its carrying amount is the present value of those cash hows (when the effect of the time value of money is material).
1.13.2 Decommissioning and restoration obligations
Full eventual liabilities towards costs relating to assets retirement obligations are recognized when the Company has an obligation to plug and abandon a well, dismantle and remove a facility or an item of plant and to restore the site on which it is located, and when a reliable estimate of that liability can be made. Liabilities towards costs relating to dismantling, abandoning and restoring well sites and associated Production Facilities are recognized at the commencement of drilling a well or when facilities are installed, as the case may be. The amount recognized is the present value of the estimated future expenditure determined in accordance with local conditions and reguirements at current prices and escalated using appropriate inflation rate till the expected date of decommissioning and discounted using appropriate riskfree discount rate.
An amount eguivalent to the decommissioning liability provision is recognized as part of the corresponding PPE, CWIP or Exploration & Evaluation Asset (E&E) as thecase maybe.
Liability for decommissioning cost is updated annually based on the technical assessment available at current costs. The unwinding of the discount is included as a finance cost. Any change in the present value of the estimated decommissioning provision other than
unwinding of discount is adjusted to decommissioning provision and added to or deducted from the cost of the asset in the current period and is considered for depreciation (depletion) prospectively. In case, reversal of decommissioning provision exceeds the corresponding carrying value of the related assets, the excess amount is recognized in the Statement of Profit & Loss.
The actual cost incurred on settlement of the obligation is adjusted against the liability and the ultimate gain or loss is recognized in the Statement of Profit and Loss, when the designated oil/gas field or a group of oil/gas fieldsceasesto produce.
1.14.0 Investments in subsidiaries, associates andjoint ventures
The Company measures its investments in subsidiaries, associates and joint ventures at cost less impairment.
1.15.0 Financial instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acguisition 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 of the financial assets or financial liabilities, as isappropriate, on initial recognition.
1.15.1 Financial assets
1.15.1.1 Investment in Securities
All regular purchases or sales of financial assets are recognized and de-recognized on a trade date basis.
All recognized financial assets are subseguently measured in their entirety either at amortized cost or fair value, depending on the classification of the financial assets
1.15.1.1.1 Classification of financial assets
(i) Debt instruments that meet the following conditions are subseguently measured at amortized cost less
impairment loss (except for debt investments that are designated as at Fair Value Through Profit or Loss (FVTPL)on initial recognition):
a) the asset is held within a business model whose objective is to hold assets till maturity in order to collect contractual cash flows; and
b) The contractual terms of the instrument give rise on specified dates to cash hows that are solely payments of principal and interest on the principal amount outstanding.
(ii) Debt instruments that meet the following conditions are subseguently measured at Fair Value Through Other Comprehensive Income (except for debt investments that are designated as at FVTPL on initial recognition):
a) The asset is held within a business model whose objective is achieved both by collecting contractual cash hows and selling financial assets; and
b) The contractual terms of the instrument give rise on specified dates to cash hows that are solely payments of principal and interest on the principal amount outstanding.
(iii) Debt instruments that do not meet the criteria of amortized cost or Fair Value through Other Comprehensive Income (FVTOCI) are measured at FVTPL.
(iv) AII other financial assets are subseguently measured at fair value through Profit or Loss.
1.15.1.1.2 Amortized cost and Effective interest method
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash hows (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognized in the statement of profit & loss
under investment income on an effective interest basis for debt instruments other than those financial assets classified as FVTPL.
1.15.1.1.3 Investments in equity instruments at Fair ValueThroughotherComprehensivelncome(FVTOCI)
On initial recognition, the Company can make an irrevocable election (on an instrument-by-instrument basis) to present the subseguent changes in fair value in other comprehensive income for eguity instruments that are not held for trading. These elected investments are initially measured at fair value plus transaction costs. Subseguently, they are measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other eguity under subhead Eguity instruments through other comprehensive income. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
Dividends on these investments in eguity instruments are recognized in the Statement of Profit and Loss when the Company''s right to receive the dividends is established and it does not represent a recovery of part of cost of the investment.
1.15.1.2 Cash and cash equivalents
Cash and cash eguivalents comprise cash at bankand in hand, including offsetting bank overdrafts, and shortterm highly liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in fair value and have a maturity of three months or less from the acguisition date.
1.15.1.3 Trade receivables
Trade receivables are recognized initially at fair value based on amounts exchanged and subseguently at the amortized costlessanyimpairment.
1.15.1.4 Impairment of financial assets
The Company measures the loss allowance for a financial instrument at an amount egual to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since its initial recognition. If the credit risk on a financial instrument has not increased significantly since its initial recognition, the Company measures the loss allowance
for that financial instrument at an amount equal to 12-month expected credit losses.
However, for trade receivables or contract assets that result in relation to revenue from contracts with customers, the Company measures the loss allowance at an amount equal to lifetime expected credit losses.
1.15.1.5 De-recognition of financial assets
The Company de-recognizes a financial asset when the contractual rights to the cash hows 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 party.
On de-recognition of a financial asset in its entirety, the difference between the asset''s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of that financial asset.
1.15.2 Financial liabilitiesand equity instruments
1.15.2.1 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issuecosts.
1.15.2.2 Financial liabilities
All financial liabilities are subsequently measured at amortized cost using the effective interest method or at FVTPL. However, financial guarantee contracts issued by the Company, and commitments issued by the Company to provide a loan at below-market interest rate are measured in accordance with the specific accounting policies set out below.
1.15.2.2.1 Financial liabilitiesat FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated asat FVTPL.
1.15.2.2.2 Financial liabilities subsequently measured at amortized cost
Financial liabilities that are not held-for-trading and not designated as at FVTPL are measured at amortized cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortized cost are determined based on the effective interest method. Interest expense that is not capitalized as part of costs of an asset is included in the ''finance costs'' line item.
The effective interest method is a method of calculating theamortized cost of afinancial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments(including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
1.15.2.2.3 Financial guarantee contracts
Afinancial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by the Company are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at thehigherof:
a) the amount of loss allowance determined in accordance with impairment requirements of Ind AS109;and
b) the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of Ind AS 115 or the amount initially recognised less, when
appropriate, the cumulative amount of finance income recognized which measured by amortizing the initial fair value of guarantee on a straight line basis over the guarantee period.
1.15.2.2.4 De-recognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognisedin profitorloss.
1.16.0 Interest in joint operations
The Company has joint operations in the nature of Production Sharing Contracts (PSCs) and Revenue Sharing Contracts(RSCs)executed with the Government of India / Government of Foreign Countries by the Company along with other entities to undertake exploration, development and production of Oil and/or Gas activities in various concessions/block/area are accounted asunder:
a) The financial statements reflect the share of the Company''s assets, liabilities and also the income and expenditure of the Joint Venture in proportion to the participating interest of the Company as per the terms of the PSCs and RSCs, on aline byline basis.
b) The revenue on account of petroleum produced and sol
Mar 31, 2019
NOTES TO THE SEPARATE STANDALONE FINANCIAL STATEMETS
1. Significant accounting policies 1.1.1 Statement of compliance
The financial statements have been prepared in accordance with the Companies Act, 2013 and in compliance with the Indian Accounting Standards (Ind AS) issued by the Ministry of Corporate Affairs under the Companies (Indian Accounting Standards) Rules,2015 as amended.
1.1.2 Basis of preparation
These financial statements are prepared in accordance with Indian Accounting standards (Ind AS) and under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act, 2013 (''the Act'') (to the extent notified). The Ind ASs are prescribed under section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting standards) Amendment Rules, 2016.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date on such basis as provided under Ind AS 113.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
As the operating cycle cannot be identified in normal course due to the special nature of industry, the same has been assumed to have duration of 12 months. Accordingly, all assets and liabilities have been classified as current or non-current as per the Company''s operating cycle and other criteria set out in Ind AS-1 "Presentation of Financial Statements" and Schedule III to the Companies Act, 2013.
1.1.3 Use of estimates
The preparation of the financial statements in conformity with Ind AS requires the Management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. The application of accounting policies that requires critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements have been disclosed in Note 1.1.4. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as the management becomes aware of the changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.
1.1.4 Major judgments, assumptions and accounting estimates
a. Estimation of oil and gas reserves
The estimation of oil and gas reserves is key factor in the accounting for oil and gas producing activities. Oil and gas reserves are estimated by analysis of geosciences and engineering data using Deterministic Method. Production pattern analysis, number of additional wells to be completed, application of recovery techniques, validity of mining lease agreements, agreements/MOU for sales etc. influence the estimation of reserves. Unit-of-production depreciation, depletion and amortization charges are principally measured based on management''s estimates of proved developed oil and gas reserves. Also, exploration drilling costs are capitalized pending the results of further exploration or appraisal activity, which may take several years to complete and before any related proved reserves can be booked.
b. Impairment of assets
As part of the determination of the recoverable value of assets of cash generating units for impairment, the estimates, assumptions and judgments mainly concern oil and gas prices scenarios, operating costs, production volumes and oil and gas proved reserves. The discount rate used for estimating the value in use is reviewed annually. Changes in assumptions could affect the carrying amounts of assets, and any impairment losses and reversals will affect the revenues.
c. Employee benefits
The benefit obligations and plan assets can be subject to significant volatility due to changes in market values and actuarial assumptions. These assumptions vary between different pension plans and thus take into account market conditions. They are determined following actuarial valuation method certified by external independent actuarial valuer. The assumptions for each plan are reviewed annually and adjusted if necessary to reflect changes from the experience and actuarial advices.
d. Asset retirement obligations
Asset retirement obligations, which result from a legal or constructive obligation, are recognized based on a reasonable estimated in the period in which the obligation arises. This estimate is based on information available in terms of costs and work program. It is regularly reviewed to take into account the changes in laws and regulations, the estimates useful life of fields based on proved and probable oil and gas reserves and current production off-take, the analysis of site conditions and technologies, risk adjusted discount rate. Such estimates can differ from estimates due to changes in the aforesaid factors. The risk adjusted discount rate used for estimating the present value of obligation is reviewed annually.
e. Taxation
Tax liabilities are recognized when it is considered probable that there will be a future outflow of funds to a taxing authority. In such cases, provision is made for the amount that is expected to be settled, where this can be reasonably estimated. This requires the application of judgment as to the ultimate outcome, which can change over time depending on facts and circumstances. A change in estimate of the likelihood of a future outflow and/or in the expected amount to be settled would be recognized in income in the period in which the change occurs.
Deferred tax assets are recognized only to the extent it is considered probable that those assets will be recoverable. This involves an assessment of when those assets are likely to reverse, and a judgment as to whether or not there will be sufficient taxable profits available to offset the assets when they do reverse. This requires assumptions regarding future profitability and is therefore inherently uncertain. To the extent assumptions regarding future profitability change, there can be an increase or decrease in the amounts recognized in respect of deferred tax assets as well as in the amounts recognized in income in the period in which the change occurs.
1.2 Revenue recognition
1.2.1 Revenue from contracts with customers
The Company derives revenues primarily from sale of products such as Crude Oil, Natural Gas, Liquefied Petroleum Gas (LPG), Condensate, Renewable Energy, sale of services such as Pipeline Transportation Services and Optical Fiber Cable (OFC) leasing and other income from Business Development services and Renewable Energy.
Effective from 1st April, 2018, the Company adopted Ind AS 115 "Revenue from Contracts with Customers" using the cumulative catch-up transition method, applied to contracts that were not completed as on 1st April, 2018. In accordance with the cumulative catch-up transition method, the comparatives have not been retrospectively adjusted. The effect on adoption of Ind AS 115 does not have any significant impact on the retained earnings as at 1 stApril, 2018.
Revenue from contracts with customers is recognized at the point in time the Company satisfies a performance obligation by transferring control of a promised product or service to a customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for the sale of products and service, net of discount, taxes or duties collected on behalf of government and Company''s share of profit petroleum paid to Government of India (GOI).
The transfer of control on sale of Crude Oil, Natural Gas and Liquefied Petroleum Gas (LPG) and Condensate occurs either at the point of delivery or the point of receipt, where usually the title is passed and the customer takes physical possession, depending upon the contractual conditions. Any retrospective revision in prices is accounted for in the year of such revision.
Revenue in respect of contractual short lifted quantity of gas is recognized when there is reasonable certainty regarding its ultimate collection i.e. when the customer''s right to volumes is expired.
As per the Production Sharing Contracts for extracting the Oil and Gas Reserves with Government of India, out of the earnings from the exploitation of reserves after recovery of cost, a part of the revenue is paid to Government of India which is called Profit Petroleum. It is reduced from the revenue from Sale of Products as Government of India''s Share in Profit Petroleum.
1.2.2 Contract balances Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer or in case of dispute, penalties have been raised on the entity by the contracting party. If a customer pays consideration before the Company transfers promised goods or services to the customer, a contract liability is recognized when the payment is made or the payment is due (whichever is earlier).
The company recognizes contract liability for consideration received for short lifted quantity of gas under take or pay arrangements for which the customer has right to take related volume in future (i.e. unsatisfied performance obligations) and for the penalties that maybe raised by the contracting party in case of a dispute and reports these amounts as advances from customers or penalties that maybe payable in future in the balance sheet. The un-accrued amounts are not recognized as revenue till all related performance obligations are fulfilled or the customer''s right to the volumes is expired.
1.2.3 Other operating revenue
(i) Claims on Central Government / Petroleum Planning
& Analysis Cell (PPAC) towards gas pool revenue are accrued based on quantity delivered to the customers at discounted price, in respect of which revenue is recognized when collectability of the receivable is reasonably certain
(ii) Revenue from sale of Renewable Energy Certificates (REC) is recognized on sale of the certificates through the Exchange i.e. when the receivable is reasonably certain.
(iii) Revenue on account of reimbursable subsidies/ grants and interest on delayed realization from customers are recognized when there is reasonable certainty of ultimate realization.
(iv) Recovery of liquidated damages is recognized in the Statement of Profit & Loss as income at the time of occurrence except in case of Joint Venture Contracts (JVC) which are governed by the respective Production Sharing Contracts. In case of return/refund of the liquidated damages, the same is accounted for as other expenses. In case of any dispute over the liquidated damages, provision is created in the accounts.
1.2.4 Other income
Dividend income from investments is recognized when the shareholder''s right to receive payment is established.
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the company and can be measured reliably. Interest income is recognized on a time proportion basis taking into account the amount outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through expected life of the financial asset to that asset''s net carrying amount on initial recognition.
Insurance claim other than that for transit loss of stores items are accounted for on final acceptance by the Insurance Company.
1.2.5 Critical accounting judgments, assumptions and key sources of estimation uncertainty
Retrospective revision in price for transportation service of crude oil
Sale and transportation of crude oil in some cases is made on provisional pricing basis where the pricing may be finalised subsequently with retrospective effect. The retrospective revision in pricing gives rise to variable consideration. The management determined that the expected amount of price revision at the time of sales is not determinable since the revised pricing of the product is based on the negotiation between the parties at the time of entering into revised contract which cannot be perceived in advance.
1.3. Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
1.3.1 The Company as lessor
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term.
1.3.2 The Company as lessee
Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
1.4 Foreign currency transactions and translations
The functional currency of the Company is the Indian Rupee. The financial statements are presented in Indian Rupees.
(i) In preparing the financial statements of the Company, transactions in currencies other than the entity''s functional currency (foreign currencies) 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 retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rate prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
(ii) Transaction gains and losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled. Revenue, expense and cash-flow items denominated in foreign currencies are translated into the relevant functional currencies using the exchange rate in effect on the date of the transaction.
(iii) Exchange differences on monetary items are recognized in the statement of profit and loss in the period in which they arise except for:
(a) Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;
(b) In accordance with para D13AA of Ind AS 101, First time Adoption of Indian Accounting Standards the Company continues to exercise policy adopted under previous IGAAP and accordingly exchange differences on long-term foreign currency monetary items relating to acquisition of depreciable and other assets were adjusted to the carrying cost of the assets and depreciated over the balance life of the assets and in other cases, exchange differences were accumulated in a "Foreign Currency Monetary Item Translation Difference Account" and amortized over the balance period of such long term foreign currency monetary item by recognition as income or expense in each of such periods in respect of items recognized in the financial statement for the period ending immediately before the beginning of the first Ind AS financial reporting period as per previous GAAP i,e; 31 March 2016 as reported date.
1.5.0 Borrowing costs
(i) Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale and also includes exchange difference arising from Foreign Currency borrowings to the extent that they are regarded as an adjustment to interest cost.
(ii) All other borrowing costs are recognized in the statement of profit and loss in the period in which they are incurred.
1.6.0 Government grants
(i) 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.
(ii) Government grants are recognized in profit or 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 with the primary condition that the Company should purchase construct or otherwise acquire non-current assets are recognized as deferred revenue in the balance sheet and transferred to the statement of profit and loss on a systematic and rational basis over the useful lives of the related assets.
1.7.0 Employee benefits
1.7.1 Retirement benefit costs and termination benefits:
Payments to defined contribution retirement benefit plans are recognized as expenses when employees have rendered service entitling them to the contributions.
The cost of providing benefits under defined benefit plans (such as gratuity, leave encashment, postretirement medical benefits, defined benefit pension schemes) is determined separately for each plan using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. This attributes the increase in present value of the defined benefit obligation resulting from employee service in the current period to determine current service cost. The current service cost as stated above and past service costs, resulting from either a plan amendment (a reduction in future obligations as a result of a material reduction in the number of employees covered by the plan), are recognized in the statement of profit and loss under ''employee benefits expense''.
Net interest which is recognized in the statement of profit and loss under ''employee benefits expense'' represents the net change in present value of plan obligations and the value of plan assets resulting from the passage of time, and is determined by applying the discount rate to the present value of the benefit obligation at the start of the year, and to the fair value of plan assets at the beginning of the year, taking into account expected changes in the obligation or plan assets during the year.
Re-measurement of the defined benefit liability and asset, comprising actuarial gains and losses, and the return on plan assets (excluding amounts included in net interest described above) are recognized in other comprehensive income in the period in which they occur and are not subsequently reclassified to the statement of profit and loss.
The defined benefit pension plan surplus or deficit recognized in the balance sheet for each plan comprises the difference between the present value of the defined benefit obligation and the fair value of plan assets out of which the obligations are to be settled directly. Defined benefit pension plan surpluses are only recognized to the extent they are recoverable, naturally by way of refund or reductions in future contributions to the plans.
1.7.2 Short-term and other long-term employee benefits
A liability is recognized for benefits accruing to employees in respect of wages and salaries (including performance related pay), annual leave, sick leave and social security contribution in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
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.
1.8.0 Taxation
Income tax expense represents the aggregate of current tax and deferred tax.
1.8.1 Current tax
Current tax is the amount of income tax payable based on taxable profit for the period. Taxable profit differs from ''profit before tax'' as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company''s current tax is calculated using tax rates and the tax laws that have been enacted or substantively enacted by the end of the reporting period.
1.8.2 Deferred tax
(i) Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.
(ii) The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the benefits of all or part of the deferred tax asset to be utilized. Any such reduction shall be reversed to the extent that it becomes probable that sufficient taxable profit will be available.
(iii) Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
(iv) Minimum Alternate Tax (''MAT'') under the provisions of the Income Tax Act, 1961 is recognized as current tax in the statement of profit and loss. The credit available under the Income Tax Act, 1961 in respect of MAT paid is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the period for which the MAT credit recognized as an asset is reviewed at each balance sheet date and written down to the extent the aforesaid convincing evidence no longer exists.
1.8.3 Current and deferred tax for the year
Current and deferred tax are recognized in the statement of profit and loss, except when they relate to items that are recognized in other comprehensive income, in which case, the current and deferred tax are also recognized in other comprehensive income.
1.9.0 Oil and gas exploration, evaluation and development expenditure
The Company follows the Successful Efforts Method (SEM) of accounting in respect of its oil and gas exploration and production activities in accordance with Ind AS 106 and the "Guidance Note on Accounting for Oil & Gas Producing Activities (Ind AS)" issued by the Institute of Chartered Accountants of India.
1.9.1 Pre-Acquisition, Acquisition, Exploration & Evaluation Costs
(i) Pre-Acquisition costs: Pre-Acquisition costs of revenue nature incurred prior to obtaining the rights to explore, develop and produce Oil & Gas like data collection & analysis cost etc. are expensed to the Statement of Profit and Loss in the year of incidence.
(ii) Acquisition costs:
(a) Acquisition costs include land acquired for drilling operations including cost of temporary occupation of the land, crop compensation paid to farmers, registration fee, legal cost, signature bonus, brokers'' fees, consideration for farm-in arrangements and other costs incurred in acquiring mineral rights.
(b) These costs are initially recorded under Exploration & Evaluation Assets (Intangible) except cost of land acquired for drilling operations which are shown as Acquisition cost-land under capital work in progress.
(c) On determination of proved developed reserves, associated acquisition costs are transferred to Property, Plant & Equipment as Oil & Gas assets.
(d) Acquisition cost relating to an exploratory well that is determined to have no proved reserves and its status is decided as dry or of no further use for exploration purpose, is charged as expenses. In such cases, for land value forming part of acquisition cost, a nominal amount of Rs,100 per bigha is transferred to Freehold land under Property, Plant & Equipment.
(e) Cost for retaining the mineral interest in properties like lease carrying cost, license fees & other cost are charged as expense when incurred.
(iii) Exploration & Evaluation Cost (E&E cost):
(a) Geological and geophysical costs, including seismic surveys for exploration purposes are expensed as incurred.
(b) Costs including allocated depreciation on support equipment and facilities involved in drilling and equipping exploratory and appraisal wells and cost of exploratory-type drilling stratigraphic test wells are initially shown as Exploration& Evaluation Assets (Intangible) till the time these are either transferred to Property, Plant & Equipment as Oil & Gas assets on establishment of Proved Developed Reserves or charged as expense when determined to be dry or of no further use.
(c) E&E costs related to each exploratory well are not carried over unless it could be reasonably demonstrated that there are indications of sufficient quantity of reserves and activities are firmly planned in near future for further assessing the reserves and economic & operating viability of the project. Costs of written off exploratory wells are not reinstated in the books even if they start producing subsequently.
1.9.2 Development Cost
Costs that are attributable to development activities including production and processing plant & facilities, service wells including allocated depreciation on support equipment and facilities are initially shown under Capital Work in Progress as Development Cost till such time they are capitalized as Oil & Gas Asset under Property, Plant &Equipment on establishment of Proved Developed Reserves. Cost of dry development well, if any is capitalized as Oil & Gas Asset under Property, Plant & Equipment upon completion of the well.
1.9.3 Production Cost
Production Cost consists of direct and indirect costs incurred to operate and maintain wells and related equipment and facilities, including depreciation and applicable operating cost of support equipment and facilities.
1.9.4 Side-Tracking Expenditure
In case of exploratory wells, the cost of abandoned portion of side tracked well is charged off to the Statement of Profit and Loss statement. In case of development wells, the entire cost of abandoned portion and side- tracking is capitalized. In case of existing producing wells, the cost of side - tracking is capitalized if it increases the proved developed reserves, otherwise is charged off to Statement of Profit and loss.
1.10.0 Research & Development Expenditure
All revenue expenditure incurred for Research & Development Projects/Schemes, net of grants-in-aid (other than those related to asset) if any, are charged to the Statement of Profit and Loss.
1.11.1 Property, plant and equipment (PPE)
(i) Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of an asset comprises its purchase price including import duties and non-refundable purchase taxes or construction cost, any costs directly attributable to bringing the asset into the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of any decommissioning obligation wherever applicable and eligible borrowing costs. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset. Assets in the course of construction are initially kept under assets under construction and capitalized when the assets are available for use in the manner as intended by the management.
(ii) Cost of day-to-day servicing of property, plant and equipment are recognized in the Statement of Profit and Loss as incurred. Major shut-down and overhaul expenditure is capitalized as the activities undertaken to improve the economic benefits expected to arise from the asset. Where an asset or part of an asset that was separately depreciated is replaced and it is probable that future economic benefits associated with the item will flow to the Company, the expenditure is capitalized and the carrying amount of the replaced asset is derecognized. Inspection costs associated with major maintenance programs from which future economic benefits are expected to flow, are capitalized and amortized over the period to the next inspection.
(iii) Oil and gas assets which comprise of producing wells, related acquisition cost and production facilities are depleted using a unit-of-production method except in cases where life of assets is lower than life of the field. The cost of producing wells and production facilities are depleted over proved developed reserves. Acquisition cost is depleted over total proved reserves. Rate of depletion is determined based on production from the Oil/Gas field or a group of Oil/Gas fields identified to the related reserves having homogeneous geological feature. Estimation of oil and natural gas reserves are done annually at the yearend and the impact of changes in the estimated proved reserves are dealt with prospectively by depleting the remaining carrying value of the asset.
(iv) Other property, plant and equipment are depreciated based on useful life of the asset under "Written down value method" as specified in Schedule II to the Companies. When any part of an item of property, plant and equipment, has different useful life and cost is significant in relation to the total cost of the asset, they are accounted for and depreciated separately. Depreciation on additions / deletions during the year is provided on pro rata basis with reference to the date of additions / deletions except low value items not exceeding Rs,,000 which are fully depreciated at the time of addition. The typical useful lives of other major property, plant and equipment are as follows:
Buildings 30 to 60 years
Plant & Machinery 10 to 40 years
Furniture and fixtures 8 to 10 years
Office equipments 3 to 10 years
Vehicles 8 to 10 years
Railway sliding''s 15 years
(v) The expected useful lives of property, plant and equipment other than Oil and gas assets are reviewed on an annual basis and, if necessary, impact arising out of the changes in useful lives are accounted for prospectively.
(vi) 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 de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the period in which the item is derecognized. Any Tangible asset, when determined of no further use, is deleted from the Gross Block of assets. The deleted assets are carried as ''Assets awaiting disposal'' under Inventories at lower of Rs,1000 or 5% of the original cost and the balance written down value, is charged off.
(vii) Physical verification of the property, plant and equipment is carried out by the Company in a phased manner to cover all the items over a period of three years. The discrepancies noticed, if any, are accounted for in the year in which such differences are found.
1.11.2 Intangible assets
Costs of intangible assets are capitalized when the asset is ready for its intended use.
Intangible assets include expenditure on computer software, and right to way/right of use of land and are stated at the amount initially recognized less accumulated amortization and accumulated impairment losses.
Cost of right of use / right of way of land is amortized on a straight line basis over the lower of period of such rights or useful life of the related asset for which right of use / right of way is taken. Cost of computer software is amortized over the useful life not exceeding five years from the date of capitalization.
Any intangible asset, when determined of no further use, is written off.
1.11.3 Impairment of property, plant & equipment (PPE), E&E assets, Intangible assets other than goodwill.
At the end of each reporting period, the Company reviews the carrying amounts of its property, plant & equipment (including capital work in progress) to determine whether there is any indication that those assets have suffered an impairment loss. For this purpose Producing fields, LPG plant, Transportation Pipeline and Power Generating Units (other than captive power plants) are considered as Cash Generating Units (CGU). If any such indication exists, the recoverable amount of the CGU is estimated in order to determine the extent of the impairment loss (if any). Corporate assets and common service assets are also allocated to individual cash-generating units on a reasonable and consistent basis.
Intangible assets are tested for impairment annually. Whenever there is an indication that the asset may be impaired, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of a CGU is estimated to be less than its carrying amount, the carrying amount of the asset or group of assets covered under the CGU is reduced to its recoverable amount. An impairment loss is recognized immediately in the statement of profit and loss.
E&E Assets are reviewed for indicators of impairment as per Ind AS 106 and if events and circumstances suggest, impairment loss is provided for and carrying amount is reduced accordingly.
When an impairment loss is subsequently reversed, the carrying amount of the asset or group of assets covered under the CGU is increased to the revised estimate of its recoverable amount, so however that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or group of assets covered under the CGU in prior years. A reversal of an impairment loss is recognized immediately in the Statement of Profit and Loss.
1.12.0 Inventories
Finished goods of Crude Oil, Liquefied Petroleum Gas (LPG) and LPG condensate are valued at cost or net realizable value, whichever is lower. Cost of finished goods is determined based on direct cost and directly attributable services cost including depreciation & depletion. The value of such inventories includes excise duty and royalty (wherever applicable). Net realizable value represents the estimated selling price for inventories less all costs necessary to effect the sale.
Crude oil in unfinished condition in the flow line up to Group Gathering Station and Natural Gas in Pipeline are not valued, as these pipeline fills are necessary for the operation of the facility.
Stores and spares are valued at weighted average cost or net realizable value whichever is lower. Obsolete / unserviceable items, as and when identified, are written off. Any item of stores and spares including those in Storage Locations which have not moved for last four years as on date of Balance Sheet are identified as slow moving items for which a provision of 95% of the value is made in the accounts.
Renewable Energy Certificates (REC) received based on generation of renewable energy certified by the competent authority, held for trading are not valued.
1.13.1 Provisions
Provisions are recognized when the Company has a present obligation as a result of a past event and it is probable that the Company will be 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 end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
1.13.2 Decommissioning and restoration obligations
Full eventual liabilities towards costs relating to assets retirement obligations are recognized when the Company has an obligation to plug and abandon a well, dismantle and remove a facility or an item of plant and to restore the site on which it is located, and when a reliable estimate of that liability can be made. Liabilities towards costs relating to dismantling, abandoning and restoring well sites and associated Production Facilities are recognized at the commencement of drilling a well or when facilities are installed, as the case may be. The amount recognized is the present value of the estimated future expenditure determined in accordance with local conditions and requirements. The provision for the costs of decommissioning wells, production facilities including fields'' pipelines at the end of their economic lives is estimated using existing technology, at current prices or future assumptions, depending on the expected timing of the activity, and discounted using government bonds rate.
An amount equivalent to the decommissioning liability provision is recognized as part of the corresponding PPE or Exploration & Evaluation Asset (E&E) as the case may be.
Liability for decommissioning cost is updated annually based on the technical assessment available at current costs. The unwinding of the discount is included as a finance cost. Any change in the present value of the estimated future cash flow to settle the obligation due to change in measurement or discount rate shall be added to or deducted from the cost of the asset in the current period and would be considered for depreciation (depletion) prospectively.
Except in the case of E&E assets, the actual cost incurred on settlement of the obligation is adjusted against the liability and the ultimate gain or loss is recognized in the Statement of Profit and Loss, when the designated oil/gas field or a group of oil/gas fields ceases to produce.
1.14.0 Investments in subsidiaries, associates and joint ventures
The Company measures its investments in subsidiaries, associates and joint ventures at cost less impairment. The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. If any such indication of impairment exists, the Company makes an estimate of its recoverable amount. Where the carrying amount of an investment exceeds its recoverable amount, the investment is considered impaired and is written down to its recoverable amount.
1.15.0 Financial instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs 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 of the financial assets or financial liabilities, as is appropriate, on initial recognition.
1.15.1 Financial assets
1.15.1.1 Investment in Securities
All regular purchases or sales of financial assets are recognized and de-recognized on a trade date basis.
All recognized financial assets are subsequently measured in their entirety either at amortized cost or fair value, depending on the classification of the financial assets.
1.15.1.1.1 Classification of financial assets
(i) Debt instruments that meet the following conditions
are subsequently measured at amortized cost less impairment loss (except for debt investments that are designated as at Fair Value Through Profit or Loss (FVTPL) on initial recognition):
a) the asset is held within a business model whose objective is to hold assets till maturity in order to collect contractual cash flows; and
b) The contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(ii) Debt instruments that meet the following conditions are subsequently measured at Fair Value Through Other Comprehensive Income (except for debt investments that are designated as at FVTPL on initial recognition):
a) the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and
b) The contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(iii) Debt instruments that do nutmeat the criteria of amortized cost or Fair Value through Other Comprehensive Income (FVTOCI) are measured at FVTPL.
(iv) All other financial assets are subsequently measured at fair value through Profit or Loss.
1.15.1.1.2 Amortized cost and Effective interest method
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash flows (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognized in the statement of profit & loss under investment income on an effective interest basis for debt instruments other than those financial assets classified as FVTPL.
1.15.1.1.3 Investments in equity instruments at Fair Value Through other Comprehensive Income (FVTOCI)
On initial recognition, the Company can make an irrevocable election (on an instrument-by-instrument basis) to present the subsequent changes in fair value in other comprehensive income for equity instruments that are not held for trading. These elected investments are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity under subhead Equity instruments through other comprehensive income. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
Dividends on these investments in equity instruments are recognized in the Statement of Profit and Loss when the Company''s right to receive the dividends is established and it does not represent a recovery of part of cost of the investment.
1.15.1.2 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, including offsetting bank overdrafts, and short-term highly liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in fair value and have a maturity of three months or less from the acquisition date.
1.15.1.3 Trade receivables
Trade receivables are recognized initially at fair value based on amounts exchanged and subsequently at the amortized cost less any impairment.
1.15.1.4 Impairment of financial assets
The Company measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since its initial recognition. If the credit risk on a financial instrument has not increased significantly since its initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses.
However, for trade receivables or contract assets that result in relation to revenue from contracts with customers, the Company measures the loss allowance at an amount equal to lifetime expected credit losses.
1.15.1.5 De-recognition of financial assets
The Company de-recognizes a financial asset 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 party.
On de-recognition of a financial asset in its entirety, the difference between the asset''s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of that financial asset.
1.15.2 Financial liabilities and equity instruments
1.15.2.1 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.
1.15.2.2 Financial liabilities
All financial liabilities are subsequently measured at amortized cost using the effective interest method or at FVTPL. However, financial guarantee contracts issued by the Company, and commitments issued by the Company to provide a loan at below-market interest rate are measured in accordance with the specific accounting policies set out below.
1.15.2.2.1 Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL.
1.15.2.2.2Financial liabilities subsequently measured at amortized cost
Financial liabilities that are not held-for-trading and not designated as at FVTPL are measured at amortized cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortized cost are determined based on the effective interest method. Interest expense that is not capitalized as part of costs of an asset is included in the ''finance costs'' line item.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
1.15.2.2.3 Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by the Company are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of:
a) the amount of loss allowance determined in accordance with impairment requirements of Ind AS 109; and
b) the amount initially recognized less, when appropriate, the cumulative amount of income recognized in accordance with the principles of Ind AS 18 or the amount initially recognized less, when appropriate, the cumulative amount of finance income recognized which measured by amortizing the initial fair value of guarantee on a straight line basis over the guarantee period.
1.15.2.2.4 De-recognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability de-recognized and the consideration paid and payable is recognized in profit or loss.
1.16.0 Interest in joint operations
Production Sharing Contracts (PSCs) executed with the Government of India / Government of Foreign Countries by the Company along with other entities to undertake exploration, development and production of Oil and/or Gas activities under a joint venture in various concessions/block/area are accounted as under:
The financial statements reflect the share of the Company''s assets, liabilities and also the income and expenditure of the Joint Venture in proportion to the participating interest of the Company as per the terms of the PSCs, on a line by line basis. Depreciation, depletion and impairment and value of Stock of Crude Oil are accounted for as per the relevant accounting policies of the Company. Proved Developed Reserve of Oil & Gas in such concessions/block/area is also considered in proportion to participating interest of the Company. Consideration recoverable from new Joint Venture Partners for the right to participate in operations is reduced from respective assets and/or expenditure to the extent of the new partner''s contribution towards past cost and balance is considered as miscellaneous receipts/expenses.
1.17.0 Segment Accounting
Considering the nature and associated risks and return of products & services, the Company has adopted its products & services (viz. Crude Oil, Natural Gas, LPG and Pipeline Transportation) as the primary reporting segments. There are no reportable geographical segments.
Segment assets, liabilities, income and expenses have been either directly identified or allocated to the segments on the basis usually followed for allocation of cost adopted for preparing and presenting the financial statements of the Company.
1.18.0 Earnings per Share
Basic earnings per share are calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, the net profit for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
1.19.0 Dividend
The final dividend on shares is recorded as a liability on the date of approval by shareholders, and interim dividends are recorded as a liability on the date of declaration by the Company''s board of directors.
1.20.0 Contingent Liabilities and Contingent Assets
(i) Contingent liabilities, if material, are disclosed by way of notes to the accounts.
(ii) Contingent assets are not recognized but disclosed in the financial statements along with an estimate of their financial effect where an inflow of economic benefits is probable and where practicable.
2.1 The Company has adopted to continue with the carrying value of its Property, Plant & Equipment (PPE) - Tangible Assets, recognized as on 1st April, 2015 (transition date) measured as per the Previous GAAP and used that carrying value as its deemed cost as on the transition date.
2.2 Carrying value of Oil and Gas assets include decommissioning liabilities amounting to Rs,108.44 crore (previous year Rs,120.85 crore).
2.3 Lands for projects and drillings operations are acquired primarily through bipartite negotiation with the occupiers/pattadars. In case, however, bipartite negotiation fails, land is acquired under relevant land laws with Government intervention. Upon successful negotiation or government order, as the case may be, consent letters are obtained from the occupiers/pattadars and surface compensation for the standing crops on the lands are settled and the same are capitalized either as Land Under Possession or as Oil & Gas assets. At the same time occupiers/pattadars are advised to submit documentary evidences in support of their
6.1 The aggregate carrying value of unquoted investments is Rs,13,181.28 crore (previous year Rs,12,943.61 crore).
6.2 The aggregate amount of quoted investments is Rs,8,568.87 crore (previous year '' 9,236.56 crore).
6.3 The aggregate market value of quoted investments is Rs,8,642.23 crore (previous year '' 9326.78 crore).
6.4 The aggregate amount of impairment in value of investment is Rs,290.72 crore (previous year Rs,202.22 crore).
* As on 31.03.2019, the Company has entered into three interest bearing Facility Agreements with Oil India International BV to extend total USD 59 million and as on balance sheet date the total amount withdrawn under the agreements is USD 58.2 million (Rs,406.07 crore).
** The interest on USD 3.2 million revised to 3 months LIBOR plus 13.65% w.e.f 01.01.2018 on account of nonpayment of USD 1.2 million as on 31.12.2017.
10.1 The cost of inventories recognized as an expense during the period in respect of continuing operations was Rs,187.45 crores (corresponding period Rs,185.18 crores).
10.2 Mode of valuation of inventories is given in Note no 1.12.0.
12.1 Trade receivables primarily comprise of government related entities. These government related entities have very strong capacity to meet their obligations. The Company allows credit period of 15-30 days to its customers for payment. Normally, payments are made by the customers on or before the due dates. The management does not anticipate any payment default from these customers other than those already provided for. Hence, as per the prevailing circumstances, management does not consider the increase in credit risk from the time of initial recognition of trade receivables and at the reporting date as significant.
12.2 The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information. The aggregate percentage of provision against trade receivables outstanding for more than six months is 96.37% as at 31.03.2019 (as at 31.03.2018 14.04%).
12.4 Trade Receivable as on 31.03.2019 includes Rs,189.95 crore receivable from M/s Brahmaputra Cracker & Polymer Limited. Out of which Rs,17.16 crore is yet to be reconciled.
14.1 If the dividend has not been paid or claimed within 30 days from the date of its declaration, the Company is required to transfer the total amount of the dividend which remains unpaid or unclaimed, to a special account maintained by the Company in a scheduled bank as "Unpaid Dividend Account". The unclaimed dividend lying with the Company is required to be transferred to the Investor Education and Protection Fund (IEPF), administered by the Central Government after a period of seven years of its declaration.
18.1 Security Deposits include deposit with Government entities and deposits made for office facilities.
18.2 Statutory Deposits & Advances include service tax and GST on Royalty paid under protest. Refer to Note 41.14.
19.1 Terms/rights attached to equity shares:
The Company has only one class of equity shares having par value of Rs,10 per share. Each holder of equity shares is entitled to one vote per share and carry a right to dividend.
19.4 20,03,78,652 Equity shares of Rs,10 each allotted as fully paid up bonus shares in the FY 2016-17.
19.5 4,49,12,000 Equity shares of Rs,10 each bought back in the FY 2017-18.
19.6 37,83,01,304 Equity shares of Rs,10 each allotted as fully paid up bonus shares in the FY 2018-19.
19.7 As per the approval of Board of Directors in its meeting held on 19th November, 2018, the Company has completed the buy-back of 5,04,98,717 fully paid up equity shares at the price of ''215 per equity share, on 12th March, 2019. After the buy back, the share capital of the Company stands decreased from Rs,1,134.90 crore to Rs,1,084.41 crore.
19.8 The Board of Directors have recommended a final dividend of Rs,1.75 per share for financial year 2018-19 which is subject to the approval of the shareholders in the ensuing Annual General Meeting.
20.1 Nature and purpose of reserves:
(a) Securities Premium : Security Premium is created when securities are issued at premium. This may be utilised for issue of fully paid bonus shares and for any other purpose as permitted under the provisions of the Companies Act, 2013.
(b) Foreign Currency Monetary Item Translation Difference Account: Exchange difference on long-term foreign currency monetary items are accumulated in a Foreign Currency Monetary Item Difference Account and amortised over the balance period of such long term foreign currency monetary item in continuance of policy as permitted under D13AA of Ind AS 101.
(c) Debenture Redemption Reserve: Debenture Redemption Reserve is created out of the profits of the Company, available for payment of dividend and the amount credited to such account shall not be utilised by the Company except for the redemption of debentures.
(d) Capital Redemption Reserve: Capital Redemption Reserve is created out of the Securities Premium/General Reserve, a sum equal to nominal value of the fully paid up own equity shares purchased by the Company during the period. The amount credited to such account may be applied in paying up unissued shares of the Company to be issued to members of the Company as fully paid bonus shares.
(e) General Reserve: The General reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. The Company has incurred expenses of Rs,7.33 crore during the financial year 2018-19 (previous year Rs,8.24 crore) in relation to buy back of shares which has been adjusted against General Reserve.
20.2 Other Comprehensive Income: It includes the cumulative gains/losses arising on measurement of equity instruments designated at fair value through Other Comprehensive Income. On disposal of such equity instruments the net amount shall be reclassified to retained earnings.
30.3 Natural Gas price is as notified by MOP&NG and applicable to operating areas of the Company. Subsidy extended to the eligible customers in North East India is reimbursed by Government of India and shown as Other Operating Revenue.
30.4 On application of Ind AS 115 - Revenue from contracts with customers, the sale of crude oil and natural gas includes transportation of own crude oil and natural gas to customers up to the delivery point which co-incides with the transfer of risk & rewards and transfer of custody. Income from pipeline transportation includes Rs,79.94 crore and Rs,0.87 crore for transportation of own crude oil and natural gas respectively.
30.5 Company is holding 40,387 (as on 31.03.2018 77,172) numbers of Renewable Energy Certificates (REC) as on 31.03.2019. The Floor Price of REC in the Energy Exchange on 31.03.2019 was Rs,1,000 (as on 31.03.2018 Rs,1,000) per REC.
35.1 Pursuant to directive from Government of India, the Company has raised overseas borrowings for acquiring 4% participating interest in Rovuma 1 offshore block in Mozambique. In the opinion of the Management, there is no explicit restriction by Government of India with regard to repayment & servicing of such overseas borrowings from domestic resources of the Company. Interest servicing of Rs,389.13 crore (Previous Year Rs,319.29 crore) on such overseas borrowings have been met from domestic resources. The Company has informed MoP&NG that servicing of interest on the overseas borrowings raised for financing of above transaction is being done from domestic resources. Approval of MOP&NG is awaited.
40. Financial Instruments 40.1.1 Capital Management
The Company manages its capital to ensure that Company will be able to continue as going concern while maximizing the return to stakeholders through the optimization of t
Mar 31, 2018
1.1.1 STATEMENT OF COMPLIANCE
The financial statements have been prepared in accordance with the Companies Act 2013 and in compliance with the Indian Accounting Standards (Ind AS) issued by the Ministry of Corporate Affairs under the Companies (Indian Accounting Standards) Rules,2015 as amended.
1.1.2 BASIS OF PREPARATION
These financial statements are prepared in accordance with Indian Accounting standards (Ind AS) and under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act, 2013 (âthe Actâ) (to the extent notified). The Ind ASs are prescribed under section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting standards) Amendment Rules, 2016.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date on such basis as provided under Ind AS 113.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
As the operating cycle cannot be identified in normal course due to the special nature of industry, the same has been assumed to have duration of 12 months. Accordingly, all assets and liabilities have been classified as current or non-current as per the Companyâs operating cycle and other criteria set out in Ind AS-1 âPresentation of Financial Statements? and Schedule III to the Companies Act, 2013.
1.1.3 USE OF ESTIMATES
The preparation of the financial statements in conformity with Ind AS requires the Management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. The application of accounting policies that requires critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements have been disclosed in Note 1.1.4. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as the management becomes aware of the changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.
1.1.4 MAJOR JUDGMENTS, ASSUMPTIONS AND ACCOUNTING ESTIMATES
A. ESTIMATION OF OIL AND GAS RESERVES
The estimation of oil and gas reserves is key factor in the in accounting for oil and gas producing activities. Oil and gas reserves are estimated by analysis of geosciences and engineering data using Deterministic Method. Production pattern analysis, number of additional wells to be completed, application of recovery techniques, validity of mining lease agreements, agreements/MOU for sales etc. influence the estimation of reserves. Unit-of-production depreciation, depletion and amortization charges are principally measured based on managementâs estimates of proved developed oil and gas reserves. Also, exploration drilling costs are capitalized pending the results of further exploration or appraisal activity, which may take several years to complete and before any related proved reserves can be booked.
B. IMPAIRMENT OF ASSETS
As part of the determination of the recoverable value of assets of cash generating units for impairment, the estimates, assumptions and judgments mainly concern oil and gas prices scenarios, operating costs, production volumes and oil and gas proved reserves. The discount rate used for estimating the value in use is reviewed annually. Changes in assumptions could affect the carrying amounts of assets, and any impairment losses and reversals will affect the revenues.
C. EMPLOYEE BENEFITS
The benefit obligations and plan assets can be subject to significant volatility due to changes in market values and actuarial assumptions. These assumptions vary between different pension plans and thus take into account market conditions. They are determined following actuarial valuation method certified by external independent actuarial valuer. The assumptions for each plan are reviewed annually and adjusted if necessary to reflect changes from the experience and actuarial advices.
D. ASSET RETIREMENT OBLIGATIONS
Asset retirement obligations, which result from a legal or constructive obligation, are recognized based on a reasonable estimated in the period in which the obligation arises. This estimate is based on information available in terms of costs and work program. It is regularly reviewed to take into account the changes in laws and regulations, the estimates useful life of fields based on proved and probable oil and gas reserves and current production off-take, the analysis of site conditions and technologies, risk adjusted discount rate. Such estimates can differ from estimates due to changes in the aforesaid factors. The risk adjusted discount rate used for estimating the present value of obligation is reviewed annually.
E. TAXATION
Tax liabilities are recognized when it is considered probable that there will be a future outflow of funds to a taxing authority. In such cases, provision is made for the amount that is expected to be settled, where this can be reasonably estimated. This requires the application of judgment as to the ultimate outcome, which can change over time depending on facts and circumstances. A change in estimate of the likelihood of a future outflow and/or in the expected amount to be settled would be recognized in income in the period in which the change occurs.
Deferred tax assets are recognized only to the extent it is considered probable that those assets will be recoverable. This involves an assessment of when those assets are likely to reverse, and a judgment as to whether or not there will be sufficient taxable profits available to offset the assets when they do reverse. This requires assumptions regarding future profitability and is therefore inherently uncertain. To the extent assumptions regarding future profitability change, there can be an increase or decrease in the amounts recognized in respect of deferred tax assets as well as in the amounts recognized in income in the period in which the change occurs.
1.2. REVENUE RECOGNITION
1.2.1 SALE OF PRODUCTS
(i) Revenue from the sale of goods is recognized at the time when the following conditions are satisfied:
- the Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
- the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
- the amount of revenue can be measured reliably;
- it is probable that the economic benefits associated with the transaction will flow to the Company; and
- the costs incurred or to be incurred in respect of the transaction can be measured reliably.
(ii) Revenue is measured at the fair value of the consideration received or receivable and represents amounts received or receivable for goods provided in the normal course of business which is net of all statutory levies recovered or recoverable from the customers and net of discounts &Companyâs share of profit petroleum paid to Government of India (GOI).
(iii) Any retrospective revision in prices is accounted for in the year of such revision.
(iv) Claims on Central Government / Petroleum Planning & Analysis Cell (PPAC) towards gas pool revenue are accrued based on quantity delivered to the customers at discounted price, in respect of which revenue has been recognized as per note no. 1.2.1(i) above.
(v) Revenue in respect of short lifted quantity of Crude Oil & Natural Gas, if any, is recognized when there is reasonable certainty of ultimate realization of the same.
1.2.2 SALE OF SERVICES
Revenue from sale of services such as transportation of crude oil, products, natural gas, etc is recognized when service is rendered in line with the agreements.
1.2.3 OTHERS
(i) Revenue from sale of Renewable Energy Certificates (REC) is recognized on sale of the certificates through the Exchange and included under other operating revenue.
(ii) Revenue on account of reimbursable subsidies/grants and interest on delayed realization from customers are recognized when there is reasonable certainty of ultimate realization.
(iii) Dividend income is recognized when the right to receive the dividend is established.
(iv) Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the company and can be measured reliably. Interest income is recognized on a time proportion basis taking into account the amount outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through expected life of the financial asset to that assetâs net carrying amount on initial recognition.
(v) Recovery of liquidated damages is recognized in the Statement of Profit & Loss as income at the time of occurrence except in case of Joint Venture Contracts (JVC) which are governed by the respective Production Sharing Contracts. In case of return/refund of the liquidated damages, the same is accounted for as other expenses. In case of any dispute over the liquidated damages, provision is created in the accounts.
(vi) Insurance claim other than that for transit loss of stores items are accounted for on final acceptance by the Insurance Company.
1.3.LEASING
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
1.3.1 THE COMPANY AS LESSOR
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term.
1.3.2 THE COMPANY AS LESSEE
Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
1.4.0 FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS
The functional currency of the Company is the Indian Rupee. The financial statements are presented in Indian Rupees.
(i) In preparing the financial statements of the Company, transactions in currencies other than the entityâs functional currency (foreign currencies) 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 retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rate prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
(ii) Transaction gains and losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled. Revenue, expense and cash-flow items denominated in foreign currencies are translated into the relevant functional currencies using the exchange rate in effect on the date of the transaction.
(iii) Exchange differences on monetary items are recognized in the statement of profit and loss in the period in which they arise except for:
(a) Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;
(b) In accordance with para D13AA of Ind AS 101, First-time Adoption of Indian Accounting Standards the Company continues to exercise policy adopted under previous IGAAP and accordingly exchange differences on long-term foreign currency monetary items relating to acquisition of depreciable and other assets were adjusted to the carrying cost of the assets and depreciated over the balance life of the assets and in other cases, exchange differences were accumulated in a âForeign Currency Monetary Item Translation Difference Accountâ and amortized over the balance period of such long term foreign currency monetary item by recognition as income or expense in each of such periods in respect of items recognized in the financial statement for the period ending immediately before the beginning of the first Ind AS financial reporting period as per previous GAAP i,e; 31 March 2016 as reported date.
1.5.0 BORROWING COSTS
(i) Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale and also includes exchange difference arising from Foreign Currency borrowings to the extent that they are regarded as an adjustment to interest cost.
(ii) All other borrowing costs are recognized in the statement of profit and loss in the period in which they are incurred.
1.6.0 GOVERNMENT GRANTS
(i) 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.
(ii) Government grants are recognized in profit or 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 with the primary condition that the Company should purchase, construct or otherwise acquire non-current assets are recognized as deferred revenue in the balance sheet and transferred to the statement of profit and loss on a systematic and rational basis over the useful lives of the related assets.
1.7.0 EMPLOYEE BENEFITS
1.7.1 RETIREMENT BENEFIT COSTS AND TERMINATION BENEFITS:
Payments to defined contribution retirement benefit plans are recognized as expenses when employees have rendered service entitling them to the contributions.
The cost of providing benefits under defined benefit plans (such as gratuity, leave encashment, postretirement medical benefits, defined benefit pension schemes) is determined separately for each plan using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. This attributes the increase in present value of the defined benefit obligation resulting from employee service in the current period to determine current service cost. The current service cost as stated above and past service costs, resulting from either a plan amendment (a reduction in future obligations as a result of a material reduction in the number of employees covered by the plan), are recognized in the statement of profit and loss under âemployee benefits expenseâ.
Net interest which is recognized in the statement of profit and loss under âemployee benefits expenseâ represents the net change in present value of plan obligations and the value of plan assets resulting from the passage of time, and is determined by applying the discount rate to the present value of the benefit obligation at the start of the year, and to the fair value of plan assets at the beginning of the year, taking into account expected changes in the obligation or plan assets during the year.
Re-measurement of the defined benefit liability and asset, comprising actuarial gains and losses, and the return on plan assets (excluding amounts included in net interest described above) are recognized in other comprehensive income in the period in which they occur and are not subsequently reclassified to the statement of profit and loss.
The defined benefit pension plan surplus or deficit recognized in the balance sheet for each plan comprises the difference between the present value of the defined benefit obligation and the fair value of plan assets out of which the obligations are to be settled directly. Defined benefit pension plan surpluses are only recognized to the extent they are recoverable, naturally by way of refund or reductions in future contributions to the plans.
1.7.2 SHORT-TERM AND OTHER LONG-TERM EMPLOYEE BENEFITS
A liability is recognized for benefits accruing to employees in respect of wages and salaries (including performance related pay), annual leave, sick leave and social security contribution in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
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.
1.8.0 TAXATION
Income tax expense represents the aggregate of current tax and deferred tax.
1.8.1 CURRENT TAX
Current tax is the amount of income tax payable based on taxable profit for the period. Taxable profit differs from âprofit before taxâ as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Companyâs current tax is calculated using tax rates and the tax laws that have been enacted or substantively enacted by the end of the reporting period.
1.8.2 DEFERRED TAX
(i) Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.
(ii) The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the benefits of all or part of the deferred tax asset to be utilized. Any such reduction shall be reversed to the extent that it becomes probable that sufficient taxable profit will be available.
(iii) Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
(iv) Minimum Alternate Tax (âMATâ) under the provisions of the Income Tax Act, 1961 is recognized as current tax in the statement of profit and loss. The credit available under the Income Tax Act, 1961 in respect of MAT paid is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the period for which the MAT credit recognized as an asset is reviewed at each balance sheet date and written down to the extent the aforesaid convincing evidence no longer exists.
1.8.3 CURRENT AND DEFERRED TAX FOR THE YEAR
Current and deferred tax are recognized in the statement of profit and loss, except when they relate to items that are recognized in other comprehensive income, in which case, the current and deferred tax are also recognized in other comprehensive income.
1.9.0 OIL AND GAS EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE
The Company follows the Successful Efforts Method (SEM) of accounting in respect of its oil and gas exploration and production activities in accordance with Ind AS 106 and the âGuidance Note on Accounting for Oil & Gas Producing Activities (Ind AS)â issued by the Institute of Chartered Accountants of India.
1.9.1 PRE-ACQUISITION, ACQUISITION, EXPLORATION & EVALUATION COSTS
(i) Pre-Acquisition costs: Pre-Acquisition costs of revenue nature incurred prior to obtaining the rights to explore, develop and produce Oil & Gas like data collection & analysis cost etc. are expensed to the Statement of Profit and Loss in the year of incidence.
(ii) Acquisition costs:
(a) Acquisition costs include land acquired for drilling operations including cost of temporary occupation of the land, crop compensation paid to farmers, registration fee, legal cost, signature bonus, brokersâ fees, consideration for farm-in arrangements and other costs incurred in acquiring mineral rights.
(b) These costs are initially recorded under Exploration & Evaluation Assets (Intangible) except cost of land acquired for drilling operations which are shown as Acquisition cost-land under capital work in progress.
(c) On determination of proved developed reserves, associated acquisition costs are transferred to Property, Plant & Equipment as Oil & Gas assets.
(d) Acquisition cost relating to an exploratory well that is determined to have no proved reserves and its status is decided as dry or of no further use for exploration purpose, is charged as expenses. In such cases, for land value forming part of acquisition cost, a nominal amount of Rs.100 per bigha is transferred to Freehold land under Property, Plant & Equipment.
(e) Cost for retaining the mineral interest in properties like lease carrying cost, license fees & other cost are charged as expense when incurred.
(III) EXPLORATION & EVALUATION COST (E&E COST):
(a) Geological and geophysical costs, including seismic surveys for exploration purposes are expensed as incurred.
(b) Costs including allocated depreciation on support equipment and facilities involved in drilling and equipping exploratory and appraisal wells and cost of exploratory-type drilling stratigraphic test wells are initially shown as Exploration & Evaluation Assets (Intangible) till the time these are either transferred to Property, Plant & Equipment as Oil & Gas assets on establishment of Proved Developed Reserves or charged as expense when determined to be dry or of no further use.
(c) E&E costs related to each exploratory well are not carried over unless it could be reasonably demonstrated that there are indications of sufficient quantity of reserves and activities are firmly planned in near future for further assessing the reserves and economic & operating viability of the project. Costs of written off exploratory wells are not reinstated in the books even if they start producing subsequently.
1.9.2 DEVELOPMENT COST
Costs that are attributable to development activities including production and processing plant & facilities, service wells including allocated depreciation on support equipment and facilities are initially shown under Capital Work in Progress as Development Cost till such time they are capitalized as Oil & Gas Asset under Property, Plant & Equipment on establishment of Proved Developed Reserves. Cost of dry development well, if any is capitalized as Oil & Gas Asset under Property, Plant & Equipment upon completion of the well.
1.9.3 PRODUCTION COST
Production Cost consists of direct and indirect costs incurred to operate and maintain wells and related equipment and facilities, including depreciation and applicable operating cost of support equipment and facilities.
1.9.4 SIDE-TRACKING EXPENDITURE
In case of exploratory wells, the cost of abandoned portion of side tracked well is charged off to the Statement of Profit and Loss. In case of development wells, the entire cost of abandoned portion and side- tracking is capitalized. In case of existing producing wells, the cost of side - tracking is capitalized if it increases the proved developed reserves, otherwise is charged off to Statement of Profit and loss.
1.10.0 RESEARCH & DEVELOPMENT EXPENDITURE
All revenue expenditure incurred for Research & Development Projects/Schemes, net of grants-in-aid (other than those related to asset) if any, are charged to the Statement of Profit and Loss.
1.11.1 PROPERTY, PLANT AND EQUIPMENT (PPE)
(i) Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of an asset comprises its purchase price including import duties and non-refundable purchase taxes or construction cost, any costs directly attributable to bringing the asset into the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of any decommissioning obligation wherever applicable and eligible borrowing costs. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset. Assets in the course of construction are initially kept under assets under construction and capitalized when the assets are available for use in the manner as intended by the management.
(ii) Cost of day-to-day servicing of property, plant and equipment are recognized in the Statement of Profit and Loss as incurred. Major shut-down and overhaul expenditure is capitalized as the activities undertaken to improve the economic benefits expected to arise from the asset. Where an asset or part of an asset that was separately depreciated is replaced and it is probable that future economic benefits associated with the item will flow to the Company, the expenditure is capitalized and the carrying amount of the replaced asset is derecognized. Inspection costs associated with major maintenance programs from which future economic benefits are expected to flow, are capitalized and amortized over the period to the next inspection.
(iii) Oil and gas assets which comprise of producing wells, related acquisition cost and production facilities are depleted using a unit-of-production method except in cases where life of assets is lower than life of the field. The cost of producing wells and production facilities are depleted over proved developed reserves. Acquisition cost is depleted over total proved reserves. Rate of depletion is determined based on production from the Oil/Gas field or a group of Oil/Gas fields identified to the related reserves having homogeneous geological feature. Estimation of oil and natural gas reserves are done annually at the year end and the impact of changes in the estimated proved reserves is dealt with prospectively by depleting the remaining carrying value of the asset.
(iv) Other property, plant and equipment are depreciated based on useful life of the asset under âWritten down value methodâ as specified in Schedule II to the Companies Act., 2013. When any part of an item of property, plant and equipment, has different useful life and cost is significant in relation to the total cost of the asset, they are accounted for and depreciated separately. Depreciation on additions / deletions during the year is provided on pro rata basis with reference to the date of additions / deletions except low value items not exceeding Rs.5,000 which are fully depreciated at the time of addition. The typical useful lives of other major property, plant and equipment are as follows:
Buildings 30 to 60 years
Plant & Machinery 10 to 40 years
Furniture and fixtures 8 to 10 years
Office equipments 3 to 10 years
Vehicles 8 to 10 years
Railway slidingâs 15 years
(v) The expected useful lives of property, plant and equipment other than Oil and gas assets are reviewed on an annual basis and, if necessary, impact arising out the changes in useful lives are accounted for prospectively.
(vi) 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 de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the period in which the item is derecognized. Any Tangible asset, when determined of no further use, is deleted from the Gross Block of assets. The deleted assets are carried as âAssets awaiting disposalâ under Inventories at lower of Rs.1000 or 5% of the original cost and the balance written down value, is charged off.
(vii)Physical verification of the property, plant and equipment is carried out by the Company in a phased manner to cover all the items over a period of five years. The discrepancies noticed, if any, are accounted for in the year in which such differences are found.
1.11.2 INTANGIBLE ASSETS
Costs of intangible assets are capitalized when the asset is ready for its intended use.
Intangible assets include expenditure on computer software, and right to way/right of use of land and are stated at the amount initially recognized less accumulated amortization and accumulated impairment losses.
Cost of right of use / right of way of land is amortized on a straight line basis over the lower of period of such rights or useful life of the related asset for which right of use / right of way is taken. Cost of computer software is amortized over the useful life not exceeding five years from the date of capitalization.;
Any intangible asset, when determined of no further use, is written off.
1.11.3 IMPAIRMENT OF PROPERTY, PLANT & EQUIPMENT (PPE), E&E ASSETS, INTANGIBLE ASSETS OTHER THAN GOODWILL.
At the end of each reporting period, the Company reviews the carrying amounts of its property, plant & equipment (including capital work in progress) to determine whether there is any indication that those assets have suffered an impairment loss. For this purpose Producing fields, LPG plant, Transportation Pipeline and Power Generating Units (other than captive power plants) are considered as Cash Generating Units (CGU). If any such indication exists, the recoverable amount of the CGU is estimated in order to determine the extent of the impairment loss (if any). Corporate assets and common service assets are also allocated to individual cash-generating units on a reasonable and consistent basis.
Intangible assets are tested for impairment annually. Whenever there is an indication that the asset may be impaired, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of a CGU is estimated to be less than its carrying amount, the carrying amount of the asset or group of assets covered under the CGU is reduced to its recoverable amount. An impairment loss is recognized immediately in the statement of profit and loss.
E&E Assets are reviewed for indicators of impairment as per Ind AS 106 and if events and circumstances suggest, impairment loss is provided for and carrying amount is reduced accordingly.
When an impairment loss is subsequently reversed, the carrying amount of the asset or group of assets covered under the CGU is increased to the revised estimate of its recoverable amount, so however that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or group of assets covered under the CGU in prior years. A reversal of an impairment loss is recognized immediately in the Statement of Profit and Loss.
1.12.0 INVENTORIES
Finished goods of Crude Oil, Liquefied Petroleum Gas (LPG) and LPG condensate are valued at cost or net realizable value, whichever is lower. Cost of finished goods is determined based on direct cost and directly attributable services cost including depreciation & depletion. The value of such inventories includes excise duty and royalty (wherever applicable). Net realizable value represents the estimated selling price for inventories less all costs necessary to effect the sale.
Crude oil in unfinished condition in the flow line up to Group Gathering Station and Natural Gas in Pipeline are not valued, as these pipeline fills are necessary for the operation of the facility.
Stores and spares are valued at weighted average cost or net realizable value whichever is lower. Obsolete / unserviceable items, as and when identified, are written off. Any item of stores and spares including those in Storage Locations which have not moved for last four years as on date of Balance Sheet are identified as slow moving items for which a provision of 95% of the value is made in the accounts.
Renewable Energy Certificates (REC) received based on generation of renewable energy certified by the competent authority, held for trading are not valued.
1.13.1 PROVISIONS
Provisions are recognized when the Company has a present obligation as a result of a past event and it is probable that the Company will be 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 end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
1.13.2 DECOMMISSIONING AND RESTORATION OBLIGATIONS
Full eventual liabilities towards costs relating to assets retirement obligations are recognized when the Company has an obligation to plug and abandon a well, dismantle and remove a facility or an item of plant and to restore the site on which it is located, and when a reliable estimate of that liability can be made. Liabilities towards costs relating to dismantling, abandoning and restoring well sites and associated Production Facilities are recognized at the commencement of drilling a well or when facilities are installed, as the case may be. The amount recognized is the present value of the estimated future expenditure determined in accordance with local conditions and requirements. The provision for the costs of decommissioning wells, production facilities including fieldsâ pipelines at the end of their economic lives is estimated using existing technology, at current prices or future assumptions, depending on the expected timing of the activity, and discounted using govt. bonds rate.
An amount equivalent to the decommissioning liability provision is recognized as part of the corresponding PPE or Exploration & Evaluation Asset (E&E) as the case may be.
Liability for decommissioning cost is updated annually based on the technical assessment available at current costs. The unwinding of the discount is included as a finance cost. Any change in the present value of the estimated future cash flow to settle the obligation due to change in measurement or discount rate shall be added to or deducted from the cost of the asset in the current period and would be considered for depreciation (depletion) prospectively.
Except in the case of E&E assets, the actual cost incurred on settlement of the obligation is adjusted against the liability and the ultimate gain or loss is recognized in the Statement of Profit and Loss, when the designated oil/gas field or a group of oil/gas fields ceases to produce.
1.14.0 INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES
The Company measures its investments in subsidiaries, associates and joint ventures at cost less impairment. The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. If any such indication of impairment exists, the Company makes an estimate of its recoverable amount. Where the carrying amount of an investment exceeds its recoverable amount, the investment is considered impaired and is written down to its recoverable amount.
1.15.0 FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs 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 of the financial assets or financial liabilities, as is appropriate, on initial recognition.
1.15.1 FINANCIAL ASSETS
1.15.1.1 INVESTMENT IN SECURITIES
All regular purchases or sales of financial assets are recognized and de-recognized on a trade date basis.
All recognized financial assets are subsequently measured in their entirety either at amortized cost or fair value, depending on the classification of the financial assets
1.15.1.1.1 CLASSIFICATION OF FINANCIAL ASSETS
(i) Debt instruments that meet the following conditions are subsequently measured at amortized cost less impairment loss (except for debt investments that are designated as at Fair Value Through Profit or Loss (FVTPL) on initial recognition):
a) the asset is held within a business model whose objective is to hold assets till maturity in order to collect contractual cash flows; and
b) the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(ii) Debt instruments that meet the following conditions are subsequently measured at Fair Value Through Other Comprehensive Income (except for debt investments that are designated as at FVTPL on initial recognition):
a) the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and
b) the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(iii) Debt instruments that do not meet the criteria of amortized cost or Fair Value through Other Comprehensive Income (FVTOCI) are measured at FVTPL.
(iv) All other financial assets are subsequently measured at fair value through Profit or Loss.
1.15.1.1.2 AMORTISED COST AND EFFECTIVE INTEREST METHOD
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash flows (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognized in the statement of profit & loss under investment income on an effective interest basis for debt instruments other than those financial assets classified as FVTPL.
1.15.1.1.3 INVESTMENTS IN EQUITY INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (FVTOCI)
On initial recognition, the Company can make an irrevocable election (on an instrument-by-instrument basis) to present the subsequent changes in fair value in other comprehensive income for equity instruments that are not held for trading. These elected investments are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity under subhead Equity instruments through other comprehensive income. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
Dividends on these investments in equity instruments are recognized in the Statement of Profit and Loss when the Companyâs right to receive the dividends is established and it does not represent a recovery of part of cost of the investment.
1.15.1.2 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash at bank and in hand, including offsetting bank overdrafts, and short-term highly liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in fair value and have a maturity of three months or less from the acquisition date.
1.15.1.3 TRADE RECEIVABLES
Trade receivables are recognized initially at fair value based on amounts exchanged and subsequently at the amortized cost less any impairment.
1.15.1.4 IMPAIRMENT OF FINANCIAL ASSETS
The Company measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since its initial recognition. If the credit risk on a financial instrument has not increased significantly since its initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses.
However, for trade receivables or contract assets that result in relation to revenue from contracts with customers, the Company measures the loss allowance at an amount equal to lifetime expected credit losses.
1.15.1.5 DE-RECOGNITION OF FINANCIAL ASSETS
The Company de-recognizes a financial asset 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 party.
On de-recognition of a financial asset in its entirety, the difference between the assetâs carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of that financial asset.
1.15.2 FINANCIAL LIABILITIES AND EQUITY INSTRUMENTS
1.15.2.1 EQUITY INSTRUMENTS
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.
1.15.2.2 FINANCIAL LIABILITIES
All financial liabilities are subsequently measured at amortized cost using the effective interest method or at FVTPL. However, financial guarantee contracts issued by the Company, and commitments issued by the Company to provide a loan at below-market interest rate are measured in accordance with the specific accounting policies set out below.
1.15.2.2.1 FINANCIAL LIABILITIES AT FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL.
1.15.2.2.2 FINANCIAL LIABILITIES SUBSEQUENTLY MEASURED AT AMORTIZED COST
Financial liabilities that are not held-for-trading and not designated as at FVTPL are measured at amortized cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortized cost are determined based on the effective interest method. Interest expense that is not capitalized as part of costs of an asset is included in the âfinance costsâ line item.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
1.15.2.2.3 FINANCIAL GUARANTEE CONTRACTS
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by the Company are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of:
a) the amount of loss allowance determined in accordance with impairment requirements of Ind AS 109; and
b) the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of Ind AS 18 or the amount initially recognised less, when appropriate, the cumulative amount of finance income recognized which measured by amortizing the initial fair value of guarantee on a straight line basis over the guarantee period.
1.15.2.2.4 DE-RECOGNITION OF FINANCIAL LIABILITIES
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability de-recognised and the consideration paid and payable is recognised in profit or loss.
1.16.0 INTEREST IN JOINT OPERATIONS
Production Sharing Contracts (PSCs) executed with the Government of India / Government of Foreign Countries by the Company along with other entities to undertake exploration, development and production of Oil and/or Gas activities under a joint venture in various concessions/block/area are accounted as under:
The financial statements reflect the share of the Companyâs assets, liabilities and also the income and expenditure of the Joint Venture in proportion to the participating interest of the Company as per the terms of the PSCs, on a line by line basis. Depreciation, depletion and impairment and value of Stock of Crude Oil are accounted for as per the relevant accounting policies of the Company. Proved Developed Reserve of Oil & Gas in such concessions/block/area is also considered in proportion to participating interest of the Company. Consideration recoverable from new Joint Venture Partners for the right to participate in operations is reduced from respective assets and/or expenditure to the extent of the new partnerâs contribution towards past cost and balance is considered as miscellaneous receipts/expenses.
1.17.0 SEGMENT ACCOUNTING
Considering the nature and associated risks and return of products & services, the Company has adopted its products & services (viz. Crude Oil, Natural Gas, LPG and Pipeline Transportation) as the primary reporting segments. There are no reportable geographical segments.
Segment assets, liabilities, income and expenses have been either directly identified or allocated to the segments on the basis usually followed for allocation of cost adopted for preparing and presenting the financial statements of the Company.
1.18.0 EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, the net profit for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
1.19.0 DIVIDEND
The final dividend on shares is recorded as a liability on the date of approval by shareholders, and interim dividends are recorded as a liability on the date of declaration by the Companyâs board of directors.
1.20.0 CONTINGENT LIABILITIES AND CONTINGENT ASSETS
(i) Contingent liabilities, if material, are disclosed by way of notes to the accounts.
(ii) Contingent assets are not recognized but disclosed in the financial statements along with an estimate of their financial effect where an inflow of economic benefits is probable and where practicable.
Mar 31, 2017
1.1.1 STATEMENT OF COMPLIANCE
The financial statements have been prepared in accordance with the Companies Act 2013 and in compliance with the Indian Accounting Standards (Ind AS) issued by the Ministry of Corporate Affairs under the Companies (Indian Accounting Standards) Rules,20l5 as amended.
1.1.2 BASIS OF PREPARATION
These financial statements are prepared in accordance with Indian Accounting standards (Ind AS) effective for the year ending 31st March,2017 and under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act, 2013(''the Act'') (to the extent notified) The Ind ASs are prescribed under section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting standards) Amendment Rules, 2016.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date on such basis as provided under Ind AS 113.
The Company has adopted all the Ind AS and the adoption was carried out in accordance with Ind AS 101, First Time adoption of Indian accounting standards. The transition was carried out from Indian Accounting Principles generally accepted in India as prescribed under section 133 of the Act, read with Rule 7 of the Companies (accounts) Rules, 2014 (IGAAP), which was the previous GAAP. Reconciliation and descriptions of the effect of the transition has been summarized in Note 40.13.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
As the quarter and year figures are taken from the sources and rounded to the nearest two decimals, the figures already reported for all the quarters during the year might not always add up to the year figures reported in the statement.
As the operating cycle cannot be identified in normal course due to the special nature of industry, the same has been assumed to have duration of 12 months. Accordingly, all assets and liabilities have been classified as current or non-current as per the Company''s operating cycle and other criteria set out in Ind AS-l "Presentation of Financial Statements" and Schedule III to the Companies Act, 2013.
1.1.3 USE OF ESTIMATES
The preparation of the financial statements in conformity with Ind AS requires the Management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. The application of accounting policies that requires critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements have been disclosed in Note 1.1.4. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as the management becomes aware of the changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.
1.1.4 MAJOR JUDGMENTS, ASSUMPTIONS AND ACCOUNTING ESTIMATES
A. ESTIMATION OF OILAND GAS RESERVES
The estimation of oil and gas reserves is key factor in the accounting for oil and gas producing activities. Oil and gas reserves are estimated by analysis of geosciences and engineering data using Deterministic Method. Production pattern analysis, number of additional wells to be completed, application of recovery techniques, validity of mining lease agreements, agreements/MOU for sales etc. influence the estimation of reserves. Unit-of-production depreciation, depletion and amortization charges are principally measured based on management''s estimates of proved developed oil and gas reserves. Also, exploration drilling costs are capitalized pending the results of further exploration or appraisal activity, which may take several years to complete and before any related proved reserves can be booked.
B. Impairment of assets
As part of the determination of the recoverable value of assets of cash generating units for impairment, the estimates, assumptions and judgments mainly concern oil and gas prices scenarios, operating costs, production volumes and oil and gas proved reserves. The discount rate used for estimating the value in use is reviewed annually. Changes in assumptions could affect the carrying amounts of assets, and any impairment losses and reversals will affect the revenues.
C. EMPLOYEE BENEFITS
The benefit obligations and plan assets can be subject to significant volatility due to changes in market values and actuarial assumptions. These assumptions vary between different pension plans and thus take into account market conditions. They are determined following actuarial valuation method certified by external independent actuarial valuer.
The assumptions for each plan are reviewed annually and adjusted if necessary to reflect changes from the experience and actuarial advices.
D. ASSET RETIREMENT OBLIGATIONS
Asset retirement obligations, which result from a legal or constructive obligation, are recognized based on a reasonable estimate in the period in which the obligation arises. This estimate is based on information available in terms of costs and work program. It is regularly reviewed to take into account the changes in laws and regulations, the estimated useful life of fields based on proved and probable oil and gas reserves and current production off-take, the analysis of site conditions and technologies, risk adjusted discount rate. Such estimates can differ from estimates due to changes in the aforesaid factors. The risk adjusted discount rate used for estimating the present value of obligation is reviewed annually.
E. TAXATION
Tax liabilities are recognized when it is considered probable that there will be a future outflow of funds to a taxing authority. In such cases, provision is made for the amount that is expected to be settled, where this can be reasonably estimated. This requires the application of judgment as to the ultimate outcome, which can change over time depending on facts and circumstances. A change in estimate of the likelihood of a future outflow and/or in the expected amount to be settled would be recognized in income in the period in which the change occurs.
Deferred tax assets are recognized only to the extent it is considered probable that those assets will be recoverable. This involves an assessment of when those assets are likely to reverse, and a judgment as to whether or not there will be sufficient taxable profits available to offset the assets when they do reverse. This requires assumptions regarding future profitability and is therefore inherently uncertain. To the extent assumptions regarding future profitability change, there can be an increase or decrease in the amounts recognized in respect of deferred tax assets as well as in the amounts recognized in income in the period in which the change occurs.
1.2. REVENUE RECOGNITION
1.2.1 SALE OF PRODUCTS
(i) Revenue from the sale of goods is recognized at the time when the following conditions are satisfied:
- the Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
- the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
- the amount of revenue can be measured reliably;
- it is probable that the economic benefits associated with the transaction will flow to the Company; and
- the costs incurred or to be incurred in respect of the transaction can be measured reliably.
(ii) Revenue is measured at the fair value of the consideration received or receivable and represents amounts received or receivable for goods provided in the normal course of business which is net of all statutory levies recovered or recoverable from the customers and net of discounts & Company''s share of profit petroleum paid to Government of India (GOI).
(iii) Any retrospective revision in prices is accounted for in the year of such revision.
(iv) Claims on Central Government / Petroleum Planning & Analysis Cell (PPAC) towards gas pool revenue are accrued based on quantity delivered to the customers at discounted price, in respect of which revenue has been recognized as per note no. 1.2.10 above.
(v) Revenue in respect of short lifted quantity of Crude Oil & Natural Gas, if any, is recognized when there is reasonable certainty of ultimate realization of the same.
1.2.2 SALE OF SERVICES
Revenue from sale of services such as transportation of crude oil, products, natural gas, etc is recognized when service is rendered in line with the agreements.
1.2.3 OTHERS
(i) Revenue from sale of Renewable Energy Certificates (REC) is recognized on sale of the certificates through the Exchange and included under other operating revenue.
(ii) Revenue on account of reimbursable subsidies/grants and interest on delayed realization from customers are recognized when there is reasonable certainty of ultimate realization.
(iii) Dividend income is recognized when the right to receive the dividend is established.
(iv) Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and can be measured reliably. Interest income is recognized on a time proportion basis taking into account the amount outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through expected life of the financial asset to that asset''s net carrying amount on initial recognition.
(v) Recovery of liquidated damages is recognized in the Statement of Profit & Loss as income at the time of occurrence except in case of Joint Venture Contracts (JVC) which are governed by the respective Production Sharing Contracts. In case of return/refund of the liquidated damages, the same is accounted for as other expenses. In case of any dispute over the liquidated damages, provision is created in the accounts.
(vi) Insurance claim other than that for transit loss of stores items are accounted for on final acceptance by the Insurance Company.
1.3.LEASING
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
1.3.1 THE COMPANY AS LESSOR
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term.
1.3.2 THE COMPANY AS LESSEE
Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
1.4.0 FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS
The functional currency of the Company is the Indian Rupee. The financial statements are presented in Indian Rupees.
(i) In preparing the financial statements of the Company, transactions in currencies other than the entity''s functional currency (foreign currencies) 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 retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rate prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
(ii) Transaction gains and losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled. Revenue, expense and cash-flow items denominated in foreign currencies are translated into the relevant functional currencies using the exchange rate in effect on the date of the transaction.
(iii) Exchange differences on monetary items are recognized in the statement of profit and loss in the period in which they arise except for:
(a) Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;
(b) In accordance with para D13M of Ind AS 101, First-time Adoption of Indian Accounting Standards the Company continues to exercise policy adopted under previous IGAAP and accordingly exchange differences on long-term foreign currency monetary items relating to acquisition of depreciable and other assets were adjusted to the carrying cost of the assets and depreciated over the balance life of the assets and in other cases, exchange differences were accumulated in a "Foreign Currency Monetary Item Translation Difference Account" and amortized over the balance period of such long term foreign currency monetary item by recognition as income or expense in each of such periods in respect of items recognized in the financial statement for the period ending immediately before the beginning of the first Ind AS financial reporting period as per previous GAAP i,e; 31st March 2016 as reported date.
1.5.0 BORROWING COSTS
(i) Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale and also includes exchange difference arising from Foreign Currency borrowings to the extent that they are regarded as an adjustment to interest cost.
(ii) All other borrowing costs are recognized in the statement of profit and loss in the period in which they are incurred.
1.6.0 GOVERNMENT GRANTS
(i) 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.
(ii) Government grants are recognized in profit or 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 with the primary condition that the Company should purchase, construct or otherwise acquire non-current assets are recognized as deferred revenue in the balance sheet and transferred to the statement of profit and loss on a systematic and rational basis over the useful lives of the related assets.
1.7.0 EMPLOYEE BENEFITS
1.7.1 RETIREMENT BENEFIT COSTS AND TERMINATION BENEFITS:
Payments to defined contribution retirement benefit plans are recognized as expenses when employees have rendered service entitling them to the contributions.
The cost of providing benefits under defined benefit plans (such as gratuity, leave encashment, post retirement medical benefits, defined benefit pension schemes) is determined separately for each plan using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. This attributes the increase in present value of the defined benefit obligation resulting from employee service in the current period to determine current service cost. The current service cost as stated above and past service costs, resulting from either a plan amendment (a reduction in future obligations as a result of a material reduction in the number of employees covered by the plan), are recognized in the statement of profit and loss under ''employee benefits expense''.
Net interest which is recognized in the statement of profit and loss under ''employee benefits expense'' represents the net change in present value of plan obligations and the value of plan assets resulting from the passage of time, and is determined by applying the discount rate to the present value of the benefit obligation at the start of the year, and to the fair value of plan assets at the beginning of the year, taking into account expected changes in the obligation or plan assets during the year.
Re-measurement of the defined benefit liability and asset, comprising actuarial gains and losses, and the return on plan assets (excluding amounts included in net interest described above) are recognized in other comprehensive income in the period in which they occur and are not subsequently reclassified to the statement of profit and loss.
The defined benefit pension plan surplus or deficit recognized in the balance sheet for each plan comprises the difference between the present value of the defined benefit obligation and the fair value of plan assets out of which the obligations are to be settled directly. Defined benefit pension plan surpluses are only recognized to the extent they are recoverable, naturally by way of refund or reductions in future contributions to the plans.
1.7.2 SHORT-TERM AND OTHER LONG-TERM EMPLOYEE BENEFITS
A liability is recognized for benefits accruing to employees in respect of wages and salaries (including performance related pay), annual leave, sick leave and social security contribution in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
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.
1.8.0 TAXATION
Income tax expense represents the aggregate of current tax and deferred tax.
1.8.1 CURRENT TAX
Current tax is the amount of income tax payable based on taxable profit for the period. Taxable profit differs from ''profit before tax'' as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company''s current tax is calculated using tax rates and the tax laws that have been enacted or substantively enacted by the end of the reporting period.
1.8.2 DEFERRED TAX
(i) Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.
(ii) The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the benefits of all or part of the deferred tax asset to be utilized. Any such reduction shall be reversed to the extent that it becomes probable that sufficient taxable profit will be available.
(iii) Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
(iv) Minimum Alternate Tax (''MAT'') under the provisions of the Income Tax Act, 1961 is recognized as current tax in the statement of profit and loss. The credit available under the Income Tax Act, 1961 in respect of MAT paid is recognized as an asset only when and to the extent there is convincing evidence that the individual Company will pay normal income tax during the period for which the MAT credit recognized as an asset is reviewed at each balance sheet date and written down to the extent the aforesaid convincing evidence no longer exists.
1.8.3 CURRENT AND DEFERRED TAX FORTHEYEAR
Current and deferred tax are recognized in the statement of profit and loss, except when they relate to items that are recognized in other comprehensive income, in which case, the current and deferred tax are also recognized in other comprehensive income.
1.9.0 OIL AND GAS EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE
The Company follows the Successful Efforts Method (SEM) of accounting in respect of its oil and gas exploration and production activities in accordance with Ind AS 106 and the "Guidance Note on Accounting for Oil & Gas Producing Activities (Ind AS)" issued by the Institute of Chartered Accountants of India.
1.9.1 PRE-ACQUISITION, ACQUISITION, EXPLORATION & EVALUATION COSTS
(i) Pre-Acquisition costs: Pre-Acquisition costs of revenue nature incurred prior to obtaining the rights to explore, develop and produce Oil & Gas like data collection & analysis cost etc. are expensed to the Statement of Profit and Loss in the year of incidence.
(ii) Acquisition Costs:
(a) Acquisition costs include land acquired for drilling operations including cost of temporary occupation of the land, crop compensation paid to farmers, registration fee, legal cost, signature bonus, brokers'' fees, consideration for farm-in arrangements and other costs incurred in acquiring mineral rights.
(b) These costs are initially recorded under Exploration & Evaluation Assets (Intangible) except cost of land acquired for drilling operations which are shown as Acquisition cost-land under capital work in progress.
(c) On determination of proved developed reserves, associated acquisition costs are transferred to Property, Plant & Equipment as Oil & Gas assets.
(d) Acquisition cost relating to an exploratory well that is determined to have no proved reserves and its status is decided as dry or of no further use for exploration purpose, is charged as expenses. In such cases, for land value forming part of acquisition cost, a nominal amount of Rs,lOO per bigha is transferred to Freehold land under Property, Plant & Equipment.
(e) Cost for retaining the mineral interest in properties like lease carrying cost, license fees & other cost are charged as expense when incurred.
(iii) Exploration & Evaluation Cost (E&E cost):
(a) Geological and geophysical costs, including seismic surveys for exploration purposes are expensed as incurred.
(b) Costs including allocated depreciation on support equipment and facilities involved in drilling and equipping exploratory and appraisal wells and cost of exploratory-type drilling stratigraphic test wells are initially shown as Exploration & Evaluation Assets (Intangible) till the time these are either transferred to Property, Plant & Equipment as Oil & Gas assets on establishment of Proved Developed Reserves or charged as expense when determined to be dry or of no further use.
(c) E&E costs related to each exploratory well are not carried over unless it could be reasonably demonstrated that there are indications of sufficient quantity of reserves and activities are firmly planned in near future for further assessing the reserves and economic & operating viability of the project. Costs of written off exploratory wells are not reinstated in the books even if they start producing subsequently.
1.9.2 DEVELOPMENT COST
Costs that are attributable to development activities including production and processing plant & facilities, service wells including allocated depreciation on support equipment and facilities are initially shown under Capital Work in Progress as Development Cost till such time they are capitalized as Oil & Gas Asset under Property, Plant & Equipment on establishment of
Proved Developed Reserves. Cost of dry development well, if any is capitalized as Oil & Gas Asset under Property, Plant & Equipment upon completion of the well.
1.9.3 PRODUCTION COST
Production Cost consist of direct and indirect costs incurred to operate and maintain wells and related equipment and facilities, including depreciation and applicable operating cost of support equipment and facilities.
1.9.4 SIDE-TRACKING EXPENDITURE
In case of exploratory wells, the cost of abandoned portion of side tracked well is charged off to Profit and Loss statement. In case of development wells, the entire cost of abandoned portion and side- tracking is capitalized. In case of existing producing wells, the cost of side - tracking is capitalized if it increases the proved developed reserves, otherwise is charged off to Statement of Profit and loss.
1.10.0 RESEARCH & DEVELOPMENT EXPENDITURE
All revenue expenditure incurred for Research & Development Projects/Schemes, net of grants-in-aid (other than those related to asset) if any, are charged to the Statement of Profit and Loss.
1.11.1 PROPERTY, PLANT AND EQUIPMENT (PPE)
(i) Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of an asset comprises its purchase price including import duties and non-refundable purchase taxes or construction cost, any costs directly attributable to bringing the asset into the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of any decommissioning obligation wherever applicable and eligible borrowing costs. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset. Assets in the course of construction are initially kept under assets under construction and capitalized when the assets are available for use in the manner as intended by the management.
(ii) Cost of day-to-day servicing of property, plant and equipment are recognized in the Statement of Profit and Loss as incurred. Major shut-down and overhaul expenditure is capitalized as the activities undertaken to improve the economic benefits expected to arise from the asset. Where an asset or part of an asset that was separately depreciated is replaced and it is probable that future economic benefits associated with the item will flow to the Company, the expenditure is capitalized and the carrying amount of the replaced asset is derecognized. Inspection costs associated with major maintenance programs from which future economic benefits are expected to flow, are capitalized and amortized over the period to the next inspection.
(iii) Oil and gas assets which comprise of producing wells, related acquisition cost and production facilities are depleted using a unit-of-production method except in cases where life of assets is lower than life of the field. The cost of producing wells and production facilities are depleted over proved developed reserves. Acquisition cost is depleted over total proved reserves. Rate of depletion is determined based on production from the Oil/Gas field or a group of Oil/Gas fields identified to the related reserves having homogeneous geological feature. Estimation of oil and natural gas reserves are done annually at the year end and the impact of changes in the estimated proved reserves is dealt with prospectively by depleting the remaining carrying value of the asset.
(iv) Other property, plant and equipment are depreciated based on useful life of the asset under "Written down value method" as specified in Schedule II to the Companies Act., 2013. When any part of an item of property, plant and equipment, has different useful life and cost is significant in relation to the total cost of the asset, they are accounted for and depreciated separately. Depreciation on additions / deletions during the year is provided on pro rata basis with reference to the date of additions / deletions except low value items not exceeding Rs, 5,000 which are fully depreciated at the time of addition. The typical useful lives of other major property, plant and equipment are as follows:
Buildings 30 to 60 years
Plant & Machinery 10 to 40 years
Furniture and fixtures 8 to 10 years
Office equipments 3 to 10 years
Vehicles 8 to 10 years
Railway sidings 15 years
(v) The expected useful lives of property, plant and equipment other than Oil and gas assets are reviewed on an annual basis and, if necessary, impact arising out the changes in useful lives are accounted for prospectively.
(vi)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 de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the period in which the item is derecognized. Any Tangible asset, when determined of no further use, is deleted from the Gross Block of assets. The deleted assets are carried as ''Assets awaiting disposal'' under Inventories at lower of Rs,1000 or 5% of the original cost and the balance written down value, is charged off.
(vii) Physical verification of the property, plant and equipment is carried out by the Company in a phased manner to cover all the items over a period of five years. The discrepancies noticed, if any, are accounted for in the year in which such differences are found.
1.11.2 INTANGIBLE ASSETS
Costs of intangible assets are capitalized when the asset is ready for its intended use.
Intangible assets include expenditure on computer software, and right to way/right of use of land and are stated at the amount initially recognized less accumulated amortization and accumulated impairment losses.
Cost of right of use / right of way of land is amortized on a straight line basis over the lower of period of such rights or useful life of the related asset for which right of use / right of way is taken. Cost of computer software is amortized over the useful life not exceeding five years from the date of capitalization.
Any intangible asset, when determined of no further use, is written off.
1.11.3 IMPAIRMENT OF PROPERTY, PLANT & EQUIPMENT (PPE), E&E ASSETS, INTANGIBLE ASSETS OTHER THAN GOODWILL.
At the end of each reporting period, the Company reviews the carrying amounts of its property, plant & equipment (including capital work in progress) to determine whether there is any indication that those assets have suffered an impairment loss. For this purpose Producing fields, LPG plant. Transportation Pipeline and Power Generating Units (other than captive power plants) are considered as Cash Generating Units (CGU). If any such indication exists, the recoverable amount of the CGU is estimated in order to determine the extent of the impairment loss (if any). Corporate assets and common service assets are also allocated to individual cash-generating units on a reasonable and consistent basis.
Intangible assets are tested for impairment annually. Whenever there is an indication that the asset may be impaired, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of a CGU is estimated to be less than its carrying amount, the carrying amount of the asset or group of assets covered under the CGU is reduced to its recoverable amount. An impairment loss is recognized immediately in the statement of profit and loss.
E&E Assets are reviewed for indicators of impairment as per Ind AS 106 and if events and circumstances suggest, impairment loss is provided for and carrying amount is reduced accordingly.
When an impairment loss is subsequently reversed, the carrying amount of the asset or group of assets covered under the CGU is increased to the revised estimate of its recoverable amount, so however that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or group of assets covered under the CGU in prior years. A reversal of an impairment loss is recognized immediately in the Statement of Profit and Loss.
1.12.0 INVENTORIES
Finished goods of Crude Oil, Liquefied Petroleum Gas (LPG) and LPG condensate are valued at cost or net realizable value, whichever is lower. Cost of finished goods is determined based on direct cost and directly attributable services cost including depreciation & depletion. The value of such inventories includes excise duty and royalty (wherever applicable). Net realizable value represents the estimated selling price for inventories less all costs necessary to effect the sale.
Crude oil in unfinished condition in the flow line up to Group Gathering Station and Natural Gas in Pipeline are not valued, as these pipeline fills are necessary to the operation of the facility.
Stores and spares are valued at weighted average cost or net realizable value whichever is lower. Obsolete / unserviceable items, as and when identified, are written off. Any item of stores and spares including those in Storage Locations which have not moved for last four years as on date of Balance Sheet are identified as slow moving items for which a provision of 95% of the value is made in the accounts.
Renewable Energy Certificates (REC) received based on generation of renewable energy certified by the competent authority, held for trading are not valued.
1.13.1 PROVISIONS
Provisions are recognized when the Company has a present obligation as a result of a past event and it is probable that the Company will be 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 end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
1.13.2 DECOMMISSIONING AND RESTORATION OBLIGATIONS
Full eventual liabilities towards costs relating to assets retirement obligations are recognized when the Company has an obligation to plug and abandon a well, dismantle and remove a facility or an item of plant and to restore the site on which it is located, and when a reliable estimate of that liability can be made. Liabilities towards costs relating to dismantling, abandoning and restoring well sites and associated Production Facilities are recognized at the commencement of drilling a well or when facilities are installed, as the case may be. The amount recognized is the present value of the estimated future expenditure determined in accordance with local conditions and requirements. The provision for the costs of decommissioning wells, production facilities including fields'' pipelines at the end of their economic lives is estimated using existing technology, at current prices or future assumptions, depending on the expected timing of the activity, and discounted using govt, bonds rate.
An amount equivalent to the decommissioning liability provision is recognized as part of the corresponding PPE or Exploration & Evaluation Asset (E&E) as the case may be.
Liability for decommissioning cost is updated annually based on the technical assessment available at current costs. The unwinding of the discount is included as a finance cost. Any change in the present value of the estimated future cash flow to settle the obligation due to change in measurement or discount rate shall be added to or deducted from the cost of the asset in the current period and would be considered for depreciation (depletion) prospectively.
Except in the case of E&E assets, the actual cost incurred on settlement of the obligation is adjusted against the liability and the ultimate gain or loss is recognized in the Statement of Profit and Loss, when the designated oil/gas field ora group of oil/gas fields ceases to produce.
1.14.0 INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINTVENTURES
The Company measures its investments in subsidiaries, associates and joint ventures at cost less impairment. The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. If any such indication of impairment exists, the Company makes an estimate of its recoverable amount. Where the carrying amount of an investment exceeds its recoverable amount, the investment is considered impaired and is written down to its recoverable amount.
1.15.0 FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs 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 of the financial assets or financial liabilities, as is appropriate, on initial recognition.
1.15.1 FINANCIAL ASSETS
1.15.1.1 INVESTMENT IN SECURITIES
All regular purchases or sales of financial assets are recognized and de-recognized on a trade date basis.
All recognized financial assets are subsequently measured in their entirety either at amortized cost or fair value, depending on the classification of the financial assets
1.15.1.1.1 CLASSIFICATION OF FINANCIAL ASSETS
(i) Debt instruments that meet the following conditions are subsequently measured at amortized cost less impairment loss (except for debt investments that are designated as at Fair Value Through Profit or Loss (FVTPL) on initial recognition):
a) the asset is held within a business model whose objective is to hold assets till maturity in order to collect contractual cash flows; and
b) the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(ii) Debt instruments that meet the following conditions are subsequently measured at Fair Value Through Other Comprehensive Income (except for debt investments that are designated as at FVTPL on initial recognition):
a) the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and
b) the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(iii) Debt instruments that do not meet the criteria of amortized cost or Fair Value through Other Comprehensive Income (FVTOCI) are measured at FVTPL.
(iv) AlI other financial assets are subsequently measured at fair value through Profit or Loss.
1.15.1.1.2 AMORTISED COST AND EFFECTIVE INTEREST METHOD
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash flows (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognized in the statement of profit & loss under investment income on an effective interest basis for debt instruments other than those financial assets classified as FVTPL.
1.15.1.1.3 INVESTMENTS IN EQUITY INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (FVTOCI)
On initial recognition, the Company can make an irrevocable election (on an instrument-by-instrument basis) to present the subsequent changes in fair value in other comprehensive income for equity instruments that are not held for trading. These elected investments are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity under subhead Equity instruments through other comprehensive income. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.
Dividends on these investments in equity instruments are recognized in the Statement of Profit and Loss when the Company''s right to receive the dividends is established and it does not represent a recovery of part of cost of the investment.
1.15.1.2 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash at bank and in hand, including offsetting bank overdrafts, and short-term highly liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in fair value and have a maturity of three months or less from the acquisition date.
1.15.1.3 TRADE RECEIVABLES
Trade receivables are recognized initially at fair value based on amounts exchanged and subsequently at the amortized cost less any impairment.
1.15.1.4 IMPAIRMENT OF FINANCIAL ASSETS
The Company measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since its initial recognition. If the credit risk on a financial instrument has not increased significantly since its initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses.
However, for trade receivables or contract assets that result in relation to revenue from contracts with customers, the Company measures the loss allowance at an amount equal to lifetime expected credit losses.
1.15.1.5 DE-RECOGNITION OF FINANCIAL ASSETS
The Company de-recognizes a financial asset 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 party.
On de-recognition of a financial asset in its entirety, the difference between the asset''s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of that financial asset.
1.15.2 FINANCIAL LIABILITIES AND EQUITY INSTRUMENTS 1.15.2.1 EQUITY INSTRUMENTS
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a Company are recognized at the proceeds received, net of direct issue costs.
1.15.2.2 FINANCIAL LIABILITIES
All financial liabilities are subsequently measured at amortized cost using the effective interest method or at FVTPL. However, financial guarantee contracts issued by the Company, and commitments issued by the Company to provide a loan at below-market interest rate are measured in accordance with the specific accounting policies set out below.
1.15.2.2.1 FINANCIAL LIABILITIES AT FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL.
1.15.2.2.2 FINANCIAL LIABILITIES SUBSEQUENTLY MEASURED AT AMORTIZED COST
Financial liabilities that are not held-for-trading and not designated as at FVTPL are measured at amortized cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortized cost are determined based on the effective interest method. Interest expense that is not capitalized as part of costs of an asset is included in the ''finance costs'' line item.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
1.15.2.2.3 FINANCIAL GUARANTEE CONTRACTS
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by a Company are initially measured at their air values and, if not designated as at FVTPL, are subsequently measured at the higher of:
a) the amount of loss allowance determined in accordance with impairment requirements of Ind AS 109; and
b) the amount initially recognized less, when appropriate, the cumulative amount of income recognized in accordance with the principles of Ind AS 18 or the amount initially recognized less, when appropriate, the cumulative amount of finance income recognized which measured by amortizing the initial fair value of guarantee on a straight line basis over the guarantee period.
1.15.2.2.4 DE-RECOGNITION OF FINANCIAL LIABILITIES
The Company derecognizes financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability de-recognized and the consideration paid and payable is recognized in profit or loss.
1.16.0 INTEREST IN JOINT OPERATIONS
Production Sharing Contracts (PSCs) executed with the Government of India/ Government of Foreign Countries by the Company along with other entities to undertake exploration, development and production of Oil and/or Gas activities under a joint venture in various concessions/block/area are accounted asunder:
The financial statements reflect the share of the Company''s assets, liabilities and also the income and expenditure of the Joint Venture in proportion to the participating interest of the Company as per the terms of the PSCs, on a line byline basis. Depreciation, depletion and impairment and value of Stock of Crude Oil are accounted for as per the relevant accounting policies of the Company. Proved Developed Reserve of Oil & Gas in such concessions/block/area is also considered in proportion to participating interest of the Company.
Consideration recoverable from new Joint Venture Partners for the right to participate in operations is reduced from respective assets and/or expenditure to the extent of the new partner''s contribution towards past cost and balance is considered as miscellaneous receipts/expenses.
1.17.0 SEGMENT ACCOUNTING
Considering the nature and associated risks and return of products & services, the Company has adopted its products & services (viz. Crude Oil, Natural Gas, LPG and Pipeline Transportation) as the primary reporting segments. There are no reportable geographical segments.
Segment assets, liabilities, income and expenses have been either directly identified or allocated to the segments on the basis usually followed for allocation of cost adopted for preparing and presenting the financial statements of the Company.
1.18.0 EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, the net profit for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
1.19.0 DIVIDEND
The final dividend on shares is recorded as a liability on the date of approval by shareholders, and interim dividends are recorded as a liability on the date of declaration by the Companyâs board of directors.
1.20.0 CONTINGENT LIABILITIES AND CONTINGENT ASSETS
(i) Contingent liabilities, if material, are disclosed by way of notes to the accounts.
(ii) Contingent assets are not recognized but disclosed in the financial statements along with an estimate of their financial effect where an inflow of economic benefits is probable and where practicable.
1.21.0 APPLICATION OF NEW OR REVISED IND AS
At the date of preparation of these financial statements, there were some amendments issued to the existing Ind ASs, after the initial notification issued by the Ministry of Corporate Affairs. MCA has notified Companies (Indian Accounting Standards) (Amendments) Rules, 2017, which are effective from April 1,2017. These rules bring in amendments to Ind AS 7, ''Statement of cash flows'' and Ind AS 102, ''Share-based payment''.
The Company is evaluating the requirements of the amendment and the effect on the financial statements is being evaluated.
6.1 The aggregate carrying value of unquoted investments is Rs, 10742.71 crore (as at 31.03.2016 Rs, 8659.83 crore and as at 01.04.2015 Rs,8377.3l crore).
6.2 The aggregate amount of quoted investments is Rs, 10058.42 crore (as at 31.03.2016Rs, 5439.24 crore and as at 01.04.2015Rs, 5014.42 crore).
6.3 The aggregate market value of quoted investments is Rs, 10150.44 crore (as at 31.03.2016Rs, 5497.98 crore and as at 01.04.2015Rs, 5192.14 crore).
(*) the increase in shares was due to issue of bonus shares.
6.7 Mode of valuation of investments is given in Note no 1.14 &1.15.
6.8 Advance against acquisition of equity shares includes advances amounting to Rs, 0.06 crore (as at 31.03.2016 Nil and as at 01.04.2015 Rs, 0.16 crore), Rs, 590.04 crore (as at 31.03.2016 Nil and as at 01.04.2015 Rs, 69.64 crore), Rs, 51.56 crore (as at 31.03.2016 Rs, 486.25 crore and as at
6.4 The aggregate amount of impairment in value of investment is Rs, 174.00 crore (as at 31.03.2016 Rs, 174.00 crore andasat0l.04.2015 Nil).
6.5 The Fair Value of Financial Guarantee - Subsidiaries represents investment in M/s Oil India (USA) Inc. & Oil India International Pte. Ltd and Fair Value of Financial Guarantee - Associates represents investment in M/s Brahmaputra Cracker & Polymer Limited.
01.04.2015 Nil), Rs,2ll.22 crore (as at 31.03.2016 Rs, 210.53 crore and as at 01.04.2015 Rs, 210.05 crore), Rs, 0.51 crore (as at 31.03.2016 Nil and as at 01.04.2015 Nil) and Rs, 213.60 crore (as at 31.03.2016 Nil and as at
01.04.2015 Nil) paid to Oil India Cyprus Limited, Oil India (USA) Inc., Beas Rovuma Energy Mozambique Ltd, Oil India International B.V., Oil India Sweden AB and Oil India International Pte. Ltd. respectively pending allotment.
7.2 In January 2014, the Company acquired 40% shares in M/s. Beas Rovuma Energy Mozambique Limited (BREML), which holds 10% participating interest in the Rovuma Areal, Mozambique. Subsequent to the acquisition, the Company has been extending advances to BREML towards its share of expenditure in the project in Mozambique. However, at end of FY 2015-16, the Company has converted such advances paid to BREML into Advance for equity to be allotted with equity shares of BREML.
7.3Loans represent loans given to
(i) M/s Oil India International B.V.:
a) Rs, 294.44 crore (USD 45 million) {as at 31.03.2016Rs, 301.05 crore (USD 45 million) and as at 01.04.2015Rs, 176.93 crore (USD 28 million)} maturing on 7th April, 2021, carries interest at 3 months LIBOR plus 5.65%.
b) Rs, 65.43 crore (USD 10 million) {as at 31.03.2016 Rs, 33.45 crore (USD 5 million) and as at 01.04.2015 Nil (USD Nil)} maturing on 7th April, 2021, carries interest at 3 months LI BOR plus 8.65%.
c) Balance Rs, 44.50 crore (as at 31.03.2016 Rs, 20.74 crore and as at 01.04.2015 Rs, 3.58 crore) represents accrued interest on the loan and revaluation thereof.
(ii) M/s Suntera Nigeria 205 Ltd.:
a) Rs, 110.29 crore (USD 16.86 million) {as at 31.03.2016 Rs, 107.02 crore (USD 16 million) and as at 01.04.2015 Nil (USD Nil)}-(before impairment) maturing on 31st January, 2022, carries interest at 8.75%.
b) Balance Rs, 62.64 crore (as at 31.03.2016 Rs, 54.53 crore and as at 01.04.2015 Nil) represents accrued interest on the loan and revaluation thereof.
c) No further allowances for doubtful loans during the year 2016-17 have been made beyond what was previously assessed as there being no indicators of further loss of future cash flows.
(iii) M/s Duliajan Numaligarh Pipeline Limited has prepaid the outstanding loan during the FY 2015-16.
(iv) M/s Brahmaputra Cracker & Polymer Limited has prepaid the outstanding loan during the FY 2016-17.
Mar 31, 2015
1 ACCOUNTING CONVENTION:
The Financial Statements are prepared under the historical cost
convention on accrual method of accounting, in accordance with the
Generally Accepted Accounting Principles and complying with the
mandatory Accounting Standards notified by the Government of India
under the Companies (Accounting Standards) Rules, 2006 and the relevant
provisions and presentational requirement of the Companies Act, 2013.
2 CLASSIFICATION OF ASSETS & LIABILITIES:
All the Assets and Liabilities of the Company are segregated into
Current & Non-current based on the principles and definitions as set
out in the Schedule III to the Companies Act, 2013 as amended. The
Company has adopted a period of 12 months as its Operating Cycle.
3 PRE-ACQUISITION COSTS, ACQUISITION
COSTS, EXPLORATION COSTS,
DEVELOPMENT COSTS AND ABANDONMENT COSTS :
The Company follows the "Successful Efforts Method" (SEM) of Accounting
in respect of its oil and gas exploration and production activities in
accordance with the "Guidance Note on Accounting for Oil & Gas
Producing Activities" issued by the Institute of Chartered Accountants
of India.
3.1 PRE-ACQUISITION COSTS:
Costs of revenue nature incurred prior to obtaining the rights to
explore, develop and produce Oil & Gas like data collection & analysis
cost etc. are expensed to the Statement of Profit and Loss in the year
of incidence.
3.2 GEOLOGICAL & GEOPHYSICAL COSTS:
Geological and Geophysical expenditure are charged as expense when
incurred.
.3 ACQUISITION COSTS:
i) Acquisition costs include land acquired for drilling operations
including cost of temporary occupation of the land, crop compensation
paid to farmers, registration fee, legal cost, signature
bonus, brokers' fees, consideration for farm-in arrangements and other
costs incurred in acquiring mineral rights.
ii) Cost for retaining the mineral interest in properties like lease
carrying cost, license fees & other cost are charged as expense when
incurred.
iii) Acquisition costs are initially recorded under Capital work in
progress-Tangible & Intangible as the case may be.
iv) On determination of proved developed reserves, associated
acquisition costs are transferred to Fixed Assets- Producing
Properties.
v) Acquisition cost of Producing Properties is capitalized under Fixed
Asset-Producing Properties.
vi) Acquisition cost relating to an exploratory well that is determined
to have no proved reserves and its status is decided as dry or of no
further use for exploration purpose, is charged as expenses. In such
cases, for land value forming part of acquisition cost, a nominal
amount of Rs.100 per bigha is transferred to Freehold land under Fixed
Assets.
3.4 EXPLORATION COSTS:
i) All exploration costs including allocated depreciation on support
equipment and facilities involved in drilling and equipping exploratory
and appraisal wells and cost of exploratory-type drilling stratigraphic
test wells are initially shown as Intangible assets under Capital Work
in Progress as exploration cost till the time these are either
transferred to Fixed Assets as Producing Properties on determination of
Proved Developed Reserves or charged as expense when determined to be
dry or of no further use.
ii) Cost of exploratory wells are not carried over unless it could be
reasonably demonstrated that there are indications
of sufficient quantity of reserves and activities are firmly planned in
near future for further assessing the reserves and economic & operating
viability of the project. Costs of written off exploratory wells are
not reinstated in the book even if they start producing subsequently.
3.5 DEVELOPMENT COSTS:
Costs that are attributable to development activities including
production and processing plant & facilities, service wells including
allocated depreciation on support equipment and facilities are
initially shown as Tangible Assets under Capital Work in Progress as
Development Cost till such time they are capitalized as Producing
Properties upon determination of Proved Developed Reserves.
3.6 PRODUCTION COSTS:
Production Cost consist of direct and indirect costs incurred to
operate and maintain wells and related equipments and facilities,
including depreciation and applicable operating cost of support
equipment and facilities.
3.7 SIDE-TRACKING EXPENDITURE:
In case of exploratory wells, the cost of abandoned portion of side
tracked well is charged off to Profit and Loss statement. In case of
development wells, the entire cost of abandoned portion and
side-tracking is capitalized. In case of existing producing wells the
cost of side - tracking is capitalized if it increases the proved
developed reserves, otherwise is charged off to Profit and loss
statement.
3.8 ABANDONMENT COSTS:-
i. Estimated full eventual liability towards costs relating to
dismantling, abandoning and restoring well sites and associated
Production Facilities are recognized at the commencement of drilling a
well or when facilities are installed, as the case may be. Liability
for abandonment cost is updated annually based on the technical
assessment available at current costs.
ii. The actual cost incurred on abandonment is adjusted against the
liability and the ultimate gain or loss is recognized in the Statement
of Profit and Loss, when the designated oil/gas field or a group of
oil/ gas fields ceases to produce.
4 FIXED ASSETS, DEPRECIATION & DEPLETION
4.1 TANGIBLE ASSETS:
i) Cost of Freehold & Leasehold land which are perpetual in nature used
for other than exploration and development activity are not amortized.
Leasehold land other than perpetual lease is amortized over the lease
period.
ii) All successful exploratory well cost, development well cost and
other development cost viz. Production Facilities are capitalized when
the same is ready to commence commercial production.
iii) Costs relating to acquisition/ construction of tangible assets
other than producing properties are capitalized on commissioning.
iv) Land acquired on perpetual lease as well as on lease over 99 years
is treated as free hold land and not amortized.
v) Land acquired on lease for 99 years or less is treated as leasehold
land and amortised over the lease period.
vi) Any Tangible asset, when determined of no further use, is deleted
from the Gross Block of assets. The deleted assets are carried as
'Assets awaiting disposal' under Inventories at lower of Rs.1000 or 5%
of the original cost and the balance Written down Value, is charged
off.
vii) Physical verification of the fixed assets is carried out by the
Company in a phased manner to cover all the items over a period of five
years. The discrepancies, if any, noticed are accounted for after
reconciliation of the same.
4.2 INTANGIBLE ASSETS:
i) Costs of intangible assets are capitalized when the asset is ready
for its intended use.
ii) Cost of right of use/right of way for laying pipelines is
capitalized and amortized on a straight line basis over the period of
such right of use / right of way or 99 years whichever is lower, as per
industry practice.
iii) Cost incurred on computer software purchased /developed are
capitalized as intangible asset and amortized over the useful life not
exceeding five years from the date of capitalization.
iv) Any intangible asset, when determined of no further use, is written
off.
4.3 DEPRECIATION:
i) Depreciation on Tangible Assets other than Producing Properties is
provided for under the "Written down Value Method", in the manner
specified in Schedule II to the Companies Act, 2013.
ii) Capital assets costing up to Rs. 5000 each are fully depreciated in
the year of acquisition.
4.4 DEPLETION:
i) Acquisition Costs are depleted using the "Unit of Production Method"
with reference to the ratio of production and related Proved reserves.
ii) Producing Wells and Production Facilities are depleted using the
"Unit of Production Method", with reference to ratio of production and
the related Proved Developed Reserves.
iii) Rate of depletion is determined based on production from the
Oil/Gas field or a group of Oil/Gas fields identified with reference to
the related reserves having common geological feature.
5 FOREIGN CURRENCY TRANSLATION
(i) Foreign currency transactions are initially recognised and
accounted for at the exchange rates prevailing at the dates of
transactions.
(a) Foreign Currency monetary assets &
liabilities outstanding at the close of the
year are translated at the rates of exchange prevailing at the date of
Balance Sheet. Resultant gains or loss is accounted for during the
year, except those relating to long-term foreign currency monetary
items.
(b) Exchange differences on long-term foreign currency monetary items
relating to acquisition of depreciable assets are adjusted to the
carrying cost of the assets and depreciated over the balance life of
the assets in line with para 46A of Accounting Standard-11. In other
cases, exchange differences are accumulated in a "Foreign Currency
Monetary Item Translation Difference Account" and amortised over the
balance period of such long term foreign currency monetary item by
recognition as income or expense in each of such periods.
(ii) Foreign currency transactions in relation to Joint Venture
(Overseas) are treated in the following manner:
(a) Foreign currency transactions are initially recognised and
accounted for at the exchange rates prevailing at the dates of
transactions. However, the average exchange rate of relevant month is
taken for the transactions of that month, where actual rate of
transaction is not available or at the rate as agreed otherwise.
(b) Foreign Currency monetary assets & liabilities outstanding at the
close of the year are translated at the rates of exchange prevailing at
the date of Balance Sheet. Resultant gains or loss is accounted for
during the year.
6 IMPAIRMENT OF ASSETS:
(i) Acquisition costs, pending capitalization to Producing Properties
and exploration costs under Intangible Assets-Capital Work in Progress
are reviewed for indicators of impairment and if events and
circumstances suggest, impairment loss is provided for and carrying
amount is reduced accordingly.
(ii) Producing fields, LPG Plant, Transportation Pipeline and Power
Generating Units (other than Captive Power Plants) are considered as
Cash Generating Units. A "Cash Generating Unit" is reviewed for
impairment at each Balance Sheet date. An impairment loss is recognized,
whenever the carrying amount of assets exceeds the recoverable amount by
writing down such assets to their recoverable amount.
An impairment loss is reversed if there is change in the recoverable
amount and such loss either no longer exists or has decreased.
Impairment loss/reversal thereof is adjusted to the carrying value of
the respective assets. Impairment testing is normally carried out at
the year-end unless compelling circumstances exist for review during
the course of the year.
7 JOINT VENTURES:
Production Sharing Contracts (PSCs) executed with the Government of
India / Government of Foreign Countries by the company along with other
entities to undertake exploration, development and production of Oil
and/or Gas activities under a joint venture in various
concessions/block/area are accounted as under:
(i) The financial statements reflect the share of the Company's assets,
liabilities and also the income and expenditure of the Joint Venture in
proportion to the participating interest of the Company as per the
terms of the PSCs, on a line by line basis. Depreciation, depletion and
impairment and value of Stock of Crude Oil are accounted for as per the
relevant accounting policies of the Company whereas provision for
abandonment is created as per terms of PSC. Proved Developed Reserve
of Oil & Gas in such concessions/block/area are also considered in
proportion to participating interest of the Company.
(ii) Consideration recoverable from new Joint Venture Partners for the
right to participate in operations are:
a) Reduced from respective assets and/or expenditure to the extent of
the new partners contribution towards past cost,
b) Balance is considered as miscellaneous receipts/expenses.
8 INCOME TAX:
i) The tax expense for the year comprises current tax and deferred tax.
ii) Provision for current tax is made using the applicable tax rates on
the taxable income for the relevant period determined in accordance
with the provisions of the Income Tax Act'1961. Deferred tax resulting
from "timing difference" between taxable income and accounting income
is accounted for using the tax rates and tax laws applicable for the
relevant financial year. Deferred Tax Asset is reassessed and
recognized only to the extent that there is virtual certainty that
sufficient future taxable income will be available against which the
deferred tax asset will be realized in future.
9 INVESTMENTS:
i) Non Current investments are valued at cost. However, provision for
diminution in value is made to recognise a decline in the value, other
than temporary.
ii) Current investments are valued at lower of cost or fair value.
10 INVENTORY:
(i) Finished goods of Crude Oil, Liquefied Petroleum Gas and LPG
condensate are valued at cost or net realizable value, whichever is
lower. Cost of finished goods is determined based on direct cost and
directly attributable services cost including depreciation & depletion.
(ii) Crude oil in unfinished condition in the flow line up to Group
Gathering Station and Natural Gas in Pipeline are not valued, as these
pipeline fills are necessary to the operation of the facility.
(iii) Stores and spare are valued at weighted average cost or net
realizable value whichever is lower. Obsolete / unserviceable items, as
and when identified, are written off. Any item of stores and spares not
moved for last four years as on date of Balance Sheet are identified as
slow moving items for which a provision of 95% of the value is made in
the accounts.
11 EMPLOYEE BENEFITS
i) All short-term employee benefits are recognised as an expense at the
undiscounted amount in the accounting period in which the related
service is rendered.
ii) Employee benefits under defined contribution
plan such as provident fund is recognised based on the undiscounted
obligations of the company to contribute to the plan.
iii) Employee benefits under defined benefit plans such as gratuity,
leave encashment, post retirement medical benefits, pension are
recognised based on the present value of defined benefit obligation,
which is computed on the basis of actuarial valuation using the
projected unit credit method. Actuarial liability in excess of
respective plan assets is recognised during the year and in case the
plan assets exceed the Actuarial Liability, no further provision is
considered. Actuarial gain and losses in respect of post employment and
other long-term benefits are recognised during the year.
12 REVENUE RECOGNITION
(i) Revenue from sale of products is recognized on custody transfer to
customers.
(ii) Sale of crude oil and gas produced from exploratory wells is
deducted from expenditure on such wells.
(iii) Sales are inclusive of statutory levies but excluding Value Added
Tax (VAT) & Central Sales Tax (CST) and net of discounts & companies
share of profit petroleum paid to GOI. Any retrospective revision in
prices is accounted for in the year of such revision.
(iv) Claims on Government / Petroleum Planning & Analysis Cell (PPAC)
are booked on acceptance in principle by the authority.
(v) Dividend Income is recognized when the right to receive the
dividend is established.
(vi) Revenue in respect of the following is recognized when there is
reasonable certainty regarding ultimate realization:
(a) Short lifted quantity of Crude Oil & Natural Gas, if any.
(b) Interest on delayed realization from customers.
(vii) Insurance claim other than for transit loss of stores items are
accounted for on final acceptance by the Insurance Company.
(viii) Recovery/Refund of Liquidated Damages are recognised in the
Statement of Profit and Loss in the year of occurrence as income or
expenditure as the case may be except in case of JVC which are governed
by the respective PSC.
(ix) Revenue from sale of other services is recognised when service is
rendered in line with contracts executed there with.
13 GRANTS
Grants are recognised when there is reasonable assurance that the same
would be realized. Grants related to specific assets are deducted from
the gross value of the concerned assets.
14 BORROWING COSTS
i) Borrowing costs during the construction period that are attributable
to qualifying assets are capitalized and also includes exchange
difference arising from Foreign Currency borrowings to the extent that
they are regarded as an adjustment to interest cost.
ii) Other borrowing costs are recognised as expenses when incurred.
15 SEGMENT ACCOUNTING
i) Considering the nature and associated risks and return of products &
services, the company has adopted its products & services (viz. Crude
Oil, Natural Gas, LPG and Pipeline Transportation) as the primary
reporting segments. There are no reportable geographical segments.
ii) Segment assets, liabilities, income and expenses have been either
directly identified or allocated to the segments on the basis usually
followed for allocation of cost adopted for preparing and presenting
the financial statements of the Company.
16 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
i) Provisions in respect of which a reliable estimate can be made are
recognised where there is a present obligation as a result of past
events and it is probable that there will be an outflow of resource.
ii) Contingent liabilities, if material, are disclosed by way of notes
to the accounts.
iii) Contingent assets are neither recognised nor disclosed in the
financial statements.
17 EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the net profit for
the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year. For the purpose of
calculating diluted earnings per share, the net profit for the year
attributable to equity shareholders and the weighted average number of
shares outstanding during the year are adjusted for the effects of all
dilutive potential equity shares.
18 GENERAL
i) All revenue expenditure, incurred for Research & Development Projects
/ Schemes, net of grants- in-aid, if any, are charged to the Statement
of Profit & Loss.
ii) Assets given on finance lease are accounted as per Accounting
Standard 19 "Leases". Such assets are included as a receivable at an
amount equal to the net investment in the lease. Initial direct costs
incurred in respect of finance leases are recognized in the statement
of profit and loss in the year in which such costs are incurred.
iii) Prior period items/Prepaid expenses having value in each case up
to Rs. 5 lacs are booked under natural head of accounts.
Mar 31, 2014
The Financial Statements are prepared under the historical cost
convention on accrual method of accounting, in accordance with the
Generally Accepted Accounting Principles and complying with the
mandatory Accounting Standards notified by the Government of India
under the Companies (Accounting Standards) Rules, 2006 and the relevant
provisions and presentational requirement of the Companies Act, 1956.
32.2 Classification of Assets & Liabilities
All the Assets and Liabilities of the Company are segregated into
Current & Non-current based on the principles and definitions as set
out in the Schedule VI to the Companies Act, 1956 as amended. The
Company has adopted a period of 12 months as its Operating Cycle.
32.3 PRE-ACQUISITION COSTS, ACQUISITION COSTS, EXPLORATION COSTS,
DEVELOPMENT COSTS AND ABANDONMENT COSTS :
The Company follows the "Successful Efforts Method" (SEM) of Accounting
in respect of its Oil and Gas exploration and production activities in
accordance with the "Guidance Note on Accounting for Oil & Gas
Producing Activities" issued by the Institute of Chartered Accountants
of India.
32.3.1 PRE-ACQUISITION COSTS:-
Costs of revenue nature incurred prior to obtaining the rights to
explore, develop and produce Oil & Gas like data collection & analysis
cost etc. are expensed to the Statement of Profit and Loss in the year
of incidence.
32.3.2 GEOLOGICAL & GEOPHYSICAL COSTS:-
Geological and Geophysical expenditure are charged as expense when
incurred.
32.3.3 ACQUISITION COSTS:-
i) Acquisition costs include land acquired for drilling operations
including cost of temporary occupation of the land, crop compensation
paid to farmers, registration fee, legal cost, signature bonus,
brokers'' fees, consideration for farm-in arrangements and other costs
incurred in acquiring mineral rights.
ii) Cost for retaining the mineral interest in properties like lease
carrying cost, license fees & other cost are charged as expense when
incurred.
iii) Acquisition costs are initially recorded under Capital work in
progress-Tangible & Intangible as the case may be.
iv) On determination of proved developed reserves, associated
acquisition costs are transferred to Fixed Assets-Producing Properties.
v) Acquisition cost of Producing Properties is capitalized under Fixed
Asset-Producing Properties.
vi) Acquisition cost relating to exploratory well that is determined to
have no proved reserves and its status is decided as dry or of no
further use for exploration purpose, is charged as expenses. In such
cases, for land value forming part of acquisition cost, a nominal
amount of Rs.100 per bigha is transferred to Freehold land under Fixed
Assets.
32.3.4 EXPLORATION COSTS:-
i) All exploration costs including allocated depreciation on support
equipment and facilities involved in drilling and equipping exploratory
and appraisal wells and cost of exploratory-type drilling stratigraphic
test wells are initially shown as Intangible assets under Capital Work
in Progress as exploration cost till the time these are either
transferred to Fixed Assets as Producing Properties on determination of
Proved Developed Reserves or charged as expense when determined to be
dry or of no further use.
ii) Cost of exploratory wells are not carried over unless it could be
reasonably demonstrated that there are indications of sufficient
quantity of reserves and activities are firmly planned in near future
for further assessing the reserves and economic & operating viability
of the project. Costs of written off exploratory wells are not
reinstated in the book even if they start producing subsequently.
32.3.5 DEVELOPMENT COSTS:-
Costs that are attributable to development activities including
production and processing plant & facilities, service wells including
allocated depreciation on support equipment and facilities are
initially shown as Tangible Assets under Capital Work in Progress as
Development Cost till such time they are capitalized as Producing
Properties upon determination of Proved Developed Reserves.
32.3.6 PRODUCTION COSTS:-
Production Cost consist of direct and indirect costs incurred to
operate and maintain wells and related equipments and facilities,
including depreciation and applicable operating cost of support
equipment and facilities.
32.3.7 SIDE-TRACKING EXPENDITURE:-
In case of exploratory wells, the cost of abandoned portion of side
tracked well is charged off to Profit and loss statement. In case of
development wells, the entire cost of abandoned portion and side-
tracking is capitalized. In case of existing producing wells the cost
of side  tracking is capitalized if it increases the proved developed
reserves, otherwise is charged off to Profit and loss statement.
32.3.8 ABANDONMENT COSTS:-
i) Estimated full eventual liability towards costs relating to
dismantling, abandoning and restoring well sites and associated
Production Facilities are recognized at the commencement of drilling a
well/when facilities are installed. Liability for abandonment cost is
updated annually based on the technical assessment available at current
costs.
ii) The actual cost incurred on abandonment is adjusted against the
liability and the ultimate gain or loss is recognized in the Statement
of Profit and Loss, when the designated oil/gas field or a group of
oil/gas fields ceases to produce.
32.4 FIXED ASSETS, DEPRECIATION & DEPLETION
32.4.1 Tangible Assets:-
i) Cost of Freehold & Leasehold land which are perpetual in nature used
for other than exploration and development activity are not amortized.
Leasehold land other than perpetual lease is amortized over the lease
period.
ii) All successful exploratory well cost, development well cost and
other development cost viz. Production Facilities are capitalized when
the same is ready to commence commercial production.
iii) Costs relating to acquisition/ construction of tangible assets
other than producing properties are capitalized on commissioning.
iv) Land acquired on perpetual lease as well as on lease over 99 years
is treated as free hold land and not amortized.
v) Land acquired on lease for 99 years or less is treated as leasehold
land and amortised over the lease period.
vi) Any Tangible asset, when determined of no further use, is deleted
from the Gross Block of assets. The deleted assets are carried as
''Assets awaiting disposal'' under Inventories at lower of Rs.1000 or 5% of
the original cost and the balance Written down Value, is charged off.
32.4.2 Intangible Assets:-
i) Costs of intangible assets are capitalized when the asset is ready
for its intended use.
ii) Cost of right of use/right of way for laying pipelines is
capitalized and amortized on a straight line basis over the period of
such right of use / right of way or 99 years whichever is lower, as per
industry practice.
iii) Cost incurred on computer software purchased / developed are
capitalized as intangible asset and amortized over the useful life not
exceeding five years from the date of capitalization.
iv) Any intangible asset, when determined of no further use, is written
off.
32.4.3 DEPRECIATION
i) Depreciation on Tangible Assets other than Acquisition cost & cost
of producing well is provided for under the "Written down Value
Method", at the rates and in the manner specified in Schedule XIV to
the Companies Act, 1956.
ii) Capital assets costing up to Rs 5000 each are fully depreciated in
the year of acquisition.
32.4.4 DEPLETION
i) Acquisition costs are depleted using the "Unit of Production Method"
with reference to the ratio of production and related Proved reserves.
ii) Producing Wells are depleted using the "Unit of Production Method",
with reference to ratio of production and the related Proved Developed
Reserves.
iii) Rate of depletion is determined based on production from the
Oil/Gas field or a group of Oil/Gas fields identified with reference to
the related reserves having common geological feature.
32.5 FOREIGN CURRENCY TRANSLATION
i) Foreign currency transactions are initially recognised and accounted
for at the exchange rates prevailing at the dates of transactions.
ii) a) Foreign Currency monetary assets & liabilities outstanding at
the close of the year, are translated at the rates of exchange
prevailing at the date of Balance Sheet. Resultant gains or loss is
accounted for during the year, except those relating to long-term
foreign currency monetary items.
b) Exchange differences on long-term foreign currency monetary items
relating to acquisition of depreciable assets are adjusted to the
carrying cost of the assets and depreciated over the balance life of
the assets in line with para 46A of Accounting Standard-11. In other
cases, exchange differences are accumulated in a "Foreign Currency
Monetary Item Translation Difference Account" and amortised over the
balance period of such long term foreign currency monetary item by
recognition as income or expense in each of such periods.
iii) Foreign currency transactions in relation to Joint Venture
(Overseas) are treated in the following manner:- a) Foreign currency
transactions are initially recognised and accounted for at the exchange
rates prevailing at the dates of transactions. However, the average
exchange rate of relevant month is taken for the transactions of that
month, where actual rate of transaction is not available or at the rate
as agreed otherwise.
b) Foreign Currency monetary assets & liabilities outstanding at the
close of the year are translated at the rates of exchange prevailing at
the date of Balance Sheet. Resultant gains or loss is accounted for
during the year.
32.6 IMPAIRMENT OF ASSETS
Acquisition costs, pending capitalization to Producing Properties and
exploration costs under Intangible Assets- Capital Work in Progress are
reviewed for indicators of impairment and if events and circumstances
suggest, impairment loss is provided for and carrying amount is reduced
accordingly.
Producing fields, LPG Plant, Transportation Pipeline and Power
Generating Units (other than Captive Power Plants) are considered as
Cash Generating Units. A "Cash Generating Unit" is reviewed for
impairment at each Balance Sheet date. An impairment loss is
recognized, whenever the carrying amount of assets exceeds the
recoverable amount by writing down such assets to their recoverable
amount.
An impairment loss is reversed if there is change in the recoverable
amount and such loss either no longer exists or has decreased.
Impairment loss/ reversal thereof is adjusted to the carrying value of
the respective assets. Impairment testing is normally carried out at
the year-end unless compelling circumstances exist for review during
the course of the year.
32.7 JOINT VENTURES
Production Sharing Contracts (PSCs) executed with the Government of
India / Government of Foreign Countries by the company along with other
entities to undertake exploration, development and production of Oil
and / or Gas activities under a joint venture in various
concessions/block/area are accounted as under:- i) The financial
statements reflect the share of the Company''s assets, liabilities and
also the income and expenditure of the Joint Venture in proportion to
the participating interest of the Company as per the terms of the PSCs,
on a line by line basis. Depreciation, depletion and impairment and
value of Stock of Crude Oil are accounted for as per the relevant
accounting policies of the Company whereas provision for abandonment is
created as per terms of PSC. Proved Developed Reserve of Oil & Gas in
such concessions/block/area are also considered in proportion to
participating interest of the Company.
ii) Consideration recoverable from new Joint Venture Partners for the
right to participate in operations are:
a) Reduced from respective assets and/or expenditure to the extent of
the new partners contribution towards past cost,
b) Balance is considered as miscellaneous receipts/ expenses.
32.8 INCOME TAX
i) The tax expense for the year comprises current tax and deferred tax.
ii) Provision for current tax is made after taking into consideration
benefits admissible on conservative basis under the provisions of the
Income Tax Act, 1961 as are applicable to the company. Deferred Tax
resulting from ''timing difference'' between taxable incomes and
accounting income is accounted for using the tax rates and tax laws
applicable for the relevant Financial Year. Deferred Tax Asset is
reassessed and recognised only to the extent that there is a virtual
certainty that the asset will be realized in future.
32.9 INVESTMENTS
i) Non Current investments are valued at cost. However, provision for
diminution in value is made to recognise a decline in the value, other
than temporary.
ii) Current investments are valued at lower of cost or fair value.
32.10 INVENTORY
i) Finished goods of Crude Oil, Liquefied Petroleum Gas and LPG
condensate are valued at cost or net realizable value, whichever is
lower. Cost of finished goods is determined based on direct cost and
directly attributable services cost including depreciation & depletion.
ii) Crude oil in unfinished condition in the flow line up to Group
Gathering Station and Natural Gas in Pipeline are not valued, as these
pipeline fills are necessary to the operation of the facility.
(iii) Stores and spare are valued at weighted average cost or net
realizable value whichever is lower. Obsolete / unserviceable items,
as and when identified, are written off. Any item of stores and spares
not moved for last four years as on date of Balance Sheet are
identified as slow moving items for which a provision of 95% of the
value is made in the accounts.
32.11 EMPLOYEE BENEFITS
i) All short-term employee benefits are recognised as an expense at the
undiscounted amount in the accounting period in which the related
service is rendered.
ii) Employee benefits under defined contribution plan such as provident
fund is recognised based on the undiscounted obligations of the company
to contribute to the plan.
iii) Employee benefits under defined benefit plans such as gratuity,
leave encashment, post retirement medical benefits, pension are
recognised based on the present value of defined benefit obligation,
which is computed on the basis of actuarial valuation using the
projected unit credit method. Actuarial liability in excess of
respective plan assets is recognised during the year and in case the
plan assets exceed the Actuarial Liability, no further provision is
considered. Actuarial gain and losses in respect of post employment and
other long-term benefits are recognised during the year.
32.12 REVENUE RECOGNITION
i) Revenue from sale of products is recognized on custody transfer to
customers.
ii) Sale of crude oil and gas produced from exploratory wells is
deducted from expenditure on such wells.
iii) Sales are inclusive of statutory levies but excluding Value Added
Tax (VAT) & Central Sales Tax (CST) and net of discounts. Any
retrospective revision in prices is accounted for in the year of such
revision.
iv) Claims on Government / Petroleum Planning & Analysis Cell (PPAC)
are booked on acceptance in principle by the authority.
v) Dividend Income is recognized when the right to receive the dividend
is established.
vi) Revenue in respect of the following is recognized when there is
reasonable certainty regarding ultimate realization:
a) Short lifted quantity of Crude Oil & Natural Gas, if any.
b) Interest on delayed realization from customers.
vii) Insurance claim other than for transit loss of stores items are
accounted for on final acceptance by the Insurance Company.
viii) Recovery/Refund of Liquidated Damages are recognised in the
Statement of Profit and Loss in the year of occurrence as income or
expenditure as the case may be except in case of JVC which are governed
by the respective PSC.
ix) Revenue from sale of other services is recognised when service is
rendered in line with contracts executed there with.
32.13 GRANTS
Grants are recognised when there is reasonable assurance that the same
would be realized. Grants related to specific assets are deducted from
the gross value of the concerned assets.
32.14 BORROWING COSTS
i) Borrowing costs during the construction period that are attributable
to qualifying assets are capitalized and also includes exchange
difference arising from Foreign Currency borrowings to the extent that
they are regarded as an adjustment to interest cost.
ii) Other borrowing costs are recognised as expenses when incurred.
32.15 SEGMENT ACCOUNTING
i) The Company has adopted its products & services (viz. Crude Oil,
Natural Gas, LPG and Pipeline Transportation) as the primary reporting
segments. There are no reportable geographical segments.
ii) Segment assets, liabilities, income and expenses have been either
directly identified or allocated to the segments on the basis usually
followed for allocation of cost adopted for preparing and presenting
the financial statements of the Company.
32.16 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
i) Provisions in respect of which a reliable estimate can be made are
recognised where there is a present obligation as a result of past
events and it is probable that there will be an outflow of resource.
ii) Contingent liabilities, if material, are disclosed by way of notes
to the accounts.
iii) Contingent assets are neither recognised nor disclosed in the
financial statements.
32.17 EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the net profit for
the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year. For the purpose of
calculating diluted earnings per share, the net profit for the year
attributable to equity shareholders and the weighted average number of
shares outstanding during the year are adjusted for the effects of all
dilutive potential equity shares.
32.18 GENERAL
i) All revenue expenditure, incurred for Research & Development
Projects / Schemes, net of grants-in-aid if any, are charged to the
Statement of Profit & Loss.
ii) Assets given on finance lease are accounted as per Accounting
Standard 19 "Leases". Such assets are included as a receivable at an
amount equal to the net investment in the lease. Initial direct costs
incurred in respect of finance leases are recognized in the statement
of profit and loss in the year in which such costs are incurred.
iii) Prior period items/Prepaid expenses having value in each case up
to Rs. 5 lacs are booked under natural head of accounts.
Mar 31, 2013
1.1 Accounting Convention
The Financial Statements are prepared under the historical cost
convention on accrual method of accounting, in accordance with the
Generally Accepted Accounting Principles and complying with the
mandatory Accounting Standards notified by the Central Government of
India under the Companies (Accounting Standards) Rules, 2006 and the
relevant provisions and presentational requirement of the Companies
Act, 1956.
1.2 Classification of Assets & Liabilities
All the Assets and Liabilities of the Company are segregated into
Current & Non-current based on the principles and definitions as set
out in the Schedule VI to the Companies Act, 1956 as amended. The
Company has adopted a period of 12 months as its Operating Cycle.
1.3 Exploration Costs, Development Expenditure And Abandonment Costs
The Company follows the accepted "Successful Efforts Method" (SEM)
of Accounting in respect of its Oil and Gas exploration and production
activities in accordance with the "Guidance Note on Accounting for
Oil & Gas Producing Activities" issued by the Institute of Chartered
Accountants of India (ICAI).
1.3.1 Exploration Costs And Development Expenditure
a) Geological and Geophysical expenditure, including the depreciation
on the cost of Tangible Assets deployed in relation thereto, charged as
expense when incurred.
b) Lease carrying costs including license fees are charged as expense
when incurred.
c) Cost of unsuccessful/dry exploratory wells or parts thereof
including allocated depreciation on support equipment and facilities,
which do not lead to discovery of/accretion to hydrocarbon reserves,
are charged as expense on determination.
d) All Acquisition costs, exploration costs involved in drilling and
equipping exploratory and appraisal wells and cost of exploratory-type
drilling stratigraphic test wells are initially shown as pre-producing
property under capital-work-in- progress till the time these are either
transferred to Tangible Assets as producing properties or charged as
expense in the year when determined to be dry or of no further use.
e) Cost of incomplete wells/wells under production testing/completed
exploratory wells pending determination of commercial viability
including allocated depreciation on support equipment and facilities,
are classified as pre-producing properties.
f) Cost of exploratory wells included in pre-producing Properties are
not carried over for more than two years from the date of completion of
the drilling of the well and written off, unless it is reasonably
determined that the well has proved reserves and development of the
field in which the well is located has been planned.
g) Cost of successful exploratory wells and completed development wells
including allocated depreciation on support equipment and facilities
after completion of production testing are capitalized as producing
properties.
1.3.2 Abandonment Costs
a) Estimated liability towards costs relating to dismantling,
abandoning and restoring well sites in respect of complete wells (net
of salvage value), other than those relating to Joint Ventures, are
recognised as cost of Producing property/ Pre-producing property. The
abandonment cost on exploratory dry well is charged as expense when
incurred. Liability for abandonment cost is updated annually based on
the technical assessment available at current costs.
b) The actual cost incurred on abandonment is adjusted against the
liability and the ultimate gain or loss is recognised in the Statement
of Profit and Loss, when the designated oil/gas field or a group of
oil/gas fields ceases to produce.
c) In respect of Joint Ventures, the recognition of abandonment cost is
specified in Policy No 31.8 (a).
1.4 Fixed Assets :
a) All costs relating to acquisition of tangible assets till the time
of commissioning are capitalized.
b) Cost of Freehold & Leasehold land used for project including the
Right of Use (ROU) which are perpetual in nature are not amortized.
c) Cost of land acquired for drilling wells are booked under
pre-producing/producing properties depending on the status of the
wells.
d) Any Tangible asset, when determined of no further use, is deleted
from the Block. The deleted assets are carried as Inventories at lower
of Rs. 1000 or 5% of the original cost and the balance Written down
Value, is charged off.
1.5 Depreciation/Depletion/Amortisation/Write off
1.5.1 Depreciation
a) Depreciation on Tangible Assets other than "Producing
Properties" is provided for under the "Written Down Value
Method", at the rates and in the manner specified in Schedule XIV to
the Companies Act, 1956.
b) Depreciation on Tangible Assets deployed in exploration and
development drilling activities is capitalized with the cost of well.
c) Capital assets costing up to Rs. 5000 each are fully depreciated in
the year of acquisition.
1.5.2 Depletion
a) Producing Properties are depleted using the "Unit of Production
Method", with reference to ratio of production and the related Proved
Developed Reserves.
b) Proved Developed Reserves of oil and gas are technically assessed
and reviewed in-house at the end of each year by following
International practices. Rate of depletion is computed on a consistent
basis with reference to designated Oil / Gas field or a group of
Oil/Gas fields, which are aggregated either based on a common
geological feature or for operational purpose.
c) Cost of land forming part of the Pre-producing/ producing properties
are either charged off or carried forward depending on the status of
the wells as per Accounting Policy No: 31.3.1(d).
d) Costs of land forming part of the producing properties are depleted
on Units of Production Method (UOP).
1.5.3 Amortisation
Depreciation rate under W.D.V method as prescribed under Schedule XIV
to the Companies Act, 1956 for Computer is adopted for amortization of
software.
1.5.4 Write off
a) Any Intangible assets when determined of no further use, is written
off.
b) The discrepancies, when noticed on physical verification are
adjusted in the accounts.
1.6 Foreign Currency Translation
(a) Foreign currency transactions are initially recognised and
accounted for at the exchange rates prevailing at the dates of
transactions.
(b) Foreign Currency monetary assets & liabilities outstanding at the
close of the year, are translated at the rates of exchange prevailing
at the date of Balance Sheet. Resultant gains or loss is accounted for
during the year.
(c) Foreign currency transactions in relation to Joint Venture
(Overseas) are treated in the following manner:-
(i) Foreign currency transactions are initially recognised and
accounted for at the exchange rates prevailing at the dates of
transactions. However, the average exchange rate of relevant month is
taken for the transactions of that month, where actual rate of
transaction is not available or at the rate as agreed otherwise.
(ii) Foreign Currency monetary assets & liabilities outstanding at the
close of the year, are translated at the rates of exchange prevailing
at the date of Balance Sheet. Resultant gains or loss is accounted for
during the year.
1.7 Impairment of Assets
At the end of each balance sheet date, the carrying amount of assets
are assessed so as to calculate there is any indication of impairment.
Tangible Assets forming part of a "Cash Generating Unit" are
reviewed for impairment at each Balance Sheet date. In case events and
circumstances indicate any impairment, recoverable amount of these
assets is determined. An impairment loss is recognized, whenever the
carrying amount of such assets exceeds the recoverable amount by
writing down such assets to their recoverable amount. The recoverable
amount is its ''value in use''. In assessing the value in use, the
estimated future cash flows from the use of assets are discounted to
their present value at appropriate rate. An impairment loss is
reversed if there is change in the recoverable amount and such loss
either no longer exists or has decreased. Impairment loss/reversal
thereof is adjusted to the carrying value of the respective assets.
Subsequent to Impairment, depletion/ depreciation is provided on the
revised carrying value of the assets.
1.8 Joint Ventures
Production Sharing Contracts (PSCs) executed with the Government of
India / Government of Foreign Countries by the company along with other
entities to undertake exploration, development and production of Oil
and / or Gas activities under a joint venture in various concessions
are accounted as under:-
(a) The financial statements reflect the share of the Company''s
assets, liabilities and also the income and expenditure of the Joint
Venture in proportion to the participating interest of the Company as
per the terms of the PSCs, on a line by line basis. Depreciation,
depletion and impairment and value of Stock of Crude Oil are accounted
for as per the relevant accounting policies of the Company whereas
provision for abandonment is created as per terms of PSC. Proved
Developed Reserve of Oil & Gas in such concessions are also considered
in proportion to participating interest of the Company.
(b) Consideration recoverable from new Joint Venture Partners for the
right to participate in operations are:
I) Reduced from respective assets and/or expenditure to the extent of
the new partners contribution towards past cost,
ii) Balance is considered as miscellaneous receipts/expenses.
1.9 Income Tax
a) The tax expense for the year comprises current tax and deferred tax.
b) Provision for current tax is made after taking into consideration
benefits admissible on conservative basis under the provisions of the
Income Tax Act, 1961 as are applicable to the company. Deferred Tax
resulting from ''timing difference'' between taxable income and
accounting income is accounted for using the tax rates and tax laws
that have been enacted or substantively enacted by the Balance Sheet
date. Deferred Tax Asset is reassessed and recognised only to the
extent that there is a virtual certainty that the asset will be
realized in future.
1.10 Investments
a) Non Current investments are valued at cost. However, provision for
diminution in value is made to recognise a decline in the value, other
than temporary.
b) Current investments are valued at lower of cost or fair value.
1.11 Inventory
(a) Finished goods of Crude Oil, Liquefied Petroleum Gas and LPG
condensate are valued at cost or net realizable value, whichever is
lower. Cost of finished goods is determined on absorption costing
method.
(b) Crude oil in unfinished condition in the flow line up to Group
Gathering Station and Natural Gas in Pipeline are not valued, as
quantity of the same is not determinable.
(c) Stores and spare are valued at weighted average cost or net
realizable value whichever is lower. Obsolete / unserviceable items,
as and when identified, are written off. Any item of stores and spares
not moved for last four years as on date of Balance Sheet are
identified as slow moving items for which a provision of 95% of the
value is made in the accounts.
1.12 Employee Benefits
a) All short-term employee benefits are recognised as an expense at the
undiscounted amount in the accounting period in which the related
service is rendered.
b) Employee benefits under defined contribution plan such as provident
fund is recognised based on the undiscounted obligations of the company
to contribute to the plan.
c) Employee benefits under defined benefit plans such as gratuity,
leave encashment, post retirement medical benefits, pension are
recognised based on the present value of defined benefit obligation,
which is computed on the basis of actuarial valuation using the
projected unit credit method. Actuarial liability in excess of
respective plan assets is recognised during the year and in case the
plan assets exceed the Actuarial Liability, no further provision is
considered. Actuarial gain and losses in respect of post employment and
other long-term benefits are recognised during the year.
1.13 Revenue Recognition
(a) Revenue from sale of products is recognized on custody transfer to
customers.
(b) Sale of crude oil and gas produced from exploratory wells is
deducted from expenditure on such wells.
(c) Sales are inclusive of statutory levies but excluding Value Added
Tax (VAT) & Central Sales Tax (CST) and net of discounts. Any
retrospective revision in prices is accounted for in the year of such
revision.
(d) Claims on Government / Petroleum Planning & Analysis Cell (PPAC)
are booked on acceptance in principle by the authority.
(e) Dividend Income is recognized when the right to receive the
dividend is established.
(f) Revenue in respect of the following is recognized when there is
reasonable certainty regarding ultimate realization:
(i) Short lifted quantity of Crude Oil & Natural Gas, if any.
(ii)Interest on delayed realization from customers.
(g) Insurance claim other than for transit loss of stores items are
accounted for on final acceptance by the Insurance Company.
(h) Recovery/Refund of Liquidated Damages are recognised in the
Statement of Profit and Loss in the year of occurrence as income or
expenditure as the case may be except in case of JVC which are governed
by the respective PSC.
(i) Revenue from sale of other services is recognised when service is
rendered in line with contracts executed therewith.
1.14 Grants
Grants are recognised when there is reasonable assurance that the same
would be realized. Grants related to specific assets are deducted from
the gross value of the concerned assets.
1.15 Borrowing Costs
a) Borrowing costs during the construction period that are attributable
to qualifying assets are capitalized and also includes exchange
difference arising from Foreign Currency borrowings to the extent that
they are regarded as an adjustment to interest cost.
b) Other borrowing costs are recognised as expenses when incurred.
1.16 Segment Accounting
(a) The Company has adopted its products & services (viz. Crude Oil,
Natural Gas, LPG and Pipeline Transportation) as the primary reporting
segments. There are no reportable geographical segments.
(b) Segment assets, liabilities, income and expenses have been either
directly identified or allocated to the segments on the basis usually
followed for allocation of cost adopted for preparing and presenting
the financial statements of the Company.
1.17 Provisions, Contingent Liabilities and Contingent Assets
(a) Provisions in respect of which a reliable estimate can be made, are
recognised where there is a present obligation as a result of past
events and it is probable that there will be an outflow of resource.
(b) Contingent assets are neither recognised nor disclosed in the
financial statements.
1.18 Earnings Per Share
Basic earnings per share are calculated by dividing the net profit for
the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year. For the purpose of
calculating diluted earnings per share, the net profit for the year
attributable to equity shareholders and the weighted average number of
shares outstanding during the year are adjusted for the effects of all
dilutive potential equity shares.
1.19 General
a) All revenue expenditure, incurred for Research & Development
Projects / Schemes, net of grants- in-aid if any, are charged to the
Statement of Profit & Loss.
b) Assets given on finance lease are accounted as per Accounting
Standard 19 "Leases". Such assets are included as a receivable at
an amount equal to the net investment in the lease. Initial direct
costs incurred in respect of finance leases are recognized in the
statement of profit and loss in the year in which such costs are
incurred.
Mar 31, 2012
1.1 ACCOUNTING CONVENTION
The Financial Statements are prepared under historical cost convention,
in accordance with the Generally Accepted Accounting Prin- ciples and
materially complying with the mandatory Accounting Standards notified
by the Central Government of India under the Companies (Accounting
Standards) Rules, 2006 and the relevant provisions and presentational
requirement of the Companies Act, 1956.
1.2 Classification of Assets & Liabilities
All the Assets and Liabilities of the Company are segregated into
Current & Non-current based on the principles and definitions as set
out in the Schedule VI to the Companies Act, 1956 as amended. The
Company has adopted a period of 12 months as its Operating Cycle.
1.3 EXPLORATION COSTS, DEVELOPMENT EXPENDITURE AND ABANDONMENT COSTS
The Company follows the internationally accepted "Successful Efforts
Method" (SEM) of Accounting in respect of its Oil and Gas exploration
and production activities read with the "Guidance Note on Accounting
for Oil & Gas Producing Activities" issued by the Institute of
Chartered Accountants of India (ICAI).
1.3.1 EXPLORATION COSTS AND DEVELOPMENT EXPENDITURE
(a) Geological and Geophysical expenditure, including the depreciation
on the cost of Fixed Assets deployed in relation thereto, are expensed
in the year of incidence.
(b) Lease carrying costs including license fees are expensed in the
year of incidence.
(c) All Acquisition costs, exploration costs involved in drilling and
equipping exploratory and appraisal wells and cost of drilling
stratigraphic test wells are initially capitalized as pre-producing
property till the time these are either transferred to Fixed Assets as
Producing Properties or expensed in the year when determined to be dry
or of no further use.
(d) Cost of successful exploratory wells and completed development
wells including allocated depreciation on support equipments and
facilities are capitalized as Producing Properties. Wells are treated
as completed only after completion of production testing.
(e) Cost of unsuccessful/dry exploratory wells or parts thereof
including allocated depreciation on support equipments and facilities,
which do not lead to discovery of/accretion to hydrocarbon reserves,
are expensed on determination.
(f) Cost of incomplete wells/wells under production testing/completed
exploratory wells pending determination of commercial viability
including allocated depreciation on support equipments and facilities,
are classified as Pre-Producing Properties.
(g) Cost of exploratory wells in progress lying in Pre-Producing
Properties are not carried over for more than two years from the date
of completion of the drilling of the well, unless it is reasonably
determined that the well has proved reserves and development of the
field in which the well is located has been planned.
1.3.2 ABANDONMENT COSTS
(a) The liability towards costs relating to dismantling, abandoning and
restoring well sites (net of salvage value), other than those relating
to Joint Ventures, are capitalized as additional cost when the well is
complete and is reasonably estimated. The abandonment cost on
exploratory dry well is expensed during the year. Liability for
abandonment cost is updated annually based on the technical assessment
available at current costs.
(b) The actual cost incurred on abandonment is adjusted against the
liability and the ultimate gain or loss is recognised in the
profit/loss, when the designated oil/gas field or a group of oil/gas
fields ceases to produce.
(c) In respect of Joint Ventures, the recognition of abandonment cost
is specified in Policy No 32.8 (a).
1.4 FIXED ASSETS :
(a) All costs relating to acquisition of tangible assets till the time
of commissioning are capitalized.
(b) Cost of Leasehold land including the Right of Use (ROU) which are
perpetual in nature are not amortized.
(c) Any Tangible asset, when of no further use, is deleted from the
Block. The deleted assets are carried as Current Assets at lower of Rs.
1000 or 5% of the original cost and the balance Written down Value, if
any is charged off.
(d) Any Intangible assets when of no further use, is written off.
(e) The discrepancies, if any, noticed on physical verification are
accounted for.
1.5 DEPRECIATION/DEPLETION/AMORTISATION
1.5.1 DEPRECIATION
(a) Depreciation on Tangible Assets other than "Producing
Properties" is provided for under the "Written Down Value
Method", at the rates and in the manner specified in Schedule XIV to
the Companies Act, 1956.
(b) Depreciation on Tangible Assets deployed in exploration and
development drilling activities is capitalized with the cost of well.
(c) Assets costing up to Rs. 5000 each are fully depreciated in the
year of acquisition.
1.5.2 DEPLETION
(a) Producing Properties including acquisition costs are depleted using
the "Unit of Production Method", with reference to ratio of
production and the related Proved Developed Reserves.
(b) Proved Developed Reserves of oil and gas are technically assessed
and reviewed in-house at the end of each year by following
International practices.
(c) Rate of depletion is computed on a consistent basis with reference
to designated Oil / Gas field or a group of Oil/Gas fields, which are
aggregated either based on a common geological feature or for
operational purpose.
1.5.3 AMORTISATION
Depreciation rate under W.D.V method as prescribed under Schedule XIV
to the Companies Act, 1956 for Computer is adopted for amortization of
software.
1.6 FOREIGN CURRENCY TRANSLATION
(a) All non-monetary transactions in foreign currency are recorded at
the rates of exchange prevailing at the dates when the relevant
transactions take place.
(b) Monetary items in the form of Loan, Current Assets and Current
Liabilities in foreign currency, outstanding at the close of the year,
are translated in Indian Currency at the appropriate rates of exchange
prevailing at the date of Balance Sheet. Resultant gains or loss is
accounted for during the year.
(c) Foreign currency transactions in relation to Joint Venture
(Overseas) are treated in the following manner:-
(i) Foreign currency transactions is initially recognised and accounted
for in Indian currency at the exchange rates prevailing at the date of
transactions. The average exchange rate of relevant month is taken for
the transactions of that month in respect of such Joint Venture, where
actual rate of transaction is not available or at the rate as agreed
otherwise.
(ii) Foreign currency monetary items are translated using the average
of the exchange rates prevailing at the Balance Sheet date.
1.7 IMPAIRMENT OF ASSETS
Tangible Assets forming part of a "Cash Generating Unit" are
reviewed for impairment at each Balance Sheet date. In case events and
circumstances indicate any impairment, recoverable amount of these
assets is determined. An impairment loss is recognized, when- ever the
carrying amount of such assets exceeds the recoverable amount by
writing down such assets to their recoverable amount. The recoverable
amount is its 'value in use'. In assessing the value in use, the
estimated future cash flows from the use of assets are discounted to
their present value at appropriate rate. An impairment loss is reversed
if there is change in the recoverable amount and such loss either no
longer exists or has decreased. Impairment loss/reversal thereof is
adjusted to the carrying value of the respective assets. Subsequent to
Impairment, depletion/ depreciation is provided on the revised carrying
value of the assets.
1.8 JOINT VENTURES
Production Sharing Contracts (PSCs) executed with the Government of
India / Government of Foreign Countries by the company along with other
entities to undertake exploration, development and production of Oil
and / or Gas activities under a joint venture in various concessions
are accounted as under:-
(a) The financial statements reflect the share of the Company's assets,
liabilities and also the income and expenditure of the Joint Venture in
proportion to the participating interest of the Company as per the
terms of the PSCs, on a line by line basis. Depreciation, depletion
and impairment and value of Stock of Crude Oil are accounted for as per
the relevant accounting policies of the Company whereas provision for
abandonment is created as per terms of PSC. Proved Developed Reserve of
Oil & Gas in such concessions are also considered in proportion to
participating interest of the Company.
(b) Consideration recoverable from new Joint Venture Partners for the
right to participate in operations are:
i. Reduced from respective capitalized cost wherever applicable,
ii. Reduced from current expenditure (net of income, if any) to the
extent it relates to current year,
iii. Balance is considered as miscellaneous receipts.
1.9 INCOME TAX
(a) The tax expense for the year comprises current tax and deferred
tax.
(b) Provision for current tax is made after taking into consideration
benefits admissible under the provisions of the Income Tax Act, 1961 as
are applicable to the company. Deferred Tax resulting from 'timing
difference' between taxable income and accounting income is accounted
for using the tax rates and tax laws that have been enacted or
substantively enacted by the Balance Sheet date. Deferred Tax Asset is
reassessed and recognised only to the extent that there is a virtual
certainty that the asset will be realized in future.
1.10 INVESTMENTS
(a) Non Current investments are valued at cost. However, provision for
diminution in value is made to recognise a decline in the value, other
than temporary.
(b) Current investments are valued at lower of cost or fair value.
1.11 INVENTORY
(a) Finished goods of Crude Oil and Liquefied Petroleum Gas are valued
at cost or net realizable value, whichever is lower. Cost of finished
goods is determined on absorption costing method.
(b) Crude oil in unfinished condition in the flow line up to Group
Gathering Station and Natural Gas in Pipeline are not valued, as
quantity of the same is not determinable.
(c) Stores and spare are valued at weighted average cost or net
realizable value whichever is lower. Obsolete / unserviceable items, as
and when identified, are written off. Any item of stores and spares not
moved for last four years as on date of Balance Sheet are identified as
slow moving items for which a provision of 95% of the value is made in
the accounts.
1.12 EMPLOYEE BENEFITS
a) All short-term employee benefits are recognised as an expense at the
undiscounted amount in the accounting period in which the related
service is rendered.
b) Employee benefits under defined contribution plan such as provident
fund is recognised based on the undiscounted obligations of the company
to contribute to the plan.
c) Employee benefits under defined benefit plans such as gratuity,
leave encashment, post retirement medical benefits, pension are
recognised based on the present value of defined benefit obligation,
which is computed on the basis of actuarial valuation using the
projected unit credit method. Actuarial liability in excess of
respective plan assets is recognised during the year and in case the
plan assets exceed the Actuarial Liability, no further provision is
considered. Actuarial gain and losses in respect of post employment and
other long-term benefits are recognised during the year.
1.13 REVENUE RECOGNITION
(a) Revenue from sale of products is recognized on custody transfer to
customers.
(b) Sale of crude oil and gas produced from exploratory
wells-in-progress in exploratory areas is deducted from expenditure on
such wells.
(c) Sales are inclusive of statutory levies but excluding Value Added
Tax (VAT) & Central Sales Tax (CST) and net of discounts. Any
retrospective revision in prices is accounted for in the year of such
revision.
(d) Claims on Government / Petroleum Planning & Analysis Cell (PPAC)
are booked on acceptance in principle by the authority.
(e) Dividend Income is recognized when the right to receive the
dividend is established.
(f) Revenue in respect of the following is recognized when there is
reasonable certainty regarding ultimate realization:
(i) Short lifted quantity of Crude Oil & Natural Gas, if any.
(ii) Interest on delayed realization from customers.
(g) Insurance claim other than for transit loss of stores items are
accounted for on final acceptance by the Insurance Company.
(h) Liquidated Damages for delay in execution of contracts/supplies are
accounted for as per the terms of the contracts and are recognised as
income in the year of deduction. In case the same is refunded due to
reconsideration of the waiver request, the same is accounted for as
expense in the year of acceptance.
(i) Revenue from sale of other services is recognised when service is
rendered in line with contracts executed therewith.
1.14 GRANTS
Grants are recognised when there is reasonable assurance that the same
would be realized. Grants related to specific assets are deducted from
the gross value of the concerned assets.
1.15 BORROWING COSTS
Borrowing costs during the construction period that are attributable to
qualifying assets are capitalized and also includes exchange difference
arising from Foreign Currency borrowings to the extent that they are
regarded as an adjustment to interest cost.
1.16 SEGMENT ACCOUNTING
(a) The Company has adopted its products & services (viz. Crude Oil,
Natural Gas, LPG and Pipeline Transportation) as the primary reporting
segments and the geographical segments viz. Assam & Arunachal Pradesh
and Rajasthan as the secondary reporting segments.
(b) Segment assets, liabilities, income and expenses have been either
directly identified or allocated to the segments on the basis usually
followed for allocation of cost adopted for preparing and presenting
the financial statements of the Company.
1.17 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
(a) Provisions in respect of which a reliable estimate can be made, are
recognised where there is a present obligation as a result of past
events and it is probable that there will be an outflow of resource.
(b) Contingent Liabilities exceeding rupees Fifty Lakhs in each case
are disclosed by ways of notes.
(c) Contingent assets are neither recognised nor disclosed in the
financial statements.
1.18 EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the net profit for
the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year. For the purpose of
calculating diluted earnings per share, the net profit for the year
attributable to equity shareholders and the weighted average number of
shares outstanding during the year are adjusted for the effects of all
dilutive potential equity shares.
1.19 GENERAL
a) All revenue expenditure, incurred for Research & Development
Projects / Schemes, net of grants-in-aid if any, are charged to the
Statement of Profit & Loss.
b) Assets given on finance lease are accounted as per Accounting
Standard 19 "Leases". Such assets are included as a receivable at
an amount equal to the net investment in the lease. Initial direct
costs incurred in respect of finance leases are recognized in the
statement of profit and loss in the year in which such costs are
incurred.
Mar 31, 2011
1. ACCOUNTING CONVENTION
The Financial Statements of the Company are prepared under historical
cost convention, except as otherwise stated, in accordance with the
Generally Accepted Accounting Principles (GAAP) in India and materially
comply with the mandatory Accounting Standards notified by the Central
Government of India under the Companies (Accounting Standard) Rules
2006, and with the relevant provisions of the Companies Act, 1956.
2. EXPLORATION COSTS, DEVELOPMENT EXPENDITURE AND ABANDONMENT COSTS
The Company generally follows the internationally accepted "Successful
Efforts Method" (SEM) of Accounting in respect of its Oil and Gas
exploration and production activities read with the guidance note on
"Accounting for oil & gas producing activities" issued by the Institute
of Chartered Accountants of India (ICAI) except for abandonment costs,
as explained below :-
2.1 EXPLORATION COSTS AND DEVELOPMENT EXPENDITURE
(a) Geological and Geophysical expenditure, other than cost of tangible
assets, equipment and facilities deployed in relation thereto on which
usual depreciation allowance as admissible, are expensed in the year of
incidence.
(b) Lease carrying costs including license fees are expensed in the
year of incidence.
(c) All Acquisition costs, exploration costs involved in drilling and
equipping exploratory and appraisal wells and cost of drilling
exploratory type strategraphic test wells are initially capitalized as
pre-producing property till the time these are either transferred to
producing properties on completion or expensed in the year when
determined to be dry or of no further use, as the case may be.
(d) Cost of successful exploratory wells and completed development
wells including allocated depreciation on support equipment and
facilities are capitalized as producing property. Wells are treated as
completed only after completion of production testing of the same.
(e) Cost of unsuccessful / dry exploratory wells or part(s) thereof
including allocated depreciation on support equipment and facilities,
which do not lead to discovery of / accretion to hydrocarbon reserves,
are expensed.
(f) Charges towards unfinished Minimum Work Programme (MWP) and for
extension of exploration period under PSC/JVC are treated as Geological
& Geophysical or Drilling expenses etc. as the case may be.
(g) Cost of incomplete wells / wells under production testing /
completed exploratory wells pending determination of commercial
viability including allocated depreciation on support equipment and
facilities, are classified as Pre-producing Properties.
(h) Cost of exploratory wells in progress are not carried over for more
than two years from the date of completion of the drilling of the well,
unless it could be reasonably demonstrated that the well has proved
reserves and development of the field in which the well is located has
been planned.
2.2 ABANDONMENT COSTS
The full eventual estimated liability towards costs relating to
dismantling, abandoning and restoring well sites (net of salvage
value), other than Joint Ventures, are capitalized as additional cost
when the well is complete. The abandonment cost on exploratory dry well
(written off during the year) is charged to Profit and Loss account.
Liability for abandonment cost is updated annually based on the
technical assessment available at current costs.
The actual cost incurred on abandonment is adjusted against the
liability and the ultimate gain or loss as may be is recognised in the
profit and loss account, when the area designated as oil/gas field or a
group of oil/gas fields ceases to produce.
In respect of Joint Ventures, the policies in respect of above are
specified in Policy No 7 (a).
3. FIXED ASSETS :
(a) Fixed assets including support equipment & facilities are stated at
historical cost. All costs relating to acquisition of fixed assets till
the time of commissioning of such assets are capitalized.
(b) Computer software acquired and developed to suit Company's internal
use being intangible asset is capitalized along with hardware cost.
(c) Leasehold lands including the Right of Use ( ROU) which are
perpetual in nature are not amortized.
(d) Any asset, when of no further use, is deleted from the Block. The
Written Down Value, if any, in excess of Rs.1000/- or 5% of the
original cost, whichever is less is charged to Profit and Loss Account.
The deleted assets are carried as Current Assets at adjusted value
awaiting disposal through normal tendering procedure. The sale proceeds
in excess of adjusted value against individual asset are accounted for
as miscellaneous income, when realized.
(e) Physical verification of the fixed assets is carried out by the
Company in a phased manner to cover all the items over a period of five
years. The discrepancies, if any, noticed are accounted for after
reconciliation of the same.
4. DEPRECIATION / DEPLETION
4.1 DEPRECIATION
(a) Depreciation on Fixed Assets is provided for under the "Written
Down Value Method"(WDV), at the rates and in the manner specified in
Schedule XIV to the Companies Act, 1956 and the fixed assets are stated
at cost less depreciation.
(b) Depreciation as computed above on Fixed Assets deployed in
exploration and development drilling activities is charged to the cost
of each well.
(c) Computer software acquired and developed to suit Company's internal
use, being intangible asset, is depreciated at the rate applicable to
Computer (Hardware).
(d) Assets costing upto Rs. 5000 each are depreciated fully in the year
of capitalization.
4.2 DEPLETION
(a) The producing properties including acquisition costs are depleted
using the "Unit of Production Method", based on the related Proved
Developed Reserves.
(b) Proved and Developed Reserves of oil and gas are technically
assessed regularly and are finally reviewed and estimated at the end of
each year in-house by following International practices.
(c) The rate of depletion is computed on a consistent basis with
reference to an area designated as Oil / Gas field or a group of
Oil/Gas fields, which are aggregated either based on a common
geological feature or for operational purpose.
5. FOREIGN CURRENCY TRANSLATION
(a) All non-monetary transactions in foreign currency are recorded at
the rates of exchange prevailing on the dates when the relevant
transactions take place.
(b) Monetary items in the form of Loan, Current Assets and Current
Liabilities in foreign currency, outstanding at the close of the year,
are converted in Indian Currency at the appropriate rates of exchange
prevailing on the date of Balance Sheet. Resultant gains or loss is
accounted during the year.
(c) Foreign currency transactions in relation to Joint Venture
Operations (Overseas) are treated in the following manner:-
(i) Foreign currency transactions on initial recognition in the
reporting currency are accounted for at the exchange rates prevailing
on the date of transactions. For practical reasons, the average
exchange rate of relevant month is taken for the transactions of the
month in respect of such Joint Venture Operations, where actual date of
transaction is not available or as agreed otherwise.
(ii) At the Balance Sheet date, foreign currency items are translated
using the average of the exchange rates prevailing on the Balance Sheet
date.
6. IMPAIRMENT OF ASSETS
Producing Properties and Fixed Assets of a "Cash Generating Unit" (CGU)
are reviewed for impairment at each Balance Sheet date. In case events
and circumstances indicate any impairment, recoverable amount of these
assets is determined. An impairment loss is recognized, whenever the
carrying amount of such assets exceeds the recoverable amount by
writing down such assets to their recoverable amount. The recoverable
amount is its 'value in use' . In assessing value in use, the estimated
future cash flows from the use of assets are discounted to their
present value at appropriate rate. An impairment loss is reversed if
there is change in the recoverable amount and such loss either no
longer exists or has decreased. Impairment loss/reversal thereof is
adjusted to the carrying value of the respective assets. Subsequent to
Impairment, depletion/ depreciation is provided on the revised carrying
value of the assets over the remaining useful life as per relevant
policy.
7. JOINT VENTURES
In respect of Production Sharing Contracts (PSCs) executed by the
Company with other companies and the Government of India to undertake
exploration, development and production of Oil and / or Gas activities
under a joint venture in various concessions:- (a) The financial
statements reflect the share of the Company's assets, liabilities and
also the income and expenditure of the Joint Venture Operations in
proportion to the participating interest of the Company as per the
terms of the PSCs, on a line by line basis. Depreciation, depletion and
impairment and value of Stock of Crude Oil are accounted for as per the
relevant accounting policies of the Company whereas provision for
abandonment is created as per terms of PSC.
(b) Proved and Developed Reserve of Oil & Gas in such concessions are
also considered in proportion to participating interest of the Company.
(c) The unamortized balance in the producing property accounts and / or
the written down values of the fixed assets installed therein in
respect of such concessions, are netted off by the consideration due/
received from other participating companies.
8. INCOME TAX
(a) Current Tax
Income tax is computed as per provisions of the Income tax Act, 1961,
read with the terms of the Agreement entered into by the Company with
the Government of India under Section 42 of the Income Tax Act, 1961
and accordingly in addition to other items of allowances, the following
are considered: -
(i) All intangible expenditure on exploration / prospecting / drilling
in Petroleum Exploration Licence areas, excluding expenditure on assets
for which usual depreciation allowance is admissible, whether abortive
or not, is allowed as a deduction equally over a period of three years
commencing from the year in which it is incurred.
(ii) All intangible expenditure on exploration / prospecting /drilling
in Mining Lease areas, excluding expenditure on assets for which usual
depreciation allowance is admissible, is allowed as a deduction in the
year in which it is incurred; and
(iii) Depreciation on tangible drilling expenditure and fixed assets is
allowed in accordance with rates prescribed under the Income Tax Rules,
1962 under the Written Down Value (WDV) method.
(b) Deferred Tax is recognized, subject to the consideration of
prudence in respect of deferred tax assets, on timing differences being
the difference between taxable income and accounting income that
originate in one period and are capable of reversal in one or more
subsequent periods and is measured using tax rates and laws that have
been enacted or substantively enacted up to the Balance Sheet date.
Deferred tax assets are reviewed at each Balance Sheet date to assess
realization.
9. INVESTMENTS
(a) Long term investments are valued at cost unless there is a
permanent diminution in value.
(b) Current investments are valued at lower of cost or fair value.
10. INVENTORY
(a) Stocks of Crude Oil and Liquefied Petroleum Gas are valued at cost
(after bifurcation of joint cost on thermal equivalence basis in case
of crude oil) or net realizable value, whichever is lower, including
applicable excise duty.
(b) Natural Gas in pipeline and crude oil in flow line are not valued.
(c) The stock of stores and spare parts are valued at weighted average
cost. Obsolete / unserviceable items, as and when identified, are
written off. Any item of stores and spares not moved for last four
years as on date of Balance Sheet are identified as slow moving items.
Against these Slow moving items a provision of 95% of value is made in
the accounts towards likely diminution in value. The stores and spare
parts include goods-in-transit which represents items pending arrival
and / or acceptance at stipulated destinations.
11. EMPLOYEE BENEFITS
a) Defined Contribution Plans such as Provident Fund, etc. Ã
Contributions are charged to the Profit and Loss Account as incurred.
b) Defined Benefit Plans à The present value of the obligation under
such plan, is determined based on an actuarial valuation using the
Projected Unit Credit Method. Actuarial gains and losses arising on
such valuation are recognized immediately in the Profit and Loss
Account. In case of funded defined benefit plans, the fair value of the
plan assets is reduced from the gross obligation under the defined
benefit plans, to recognize the obligation on net basis the excess, if
any, it treated as a prepayment.
c) The contribution to Provident Fund, Gratuity Fund, and Pension Funds
are paid to the respective Funds administered through Trusts having
exemptions under Employees' Provident Funds and Miscellaneous Provision
Acts 1952 above as applicable. The interest payable by the Provident
Fund Trust is notified by the Government. The Company has an obligation
to make good the shortfall, if any.
d) Other Long term Employee Benefits are recognized in the same manner
as Defined Benefit Plans.
e) Termination benefits are recognized as and when incurred.
12. REVENUE RECOGNITION
(a) Revenue from sale of products and transportation income are
recognized on transfer of custody to customers.
(b) Sale of crude oil and gas produced from exploratory
wells-in-progress in exploratory areas is deducted from expenditure on
such wells.
(c) Sales are inclusive of statutory levies but net of discounts. Any
retrospective revision in prices is accounted for in the year of such
revision.
(d) Claims on Government / Petroleum Planning & Analysis Cell (PPAC)
are booked on acceptance in principle thereof.
(e) Dividend Income is recognized when the right to receive the
dividend is established.
(f) Revenue in respect of the following is recognized when there is
reasonable certainty regarding ultimate realization:
(i) Short lifted quantity of crude oil, if any.
(ii) Interest on delayed realization from customers.
(g) Insurance claim other than for transit loss of stores items are
accounted for on final acceptance by the Insurance Company.
(h) Liquidated Damages for delay in execution of contracts/supplies are
accounted for as per the terms of the contracts and are recognized as
income in the year of deduction. In case the same is refunded due to
reconsideration/justification of the waiver request, the same is
accounted for as expense in the year of acceptance.
13. GRANTS & SUBSIDIES
Grants and Subsidies are accounted in revenue or capital account
according to their nature, when there is reasonable assurance that the
same would be realized. Grants related to specific assets are deducted
from the gross value of the concerned assets while arriving at their
book value.
14. BORROWING COSTS
Borrowing costs during the construction period, net of Income if any,
that are attributable to qualifying assets are capitalized.
15. SEGMENT ACCOUNTING
(a) In accordance with the existing management reporting system, the
Company has adopted its products & services (viz. Crude Oil, Natural
Gas, LPG and Pipeline Transportation) as the primary reporting segments
and the geographical segments viz. Assam & Arunachal Pradesh, Rajasthan
etc. as the secondary reporting segments.
(b) Segment assets, liabilities, income and expenses have been either
directly identified or allocated to the segments on the basis usually
followed for allocation of cost adopted for preparing and presenting
the financial statements of the Company.
16. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
(a) The Company generally provides for present obligations resulting
from past event, the amount of which can be estimated with reasonable
accuracy.
(b) Liabilities contingent upon happening of future event are disclosed
by way of a note in the accounts. Claims against the Company where a
demand has been raised by any authority or disputed in arbitration
exceeding Rupees Five Lakh in each case are recognized as contingent
liability, if contested.
(c) Contingent assets are not recognized.
17. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the net profit for
the period attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year. For the purpose of
calculating diluted earnings per share, the net profit for the period
attributable to equity shareholders and the weighted average number of
shares outstanding during the period are adjusted for the effects of
all dilutive potential equity shares.
18. GENERAL
a) Prior Period Items exceeding Rupees Five Lakh in each case are
separately disclosed in the Profit and Loss Account.
b) Adjustments pertaining to earlier years but crystallized during the
year, exceeding Rupees Five Lakh in each case are separately disclosed
under "Other Adjustments".
c) All expenditure, other than assets, on which usual depreciation
allowance is admissible, incurred for Research & Development Projects /
Schemes, net of grants-in-aid if any, are charged to the Profit & Loss
Account.
d) Joint cost of production relating to crude oil and natural gas is
apportioned on thermal equivalence basis.
e) Refunds / Duty drawbacks and Demands from / in relation to Revenue
Authorities are accounted for on the basis of acceptance considering
information available upto the date of finalization of Accounts.
f) Assets given under finance leases are recognized as receivable at an
amount equal to the net investment in the lease and the finance income
is based on a constant rate of return on the outstanding net investment
in line with AS 19 issued by the ICAI.
g) General administrative expenses including corporate overhead are
charged to Profit & Loss Account.
h) Accounting of Contract works under various Projects for the Company
carried out by the Company in consortium with other entities is
accounted in line with AS 7 issued by ICAI after neutralizing the
profit earned by the Company in it from the Project cost.
i) Costs of Intangible assets are accounted for in line with AS 26
issued by ICAI.
Mar 31, 2010
1. ACCOUNTING CONVENTION
The Financial Statements of the Company are prepared under historical
cost convention, except as otherwise stated, in accordance with the
Generally Accepted Accounting Principles (GAAP) in India and materially
comply with the mandatory Accounting Standards notifi ed by the Central
Government of India under the Companies (Accounting Standard) Rules
2006, and with the relevant provisions of the Companies Act, 1956.
2. EXPLORATION COSTS, DEVELOPMENT EXPENDITURE AND ABANDONMENT COSTS
The Company generally follows the internationally accepted "Successful
Efforts Method" (SEM) of Accounting in respect of its Oil and Gas
exploration and production activities read with the guidance note on
"Accounting for oil & gas producing activities" issued by the Institute
of Chartered Accountants of India (ICAI) except for abandonment costs,
as explained below :-
2.1 EXPLORATION COSTS AND DEVELOPMENT EXPENDITURE
(a) Geological and Geophysical expenditure, other than cost of tangible
assets, equipment and facilities deployed in relation thereto on which
usual depreciation allowance as admissible, are expensed in the year of
incidence.
(b) Lease carrying costs including license fees are expensed in the
year of incidence.
(c) All Acquisition costs, exploration costs involved in drilling and
equipping exploratory and appraisal wells and cost of drilling
exploratory type strategraphic test wells are initially capitalized as
pre-producing property till the time these are either transferred to
producing properties on completion or expensed in the year when
determined to be dry or of no further use, as the case may be.
(d) Cost of successful exploratory wells and completed development
wells including allocated depreciation on support equipment and
facilities are capitalized as producing property. Wells are treated as
completed only after completion of production testing of the same.
(e) Cost of unsuccessful / dry exploratory wells or part(s) thereof
including allocated depreciation on support equipment and facilities,
which do not lead to discovery of / accretion to hydrocarbon reserves,
are expensed.
(f) Charges towards unfi nished Minimum Work Programme (MWP) and for
extension of exploration period under PSC/JVC are treated as Geological
& Geophysical or Drilling expenses etc. as the case may be.
(g) Cost of incomplete wells / wells under production testing /
completed exploratory wells pending determination of commercial
viability including allocated depreciation on support equipment and
facilities, are classifi ed as Pre-producing Properties.
(h) Cost of exploratory wells in progress are not carried over for more
than two years from the date of completion of the drilling of the well,
unless it could be reasonably demonstrated that the well has proved
reserves and development of the fi eld in which the well is located has
been planned.
2.2 ABANDONMENT COSTS
Abandonment costs relating to dismantling and restoration of well sites
(net of salvage value), if any, are accounted for in the year in which
the same are incurred instead of creating provision in line with
Guidance Note issued by ICAI as the Salvage Value is expected to take
care of the Abandonment Costs except in case of Joint Ventures, the
policy in respect of which is specifi ed in Policy No.7 below.
3. FIXED ASSETS :
(a) Fixed assets including support equipment & facilities are stated at
historical cost. All costs relating to acquisition of fi xed assets
till the time of commissioning of such assets are capitalized.
(b) Computer software acquired and developed to suit Companys internal
use being intangible asset is capitalized along with hardware cost.
(c) Leasehold lands including the Right of Use ( ROU) which are
perpetual in nature are not amortized.
(d) Any asset, when of no further use, is deleted from the Block. The
Written Down Value, if any, in excess of Rs.1000/- or 5% of the
original cost, whichever is less is charged to Profi t and Loss
Account. The deleted assets are carried as Current Assets at adjusted
value awaiting disposal through normal tendering procedure. The sale
proceeds in excess of adjusted value against individual asset are
accounted for as miscellaneous income, when realized.
(e) Physical verifi cation of the fi xed assets is carried out by the
Company in a phased manner to cover all the items over a period of fi
ve years. The discrepancies, if any, noticed are accounted for after
reconciliation of the same.
4. DEPRECIATION / DEPLETION
4.1 DEPRECIATION
(a) Depreciation on Fixed Assets is provided for under the "Written
Down Value Method"(WDV), at the rates and in the manner specifi ed in
Schedule XIV to the Companies Act, 1956 and the fi xed assets are
stated at cost less depreciation.
(b) Depreciation as computed above on Fixed Assets deployed in
exploration and development drilling activities is charged to the cost
of each well.
(c) Computer software acquired and developed to suit Companys internal
use, being intangible asset, is depreciated at the rate applicable to
Computer (Hardware).
(d) Assets costing upto Rs. 5000 each are depreciated fully in the year
of capitalization.
4.2 DEPLETION
(a) The producing properties including acquisition costs are depleted
using the "Unit of Production Method", based on the related Proved
Developed Reserves.
(b) Proved and Developed Reserves of oil and gas are technically
assessed regularly and are fi nally reviewed and estimated at the end
of each year in-house by following International practices.
(c) The rate of depletion is computed on a consistent basis with
reference to an area designated as Oil / Gas fi eld or a group of
Oil/Gas fi elds, which are aggregated either based on a common
geological feature or for operational purpose.
5. FOREIGN CURRENCY TRANSLATION
(a) All non-monetary transactions in foreign currency are recorded at
the rates of exchange prevailing on the dates when the relevant
transactions take place.
(b) Monetary items in the form of Loan, Current Assets and Current
Liabilities in foreign currency, outstanding at the close of the year,
are converted in Indian Currency at the appropriate rates of exchange
prevailing on the date of Balance Sheet. Resultant gains or loss is
accounted during the year.
(c) Foreign currency transactions in relation to Joint Venture
Operations (Overseas) are treated in the following manner:- (i) Foreign
currency transactions on initial recognition in the reporting currency
are accounted for at the exchange rates prevailing on the date of
transactions. For practical reasons, the average exchange rate of
relevant month is taken for the transactions of the month in respect of
such Joint Venture Operations, where actual date of transaction is not
available or as agreed otherwise.
(ii) At the Balance Sheet date, foreign currency items are translated
using the average of the exchange rates prevailing on the Balance Sheet
date.
6. IMPAIRMENT OF ASSETS
Producing Properties and Fixed Assets of a "Cash Generating Unit" (CGU)
are reviewed for impairment at each Balance Sheet date. In case events
and circumstances indicate any impairment, recoverable amount of these
assets is determined. An impairment loss is recognized, whenever the
carrying amount of such assets exceeds the recoverable amount by
writing down such assets to their recoverable amount. The recoverable
amount is its Ãvalue in use . In assessing value in use, the estimated
future cash fl ows from the use of assets are discounted to their
present value at appropriate rate. An impairment loss is reversed if
there is change in the recoverable amount and such loss either no
longer exists or has decreased. Impairment loss/ reversal thereof is
adjusted to the carrying value of the respective assets. Subsequent to
Impairment, depletion/ depreciation is provided on the revised carrying
value of the assets over the remaining useful life as per relevant
policy.
7. JOINT VENTURES
In respect of Production Sharing Contracts (PSCs) executed by the
Company with other companies and the Government of India to undertake
exploration, development and production of Oil and / or Gas activities
under a joint venture in various concessions:- (a) The financial
statements refl ect the share of the Companys assets, liabilities and
also the income and expenditure of the Joint Venture Operations in
proportion to the participating interest of the Company as per the
terms of the PSCs, on a line by line basis. Depreciation, depletion and
impairment and value of Stock of Crude Oil are accounted for as per the
relevant accounting policies of the Company whereas provision for
abandonment is created as per terms of PSC.
(b) Proved and Developed Reserve of Oil & Gas in such concessions are
also considered in proportion to participating interest of the Company.
(c) The unamortized balance in the producing property accounts and / or
the written down values of the fi xed assets installed therein in
respect of such concessions, are netted off by the consideration due/
received from other participating companies.
8. INCOME TAX
(a) Current Tax
Income tax is computed as per provisions of the Income tax Act, 1961,
read with the terms of the Agreement entered into by the Company with
the Government of India under Section 42 of the Income Tax Act, 1961
and accordingly in addition to other items of allowances, the following
are considered: -
(i) All intangible expenditure on exploration / prospecting / drilling
in Petroleum Exploration Licence areas, excluding expenditure on assets
for which usual depreciation allowance is admissible, whether abortive
or not, is allowed as a deduction equally over a period of three years
commencing from the year in which it is incurred.
(ii) All intangible expenditure on exploration / prospecting /drilling
in Mining Lease areas, excluding expenditure on assets for which usual
depreciation allowance is admissible, is allowed as a deduction in the
year in which it is incurred; and
(iii) Depreciation on tangible drilling expenditure and fi xed assets
is allowed in accordance with rates prescribed under the Income Tax
Rules, 1962 under the Written Down Value (WDV) method.
(b) Deferred Tax is recognized, subject to the consideration of
prudence in respect of deferred tax assets, on timing differences being
the difference between taxable income and accounting income that
originate in one period and are capable of reversal in one or more
subsequent periods and is measured using tax rates and laws that have
been enacted or substantively enacted up to the Balance Sheet date.
Deferred tax assets are reviewed at each Balance Sheet date to assess
realization.
9. INVESTMENTS
(a) Long term investments are valued at cost unless there is a
permanent diminution in value.
(b) Current investments are valued at lower of cost or fair value.
10. INVENTORY
(a) Stocks of Crude Oil and Liquefi ed Petroleum Gas are valued at cost
(after bifurcation of joint cost on thermal equivalence basis in case
of crude oil) or net realizable value, whichever is lower, including
applicable excise duty.
(b) Natural Gas in pipeline and crude oil in fl ow line are not valued.
(c) The stock of stores and spare parts are valued at weighted average
cost. Obsolete / unserviceable items, as and when identifi ed, are
written off. Any item of stores and spares not moved for last four
years as on date of Balance Sheet are identifi ed as slow moving items.
Against these Slow moving items a provision of 95% of value is made in
the accounts towards likely diminution in value. The stores and spare
parts include goods-in-transit which represents items pending arrival
and / or acceptance at stipulated destinations.
11. EMPLOYEE BENEFITS
(a) Defi ned Contribution Plans such as Provident Fund, etc. Ã
Contributions are charged to the Profi t and Loss Account as incurred.
(b) Defi ned Benefi t Plans à The present value of the obligation under
such plan, is determined based on an actuarial valuation using the
Projected Unit Credit Method. Actuarial gains and losses arising on
such valuation are recognized immediately in the Profi t and Loss
Account. In case of funded defi ned benefi t plans, the fair value of
the plan assets is reduced from the gross obligation under the defi ned
benefi t plans, to recognize the obligation on net basis the excess, if
any, it treated as a prepayment.
(c) The contribution to Provident Fund, Gratuity Fund, and Pension
Funds are paid to the respective Funds administered through Trusts
having exemptions under Employees Provident Funds and Miscellaneous
Provision Acts 1952 above as applicable. The interest payable by the
Provident Fund Trust is notifi ed by the Government. The Company has an
obligation to make good the shortfall, if any.
(d) Other Long term Employee Benefi ts are recognized in the same
manner as Defi ned Benefi t Plans.
(e) Termination benefi ts are recognized as and when incurred.
12. REVENUE RECOGNITION
(a) Revenue from sale of products and transportation income are
recognized on transfer of custody to customers.
(b) Sale of crude oil and gas produced from exploratory
wells-in-progress in exploratory areas is deducted from expenditure on
such wells.
(c) Sales are inclusive of statutory levies but net of discounts. Any
retrospective revision in prices is accounted for in the year of such
revision.
(d) Claims on Government / Petroleum Planning & Analysis Cell (PPAC)
are booked on acceptance in principle thereof.
(e) Dividend Income is recognized when the right to receive the
dividend is established.
(f) Revenue in respect of the following is recognized when there is
reasonable certainty regarding ultimate realization:
(i) Short lifted quantity of crude oil, if any.
(ii) Interest on delayed realization from customers.
(g) Insurance claim other than for transit loss of stores items are
accounted for on fi nal acceptance by the Insurance Company.
(h) Liquidated Damages for delay in execution of contracts/supplies are
accounted for as per the terms of the contracts and are recognized as
income in the year of deduction. In case the same is refunded due to
reconsideration/justifi cation of the waiver request, the same is
accounted for as expense in the year of acceptance.
13. GRANTS & SUBSIDIES
Grants and Subsidies are accounted in revenue or capital account
according to their nature, when there is reasonable assurance that the
same would be realized. Grants related to specifi c assets are deducted
from the gross value of the concerned assets while arriving at their
book value.
14. BORROWING COSTS
Borrowing costs during the construction period, net of Income if any,
that are attributable to qualifying assets are capitalized.
15. SEGMENT ACCOUNTING
(a) In accordance with the existing management reporting system, the
Company has adopted its products & services (viz. Crude Oil, Natural
Gas, LPG and Pipeline Transportation) as the primary reporting segments
and the geographical segments viz. Assam & Arunachal Pradesh, Rajasthan
etc. as the secondary reporting segments.
(b) Segment assets, liabilities, income and expenses have been either
directly identifi ed or allocated to the segments on the basis usually
followed for allocation of cost adopted for preparing and presenting
the financial statements of the Company.
16. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
(a) The Company generally provides for present obligations resulting
from past event, the amount of which can be estimated with reasonable
accuracy.
(b) Liabilities contingent upon happening of future event are disclosed
by way of a note in the accounts. Claims against the Company where a
demand has been raised by any authority or disputed in arbitration
exceeding Rupees Five Lakh in each case are recognized as contingent
liability, if contested.
(c) Contingent assets are not recognized.
17. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the net profi t for
the period attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year. For the purpose of
calculating diluted earnings per share, the net profi t for the period
attributable to equity shareholders and the weighted average number of
shares outstanding during the period are adjusted for the effects of
all dilutive potential equity shares.
18. GENERAL
(a) Prior Period Items exceeding Rupees Five Lakh in each case are
separately disclosed in the Profi t and Loss Account.
(b) Adjustments pertaining to earlier years but crystallized during the
year, exceeding Rupees Five Lakh in each case are separately disclosed
under "Other Adjustments".
(c) All expenditure, other than assets, on which usual depreciation
allowance is admissible, incurred for Research & Development Projects /
Schemes, net of grants-in-aid if any, are charged to the Profi t & Loss
Account.
(d) Joint cost of production relating to crude oil and natural gas is
apportioned on thermal equivalence basis.
(e) Refunds / Duty drawbacks and Demands from / in relation to Revenue
Authorities are accounted for on the basis of acceptance considering
information available upto the date of fi nalization of Accounts.
(f) Assets given under fi nance leases are recognized as receivable at
an amount equal to the net investment in the lease and the fi nance
income is based on a constant rate of return on the outstanding net
investment in line with AS 19 issued by the ICAI.
(g) General administrative expenses including corporate overhead are
charged to Profi t & Loss Account.
(h) Accounting of Contract works under various Projects for the Company
carried out by the Company in consortium with other entities is
accounted in line with AS 7 issued by ICAI after neutralizing the profi
t earned by the Company in it from the Project cost.
(i) Costs of Intangible assets are accounted for in line with AS 26
issued by ICAI.
Mar 31, 2003
1. ACCOUNTING CONVENTION
The financial statements are prepared under the historical cost
concept. Generally, revenues are recognised on accrual basis with
provision made for known losses and expenses.
2. EXPLORATION AND DEVELOPMENT EXPENDITURE
The Company generally follows the internationally accepted "Successful
Efforts Method" (SEM) of Accounting in respect of its Oil and Gas
exploration and production activities as explained below :-
(a) Geological and Geophysical expenditure, other than cost of tangible
assets, equipment and facilities deployed in relation thereto on which
usual depreciation allowance is admissible, are expensed in the year of
incidence.
(b) Lease carrying costs including license fees are expensed in the
year of incidence.
(c) Cost of successful exploratory wells, and completed development
wells, including allocated depreciation on support equipment and
facilities are capitalized as producing properties.
(d) Cost of unsuccessful/dry exploratory wells, including allocated
depreciation on support equipment and facilities, which do not lead to
discovery of/ accretion to hydrocarbon reserves, are expensed.
(e) Cost of incomplete wells / wells under production testing /
completed exploratory wells pending determination of commercial
viability including allocated depreciation on support equipment and
facilities, are classified as Pre- producing Properties.
(f) Abandonment costs relating to dismantling and restoration of well
sites (net of salvage value), if any, are accounted for in the year in
which the same are incurred.
(g) Adjustments arising out of refunds/claims from or to
Customs/Revenue Authorities for earlier years are considered as per
Para 14(d) of Significant Accounting Policies and treated
appropriately/prospectively.
3. FIXED ASSETS/DEPRECIATION ON EQUIPMENT AND FACILITIES PRODUCING
PROPERTIES/DEPLETION OF WASTING ASSETS
(a) Depreciation on all Fixed Assets is computed on "Straight Line
Method" (SLM), at the rates and in the manner specified in Schedule XIV
to the Companies Act, 1956 and the fixed assets are stated at cost less
depreciation.
(b) Depreciation as computed above on Fixed Assets deployed in
exploration and development drilling activities is charged to the cost
of each well.
(c) Assets costing up to Rs. 5000.00 per unit are depreciated fully in
the year of capitalisation.
(d) Any assets when certified by the User Department as of no further
use are deleted from the Block and Written Down Value, if any are
charged to Profit and Loss Account. The deleted assets are accumulated
and disposed off through normal tendering procedure. The sale proceeds
are accounted for as Miscellaneous income when realized.
(e) (i) The producing properties are depleted using the "Unit of
Production Method", based on the related Proved, Developed and
Producing (PDP) reserves.
(ii) Proved and Developed Reserves of oil and gas are technically
assessed regularly and are finally reviewed and estimated at the end of
each year by the Company.
(iii) The rate of depletion is computed with reference to an area
designated as Oil/Gas field.
4. FOREIGN CURRENCY TRANSACTIONS
4.1 FOREIGN CURRENCY LOANS
The outstanding balances against foreign currency loans/credits are
converted at the rates of exchange prevailing on the date of the
Balance Sheet and in case of non-availability of such rates, the rates
on the date nearest to the Balance Sheet date are considered. Loss/gain
due to exchange rate fluctuations, in respect of foreign currency loans
is dealt with in the following manner :-
(a) Exchange rate fluctuations in respect of foreign currency loans
which were raised for specific projects, are charged/credited to the
respective project accounts and amortised/depreciated in the manner the
related project expenditure is being treated as per accounting policy.
(b) Exchange rate fluctuations in respect of other general purpose
foreign currency loans not raised for any specific project or for
acquisition of any specific asset, are adjusted/booked in the Profit &
Loss Account.
4.2 OTHER TRANSACTIONS
Foreign currency transactions in relation to purchase of goods and
services are recorded and treated in the following manner :-
(a) In respect of transactions involving purchase of equipment and
facilities and procurement of services in relation thereto, in the
nature of fixed assets, and for purchase of stores for eventual use in
jobs, which are capitalised as per the accounting policies, are
recorded on the basis of the exchange rate on the settlement date or
the year end date, whichever is earlier.
(b) In respect of transactions involving purchase of stores, spares for
consumption in revenue accounts and payment for related services, the
transactions are recorded on the basis of the exchange rate on the
transaction date, and the exchange rate difference between the
transaction and the settlement date or the year end date, as the case
may be, is recognised as income or as expense in the period in which
they arise.
5. JOINT VENTURES
In respect of production sharing contracts (PSCs) executed by the
Company with other companies and the Government of India to undertake
development and production activities under a joint venture in its
concessions:-
i) The financial statements reflect the share of the Companys assets
and liabilities as also the income and expenditure of the joint venture
operations in proportion to the participating interest of the Company
as per the terms of the PSCs, on a line by line basis.
ii) The reserves of hydrocarbons in such concessions are also stated as
per the terms of the PSCs.
iii) The unamortised balance in the producing property accounts and/or
the written down values of the fixed assets installed therein in
respect of such concessions, are netted off by the consideration due
from the other participating companies.
6. INCOME TAX
(a) Current Tax
Income tax is computed as per provisions of the Income Tax Act, 1961,
read with the terms of the Agreement entered into by the Company with
the Government of India under Section 42 of the Income Tax Act, 1961
and accordingly in addition to other items of allowances :-
i) All intangible expenditure on exploration/prospecting/drilling in
Petroleum Exploration License areas, excluding expenditure on assets
for which usual depreciation allowance is admissible, whether abortive
or not, is allowed as a deduction equally over a period of three years
commencing from the year in which it is incurred;
ii) All intangible expenditure on exploration/prospecting/drilling in
Mining Lease areas, excluding expenditure on assets for which usual
depreciation allowance is admissible, is allowed as a deduction in the
year in which it is incurred; and
iii) Depreciation on tangible drilling expenditures and fixed assets is
allowed in accordance with rates prescribed under the Income Tax
Rules,1962 under the Written Down Value (WDV) method.
(b) Deferred Tax
Deferred Tax is recognised, subject to the consideration of prudence in
respect of deferred tax assets, on timing differences being the
difference between taxable income and accounting income that originate
in one period and are capable to reversal in one or more subsequent
periods and is measured using tax rates and laws that have been enacted
or substantively enacted by the Balance Sheet date. Deferred tax assets
are reviewed at each Balance Sheet date to reassess realisation.
7. LONG TERM INVESTMENTS
Long term investments are valued at cost unless there is a permanent
diminution in value.
8. INVENTORY
(a) Stocks of Crude Oil and Liquefied Petroleum Gas are valued at cost,
or realisable value, whichever is lower, excluding applicable excise
duty recoverable from the customers.
(b) Natural Gas in pipeline is not valued, since not measurable.
(c) The stores and spare parts are valued at weighted average cost.
Obsolete/unserviceable items, as and when identified, are written off.
Slow moving items (excluding Insurance Spares, items related to
deferred projects/drilling wells and accessories of plant & equipment)
are valued at residual value at 5% of the aforesaid cost. The stores
and spare parts also include goods-in-transit which represents items
pending arrival and/or acceptance at stipulated destinations.
9. RETIREMENT AND OTHER BENEFITS
(a) Contributions to approved Gratuity and Pension Funds are based on
an Actuarial valuation of the Funds carried out every three years,
unless a revision in the valuation is necessitated due to a revision in
emoluments or the benefits.
(b) Provision in respect of leave encashment liability is based on an
annual Actuarial valuation at the year end.
(c) Compensation paid/payable to the employees under the Voluntary
Retirement Scheme are expensed in the year of acceptance of the same by
the Company.
10. CLAIMS
Claims on Oil Co-ordination Committee (OCC) / Petroleum Planning &
Analysis Cell (PPAC) are booked on acceptance in principle thereof.
11. GRANTS & SUBSIDIES
Grants and Subsidies are accounted in revenue or capital account
according to the nature, when there is reasonable assurance that the
same would be realised. Grants related to specific assets are presented
in the Balance Sheet by showing the grant as a deduction from the gross
value of the assets concerned while arriving at their book value.
12. BORROWING COSTS
Borrowing cost during the construction period, net of Income if any,
that are attributable to qualifying assets are capitalised.
13. SEGMENT ACCOUNTING
(a) In accordance with the existing management reporting system, the
company has adopted its products and services (viz. Crude Oil, Natural
Gas, LPG and Pipeline transportation) as the primary reporting segments
and the geographical segments viz. Assam & Arunachal Pradesh, Rajasthan
etc. as the secondary reporting segments.
(b) Segment assets, liabilities, income and expenses have been either
directly identified or allocated to the segments on the basis usually
followed for allocation of cost adopted for preparing and presenting
the financial statements of the Company.
14. GENERAL
(a) Adjustments pertaining to earlier years, each transaction not
exceeding 0.25 per cent of the total expenditure of the Company, are
not considered material and hence not separately disclosed in the
Profit & Loss Accounts.
(b) All expenditure, other than assets, on which usual depreciation
allowance is admissible, incurred for Research & Development
Projects/Schemes, net of grants-in-aid, is charged to the Profit & Loss
Account.
(c) Joint cost of Production relating to crude oil and natural gas is
apportioned on thermal equivalence basis.
(d) Refunds/Duty drawbacks, Demands from/in relation to Revenue
Authorities are accounted for on the basis of acceptance considering
information available up to the date of finalisation of Accounts.
(e) All the accounting standards prescribed by the Institute of
Chartered Accountants of India as mandatory and as applicable to the
Company have been complied with while preparing the Accounts.
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