Accounting Policies of Torrent Power Ltd. Company
Mar 31, 2023
Note 1a: General information
Torrent Power Limited (âthe Companyâ) is a public company domiciled in India and is incorporated under the provisions of the Companies Act, applicable in India. Its equity shares are listed on BSE Ltd. and National Stock Exchange Ltd. in India. The registered office of the Company is located at âSamanvayâ, 600, Tapovan, Ambawadi, Ahmedabad - 380 015.
The Company is engaged in the business of generation, transmission and distribution of Electricity.
Note 1b: New standards or interpretations adopted by the Company
The Ministry of Corporate Affairs had vide notification dated March 23, 2022 notified Companies (Indian Accounting Standards) Amendment Rules, 2022 which amended certain accounting standards, and are effective April 1, 2022. These amendments did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
Note 1c: New standards or interpretations issued but not yet effective
The Ministry of Corporate Affairs has vide notification dated March 31, 2023 notified Companies (Indian Accounting Standards) Amendment Rules, 2023 (the ''Rules'') which amends certain accounting standards, and are effective April 1, 2023.
The Rules predominantly amend Ind AS 12, Income taxes, and Ind AS 1, Presentation of financial statements. The other amendments to Ind AS notified by these rules are primarily in the nature of clarifications.
These amendments are not expected to have a material impact on the Company in the current or future reporting periods and on foreseeable future transactions.
Note 2: Significant accounting policies2.1 Basis of preparation:
Compliance with Ind AS
The financial statements are in compliance, in all material aspects, with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) read with the [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act and rules made thereunder.
Historical cost convention
The financial statements have been prepared on an accrual basis under the historical cost convention except for following which have been measured at fair value;
⢠Defined benefit plan assets
All assets and liabilities have been classified as current or non-current as set out in the Schedule III (Division II) to the Companies Act, 2013.
2.2 Business combinations and Goodwill:
Business combination - acquisition
Acquisitions of businesses are accounted for using the acquisition method. In determining whether a particular set of activities and assets is a business, the Company assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred, liabilities incurred to the former owners of the acquiree and the equity interests issued by the Company in exchange for control of the acquiree.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date.
Acquisition-related costs are expensed as incurred.
The excess of the
⢠consideration transferred; and
⢠acquisition-date fair value of any previous equity interest in the acquired entity
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised in other comprehensive income and accumulated in equity as capital reserve provided there is clear evidence of the underlying reasons for classifying the business combination as a bargain purchase. In other cases, the bargain purchase gain is recognised directly in equity as capital reserve.
Business combination - common control transaction
Business combinations involving entities that are controlled by the Company are accounted for using the pooling of interests method as follows:
⢠The assets and liabilities of the combining entities are reflected at their carrying amounts.
⢠No adjustments are made to reflect fair values, or recognise any new assets or liabilities. Adjustments are only made to harmonise accounting policies.
⢠The financial information in the financial statements in respect of prior periods is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. However, where the business combination had occurred after that date, the prior period information is restated only from that date.
⢠The balance of the retained earnings appearing in the financial statements of the transferor is aggregated with the corresponding balance appearing in the financial statements of the transferee or is adjusted against general reserve.
⢠The identity of the reserves is preserved and the reserves of the transferor become the reserves of the transferee.
⢠The difference, if any, between the amounts recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of share capital of the transferor is transferred to capital reserve and is presented separately from other capital reserves.
Business combination-related costs are generally recognised in statement of profit and loss as incurred. Acquisition of an asset or a group of assets
In case of acquisition of an asset or a group of assets that does not constitute a business, the Company identifies and recognises individual identifiable assets acquired (including those assets that meet the definition of, and recognition criteria for, intangible assets under Ind AS 38, Intangible Assets) and liabilities assumed. The Purchase Consideration shall be allocated to the individual identifiable assets and liabilities on the basis of their relative fair values at the date of purchase. Such a transaction or event does not give rise to goodwill or gain on bargain purchase.
Goodwill
Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of a business include the carrying amount of goodwill relating to such business.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units that are expected to benefit from the business combination in which the goodwill arose.
2.3 Investments in subsidiaries, joint ventures and associates:
Investments in associates, joint ventures and subsidiaries are measured at cost less provision for impairment, if any.
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all the attached conditions.
Government grants relating to income are recognised in profit or loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate. Government grants relating to purchase of property, plant and equipment whose primary condition is that the Company should purchase, construct or otherwise acquire property, plant and equipment are recognised as deferred revenue in the balance sheet and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.
2.5 Property, plant and equipment:
Freehold land is carried at historical cost. All other items of property, plant and equipment held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses, except that on adoption of Ind AS, property, plant and equipment had been measured at deemed cost, using the net carrying value as per previous GAAP as at April 1, 2015.
Capital work in progress in the course of construction for production, supply or administrative purposes is carried at cost, less any recognised impairment loss. Cost includes purchase price, taxes and duties, labour cost and other directly attributable costs incurred upto the date the asset is ready for its intended use. Such property, plant and equipment are classified to the appropriate categories when completed and ready for intended use.
Subsequent cost are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. Subsequent costs relating to day to day servicing of the item are not recognised in the carrying amount of an item of property, plant and equipment; rather, these costs are recognised in profit or loss as incurred.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Depreciation methods, estimated useful lives and residual value
Depreciation commences when the assets are ready for their intended use. Depreciation for the year is provided on additions / deductions of the assets during the period from / up to the month in which the asset is added / deducted. Depreciation on property, plant and equipment which are governed as per the provisions of Part B of Schedule II of the Companies Act, 2013 is provided on straight line basis using the depreciation rates, the methodology and residual value as notified by the respective regulatory bodies in accordance with the Electricity Act, 2003. For other property, plant and equipment in non-regulated business, depreciation is provided on a straight line basis over the estimated useful lives.
The estimated useful life, residual values and depreciation method are reviewed at the end of each reporting period in respect of property, plant and equipment of non-regulated business. The effect of any such change in estimate in this regard is accounted for on a prospective basis.
|
The range of depreciation rates of property, plant and equipment are as follows: |
|||
|
Class of assets |
Rate of depreciation |
||
|
Regulated business $ |
Franchisee business @ |
Other business |
|
|
Buildings |
1.26% to 6.73% |
3.34% |
3.34% |
|
Railway siding |
1.80% to 5.28% |
- |
- |
|
Leasehold improvement |
- |
16.86% to 23.08% |
- |
|
Plant and machinery |
0.92% to 19.00% |
5.28% |
3.60% |
|
Electrical fittings and apparatus |
0.64% to 19.00% |
6.33% |
6.33% |
|
Furniture and fixtures |
0.91% to 15.00% |
6.33% |
6.33% |
|
Vehicles |
9.50% to 18.00% |
9.50% |
9.50% |
|
Office equipment |
0.91% to 31.67% |
5.28% to 15.00% |
6.33% to 15.00% |
@ governed by the applicable regulations of Uttar Pradesh Electricity Regulatory Commission (UPERC) / Maharashtra Electricity Regulatory Commission (MERC) for this purpose.
$ For assets acquired on or after April 1, 2009 in case of Regulated generation and distribution business, remaining depreciable value as on 31st March of the year closing after a period of 12 years from date on which assets are ready for their intended use, shall be spread over the balance useful life of the assets as defined in GERC / CERC Multi Year Tariff (MYT) regulations.
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Company, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalised to the asset''s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from its current use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised.
Investment properties, other than free hold land, are depreciated using straight line method over their estimated useful lives.
2.7 Intangible assets - acquired:
Computer software is carried at cost less accumulated amortisation and accumulated impairment losses, if any. Amortisation is recognised on a straight-line basis over its estimated useful life of 3 years. The estimated useful life and amortisation method are reviewed at the end of each reporting period and the effect of any changes in such estimate is accounted for on a prospective basis.
Expenditure incurred on acquisition of intangible assets which are not ready to use at the reporting date is disclosed under âIntangible assets under developmentâ.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from its use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.
Property, plant and equipment and intangible assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount of the assets exceeds its recoverable amount, which is the higher of an asset''s fair value less costs of disposal and value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit. An impairment loss is recognised immediately in profit or loss.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
Borrowing costs that are directly attributable to the acquisition and construction of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use, such as new projects and / or specific assets created in the existing business, are capitalized up to the date of completion and ready for their intended use.
Income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are charged to the statement of profit and loss in the period of their accrual.
2.10 Cash and cash equivalents:
For the purpose of presentation in the statement of cash flows, cash and cash equivalents include cash on hand, cheques / drafts on hand, current account balances with banks and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
Raw materials, fuel, stores and spares, packing materials, loose tools, work in progress, traded and finished goods are stated at the lower of cost and net realisable value. Cost of inventories includes purchase price and all other costs incurred in bringing the inventories to their present location and condition. Costs are assigned to individual items of inventory on the weighted average basis except for inventory of Regasified Liquefied Natural Gas (RLNG) which is valued using specific identification method considering its procurement for beneficiary usage or others. Costs of purchased inventory are determined after deducting rebates and discounts.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
Revenue towards satisfaction of a performance obligation is measured and recognized at transaction price, when the control of the goods or services has been transferred to consumers net of discounts and other similar allowances.
(i) Revenue from power supply is accounted for in accordance with the rates, terms and conditions laid down under the relevant Tariff Regulations / Tariff Orders notified by the Electricity Regulators / agreements entered with the customers / power exchange rates, as applicable. Revenue recognised includes amounts billed to consumers on the basis of recording of consumption of energy by installed meters based on the applicable tariff and adjustments in respect of unbilled amounts towards revenue gaps / unapproved Fuel and Power Purchase Price Adjustment (FPPPA) which are recognised considering applicable tariff regulations / tariff orders, past trends of approval, management''s probability estimate and when no significant uncertainty exists in such determination. Revenue from power supply exclude taxes and duties.
These adjustments / accruals are carried forward as ''Unbilled revenue'' under âOther current financial assetsâ in Note 21, which would be adjusted through future billing based on tariff determination by the regulator in accordance with the electricity regulations.
(ii) Trading of RLNG are recognised, net of returns and rebates, on transfer of control of ownership to the buyer. Sales exclude Goods and Services Tax.
(iii) Income from Generation Based Incentive is accounted on accrual basis considering eligibility of project for availing incentive.
(iv) Contributions by consumers towards items of property, plant and equipment, which require an obligation to provide electricity connectivity to the consumers, are recognised as a credit to deferred revenue. Such revenue is recognised over the useful life of the property, plant and equipment.
2.13 Foreign currency translation:
Functional and presentation currency
The financial statements are prepared in Indian rupee (?) which is functional as well as presentation currency of the Company.
Transactions and balances
In preparing the financial statements of the Company, transactions in currencies other than the entity''s functional currency (foreign currencies) are recognised 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 that are measured in terms of historical cost in a foreign currency are not retranslated.
Foreign exchange differences arising on foreign currency borrowings are presented in the Statement of profit and loss, within finance costs. All other foreign exchange differences arising on settlement of monetary items or on reporting the Company''s monetary items at rates different from those at which they were initially recorded during the financial year are recognized as income or expense in the financial year in which they arise.
Defined contribution plans
Contributions to retirement benefit plans in the form of provident fund, employee state insurance scheme, pension scheme and superannuation schemes as per regulations are charged as an expense on an accrual basis when employees have rendered the service. The Company has no further payment obligations once the contributions have been paid.
Defined benefits plans
The liability or asset recognised in the balance sheet in respect of the retirement benefit plan i.e. gratuity plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated by an actuary using projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligations.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of the plan assets. This cost is included in the employee benefit expense in the statement of profit and loss.
Remeasurements, comprising actuarial gains and losses and the effect of the changes to the asset ceiling (if applicable), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur and consequently recognised in retained earnings and is not reclassified to profit or loss.
The retirement benefit recognised in the balance sheet represents the actual deficit or surplus in the Company''s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of reductions in future contributions to the plans.
Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
The said obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on estimated taxable income for the year in accordance with the provisions of the Income Tax Act, 1961. Taxable profit differs from ''profit before tax'' as reported in the statement of profit and loss because of items of income or expenses that are taxable or deductible in other years and items that are never taxable or deductible. Management periodically evaluates positions taken in the tax returns with respect to situations for which applicable tax regulations are subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Company measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.
Advance taxes and provisions for current income taxes are offset with each other when there is a legally enforceable right to offset and balances arise with the same tax authority.
Deferred tax
Deferred tax is recognised 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 recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
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 all or part of the asset to be recovered.
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 realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.
Deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.
Basic earnings per share is computed by dividing the profit / (loss) by the weighted average number of equity shares outstanding during the year.
Diluted earnings per share is computed by adjusting the figures used in the determination of basic EPS to take into account:
⢠After tax effect of interest and other financing costs associated with dilutive potential equity shares.
⢠The weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
2.17 Provisions, contingent liabilities and contingent assets:
Provisions
A provision is recognized when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made.
The amount recognised 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).
Contingent liability
A possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise are disclosed as contingent liability and not provided for. Such liability is not disclosed if the possibility of outflow of resources is remote.
Contingent assets
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.
Contingent assets are not recognised but disclosed only when an inflow of economic benefits is probable.
Financial assets
i) Classification of financial assets (including debt instruments)
The Company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
⢠those measured at amortised cost.
The classification depends on the entity''s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
ii) Initial measurement
Financial assets (excluding trade receivables) are initially measured at fair value. Transaction costs that are directly attributable to the acquisition (other than financial assets at fair value through profit or loss) are added to the fair value of the financial assets, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial assets at fair value through profit or loss are recognised immediately in profit or loss. Trade receivables which do not contain a significant financing component are measured at transaction price.
iii) Subsequent measurement
There are three measurement categories into which the debt instruments can be classified:
⢠Amortised cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses). Impairment losses are presented as separate line item in the statement of profit and loss.
⢠Fair value through other comprehensive income (FVOCI)
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets'' cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains / (losses). Interest income from these financial assets is included in other income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains and losses and impairment expenses in other expenses. The Company currently does not have any debt instruments which are measured at FVOCI.
⢠Fair value through profit or loss (FVTPL)
Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss is recognised in profit or loss and presented net in the statement of profit and loss within other gains / (losses) in the period in which it arises. Net gains / (losses) from these financial assets is included in other income.
iv) Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its financial assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115, the Company follows ''simplified approach'' for recognition of impairment loss and always measures the loss allowance at an amount equal to lifetime expected credit losses to measure the expected credit losses, trade receivables have been grouped based on days past due. The policy of the Company is to provide for credit loss takes into consideration of factors such as type of Consumers i.e. Government Consumers / Non Government consumers, Status of Consumers i.e. Live consumers / Disconnected consumers and Security deposits provided by the Consumer.
v) Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Company''s balance sheet) when:
⢠The rights to receive cash flows from the asset have expired, or
⢠The Company has transferred its rights to receive cash flows from the asset
When the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of financial asset, the financial asset is derecognised if the Company has not retained control over the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
vi) Income recognition
Dividend is accounted when the right to receive payment is established.
I nterest income on financial assets at amortised cost is calculated using the effective interest method is recognised in the statement of profit and loss as part of other income.
Interest on overdue receivables of energy bills and claims including insurance claims, coal cost variation and other claims etc. are accounted when there is a certainty of recovery.
Financial liabilities
i) Classification
All the Company''s financial liabilities are measured at amortized cost.
ii) Initial measurement
Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the issue of financial liabilities are deducted from the fair value of the financial liabilities, as appropriate, on initial recognition.
iii) Subsequent measurement
Financial liabilities are subsequently measured at amortised cost using the Effective Interest Rate Method.
The Effective Interest Rate Method is a method of calculating the amortised 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 transaction costs and other premiums or discounts) through the expected life of the financial liability.
iv) Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or waived off or have expired. An exchange between the Company and the lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
v) Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Transaction costs of an equity transaction shall be accounted for in other equity.
Company as a lessee:
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Company. Contracts may contain both lease and non-lease components.
Lease liabilities:
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the lease payments.
The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in which the event or condition that triggers the payment occurs. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the lessee''s incremental borrowing rate. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets:
Right-of-use assets are measured at cost comprising the amount of the initial measurement of lease liability and lease payments made before the commencement date.
Right-of-use assets are depreciated over the lease term on a straight-line basis. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, and lease payments made at or before the commencement date less any lease incentives received.
Right-of-use assets are depreciated over the asset''s lease term on a straight-line basis.
Short term leases and leases of low value assets:
Payments associated with short-term leases of equipment and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise small items of office equipment including IT equipment.
When items of income or expense are of such nature, size and incidence that their disclosure is necessary to explain the performance of the Company for the year, the company makes a disclosure of the nature and amount of such items separately under the head âExceptional items.â
2.22 Amount presented and rounding off:
All amounts in the financial statements and notes have been presented in H Crore (except for share data) rounded to two decimals as per the requirement of Schedule III of the Companies Act, 2013, unless otherwise stated. Figures below H 50,000 are denoted by ''*''.
Note 3: Critical accounting judgements and key sources of estimation uncertainty
In the course of applying the policies outlined in all notes under note 2 above, the management of the Company is required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
Such estimates and associated assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future period, if the revision affects current and future periods.
The Company has recognised revenue (including the adjustment in respect of unapproved FPPPA claims and other true up adjustment claims) as per the applicable tariff regulations / tariff orders, management''s probability estimate and the past trends of approval. The company has not recognized those truing up adjustment claims which are disputed and for which the company is in appeal with regulatory authorities. These are recognised on receipt of final orders of respective regulatory authorities. [Refer note 35 & 43]
3.2 Property, plant and equipment:
(i) Service concession arrangements
The Company has assessed applicability of Appendix D of Ind AS 115 âService Concession Arrangementsâ with respect to its Property, plant and equipment. In assessing the applicability, the Company has exercised judgment in relation to the provisions of the Electricity Act, 2003, conditions provided under transmission and distribution license and / or agreements. Further, the Company has ability to pledged the assets pursuant to which it has control and ability to direct the use of assets. Based on such assessment, it has concluded that Appendix D of Ind AS 115 is not applicable.
(ii) Impairment of property, plant and equipment
Determining whether property, plant and equipment are impaired requires an estimation of the value in use of the relevant cash generating units. The value in use calculation is based on a Discounted Cash Flow model over the estimated useful life of the property, plant and equipment. Further, the cash flow projections are based on estimates and assumptions relating to expected demand, future price of fuel, expected tariff rates for electricity, discount rate, exchange rate and electricity market scenario, based on past trends and the current and likely future state of the industry etc. which are considered reasonable by the Management. Any reasonable possible change in the underlying assumptions would not lead to a material change to the amount of impairment. [Refer note 41(1)].
3.3 Impairment of investments in subsidiaries
At the end of each reporting period, the Company reviews the carrying amounts of its investments in subsidiaries when there is an indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for. [Refer note 41(2)]
Impairment of loans
The Company applies the Ind AS 109 simplified approach to measure expected credit losses which uses a lifetime expected loss allowance for loans granted by the Company to its subsidiaries.
Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies, including estimates of temporary differences reversing on account of available benefits from the Income Tax Act, 1961.
Deferred tax assets are recognised for unused tax credits to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Management judgement is required to determine the amount of deferred tax assets for unused tax credits that can be recognised, based upon the likely timing and the level of future taxable profits [Refer note 42(d)]
Contingent liabilities
In the normal course of business, contingent liabilities may arise from litigation and other claims against the Company. Potential liabilities that are possible but not probable of crystallising or are very difficult to quantify reliably are treated as contingent liabilities. Such liabilities are disclosed in the notes but are not recognised. Potential liabilities that are remote are neither recognized nor disclosed as contingent liability. The management judgement is involved in classification under ''remote'', ''possible'' or ''probable'' which is carried out based on expert advice, past judgements, experiences etc. [Refer note 44(a)]
Defined benefit plans and other long-term employee benefits
The present value of obligations under defined benefit plan and other long term employment benefits is determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual development in the future. These include the determination of the discount rate, future salary escalations, attrition rate and mortality rates. Due to the complexities involved in the valuation and its longterm nature, these obligations are highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Information about the various estimates and assumptions made in determining present value of defined benefit obligation are disclosed in note 48.2.
Mar 31, 2022
Note 1A: General information
Torrent Power Limited (âthe Companyâ) is a public company domiciled in India and is incorporated under the provisions of the Companies Act, applicable in India. Its equity shares are listed on BSE Ltd. and National Stock Exchange Ltd. in India. The registered office of the Company is located at âSamanvayâ, 600, Tapovan, Ambawadi, Ahmedabad - 380 015.
The Company is engaged in the business of generation, transmission and distribution of Electricity.
Note 1B: New standards or interpretations adopted by the Company
The Company has applied the following amendment to Ind AS for the first time for its annual reporting period commencing April 01, 2021:
i) Ind AS 116, extension of COVID-19 related concessions
ii) Ind AS 107, Ind AS 109 and Ind AS 116, Interest rate benchmark reform
The above other amendments did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
Note 1C: New standards or interpretations issued but not yet effective
The Company will apply the following standard for the first time for its annual reporting period commencing April 01, 2022:
Ind AS 16, "Property, Plant and Equipmentâ, proceeds before intended use of property, plant and equipment
The amendment clarifies that an entity shall deduct from the cost of an item of property, plant and equipment any proceeds received from selling items produced while the entity is preparing the asset for its intended use (for example, the proceeds from selling samples produced when testing a machine to see if it is functioning properly).
Ind AS 37, "Provisions, Contingent Liabilities and Contingent Assetsâ, onerous contracts - cost of fulfilling a contract
The amendment explains that the cost of fulfilling a contract comprises: the incremental costs of fulfilling that contract and an allocation of other costs that relate directly to fulfilling contracts.
Ind AS 103, "Business combinationsâ, References to the conceptual framework
The amendment adds a new exception in Ind AS 103 for liabilities and contingent liabilities.
Ind AS 109, "Financial Instrumentsâ, Fees included in the 10% test for derecognition of financial liabilities
The amendment clarifies which fees an entity includes when it applies the â10%'' test in assessing whether to derecognise a financial liability. An entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other''s behalf.
Ind AS 101, "First-time adoptionâ, subsidiary as a first-time adopter
Simplifies the application of Ind AS 101 by a subsidiary that becomes a first-time adopter after its parent in relation to the measurement of cumulative translation differences.
Note 1D: Reclassifications consequent to amendments to Schedule III:
The Ministry of Corporate Affairs amended the Schedule III to the Companies Act, 2013 on March 24, 2021 to increase the transparency and provide additional disclosures to users of financial statements. These amendments are effective from April 01, 2021.
Consequent to above, the Company has changed the classification/presentation as per below in the current year:
⢠Current maturities of long-term borrowings have now been included in the âCurrent borrowingsâ line item as compared to previous disclosure under the line item âother financial liabilities''.
⢠Security deposits (which meet the definition of a financial asset as per Ind AS 32) have been included in âother financial assets'' line item as compared to previous disclosure under the line item âloans''.
Note 2: Significant accounting policies
2.1 Basis of preparation:
Compliance with Ind AS
The financial statements are in compliance, in all material aspects, with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) read with the [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act and rules made thereunder.
As prescribed by the Ind AS, if the particular Ind AS is not in conformity with the applicable laws, the provisions of the said law shall prevail and financial statements shall be prepared in conformity with such laws. Consequently, the Company has applied this norm while preparing the financial statements.
Historical cost convention
The financial statements have been prepared on an accrual basis under the historical cost convention except for following which have been measured at fair value;
⢠Defined benefit plan assets
All assets and liabilities have been classified as current or non-current as set out in the Schedule III (Division II) to the Companies Act, 2013.
2.2 Business combinations and Goodwill:
Business combination - acquisition
Acquisitions of businesses are accounted for using the acquisition method. In determining whether a particular set of activities and assets is a business, the Company assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition date fair values of the assets transferred, liabilities incurred to the former owners of the acquiree and the equity interests issued by the Company in exchange for control of the acquiree.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date.
Acquisition-related costs are expensed as incurred.
The excess of the
⢠consideration transferred; and
⢠acquisition date fair value of any previous equityinterest in the acquired entity
The Company has reclassified comparative amounts to conform with current year presentation as per the requirements of Ind AS 1. The impact of such classifications is summarised as below:
|
Balance sheet (extract) |
March 31, 2021 (previously reported) |
Increase/ (Decrease) |
March 31, 2021 (restated) |
|
Loans (non-current) |
1,087.04 |
(16.80) |
1,070.24 |
|
Other financial assets (non-current) |
57.21 |
16.80 |
74.01 |
|
Loans (current) |
145.40 |
(29.07) |
116.33 |
|
Other financial assets (current) |
2,024.55 |
29.07 |
2,053.62 |
|
Borrowings (current) |
- |
1,092.99 |
1,092.99 |
|
Other financial liabilities (current) |
2,762.29 |
(1,092.99) |
1,669.30 |
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised in other comprehensive income and accumulated in equity as capital reserve provided there is clear evidence of the underlying reasons for classifying the business combination as a bargain purchase. In other cases, the bargain purchase gain is recognised directly in equity as capital reserve.
Business combination - common control transaction
Business combinations involving entities that are controlled by the Company are accounted for using the pooling of interests method as follows:
⢠The assets and liabilities of the combining entities are reflected at their carrying amounts.
⢠No adjustments are made to reflect fair values, or recognise any new assets or liabilities. Adjustments are only made to harmonise accounting policies.
⢠The financial information in the financial statements in respect of prior periods is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. However, where the business combination had occurred after that date, the prior period information is restated only from that date.
⢠The balance of the retained earnings appearing in the financial statements of the transferor is aggregated with the corresponding balance appearing in the financial statements of the transferee or is adjusted against general reserve.
⢠The identity of the reserves is preserved and the reserves of the transferor become the reserves of the transferee.
⢠The difference, if any, between the amounts recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of share capital of the transferor is transferred to capital reserve and is presented separately from other capital reserves.
Business combination-related costs are generally recognised in statement of profit and loss as incurred.
Acquisition of an asset or a group of assets
In case of acquisition of an asset or a group of assets that does not constitute a business, the Company identifies and recognises individual identifiable assets acquired (including those assets that meet the definition of, and recognition criteria for, intangible assets under Ind AS 38, Intangible Assets) and liabilities assumed. The Purchase Consideration shall be allocated to the individual identifiable assets and liabilities on the basis of their relative fair values at the date of purchase. Such a transaction or event does not give rise to goodwill or gain on bargain purchase.
Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of a business include the carrying amount of goodwill relating to such business.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units that are expected to benefit from the business combination in which the goodwill arose.
2.3 Investments in subsidiaries, joint ventures and associates:
Investments in associates, joint ventures and subsidiaries are measured at cost less provision for impairment, if any.
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all the attached conditions.
Government grants relating to income are recognised in profit or loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate. Government grants relating to purchase of property, plant and equipment whose primary condition is that the Company should purchase, construct or otherwise acquire property, plant and equipment are recognised as deferred revenue in the balance sheet and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.
2.5 Property, plant and equipment:
Freehold land is carried at historical cost. All other items of property, plant and equipment held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses, except that on adoption of Ind AS, property, plant and equipment had been measured at deemed cost, using the net carrying value as per previous GAAP as at April 01, 2015.
Capital work in progress in the course of construction for production, supply or administrative purposes is carried at cost, less any recognised impairment loss. Cost includes purchase price, taxes and duties, labour cost and other directly attributable costs incurred upto the date the asset is ready for its intended use. Such property, plant and equipment are classified to the appropriate categories when completed and ready for intended use.
Subsequent cost are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. Subsequent costs relating to day to day servicing of the item are not recognised in the carrying amount of an item of property, plant and equipment; rather, these costs are recognised in profit or loss as incurred.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Depreciation methods, estimated useful lives and residual value
Depreciation commences when the assets are ready for their intended use. Depreciation for the year is provided on additions / deductions of the assets during the period from / up to the month in which the asset is added / deducted. Depreciation on property, plant and equipment which are governed as per the provisions of Part B of Schedule II of the Companies Act, 2013 is provided on straight line basis using the depreciation rates, the methodology and residual value as notified by the respective regulatory bodies in accordance with the Electricity Act, 2003. For other property, plant and equipment in non-regulated business, depreciation is provided on a straight line basis over the estimated useful lives.
The estimated useful life, residual values and depreciation method are reviewed at the end of each reporting period in respect of property, plant and equipment of non-regulated business. The effect of any such change in estimate in this regard is accounted for on a prospective basis.
The range of depreciation rates of property, plant and equipment are as follows:
|
Class of assets |
Rate of depreciation |
||
|
Regulated business |
Franchisee business @ |
Other business |
|
|
Buildings |
1.80% to 6.00% |
3.34% |
3.34% |
|
Railway siding |
1.80% to 5.28% |
- |
- |
|
Leasehold improvement |
- |
11.65% to 17.65% |
- |
|
Plant and machinery |
1.80% to 7.00% |
5.28% |
3.60% |
|
Electrical fittings and apparatus |
5.28% to 19.00% |
6.33% |
6.33% |
|
Furniture and fixtures |
5.28% to 15.00% |
6.33% |
6.33% |
|
Vehicles |
9.50% |
9.50% |
9.50% |
|
Office equipment |
3.60% to 19.00% |
5.28% to 15.00% |
6.33% to 15.00% |
@ governed by the applicable regulations of U. P. Electricity Regulatory Commission (UPERC) / Maharashtra Electricity Regulatory Commission (MERC) for this purpose.
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Company, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalised to the asset''s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from its current use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised.
Investment properties, other than free hold land, are depreciated using straight line method over their estimated useful lives.
2.7 Intangible assets - acquired:
Computer software is carried at cost less accumulated amortisation and accumulated impairment losses, if any. Amortisation is recognised on a straight-line basis over its estimated useful life of 3 years. The estimated useful life and amortisation method are reviewed at the end of each reporting period and the effect of any changes in such estimate is accounted for on a prospective basis.
Expenditure incurred on acquisition of intangible assets which are not ready to use at the reporting date is disclosed under âIntangible assets under developmentâ.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from its use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.
Property, plant and equipment and intangible assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount of the assets exceeds its recoverable amount, which is the higher of an asset''s fair value less costs of disposal and value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit. An impairment loss is recognised immediately in profit or loss.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
Borrowing costs that are directly attributable to the acquisition and construction of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use, such as new projects and / or specific assets created in the existing business, are capitalized up to the date of completion and ready for their intended use.
Income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are charged to the statement of profit and loss in the period of their accrual.
2.10 Cash and cash equivalents:
For the purpose of presentation in the statement of cash flows, cash and cash equivalents include cash on hand, cheques / drafts on hand, current account balances with banks and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
Raw materials, fuel, stores and spares, packing materials, loose tools, work in progress, traded and finished goods are stated at the lower of cost and net realisable value. Cost of inventories includes purchase price and all other costs incurred in bringing the inventories to their present location and condition. Costs are assigned to individual items of inventory on the weighted average basis except for inventory of Regasified Liquefied Natural Gas (RLNG) which is valued using specific identification method considering its procurement for beneficiary usage or others. Costs of purchased inventory are determined after deducting rebates and discounts.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
Revenue is recognized, when the control of the goods or services has been transferred to consumers net of discounts and other similar allowances.
i) Revenue from power supply is accounted for in accordance with the principles laid down under the relevant Tariff Regulations / Tariff Orders notified by the Electricity Regulator. Revenue recognised includes amounts billed to consumers on the basis of recording of consumption of energy by installed meters based on the applicable tariff and adjustments in respect of unbilled amounts towards revenue gaps / unapproved FPPPA which are recognised considering applicable tariff regulations / tariff orders, past trends of approval, management''s probability estimate and when no significant uncertainty exists in such determination. Revenue from power supply exclude taxes and duties.
These adjustments / accruals are carried forward as âUnbilled revenue'' under âOther current financial assetsâ in Note 21, which would be adjusted through future billing based on tariff determination by the regulator in accordance with the electricity regulations.
ii) Trading of RLNG are recognised, net of returns and rebates, on transfer of control of ownership to the buyer. Sales exclude Goods and Services Tax.
iii) Income from Generation Based Incentive is accounted on accrual basis considering eligibility of project for availing incentive.
iv) Contributions by consumers towards items of property, plant and equipment, which require an obligation to provide electricity connectivity to the consumers, are recognised as a credit to deferred revenue. Such revenue is recognised over the useful life of the property, plant and equipment.
2.13 Foreign currency translation:Functional and presentation currency
The financial statements are prepared in Indian rupee (?) which is functional as well as presentation currency of the Company.
In preparing the financial statements of the Company, transactions in currencies other than the entity''s functional currency (foreign currencies) are recognised 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 that are measured in terms of historical cost in a foreign currency are not retranslated.
Foreign exchange differences arising on foreign currency borrowings are presented in the Statement of profit and loss, within finance costs. All other foreign exchange differences arising on settlement of monetary items or on reporting the Company''s monetary items at rates different from those at which they were initially recorded during the financial year are recognized as income or expense in the financial year in which they arise.
2.14 Employee benefits:Defined contribution plans
Contributions to retirement benefit plans in the form of provident fund, employee state insurance scheme, pension scheme and superannuation schemes as per regulations are charged as an expense on an accrual basis when employees have rendered the service. The Company has no further payment obligations once the contributions have been paid.
The liability or asset recognised in the balance sheet in respect of the retirement benefit plan i.e. gratuity plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated by an actuary using projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligations.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of the plan assets. This cost is included in the employee benefit expense in the statement of profit and loss.
Remeasurements, comprising actuarial gains and losses and the effect of the changes to the asset ceiling (if applicable), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur and consequently recognised in retained earnings and is not reclassified to profit or loss.
The retirement benefit recognised in the balance sheet represents the actual deficit or surplus in the Company''s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of reductions in future contributions to the plans.
Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
The said obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on estimated taxable income for the year in accordance with the provisions of the Income Tax Act, 1961. Taxable profit differs from âprofit before tax'' as reported in the statement of profit and loss because of items of income or expenses that are taxable or deductible in other years and items that are never taxable or deductible. Management periodically evaluates positions taken in the tax returns with respect to situations for which
applicable tax regulations are subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. . The Company measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.
Advance taxes and provisions for current income taxes are offset with each other when there is a legally enforceable right to offset and balances arise with the same tax authority.
Deferred tax is recognised 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 recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
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 all or part of the asset to be recovered.
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 realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.
Deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.
Basic earnings per share is computed by dividing the profit / (loss) by the weighted average number of equity shares outstanding during the year.
Diluted earnings per share is computed by adjusting the figures used in the determination of basic EPS to take into account:
⢠After tax effect of interest and other financing costs associated with dilutive potential equity shares.
⢠The weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
2.17 Provisions, contingent liabilities and contingent assets:Provisions
A provision is recognized when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made.
The amount recognised 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).
A possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise are disclosed as contingent liability and not provided for. Such liability is not disclosed if the possibility of outflow of resources is remote.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.
Contingent assets are not recognised but disclosed only when an inflow of economic benefits is probable.
2.18 Financial instruments:Financial assets
i) Classification of financial assets (including debt instruments)
The Company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
⢠those measured at amortised cost.
The classification depends on the entity''s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
Financial assets are initially measured at fair value. Transaction costs that are directly attributable to the acquisition (other than financial assets at fair value through profit or loss) are added to the fair value of the financial assets, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial assets at fair value through profit or loss are recognised immediately in profit or loss.
There are three measurement categories into which the debt instruments can be classified:
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
⢠Fair value through other comprehensive income (FVOCI)
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets'' cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains / (losses). Interest income from these financial assets is included in other income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains and losses and impairment expenses in other expenses.
⢠Fair value through profit or loss (FVTPL)
Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not
part of a hedging relationship is recognised in profit or loss and presented net in the statement of profit and loss within other gains / (losses) in the period in which it arises. Net gains / (losses) from these financial assets is included in other income.
iv) Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its financial assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115 only, the Company follows âsimplified approach'' for recognition of impairment loss and always measures the loss allowance at an amount equal to lifetime expected credit losses.
The Company applies the Ind AS 109 simplified approach to measure expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on days past due. The Company recognises expected loss rates in case of unbilled revenue after considering applicable tariff regulations / tariff orders, management''s probability estimate and the past trends of approval.
v) Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Company''s balance sheet) when:
⢠The rights to receive cash flows from the asset have expired, or
⢠The Company has transferred its rights to receive cash flows from the asset
When the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of financial asset, the financial asset is derecognised if the Company has not retained control over the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
Dividend is accounted when the right to receive payment is established.
Interest income on financial assets at amortised cost is calculated using the effective interest method is recognised in the statement of profit and loss as part of other income.
Interest on overdue receivables of energy bills and claims including insurance claims, coal cost variation and other claims etc. are accounted as and when recovered.
The Company''s financial liabilities include trade and other payables, loans and borrowings.
All the Company''s financial liabilities are measured at amortized cost.
Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the issue of financial liabilities are deducted from the fair value of the financial liabilities, as appropriate, on initial recognition.
Financial liabilities are subsequently measured at amortised cost using the Effective Interest Rate Method.
The Effective Interest Rate Method is a method of calculating the amortised 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 transaction costs and other premiums or discounts) through the expected life of the financial liability.
iv) Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or waived off or have expired. An exchange between the Company and the lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
v) Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Transaction costs of an equity transaction shall be accounted for in other equity.
2.20 Leases:Company as a lessee:
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Company. Contracts may contain both lease and non-lease components.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the lease payments.
The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in which the event or condition that triggers the payment occurs. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the lessee''s incremental borrowing rate. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the amount of the initial measurement of lease liability and lease payments made before the commencement date.
Right-of-use assets are depreciated over the lease term on a straight-line basis. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, and lease payments made at or before the commencement date less any lease incentives received.
Right-of-use assets are depreciated over the asset''s lease term on a straight-line basis.
Short term leases and leases of low value assets:
Payments associated with short-term leases of equipment and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise small items of office equipment including IT equipment.
When items of income or expense are of such nature, size and incidence that their disclosure is necessary to explain the performance of the Company for the year, the company makes a disclosure of the nature and amount of such items separately under the head âExceptional items.â
2.22 Amount presented and rounding off:
All amounts in the financial statements and notes have been presented in f Crore (except for share data) rounded to two decimals as per the requirement of Schedule III of the Companies Act, 2013, unless otherwise stated. Figures below f 50,000 are denoted by â*''.
Note 3: Critical Accounting Judgements And Key Sources Of Estimation Uncertainty
In the course of applying the policies outlined in all notes under note 2 above, the management of the Company is required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
Such estimates and associated assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future period, if the revision affects current and future periods.
The Company has recognised revenue (including the adjustment in respect of unapproved FPPPA claims and other true up adjustment claims) as per the applicable tariff regulations / tariff orders, management''s probability estimate and the past trends of approval. The company has not recognized those truing up adjustment claims which are disputed and for which the company is in appeal with regulatory authorities. These are recognised on receipt of final orders of respective regulatory authorities. [Refer note 35 & 44]
3.2 Property, plant and equipment:i) Service concession arrangements
The Company has assessed applicability of Appendix D of Ind AS115 âService Concession Arrangementsâ with respect to its Property, plant and equipment. In assessing the applicability, the Company has exercised judgment in relation to the provisions of the Electricity Act, 2003, conditions provided under transmission and distribution license and / or agreements. Further, the Company has ability to pledged the assets pursuant to which it has control and ability to direct the use of assets. Based on such assessment, it has concluded that Appendix D of Ind AS 115 is not applicable.
ii) Impairment of property, plant and equipment
Determining whether property, plant and equipment are impaired requires an estimation of the value in use of the relevant cash generating units. The value in use calculation is based on a Discounted Cash Flow model over the estimated useful life of the property, plant and equipment. Further, the cash flow projections are based on estimates and assumptions relating to expected demand, future price of fuel, expected tariff rates for electricity, discount rate, exchange rate and electricity market scenario, based on past trends and the current and likely future state of the industry etc. which are considered reasonable by the Management. Any reasonable possible change in the underlying assumptions would not lead to a material change to the amount of impairment. [Refer note 42(1)]
3.3 Impairment of investments in subsidiaries
At the end of each reporting period, the Company reviews the carrying amounts of its investments in subsidiaries when there is an indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for. [Refer note 42(2)]
The Company applies the Ind AS 109 simplified approach to measure expected credit losses which uses a lifetime expected loss allowance for loans granted by the Company to its subsidiaries.
Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies, including estimates of temporary differences reversing on account of available benefits from the Income Tax Act, 1961.
Deferred tax assets are recognised for unused tax credits to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Management judgement is required to determine the amount of deferred tax assets for unused tax credits that can be recognised, based upon the likely timing and the level of future taxable profits [Refer note 43(d)]
3.5 Contingencies:Contingent liabilities
In the normal course of business, contingent liabilities may arise from litigation and other claims against the Company. Potential liabilities that are possible but not probable of crystallising or are very difficult to quantify reliably are treated as contingent liabilities. Such liabilities are disclosed in the notes but are not recognised. Potential liabilities that are remote are neither recognized nor disclosed as contingent liability. The management judgement is involved in classification under âremote'', âpossible'' or âprobable'' which is carried out based on expert advice, past judgements, experiences etc. [Refer note 45(a)]
3.6 Employee benefit plans:Defined benefit plans and other long-term employee benefits
The present value of obligations under defined benefit plan and other long term employment benefits is determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual development in the future. These include the determination of the discount rate, future salary escalations, attrition rate and mortality rates Due to the complexities involved in the valuation and its long term nature, these obligations are highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Information about the various estimates and assumptions made in determining present value of defined benefit obligation are disclosed in note 49.2
Mar 31, 2021
Torrent Power Limited (âthe Companyâ) is a public Company domiciled in India and is incorporated under the provisions of the Companies Act, applicable in India. Its equity shares are listed on BSE Ltd. and National Stock Exchange Ltd. in India. The registered office of the Company is located at âSamanvayâ, 600, Tapovan, Ambawadi, Ahmedabad - 380 015.
The Company is engaged in the business of generation, transmission and distribution of Electricity.
NOTE 1A: NEW STANDARDS OR INTERPRETATIONS ADOPTED BY THE COMPANY
The Company has applied the following amendment to Ind AS for the first time for its annual reporting period commencing April 01, 2020:
i) Ind AS - 1 and Ind AS - 8, Definition of Material
ii) Ind AS - 103, Definition of a Business
iii) Ind AS - 116, COVID-19 related concessions
The above other amendments did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation:
Compliance with Ind AS
The financial statements are in compliance, in all material aspects, with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) read with the [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act and rules made thereunder.
As prescribed by the Ind AS, if the particular Ind AS is not in conformity with the applicable laws, the provisions of the said law shall prevail and financial statements shall be prepared in conformity with such laws. Consequently, the Company has applied this norm while preparing the financial statements.
Historical cost convention
The financial statements have been prepared on an accrual basis under the historical cost convention except for following which have been measured at fair value;
⢠Defined benefit plan assets
All assets and liabilities have been classified as current or non-current as set out in the Schedule III (Division II) to the Companies Act, 2013.
2.2 Business combinations and goodwill:
Business combination - acquisition
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred, liabilities incurred to the former owners of the acquiree and the equity interests issued by the Company in exchange for control of the acquiree.
I dentifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date.
Acquisition-related costs are expensed as incurred.
The excess of the
⢠consideration transferred; and
⢠acquisition-date fair value of any previous equity interest in the acquired entity
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised in other comprehensive income and accumulated in equity as capital reserve provided there is clear evidence of the underlying reasons for classifying the business combination as a bargain purchase. In other cases, the bargain purchase gain is recognised directly in equity as capital reserve.
Business combination - common control transaction
Business combinations involving entities that are controlled by the Company are accounted for using the pooling of interests method as follows:
⢠The assets and liabilities of the combining entities are reflected at their carrying amounts.
⢠No adjustments are made to reflect fair values or recognise any new assets or liabilities. Adjustments are only made to harmonise accounting policies.
⢠The financial information in the financial statements in respect of prior periods is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. However, where the business combination had occurred after that date, the prior period information is restated only from that date.
⢠The balance of the retained earnings appearing in the financial statements of the transferor is aggregated with the corresponding balance appearing in the financial statements of the transferee or is adjusted against general reserve.
⢠The identity of the reserves is preserved and the reserves of the transferor become the reserves of the transferee.
⢠The difference, if any, between the amounts recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of share capital of the transferor is transferred to capital reserve and is presented separately from other capital reserves.
Business combination-related costs are generally recognised in statement of profit and loss as incurred.
Goodwill
Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of a business include the carrying amount of goodwill relating to such business.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cashgenerating units that are expected to benefit from the business combination in which the goodwill arose.
2.3 Investments in subsidiaries, joint ventures and associates:
Investments in associates, joint ventures and subsidiaries are measured at cost less provision for impairment, if any.
2.4 Government grants:
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all the attached conditions.
Government grants relating to income are recognised in profit or loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate. Government grants relating to purchase of property, plant and equipment whose primary condition is that the Company should purchase, construct or otherwise acquire property, plant and equipment are recognised as deferred revenue in the balance sheet and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.
2.5 Property, plant and equipment:
Tangible fixed assets
Freehold land is carried at historical cost. All other items of property, plant and equipment held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses, except that on adoption of Ind AS, property, plant and equipment had been measured at deemed cost, using the net carrying value as per previous GAAP as of April 01,2015.
Capital work in progress in the course of construction for production, supply or administrative purposes is carried at cost, less any recognised impairment loss. Cost includes purchase price, taxes and duties, labour cost and other directly attributable costs incurred upto the date the asset is ready for its intended use. Such property, plant and equipment are classified to the appropriate categories when completed and ready for intended use.
Subsequent cost are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. Subsequent costs relating to day to day servicing of the item are not recognised in the carrying amount of an item of property, plant and equipment; rather, these costs are recognised in profit or loss as incurred.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Depreciation methods, estimated useful lives and residual value
Depreciation commences when the assets are ready for their intended use. Depreciation for the year is provided on additions / deductions of the assets during the period from / up to the month in which the asset is added / deducted. Depreciation on tangible assets which are governed as per the provisions of Part B of Schedule II of the Companies Act, 2013 is provided on straight line basis using the depreciation rates, the methodology and residual value as notified by the respective regulatory bodies in accordance with the Electricity Act, 2003. For other tangible assets in non-regulated business, depreciation is provided on a straight line basis over the estimated useful lives.
The estimated useful life, residual values and depreciation method are reviewed at the end of each reporting period in respect of tangible assets of non-regulated business. The effect of any such change in estimate in this regard is accounted for on a prospective basis.
The range of depreciation rates of property, plant and equipment are as follows:
|
Class of Assets |
Regulated Business |
Franchisee Business @ |
Other Business |
|
Buildings |
1.80% to 6.00% |
3.34% |
3.34% |
|
Railway siding |
1.80% to 5.28% |
- |
- |
|
Plant and machinery |
1.80% to 7.00% |
5.28% |
3.60% |
|
Electrical fittings and apparatus |
5.28% to 19.00% |
6.33% |
6.33% |
|
Furniture and fixtures |
5.28% to 15.00% |
6.33% |
6.33% |
|
Vehicles |
9.50% |
9.50% |
9.50% |
@ governed by the applicable regulations of U. P Electricity Regulatory Commission (UPERC) / Maharashtra Electricity Regulatory Commission (MERC) for this purpose.
2.6 Investment properties:
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Company, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalised to the asset''s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from its current use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised.
Investment properties, other than free hold land, are depreciated using straight line method over their estimated useful lives.
2.7 Intangible assets - acquired:
Computer software is carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over its estimated useful life of 3 years. The estimated useful life and amortisation method are reviewed at the end of each reporting period and the effect of any changes in such estimate is accounted for on a prospective basis.
Expenditure incurred on acquisition of intangible assets which are not ready to use at the reporting date is disclosed under âIntangible assets under developmentâ.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from its use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.
2.8 Impairment of tangible and intangible assets:
Tangible and intangible assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the assets exceeds its recoverable amount, which is the higher of an asset''s fair value less costs of disposal and value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or cashgenerating unit. An impairment loss is recognised immediately in profit or loss.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
2.9 Borrowing costs:
Borrowing costs that are directly attributable to the acquisition and construction of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use, such as new projects and / or specific assets created in the existing business, are capitalised up to the date of completion and ready for their intended use.
I ncome earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are charged to the statement of profit and loss in the period of their accrual.
2.10 Cash and cash equivalents:
For the purpose of presentation in the statement of cash flows, cash and cash equivalents include cash on hand, cheques / drafts on hand, current account balances with banks and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
2.11 Inventories:
Raw materials, fuel, stores and spares, packing materials, loose tools, work in progress, traded and finished goods are stated at the lower of cost and net realisable value. Cost of inventories includes purchase price and all other costs incurred in bringing the inventories to their present location and condition. Costs are assigned to individual items of inventory on the weighted average basis except for inventory of Regasified Liquefied Natural Gas (RLNG) which is valued using specific identification method considering its procurement for beneficiary usage or others. Costs of purchased inventory are determined after deducting rebates and discounts.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
2.12 Revenue recognition:
Revenue is recognised, when the control of the goods or services has been transferred to consumers net of discounts and other similar allowances.
(i) Revenue from power supply is accounted for in accordance with the principles laid down under the relevant Tariff Regulations / Tariff Orders notified by the Electricity Regulator. Revenue recognised includes amounts billed to consumers on the basis of recording of consumption of energy by installed meters based on the applicable tariff and adjustments in respect of unbilled amounts towards revenue gaps / unapproved FPPPA which are recognised considering applicable tariff regulations / tariff orders, past trends of approval, management''s probability estimate and when no significant uncertainty exists in such determination. Revenue from power supply exclude taxes and duties.
These adjustments / accruals are carried forward as âUnbilled revenue'' under âOther current financial assetsâ in Note 21, which would be adjusted through future billing based on tariff determination by the regulator in accordance with the electricity regulations.
(ii) Sales of cables and trading of RLNG are recognised, net of returns and rebates, on transfer of control of ownership to the buyer. Sales exclude Goods and Services Tax.
(iii) I ncome from Generation Based Incentive is accounted on accrual basis considering eligibility of project for availing incentive.
(iv) Contributions by consumers towards items of property, plant and equipment, which require an obligation to provide electricity connectivity to the consumers, are recognised as a credit to deferred revenue. Such revenue is recognised over the useful life of the property, plant and equipment.
2.13 Foreign currency translation:
Functional and presentation currency
The financial statements are prepared in Indian rupee (INR) which is functional as well as presentation currency of the Company.
Transactions and balances
In preparing the financial statements of the Company, transactions in currencies other than the entity''s functional currency (foreign currencies) are recognised 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 that are measured in terms of historical cost in a foreign currency are not retranslated.
Foreign exchange differences arising on foreign currency borrowings are presented in the Statement of profit and loss, within finance costs. All other foreign exchange differences arising on settlement of monetary items or on reporting the Company''s monetary items at rates different from those at which they were initially recorded during the financial year are recognised as income or expense in the financial year in which they arise.
2.14 Employee benefits:
Defined contribution plans
Contributions to retirement benefit plans in the form of provident fund, employee state insurance scheme, pension scheme and superannuation schemes as per regulations are charged as an expense on an accrual basis when employees have rendered the service. The Company has no further payment obligations once the contributions have been paid.
Defined benefits plans
The liability or asset recognised in the balance sheet in respect of the retirement benefit plan i.e. gratuity plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated by an actuary using projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligations.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of the plan assets. This cost is included in the employee benefit expense in the statement of profit and loss.
Remeasurements, comprising actuarial gains and losses and the effect of the changes to the asset ceiling (if applicable), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur and consequently recognised in retained earnings and is not reclassified to profit or loss.
The retirement benefit recognised in the balance sheet represents the actual deficit or surplus in the Company''s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of reductions in future contributions to the plans.
Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
The said obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
2.15 Taxation:
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on estimated taxable income for the year in accordance with the provisions of the Income Tax Act, 1961. Taxable profit differs from âprofit before tax'' as reported in the statement of profit and loss because of items of income or expenses that are taxable or deductible in other years and items that are never taxable or deductible. Management periodically evaluates positions taken in the tax returns with respect to situations for which applicable tax regulations are subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment.The Company measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.
Advance taxes and provisions for current income taxes are offset with each other when there is a legally enforceable right to offset and balances arise with the same tax authority.
Deferred tax
Deferred tax is recognised 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 recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
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 all or part of the asset to be recovered.
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 realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.
Deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.
2.16 Earnings per share:
Basic earnings per share is computed by dividing the profit / (loss) by the weighted average number of equity shares outstanding during the year.
Diluted earnings per share is computed by adjusting the figures used in the determination of basic EPS to take into account:
⢠After tax effect of interest and other financing costs associated with dilutive potential equity shares.
⢠The weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
2.17 Provisions, contingent liabilities and contingent assets:
Provisions
A provision is recognised when the Company has a present obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made.
The amount recognised 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).
Contingent liability
A possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise are disclosed as contingent liability and not provided for. Such liability is not disclosed if the possibility of outflow of resources is remote.
Contingent assets
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.
Contingent assets are not recognised but disclosed only when an inflow of economic benefits is probable.
Financial assets
i) Classification of financial assets (including debt instruments)
The Company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
⢠those measured at amortised cost.
The classification depends on the entity''s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
ii) Initial measurement
Financial assets are initially measured at fair value. Transaction costs that are directly attributable to the acquisition (other than financial assets at fair value through profit or loss) are added to the fair value of the financial assets, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial assets at fair value through profit or loss are recognised immediately in profit or loss.
iii) Subsequent measurement
There are three measurement categories into which the debt instruments can be classified:
⢠Amortised cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
⢠Fair value through other comprehensive income (FVOCI)
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets'' cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains / (losses). Interest income from these financial assets is included in other income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains and losses and impairment expenses in other expenses.
⢠Fair value through profit or loss (FVTPL)
Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented net in the statement of profit and loss within other gains / (losses) in the period in which it arises. Net gains / (losses) from these financial assets is included in other income.
iv) Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its financial assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115 only, the Company follows âsimplified approach'' for recognition of impairment loss and always measures the loss allowance at an amount equal to lifetime expected credit losses.
The Company applies the Ind AS 109 simplified approach to measure expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on days past due. The Company recognises expected loss rates in case of unbilled revenue after considering applicable tariff regulations / tariff orders, management''s probability estimate and the past trends of approval.
v) Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Company''s balance sheet) when:
⢠The rights to receive cash flows from the asset have expired, or
⢠The Company has transferred its rights to receive cash flows from the asset
When the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of financial asset, the financial asset is derecognised if the Company has not retained control over the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
vi) Income recognition
Dividend is accounted when the right to receive payment is established.
I nterest income on financial assets at amortised cost is calculated using the effective interest method is recognised in the statement of profit and loss as part of other income.
I nterest on overdue receivables of energy bills and claims including insurance claims, coal cost variation and other claims etc. are accounted as and when recovered.
Financial liabilities
The Company''s financial liabilities include trade and other payables, loans and borrowings.
i) Classification
All the Company''s financial liabilities are measured at amortised cost.
ii) Initial measurement
Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the issue of financial liabilities are deducted from the fair value of the financial liabilities, as appropriate, on initial recognition.
iii) Subsequent measurement
Financial liabilities are subsequently measured at amortised cost using the Effective Interest Rate Method.
The Effective Interest Rate Method is a method of calculating the amortised 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 transaction costs and other premiums or discounts) through the expected life of the financial liability.
iv) Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or waived off or have expired. An exchange between the Company and the lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation.
2.19 Contributed equity:
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Transaction costs of an equity transaction shall be accounted for in other equity.
2.20 Leases:
Company as a lessee:
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Company. Contracts may contain both lease and non-lease components.
Lease liabilities:
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the lease payments.
The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in which the event or condition that triggers the payment occurs. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the lessee''s incremental borrowing rate. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets:
Right-of-use assets are measured at cost comprising the amount of the initial measurement of lease liability and lease payments made before the commencement date.
Right-of-use assets are depreciated over the lease term on a straight-line basis. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, and lease payments made at or before the commencement date less any lease incentives received.
Right-of-use assets are depreciated over the asset''s lease term on a straight-line basis.
Short term leases and leases of low value assets:
Payments associated with short-term leases of equipment and all leases of low-value assets are recognised on a straightline basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise small items of office equipment including IT equipment.
2.21 Exceptional items:
When items of income or expense are of such nature, size and incidence that their disclosure is necessary to explain the performance of the Company for the year, the Company makes a disclosure of the nature and amount of such items separately under the head âExceptional items.
2.22 Amount presented and rounding off:
All amounts in the financial statements and notes have been presented in C Crore (except for share data) rounded to two decimals as per the requirement of Schedule III of the Companies Act, 2013, unless otherwise stated. Figures below C50,000 are denoted by â*â.
NOTE 3: CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the course of applying the policies outlined in all notes under note 2 above, the management of the Company is required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
Such estimates and associated assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future period, if the revision affects current and future periods.
3.1 Revenue recognition:
The Company has recognised revenue (including the adjustment in respect of unapproved FPPPA claims and other true up adjustment claims) as per the applicable tariff regulations / tariff orders, management''s probability estimate and the past trends of approval. The Company has not recognised those truing up adjustment claims which are disputed and for which the Company is in appeal with regulatory authorities. These are recognised on receipt of final orders of respective regulatory authorities. [Refer note 35 & 45]
3.2 Property, plant and equipment:
i) Service concession arrangements
The Company has assessed applicability of Appendix D of Ind AS115 âService Concession Arrangementsâ with respect to its property, plant and equipment. In assessing the applicability, the Company has exercised judgment in relation to the provisions of the Electricity Act, 2003, conditions provided under transmission and distribution license and / or agreements. Further, the Company has ability to pledge the assets pursuant to which it has control and ability to direct the use of assets. Based on such assessment, it has concluded that Appendix D of Ind AS 115 is not applicable.
ii) Impairment of property, plant and equipment
Determining whether property, plant and equipment are impaired requires an estimation of the value in use of the relevant cash generating units. The value in use calculation is based on a Discounted Cash Flow model over the estimated useful life of the property, plant and equipment. Further, the cash flow projections are based on estimates and assumptions relating to expected demand, future price of fuel, expected tariff rates for electricity, discount rate, exchange rate and electricity market scenario, based on past trends and the current and likely future state of the industry etc. which are considered reasonable by the Management. Any reasonable possible change in the underlying assumptions would not lead to a material change to the amount of impairment. [Refer note 43(1)]
3.3 Impairment of investments in subsidiaries
At the end of each reporting period, the Company reviews the carrying amounts of its investments in subsidiaries when there is an indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for. [Refer note 43(2)]
Impairment of loans
The Company applies the Ind AS 109 simplified approach to measure expected credit losses which uses a lifetime expected loss allowance for loans granted by the Company to its subsidiaries.
3.4 Taxes:
Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies, including estimates of temporary differences reversing on account of available benefits from the Income Tax Act, 1961.
Deferred tax assets are recognised for unused tax credits to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Management judgement is required to determine the amount of deferred tax assets for unused tax credits that can be recognised, based upon the likely timing and the level of future taxable profits [Refer note 44(d)]
3.5 Contingencies:
Contingent liabilities
I n the normal course of business, contingent liabilities may arise from litigation and other claims against the Company. Potential liabilities that are possible but not probable of crystallising or are very difficult to quantify reliably are treated as contingent liabilities. Such liabilities are disclosed in the notes but are not recognised. Potential liabilities that are remote are neither recognised nor disclosed as contingent liability. The management judgement is involved in classification under âremote'', âpossible'' or âprobable'' which is carried out based on expert advice, past judgements, experiences etc. [Refer note 46(a)]
3.6 Employee benefit plans:
Defined benefit plans and other long-term employee benefits
The present value of obligations under defined benefit plan and other long term employment benefits is determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual development in the future. These include the determination of the discount rate, future salary escalations, attrition rate and mortality rates Due to the complexities involved in the valuation and its long term nature, these obligations are highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Information about the various estimates and assumptions made in determining present value of defined benefit obligation are disclosed in note 50.2
Mar 31, 2019
NOTE 1A: GENERAL INFORMATION
Torrent Power Limited (âthe Companyâ) is a public company domiciled in India and is incorporated under the provisions of the Companies Act, applicable in India. Its equity shares are listed on BSE Ltd. and National Stock Exchange Ltd. in India. The registered office of the Company is located at âSamanvayâ, 600, Tapovan, Ambawadi, Ahmedabad - 380 015.
The Company is engaged in the business of generation, transmission and distribution of Power and of manufacture and sale of Cables.
NOTE 1B: NEW STANDARDS OR INTERPRETATIONS ADOPTED BY THE COMPANY
The Company has applied the following Ind AS for the first time for its annual reporting period commencing 1st April, 2018: Change due to transition to Ind AS - 115 âRevenue from Contracts with Customersâ
The Ministry of Corporate Affairs (MCA) has notified the Companies (Indian Accounting Standards) Amendment Rules,
2018 on 28th March, 2018 which include Indian Accounting Standard (Ind AS) 115 in respect of âRevenue from Contracts with Customersâ which has replaced inter alia, the existing Ind AS 18 âRevenueâ and is mandatory for reporting periods beginning on or after 1st April, 2018.
Refer note 2.12 for the accounting policy and note 57 for the impact on change in policy and related disclosures.
NOTE 1C: NEW STANDARDS OR INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
The Company will apply the following standard for the first time for its annual reporting period commencing 1st April, 2019: Ind AS - 116 âLeasesâ
The Ministry of Corporate Affairs (MCA) has notified the Companies (Indian Accounting Standards), 2019 on 30th March, 2019 which includes Ind AS - 116 âLeasesâ. This will replace Ind AS 17 on leases.
Ind AS - 116 will result in almost all leases being recognized on the balance sheet by the lessees, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognized. The only exceptions are short term and low value leases.
In order to identify the potential impact of the standard on the Companyâs financial statements, the Company is analyzing leasing contracts. The Company has begun the analysis on the key areas identified, in order to estimate the effect of the application of the new standard for which the work is ongoing and impact areas may be identified as the Company progresses further in the implementation process. As a result, at this stage the Company is not able to estimate the impact of the new standard on the Companyâs financial statements. The Company will make a more detailed assessment of the impact over the future periods.
Other amendments
On 30th March, 2019, the Ministry of Corporate Affairs (MCA) notified certain other amendments to Indian Accounting Standards (Ind AS), as below, as part of the Companies (Indian Accounting Standards) Second Amendment Rules, 2019. These other amendments come into force on 1st April, 2019.
Ind AS - 12 âIncome taxesâ, Appendix C - Uncertainty over income tax treatments
The appendix explains how to determine the probability of the relevant tax authority accepting each tax treatment, or group of tax treatments, that the companies have used or plan to use in their income tax filing which has to be considered to compute the most likely amount or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates.
Ind AS - 12 âIncome taxesâ
The amendment clarifies that an entity shall recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events.
Ind AS - 19 âEmployee benefitsâ, Plan amendment, curtailment or settlement
The amendments require an entity:
- to use updated assumptions to determine current service cost and net interest for the remainder of the period after a plan amendment, curtailment or settlement; and
- to recognize in profit or loss as part of past service cost, or a gain or loss on settlement, any reduction in a surplus, even if that surplus was not previously recognized because of the impact of the asset ceiling.
Ind AS - 23 âBorrowing costsâ
The amendments clarify that if a specific borrowing remains outstanding after the related qualifying asset is ready for its intended use or sale, it becomes part of general borrowings.
The effective date for adoption of amendments as per Companies (Indian Accounting Standards) Second Amendment Rules, 2019 is annual periods beginning on or after 1st April, 2019. The Company will adopt the standard on 1st April, 2019 and is in the process of evaluating the impact on account of above amendment on its financial statements and will accordingly consider the same from period beginning 1stApril, 2019.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation:
Compliance with Ind AS
The financial statements are in compliance, in all material aspects, with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) read with the [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act and rules made there under.
As prescribed by the Ind AS, if the particular Ind AS is not in conformity with the applicable laws, the provisions of the said law shall prevail and financial statements shall be prepared in conformity with such laws. Consequently, the Company has applied this norm while preparing the financial statements.
Historical cost convention
The financial statements have been prepared on an accrual basis under the historical cost convention except for following which have been measured at fair value;
- Derivative instruments
- Defined benefit plan assets
All assets and liabilities have been classified as current or non-current as set out in the Schedule III (Division II) to the Companies Act, 2013.
2.2 Business combinations and Goodwill:
Business combination - acquisition
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred, liabilities incurred to the former owners of the acquire and the equity interests issued by the Company in exchange for control of the acquire.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date.
Acquisition-related costs are expensed as incurred.
The excess of the
- consideration transferred;
- amount of any non-controlling interest in the acquired entity, and
- acquisition-date fair value of any previous equity interest in the acquired entity
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognized in other comprehensive income and accumulated in equity as capital reserve provided there is clear evidence of the underlying reasons for classifying the business combination as a bargain purchase. In other cases, the bargain purchase gain is recognized directly in equity as capital reserve.
Business combination - common control transaction
Business combinations involving entities that are controlled by the Company are accounted for using the pooling of interests method as follows:
- The assets and liabilities of the combining entities are reflected at their carrying amounts.
- No adjustments are made to reflect fair values, or recognize any new assets or liabilities. Adjustments are only made to harmonies accounting policies.
- The financial information in the financial statements in respect of prior periods is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. However, where the business combination had occurred after that date, the prior period information is restated only from that date.
- The balance of the retained earnings appearing in the financial statements of the transferor is aggregated with the corresponding balance appearing in the financial statements of the transferee or is adjusted against general reserve.
- The identity of the reserves is preserved and the reserves of the transferor become the reserves of the transferee.
- The difference, if any, between the amounts recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of share capital of the transferor is transferred to capital reserve and is presented separately from other capital reserves.
Business combination-related costs are generally recognized in statement of profit and loss as incurred.
Goodwill
Goodwill on acquisitions of subsidiaries, associates and joint ventures is included in intangible assets. Goodwill is not amortized but is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to such entity.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units that are expected to benefit from the business combination in which the goodwill arose.
2.3 Investments in subsidiaries, joint ventures and associates:
Investments in associates, joint ventures and subsidiaries are measured at cost less provision for impairment, if any.
2.4 Government grants:
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all the attached conditions.
Government grants relating to income 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 relating to purchase of property, plant and equipment whose primary condition is that the Company should purchase, construct or otherwise acquire property, plant and equipment are recognized as deferred revenue in the balance sheet and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.
2.5 Property, plant and equipment:
Tangible fixed assets
Freehold land is carried at historical cost. All other items of property, plant and equipment held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses, except that on adoption of Ind AS, property, plant and equipment had been measured at deemed cost, using the net carrying value as per previous GAAP as at 1st April, 2015.
Capital work in progress in the course of construction for production, supply or administrative purposes is carried at cost, less any recognized impairment loss. Cost includes purchase price, taxes and duties, labour cost and other directly attributable costs incurred up to the date the asset is ready for its intended use. Such property, plant and equipment are classified to the appropriate categories when completed and ready for intended use.
Subsequent cost are included in the assetâs carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. Subsequent costs relating to day to day servicing of the item are not recognized in the carrying amount of an item of property, plant and equipment; rather, these costs are recognized in profit or loss as incurred.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.
Depreciation methods, estimated useful lives and residual value
Depreciation commences when the assets are ready for their intended use. Depreciation for the year is provided on additions / deductions of the assets during the period from / up to the month in which the asset is added / deducted. Depreciation on tangible assets which are governed as per the provisions of Part B of Schedule II of the Companies Act, 2013 is provided on straight line basis (other than Agra Franchisee Business for which it is provided on written down value basis) using the depreciation rates, the methodology and residual value as notified by the respective regulatory bodies in accordance with the Electricity Act, 2003. For other tangible assets in non-regulated business, depreciation is provided on a straight line basis over the estimated useful lives.
The estimated useful life, residual values and depreciation method are reviewed at the end of each reporting period in respect of tangible assets of non-regulated business. The effect of any such change in estimate in this regard is accounted for on a prospective basis.
@ governed by the applicable regulations of U. P. Electricity Regulatory Commission (UPERC)/ Maharashtra Electricity Regulatory Commission (MERC) for this purpose.
2.6 Investment properties:
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Company, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalized to the assetâs carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably.
An investment property is derecognized upon disposal or when the investment property is permanently withdrawn from its current use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognized.
Investment properties, other than free hold land, are depreciated using straight line method over their estimated useful lives.
2.7 Intangible assets - acquired:
Computer software is carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over its estimated useful life of 3 years. The estimated useful life and amortization method are reviewed at the end of each reporting period and the effect of any changes in such estimate being accounted for on a prospective basis.
Expenditure incurred on acquisition of intangible assets which are not ready to use at the reporting date is disclosed under âIntangible assets under developmentâ.
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from its use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized.
2.8 Impairment of tangible and intangible assets other than goodwill:
Tangible and intangible assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount of the assets exceeds its recoverable amount, which is the higher of an assetâs fair value less costs of disposal and value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit. An impairment loss is recognized immediately in profit or loss.
2.9 Borrowing costs:
Borrowing costs that are directly attributable to the acquisition and construction of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use, such as new projects and / or specific assets created in the existing business, are capitalized up to the date of completion and ready for their intended use.
Income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
Other borrowing costs are charged to the statement of profit and loss in the period of their accrual.
2.10 Cash and cash equivalents:
For the purpose of presentation in the statement of cash flows, cash and cash equivalents include cash on hand, cheques / drafts on hand, current account balances with banks and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
2.11 Inventories:
Raw materials, fuel, stores and spares, packing materials, loose tools, work in progress, traded and finished goods are stated at the lower of cost and net realizable value. Cost of inventories includes purchase price and all other costs incurred in bringing the inventories to their present location and condition. Costs are assigned to individual items of inventory on the weighted average basis except inventory of Degasified Liquefied Natural Gas (RLNG) which is valued on FIFO basis and using specific identification method considering its procurement for beneficiary usage or others. Costs of purchased inventory are determined after deducting rebates and discounts.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
2.12 Revenue recognition:
Revenue is recognized, when the control of the goods or services has been transferred to consumers. Revenue is measured at the fair value of the consideration received or receivable, net of discounts and other similar allowances.
(i) Revenue from power supply is accounted for in accordance with the principles laid down under the relevant Tariff Regulations / Tariff Orders notified by the Electricity Regulator. Revenue recognized includes amounts billed to consumers on the basis of recording of consumption of energy by installed meters based on the applicable tariff and adjustments in respect of unbilled amounts towards revenue gaps / unapproved FPPPA which are recognized considering applicable tariff regulations / tariff orders, past trends of approval, managementâs probability estimate and when no significant uncertainty exists in such determination.
These adjustments / accruals are carried forward as âUnbilled revenueâ under âOther current financial assetsâ in Note 18, which would be adjusted through future billing based on tariff determination by the regulator in accordance with the electricity regulations.
(ii) Sales of cables and trading of RLNG are recognized, net of returns and rebates, on transfer of control of ownership to the buyer. Sales exclude Goods and service tax.
(iii) Gross proceeds from sale of Certified Emission Reduction certificates (CERs) are recognized when all the control of CERs have been passed to the buyer, usually on delivery of the CERs.
(iv) Income from Generation Based Incentive is accounted on accrual basis considering eligibility of project for availing incentive.
(v) Contributions by consumers towards items of property, plant and equipment, which require an obligation to provide electricity connectivity to the consumers, are recognized as a credit to deferred revenue. Such revenue is recognized over the useful life of the property, plant and equipment.
2.13 Foreign currency translation:
Functional and presentation currency
The financial statements are prepared in Indian rupee (INR) which is functional as well as presentation currency of the Company.
Transactions and balances
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 that are measured in terms of historical cost in a foreign currency are not retranslated.
Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the Statement of profit and loss, within finance costs. All other foreign exchange differences arising on settlement of monetary items or on reporting the Companyâs monetary items at rates different from those at which they were initially recorded during the financial year are recognized as income or expense in the financial year in which they arise.
The exchange differences relating to long term foreign currency monetary items, recognized in the financial statement upto 31st March, 2016, in so far as they relate to acquisition of depreciable capital assets is adjusted to the cost of such capital asset and depreciated over the balance useful life of such asset.
2.14 Employee benefits:
Defined contribution plans
Contributions to retirement benefit plans in the form of provident fund, employee state insurance scheme, pension scheme and superannuation schemes as per regulations are charged as an expense on an accrual basis when employees have rendered the service. The Company has no further payment obligations once the contributions have been paid.
Defined benefits plans
The liability or asset recognized in the balance sheet in respect of the retirement benefit plan i.e. gratuity plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated by an actuary using projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligations.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of the plan assets. This cost is included in the employee benefit expense in the statement of profit and loss.
Remeasurements, comprising actuarial gains and losses and the effect of the changes to the asset ceiling (if applicable), is reflected immediately in the balance sheet with a charge or credit recognized in other comprehensive income in the period in which they occur and consequently recognized in retained earnings and is not reclassified to profit or loss.
The retirement benefit obligation recognized in the balance sheet represents the actual deficit or surplus in the Companyâs defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of reductions in future contributions to the plans.
Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in profit or loss.
The said obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
2.15 Taxation:
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on estimated taxable income for the year in accordance with the provisions of the Income Tax Act, 1961. Taxable profit differs from âprofit before taxâ as reported in the statement of profit and loss because of items of income or expenses that are taxable or deductible in other years and items that are never taxable or deductible. Management periodically evaluates positions taken in the tax returns with respect to situations for which applicable tax regulations are subject to interpretation and revises the provisions, if so required where consider necessary.
Advance taxes and provisions for current income taxes are offset with each other when there is a legally enforceable right to offset and balances arise with the same tax authority.
Deferred tax
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, unused tax losses and unused tax credits to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.
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 all or part of the asset to be recovered.
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.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.
Deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity.
2.16 Earnings per share:
Basic earnings per share is computed by dividing the profit / (loss) by the weighted average number of equity shares outstanding during the year.
Diluted earnings per share is computed by adjusting the figures used in the determination of basic EPS to take into account:
- After tax effect of interest and other financing costs associated with dilutive potential equity shares.
- The weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
2.17 Provisions, contingent liabilities and contingent assets: Provisions
A provision is recognized when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made.
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).
Contingent liability
A possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise are disclosed as contingent liability and not provided for. Such liability is not disclosed if the possibility of outflow of resources is remote.
Contingent assets
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.
Contingent assets are not recognized but disclosed only when an inflow of economic benefits is probable.
2.18 Financial instruments: Financial assets i) Classification of financial assets (including debt instruments)
The Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
- those measured at amortized cost.
The classification depends on the entityâs business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
ii) Initial measurement
Financial assets are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets (other than financial assets at fair value through profit or loss) are added to or deducted from the fair value of the financial assets, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial assets at fair value through profit or loss are recognized immediately in profit or loss.
iii) Subsequent measurement
There are three measurement categories into which the debt instruments can be classified:
- Amortized cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at Amortized cost. A gain or loss on a debt investment that is subsequently measured at Amortized cost and is not part of a hedging relationship is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
- Fair value through other comprehensive income (FVOCI)
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assetsâ cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognized in profit and loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in other gains / (losses). Interest income from these financial assets is included in other income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains and losses and impairment expenses in other expenses.
- Fair value through profit or loss (FVTPL)
Assets that do not meet the criteria for Amortized cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss and presented net in the statement of profit and loss within other gains / (losses) in the period in which it arises. Interest income from these financial assets is included in other income.
iv) Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its financial assets carried at Amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115 only, the Company follows âsimplified approachâ for recognition of impairment loss and always measures the loss allowance at an amount equal to lifetime expected credit losses.
Further, for the purpose of measuring lifetime expected credit loss allowance for trade receivables, the Company has used a practical expedient as permitted under Ind AS 109 i.e. expected credit loss allowance as computed based on historical credit loss experience.
v) Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e. removed from the Companyâs balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset
When the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognized. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognized.
Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of financial asset, the financial asset is derecognized if the Company has not retained control over the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognized to the extent of continuing involvement in the financial asset.
vi) Income recognition
Dividend is accounted when the right to receive payment is established.
Interest income from financial assets is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.
Interest on overdue receivables of energy bills and claims including insurance claims, coal cost variation and other claims etc. are accounted as and when recovered.
Financial liabilities
The Companyâs financial liabilities include trade and other payables, loans and borrowings.
i) Classification
All the Companyâs financial liabilities, except for financial liabilities at fair value through profit or loss, are measured at amortized cost.
ii) Initial measurement
Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial liabilities (other than financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial liabilities, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.
iii) Subsequent measurement
Financial liabilities are subsequently measured at Amortized cost using the Effective Interest Rate Method.
The Effective Interest Rate 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 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.
iv) Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or waived off or have expired. An exchange between the Company and the lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.
2.19 Contributed equity:
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Transaction costs of an equity transaction shall be accounted for in other equity.
2.20 Leases:
Leases (including lease arrangements for land) 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.
Operating Lease (The Company as Lessee): Lease payments under an operating lease are recognized as expense in the statement of profit and loss, on a straight-line or other systematic basis over the lease term. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the Lessorâs expected inflationary cost increases, such increases are recognized in the year in which such liability accrues.
2.21 Amount presented and rounding off:
All amounts in the financial statements and notes have been presented in '' Crore (except for share data) rounded to two decimals as per the requirement of Schedule III of the Companies Act, 2013, unless otherwise stated. Figures below Rs,50,000 are denoted by â*â.
NOTE 3: CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the course of applying the policies outlined in all notes under note 2 above, the management of the Company is required to make judgments, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
Such estimates and associated assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future period, if the revision affects current and future periods.
3.1 Revenue recognition:
The Company has recognized revenue (including the adjustment in respect of unapproved FPPPA claims and other true up adjustment claims) as per the applicable tariff regulations / tariff orders, managementâs probability estimate and the past trends of approval. The company has not recognized those truing up adjustment claims which are subject of dispute and for which the company is in appeal with regulatory authorities.
3.2 Property, plant and equipment:
(i) Service concession arrangements
The Company has assessed applicability of Appendix D of Ind AS - 115 âService Concession Arrangementsâ with respect to its distribution and transmission assets portfolio. In assessing the applicability, the Company has exercised judgment in relation to the provisions of the Electricity Act, 2003, transmission / distribution license and / or agreements. Based on such assessment, it has concluded that Appendix D of Ind AS 115 is not applicable.
(ii) Impairment of property, plant and equipment
At the end of each reporting period, the Company reviews the carrying amounts of its property, plant and equipment to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Recoverable amount of property, plant and equipment is the higher of its fair value less costs of disposal and value in use. Value in use is usually determined on the basis of discounted estimated future cash flows. This involves management estimates on anticipated PLF, fuel availability at economical rates, economic and regulatory environment, discount rates and other factors. Any subsequent changes to cash flow due to changes in the above mentioned factors could impact the carrying value of assets. [Refer note 41(1)]
3.3 Impairment of financial assets:
(i) Trade receivables
The Company estimates the credit allowance as per practical expedient based on historical credit loss experience as enumerated in note 56.
(ii) Impairment of investments
At the end of each reporting period, the Company reviews the carrying amounts of its investments when there is an indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for. [Refer note 41(2)]
3.4 Taxation:
(i) Current tax
The Company has treated certain expenditure as being deductible for tax purposes. However, the tax legislation in relation to such expenditure is not clear and the Company has applied their judgement and interpretation for the purpose of taking their tax position.
(ii) Deferred tax assets
Deferred tax assets are recognized for unused tax losses / credits to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. [Refer note 42]
3.5 Contingencies:
Contingent liabilities
In the normal course of business, contingent liabilities may arise from litigation and other claims against the Company. Potential liabilities that are possible but not probable of crystallizing or are very difficult to quantify reliably are treated as contingent liabilities. Such liabilities are disclosed in the notes but are not recognized. Potential liabilities that are remote are neither recognized nor disclosed as contingent liability. The management decides whether the matters needs to be classified as âremoteâ, âpossibleâ or âprobableâ based on expert advice, past judgments, experiences etc.
3.6 Employee benefit plans:
Defined benefit plans and other long-term employee benefits
The present value of obligations under defined benefit plan and other long term employment benefits is determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual development in the future. These include the determination of the discount rate, future salary escalations, attrition rate and mortality rates etc. Due to the complexities involved in the valuation and its long term nature, these obligations are highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
Mar 31, 2018
1.1 Basis of preparation: compliance with Ind AS
The financial statements are in compliance, in all material aspects, with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) read with the [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act and rules made thereunder.
As prescribed by the Ind AS, if the particular Ind AS is not in conformity with the applicable laws, the provisions of the said law shall prevail and financial statements shall be prepared in conformity with such laws. Consequently, the Company has applied this norm while preparing the financial statements.
Historical cost convention
The financial statements have been prepared on an accrual basis under the historical cost convention except for following which have been measured at fair value;
- Derivative instruments
- Defined benefit plan assets
All assets and liabilities have been classified as current or non-current as set out in the Schedule III (Division II) to the Companies Act, 2013
1.2 Business combinations and goodwill:
Business combination - acquisition
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred, liabilities incurred to the former owners of the acquiree and the equity interests issued by the Company in exchange for control of the acquiree.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date.
Acquisition-related costs are expensed as incurred.
The excess of the
- consideration transferred;
- amount of any non-controlling interest in the acquired entity, and
- acquisition-date fair value of any previous equity interest in the acquired entity
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised in other comprehensive income and accumulated in equity as capital reserve provided there is clear evidence of the underlying reasons for classifying the business combination as a bargain purchase. In other cases, the bargain purchase gain is recognised directly in equity as capital reserve.
Business combination - common control transaction
Business combinations involving entities that are controlled by the Company are accounted for using the pooling of interests method as follows:
- The assets and liabilities of the combining entities are reflected at their carrying amounts.
- No adjustments are made to reflect fair values, or recognise any new assets or liabilities. Adjustments are only made to harmonise accounting policies.
- The financial information in the financial statements in respect of prior periods is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. However, where the business combination had occurred after that date, the prior period information is restated only from that date.
- The balance of the retained earnings appearing in the financial statements of the transferor is aggregated with the corresponding balance appearing in the financial statements of the transferee or is adjusted against general reserve.
- The identity of the reserves are preserved and the reserves of the transferor become the reserves of the transferee.
- The difference, if any, between the amounts recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of share capital of the transferor is transferred to capital reserve and is presented separately from other capital reserves.
Business combination-related costs are generally recognised in statement of profit and loss as incurred.
Goodwill
Goodwill on acquisitions of subsidiaries, associates and joint ventures is included in intangible assets. Goodwill is not amortised but is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to such entity.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units that are expected to benefit from the business combination in which the goodwill arose.
1.3 Investments in subsidiaries, joint ventures and associates:
Investments in associates, joint ventures and subsidiaries are measured at cost less provision for impairment, if any.
1.4 Government grants:
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all the attached conditions.
Government grants relating to income are recognised in profit or loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate. Government grants relating to purchase of property, plant and equipment whose primary condition is that the Company should purchase, construct or otherwise acquire property, plant and equipment are recognised as deferred revenue in the balance sheet and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.
1.5 Property, plant and equipment:
Tangible fixed assets
Freehold land is carried at historical cost. All other items of property, plant and equipment held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses, except that on adoption of Ind AS, property, plant and equipment had been measured at deemed cost, using the net carrying value as per previous GAAP as at 1st April, 2015.
Capital work in progress in the course of construction for production, supply or administrative purposes is carried at cost, less any recognised impairment loss. Cost includes purchase price, taxes and duties, labour cost and other directly attributable costs incurred upto the date the asset is ready for its intended use. Such property, plant and equipment are classified to the appropriate categories when completed and ready for intended use.
Subsequent cost are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. Subsequent costs relating to day to day servicing of the item are not recognised in the carrying amount of an item of property, plant and equipment; rather, these costs are recognised in profit or loss as incurred.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Depreciation methods, estimated useful lives and residual value
Depreciation commences when the assets are ready for their intended use. Depreciation for the year is provided on additions / deductions of the assets during the period from / up to the month in which the asset is added / deducted. Depreciation on tangible assets which are governed as per the provisions of Part B of Schedule II of the Companies Act, 2013 is provided on straight line basis (other than Agra Franchisee Business for which it is provided on written down value basis) using the depreciation rates, the methodology and residual value as notified by the respective regulatory bodies in accordance with the Electricity Act, 2003. For other tangible assets in non-regulated business, depreciation is provided on a straight line basis over the estimated useful lives.
The estimated useful life, residual values and depreciation method are reviewed at the end of each reporting period in respect of tangible assets of non-regulated business. The effect of any such change in estimate in this regard being accounted for on a prospective basis.
The range of depreciation rates of property, plant and equipment are as follows:
1.6 Investment properties:
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Company, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalised to the assetâs carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from its current use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised.
Investment properties, other than free hold land, are depreciated using straight line method over their estimated useful lives.
1.7 Intangible assets - acquired:
Computer software is carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over its estimated useful life of 3 years. The estimated useful life and amortisation method are reviewed at the end of each reporting period and the effect of any changes in such estimate being accounted for on a prospective basis.
Expenditure incurred on acquisition of intangible assets which are not ready to use at the reporting date is disclosed under âIntangible assets under developmentâ
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from its use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.
1.8 Impairment of tangible and intangible assets other than goodwill:
Tangible and intangible assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount of the assets exceeds its recoverable amount, which is the higher of an assetâs fair value less costs of disposal and value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit. An impairment loss is recognised immediately in profit or loss.
1.9 Borrowing costs:
Borrowing costs that are directly attributable to the acquisition and construction of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use, such as new projects and / or specific assets created in the existing business, are capitalized up to the date of completion and ready for their intended use.
Income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are charged to the statement of profit and loss in the period of their accrual.
1.10 cash and cash equivalents:
For the purpose of presentation in the statement of cash flows, cash and cash equivalents include cash on hand, cheques / drafts on hand, current account balances with banks and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
1.11 Inventories:
Raw materials, fuel, stores and spares, packing materials, loose tools, work in progress, traded and finished goods are stated at the lower of cost and net realisable value. Cost of inventories includes all other costs incurred in bringing the inventories to their present location and condition. Costs are assigned to individual items of inventory on the weighted average basis. Costs of purchased inventory are determined after deducting rebates and discounts.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
1.12 Revenue recognition:
Revenue is recognized, when the products are delivered or services are rendered to consumers and when no significant uncertainty as to the measurability or collectability exists. Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for discounts and other similar allowances.
(i) Revenue from power supply and transmission charges are accounted for on the basis of billings to consumers and Central transmission utility respectively in accordance with tariff orders issued by the respective regulatory commissions. Revenue recognized in excess of billing has been reflected under âother financial assetsâ as unbilled revenue.
Further, in view of the uncertainties involved in the recoverability, the quarterly Fuel and Power Purchase Price Adjustment (âFPPPAâ) claims are accounted for as and when allowed by the regulatory authorities and truing up adjustments claims are accounted for as and when billed to the consumers. [Refer note 3.1(i)]
(ii) Sales of cables and surplus fuel (RLNG) are recognised, net of returns and rebates, on transfer of significant risks and rewards of ownership to the buyer. Sales includes excise duty but excludes sales-tax, value added tax and Goods and service tax.
(iii) Gross proceeds from sale of Certified Emission Reduction certificates (CERs) are recognized when all the significant risks and rewards of ownership of CERs have been passed to the buyer, usually on delivery of the CERs.
(iv) Income from Generation Based Incentive is accounted on accrual basis considering eligibility of project for availing incentive.
(v) Dividend is accounted when the right to receive payment is established.
(vi) Interest income from financial assets is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.
Interest on overdue receivables of energy bills and claims including insurance claims, coal cost variation and other claims etc. are accounted as and when recovered.
(vii) Contributions by consumers towards items of property, plant and equipment, which require an obligation to provide electricity connectivity to the consumers, are recognised as a credit to deferred revenue. Such revenue is recognised over the useful life of the property, plant and equipment.
1.13 Foreign currency translation:
Functional and presentation currency
The financial statements are prepared in Indian rupee (INR) which is functional as well as presentation currency of the Company.
Transactions and balances
In preparing the financial statements of the Company, transactions in currencies other than the entityâs functional currency (foreign currencies) are recognised 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 that are measured in terms of historical cost in a foreign currency are not retranslated.
Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the statement of profit and loss, within finance costs. All other foreign exchange differences arising on settlement of monetary items or on reporting the Companyâs monetary items at rates different from those at which they were initially recorded during the financial year are recognized as income or expense in the financial year in which they arise.
The exchange differences relating to long term foreign currency monetary items, recognised in the financial statement upto 31st March, 2016, in so far as they relate to acquisition of depreciable capital assets is adjusted to the cost of such capital asset and depreciated over the balance useful life of such asset.
1.14 Employee benefits:
Defined contribution plans
Contributions to retirement benefit plans in the form of provident fund, employee state insurance scheme and superannuation schemes as per regulations are charged as an expense on an accrual basis when employees have rendered the service. The Company has no further payment obligations once the contributions have been paid.
Defined benefits plans
The liability or asset recognised in the balance sheet in respect of the retirement benefit plan i.e. gratuity plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated by an actuary using projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximately to the terms of the related obligations.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of the plan assets. This cost is included in the employee benefit expense in the statement of profit and loss.
Remeasurements, comprising actuarial gains and losses and the effect of the changes to the asset ceiling (if applicable), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur and consequently recognised in retained earnings and is not reclassified to profit or loss.
The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in the Companyâs defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of reductions in future contributions to the plans.
Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
The said obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
1.15 Taxation:
Income tax expense represents the sum of the tax currently payable and deferred tax. current tax
The tax currently payable is based on estimated taxable income for the year in accordance with the provisions of the Income Tax Act, 1961. Taxable profit differs from âprofit before taxâ as reported in the statement of profit and loss because of items of income or expenses that are taxable or deductible in other years and items that are never taxable or deductible. Management periodically evaluates positions taken in the tax returns with respect to situations for which applicable tax regulations are subject to interpretation and revises the provisions, if so required where consider necessary.
Advance taxes and provisions for current income taxes are offset with each other when there is a legally enforceable right to offset and balances arise with the same tax authority.
Deferred tax
Deferred tax is recognised 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 recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
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 all or part of the asset to be recovered.
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 realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.
Deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.
1.16 Earnings per share:
Basic earnings per share is computed by dividing the profit / (loss) by the weighted average number of equity shares outstanding during the year.
Diluted earnings per share is computed by adjusting the figures used in the determination of basic EPS to take into account:
- After tax effect of interest and other financing costs associated with dilutive potential equity shares.
- The weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
1.17 Provisions, contingent liabilities and contingent assets: Provisions
A provision is recognized when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made.
The amount recognised 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).
Contingent liability
A possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the enterprise are disclosed as contingent liability and not provided for. Such liability is not disclosed if the possibility of outflow of resources is remote.
Contingent assets
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.
Contingent assets are not recognised but disclosed only when an inflow of economic benefits is probable.
1.18 Financial instruments: Financial assets
i) Classification of financial assets (including debt instruments)
The Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
- those measured at amortised cost.
The classification depends on the entityâs business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
ii) Initial measurement
Financial assets are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets (other than financial assets at fair value through profit or loss) are added to or deducted from the fair value of the financial assets, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial assets at fair value through profit or loss are recognised immediately in profit or loss.
iii) Subsequent measurement
There are three measurement categories into which the debt instruments can be classified:
- Amortised cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
- Fair value through other comprehensive income (FVOCI)
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assetsâ cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/ (losses). Interest income from these financial assets is included in other income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains and losses and impairment expenses in other expenses.
- Fair value through profit or loss (FVTPL)
Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented net in the statement of profit and loss within other gains / (losses) in the period in which it arises. Interest income from these financial assets is included in other income.
iv) Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its financial assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 18 only, the Company follows âsimplified approachâ for recognition of impairment loss and always measures the loss allowance at an amount equal to lifetime expected credit losses.
Further, for the purpose of measuring lifetime expected credit loss allowance for trade receivables, the Company has used a practical expedient as permitted under Ind AS 109 i.e. expected credit loss allowance as computed based on historical credit loss experience.
v) Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Companyâs balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset
When the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of financial asset, the financial asset is derecognised if the Company has not retained control over the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
Financial liabilities
The Companyâs financial liabilities include trade and other payables, loans and borrowings.
i) classification
All the Companyâs financial liabilities, except for financial liabilities at fair value through profit or loss, are measured at amortized cost.
ii) Initial measurement
Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial liabilities (other than financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial liabilities, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
iii) Subsequent measurement
Financial liabilities are subsequently measured at amortised cost using the Effective Interest Rate Method.
The Effective Interest Rate Method is a method of calculating the amortised 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 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.
iv) Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or waived off or have expired. An exchange between the Company and the lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
1.19 contributed equity:
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Transaction costs of an equity transaction shall be accounted for in other equity.
1.20 Leases:
Leases (including lease arrangements for land) 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.
Operating lease (The Company as lessee): Lease payments under an operating lease are recognized as expense in the statement of profit and loss, on a straight-line or other systematic basis over the lease term. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the Lessorâs expected inflationary cost increases, such increases are recognised in the year in which such liability accrues.
1.21 Rounding of amounts:
All amounts disclosed in the financial statements and notes have been presented in crore rounded to two decimals as per the requirement of Schedule III of the Companies Act, 2013, unless otherwise stated. Figures below Rs.50,000 are denoted by â*â.
Mar 31, 2017
NOTE 1: GENERAL INFORMATION
The financial statements comprise financial statements of Torrent Power Limited (âthe Companyâ) for the year ended 31st March, 2017.
The Company is a public company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. Its shares are listed on BSE Ltd. and National Stock Exchange Ltd. in India. The registered office of the Company is located at âSamanvayâ, 600, Tapovan, Ambawadi, Ahmadabad - 380 015.
The Company is an integrated power utility and is engaged in the generation, transmission, distribution of power and manufacturing of the Cables.
NOTE 2: STATEMENT OF COMPLIANCE
The financial statements is in compliance, in all material aspects, with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (âthe Actâ) read with the [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act and rules made there under.
Upto the year ended 31st March, 2016, the financial statements were prepared in accordance with the accounting standards notified under Companies (Accounting Standard) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP).
These financial statements are the first financial statements of the Company under Ind AS. The date of transition to Ind AS is 1st April, 2015. Financial information in the financial statements for the year ended 31st March, 2016 and the opening balance sheet as at 1st April, 2015 have been restated in accordance with Ind AS. Refer note 4.24 for the details of significant first-time adoption exemptions availed by the Company. Refer note 72 for an explanation of how the transition from previous GAAP to Ind AS has affected the Companyâs financial position, financial performance and cash flows.
As prescribed by the Indian Accounting Standard (Ind AS), if the particular Ind AS is not in conformity with the applicable laws, the provisions of the said law shall prevail and financial statements shall be prepared in conformity with such laws. Consequently, the Company has applied this norm while preparing the financial statements.
NOTE 3: NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017 notifying amendments to Ind AS - 7 âStatement of cash flowsâ and Ind AS - 102 âShare-based paymentâ.â These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7 Statement of cash flows and IFRS 2, Share-based payment, respectively. The amendments are applicable to the Company from 1st April, 2017.
The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including changes arising from both cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.
The Company is evaluating the requirements of the amendment and the effect on itâs financial statements.
The amendment to Ind AS 102 is not applicable to the Company.
4.1 Basis of preparation:
The financial statements have been prepared on an accrual basis under the historical cost convention except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies stated hereunder.
4.2 Business combinations and Goodwill:
Business combination - acquisition
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Company, liabilities incurred by the Company to the former owners of the acquire and the equity interests issued by the Company in exchange for control of the acquire.
Business combination - common control transaction
Business combinations involving entities that are controlled by the Company are accounted for using the pooling of interests method as follows:
- The assets and liabilities of the combining entities are reflected at their carrying amounts.
- No adjustments are made to reflect fair values, or recognize any new assets or liabilities. Adjustments are only made to harmonies accounting policies.
- The financial information in the financial statements in respect of prior periods is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. However, where the business combination had occurred after that date, the prior period information is restated only from that date.
- The balance of the retained earnings appearing in the financial statements of the transferor is aggregated with the corresponding balance appearing in the financial statements of the transferee or is adjusted against general reserve.
- The identity of the reserves are preserved and the reserves of the transferor become the reserves of the transferee.
- The difference, if any, between the amounts recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of share capital of the transferor is transferred to capital reserve and is presented separately from other capital reserves.
Business combination-related costs are generally recognized in statement of profit and loss as incurred.
Goodwill
Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortized but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to such entity.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units that are expected to benefit from the business combination in which the goodwill arose.
4.3 Investments:
Investments in mutual funds are primarily held for the Companyâs temporary cash requirements and can be readily convertible in cash. These investments are initially recorded at fair value and classified as fair value through profit or loss.
Investments in associates, joint ventures and subsidiaries are measured at cost less provision for impairment, if any.
4.4 Government grants:
Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received.
Government grants are recognized in 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. Specifically, government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are recognized as deferred revenue in the balance sheet and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.
4.5 Property, plant and equipment:
Tangible fixed assets
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses. Freehold land is not depreciated.
Property, plant and equipment including capital work in progress in the course of construction for production, supply or administrative purposes are carried at cost, less any recognized impairment loss. Cost includes purchase price, taxes and duties, labour cost and other directly attributable costs incurred upto the date the asset is ready for its intended use. Such property, plant and equipment are classified to the appropriate categories when completed and ready for intended use.
Subsequent cost are included in the assetâs carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. Subsequent costs relating to day to day servicing of the item are not recognized in the carrying amount of an item of property, plant and equipment; rather, these costs are recognized in profit or loss as incurred.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.
Depreciation commences when the assets are ready for their intended use. Depreciation for the year is provided on additions / deductions of the assets during the period from / up to the month in which the asset is added / deducted. Depreciation is calculated on a straight line basis. Depreciation on tangible assets which are governed as per the provisions of Part B of Schedule II of the Companies Act, 2013 is provided based on the depreciation rates, the methodology and residual value as notified by the respective regulatory bodies in accordance with the Electricity Act, 2003. For other tangible assets, depreciation is provided as per the estimated useful lives.
The estimated useful life and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
4.6 Investment properties:
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Company, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalized to the assetâs carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably.
An investment property is derecognized upon disposal or when the investment property is permanently withdrawn from its current use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognized.
Investment properties, other than free hold land, are depreciated using straight line method over their estimated useful lives.
4.7 Intangible assets - acquired:
Computer software is carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over its estimated useful life of 3 years. The estimated useful life and amortization method are reviewed at the end of each reporting period and the effect of any changes in such estimate being accounted for on a prospective basis.
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from its use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized.
4.8 Impairment of tangible and intangible assets other than goodwill:
Tangible and intangible assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount of the assets exceeds its recoverable amount, which is the higher of an assets net selling price and value in use. An impairment loss is recognized immediately in profit or loss.
4.9 Borrowing costs:
Borrowing costs attributed to the acquisition and construction of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, such as new projects and / or specific assets created in the existing business, are capitalized up to the date of completion and ready for their intended use.
Income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
Other borrowing costs are charged to the statement of profit and loss in the period of their accrual.
4.10 Cash and cash equivalents:
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
4.11 Inventories:
Inventories of raw material, stores, spare parts, coal, fuel, packing materials and loose tools are valued at lower of weighted average cost and net realizable value. Cost of inventories includes cost of purchase price, conversion cost and other costs incurred in bringing the inventories to their present location and condition. Adequate provision for slow and non-moving items is made as per the policy of the Company.
With respect to Cables unit, the cost of work-in-progress and finished goods is determined on full absorption costing method and comprises of raw materials and other direct costs and related production overheads and, where applicable, excise duty. Scrap is valued at net realizable value.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
4.12 Revenue recognition:
(i) Revenue is recognized when no significant uncertainty as to the measurability or collectability exists. Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for rebates and other similar allowances.
Revenue from power supply and transmission charges are accounted for on the basis of billings to consumers and Central transmission utility respectively in accordance with tariff orders issued by the respective regulatory commissions. Revenue recognized in excess of billing has been reflected under âother financial assetsâ as unbilled revenue.
Further, in view of the uncertainties involved in the recoverability, the quarterly Fuel and Power Purchase Price Adjustment (âFPPPAâ) claims are accounted for as and when allowed by the regulatory authorities and truing up adjustments claims are accounted for as and when billed to the consumers. [note 5.1(i)]
(ii) Sales with respect to Cables unit are recognized, net of returns and rebates, on transfer of significant risks and rewards of ownership to the buyer. Sales includes excise duty but excludes sales-tax and value added tax.
(iii) Gross proceeds from sale of Certified Emission Reduction certificates (CERs) are recognized when all the significant risks and rewards of ownership of CERs have been passed to the buyer, usually on delivery of the CERs.
(iv) Dividend is accounted when the right to receive payment is established.
(v) Interest income from financial assets is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.
Interest on overdue receivables of energy bills, insurance, coal cost variation and other claims, casual income etc. are accounted on grounds of prudence, as and when recovered.
(vi) Contributions by consumers towards items of property, plant and equipment, which require an obligation to provide electricity connectivity to the consumers, are recognized as a credit to deferred revenue. Such revenue is recognized over the useful life of the property, plant and equipment.
4.13 Foreign currency translation:
(a) Functional and presentation currency
The financial statements are prepared in Indian rupee (INR) which is functional as well as presentation currency of the Company.
(b) Transactions and balances
(i) I n 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.
(ii) At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date.
(iii) Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
(iv) Exchange differences arising on settlement of monetary items or on reporting the Companyâs monetary items at rates different from those at which they were initially recorded during the financial year are recognized as income or expense in the financial year in which they arise.
(v) The Company has decided to continue the policy adopted for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognized in the financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period as per the previous GAAP i.e. exchange differences relating to long term foreign currency monetary items in so far as they relate to acquisition of depreciable capital assets is adjusted to the cost of such capital asset and depreciated over the balance useful life of such asset.
4.14 Employee benefits:
Defined contribution plans
Retirement benefit plans in the form of provident fund, family pension fund and superannuation schemes are charged as an expense on an accrual basis when employees have rendered the service.
Defined benefits plans
For defined retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each reporting period. Remeasurement, comprising actuarial gains and losses and the effect of the changes to the asset ceiling (if applicable), is reflected immediately in the balance sheet with a charge or credit recognized in other comprehensive income in the period in which they occur and consequently recognized in retained earnings and is not reclassified to profit or loss.
The retirement benefit obligation recognized in the balance sheet represents the actual deficit or surplus in the Companyâs defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of reductions in future contributions to the plans.
Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in profit or loss.
The said obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
4.15 Taxation:
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on estimated taxable profit for the year in accordance with the provisions of the Income Tax Act, 1961. Taxable profit differs from âprofit before taxâ as reported in the statement of profit and loss because of items of income or expenses that are taxable or deductible in other years and items that are never taxable or deductible. Management periodically evaluates positions taken in the tax returns with respect to situations for which applicable tax regulations are subject to interpretation and revises the provisions, if so required where consider necessary.
Deferred tax
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, unused tax losses and unused tax credits to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.
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 all or part of the asset to be recovered.
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.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
4.16 Earnings per share:
Basic earnings per share is computed by dividing the profit / (loss) by the weighted average number of equity shares outstanding during the year.
Diluted earnings per share is computed by adjusting the figures used in the determination of basic EPS to take into account:
- After tax effect of interest and other financing costs associated with dilutive potential equity shares.
- The weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
4.17 Provisions, contingent liabilities and contingent assets: Provisions
A provision is recognized when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made.
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).
Contingent liability
A possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise are disclosed as contingent liability and not provided for. Such liability is not disclosed if the possibility of outflow of resources is remote.
Contingent assets
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.
Contingent assets are not recognized but disclosed only when an inflow of economic benefits is probable.
4.18 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 appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.
Financial assets
Classification of financial assets
Debt instruments (including mutual fund)
Debt Instruments that meet the following conditions are subsequently measured at amortized cost (except for debt instruments that are designated at fair value through profit or loss on initial recognition):
- the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
- t he 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.
All other financial assets are subsequently measured at fair value.
Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.
Impairment of financial assets
I n accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss on the following financial assets considering the credit risk exposure:
Financial assets that are debt instruments, and are measured at amortized cost e.g. loans, debt securities, deposits, trade receivables and bank balance.
The Company assesses on a forward looking basis the expected credit losses associated with its financial assets carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 18 only, the Company follows âsimplified approachâ for recognition of impairment loss and always measures the loss allowance at an amount equal to lifetime expected credit losses.
Further, for the purpose of measuring lifetime expected credit loss allowance for trade receivables, the Company has used a practical expedient as permitted under Ind AS 109 i.e. expected credit loss allowance as computed based on historical credit loss experience.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e. removed from the Companyâs balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset
4.19 Financial liabilities:
Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
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. Transaction costs of an equity transaction shall be accounted for in other equity.
Financial liabilities
The Companyâs financial liabilities include trade and other payables, loans and borrowings including derivative financial instruments.
Subsequent measurement
All the Companyâs financial liabilities, except for financial liabilities at fair value through profit or loss, are measured at amortized cost. The carrying amounts of financial liabilities, that are subsequently measured at amortized cost, are determined based on the effective interest method.
The Effective Interest Rate Method (EIR) 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 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.
Loans and borrowings
Loans and borrowings are initially recognized at fair value, net of transaction cost incurred. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit and loss.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or waived off or have expired. An exchange between the Company and the lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.
4.20 Derivative financial instruments:
The Company enters into derivative financial instruments to hedge itself against foreign exchange fluctuations and against variation in the prices of underlying commodities.
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently premeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately.
4.21 Fair value measurement:
The Company measures financial instruments, such as, derivatives, investment in units of mutual fund at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
4.22 Leases :
Leases (including lease arrangements for land) 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.
Operating Lease (The Company as Lessee): Lease payments under an operating lease are recognized as expense in the statement of profit and loss, on a straight-line or other systematic basis over the lease term. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the Less orâs expected inflationary cost increases, such increases are recognized in the year in which such liability accrues.
4.23 Rounding of amounts :
All amounts disclosed in the financial statements and notes have been rounded off to the nearest lacs as per the requirement of Schedule III of the Companies Act, 2013, unless otherwise stated.
4.24 First-time adoption - mandatory exceptions and optional exemptions:
Overall principle
The Company has prepared the opening balance sheet as per Ind AS as at 1st April, 2015 (transition date) after applying mandatory exceptions and availing certain optional exemptions as given below:
Past business combinations
The Company has elected not to apply Ind AS - 103 âBusiness Combinationsâ retrospectively to past business combinations that occurred before the transition date of 1st April, 2015 and consequently the Company has applied same recognition principles and has kept the same classification for the past business combination as in its previous GAAP financial statements.
Deemed cost for property, plant and equipment, investment property, and intangible assets
The Company has elected to continue with the carrying value of all of its plant and equipment, investment property and intangible assets recognized as of 1st April, 2015 (transition date), measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
Transfers of Assets from Customers
The Company has applied Appendix C of Ind AS - 18 âTransfers of Assets from Customersâ (including for balances as on the Transition date i.e. 1st April, 2015 as permitted under Para D 36 of the Ind AS 101). This relates to contribution received from customers for ongoing access to electricity distribution system, which are now classified as deferred revenue and transferred to income statement over the useful life of assets, in line with Ind AS 18. This was hitherto been referred to as service line contribution and classified under reserve and adjusted against depreciation charge, in the income statement, over the useful life of the assets.
Exchange differences arising on long-term foreign currency monetary items
Under previous GAAP, the Company had opted to defer / capitalize exchange differences arising on long-term foreign currency monetary items in accordance with paragraph 46A of AS - 11 âThe Effects of Changes in Foreign Exchange Ratesâ.â The Company has now availed the option available under Ind AS - 101 âFirst-time Adoption of Indian Accounting Standardsâ whereby a first time adopter can continue its Indian GAAP policy for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognized in the Indian GAAP financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period i.e. 1st April, 2016.
Classification and measurement of financial assets
The Company has followed classification and measurement of financial assets in accordance with Ind AS 109 Financial Instruments on the basis of facts and circumstances that existed at the date of transition to Ind AS.
Impairment of financial assets
The Company has applied the impairment requirements of Ind AS 109 retrospectively; however, as permitted by Ind AS 101, it has used reasonable and supportable information that is available without undue cost or effort to determine the credit risk as at the date that financial instruments were initially recognized in order to compare it with the credit risk as at the transition date.
However, as permitted by Ind AS 101, the Company has not undertaken an exhaustive search for information when determining, at the date of transition to Ind ASs, whether there have been significant increases in credit risk since initial recognition.
Deemed cost for investments in subsidiaries, associates and joint ventures
The Company has elected to continue with the carrying value of all of its investments in subsidiaries, associates and joint ventures as of 1st April, 2015 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
Mar 31, 2015
1.1 Basis for preparation of financial statements:
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards specified under
Section 133 of the Companies Act, 2013, read with Rule 7 of the
Companies (Accounts) Rules, 2014 and the relevant provisions of the
Companies Act, 2013 ("the 2013 Act") / Companies Act, 1956 ("the 1956
Act"), as applicable. The financial statements have been prepared on
accrual basis under the historical cost convention. The accounting
policies adopted in the preparation of the financial statements are
consistent with those followed in the previous year, unless otherwise
stated.
1.2 Use of estimates:
The preparation of financial statements requires certain estimates and
assumptions. These estimates and assumptions affect the reported amount
of assets and liabilities on the date of the financial statements and
the reported amount of revenues and expenses during the reporting
period. Difference between the actual result and estimates are
recognised in the period in which the results are known / materialized.
1.3 Capital receipts:
(i) Grant received under the Accelerated Power Development and Reforms
Programme (APDRP) of the Ministry of Power, Government of India, is
treated as capital receipt and accounted as capital reserve.
(ii) Service line contributions received from consumers are treated as
capital receipt and accounted as capital reserve.
1.4 Fixed assets:
Tangible fixed assets:-
Fixed Assets are stated at cost of acquisition or construction less
accumulated depreciation. Cost includes purchase price, taxes and
duties, labour cost and other direct costs incurred up to the date the
asset is ready for its intended use. Allocation of indirect expenses to
capital account is done on the basis of technical evaluation by the
Management.
Intangible assets :-
Certain computer software costs are capitalized and recognised as
Intangible assets based on materiality, accounting prudence and
significant benefits expected to flow therefrom for a period longer
than one year.
1.5 Impairment of fixed assets:
Fixed assets are reviewed for impairment losses whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which
the carrying amount of the assets exceeds its recoverable amount, which
is the higher of an asset''s net selling price and value in use.
1.6 Borrowing costs:
Borrowing costs comprising interest, finance charges etc. to the extent
related / attributed to the qualifying assets, such as new projects and
/ or specific assets created in the existing business, are capitalized
up to the date of completion and ready for their intended use. Other
borrowing costs are charged to the statement of profit and loss in the
period of their accrual.
1.7 Depreciation and amortization:
(i) Depreciation for the year is provided on additions / deductions of
the assets during the period from / up to the month in which the asset
is added / deducted.
(ii) Depreciation for the year has been shown after reducing the
proportion of the amount of depreciation provided on assets created
against the service line contribution, APDRP grant received and others.
(iii) In respect of fixed assets pertaining to AMGEN, Ahmedabad
Distribution and Surat Distribution, depreciation is provided on
straight line method at the rates as per CERC regulations as applicable
in the year of addition.
(iv) In respect of assets pertaining to Agra and Bhiwandi Distribution
Circles, depreciation is provided on straight line method at the rates
mentioned below, as provided in the Distribution Franchise Agreement
which are higher than the effective rates prescribed under Schedule II
to the Companies Act, 2013:
(v) In respect of assets pertaining to SUGEN and UNOSUGEN, depreciation
is provided on straight line method considering the rates and the
methodology provided in CERC (Terms and Conditions of Tariff)
Regulations, 2014.
(vi) In respect of assets pertaining to Windmill (Jamnagar),
depreciation is provided on straight line method at the rates mentioned
in CERC Order issued on ''Determination of the tariff for Procurement
of Power by Distribution Licensees from Wind Energy Generators and
other commercial issues''.
(vii) Leasehold land is amortized over the lease period.
(viii) Computer software costs are amortized over its useful life which
is estimated at 3 years.
1.8 Investments:
Investments are classified into current and long term investments.
Current investments are stated at the lower of cost and fair value.
Long term investments are stated at cost less provision for diminution
other than temporary, if any, in the value of such investments.
1.9 cash and cash equivalents:
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short term, highly liquid investments that are readily
convertible into known amounts of cash and which are subject to
insignificant risk of changes in value.
1.10 Inventories:
Inventories of stores, spare parts, coal, fuel and loose tools are
valued at weighted average cost and net realizable value, whichever is
lower. Cost of inventories includes cost of purchase price, costs of
conversion and other costs incurred in bringing the inventories to
their present location and condition.
1.11 Revenue recognition:
(i) Revenue (income) is recognised when no significant uncertainty as
to the measurability or collectability exists. Revenue recognised in
excess of billing has been reflected under "Other Current Assets"
as unbilled revenue. Further, in view of the uncertainties involved in
the recoverability, the Company accounts for the quarterly fuel and
power purchase price adjustment claims as and when allowed by the
regulatory authorities and truing-up adjustment claims as and when
realized.
(ii) Gross proceeds from CERs is recognised when all the significant
risks and rewards of ownership of CERs have been passed to the buyer,
usually on delivery of the CERs.
(iii) Dividend is accounted when the right to receive payment is
established.
(iv) Interest on overdue receivables of energy bills, insurance, coal
and other claims, casual income etc. are accounted on grounds of
prudence, as and when recovered.
1.12 Transactions in foreign currency:
(i) Transactions denominated in foreign currencies are normally
recorded at the exchange rate prevailing at the time of the
transaction.
(ii) Monetary items denominated in foreign currencies at the period end
are restated at period end rates.
(iii) Non-monetary foreign currency items are carried at cost.
(iv) Exchange differences arising on settlement of monetary items or on
reporting the company''s monetary items at rates different from those
at which they were initially recorded during the financial year are
recognised as income or expense in the financial year in which they
arise except for such adjustment of exchange difference arising on long
term foreign currency monetary items in so far they related to the
acquisition of a depreciable capital assets which are adjusted to the
cost of the assets and depreciated over the remaining useful life of
such assets.
(v) Forward exchange contracts are not intended for trading purposes.
In case of forward exchange contracts, difference between the forward
rate and the exchange rate on the date of transaction is recognised as
expense or income over the life of the contract. Exchange differences
on such contracts are recognised in the statement of profit and loss in
the year in which the exchange rates change. Any profit or loss arising
on cancellation or renewal of forward exchange contract is recognised
as income or as expense for the year.
1.13 Retirement and other employee benefits:
Retirement benefits in the form of provident fund, family pension fund
and superannuation schemes, which are defined contribution schemes, are
charged to the statement of profit and loss of the period in which the
contributions to the respective funds accrue.
The Company has created employees group gratuity fund which has taken a
group gratuity insurance policy from Life Insurance Corporation of
India (LIC). Premium on the above policy as intimated by LIC is charged
to the statement of profit and loss. The adequacy of balances available
is compared with actuarial valuation obtained at the period-end and
shortfall, if any, is provided for in the statement of profit and loss.
Provision for leave encashment is determined and accrued on the basis
of actuarial valuation.
Actuarial gains and losses are immediately recognised in the statement
of profit and loss and are not deferred.
1.14 Taxation:
Provision for current tax is made on the basis of estimated taxable
income for the current accounting period and in accordance with the
provisions of the Income Tax Act, 1961. Deferred tax resulting from
"timing differences" between accounting and taxable profit for the
period is accounted for using the tax rates and laws that have been
enacted or substantively enacted as at the balance sheet date. Deferred
tax asset, on account of unabsorbed depreciation and 1 carry forward
losses are recognised only if there is virtual certainty supported by
convincing evidences that there will be sufficient future taxable
income available to realize the assets and on account of other asset is
recognised and carried forward only to the extent that there is a
reasonable certainty that sufficient future taxable income will be
available against which such assets can be realized.
1.15 Earnings per share:
Basic earnings per share is computed by dividing the profit / (loss)
after tax by the weighted average number of equity shares outstanding
during the year. Diluted earnings per share is computed by dividing the
profit / (loss) after tax as adjusted for dividend, interest and other
charges to expense or income relating to the dilutive potential equity
shares, by the weighted average number of equity shares considered for
deriving basic earnings per share and the weighted average number of
equity shares which could have been issued on the conversion of all
dilutive potential equity shares. Potential equity shares are deemed
to be dilutive only if their conversion to equity shares would decrease
the net profit per share from continuing ordinary operations. Potential
dilutive equity shares are deemed to be converted as at the beginning
of the period, unless they have been issued at a later date.
1.16 Provisions, contingent liabilities and contingent assets:
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
balance sheet date. These are reviewed at each balance sheet date and
adjusted to reflect the current best estimates.
A possible obligation that arises from past events and the existence of
which will be confirmed only by the occurrence or non-occurrence of one
or more uncertain future events not wholly within the control of the
enterprise are disclosed as contingent liability and not provided for.
Such liability is not disclosed if the possibility of outflow of
resources is remote.
Contingent assets are neither recognised nor disclosed in the financial
statements.
1.17 Leases :
(i) Operating: Lease of assets under which significant risks and
rewards of ownership are effectively retained by the lessor are
classified as operating leases. Lease payments under an operating lease
are recognised as expense in the statement of profit and loss, on a
straight-line or other systematic basis over the lease term.
(ii) Finance: Leased assets acquired on which significant risks and
rewards of ownership are effectively transferred to the Company are
capitalized at lower of fair value and the present value of minimum
lease payments. Such assets are depreciated / amortized over the period
of lease or estimated life of such assets, whichever is less.
Mar 31, 2014
1.1 Basis for preparation of financial statements:
The financial statements have been prepared and presented to comply in
all material respects with notifed accounting standards by the
Companies Accounting Standards Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956 ("the 1956 Act"). The
said rules continue to be applicable in respect of Section 133 of the
Companies Act, 2013 ("the 2013 Act") in terms of General Circular
15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs
and the relevant provisions of the 1956 Act / 2013 Act, as applicable.
The financial statements have been prepared under the historical cost
convention on an accrual basis in accordance with the accounting
principles generally accepted in India. Accounting policies have been
followed consistently except as stated Specifically.
1.2 Use of estimates:
The preparation of financial statements requires certain estimates and
assumptions. These estimates and assumptions affect the reported amount
of assets and liabilities on the date of the financial statements and
the reported amount of revenues and expenses during the reporting
period. Difference between the actual result and estimates are
recognized in the period in which the results are known / materialized.
1.3 Capital receipts:
(i) Grant received under the Accelerated Power Development and Reforms
Programme (APDRP) of the Ministry of Power, Government of India, is
treated as capital receipt and accounted as capital reserve.
(ii) Service line contributions received from consumers are treated as
capital receipt and accounted as capital reserve.
1.4 Fixed assets:
Tangible fixed assets:-
Fixed assets are stated at cost of acquisition or construction less
accumulated depreciation. Cost includes purchase price, taxes and
duties, labour cost and other direct costs incurred up to the date the
asset is ready for its intended use. Allocation of indirect expenses to
capital account is done on the basis of technical evaluation by the
Management.
Intangible assets :-
Certain computer software costs are capitalized and recognized as
Intangible assets based on materiality, accounting prudence and
significant benefits expected to flow therefrom for a period longer than
one year.
1.5 Impairment of fixed assets:
Fixed assets are reviewed for impairment losses whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognized for the amount by which
the carrying amount of the assets exceeds its recoverable amount, which
is the higher of an assets'' net selling price and value in use.
1.6 Borrowing costs:
Borrowing costs comprising interest, finance charges etc. to the extent
related / attributed to the qualifying assets, such as new projects and
/ or Specific assets created in the existing business, are capitalized
up to the date of completion and ready for their intended use. Other
borrowing costs are charged to the statement of Profit and loss in the
period of their accrual.
1.7 Depreciation and amortization:
(i) Depreciation for the year is provided on additions / deductions of
the assets during the period from / up to the month in which the asset
is added / deducted.
(ii) Depreciation for the year has been shown after reducing the
proportion of the amount of depreciation provided on assets created
against the service line contribution, APDRP grant received and others.
(iii) In respect of fixed assets pertaining to AMGEN, Ahmedabad
Distribution, and Surat Distribution, depreciation is provided on
straight line method at the rates as per CERC regulations as applicable
in the year of addition.
(iv) In respect of assets pertaining to Agra, Bhiwandi and Kanpur
Distribution Circles, depreciation is provided on straight line method
at the rates mentioned below, as provided in the Distribution Franchise
Agreement which are higher than the rates prescribed under Schedule XIV
to the Companies Act, 1956:
(v) In respect of assets pertaining to SUGEN and SUGEN 40, depreciation
is provided on straight line method considering the rates as provided
in Appendix III of the CERC (Terms and Conditions of Tariff)
Regulations, 2009.
(vi) In respect of assets pertaining to Windmill (Jamnagar),
depreciation is provided on straight line method at the rates mentioned
in CERC Order issued on ''Determination of the tariff for procurement of
power by distribution licensees from Wind Energy Generators and other
commercial issues''.
(vii) Leasehold land is amortized over the lease period.
(viii) Computer software costs are amortised over its useful life which
is estimated at 3 years.
1.8 Investments:
Investments are classifed into current and long term investments.
Current investments are stated at the lower of cost and fair value.
Long term investments are stated at cost less provision for diminution
other than temporary, if any, in the value of such investments.
1.9 Cash and cash equivalents:
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short term, highly liquid investments that are readily
convertible into known amounts of cash and which are subject to
insignificant risk of changes in value.
1.10 Inventories:
Inventories of stores, spare parts, coal, fuel and loose tools are
valued at weighted average cost and net realizable value whichever is
lower.
1.11 Revenue recognition:
(i) Revenue (income) is recognized when no significant uncertainty as to
the measurability or collectability exists. Revenue recognized in
excess of billing has been refected under "Other Current Assets" as
unbilled revenue. Further, in view of the uncertainties involved in
the recoverability, the Company accounts for the quarterly fuel and
power purchase price adjustment claims as and when allowed by the
regulatory authorities and truing-up adjustment claims as and when
realized.
(ii) Gross proceeds from CERs is recognized when all the significant
risks and rewards of ownership of CERs have been passed to the buyer,
usually on delivery of the CERs.
(iii) Dividend is accounted when the right to receive payment is
established.
(iv) Interest on overdue receivables of energy bills, insurance, coal
and other claims, casual income etc. are accounted on grounds of
prudence, as and when recovered.
1.12 Transactions in foreign currency:
(i) Transactions denominated in foreign currencies are normally
recorded at the exchange rate prevailing at the time of the
transaction.
(ii) Monetary items denominated in foreign currencies at the period end
are restated at period end rates.
(iii) Non-monetary foreign currency items are carried at cost.
(iv) Any income or expense on account of exchange difference either on
settlement or on translation of revenue in nature, is recognized in the
statement of Profit and loss.
1.13 Retirement and other employee benefits:
Retirement benefits in the form of provident fund, family pension fund
and superannuation schemes, which are defined contribution schemes, are
charged to the statement of Profit and loss of the period in which the
contributions to the respective funds accrue.
The Company has created employees group gratuity fund which has taken a
group gratuity insurance policy from Life Insurance Corporation of
India (LIC). Premium on the above policy as intimated by LIC is charged
to the statement of Profit and loss. The adequacy of balances available
is compared with actuarial valuation obtained at the period-end and
shortfall, if any, is provided for in the statement of Profit and loss.
Provision for leave encashment is determined and accrued on the basis
of actuarial valuation.
Actuarial gains and losses are immediately recognized in the statement
of Profit and loss and are not deferred.
1.14 Taxation:
Provision for current tax is made on the basis of estimated taxable
income for the current accounting period and in accordance with the
provisions of the Income Tax Act, 1961. Deferred tax resulting from
"timing differences" between accounting and taxable Profit for the
period is accounted for using the tax rates and laws that have been
enacted or substantively enacted as at the balance sheet date. Deferred
tax asset, on account of unabsorbed depreciation and carry forward
losses are recognised only if there is virtual certainty supported by
convincing evidences that there will be suffcient future taxable income
available to realize the assets and on account of other asset is
recognized and carried forward only to the extent that there is a
reasonable certainty that suffcient future taxable income will be
available against which such assets can be realized.
1.15 Earnings per share:
Basic earnings per share is computed by dividing the Profit / (loss)
after tax by the weighted average number of equity shares outstanding
during the year. Diluted earnings per share is computed by dividing the
Profit / (loss) after tax as adjusted for dividend, interest and other
charges to expense or income relating to the dilutive potential equity
shares, by the weighted average number of equity shares considered for
deriving basic earnings per share and the weighted average number of
equity shares which could have been issued on the conversion of all
dilutive potential equity shares. Potential equity shares are deemed to
be dilutive only if their conversion to equity shares would decrease
the net Profit per share from continuing ordinary operations. Potential
dilutive equity shares are deemed to be converted as at the beginning
of the period, unless they have been issued at a later date.
1.16 Provisions, contingent liabilities and contingent assets:
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
balance sheet date. These are reviewed at each balance sheet date and
adjusted to refect the current best estimates.
A possible obligation that arises from past events and the existence of
which will be confirmed only by the occurrence or non-occurrence of one
or more uncertain future events not wholly within the control of the
enterprise are disclosed as contingent liability and not provided for.
Such liability is not disclosed if the possibility of outflow of
resources is remote.
Contingent assets are neither recognized nor disclosed in the financial
statements.
1.17 Leases :
(i) Operating: Lease of assets under which significant risks and rewards
of ownership are effectively retained by the lessor are classifed as
operating leases. Lease payments under an operating lease are
recognised as expense in the statement of Profit and loss, on a
straight-line or other systematic basis over the lease term.
(ii) Finance: Leased assets acquired on which significant risks and
rewards of ownership effectively transferred to the Company are
capitalised at lower of fair value and the present value of minimum
lease payments. Such assets are depreciated / amortised over the period
of lease or estimated life of such assets, whichever is less.
Mar 31, 2013
1.1 Basis of preparation of financial statements:
The financial statements have been prepared and presented to comply in
all material respects with relevant provisions of the Companies Act,
1956 and notified accounting standards by Companies Accounting
standards Rules, 2006 (as amended). The financial statements have been
prepared under the historical cost convention on an accrual basis in
accordance with the generally accepted accounting principles in India.
Accounting policies have been followed consistently except as stated
specifically.
1.2 Use of estimates:
The preparation of financial statements requires certain estimates and
assumptions. These estimates and assumptions affect the reported amount
of assets and liabilities on the date of the financial statements and
the reported amount of revenues and expenses during the reporting
period. Difference between the actual result and estimates are
recognized in the period in which the results are known / materialized.
1.3 Capital receipts:
(i) Grant received under the Accelerated Power Development and Reforms
Programme (APDRP) of the Ministry of Power, Government of India, is
treated as capital receipt and accounted as capital reserve.
(ii) service line contributions received from consumers are treated as
capital receipt and accounted as capital reserve.
1.4 Fixed assets: Tangible fixed assets:-
Fixed Assets are stated at cost of acquisition or construction less
accumulated depreciation. Cost includes purchase price, taxes and
duties, labour cost and other direct costs incurred up to the date the
asset is ready for its intended use. Allocation of indirect expenses to
capital account is done on the basis of technical evaluation by the
Management.
Intangible assets:-
Certain computer software costs are capitalized and recognized as
Intangible assets based on materiality, accounting prudence and
significant benefits expected to flow there from for a period longer
than one year.
1.5 Impairment of fixed assets:
fixed assets are reviewed for impairment losses whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognized for the amount by which
the carrying amount of the assets exceeds its recoverable amount, which
is the higher of an assets'' net selling price and value in use.
1.6 Borrowing costs:
Borrowing costs comprising interest, finance charges etc. to the extent
related / attributed to the qualifying assets, such as new projects and
/ or specific assets created in the existing business, are capitalized
up to the date of completion and ready for their intended use. other
borrowing costs are charged to the statement of profit and loss in the
period of their accrual.
1.7 Depreciation and amortisation:
(i) Depreciation for the year is provided on additions / deductions of
the assets during the period from / up to the month in which the asset
is added / deducted.
(ii) Depreciation for the year has been shown after reducing the
proportion of the amount of depreciation provided on assets created
against the service line contribution, APDRP grant received and others.
(iii) In respect of fixed assets pertaining to AMGEN, Ahmedabad
Distribution and surat Distribution, depreciation is provided on
straight line method at the rates as per CERC regulations as applicable
in the year of addition.
(iv) In respect of assets pertaining to Agra, bhiwandi and Kanpur
Distribution Circles, depreciation is provided on straight line method
at the rates mentioned below, as provided in the Distribution franchise
Agreement which are higher than the rates prescribed under schedule XIV
to the Companies Act, 1956:
(v) In respect of assets pertaining to sUGEN, depreciation is provided
on straight line method considering the rates as provided in Appendix
III of the CERC (Terms and Conditions of Tariff) Regulations, 2009.
(vi) In respect of assets pertaining to Windmill (Jamnagar),
depreciation is provided on straight line method at the rates mentioned
in CERC order issued on ''Determination of the tariff for procurement
of power by distribution licensees from Wind Energy Generators and
other commercial issues''.
(vii) Leasehold land is amortized over the lease period.
(viii) Computer software costs are amortised over its useful life which
is estimated at 3 years.
1.8 Investments:
Investments are classified into current and long term investments.
Current investments are stated at the lower of cost and fair value.
Long term investments are stated at cost less provision for diminution
other than temporary, if any, in the value of such investments.
1.9 Cash and cash equivalents:
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short term, highly liquid investments that are readily
convertible into known amounts of cash and which are subject to
insignificant risk of changes in value.
1.10 Inventories:
Inventories of stores, spare parts, coal, fuel and loose tools are
valued at weighted average cost and net realizable value whichever is
lower.
1.11 Revenue recognition:
(i) Revenue (income) is recognized when no significant uncertainty as
to the measurability or collectability exists. Revenue recognized in
excess of billing has been reflected under "other Current Assets"
as unbilled revenue. further, in view of the uncertainties involved in
the recoverability of truing-up adjustment claims, the Company accounts
for the same as and when realized.
(ii) Gross proceeds from CeR is recognized when all the significant
risks and rewards of ownership of CeR have been passed to the buyer,
usually on delivery of the CeR.
(iii) Dividend is accounted when the right to receive payment is
established.
(iv) Interest on overdue receivables of energy bills, insurance, coal
and other claims, casual income etc. are accounted on grounds of
prudence, as and when recovered.
1.12 Transactions in foreign currency:
(i) Transactions denominated in foreign currencies are normally
recorded at the exchange rate prevailing at the time of the
transaction.
(ii) Monetary items denominated in foreign currencies at the period end
are restated at period end rates.
(iii) Non-monetary foreign currency items are carried at cost.
(iv) Any income or expense on account of exchange difference either on
settlement or on translation of revenue in nature, is recognized in the
statement of profit and loss.
1.13 Retirement and other employee benefits:
Retirement benefits in the form of provident fund, family pension fund
and superannuation schemes, which are defined contribution schemes, are
charged to the statement of profit and loss of the period in which the
contributions to the respective funds accrue.
The Company has created employees group gratuity fund which has taken a
group gratuity insurance policy from Life Insurance Corporation of
India (LIC). Premium on the above policy as intimated by LIC is charged
to the statement of profit and loss. The adequacy of balances available
is compared with actuarial valuation obtained at the period-end and
shortfall, if any, is provided for in the statement of profit and loss.
Provision for leave encashment is determined and accrued on the basis
of actuarial valuation.
Actuarial gains and losses are immediately recognized in the statement
of profit and loss and are not deferred.
1.14 Taxation:
Provision for current tax is made on the basis of estimated taxable
income for the current accounting period and in accordance with the
provisions of the Income Tax Act, 1961. Deferred tax resulting from
"timing differences" between accounting and taxable profit for the
period is accounted for using the tax rates and laws that have been
enacted or substantively enacted as at the balance sheet date. Deferred
tax asset is recognized and carried forward only to the extent that
there is a reasonable certainty that sufficient future taxable income
will be available against which such assets can be realized.
1.15 Earnings per share:
basic earnings per share is computed by dividing the profit/(loss)
after tax by the weighted average number of equity shares outstanding
during the year. Diluted earnings per share is computed by dividing the
profit/(loss) after tax as adjusted for dividend, interest and other
charges to expense or income relating to the dilutive potential equity
shares, by the weighted average number of equity shares considered for
deriving basic earnings per share and the weighted average number of
equity shares which could have been issued on the conversion of all
dilutive potential equity shares. Potential equity shares are deemed to
be dilutive only if their conversion to equity shares would decrease
the net profit per share from continuing ordinary operations. Potential
dilutive equity shares are deemed to be converted as at the beginning
of the period, unless they have been issued at a later date.
1.16 Provisions, contingent liabilities and contingent assets:
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
balance sheet date. These are reviewed at each balance sheet date and
adjusted to reflect the current best estimates.
A possible obligation that arises from past events and the existence of
which will be confirmed only by the occurrence or nonoccurrence of one
or more uncertain future events not wholly within the control of the
enterprise are disclosed as Contingent liability and not provided for.
such liability is not disclosed if the possibility of outflow of
resources is remote.
Contingent assets are neither recognized nor disclosed in the financial
statements.
1.17 Leases:
(i) operating: Lease of assets under which significant risks and
rewards of ownership are effectively retained by the lessor are
classified as operating leases. Lease payments under an operating lease
are recognised as expense in the statement of Profit and Loss, on a
straight-line or other systematic basis over the lease term.
(ii) finance: Leased assets acquired on which significant risks and
rewards of ownership effectively transferred to the Company are
capitalised at lower of fair value and the present value of minimum
lease payments. such assets are depreciated / amortised over the period
of lease or estimated life of such assets, whichever is less.
Mar 31, 2012
1.1 Basis for preparation of financial statements:
The Financial statements have been prepared and presented to comply in
all material respects with relevant provisions of the Companies Act,
1956 and notified accounting standards by Companies Accounting
Standards Rules, 2006 (as amended). The financial statements have been
prepared under the historical cost convention on an accrual basis in
accordance with the generally accepted accounting principles in India.
Accounting policies have been followed consistently except as stated
specifically.
1.2 Use of estimates:
The preparation of financial statements requires certain estimates and
assumptions. These estimates and assumptions affect the reported amount
of assets and liabilities on the date of the financial statements and
the reported amount of revenues and expenses during the reporting
period. Difference between the actual result and estimates are
recognized in the period in which the results are known / materialized.
1.3 Capital receipts:
(i) Grant received under the Accelerated Power Development and Reforms
Programme (APDRP) of the Ministry of Power, Government of India, is
treated as capital receipt and accounted as capital reserve.
(ii) Service line contributions received from consumers are treated as
capital receipt and accounted as capital reserve.
1.4 Fixed assets:
Fixed assets are stated at cost of acquisition or construction less
accumulated depreciation. Cost includes purchase price, taxes and
duties, labour cost and other direct costs incurred up to the date the
asset is ready for its intended use. Allocation of indirect expenses to
capital account is done on the basis of technical evaluation by the
Management.
Certain computer software costs are capitalized and recognized as
Intangible assets based on materiality, accounting prudence and
significant benefits expected to flow there from for a period longer
than one year.
1.5 Impairment of fixed assets:
Fixed assets are reviewed for impairment losses whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognized for the amount by which
the carrying amount of the assets exceeds its recoverable amount, which
is the higher of an assets' net selling price and value in use.
1.6 Borrowing costs:
Borrowing costs comprising interest, finance charges etc. to the extent
related / attributed to the qualifying assets, such as new projects and
/ or specific assets created in the existing business, are capitalized
up to the date of completion and ready for their intended use. Other
borrowing costs are charged to the statement of profit and loss in the
period of their accrual.
1.7 Depreciation and amortisation:
(i) Depreciation for the year is provided on additions / deductions of
the assets during the period from / up to the month in which the asset
is added / deducted.
(ii) Depreciation for the year has been shown after reducing the
proportion of the amount of depreciation provided on assets created
against the service line contribution & APDRP grant received.
(iii) In respect of fixed assets pertaining to Ahmedabad Generation,
Ahmedabad Distribution and Surat Distribution, depreciation is provided
on straight line method at the rates as per CERC regulations as
applicable in the year of addition.
(v) In respect of assets pertaining to SUGEN, depreciation is provided
on straight line method considering the rates as provided in Appendix
III of the CERC (Terms and Conditions of Tariff) Regulation 2009.
(vi) In respect of assets pertaining to Windmill (Jamnagar),
depreciation is provided on straight line method at the rates mentioned
in CERC order issued on ÃDetermination of the tariff for procurement of
power by distribution licensees from Wind Energy Generators and other
commercial issues'.
(vii) Leasehold land is amortized over the lease period.
(viii) Computer software costs are amortised over its useful life which
is estimated at 3 years.
1.8 Investments:
Investments are classified into current and long term investments.
Current investments are stated at the lower of cost and fair value.
Long term investments are stated at cost less provision for diminution
other than temporary, if any, in the value of such investments.
1.9 Inventories:
Inventories of stores, spare parts, coal, fuel and loose tools are
valued at weighted average cost and net realizable value whichever is
lower.
1.10 Revenue recognition:
(i) Revenue (income) is recognized when no significant uncertainty as
to the measurability or collectability exists. Revenue recognized in
excess of billing has been reflected under "Other Current Assets" as
unbilled revenue.
(ii) Gross proceeds from CER is recognized when all the significant
risks and rewards of ownership of CER have been passed to the buyer,
usually on delivery of the CER.
(iii) Dividend is accounted when the right to receive payment is
established.
(iv) Interest on overdue receivables of energy bills, insurance, coal
and other claims, casual income etc. are accounted on grounds of
prudence, as and when recovered.
1.11 Transactions in foreign currency:
(i) Transactions denominated in foreign currencies are normally
recorded at the exchange rate prevailing at the time of the
transaction.
(ii) Monetary items denominated in foreign currencies at the period end
are restated at period end rates.
(iii) Non-monetary foreign currency items are carried at cost.
(iv) Any income or expense on account of exchange difference either on
settlement or on transaction of revenue in nature, is recognized in the
statement of profit and loss.
1.12 Retirement and other employee benefits:
Retirement benefits in the form of provident fund, family pension fund
and superannuation schemes, which are defined contribution schemes, are
charged to the statement of profit and loss of the period in which the
contributions to the respective funds accrue.
The Company has created employees group gratuity fund which has taken a
group gratuity insurance policy from Life Insurance Corporation of
India (LIC). Premium on the above policy as intimated by LIC is charged
to the statement of profit and loss. The adequacy of balances available
is compared with actuarial valuation obtained at the period-end and
shortfall, if any, is provided for in the statement of profit and loss.
Provision for leave encashment is determined and accrued on the basis
of actuarial valuation.
Actuarial gains and losses are immediately recognized in the statement
of profit and loss and are not deferred.
1.13 Taxation:
Provision for current tax is made on the basis of estimated taxable
income for the current accounting period and in accordance with the
provisions of the Income Tax Act, 1961. Deferred tax resulting from
"timing differences" between accounting and taxable profit for the
period is accounted for using the tax rates and laws that have been
enacted or substantively enacted as at the balance sheet date. Deferred
tax asset is recognized and carried forward only to the extent that
there is a reasonable certainty that sufficient future taxable income
will be available against which such assets can be realized.
1.14 Provisions, contingent liabilities and contingent assets:
Provisions involving substantial degree of estimation in measurement
are recognized when there is a probable present obligation and outflow
of resources as a result of past events.
Liabilities which are of contingent nature are not provided but are
disclosed at their estimated amount in the notes. Contingent assets are
neither recognized nor disclosed in financial statements.
Mar 31, 2011
1. Basis of Preparation of Financial Statements:
The Company has applied provisions of the Companies Act, 1956 for
preparation of its financial statements. The Financial statements are
prepared and presented under the historical cost convention on accrual
basis of accounting, in accordance with the accounting principles
generally accepted in India and comply with the mandatory Accounting
Standards issued by the Institute of Chartered Accountants of India.
Accounting policies have been followed consistently except as stated
specifically.
2. Use of Estimates:
The presentation of financial statements requires certain estimates and
assumptions. These estimates and assumptions affect the reported amount
of assets and liabilities on the date of the financial statements and
the reported amount of revenues and expenses during the reporting
period. Difference between the actual result and estimates are
recognized in the period in which the results are known / materialized.
3. Capital Receipts:
(i) Grant received under the Accelerated Power Development and Reforms
Programme (APDRP) of the Ministry of Power, Government of India, is
treated as capital receipt and accounted as Capital Reserve.
(ii) Service Line Contributions received from consumers are treated as
capital receipt and accounted as Capital Reserve.
4. Revenue Recognition:
(i) Revenue (income) is recognized when no significant uncertainty as
to the measurability or collectability exists.
(ii) Dividend is accounted when the right to receive payment is
established.
(iii) Interest on overdue receivables of energy bills, insurance, coal
and other claims, casual income etc. are accounted on grounds of
prudence, as and when recovered.
(iv) All expenses are accounted on accrual basis except leave travel
concession, educational allowance and medical reimbursement to
employees which are accounted on payment basis.
(v) Allocation of indirect expenses to capital / revenue account is
done on the basis of technical evaluation by the Management.
(vi) Material items of prior period expenses, non-recurring and
extra-ordinary expenses are disclosed separately.
5. Inventories:
(i) Inventories are valued at weighted average cost or net realizable
value whichever is lower.
(ii) Work-in-Progress in respect of Services Division is valued at cost
or net realizable value whichever is lower.
6. Investments:
Investments are classified into current and long term investments.
Current investments are stated at the lower of cost and fair value.
Long term investments are stated at cost less provision for diminution
other than temporary, if any, in the value of such investments.
7. Fixed Assets:
Fixed Assets are stated at historical cost less accumulated
depreciation. Advances given to suppliers for identified capital
project / expenditure are included in Capital Work-in-Progress.
Certain computer software costs are capitalised and recognised as
Intangible assets based on materiality, accounting prudence and
significant benefits expected to flow there from for a period longer
than one year.
8. Impairment of Fixed Assets:
Fixed Assets are reviewed for impairment losses whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognized for the amount by which
the carrying amount of the assets exceeds its recoverable amount, which
is the higher of an assets net selling price and value in use.
9. Expenditure during Construction Period:
Expenditure incurred during construction / pre-operative period
including interest and finance charges on specific loans, prior to
commencement of commercial operation is capitalised and interest on
temporary investments of the specific loan funds earned during the
construction period is deducted from the total of the capital
expenditure.
10. Borrowing Costs:
Borrowing costs comprising interest, finance charges, etc. to the
extent related / attributed to the qualifying assets, such as new
projects and / or specific assets created in the existing business, are
capitalised up to the date of completion and ready for their intended
use. Other borrowing costs are charged to the profit and loss account
in the period of their accrual.
11. Depreciation and Amortisation:
The depreciation for the year is provided on additions / deductions of
the assets during the period from / up to the month in which the asset
is added / deducted.
The depreciation for the year has been shown after reducing the
proportion of the amount of depreciation provided on assets created
against the Service Line Contribution & APDRP Grant received.
In respect of assets pertaining to Agra, Bhiwandi and Kanpur
Distribution Circles, depreciation is provided on SLM at the rates
mentioned below, as provided in the Distribution Franchise Agreement
which are higher than the rates prescribed under Schedule XIV to the
Companies Act, 1956.
In respect of assets pertaining to Sugen, Ahmedabad Generation and
Distribution and Surat Distribution, depreciation is provided on SLM
considering the rates as provided in Appendix III of the Regulation
issued by the Central Electricity Regulatory Commission (CERC) dated
19th January, 2009 or rates prescribed under Schedule XIV to the
Companies Act, 1956, whichever are higher. The following categories of
the assets have higher rates as per aforesaid CERC regulation as
compared to the rates mentioned in Schedule XIV to the Companies Act,
1956.
Leasehold land is amortized over the lease period.
Computer Software costs are amortised over its useful life which is
estimated at 3 years.
12. Transactions in Foreign Currency:
(i) Transactions denominated in foreign currencies are normally
recorded at the exchange rate prevailing at the time of the
transaction.
(ii) Monetary items denominated in foreign currencies at the period end
are restated at period end rates.
(iii) Non monetary foreign currency items are carried at cost.
(iv) Any income or expense on account of exchange difference either on
settlement or on transaction is recognized in the profit and loss
account.
13. Retirement and Other Employee Benefits:
Retirement Benefits in the form of Provident Fund, Family Pension Fund
and Superannuation Schemes, which are defined contribution schemes, are
charged to the profit and loss account of the period in which the
contributions to the respective funds accrue.
The Company has created Employees Group Gratuity Fund which has taken a
Group Gratuity Insurance Policy from Life Insurance Corporation of
India (LIC). Premium on the above policy as intimated by LIC is charged
to the profit and loss account. The adequacy of balances available is
compared with actuarial valuation obtained at the period-end and
shortfall, if any, is provided for in the profit and loss account.
Provision for leave encashment is determined and accrued on the basis
of actuarial valuation.
Actuarial gains and losses are immediately recognized in the profit and
loss account and are not deferred.
14. Taxation:
Provision for Current tax is made on the basis of estimated taxable
income for the current accounting period and in accordance with the
provisions of the Income Tax Act, 1961. Deferred tax resulting from
Ãtiming differences" between accounting and taxable profit for the
period is accounted for using the tax rates and laws that have been
enacted or substantively enacted as at the balance sheet date. Deferred
tax asset is recognized and carried forward only to the extent that
there is a reasonable certainty that sufficient future taxable income
will be available against which such assets can be realized.
15. Provisions, Contingent Liabilities and Contingent Assets:
Provisions involving substantial degree of estimation in measurement
are recognized when there is a probable present obligation and outflow
of resources as a result of past events.
Liabilities which are of contingent nature are not provided but are
disclosed at their estimated amount in the Notes on Accounts.
Contingent assets are neither recognized nor disclosed in financial
statements.
Mar 31, 2010
1. Basis of Preparation of Financial Statements:
The Company has applied provisions of the Companies Act, 1956 for
preparation of its financial statements. The financial statements are
prepared and presented under the historical cost convention on accrual
basis of accounting, in accordance with the accounting principles
generally accepted in India and comply with the mandatory Accounting
Standards issued by the Institute of Chartered Accountants of India.
Accounting policies have been followed consistently except as stated
specifically.
2. Use of Estimates:
The presentation of financial statements requires certain estimates and
assumptions. These estimates and assumptions affect the reported amount
of assets and liabilities on the date of the financial statements and
the reported amount of revenues and expenses during the reporting
period. Difference between the actual result and estimates are
recognized in the period in which the results are known / materialized.
3. Capital Receipts:
(i) Grant received under the Accelerated Power Development and Reforms
Programme (APDRP) of the Ministry of Power, Government of India, is
treated as capital receipt and accounted as Capital Reserve.
(ii) Service line contributions received from consumers are treated as
capital receipt and accounted as Capital Reserve.
4. Revenue Recognition:
(i) Revenue (income) is recognized when no significant uncertainty as
to the measurability or collectability exists.
(ii) Dividend is accounted when the right to receive payment is
established.
(iii) Interest on overdue receivables of energy bills, insurance, coal
and other claims, casual income etc. are accounted on grounds of
prudence, as and when recovered.
(iv) All expenses are accounted on accrual basis except leave travel
concession, educational allowance and medical reimbursement to
employees which are accounted on payment basis.
(v) Allocation of indirect expenses to capital / revenue account is
done on the basis of technical evaluation by the Management.
(vi) Material items of prior period expenses, non-recurring and
extra-ordinary expenses are disclosed separately.
5. Inventories:
(i) Inventories are valued at weighted average cost or net realizable
value whichever is lower.
(ii) Work-in-Progress in respect of Services Division is valued at cost
or net realizable value whichever is lower.
6. Investments:
Investments are classified into current and long term investments.
Current investments are stated at the lower of cost and fair value.
Long term investments are stated at cost less provision for diminution
other than temporary, if any, in the value of such investments.
7. Fixed Assets: ,-
Fixed Assets are stated at historical cost less accumulated
depreciation. Advances given to suppliers for identified capital
project / expenditure are included in Capital Work-in-Progress.
Certain computer software costs are capitalised and recognised as
Intangible assets based on materiality, accounting prudence and
significant benefits expected to flow there from for a period longer
than one year.
8. Impairment of Fixed Assets:
Fixed Assets are reviewed for impairment losses whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognized for the amount by which
the carrying amount of the assets exceeds its recoverable amount, which
is the higher of an assets net selling price and value in use.
9. Expenditure during Construction Period:
Expenditure incurred during construction / pre-operative period
including interest and finance charges on specific loans, prior to
commencement of commercial operation is capitalised and interest on
temporary investments of the specific loan funds earned during the
construction period Js deducted from the total of the capital
expenditure.
10. Borrowing Cost:
Borrowing costs comprising interest, finance charges, etc. to the
extent related / attributed to the qualifying assets, such as new
projects and / or specific assets created in the existing business, are
capitalised up to the date of completion and ready for their intended
use. Other borrowing costs are charged to the profit and loss account
in the period of their accrual.
11. Depreciation and Amortisation:
The depreciation for the year is provided on additions / deductions of
the assets during the period from / up to the month in which the asset
is added / deducted.
The depreciation for the year has been shown after reducing the
proportion of the amount of depreciation provided on assets created
against the service line contribution & APDRP Grant received.
In respect of assets pertaining to Agra, Bhiwandi and Kanpur
Distribution Circles, depreciation is provided on SLM at the rates
mentioned below, as provided in the Distribution Franchise Agreement
which are higher than the rates prescribed under Schedule XIV to the
Companies Act, 1956.
Transformers, Switch Gears & Equipments 7.84%
Meters 12.77%
Distribution Systems - Overhead 7.84%
- Underground 5.27%
Others 7.84%
Vehicles 33.40%
Electrical fittings, Apparatus, Furniture
Fixtures, Communication equipments
and Office equipments 12.77%
In respect of assets pertaining to Sugen, Ahmedabad Generation and
Distribution and Surat Distribution, depreciation is provided on SLM
considering the rates as provided in Appendix III of the Regulation
issued by the Central Electricity Regulatory Commission (CERC) dated
19th January, 2009 or rates prescribed under Schedule XIV to the
Companies Act, 1956, whichever are higher. The following categories of
the assets have higheElectrical fittings, Apparatus, Furniture
Fixtures, Communication equipments
and Office equipmentsElectrical fittings, Apparatus, Furniture
Fixtures, Communication equipments
and Office equipmentsr rates as per aforesaid CERC regulation as
compared to the rates mentioned in Schedule XIV to the Companies Act.
Transformers Switch Gears & equipments 5.28%
Meters 5.28%
Distribution Systems -Overhead 5.28%
-UnderGround 5.28%
Vehicles 9.50%
Electrical fittings, Apparatus,
Furniture Fixture, Communicfation
equipments and Office equipments 6.33%
Leasehold land is amoElectrical fittings, Apparatus, Furniture
Fixtures, Communication equipments and Office equipmentsrtized over the
lease period.
Computer Software costs are amortised over its useful life which is
estimated at 3 years.
12. Transactions in Foreign Currency:
(i) Transactions denominated in foreign currencies are normally
recorded at the exchange rate prevailing at the time of the
transaction.
(ii) Monetary items denominated in foreign currencies at the period end
are restated at period end rates.
(iii) Non monetary foreign currency items are carried at cost.
(iv) Any income or expense on account of exchange difference either on
settlement or on transaction is recognized in the profit and loss
account.
13. Retirement and Other Employee Benefits:
Retirement Benefits in the form of Provident Fund, Family Pension Fund
and Superannuation Schemes, which are defined contribution schemes, are
charged to the profit and loss account of the period in which the
contributions to the respective funds accrue.
The Company has created Employees Group Gratuity Fund which has taken a
Group Gratuity Insurance Policy from Life Insurance Corporation of
India (LIC). Premium on the above policy as intimated by LIC is charged
to the profit and loss account. The adequacy of balances available is
compared with actuarial valuation obtained at the period-end and
shortfall, if any, is provided for in the profit and loss account.
Provision for leave encashment is determined and accrued on the basis
of actuarial valuation.
Actuarial gains and losses are immediately recognized in the profit and
loss account and are not deferred.
14. Taxation:
Provision for Current tax is made on the basis of estimated taxable
income for the current accounting period and in accordance with the
provisions of the Income Tax Act, 1961. Deferred tax resulting from
"timing differences" between accounting and taxable profit for the
period is accounted for using the tax rates and laws that have been
enacted or substantively enacted as at the balance sheet date.
Deferred tax asset is recognized and carried forward only to the extent
that there is a reasonable certainty that sufficient future taxable
income will be available against which such assets can be realized.
Provision for Fringe benefit tax, if any is made on the basis of
estimated taxable liabilities for the period.
15. Provisions, Contingent Liabilities and Contingent Assets:
Provisions involving substantial degree of estimation in measurement
are recognized when there is a probable present obligation and outflow
of resources as a result of past events.
Liabilities which are of contingent nature are not provided but are
disclosed at their estimated amount in the Notes on Accounts.
Contingent assets are neither recognized nor disclosed in financial
statements.
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