3. Material Accounting Policies

3.1. Statement of Compliance

These financial statements ("the financial statements")
have been prepared to comply in all material respects
with the Indian Accounting Standards ("Ind AS") as per
the Companies (Indian Accounting Standards) Rules,
2015 (as amended from time to time) and presentation
requirements of Division II of Schedule III as prescribed
under Section 133 of the Companies Act, 2013 ("the
Act"), other relevant provisions of the Act and guidelines
issued by the Securities and Exchange Board of India
("SEBI"), as applicable.

The Company's presentation currency and functional
currency is Indian Rupees. All figures appearing in the
Financial Statements are rounded off to the nearest
lakhs (? in lakhs), except where otherwise indicated.

3.2. Basis of Measurement

The financial statements have been prepared on a going
concern basis and using historical cost, except for the
following:

a. Financial assets and liabilities measured at fair
value (refer accounting policy regarding financial
instruments); and

b. Defined benefit plans - plan assets measured at fair
value.

3.3. Current and non-current classification

The company presents assets and liabilities in the balance
sheet based on current and non-current classification.
An asset is current when it is:

• Expected to be realised or intended to be sold or
consumed in a normal operating cycle;

• Held primarily for the purpose of trading;

• Expected to be realised with in twelve months after
the reporting period; or

• Cash or cash equivalent unless restricted from
being exchanged or used to settle a liability for at
least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is current when:

• It is expected to be settled in a normal operating
cycle;

• It is held primarily for the purpose of trading;

• It is due to be settled within twelve months after the
reporting period; or

• There is no unconditional right to defer the
settlement of the liability for at least twelve months
after the reporting period.

All other liabilities are classified as non-current. Deferred
tax assets / liabilities are classified as non-current assets
or non-current liabilities.

The operating cycle is the time between the acquisition
of assets for processing and their realisation in cash
and cash equivalents. As the operating cycle can not be
identified in normal course due to the special nature of
industry, the same have been assumed to have duration
of 12 months.

3.4. Use of estimates and judgements

The preparation of Financial Statements requires
management to make judgements, estimates and
assumptions to be made that affect the reported
amounts of revenue, expenses, assets, liabilities and
the accompanying disclosures along with contingent
liabilities. Uncertainty about these assumptions and
estimates could result in outcomes that require material
adjustments to the carrying amount of assets or liabilities
affected in future periods. The Company continually
evaluates these estimates and assumptions based on
the most recently available information. Difference
between actual results and estimates are recognized in
the period prospectively in which the results are known /
materialized.

3.5. Inventories

Inventories are valued in the balance sheet as follows :

a. Crude oil : Valued at cost or net realisable value
whichever is lower. Cost is calculated on absorption
cost method (on FIFO basis).

b. Component, stores, spares and consumables
(including items related to hydrocarbon properties):
at cost (on FIFO basis) or net realizable value,
whichever is lower. However, items held for use in
the production of inventories are not written down
below cost if the finished products in which they will
be incorporated are expected to be sold at or above
cost.

Cost comprises of all costs of purchase, cost of conversion
and other costs incurred in bringing the inventories to
their present location and condition. 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.

3.6. Cash and Cash Equivalents

Cash and cash equivalents in the financial statements
comprise cash in hand, balance with Banks, short-term
deposits with an original maturity of three months or less
and highly liquid investments that are readily convertible
into known amount of cash and which are subject to

insignificant risk of changes in value.

3.7. Tax Expenses

Tax expenses represents the sum of the tax currently
payable and deferred tax. It is recognised in the
statement of profit and loss except to the extent that it
relates to an item recognized directly in equity or in other
comprehensive income.

a. Current income tax

Tax on income for the current period is determined
on the basis of estimated taxable income and
tax credits computed in accordance with the
provisions of the relevant tax laws and based on
the expected outcome of assessments / appeals.
Current income tax relating to items recognised
directly in equity is recognised in equity and not
in the statement of profit and loss. Management
periodically evaluates positions taken in the tax
returns with respect to situations in which applicable
tax regulations are subject to interpretation and
establishes provisions where appropriate.

b. Deferred tax

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

Deferred tax liabilities are recognised for all taxable
temporary differences.

Deferred tax assets are recognised for all deductible
temporary differences, the carry forward of unused
tax credits and any unused tax losses. Deferred
tax assets are recognised to the extent that it is
probable that taxable profit will be available against
which the deductible temporary differences, and the
carry forward of unused tax credits and unused tax
losses can be utilised.

The carrying amount of deferred tax assets is
reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of
the deferred tax asset to be utilised.

Unrecognised deferred tax assets are reassessed at
each reporting date and recognised to the extent that
it has become probable that future taxable profits
will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at
the tax rates that are expected to apply in the year

when the asset is realised or the liability is settled,
based on tax rates (and tax laws) that have been
enacted or substantively enacted at the reporting
date.

Deferred tax relating to items recognised outside
the statement of profit and loss is recognised either
in other comprehensive income or in equity in
correlation to the underlying transaction recognised
either in OCI or directly in equity.

Deferred tax assets and deferred tax liabilities are
offset if a legally enforceable right exists to set
off current tax assets against current income tax
liabilities and the deferred taxes relate to the same
taxable entity and the same taxation authority and
the Company intends to settle its current tax assets
and liabilities on net basis.

3.8. Property, Plant and Equipment

Property, Plant and Equipment held for use in the
production or/and supply of goods or services, or for
administration purposes are stated in the Balance
Sheet at cost, less accumulated depreciation and
accumulated impairment losses (if any). Cost of an item
of Property, Plant and Equipment acquired comprises
its purchase price including import duties and non¬
refundable purchase taxes, directly attributable
borrowing costs, any other directly attributable costs
of bringing the assets to its working condition and
location for its intended use, present value of any
estimated cost of dismantling and removing the
item and restoring the site on which it is located.
If significant parts of an item of Property, Plant and
Equipment have different useful lives, then they are
accounted for a separate items (major components)
of property, plant and equipment. Profit or loss
arising on disposal of property, plant and equipment
are recognized in the statement of profit and loss.
Subsequent costs are included in the asset's carrying
amount, only when it is probable that future economic
benefits associated with the cost incurred will flow to
the Company and the cost of the item can be measured
reliably. The carrying amount of any component
accounted for as a separate asset is derecognized
when replaced. Major Inspection/ Repairs / Overhauling
expenses are recognized in the carrying amount of the
item of Property, Plant and Equipment as a replacement
if the recognition criteria are satisfied. Any unamortized
part of the previously recognized expenses of similar
nature is derecognized.

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 net disposal proceeds and the
carrying amount of the asset and is recognized in the
statement of profit and loss.

Capital work in progress is stated at cost less
accumulated impairment losses, if any, which includes
expenses incurred during construction period, interest
on amount borrowed for acquisition of qualifying assets
and other expenses incurred in connection with project
implementation in so far as such expenses relate to
the period prior to the commencement of commercial
production.

3.9. Intangible Assets

Intangible assets are recognised when it is probable that
the future economic benefits that are attributable to the
assets will flow to the company and the cost of the asset
can be measured reliably.

Intangible assets acquired separately are measured at
cost. Subsequent to initial recognition, intangible assets
are stated at cost less accumulated amortisation and
accumulated impairment loss, if any. Internally generated
intangibles, excluding capitalised development costs, are
not capitalised and the related expenditure is reflected in
profit and loss in the period in which the expenditure is
incurred.

Intangible assets consisting of computer software are
amortised over a period of 3-5 years.

Gain or losses arising from derecognising of an intangible
asset are measured as the difference between the net
disposal proceed and the carrying amount of the asset
and are recognised in the statement of profit and loss
when the asset is derecognised.

3.10. Depreciation on Property, Plant and Equipment
(PPE)

Depreciation on tangible assets is provided on straight
line method at the rates determined based on the useful
lives of respective assets as prescribed in the Schedule
II to the Act. On additions costing less than ? 5,000/-,
depreciation is provided at 100% in the year of addition.
The determination of the useful economic life and
residual values of property, plant and equipment is
subject to management estimation. The residual value of
PPE has been considered as Nil. The residual values,

useful lives and methods of depreciation of property,
plant and equipment are reviewed at each financial year
end and adjusted prospectively, if appropriate.

Property, plant and equipment which are added/disposed
off during the year, depreciation is provided on pro-rata
basis with reference to the date of addition / deletion.

3.11.Development of Hydrocarbon Properties (DHP)

It has been considered appropriate to show the
development expenses of oil wells as "Development
of Hydrocarbon Properties' a separate item in financial
statements. '"Development of Hydrocarbon Properties"
includes the cost incurred on the collection of seismic
data, drilling of wells and other associated drilling
related costs, reservoir modeling costs and other related
expenditures on development of oil fields.

Amortisation for the same is done on a straight line
basis over the remaining / extended lease period, as
considered appropriate by the Management, as under
the contract or any Government Notifications issued, as
this method most closely reflects the expected pattern of
consumption of the future economic benefits embodied
in the asset and this method is applied consistently from
period to period.

3.12. Impairment of non-financial assets

As at each reporting date, the Company assesses whether
there is an indication that an asset may be impaired
and also whether there is an indication of reversal of
impairment loss recognised in the previous periods. If any
indication exists, or when annual impairment testing for
an asset is required, if any, the Company determines the
recoverable amount and impairment loss is recognised,
in the statement of profit and loss, when the carrying
amount of an asset exceeds its recoverable amount.

Recoverable amount is determined:-

a. In the case of an individual asset, at the higher of the
fair value less cost to sell and the value in use ; and

b. In the case of cash generating unit (a group of asset
that generates identified, independent cash flow),
at the higher of the cash generating unit's fair value
less cost to sell and the value in use.

In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre¬
tax discounting rate that reflect the current market
assessment of the time value of the money and the
risk specific to the asset. In determining fair value less
cost of disposal, recent market transaction is taken into
account. If no such transaction can be identified, an
appropriate valuation model is used. These calculations
are corroborated by valuation multiples, quoted share
prices for publicly traded companies or other available
fair value indicators.

3.13. Leases

The determination of whether an arrangement is
(or contains) a lease is based on the substance of
the arrangement at the inception of the lease. The
arrangement is, or contains, a lease if fulfilment of the
arrangement is dependent on the use of a specific asset
or assets and the arrangement conveys a right to use the
asset or assets, even if that right is not explicitly specified
in an arrangement.

Company as a Lessee

The Company's lease asset classes primarily comprise
of lease for land and building. The Company assesses
whether a contract contains a lease, at inception of a
contract. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset
for a period of time in exchange for consideration. To
assess whether a contract conveys the right to control
the use of an identified asset, the Company assesses
whether: (i) the contract involves the use of an identified
asset (ii) the Company has substantially all of the
economic benefits from use of the asset through the
period of the lease and (iii) the Company has the right to
direct the use of the asset.

At the date of commencement of the lease, the
Company recognizes a right-of-use asset ("ROU") and a
corresponding lease liability for all lease arrangements
in which it is a lessee, except for leases with a term of
twelve months or less (short-term leases) and low value
leases.

For these short-term and low value leases, the Company
recognizes the lease payments as an operating expense
on a straight-line basis over the term of the lease.
Certain lease arrangements include the options to extend
or terminate the lease before the end of the lease term.
ROU assets and lease liabilities include these options
when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost,
which comprises the initial amount of the lease liability
recognised adjusted for any lease payments made at
or prior to the commencement date of the lease plus
any initial direct costs less any lease incentives. They
are subsequently measured at cost less accumulated
depreciation and impairment losses. Right-of-use assets
are depreciated from the commencement date on a
straight-line basis over the shorter of the lease term and
estimated useful life of the underlying asset. If ownership
of the leased asset transfers to the Company at the end
of the lease term or the cost reflects the exercise of a
purchase option, depreciation is calculated using the
estimated useful life of the asset. The right of use assets
are also subject to impairment. Refer to the accounting
policies in section 'Impairment of Non-Financial Assets'.
The lease liability is initially measured at amortized cost
at the present value of the future lease payments to be
made over the lease term. 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 any. The lease payments are discounted
using the incremental borrowing rate at the lease
commencement date. Lease liabilities are remeasured
with a corresponding adjustment to the related right
of use asset if the Company changes its assessment if
whether it will exercise an extension or a termination
option.

Lease liability and Right of Use Assets (ROU) have been
separately presented in the Balance Sheet and lease
payments have been classified as financing cash flows.

Company as a Lessor

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

leases. For finance leases, lease rental receipts are
apportioned between the finance income and capital
repayment based on the implicit rate of return. For
operating leases, rental income is recognized on a
straight line basis over the term of the relevant lease.
Contingent rents are recognized as revenue in the period
in which they are earned.

3.14. Revenue Recognition

Revenue is recognised to the extent that it is probable
that the economic benefits will flow to the company
and the revenue can be reliably measured, regardless of
when the payment is being made. Revenue is measured
at the transaction price of the consideration received
or receivable, taking into account contractually defined
terms of payment and excluding taxes or duties collected
on behalf of the government.

a. Sale of Goods:

Income on sale of crude oil and gas is accounted
for net of VAT and profit petroleum payable to the
Government of India is recognised when the risk and
rewards are transferred to customers.

b. Dividend Income:

Dividend income is accounted for when the right to
receive the same is established, which is generally
when the mutual fund / shareholders approve the
dividend.

c. Interest Income

For all financial instruments measured at amortised
cost, interest income is recorded using the effective
interest rate (EIR) which is the rate that exactly
discounts the estimated future cash payments or
receipt through the expected life of the financial
instrument or a shorter period, where appropriate
to the net carrying amount of the financial asset.
Interest income is included in other income in the
statement of profit and loss.

3.15. Employee benefits

Employee benefits include salaries, wages, provident
fund, gratuity, leave encashment towards un-availed
leave, share based payments and other terminal benefits.

a. Short term employee benefits

All short term employee benefits are expensed as the
related service is provided. A liability is recognized
for the amount expected to be settled wholly before
twelve months after the year end, if the Company
has a present legal or constructive obligation to pay

d. Employee Share based Payments:

The Company operates equity settled share-based
plan for the employees (Referred to as employee
stock option plan (ESOP)). ESOP granted to the
employees are measured at fair value of the stock
options at the grant date. Such fair value of the
equity settled share based payments is expensed off
on a straight line basis over the vesting period, based
on the Company's estimate of equity shares that will
eventually vest, with a corresponding increase in
equity (employee stock option reserve). At the end
of each reporting period, the Company revises its
estimate of number of equity shares expected to vest.
The impact of the revision of the original estimates, if
any, is recognized in the Statement of Profit and Loss
such that cumulative expense reflects the revision
estimate, with a corresponding adjustments to the
employee stock option reserve.

The dilutive effect of outstanding options is reflected
as additional share dilution in the computation of
diluted earnings per share.

3.16. Foreign Currency transactions

a. Foreign currency transactions are translated into
the functional currency using the spot rates of
exchanges prevailing on the date of transaction.
Monetary outstanding liabilities/ receivables
denominated in foreign currencies are translated
at the functional currency spot rate of exchange at
reporting date and the resultant exchange difference
is recognised in the Statement of Profit and Loss.
Non monetary items are not retranslated at period
end and are measured at historical cost (translated
using the exchange rate at the transaction date).

b. In terms of Production Sharing Contracts (PSCs) with
the Government of India, wherever sales are made
in US Dollars, the conversion of US Dollars to Indian
Rupees is done by using monthly average of SBI
TT Buying Rate of supply month or conversion rate
prevailing at the time of payment, as case may be,
applied. The PSC also permits sale of gas to domestic
users. Sale of Gas is based on US Dollars or rupee
denominated rate as per contractual agreements
and for conversion of US Dollars to Indian Rupees,
Company uses average of RBI rates for the period of
supply.

3.17.Segment Reporting

The Company operates in a single segment of production
of Oil and Natural Gas. Therefore, Ind AS-108 on Segment
Reporting is not applicable to the Company.

3.18. Earning per share

Basic earnings per share is calculated by dividing the
net profit or loss for the period attributable to equity
shareholders (after deducting preference dividend,
if any, and attributable taxes) of the Company by the
weighted average number of equity shares outstanding
during the period.

Diluted earnings per share are calculated by dividing
the profit or loss for the period attributable to the equity
shareholders by the weighted average number of equity
shares outstanding during the period after adjusting for
the effect of all dilutive potential equity shares.