3. Statement of compliance and Material Accounting Policies
3.1 Statement of Compliance
As stated in note no. 49, balances under various heads which otherwise would have been measured and disclosed as per the requirement of
relevant Indian Accounting Standards due to the reasons stated therein have been continued to be so carried forward pending finalisation
of the matter and determination of the amount as claim of the company in this respect. Other than this, these financial statements have
been prepared in accordance with Indian Accounting Standards (referred to as "Ind AS”) notified under the Companies (Indian Accounting
Standards) Rules, 2015 (as amended) read with Section 133 of the Companies Act, 2013 ("the Act”) and the Company has complied with Ind
AS issued, notified and made effective till the date of authorisation of the financial statements.
Accounting Policies have been consistently applied except where a newly issued Indian Accounting Standard is initially adopted or a revision
to an existing Indian Accounting Standard requires a change in the accounting policy hitherto in use.
Basis of Preparation
The Financial Statements have been prepared under the historical cost convention on accrual basis except for:-
a) certain financial instruments that are measured in terms of relevant Ind AS at fair value/ amortized cost at the end of each reporting
period;
b) certain class of Property, Plant and Equipment which on the date of transition have been fair valued to be considered as deemed costs;
and
c) Defined benefit plans- Plan Assets measured at fair value
Historical cost convention is generally based on the fair value of the consideration given in exchange for goods and services.
All the assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set
out in Ind AS-1 'Presentation of Financial Statements' and Schedule III to the Companies Act, 2013. Having regard to the nature of business
being carried out by the Company, the Company has determined its operating cycle as twelve months for the purpose of current and non¬
current classification.
The functional currency of the Company is determined as the currency of the primary economic environment in which it operates. The
Standalone Financial Statements are presented in Indian Rupees and all values are rounded off to the nearest two decimal lakhs except
otherwise stated.
Fair Value Measurement
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 under current market conditions.
The Company categorizes assets and liabilities measured at fair value into one of three levels depending on the ability to observe inputs
employed for such measurement:
Level 1 : Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 : Inputs other than quoted prices included within level 1 that are observable, either directly or indirectly for the asset or liability.
Level 3 : Inputs for the asset or liability which are not based on observable market data (unobservable inputs).
The company has an established control framework with respect to the measurement of fair value. This includes a finance team that has
overall responsibility for overseeing all significant fair value measurements who regularly review significant unobservable inputs, valuation
adjustments and fair value hierarchy under which the valuation should be classified.
3.2 Property Plant and Equipment (PPE)
Property, plant and equipment are stated at cost of acquisition, construction and subsequent improvements thereto less accumulated
depreciation and impairment losses, if any. For this purpose cost include deemed cost on the date of transition i.e. PPE which have been
fair valued on transition to be considered as deemed cost, purchase price of assets or its construction cost including duties and taxes (net
of input tax credit availed), inward freight and other expenses incidental to acquisition or installation, adjustment for exchange differences
wherever applicable and any cost directly attributable to bring the asset into the location and condition necessary for it to be capable of
operating in the manner intended for its use. In addition interest on borrowing to finance the construction of qualifying assets is capitalised
as a part of the assets cost until such time the asset is ready for it's intended use.
Parts of an item of PPE having different useful lives and material value and subsequent expenditure on Property, Plant and Equipment
arising on account of capital improvement or other factors are accounted for as separate components. This includes expenditure on Blast
Furnace/Coke Oven Battery Relining is capitalized.
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that
the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The costs of the day-
to-day servicing of property, plant and equipment are recognised in the Statement of Profit and Loss when incurred. Assets to be disposed
off are reported at the lower of the carrying value or the fair value less cost to sell.
Capital Work-in-progress includes project development expenses, equipments to be installed, construction and erection materials etc.
Such costs are added to the related items and are classified to the appropriate categories of PPE when completed and ready for intended
use.
The Company had opted for accounting the exchange differences arising on reporting of long term foreign currency monetary items in line
with Companies (Accounting Standards) Amendment Rules 2009 relating to Accounting Standard-11 notified by Government of India on
March 31,2009 (as amended on December 29, 2011), which will be continued in accordance with Ind-AS 101 for all pre-existing long term
foreign currency monetary items as at March 31,2016. Accordingly, exchange differences relating to long term monetary items, in so far as
they relate to the acquisition of PPE, were adjusted in the carrying amount of such assets.
Depreciation and Amortization
Depreciation on PPE except as stated below, is provided as per Schedule II of the Companies Act, 2013 on straight line method. In the
following cases depreciation has been provided on written down value method using the rates arrived at based on the useful life as specified
in Schedule II of the Companies Act 2013:
- PPE at Elavur unit and
- PPE at Khardah, Haldia and Bansberia unit excluding plant and equipment and office equipments
Certain plant and equipments have been considered as Continuous Process Plant on the basis of technical assessment. Depreciation on
upgradation of Property, Plant and Equipment is provided over the remaining useful life of the entire component/ PPE.
In case the cost of part of tangible asset is significant to the total cost of the assets and useful life of that part is different from the remaining
useful life of the asset, depreciation on such part has been based on internal assessment and independent technical evaluation carried out
by external valuers.
Depreciation on Property, Plant and Equipments commences when the assets are ready for their intended use. Based on above, the useful
lives as estimated and considered for depreciation are as follows:
Railway siding constructed on Government land is amortised over the period of 10 years in terms of agreement.
Assets costing rupees five thousand or less are being depreciated fully in the year of addition/acquisition.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life
of the underlying asset.
Right to use wagons acquired under "Wagon Investment Scheme”, cost of computer software packages (ERP and others) and mining rights
are allocated / amortized over a period of 10 years, 5 years and available period of mining lease respectively.
The management believes that the useful lives as considered above is realistic and reflect a fair approximation of the period over which
assets are expected to be used.
Depreciation/ Amortisation methods, useful lives and residual values are reviewed and adjusted as appropriate, at each reporting date.
3.3 Intangible Assets
Intangible assets are stated at deemed cost on transition date or at cost of acquisition comprising of purchase price inclusive of duties and
taxes (net of input tax credit) less accumulated amortization and impairment losses.
Expenditure incurred on research and development are not capitalized but are charged as expense in the statement of profit and loss in the
period in which such expenditure is incurred.
3.4 Leases
(i) Company as a lessee
The Company's lease asset classes primarily consist of leases for Land, Buildings and Plant and Equipment. The Company assesses
whether a contract is or contains a lease at the 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:
1. the contract involves the use of an identified asset;
2. the Company has substantially all of the economic benefits from use of the asset through the period of the lease; and
3. the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognises a right-of-use asset ("ROU”) and a corresponding lease liability
for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short term leases) or leases
pertaining to low value assets. For these short term leases or low value assets, the Company recognises 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 considered for arriving at ROU and lease liabilities when it is reasonably certain that they will be
exercised.
The right-of-use assets are initially recognised at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are
subsequently measured at cost less accumulated depreciation and impairment losses, if any. Right-of-use assets are depreciated from
the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.
The lease liability is initially measured at the present value of the future lease payments. The lease payments are discounted using the
interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates. Lease liabilities are remeasured
with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an
extension or a termination option. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest
on the lease liability, reducing the carrying amount to reflect the lease payments made.
A lease liability is remeasured upon the occurrence of certain events such as a change in the lease term or a change in an index or rate
used to determine lease payments. The remeasurement normally also adjusts the leased assets.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as
financing cash flows.
(ii) Company as a lessor
a. Finance Lease
Leases which effectively transfer to the lessee substantially all the risks and benefits incidental to ownership of the leased item are
classified and accounted for as finance lease. Lease rental receipts are apportioned between the finance income and capital repayment
based on the implicit rate of return. Contingent rents are recognized as revenue in the period in which they are earned.
b. Operating Lease
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating
leases. Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease except where
scheduled increase in rent compensates the Company with expected inflationary costs.
3.5 Derecognition of Tangible and Intangible assets
An item of PPE/ ROU/ Intangible Asset is de-recognised upon disposal or when no future economic benefits are expected to arise from
its use or disposal. Gain or loss arising on the disposal or retirement of an item of PPE/ Intangible Assets is determined as the difference
between the sales proceeds and the carrying amount of the asset and is recognised in the Statement of Profit and Loss.
3.6 Impairment of Tangible/ Intangible and ROU Assets
Tangible/ Intangible and ROU assets are reviewed at each balance sheet date for impairment. In case events and circumstances indicate any
impairment, recoverable amount of assets is determined. An impairment loss is recognized in the statement of profit and loss, whenever
the carrying amount of assets either belonging to Cash Generating Unit (CGU) or otherwise exceeds recoverable amount. The recoverable
amount is the higher of assets' fair value less cost of disposal and its value in use. In assessing value in use, the estimated future cash flows
from the use of the assets are discounted to their present value at appropriate rate.
Impairment losses recognized earlier may no longer exist or may have come down. Based on such assessment at each reporting period the
impairment loss is reversed and recognized in the Statement of Profit and Loss. In such cases the carrying amount of the asset is increased
to the lower of its recoverable amount and the carrying amount that have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years.
3.7 Financial Instruments
Financial assets and financial liabilities (financial instruments) are recognised when the company becomes a party to the contractual
provisions of the instruments. The company determines the classification of its financial assets and financial liabilities at initial recognition
based on its nature and characteristics.
The company categorizes financial assets and financial liabilities measured at fair value into one of three levels depending on the ability to
observe inputs employed for such measurement:
Level 1 : Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 : Inputs other than quoted prices included within level 1 that are observable, either directly or indirectly for the asset or liability.
Level 3 : Inputs for the asset or liability which are not based on observable market data (unobservable inputs).
A. Financial Assets
I. Initial Recognition and measurement
The financial assets include investments, trade receivable, loans and advances, cash and cash equivalents, bank balances other than
cash and cash equivalents, derivative financial instruments and other financial assets.
Financial assets are initially measured at fair value. Transaction costs 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 are deducted from the fair value of the financial assets
as appropriate on initial recognition. However, trade receivable that do not contain a significant financing component are measured
at transaction price.
II. Subsequent measurement
For the purpose of subsequent measurement, financial assets are classified in the following categories:
(i) at amortised cost,
(ii) at fair value through other comprehensive income (FVTOCI), and
(iii) at fair value through profit or loss (FVTPL).
A 'financial Asset' is measured at the amortised cost if the following two conditions are met:
(i) The asset is held within a business whose objective is to hold these assets in order to collect contractual cash flows and
(ii) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
Amortised Cost is determined using the Effective Interest Rate ("EIR”) method. Discount or premium on acquisition and other fees or
costs forms an integral part of the EIR.
Financial Asset at Fair Value through Other Comprehensive Income (FVTOCI)
Financial assets are measured at fair value through other comprehensive income if these financial assets are held both for collection
of contractual cash flows and for selling the financial assets, and contractual terms of the financial assets give rise to cash flows
representing solely payments of principal and interest.
Financial Assets at Fair value through profit or loss (FVTPL)
Financial Assets which does not meet the criteria of amortised cost or fair value through other comprehensive income are classified as
Fair Value through Profit or loss. These are recognised at fair value and changes therein are recognized in the Statement of profit and
loss.
Equity Instruments
Equity instruments covered within the Scope of Ind AS 109 are measured at FVTPL except for investments in Subsidiaries and Joint
Ventures which are measured at cost.
The company makes an election to present changes in fair value through other comprehensive income or through profit or loss on
instrument by instrument basis. The classification is made on initial recognition and is irrevocable.
In case the company decides to classify an equity instrument at FVTOCI, then all fair value changes on the instrument, excluding
dividends, are recognized in the other comprehensive income (OCI). Profit or loss arising on sale is taken to OCI. The amount
accumulated in this respect is transferred within the Equity on derecognition.
III. Derecognition
The company derecognizes a financial asset or a group of financial assets when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
B. Financial Liabilities
I. Initial Recognition and measurement
The financial liabilities include trade and other payables, loan and borrowings, derivative financial instruments and other financial
liabilities.
Financial liabilities are initially measured at fair value. Transaction costs 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 are deducted from the fair value of the
financial liabilities as appropriate in initial recognition.
II. Subsequent measurement
For the purpose of subsequent measurement, financial liabilities are classified in the following categories:
(i) at amortised cost; or
(ii) at fair value through profit or loss (FVTPL).
Financial Liabilities at amortised cost
After initial recognition, financial liabilities are measured at amortized cost using Effective Interest Rate (EIR) method. When the
financial liabilities are derecognised, gain or losses are recognised in the statement of profit and loss. Discount or premium on
acquisition and other fees or costs forms an integral part of the EIR.
Financial Liabilities which does not meet the criteria of amortised cost are classified as Fair Value through Profit or loss. These are
recognised at fair value and changes therein are recognized in the Statement of Profit and Loss.
III. Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
C. Derivative and Hedge Accounting
Initial Recognition and Subsequent measurement
The company enters into derivative financial instruments such as foreign exchange forward, swap and option contracts to mitigate the
risk of changes in foreign exchange rates in respect of financial instruments and forecasted cash flows denominated in certain foreign
currencies. The company uses hedging instruments which provide principles on the use of such financial derivatives consistent with the
risk management strategy of the company. The hedge instruments are designated and documented as hedges and effectiveness of hedge
instruments to reduce the risk associated with the exposure being hedged is assessed and measured at inception and on an ongoing basis.
Any derivative that is either not designated as a hedge, or is so designated but is ineffective as per Ind AS 109 "Financial Instruments”, is
categorized as a financial asset/ financial liability, at fair value through profit or loss. Transaction costs attributable are also recognized in the
Statement of Profit and Loss. Changes in the fair value of the derivative hedging instrument designated as a fair value hedge are recognized
in the Statement of Profit and Loss.
Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognized in other comprehensive
income and presented within equity as cash flow hedging reserve to the extent that the hedge is effective.
Hedging instrument which no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge
accounting is discontinued prospectively. Any gain or loss recognised in other comprehensive income and accumulated remains therein
till that time and thereafter to the extent hedge accounting being discontinued is recognised in Statement of Profit and Loss. When a
forecasted transaction is no longer expected to occur, the cumulative gain or loss accumulated in equity is transferred to the Statement of
profit and loss.
D. 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 recognized initially as a liability at fair value, adjusted for transaction costs. Subsequently, the liability is measured
at the higher of the amount of loss allowance determined as per impairment requirement of Ind AS 109 and the amount recognized less
cumulative amortization.
E. Offsetting financial instruments
Financial assets and liabilities including derivative financial instruments are offset and the net amount is reported in the balance sheet
where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the
asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable
in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
F. Impairment of financial assets
A financial asset is assessed for impairment at each balance sheet date. A financial asset is considered to be impaired if objective evidence
indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. The company recognises loss
allowances using the Expected Credit Loss ("ECL”) model for financial assets measured at amortised cost.
The company recognises lifetime expected credit losses for trade receivables. Loss allowance equal to the lifetime expected credit losses
are recognised if the credit risk on that financial asset has increased significantly since initial recognition. If the credit risk on a financial
instrument has not increased significantly since initial recognition, the company measures the loss allowance for that financial instrument
at an amount equal to 12-month expected credit losses.
3.8 Inventories
Inventories are valued at lower of cost or net realisable value. Cost of inventories is ascertained on 'weighted average' basis. Materials and
other supplies held for use in the production of inventories are not written down below cost if the related finished products are expected to
be sold at or above cost.
Cost in respect of raw materials and stores and spares includes expenses incidental to procurement of the same. Cost in respect of finished
goods and process stock represents direct and indirect cost for bringing the inventory to present situation and condition including cost of
material plus costs of conversion, comprising of labour costs and an attributable proportion of manufacturing overheads based on normal
levels of activity.
Cost of traded goods include cost of purchase and other cost incurred in bringing the inventory to their present location and condition.
Scrap and By Products which are sold are valued at estimated net realizable value.
Net Realizable Value is the estimated selling price in the ordinary course of business less estimated cost of completion and the estimated
cost necessary to make the sale.
3.9 Foreign Currency Transactions
Foreign currency transactions are translated into the functional currency at the exchanges rate prevailing on the dates of the transactions.
Foreign currency monetary assets and liabilities at the reporting date are translated at the reporting date exchange rates. Non-monetary
items which are carried in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of
transaction.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and
liabilities are generally recognized in the Statement of Profit and Loss in the year in which they arise except for exchange differences on
foreign currency borrowings relating to qualifying assets when they are regarded as an adjustment to interest costs on those foreign
currency borrowings, the balance is presented in the Statement of Profit and Loss within finance costs.
The Company had opted for accounting the exchange differences arising on reporting of long term foreign currency monetary items in line
with Companies (Accounting Standards) Amendment Rules 2009 relating to Accounting Standard-11 notified by Government of India on
March 31,2009 (as amended on December 29, 2011), which has been continued in accordance with Ind-AS 101 for all pre-existing long term
foreign currency monetary items as at March 31,2016. Accordingly, exchange differences relating to long term monetary items, in so far as
they relate to the acquisition of Property, Plant and Equipment, were adjusted in the carrying amount of such assets.
3.10 Equity Share Capital
An equity instrument is a contract that evidences residual interest in the assets of the company after deducting all of its liabilities. Par value
of the equity shares is recorded as share capital and the amount received in excess of par value is classified as Securities Premium.
Costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.
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