3. Material Accounting Policies
3.1. Property, Plant & Equipment
The Company had elected to continue with the carrying value of its other Property Plant & Equipment (PPE) recognised as of
1st April, 2015 (transition date) measured as per the Previous GAAP and used that carrying value as its deemed cost as on the
transition date as per para D7AA of Ind AS 101.
Property, Plant & Equipment (PPE) are stated at cost, net of tax/duty credit availed, if any, after reducing accumulated
depreciation and accumulated impairment loss, if any. The cost of PPE comprises of its purchase price or its construction cost
(net of applicable tax credit, if any), 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 by the management and decommissioning costs.
Direct costs are capitalized until the asset is ready for use and includes borrowing cost capitalised in accordance with the
Company's accounting policy.
Works under erection/installation /execution (including such work pertaining to a new project) are shown as Capital Work in
Progress.
Capital Spares which can be used only in connection with an item of tangible assets and whose use is not of regular nature are
capitalized at cost.
Subsequent expenditure is recognised as an increase in the carrying amount of the asset when it is probable that future
economic benefits deriving from the cost incurred will flow to the enterprise and the cost of the item can be measured reliably.
Expenditure on capital overhauling and major inspection is capitalised, when it meets the asset recognition criteria.
An item of PPE is de-recognised upon disposal or when no future economic benefits are expected to arise from the continued
use of the PPE. Any gain or loss arising on the disposal or retirement of an item of PPE is determined as the difference between
the sales proceeds and the carrying amount of the PPE and is recognised in the Statement of Profit and Loss.
Freehold Land is not depreciated. Depreciation of the PPE other than Freehold Land commences when the assets are ready for
their intended use.
Assets are identified with power generating units/power plants, the useful life of PPE is considered based on the period of
Power Purchase Agreement for the respective plants or life prescribed under Central Electricity Regulatory Commission (Terms
and condition of Tariff) Regulation, 2014 for Thermal Power Plants or Central Electricity Regulatory Commission (Terms
and Conditions for Tariff determination from Renewable Energy Sources) Regulations, 2017 for Renewable Power Plants,
whichever is higher. Capital-Spares are depreciated over the useful life of such Spares but not exceeding the remaining useful
life of related tangible asset.
Useful lives of different plants as under:
Cost of capital overhauling and major inspection which have been capitalised are depreciated over the period until the next
scheduled or actual major inspection and capital overhauling occurs, whichever is earlier.
Depreciation on additions/deletions to PPE during the year is provided for on a pro-rata basis with reference to the date of
additions/deletions. Depreciation on subsequent expenditure on PPE arising on account of capital improvement is provided for
prospectively over the remaining useful life of the asset.
The estimated useful lives, residual values and depreciation method are reviewed on an annual basis and if necessary, changes
in estimates are accounted for prospectively.
3.2. Mine Development Asset
Mine Development asset comprises of initial expenditure for lignite mines and expenditure for removal of overburden. It is
amortized as per the provisions of Fuel Price Mechanism agreed by the Company with the Buyer. Such amortization is based
either on quantity of Lignite actually extracted during the year or period based fixed amortization on a yearly basis as per the
respective provisions of the Fuel Price Agreement referred above. However, the Amortization method, in case of any mine,
once agreed under the Fuel Price Mechanism, is consistently applied over the life of mine.
3.3. Intangible Assets
The Company had elected to continue with the carrying value of all of its Intangible Assets recognised as of 1st April, 2015
(transition date) measured as per the Previous GAAP and used that carrying value as its deemed cost as on the transition date
as per Para D7AA of Ind AS 101 'First time Adoption of Indian Accounting Standards'.
Intangible assets with finite useful life acquired separately, are recognized only if it is probable that future economic benefits
that are attributable to the assets will flow to the company and the cost of assets can be measured reliably. The intangible assets
are recorded at cost and are carried at cost less accumulated amortization and accumulated impairment losses, if any. An
intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or
losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the
carrying amount of the asset, are recognized in the Statement of Profit and Loss when the asset is derecognized.
Amortisation on all intangible assets is provided on straight line method as per rates and methodology notified by the
Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2014 for Thermal Power Plants and
Central Electricity Regulatory Commission (Terms and Conditions for Tariff determination from Renewable Energy Sources)
Regulations, 201 7 for Renewable Power Plants.
3.4. Impairment of Assets
The Company reviews at the end of each reporting period whether there is any indication that an asset may be impaired. If
any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the
asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the
carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in
the Statement of Profit & Loss. If at the end of reporting period, there is an indication that there is reversal of the previously
assessed impairment loss, the recoverable amount is reassessed and the asset is reflected at the recoverable amount, such that
the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment
loss was recognised for the asset or cash generating unit in prior years. If at the end of reporting period, there is an indication
that there is reversal of the previously assessed impairment loss, the recoverable amount is reassessed and the asset is reflected
at the recoverable amount, such that the increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss was recognised for the asset or cash generating unit in prior years. A reversal of an
impairment loss is recognised in the Statement of Profit & Loss.
3.5. Government Grant
Government grants, including non-monetary grants at fair value are not recognized until there is reasonable assurance that the
Company will comply with the conditions attached to them and that the grants will be received.
Government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current
assets and non-monetary grants are recognized and disclosed as Deferred Income in the Balance Sheet and transferred to the
Statement of Profit and Loss on a systematic basis over the useful lives of the related assets.
3.6. Inventories
Inventories are valued at lower of cost and net realizable value as under:
a. Raw Materials - Fuel (other than Lignite from Captive Mines)
Weighted Average Cost
b. Lignite
Absorption costing
c. Stores and Spares
Weighted Average Cost
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.
Cost of inventories includes purchase price and all other costs incurred in bringing the inventories to their present location and
condition.
3.7. Mine Closure Expenditure
Progressive mine closure expenses are accounted as and when incurred. Annual cost of mine closure is provided as per the
guidelines for preparation of mine closure plan issued by Ministry of Coal from time to time.
3.8. Revenue Recognition
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the
consideration we expect to receive in exchange for those products or services.
Revenue is measured at the transaction price of the consideration received or receivable and represents amounts receivable
for goods and services provided in the normal course of business based on the consideration specified in a contract with a
customer and excludes amounts collected on behalf of third parties.
Contract assets are recognized when there is right to consideration in exchange for goods or services that are transferred to a
customer and when that right is conditioned on something other than the passage of time.
Revenue from Contract with Customers:
a. Revenue from sale of power is recognized when no significant uncertainty as to the measurability or ultimate collection
exists.
b. Delayed payment charges under Power Purchase Agreements are recognized, on grounds of prudence, as and when
recovered.
c. The upfront development fees received are recognized as revenue over the period of performance, based on the
satisfaction of performance obligations as per the agreement with customer. The fees are initially recorded as liabilities
and subsequently recognized in Statement of Profit and Loss over the period of performance
Other Income:
a. Interest on investment is booked on a time proportion basis taking into account the amounts invested and the rate of
interest.
b. Dividend income is recognized when the right to receive payment is established.
c. Claims lodged with insurance company in respect of risk insured are accounted on admittance basis.
d. Other income is recognized on accrual basis except when realization of such income is uncertain.
e. Liquidated damages/penalties deducted from suppliers / contractors are recognized as income or credited to the cost of
assets at the time of final settlement. Till such time, they are shown under liabilities.
3.9. Leases
As a lessee
The Company's Right-of-use assets primarily consist of leases for land. 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:
- the contract involves the use of an identified asset;
- the Company has substantially all of the economic benefits from use of the asset throughout the period of the lease and
- the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a 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 and corresponding Right-
of-use Asset. 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.
The Right-of-use Assets are initially recognized 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 and adjusted for any
remeasurement of the lease liability.
Right-of-use Assets are depreciated 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 amortized cost 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
in the country of domicile of these leases. 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.
3.10. Employee Benefits
Employee benefits include salaries, wages, provident fund and other contribution funds, gratuity, leave encashment,
compensated absences and post-retirement medical benefits.
a. Short-term employee benefits
Employee benefits payable wholly within twelve months of receiving employee services are classified as short-term
employee benefits. These benefits include salaries and wages, performance incentives and compensated absences which
are expected to occur in next twelve months. The undiscounted amount of short-term employee benefits to be paid in
exchange for employee services is recognized as an expense as the related service is rendered by employees.
b. Defined contribution plans
Employee Benefit under defined contribution plans comprising of provident fund, superannuation fund and other
contribution funds are recognized based on the undiscounted amount of obligations of the Company to contribute to the
plan. Company's contribution is paid to a fund administered through separate trusts.
c. Defined benefit plans
Defined Benefit plans comprising of gratuity and post-retirement medical benefits are recognized based on the present
value of defined benefit obligation which is computed using the projected unit credit method, with actuarial valuations
being carried out by an Independent Actuary.
Net interest on the net defined liability is calculated by applying the discount rate at the beginning of the period to the
net defined benefit liability or asset and is recognised in the Statement of Profit and Loss.
Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and
the return on plan assets (excluding net interest as defined above), are recognized in other comprehensive income in the
period in which they occur and are not subsequently reclassified to Statement of Profit and Loss.
The retirement benefit obligation recognized in the Balance Sheet represents the present value of the defined benefit
obligation.
d. Other long-term employee benefits
Other long-term employee benefit comprises of leave encashment, these are recognized based on the present value of
defined obligation which is computed using the projected unit credit method, with actuarial valuations being carried
out by an Independent Actuary. These are accounted either as current employee cost or included in cost of assets as
permitted.
e. Termination Benefits
Terminal Benefits comprising of Voluntary Retirement Scheme is recognised in the Statement of Profit and Loss in the year
when the option is exercised by the employee and is accepted by the Management.
3.11. Taxes on Income
Income tax expense represents the sum of the current tax expense and deferred tax.
Current tax
Current tax is based on taxable profit for the year. Taxable profit differs from 'profit before tax' as reported in the Statement of
Profit and Loss because of items of income or expense that are taxable or deductible in current / other years and items that are
never taxable or deductible. The Company's current tax is calculated using tax rates that have been enacted or substantively
enacted by the end of the reporting period.
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 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 deferred tax asset to be utilised.
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.
The Company offsets tax assets and liabilities, where it has a legally enforceable right to set off the recognised amounts and
where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Deferred tax assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which is likely
to give future economic benefits in the form of availability of set off against future income tax liability. Accordingly, MAT is
recognised as deferred tax assets in the Balance Sheet when the asset can be measured reliably and it is probable that the future
economic benefit associated with the asset will be realised.
Current and deferred tax for the year
Current and deferred tax are recognized in Statement of Profit and Loss, except when they relate to items that are recognized
in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other
comprehensive income or directly in equity respectively.
3.12. Borrowing Costs
Borrowing Cost specifically identified to the acquisition or construction of qualifying assets is capitalized as part of such assets.
A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs
are charged to the Statement of Profit and Loss.
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