02 Material Accounting Policy
_Information_
2.1. Property, Plant and Equipment
2.1.1. Freehold lands are carried at cost. AH other items of
Property, Plant and Equipment are stated at cost, net of
accumulated depreciation and accumulated impairment
losses, if any;
2.1.2. Technical know-how / licence fee relating to plants
/ facilities are capitalized as part of cost of the
underlying asset;
2.1.3. Spare parts which are meeting the requirement of
Property, Plant and Equipment are capitalized as Property,
Plant and Equipment in case the unit value of the spare
part is above the threshold limit (*). In other cases, the
spare parts are inventorised on procurement and charged
to Statement of Profit and Loss on consumption;
2.1.4. Gas distribution systems are treated as commissioned
when supply of gas reaches to the individual points.
2.1.5. An item of Property, Plant and Equipment and any
significant part initially recognised separately as part
of Property, Plant and Equipment is de-recognised
upon disposal; or when no future economic benefits are
expected from its use or disposal; or when the Property,
Plant and Equipment has been re-classified as ready for
disposal. Any gain or loss arising on de-recognition of the
asset is included in the Statement of Profit and Loss when
the asset is de-recognised;
2.1.6. The residual values and useful lives of Property, Plant and
Equipment are reviewed during each financial year and
changes, if any, are accounted for as change in accounting
estimates on a prospective basis;
2.1.7. The Corporation has chosen the carrying value of Property,
Plant and Equipment existing as per previous GAAP
as on date of transition to Ind AS i.e. 1st April, 2015 as
deemed cost.
2.2. Depreciation / amortization
2.2.1. Depreciation on Property, Plant and Equipment is provided
on straight line method. In accordance with requirements
prescribed under Schedule II of Companies Act, 2013, the
Corporation has assessed the estimated useful lives of
its Property, Plant and Equipment, and has adopted the
useful lives and residual value as prescribed in Schedule
II, except for the following:
b) In case of assets covered under specific
arrangements e.g. agreements entered into with
Railways Consumer Depots, useful life as per
agreement or Schedule II to the Act, whichever is
lower, is considered.
c) In case, the useful life of an item of Property,
Plant and Equipment is provided separately
under an Act/Regulation which is at variance
with the useful life provided in Schedule II to the
Companies Act , 2013, the lower of useful life as
provided is considered.
2.2.2. The Corporation identifies and depreciates significant
components of the main asset (which have different
useful lives as compared to the main asset) based on
the individual useful life of those components. Useful
life for such components is assessed by considering
historical experience, internal technical inputs and any
other relevant factor;
2.2.3. Items of Property, Plant and Equipment costing not
more than the threshold limit (*) are depreciated at 100
percent in the year of acquisition except LPG Cylinders
and Pressure Regulators (excluding cylinders held for
sale) which are depreciated over a useful life of 15 years
based on the technical assessment;
2.2.4. Depreciation on spare parts specific to an item of
Property, Plant and Equipment is based on life of the
related Property, Plant and Equipment. In other cases, the
spare parts are depreciated over their estimated useful
life based on the technical assessment;
2.2.5. Depreciation / amortization is charged on additions /
deletions on pro-rata monthly basis including the month
of addition / deletion.
2.3. Intangible assets
2.3.1. Intangible assets are carried at cost net of accumulated
amortization and accumulated impairment losses, if any.
2.3.2. Assets, where entire output generated is committed to
be sold to a public service entity (including Government
body) for almost the entire useful life of the asset, are
classified as intangible assets as per the requirements
of Ind AS and are amortised (after retaining the residual
value, if applicable) over their useful life.
2.3.3. The useful lives of intangible assets are assessed as
either finite or indefinite.
2.3.4. Intangible assets with finite lives are amortised on
straight line basis over their useful life and tested
for impairment annually at the Cash Generating Unit
(CGU) level.
2.3.5. Intangible assets with indefinite useful lives, such as
‘right of way’ which is perpetual and absolute in nature,
are not amortised, but are tested for impairment annually
at the CGU level.
2.3.6. Technical know-how / license fee relating to production
process and process design are recognized as
Intangible Assets.
2.3.7. Estimated lives of intangible assets (acquired) are
as follows:
• Software: 2 to 4 years
• Technical know-how/license fees: 2 to 25 years
• Right-to-use wind mills: 22 years
2.3.8. The Corporation has chosen the carrying value of
Intangible Assets existing as per previous GAAP as
on date of transition to Ind AS i.e., 1st April 2015 as
deemed cost.
2.4. Capital Work in Progress / Intangible Assets
under Development
Expenditure, including eligible borrowing cost, net of
income earned, during the construction/development
period of Property, Plant and Equipment, and Intangible
Assets respectively is included under capital work-in¬
progress or intangible assets under development, as the
case be, and the same is attributed to the respective
assets when they are ready for intended use.
2.5. Borrowing Cost
2.5.1. Borrowing costs directly attributable to the acquisition or
construction of a qualifying asset are capitalised as part
of the cost of the asset till the month in which the asset is
ready for intended use. Capitalisation of borrowing costs
is suspended when active development on the qualifying
assets is interrupted except when temporary and charged
to the Statement of Profit and Loss during such periods.
All other borrowing costs are expensed in the period in
which they are incurred;
2.5.2. Borrowing cost, if any, incurred on General Borrowings
used for projects is capitalised at the rate computed on
weighted average basis.
2.6. Non-current assets held for sale
2.6.1. Non-current assets are classified as held for sale if
their carrying amounts will be recovered through a sale
transaction rather than through continuing use. This
condition is regarded as met, only when the sale is highly
probable and the asset is available for immediate sale in
its present condition subject only to terms that are usual
and customary for sale of such assets;
2.6.2. Non-current assets classified as held for sale are
measured at the lower of carrying amount and fair value
less costs to sell;
2.7. Leases
2.7.1 As Lessee
At the commencement of the lease, the Corporation
recognises right-of-use asset and lease liability, with
an exception of short-term leases or lease of low-value
underlying assets. The right-of-use asset is measured at
cost, less any accumulated depreciation and impairment
loss, if any, and adjusted for any remeasurement of
lease liabilities.
The lease liability is measured at Present Value of the
lease payments to be made during the course of the lease
by using incremental borrowing rate that prevail at the
beginning of each reporting period for a similar tenure
(such as, AAA Corporate Bond rates for varying tenures
of 5, 10 & 15 years) for all of the contracts executed in
that period. After the commencement date, the amount
of lease liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made.
The Corporation has elected not to separate non-lease
components in a contract and account as one unified
lease contract covering all underlying assets by using
the practical expedient prescribed in the Standard.
2.7.2 As Lessor
Rental income from operating lease is recognised
on a straight-line basis over the term of the relevant
lease except where another systematic basis is more
representative of the time pattern of the benefit derived
from the asset given on lease.
2.8. Impairment of Non-Financial Assets
Non-financial assets other than inventories, deferred tax
assets, and non-current assets classified as held for sale
are reviewed at each Balance Sheet date to determine
whether there is any indication of impairment;
During annual impairment testing, the Corporation
estimates the asset’s recoverable amount. The recoverable
amount is the higher of the asset’s or Cash-Generating
Unit’s (CGU) fair value less costs of disposal and its value
in use. Recoverable amount is determined for an individual
asset, unless the asset does not generate cash inflows
that are largely independent of those from other assets
or groups of assets;
The impairment testing is based on detailed budget and
forecast which is prepared separately for each of the
CGUs to which the individual assets are allocated and
generally covers a period of 15 years. To estimate cash
flow projections beyond periods covered by the most
recent budgets/forecasts, the Company extrapolates
cash flow projections in the budget using a steady growth
rate for the subsequent years, unless a higher rate can
be justified.
An impairment loss is recognised whenever the carrying
amount of asset or assets of cash generating unit (CGU)
exceeds their recoverable amount.
2.9. Inventories
2.9.1. Valuation of inventories (including in transit) of different
categories is as under: -
a) Crude oil is valued at the lower of cost [on First in
First Out (FIFO) basis] and net realisable value. Crude
oil is not written down below cost except in cases
where their prices have declined subsequently and it
is estimated that the cost of the finished goods will
exceed their net realisable value;
b) Raw materials other than ‘a)’ above are valued at the
lower of cost (on weighted average basis) and net
realisable value;
c) Stock-in process is valued at the lower of raw material
cost plus cost of conversion and net realisable value;
d) Empty packages are valued at weighted average cost;
e) Stores and spares which do not meet the recognition
criteria under Property, Plant and Equipment are
valued at weighted average cost. Surplus, obsolete
and slow moving stores and spares, if any, are valued
at the lower of cost and net realisable value. Surplus
items, when transferred from completed projects are
valued at cost / estimated value, pending periodic
assessment / ascertainment of condition. Stores and
Spares in transit are valued at cost;
f) Finished products other than Lubricants and
petrochemicals are valued at the lower of cost (on
FIFO basis month-wise) and net realisable value;
g) Finished products (lubricants and petrochemicals)
are valued at the lower of cost (on weighted average
basis) and net realisable value;
2.9.2. Customs duty on Raw materials/Finished goods lying in
bonded warehouse are provided for at the applicable
rates except where liability to pay duty is transferred
to consignee;
2.9.3. Excise duty on finished stocks lying at manufacturing
locations is provided for at the assessable value applicable
at each of the locations based on applicable duty;
2.9.4. The net realisable value of finished goods and stock-in¬
trade are final selling prices for sales to oil marketing
companies and depot prices applicable to the locations.
For the purpose of inventory valuation, the proportion of
sales to oil marketing companies and consumer sales are
determined on location wise and product wise sales of
subsequent period.
2.10. Revenue recognition
2.10.1. Sale of goods
Revenue is recognised at transaction price when:
a) the Corporation satisfies a performance
obligation by transferring control of a promised
goods / services to a customer; and
b) it is probable that the Corporation will collect
the consideration to which it will be entitled to
in exchange for the goods or services that will
be transferred to the customer.
The transaction price is the amount of consideration
to which the Corporation expects to be entitled in
exchange for transferring promised goods or services
to a customer including excise duties, as applicable
and is measured at the consideration received or
receivable, net of returns, taxes or duties collected
on behalf of the government and trade discounts or
rebates, as applicable;
Transaction price is allocated on each performance
obligation and is recognised as and when the
particular performance obligation is satisfied either
at a point in time or over a period of time;
Revenue is allocated between Loyalty Programs and
other components of the sale. The amount allocated
to the Loyalty Program is deferred, and is recognised
as Revenue when the Corporation has fulfilled its
obligation to supply the products under the terms
of the Program or when it is no longer probable that
the points under the Program will be redeemed.
Claims, including subsidy on Liquified Petroleum
Gas (LPG) and Superior Kerosene Oil (SKO), from
Government of India, are booked on in-principle
acceptance thereof on the basis of available
instructions / clarifications, subject to final
adjustments as stipulated.
2.10.2 Interest income is recognised taking into account
the amount outstanding and the applicable effective
interest rate;
2.10.3 Dividend is recognised when right to receive the
payment is established;
2.10.4 Income from sale of scrap is accounted for
on realisation.
2.11. Accounting / classification of expenditure
and income
2.11.1. Income / expenditure in aggregate pertaining
to prior year(s) above the threshold limit (*) are
corrected retrospectively;
2.11.2. Prepaid expenses up to threshold limit (*) in each
case, are charged to revenue as and when incurred;
2.11.3. Insurance claims are accounted on acceptance basis;
2.11.4. All other claims / entitlements are accounted on the
merits of each case.
2.12. Employee benefits
2.12.1. Short-term employee benefit
Short-term employee benefits are recognized as an
expense at undiscounted amount in the Statement of
Profit & Loss of the year in which the related services
are rendered by the employees.
2.12.2. Post-employment benefits
Defined Contribution Plans
Obligations for contributions to defined contribution
plans are expensed in the Statement of Profit & Loss
of the year in which the related services are rendered
by the employees.
Defined Benefit Plans
Post-employment benefits and Other Long Term
Employee Benefits
The Corporation operates defined benefit plans for
gratuity, pension, post-retirement medical benefits,
resettlement allowance, felicitation scheme and ex-
gratia. The obligation towards such defined benefits
is determined on actuarial valuation by independent
actuaries at the year-end by using Projected Unit
Credit method;
The Corporation’s contribution to the Provident Fund
is remitted to a separate Trust established for this
purpose based on a fixed percentage of the eligible
employee’s salary and charged to the Statement of
Profit and Loss.
Liability towards other long-term employee
benefits (leave encashment and death benefits), are
determined on actuarial valuation by independent
actuaries using Projected Unit Credit method;
Re-measurement of the net defined benefit liability,
which comprises of actuarial gains and losses, the
return on plan assets (excluding interest) and the
effect of the asset ceiling (if any, excluding interest),
are recognised in Other Comprehensive Income. Re¬
measurements gains and losses in respect of other
long-term benefits are recognized in the Statement
of Profit and Loss in the period in which they arise;
Prepaid contributions are recognized as an asset to
the extent that a cash refund or a set-off in future
payments is available.
2.13. Foreign currency transactions
2.13.1. Monetary items
Transactions in foreign currencies are initially
recorded at the respective exchange rates prevailing
at the date of transaction;
Monetary assets and liabilities denominated in
foreign currencies are translated at spot rates of
exchange at the reporting date;
Exchange differences arising on settlement or
translation of monetary items are recognised in
Statement of Profit and Loss either as ‘Exchange
Rate Variation’ or as ‘Finance Costs’ (to the extent
regarded as an adjustment to borrowing costs), as
the case maybe.
2.13.2. Non-Monetary items
Non-monetary items, other than those measured
at fair value, denominated in foreign currency, are
valued at the exchange rate prevailing on the date
of transaction.
2.14. Investment in Subsidiary, associates and
joint ventures
Investments in equity shares of Subsidiaries, Joint
Ventures & Associates are recorded at cost and it
is assessed at the end of each reporting period for
any indication of impairment. If any such indication
exists, recoverable amount of the asset is estimated;
The Corporation has chosen the carrying value of
the investment in Subsidiaries, associates and joint
ventures existing as per previous GAAP as on date of
transition to Ind AS i.e. 1st April 2015 as deemed cost.
2.15. Government Grants
2.15.1. Government grants are recognized where there is
reasonable assurance that the grant will be received
and all attached conditions will be complied with;
2.15.2. When the grant relates to an expense item, it is
recognized in Statement of Profit and Loss on a
systematic basis over the periods that the related
costs, for which it is intended to compensate,
are expensed;
2.15.3. When the grant relates to property, plant and
equipment, the cost of property, plant and equipment
is shown at gross value and grant thereon is treated
as liability (deferred income) and are credited to
statement of profit and loss on a systematic basis
over the useful life of the asset.
2.16. Exploration and Production expenditure
"Successful Efforts Method” of accounting is followed
for Oil & Gas exploration and production activities,
as stated below:
2.16.1. Cost of surveys, studies, carrying and retaining
undeveloped properties is expensed out in the year
of incurrence;
2.16.2 Cost of acquisition, drilling and development is
treated as Capital Work-in-Progress when incurred,
and the same is capitalised when the well is ready
to commence commercial production. Depletion is
calculated and charged as Depreciation using the
Unit of Production method;
2.16.3. Accumulated costs on exploratory wells in progress
are expensed out in the year in which these are
determined to be dry or are of no further use, as the
case may be;
2.16.4. The proportionate share in the assets, liabilities,
income and expenditure of joint operations are
accounted as per the participating interest in such
joint operations.
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