3.(I) MATERIAL ACCOUNTING POLICIES
a) Fair value measurement
The Company measures financial instruments, such as,
derivatives at fair value at each balance sheet date.
The fair value of an asset or a liability is measured using
the assumptions that market participants would use
when pricing the asset or liability, assuming that market
participants act in their best economic interest.
The Company uses valuation techniques that are
appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximizing the
use of relevant observable inputs and minimizing the
use of unobservable inputs.
For the purpose of fair value disclosures, the Company
has determined classes of assets and liabilities on the
basis of the nature, characteristics and risks of the asset
or liability and the level of the fair value hierarchy.
b) Current and non-current classification
The assets and liabilities are classified as current/ non¬
current based on the operating cycle, which has been
identified as 12 months.
c) Functional and presentation currency
The financial statements are prepared in Indian Rupees
('), which is the Company's functional currency. All
financial information presented in Indian Rupees (?) has
been rounded to the nearest Crore. Amounts less than
' 0.50 Crore have been presented as “0”.
d) Revenue recognition
(i) Sale of goods (Products, Scrap and residual)
Revenue from contracts with customers is
recognised when control (as defined in Ind AS
115) of the goods or services is transferred to the
customer as per the terms of contract, which usually,
is at the time of dispatch of goods to the customer
or on the delivery of goods to a carrier responsible
for transporting the goods to the customer, or on
the date of bill of lading on delivery of the goods
to the carriers at an amount that reflects the
consideration to which the Company expects to be
entitled in exchange for those goods or services.
Revenue is recognised net of discounts, volume
rebates, outgoing sales taxes/ goods and service
tax and other indirect taxes. Revenues from sale of
by-products are included in revenue. The Company
has generally concluded that it is the principal in its
revenue arrangements.
Goods are often sold with volume discounts
based on aggregate sales over a 12 months
period. Revenue from these sales is recognised
based on the price specified in the contract, net
of the estimated volume discounts. A liability is
recognised for expected volume discounts payable
to customers in relation to sales made until the end
of the reporting period. No element of financing is
deemed present as the sales are generally made
with a credit term of 0-180 days, which is consistent
with market practice. Any obligation to provide a
refund is recognised as a provision. A receivable is
recognised when the goods are delivered as per
the contractual terms as this is the point in time
that the consideration is unconditional because
only the passage of time is required before the
payment is due.
Certain of the Company's sales contracts provide
for provisional pricing based on the price on the
London Metal Exchange (LME), as specified in the
contract. Revenue in respect of such contracts is
recognised when control passes to the customer and
is measured at the amount the entity expects to be
entitled - being the estimate of the price expected to
be received at the end of the measurement period.
Post transfer of control of goods, provisional pricing
features are accounted in accordance with Ind AS
109 ‘Financial Instruments' rather than Ind AS 115
and therefore the Ind AS 115 rules on variable
consideration do not apply. These ‘provisional
pricing' adjustments i.e., the consideration received
post transfer of control are included in total revenue
from operations on the face of the Statement
of Profit and loss. Final settlement of the price is
based on the applicable price for a specified future
period. The Company's provisionally priced sales
are marked to market using the relevant forward
prices for the future period specified in the contract
and is adjusted in revenue.
Contract assets
Trade receivables
A receivable is recognised if an amount of
consideration is unconditional (i.e., only the
passage of time is required before payment of the
consideration is due). Refer to accounting policies of
financial assets in section 3(h) Financial instruments
- Initial recognition and subsequent measurement
Contract Liabilities
A contract liability is the obligation to transfer
goods or services to a customer for which the
Company has received consideration (or an amount
of consideration is due) from the customer. If a
customer pays consideration before the Company
transfers goods or services to the customer, a
contract liability is recognised when the payment is
made or the payment is due (whichever is earlier).
Contract liabilities are recognised as revenue when
the Company performs under the contract.
The Company does not expect to have any
contracts where the period between the transfer
of the promised goods or services to the customer
and payment by the customer exceeds one year. As
a consequence, the Company does not adjust any
of the transaction prices for the time value of money.
(ii) Income from wind energy
Revenue from sale of wind power is recognised
when delivered and measured based on rates as
per bilateral contractual agreements with buyers
and at rate arrived at based on the principles laid
down under the relevant Tariff Regulations as
notified by the regulatory bodies, as applicable.
(iii) Dividends
Dividend income is recognized in the statement
of profit and loss only when the right to receive
payment is established, provided it is probable that
the economic benefits associated with the dividend
will flow to the Company, and the amount of the
dividend can be measured reliably.
(iv) Interest income
Interest income from a financial asset 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 income is accrued
on a time basis, with reference to the principal
outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts
estimated future cash receipts through the
expected life of the financial asset to that asset's
net carrying amount on initial recognition.
(v) Others
Revenue relating to insurance claims and interest
on delayed or overdue payments from trade
receivable is recognized when no significant
uncertainty as to measurability or collection exists.
e) Property, plant and equipment
(i) Property, plant and equipment other than
mining properties
The initial cost of property, plant and equipment
comprises its purchase price, including import
duties and non-refundable purchase taxes, and
any directly attributable costs of bringing an asset
to working condition and location for its intended
use. Plant and equipment is stated at cost, net
of accumulated depreciation and accumulated
impairment losses, if any. Such cost includes the
cost of replacing part of the plant and equipment
and borrowing costs for qualifying assets if the
recognition criteria are met. The present value of
the expected cost for the decommissioning of an
asset and mine restoration after its use is included
in the cost of the respective asset if the recognition
criteria for a provision are met. Major machinery
spares and parts are capitalized when they meet
the definition and recognition criteria of Property,
Plant and Equipment. Expenditure incurred after
the property, plant and equipment have been put
into operation, such as repairs and maintenance,
are normally charged to the Statement of Profit and
Loss in the period in which the costs are incurred.
Major inspection and overhaul expenditure is
capitalized if the recognition criteria is met.
If significant parts of an item of property, plant
and equipment have different useful lives, then
they are accounted for as separate items (major
components) of property, plant and equipment.
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. Gains and losses on
disposal of an item of property, plant and equipment
are determined by comparing the proceeds from
disposal with the carrying amount of property,
plant and equipment, and are recognized net within
other income/other expenses in the Statement of
Profit and Loss.
Government grant related to property, plant and
equipment is capitalized along with the asset
that it relates to and depreciated over the life of
the primary asset.
(ii) Mining properties
The costs of mining properties, which include
the costs of developing mining properties are
capitalized as Property, Plant and Equipment under
the heading “Mining properties” in the year, when
a decision is taken that a Mining property is viable
for commercial production (i.e. when the Company
determines that the Mining Property will provide
sufficient and sustainable return relative to the
risks and the Company decided to proceed with
the mine development), All further pre-production
primary development expenditure other than
land, buildings, plant and equipment is capitalized
as developing asset until the mining property
are capable of commercial production. Revenue
derived during the project phase is adjusted from
the cost incurred on the project from which such
revenue is generated.
(iii) Capital work in progress (CWIP)
Assets in the course of construction are capitalized
in capital work in progress account. At the point
when an asset is capable of operating in the manner
intended by management, the cost of construction
is transferred to the appropriate category of
property, plant and equipment. Costs associated
with the commissioning of an asset are capitalized
in CWIP until the period of commissioning has
been completed and the asset is ready for
its intended use.
Capital work in progress is carried at cost less
accumulated impairment losses, if any.
(iv) Depreciation
Depreciable amount for assets is the cost of an
asset, or other amount substituted for cost, less its
estimated residual value. Depreciation on property,
plant and equipment other than mining properties
has been provided on the straight-line method over
the estimated useful life.
• Depreciation has been provided over remaining
useful life or life of replaced part whichever is
shorter of the respective property, plant and
equipment in respect of additions arising on
account of insurance spares, on additions or
extension forming an integral part of existing
plants and on the revised carrying amount of
assets identified as impaired.
• Mining properties are amortized, from the
date on which they are first available for
use, in proportion to the annual ore raised
to the remaining commercial ore reserves
(on a unit-of-production basis) over the total
estimated remaining commercial reserves of
each property or group of properties and are
subject to impairment review. Commercial
reserves are proved and probable reserves
and any changes affecting unit of production
calculations are dealt with prospectively over
the revised remaining reserves. In the year of
abandonment of mine, the residual balance in
mining properties are written off. Costs used in
the computation of unit of production comprises
the net book value of the capitalised costs
plus the future estimated costs required to be
incurred to access the commercial reserves.
• Based on technical evaluation, the management
believes that the useful lives as given below
best represent the period over which the
management expects to use the asset.
Management's assessment takes into account,
inter alia, the nature of the assets, the estimated
usage of the assets, the operating conditions
of the assets, past history of replacement and
maintenance support.
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.
Furthermore, the Company considers climate-
related matters, including physical and transition
risks. Specifically, the company determines whether
climate-related legislation and regulations might
impact either the useful life or residual values, e.g.,
by banning or restricting the use of the company's
fossil fuel-driven machinery and equipment or
imposing additional energy efficiency requirements
on the company's buildings and office properties.
(v) Exploration & evaluation assets
Exploration and evaluation expenditure incurred
prior to obtaining the mining right or the legal right
to explore are expensed as incurred.
Exploration and evaluation expenditure incurred
after obtaining the mining right or the legal right
to explore, are capitalised as exploration and
evaluation assets (intangible assets) and stated
at cost less impairment, if any. Exploration and
evaluation assets are transferred to the appropriate
category of property, plant and equipment when
the technical feasibility and commercial viability
has been determined. Exploration and evaluation
assets are assessed for impairment and impairment
loss, if any, is recognised prior to reclassification.
Exploration expenditure includes all direct and
allocated indirect expenditure associated with
finding specific mineral resources.
(vi) Borrowing costs
Borrowing costs directly attributable to the
acquisition, construction or production of an asset
that necessarily takes a substantial period of time to
get ready for its intended use or sale are capitalised
as part of the cost of the asset. All other borrowing
costs are expensed in the period in which they
occur. Borrowing costs consist of interest and other
costs that an entity incurs in connection with the
borrowings of the funds.
f) Intangible assets
Intangible assets acquired separately are measured on
initial recognition at cost. Following initial recognition,
intangible assets are carried at cost less any
accumulated amortization and accumulated impairment
losses, if any.
Intangible assets are amortized over their estimated
useful life. Amounts paid for securing mining rights are
amortized over the period of mining lease of 20 years.
The estimated useful life of the intangible assets and
the amortization period are reviewed at the end of each
financial year and the amortization period is revised to
reflect the changed pattern, if any.
An intangible asset is derecognised upon disposal (i.e.,
at the date the recipient obtains control) or when no
future economic benefits are expected from its use or
disposal. Any gain or loss arising upon derecognition
of the intangible asset (calculated as the difference
between the net disposal proceeds and the carrying
amount of the asset) is included in the Statement of
profit and loss when the asset is derecognised.
g) Impairment of non-financial assets
I mpairment charges and reversals are assessed at the
level of cash-generating units (CGU).
I mpairment tests are carried out annually for all assets
when there is an indication of impairment. The company
assesses at each reporting date, whether there is an
indication that an asset may be impaired. The Company
conducts an internal review of asset values annually,
which is used as a source of information to assess for
any indications of impairment or reversal of previously
recognized impairment losses. External factors, such
as changes in expected future prices, costs and
other market factors are also monitored to assess for
indications of impairment or reversal of previously
recognized impairment losses.
If any such indication exists then an impairment review
is undertaken, the recoverable amount is calculated as
the higher of fair value less costs of disposal and the
asset's value in use.
Fair value less costs of disposal is the price that would
be received to sell the asset in an orderly transaction
between market participants and does not reflect the
effects of factors that may be specific to the entity and
not applicable to entities in general.
Value in use is determined as the present value of the
estimated future cash flows expected to arise from
the continued use of the asset in its present form and
its eventual disposal. The cash flows are discounted
using a pre-tax discount rate that reflects current
market assessments of the time value of money and
the risks specific to the asset for which estimates of
future cash flows have not been adjusted. Value in use
is determined by applying assumptions specific to the
company's continued use and cannot take into account
future development.
The carrying amount of the CGU is determined on a
basis consistent with the way the recoverable amount
of the CGU is determined.
If the recoverable amount of an asset or CGU is
estimated to be less than its carrying amount, the
carrying amount of the asset or CGU is reduced to its
recoverable amount. An impairment loss is recognized
in the Statement of Profit and Loss.
h) Financial instruments
A financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability or
equity instrument of another entity.
Financial assets - recognition and subsequent
measurement
The classification of financial assets at initial recognition
depends on the financial asset's contractual cash flow
characteristics and the Company's business model for
managing them. With the exception of trade receivables
that do not contain a significant financing component
or for which the Company has applied the practical
expedient, financial assets are recognized initially at fair
value plus, in the case of financial assets not recorded at
fair value through profit and loss, transaction costs that
are attributable to the acquisition of the financial asset.
Purchases or sales of financial assets except treasury
investment that require delivery of assets within a time
frame established by regulation or convention in the
market place (regular way trades) are recognized on
the trade date, i.e., the date that the Company commits
to purchase or sell the asset. Treasury investments
are accounted for when the amount is settled in
Bank account. Trade receivables that do not contain
a significant financing component are measured at
transaction price as per Ind AS 115.
For purposes of subsequent measurement, financial
assets are classified in three categories:
• Financial assets at amortized cost
A ‘financial asset' is measured at the amortized cost if
both the following conditions are met:
a) The asset is held within a business model whose
objective is to hold assets for collecting contractual
cash flows, and
b) Contractual terms of the asset give rise on specified
dates to cash flows that are solely payments
of principal and interest (SPPI) on the principal
amount outstanding.
After initial measurement, such financial assets are
subsequently measured at amortized cost using the
effective interest rate (EIR) method. 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
in finance income in the Statement of Profit and Loss.
The losses arising from impairment are recognized in
the Statement of Profit and Loss. This category generally
applies to trade and other receivables.
• Financial assets at fair value through other
comprehensive income (FVTOCI)
A ‘financial asset' is classified as at the FVTOCI if both
of the following criteria are met:
a) The objective of the business model is achieved
both by collecting contractual cash flows and
selling the financial assets, and
b) The asset's contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category
are measured initially as well as at each reporting date
at fair value. Fair value movements are recognized in
the other comprehensive income (OCI). However, the
Company recognizes interest income, impairment
losses and reversals and foreign exchange gain or loss
in the profit and loss. On derecognition of the asset,
cumulative gain or loss previously recognized in OCI is
reclassified from the equity to profit and loss. Interest
earned whilst holding FVTOCI debt instrument is
reported as interest income using the EIR method.
For equity instruments, the Company may make an
irrevocable election to present subsequent changes
in the fair value in OCI. The Company makes such
election on an instument-by-instrument basis. If the
company decides to classify an equity instrument as at
FVTOCI, then all fair value changes on the instrument,
excluding dividends, are recognized in the OCI. There is
no recycling of the amounts from OCI to the statement
of profit and loss, even on sale of investment. However,
the company may transfer the cumulative gain or
loss within equity.
• Financial assets at fair value through Statement of Profit
and Loss (FVTPL)
FVTPL is a residual category for debt instruments
and default category for equity instruments. Any
debt instrument, which does not meet the criteria for
categorization as at amortized cost or as at FVTOCI, is
classified as at FVTPL.
Debt instrument included within the FVTPL category
are measured at fair value with all changes recognized
in the Statement of Profit and Loss.
Further, the provisionally priced trade receivables are
marked to market using the relevant forward prices
for the future period specified in the contract and is
adjusted in revenue.
Financial assets - derecognition
When the Company has transferred its rights to receive
cash flows from an asset or has entered into a pass¬
through arrangement, it evaluates if and to what extent
it has retained the risks and rewards of ownership. When
it has neither transferred nor retained substantially all
of the risks and rewards of the asset, nor transferred
control of the asset, the Company continues to recognize
the transferred asset to the extent of the Company's
continuing involvement. In that case, the Company
also recognizes an associated liability. The transferred
asset and the associated liability are measured on a
basis that reflects the rights and obligations that the
Company has retained.
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:
• Financial assets that are debt instruments and
are measured at amortized cost e.g., loans, debt
securities, deposits and trade receivables
• Financial assets that are debt instruments and are
measured as at FVTOCI
The Company follows ‘simplified approach' for
recognition of impairment loss allowance on
trade receivables.
The application of simplified approach does not
require the Company to track changes in credit risk.
Rather, it recognizes impairment loss allowance based
on lifetime ECLs at each reporting date, right from its
initial recognition.
For recognition of impairment loss on other financial
assets and risk exposure, the Company determines
whether there has been a significant increase in the
credit risk since initial recognition. If credit risk has not
increased significantly, 12-month ECL is used to provide
for impairment loss. However, if credit risk has increased
significantly, lifetime ECL is used. If, in a subsequent
period, credit quality of the instrument improves such
that there is no longer a significant increase in credit
risk since initial recognition, then the Company reverts
to recognizing impairment loss allowance based
on 12-month ECL.
Lifetime ECL are the expected credit losses resulting
from all possible default events over the expected life of
a financial instrument. The 12-month ECL is a portion of
the lifetime ECL which results from default events that
are possible within 12 months after the reporting date.
ECL is the difference between all contractual cash
flows that are due to the Company in accordance
with the contract and all the cash flows that the entity
expects to receive (i.e. all cash shortfalls), discounted at
the original EIR.
ECL impairment loss allowance (or reversal) recognized
during the period is recognized as expense/income
in the Statement of Profit and Loss (P&L). This amount
is reflected under the head ‘other expenses' in the
Statement of Profit and Loss (P&L). The balance sheet
presentation for various financial instruments is
described below:
• Financial assets measured as at amortized cost:
ECL is presented as an allowance, i.e., as an integral
part of the measurement of those assets in the
balance sheet. The allowance reduces the carrying
amount. Until the asset meets write-off criteria, the
Company does not reduce impairment allowance
from the gross carrying amount.
• Debt instruments measured at FVTOCI: Since
financial assets are already reflected at fair value,
impairment allowance is not further reduced from
its value. Rather, ECL amount is presented as
‘accumulated impairment amount' in the OCI.
For assessing increase in credit risk and impairment
loss, the Company combines financial instruments on
the basis of shared credit risk characteristics with the
objective of facilitating an analysis that is designed to
enable significant increases in credit risk to be identified
on a timely basis.
Financial liabilities - recognition and subsequent
measurement
Financial liabilities are classified, at initial recognition,
as financial liabilities at fair value through profit or
loss, loans and borrowings, payables, or as derivatives
designated as hedging instruments in an effective
hedge, as appropriate.
All financial liabilities are recognized initially at fair value
and, in the case of loans and borrowings and payables,
net of directly attributable transaction costs.
The Company's financial liabilities include trade and
other payables, loans and borrowings including bank
overdrafts and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on
their classification, as described below:
• Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss
include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair
value through profit or loss. Financial liabilities are
classified as held for trading if they are incurred for the
purpose of repurchasing in the near term. This category
also includes derivative financial instruments entered
into by the Company that are not designated as hedging
instruments in hedge relationships as defined by Ind
AS 109. Separated embedded derivatives are also
classified as held for trading unless they are designated
as effective hedging instruments.
Gains or losses on liabilities held for trading are
recognized in the Statement of Profit and Loss.
• Financial liabilities at amortized cost (Loans, Borrowings
and Trade and Other payables)
After initial recognition, interest-bearing loans,
borrowings and Trade and Other payables 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.
Financial liabilities - derecognition
A financial liability is derecognized when the obligation
under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another
from the same lender on substantially different terms,
or the terms of an existing liability are substantially
modified, such an exchange or modification is treated
as the derecognition of the original liability and the
recognition of a new liability. The difference in the
respective carrying amounts is recognized in the
Statement of Profit and Loss.
Embedded derivatives
An embedded derivative is a component of a hybrid
(combined) instrument that also includes a non¬
derivative host contract - with the effect that some of
the cash flows of the combined instrument vary in a
way similar to a stand-alone derivative. An embedded
derivative causes some or all of the cash flows that
otherwise would be required by the contract to be
modified according to a specified interest rate, financial
instrument price, commodity price, foreign exchange
rate, index of prices or rates, credit rating or credit
index, or other variable, provided in the case of a non¬
financial variable that the variable is not specific to a
party to the contract. Reassessment only occurs if
there is either a change in the terms of the contract
that significantly modifies the cash flows that would
otherwise be required or a reclassification of a financial
asset out of the fair value through Profit or Loss.
I f the hybrid contract contains a host that is a financial
asset within the scope of Ind AS 109, the Company
does not separate embedded derivatives. Rather, it
applies the classification requirements contained in
Ind AS 109 to the entire hybrid contract. Derivatives
embedded in all other host contracts are accounted
for as separate derivatives and recorded at fair value
if their economic characteristics and risks are not
closely related to those of the host contracts and the
host contracts are not held for trading or designated
at fair value though Profit or Loss. These embedded
derivatives are measured at fair value with changes in
fair value recognized in profit or loss, unless designated
as effective hedging instruments.
Reclassification of financial assets
The Company determines classification of financial
assets and liabilities on initial recognition. After
initial recognition, no reclassification is made for
financial assets which are equity instruments and
financial liabilities.
Offsetting of financial instruments
Financial assets and financial liabilities are offset
and the net amount is reported in the balance sheet
if there is a currently enforceable legal right to offset
the recognized amounts and there is an intention to
settle on a net basis, to realize the assets and settle the
liabilities simultaneously.
i) Derivative financial instruments and hedge accounting
Initial recognition and subsequent measurement
I n order to hedge its exposure to foreign exchange,
and commodity price risks, the Company enters into
forward currency contracts, commodity contracts and
other derivative financial instruments. The Company
does not hold derivative financial instruments for
speculative purposes.
Such derivative financial instruments are initially
recognized at fair value on the date on which a
derivative contract is entered into and are subsequently
re-measured at fair value. Derivatives are carried as
financial assets when the fair value is positive and as
financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair
value of derivatives are taken directly to profit or loss,
except for the effective portion of cash flow hedges,
which is recognized in OCI and later reclassified to
profit or loss when the hedge item affects profit or loss
or treated as basis adjustment if a hedged forecast
transaction subsequently results in the recognition of a
non-financial asset or non-financial liability.
For the purpose of hedge accounting, hedges
are classified as:
• Fair value hedges
• Cash flow hedges
At the inception of a hedge relationship, the Company
formally designates and documents the hedge
relationship to which the Company wishes to apply
hedge accounting and the risk management
objective and strategy for undertaking the hedge.
The documentation includes the Company's risk
management objective and strategy for undertaking
hedge, the hedging/ economic relationship, the
hedged item or transaction, the nature of the risk being
hedged, hedge ratio and how the entity will assess the
effectiveness of changes in the hedging instrument's
fair value in offsetting the exposure to changes in the
hedged item's fair value or cash flows attributable to
the hedged risk. Such hedges are expected to be highly
effective in achieving offsetting changes in fair value or
cash flows and are assessed on an on-going basis to
determine that they actually have been highly effective
throughout the financial reporting periods for which
they were designated.
Hedges that meet the strict criteria for hedge accounting
are accounted for, as described below:
(i) Fair value hedges
Changes in the fair value of derivatives that are
designated and qualify as fair value hedges
are recognized in profit or loss immediately,
together with any changes in the fair value of the
hedged asset or liability that are attributable to
the hedged risk.
If the hedged item is derecognized, the
unamortized fair value is recognized immediately
in profit or loss. When an unrecognized firm
commitment is designated as a hedged item, the
subsequent cumulative change in the fair value of
the firm commitment attributable to the hedged
risk is recognized as an asset or liability with a
corresponding gain or loss recognized in the
Statement of Profit and Loss.
(ii) Cash flow hedges
The effective portion of the gain or loss on the
hedging instrument is recognized in OCI in the cash
flow hedge reserve, while any ineffective portion
is recognized immediately in the Statement of
Profit and Loss.
Amounts recognized as OCI are transferred to
Statement of Profit and Loss when the hedged
transaction affects profit or loss, such as when the
hedged financial income or financial expense is
recognized or when a forecast sale occurs. When
the hedged item is the cost of a non-financial asset
or non-financial liability, the amounts recognized as
OCI are transferred to the initial carrying amount of
the non-financial asset or liability.
If the hedging instrument expires or is sold,
terminated or exercised without replacement or
rollover (as part of the hedging strategy), or if its
designation as a hedge is revoked, or when the
hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss previously
recognized in OCI remains separately in equity
until the forecast transaction occurs or the foreign
currency firm commitment is met.
j) Government grants, subsidies and export incentives
Grants and subsidies from the government are
recognized when there is reasonable assurance that (i)
the Company will comply with the conditions attached
to them, and (ii) the grant/subsidy will be received.
When the grant or subsidy relates to revenue, it is
recognized as income on a systematic basis in the
Statement of Profit and Loss over the periods necessary
to match them with the related costs, which they are
intended to compensate.
Where the grant relates to an asset, it is recognized
as deferred income and released to income in equal
amounts over the expected useful life of the related
asset and presented within other income.
k) Inventories
Inventories are valued at the lower of cost and net
realizable value.
Costs comprise direct materials, direct labour costs and
those overheads that have been incurred in bringing the
inventories to their present location and condition. Cost
of different categories of inventories are accounted
for as follows:
(i) Ore, concentrate (mined metal), work-in-progress
and finished goods (including significant by¬
products i.e. silver) are valued at lower of cost and
net realizable value on weighted average basis.
(ii) Stores and spares are valued at lower of cost and
net realizable value on weighted average basis.
(iii) Immaterial by-products, aluminium scrap, chemical
lead scrap, anode scrap and coke fines are valued
at net realizable value.
Net realizable value is determined based on estimated
selling price, less further costs expected to be incurred
to completion and disposal.
Inventories of ‘Fuel Stock' mainly consist of coal which
is used for generating power. On consumption, the cost
is charged off to ‘Power and Fuel' in the statement of
profit and loss.
Provisions are made to cover slow moving and obsolete
items based on historical experience of utilization.
l) Taxation
Current tax
Current income tax assets and liabilities are measured
at the amount expected to be recovered from or paid to
the taxation authorities. The tax rates and tax laws used
to compute the amount are those that are enacted or
substantively enacted, at the reporting date.
Current income tax relating to items recognized outside
profit or loss is recognized outside profit or loss
(either in other comprehensive income or in equity).
Current tax items are recognized in correlation to the
underlying transaction either in OCI or directly in equity.
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.
Deferred tax
Deferred tax is provided, using the balance sheet
method, on all 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 recognized for all taxable
temporary differences, except:
• In respect of taxable temporary differences
associated with investments in subsidiaries,
associates and interests in joint ventures, when
the timing of the reversal of the temporary
differences can be controlled and it is probable that
the temporary differences will not reverse in the
foreseeable future
Deferred tax assets are recognized for all deductible
temporary differences, the carry forward of unused
tax credits and any unused tax losses. Deferred
tax assets are recognized 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 utilized, except:
• When the deferred tax asset relating to the
deductible temporary difference arises from
the initial recognition of an asset or liability in a
transaction that is not a business combination and,
at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss and
does not give to equal taxable and deductible
taxable differences.
• In respect of deductible temporary differences
associated with investments in subsidiaries and
interests in joint ventures, deferred tax assets are
recognized only to the extent that it is probable
that the temporary differences will reverse in
the foreseeable future and taxable profit will be
available against which the temporary differences
can be utilized.
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 utilized. Unrecognized
deferred tax assets are re-assessed at each
reporting date and are recognized 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 to the
year when the asset is realized 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
profit or loss is recognised outside profit or loss
(either in other comprehensive income or in equity).
Deferred tax items are recognised in correlation
to the underlying transaction 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 tax liabilities and
the deferred taxes relate to the same taxable entity
and the same taxation authority.
m) Retirement and other Employee benefit schemes
i. 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.
ii. Post-Employment Benefits
Gratuity
In accordance with the Payment of Gratuity Act
of 1972, the Company contributes to a defined
benefit plan (the “Gratuity Plan”). The Gratuity
Plan provides a lump sum payment to employees
who have completed at least 5 years of service; at
retirement, disability or termination of employment
being an amount equal to 15 days' salary (based
on the respective employee's last drawn salary) for
every completed year of service.
Based on actuarial valuations conducted as at
year end, a provision is recognized in full for the
benefit obligation over and above the funds held in
the Gratuity Plan.
I n respect of defined benefit schemes, the assets
are held in separately administered funds. In
respect of defined benefit schemes, the cost of
providing benefits under the plans is determined
by actuarial valuation separately each year using
the projected unit credit method by independent
qualified actuary as at the year end.
Re-measurements, comprising of actuarial
gains and losses, the effect of the asset ceiling,
excluding amounts included in net interest on
the net defined benefit liability and the return on
plan assets (excluding amounts included in net
interest on the net defined benefit liability), are
recognized immediately in the balance sheet with a
corresponding debit or credit to retained earnings
through OCI in the period in which they occur. Re¬
measurements are not reclassified to the Statement
of Profit and Loss in subsequent periods.
The Company recognizes the following changes in
the net defined benefit obligation as an expense in
the Statement of Profit and Loss:
• Service costs comprising current service
costs, past-service costs, gains and losses on
curtailments and non-routine settlements; and
• Net interest expense or income
Provident Fund
The Company offers retirement benefits to its
employees, under provident fund scheme which
is a defined benefit plan. The Company and
employees contribute at predetermined rates to
‘Hindustan Zinc Limited Employee's Contributory
Provident Fund' (‘Trust') accounted on accrual
basis and the conditions for grant of exemption
stipulate that the employer shall make good the
deficiency, if any, between the return guaranteed
by the statute and actual earning of the Trust. The
contribution towards provident fund is recognized
as an expense in the Statement of Profit and Loss.
Family Pension
The Company offers its employees benefits under
defined contribution plans in the form of family
pension scheme. Contributions are paid during the
year into the fund under statutory arrangements.
The contribution to family pension fund is made
at predetermined rates by the Company based on
prescribed rules of family pension scheme. The
contribution towards family pension is recognized
as an expense in the Statement of Profit and Loss.
The Company has no further obligation other than
the contribution made.
Superannuation
Certain employees of the Company, who have
joined post disinvestment are members of the
Superannuation plan. The Company has no
further obligations to the Plan beyond its monthly
contributions which are periodically contributed
to a trust fund, the corpus of which is invested
with the Life Insurance Corporation of India. The
contribution is recognized as an expense in the
Statement of Profit and Loss.
With respect to defined contribution plans if the
contribution payable to the scheme for service
received before the balance sheet date exceeds the
contribution already paid, the deficit payable to the
scheme is recognized as a liability after deducting
the contribution already paid. If the contribution
already paid exceeds the contribution due for
services received before the balance sheet date,
then excess is recognized as an asset to the extent
that the pre-payment will lead to, for example, a
reduction in future payment or a cash refund.
iii. Other Long-Term Employee Benefits
Compensated absences
The Company has a policy on compensated
absences which are both accumulating and
non-accumulating in nature. The expected cost
of accumulating compensated absences is
determined by actuarial valuation performed by an
independent actuary at each balance sheet date
using projected unit credit method on the additional
amount expected to be paid/availed as a result of
the unused entitlement that has accumulated at
the balance sheet date. The Company recognizes
expected cost of short-term employee benefit as
an expense, when an employee renders the related
service. Actuarial differences are recognised
immediately in the Statement of Profit and Loss.
Expense on non-accumulating compensated
absences is recognized in the period in which the
absences occur.
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