3. Material Accounting Policies
3.1 Basis of Measurement
These standalone financial statements have been
prepared under the historical cost convention
on the accrual basis, except for the following
assets and liabilities which have been measured
fair value:
• Property, Plant & Equipment (at fair value as
deemed cost as at 1st April 2015),
• Derivative financial instruments,
• Defined benefit plans- plan assets measured
at fair value
• Financial assets and liabilities except certain
investments and borrowings carried at
amortised cost (refer accounting policy
regarding financial instruments).
• Share based payments
3.2 Property, plant and equipment
On transition to IND AS, the Company has adopted
optional exception under IND AS 101 to measure
Property, Plant and Equipment at fair value.
Consequently, the fair value has been assumed
to be deemed cost of Property, Plant and
Equipment on the date of transition. Subsequently
Property, Plant and Equipment are stated at cost/
deemed cost less accumulated depreciation
and impairment losses, if any. Costs include costs
of acquisition or construction including incidental
expenses thereto, borrowing costs, and other
attributable costs of bringing the asset to its
working condition for its intended use and are net
of available duty/tax credits.
Subsequent expenditure relating to property,
plant and equipment is capitalized only when
it is probable that future economic benefits
associated with these will flow to the Company
and the cost of the item can be measured
reliably. All other repair and maintenance costs
are recognised in Statement of Profit & Loss
as incurred.
Gains or losses arising from discard/sale of
Property, Plant and Equipment are measured
as the difference between the net disposal
proceeds and the carrying amount of the asset
and are recognized in the statement of profit and
loss when the asset is discarded / sold.
The Company adjusts exchange differences
arising on translation/settlement of long-term
foreign currency monetary items as referred in
Policy for Foreign exchange transactions.
The residual values, useful lives and methods of
depreciation of property, plant and equipment
are reviewed at each financial year end and
adjusted prospectively.
Capital work-in-progress: Expenditure related
to and incurred on implementation of new/
expansion-cum-modernisation projects is
included under capital work-in-progress until the
relevant assets are ready for its intended use.
All other expenditure (including trial run / test
run expenditures) during construction / erection
period (net of income) are shown as part of
pre-operative expenditure pending allocation /
capitalization and the same is allocated to the
respective asset on completion of its construction/
erection.
Depreciation: Depreciation on property, plant and
equipment is provided on straight-line method
(SLM) as per the useful life of assets, as estimated
by the management / independent professional,
which is generally in line with Schedule II to the
Companies Act, 2013 except for certain assets
specified below:
Estimated useful lives of Property, plant &
Equipment are as follows:
2015 under IND AS 101, depreciation is charged on
fair valued amount less estimated salvage value.
Based on management evaluation, depreciation
rates currently used fairly reflect its estimate of
the useful lives and residual values of property,
plant and equipment.
Certain plant and machinery have been
considered as continuous process plant on the
basis of technical assessment and depreciation
on the same is provided for accordingly.
Leasehold land is amortized on a straight-line
basis over the period of lease.
1.3 Mining Assets
Acquisition Costs
Lhe cost of Mining Assets capitalised includes
costs associated with acquisition of licenses and
rights to explore, stamp duty, registration fees
and other such costs. Bid premium and royalties
payable with respect to mining operations is
contractual obligation. The said obligations are
variable and linked to market prices. The Company
has accounted for the same as expenditure on
accrual basis as and when related liability arises
as per respective agreements/ statute.
Exploration and evaluation
Exploration and evaluation expenditure incurred
after obtaining the mining right/assets or the legal
right to explore are capitalised as exploration and
evaluation assets (intangible assets) and stated
at cost less impairment.
Exploration and evaluation assets are assessed
for impairment when facts and circumstances
suggest that the carrying amount of an
exploration and evaluation asset may exceed its
recoverable amount.
The Company measures its exploration and
evaluation assets at cost and classifies as
Property, plant and equipment or intangible assets
according to the nature of the assets acquired
and applies the classification consistently. To
the extent that tangible asset is consumed in
developing an intangible asset, the amount
reflecting that consumption is capitalised as a
part of the cost of the intangible asset.
Exploration expenditure includes all direct and
allocated indirect expenditure associated with
finding specific mineral resources which includes
depreciation and applicable operating costs of
related support equipment and facilities and
other costs of exploration activities.
Site restoration, rehabilitation and
environmental costs
Provision is made for costs associated with
restoration and rehabilitation of mining sites as
soon as the obligation to incur such costs arises.
Such restoration and closure costs are typical
of extractive industries and they are normally
incurred at the end of the life of the mine. The
costs are estimated on the basis of mine closure
plans and the estimated discounted costs of
dismantling and removing these facilities and
the costs of restoration are capitalised. The
provision for decommissioning assets is based on
the current estimates of the costs for removing
and decommissioning production facilities, the
forecast timing of settlement of decommissioning
liabilities and the appropriate discount rate.
A corresponding provision is created on the
liability side. The capitalised asset is charged to
profit and loss over the life of the asset through
amortisation over the life of the operation and the
provision is increased each period via unwinding
the discount on the provision. Management
estimates are based on local legislation and/
or other agreements are reviewed periodically
The actual costs and cash outflows may differ
from estimates because of changes in laws and
regulations, changes in prices, analysis of site
conditions and changes in restoration technology.
Details of such provisions are set out in note 24.
Mining assets are amortised using unit of
production method over the entire lease term.
3.4 Valuation of Inventories
Inventories are valued at lower of cost, computed
on weighted average basis, or net realizable value
as per Ind AS-2” Inventories”. Cost of inventories
includes in case of raw material, cost of purchase
and incidental expenses; in case of work-in¬
progress, estimated direct cost and appropriate
proportion of administrative and other overheads;
in case of finished goods, estimated direct
cost and appropriate administrative and other
overheads and excise duty; and in case of traded
goods, cost of purchase and other costs.
Scrap is valued at estimated realizable value.
However raw materials, components, stores and
spares held for use in the production of finished
goods are not written down below cost if the
finished products are expected to be sold at or
above cost.
Net realizable value is the estimated selling price
in the ordinary course of business, less estimated
costs of completion and estimated costs
necessary to make the sale.
3.5 Foreign Currency Transactions
• Transactions in foreign currencies are initially
recorded by the Company at rates prevailing
at the date of the transaction. Subsequently,
monetary items are translated at closing
exchange rates of balance sheet date and the
resulting exchange difference recognised in
profit or loss. Differences arising on settlement
of monetary items are also recognised in profit
or loss. Non-monetary items that are measured
in terms of historical cost in a foreign currency
are translated using the exchange rates at the
dates of the transaction. Non-monetary items
(Other than investment in shares of Subsidiaries,
Joint Ventures and Associates) carried at
fair value that are denominated in foreign
currencies are translated at the exchange
rates prevailing at the date when the fair value
was determined. Exchange component of the
gain or loss arising on fair valuation of non¬
monetary items is recognised in line with the
gain or loss of the item that gave rise to such
exchange difference.
• The Company has availed the exemption
available in IND AS 101, to continue capitalisation
of foreign currency fluctuation on long
term foreign currency monetary liabilities
outstanding on transition date.
3.6 Revenue Recognition
• Revenue from contracts with customers is
recognized on transfer of control of promised
goods or services to a customer at an amount
that reflects the consideration to which the
Company is expected to be entitled to in
exchange for those goods or services.
• Revenue towards satisfaction of a
performance obligation is measured at the
amount of transaction price (net of variable
consideration) allocated to that performance
obligation. The transaction price of goods
sold and services rendered is net of variable
consideration on account of various discounts
and schemes offered by the Company as part
of the contract. This variable consideration
is estimated based on the expected value of
outflow. Revenue (net of variable consideration)
is recognized only to the extent that it is highly
probable that the amount will not be subject to
significant reversal when uncertainty relating
to its recognition is resolved.
• Revenue from sale of products is recognized
when the control on the goods have been
transferred to the customer. The performance
obligation in case of product is satisfied at a
point in time i.e., when the material is shipped
/ delivered to the customer or when it is
delivered to a carrier for export sale, as may be
specified in the contract. Revenue is measured
at fair value of the consideration received or
receivable. The Company recognizes revenue
from sale of products net of discounts, sales
incentives, rebates granted, returns and GST
when the products are delivered to customer
or when delivered to a carrier for export sale,
which is when significant risks and rewards of
ownership pass to the customer.
• Income from aviation and other services is
accounted for at the time of completion of
service and billing thereof.
• Revenue from sale of power is recognized when
delivered and measured based on bilateral
contractual arrangements.
• Export benefits available are accounted for in
the year of export, to the extent the realisation
of the same is not considered uncertain by
the Company.
• Government grants/ subsidies are recognised
at fair value where there is reasonable certainty
that the grant /subsidy will be received, and all
attached conditions will be complied with. The
grant/subsidy is recognised in the statement of
profit and loss on a systematic basis over the
periods in which the Company recognises as
expenses the related costs for which the grants
are intended to compensate.
3.7 Employee Benefits
• Short term employee benefits are recognized
as an expense in the Statement of Profit and
Loss of the year in which the related services
are rendered.
• Payment to defined contribution plan is
recognized as expense when employees
have rendered services. Re-Measurements of
the defined benefit liability/asset comprising
actuarial gains and losses are recognized in
other comprehensive income.
• The liability for gratuity, a defined benefit plan
is determined using the projected unit credit
method, on the basis of actuarial valuations
carried out by third party actuaries at each
balance sheet date. Re-Measurements
comprising actuarial gains and losses arising
278 The Steel of India
from experience adjustments and changes in
actuarial assumptions are charged / credited
to Other Comprehensive Income in period in
which they arise. Other costs are accounted for
in Statement of Profit and Loss.
• Liability in respect of compensated absences
due or expected to be availed within one year
from the Balance Sheet date is estimated on
the basis of valuation carried out by third party
actuaries at each Balance Sheet date. Re¬
Measurements comprising actuarial gains and
losses arising from experience adjustments
and changes in actuarial assumptions are
charged / credited to profit and loss in the
period in which they arise.
• Share based compensation benefits are
recognised in the profit and loss in the year in
which the same is granted as per Employees
Share Purchase Scheme/ JSPL Employees Stock
Option Plan of the Company.
The Company has created an Employee Benefit
Trust (Trust) for providing share-based payment
to its employees. The Company uses the Trust as a
vehicle for distributing shares to employees under
the employee remuneration schemes. The Trust
buys shares of the Company from the market, for
giving shares to employees. The Company treats
Trust as its extension and shared held by the Trust
are treated as treasury shares.
Own equity instruments that are reacquired
(treasury shares) are recognised at cost
and deducted from Equity. No gain or loss is
recognised in profit and loss on the purchase,
sale, issue or cancellation of the Company's
own equity instruments. Any difference between
the carrying amount and the consideration, if
reissued, is recognised in other equity. Share
options exercised during the reporting year are
satisfied with treasury shares.
.8 Taxes on Income
Tax expense comprises current and deferred tax.
Current Tax
Current income-tax is measured at the amount
expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961
enacted in India and tax laws prevailing in the
respective tax jurisdictions where the company
operates. The tax rates and tax laws used to
compute the amount are those that are enacted
or substantively enacted, at the reporting date.
Deferred Tax
Deferred tax is provided on temporary difference
arising between the tax bases of assets & liabilities
and their carrying amounts for financial reporting
purposes at the reporting date. Deferred tax is
measured using the tax rate that are expected
to apply in the year when the asset is realized or
the liability is settled based on the tax rates and
the tax laws enacted or substantively enacted at
the reporting date. Deferred tax relating to items
recognized directly in equity/OCI is recognized
in equity/OCI and not in the statement of profit
and loss.
Deferred tax asset is recognized to the extent that
it is probable that sufficient future taxable profit
will be available against which the deductible
temporary differences and the carry forward
unused tax credits and unused tax losses 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.
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