Material Accounting Policy Information
Note No. 1. Company Overview:
National Aluminium Company Limited (the “Company”) is a public limited company domiciled and incorporated in India on 7th January 1981. The
Company is a Navaratna Central Public Sector Enterprise (CPSE) under Ministry of Mines, Government of India, limited by shares which are listed and
traded on National Stock Exchange of India Limited (NSE) and BSE Limited (BSE) in India. The registered office of the Company is at NALCO Bhawan, Plot
No. P/1, Nayapalli, Bhubaneswar - 751013, Odisha.
The Company is engaged in the business of manufacturing and selling of Alumina and Aluminium. The Company is operating a 22.75 lakh MT per
annum Alumina Refinery plant located at Damanjodi in Koraput district of Odisha and 4.60 lakh MT per annum Aluminium Smelter located at Angul,
Odisha. The Company has a captive bauxite mine adjacent to refinery plant to feed the bauxite requirement of Alumina Refinery and also a 1200 MW
captive thermal power plant adjacent to Smelter plant to meet the power requirement of Smelter. The Company has captive coal mines at Angul to meet
coal requirement of the power plant. Besides, the Company is also operating four wind power plants with total capacity of 198.40 MW located in the
state of Andhra Pradesh (Gandikota), Rajasthan (Ludherva & Devikot) and Maharashtra (Sangli) to harness the renewable energy and to comply with
its Renewable Purchase Obligation.
Note No. 2. Basis of preparation and measurement:
2.1 Statement of Compliance:
These financial statements of the Company have been prepared on a going concern basis following accrual system of accounting and in accordance
with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting
Standards) Rules, 2015, as amended, and other relevant provisions of the Companies Act, 2013.
These financial statements have been approved for issue by the Board of Directors in its meeting held on 21st May, 2025.
2.2 Basis of measurement:
The financial statements have been prepared on historical cost convention except for financial instruments and other items specified below that
are measured at fair values at the end of each reporting period in accordance with the requirements of the relevant Ind AS:
(a) certain financial assets and liabilities which are classified at fair value through profit and loss or fair value through other comprehensive
income;
(b) assets held for sale, at the lower of the carrying amounts and fair value less cost to sell;
(c) plan assets under the defined benefit plans and certain other long-term employee benefit plans.
2.3 Functional currency and presentation currency:
These financial statements are presented in Indian Rupees (^) which is the Company’s presentation and functional currency and all values are
rounded to the nearest crore (up to two decimals), except when indicated otherwise.
2.4 Current and non-current classification:
The company uses twelve months period for determining current and non-current classification of assets and liabilities in the balance sheet.
Deferred tax assets/liabilities are classified as non-current.
2.5 Use of estimates:
These financial statements have been prepared using estimates and assumptions, wherever necessary, in conformity with the recognition and
measurement principles of Ind AS.
Estimates and underlying assumptions are reviewed on an ongoing basis and revisions, if any, in such estimates are accounted for in the year of
revision.
Key sources of estimation uncertainty, which may cause a material adjustment to the carrying amounts of assets and liabilities, are stated in Note
No. 4.
Note No. 3. Material Accounting Policies:
The material accounting policies applied in preparation of the financial statements are given below. These policies have been applied consistently to all
periods presented in the financial statements.
3.1 Property, Plant and Equipment:
3.1.1 Initial recognition and measurement:
Property, Plant and Equipment (PPE) are stated in the Balance Sheet at cost, less any accumulated depreciation and accumulated impairment
losses (if any), except freehold land which are carried at historical cost.
Items of property, plant, and equipment that qualifies for recognition as an asset is initially recognised at cost. The initial cost comprises of
purchase price, import duties and non-refundable purchase taxes, borrowing cost, if any, incurred, and the initial estimates of the present value
of any asset restoration obligation or obligatory decommissioning and dismantling costs and other expenditure directly attributable to bringing
the assets to its location and condition necessary for it to be capable of operating in the manner intended by the management.
Expenditure incurred on development of freehold land is capitalized as part of the cost of the land.
In case of self-constructed assets, cost includes the costs of all materials used in construction, direct labour, allocation of overheads and directly
attributable borrowing costs, if any.
Technical know-how / licence fee relating to plants/ facilities and specific software that are integral part of the related hardware are capitalised as
part of cost of the underlying asset.
Environment responsibility related obligations directly attributable to projects is recognized as project cost on the basis of progress of project or
on actual incurrence, whichever is higher.
Spare Parts having unit value of more than ^10 lakhs are capitalized when they meet the definition of PPE.
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its PPE recognized as at April 1, 2015 measured as
per the previous GAAP and use that carrying value as the deemed cost of the PPE.
3.1.2 Subsequent expenditure:
Subsequent expenditure is recognised in the carrying amount of the asset when it is probable that future economic benefits derived from the cost
incurred will flow to the Company and the cost of the item can be measured reliably.
Expenditure on major inspection/maintenance or repairs including cost of replacing the parts of assets and overhaul costs where it is probable
that future economic benefits associated with the expenditure will be available to the Company over a period of more than one year, are capitalised
and the carrying amount of the identifiable parts so replaced is derecognised.
On subsequent overhaul, remaining carrying amount of the costs of previous overhaul, if any, are derecognised.
3.1.3 Capital work-in-progress:
Assets in the course of construction are included under capital work in progress and are carried at cost, less any recognised impairment loss. Such
capital work in progress, on completion, is transferred to the appropriate category of property, plant, and equipment.
Expenses for assessment of new potential projects incurred till investment decisions are taken are recognised in the statement of profit and loss
when incurred. Expenditure incurred for projects after investment decisions are taken are accounted for under capital work in progress and are
capitalized subsequently.
Any costs directly attributable to acquisition/ construction of property, plant, and equipment till it is brought to the location and condition
necessary for it to be capable of operating in the manner as intended by the management form part of capital work-in-progress.
3.1.4 Depreciation and amortisation:
Depreciation on property, plant and equipment are provided on a straight-line basis over their useful life, either as prescribed under
Schedule II of the Companies Act, 2013 or, wherever considered necessary, determined on the basis of technical estimations carried out by the
Management not exceeding the prescribed useful life as per Schedule II to the Companies Act, 2013.
Component of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of that item, is depreciated
separately if its useful life differs from that of the main asset. The Company has chosen a benchmark of ^1 crore as material value for identification
of a separate component except ‘Pot Relining’ which is considered as a component of each ‘Electrolytic Pot’ due to its inherent nature and useful
life.
The residual value of plant and machinery, vehicles, mobile equipment, and earth moving equipment, railway facilities, rolling stock, and
residential quarters are maintained at 5% of the original cost and for all other assets, the residual value is considered as Nil.
The estimated useful lives and residual values are reviewed at each year end and the effect of any changes in estimates, is accounted for on a
prospective basis.
Depreciation on certain assets is computed based on useful life which is different from those prescribed under Part C of Schedule II of the
Companies Act, 2013. The useful life of such assets is based on internal assessment/technical evaluation and best represents the period over which
the Company expects to use these assets. The useful life of:
(a) immovable property, plant and equipment at bauxite mines and coal mines is the life of the individual asset or the balance lease period of
mines whichever is lower.
(b) plant and equipment at captive thermal power generation plant namely Captive Power Plant (CPP) is considered to be in the range of
10-40 years.
(c) plant and equipment at Steam Power Plant (SPP) is considered to be in the range of 10-40 years.
(d) Red Mud Ponds and Ash Ponds at Alumina Refinery and Ash Ponds at Smelter are based on their estimated remaining useful lives
(holding capacity) evaluated on the basis of technical estimates made periodically.
(e) lean slurry ash disposal system at CPP is considered based on the estimated period over which ash can be disposed in the designated mine
void.
(f) assets laid on leasehold land excluding assets of Bauxite mines are considered to be lower of balance lease period or the useful life of the
asset.
(g) major spares are based on technical estimation of the said spares.
(h) major inspection / overhaul costs which have been capitalized are depreciated over the period until the next scheduled inspection /
overhaul.
Depreciation commences when the property, plant, and equipment are available for use in the location and condition necessary for it to be capable
of operating in the manner intended by the management.
Assets laid on land not owned by the Company are depreciated over the useful life from the date on which the asset is capable of operating in the
manner intended by the management unless a longer / shorter life can be justified.
Individual assets costing H0,000/- or less are depreciated fully in the year in which they are available for use in the location and condition
necessary for it to be capable of operating in the manner intended by the management. However, small value assets costing upto ^2,000/- are
charged to revenue.
3.1.5 De-recognition 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 use
of the asset or its disposal. Any gain or loss arising on the disposal/de-recognition is recognised in the statement of profit and loss.
3.1.6 Stripping costs:
Stripping costs of surface mining is recognised as an asset when they represent significantly improved access to ore, provided all the following
conditions are met:
(a) it is probable that the future economic benefit associated with the stripping activity will be realised;
(b) the component of the ore body for which access has been improved can be identified; and
(c) the costs relating to the stripping activity associated with the improved access can be reliably measured.
After initial recognition, stripping activity assets are carried at cost less accumulated amortisation and impairment. The expected useful life of the
identified component of the ore body is used to depreciate or amortise the stripping asset.
Production stripping costs are incurred to extract the ore in the form of inventories and/or to improve access to an additional component of
an ore body or deeper levels of material. Production stripping costs are accounted for as inventories to the extent the benefit from production
stripping activity is realised in the form of inventories.
Where the mine development and operation are outsourced to a Mine Developer and Operator (‘MDO’) and the MDO is responsible for
excavation and supply of coal / bauxite against an agreed price, irrespective of the stripping ratio, the Company does not recognise any stripping
asset.
3.2 Intangible Assets:
An intangible asset is recognised if:
(a) it is probable that the expected future economic benefits that are attributable to the asset will flow to the Company; and
(b) the cost of the asset can be measured reliably.
3.2.1 Intangible assets acquired separately:
Intangible assets acquired are reported at cost less accumulated amortisation and impairment loss, if any. Intangible assets having finite useful
life are amortised over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each annual
reporting period, and the effect of any changes in estimate is accounted for on a prospective basis.
3.2.2 Internally generated intangible assets - research and development expenditure:
Expenditure on research activities, except capital expenditure which qualifies for recognition as property, plant and equipment, is recognised as
an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development phase is recognised only when all the criteria specified in Ind AS 38 - Intangible
Assets are satisfied.
3.2.3 Mining Rights:
Mining Right is the authorization granted to the Company by the respective authorities for mining operation.
The cost of mining rights includes amounts paid towards upfront money, compensatory afforestation (CA), wildlife management (WLF), Net
Present Value (NPV) and related payments as determined by the regulatory authorities.
Cost of mining rights of each mine is amortised over its remaining lease period and subject to impairment loss.
3.2.4 Mines Development Expenses:
Expenditure incurred for mines development prior to commercial production i.e., preliminary development expenditure is capitalised when
mining property is capable of commercial production.
3.2.5 User Rights:
Amount of expenditure incurred in a cluster project, having future economic benefits with exclusive use of co-beneficiaries but without physical
control on the assets, are capitalised as user rights.
3.2.6 Software:
Software acquired separately, not embedded with original equipment are capitalised as software.
3.2.7 License and Franchise:
Amount of expenditure incurred for obtaining license for use of technology is capitalised under the head “License and Franchise”.
3.2.8 De-recognition of intangible assets:
An intangible asset is derecognised upon disposal or when no future economic benefits are expected to arise from the use of the asset or its
disposal. Any gain or loss arising on the disposal/de-recognition is recognised in the statement of profit and loss.
3.2.9 Amortisation of intangible assets:
The basis of amortisation of intangible assets is as follows:
(a) Licenses in the nature of technical know-how for processing plants which are available for the useful life of the respective processing plants
are amortised over a period of ten years.
(b) Software classified as intangible assets carries a useful life of 3 years and are amortised over that period.
(c) Mining Rights and Mines Development Expenses are amortised over the remaining lease period.
(d) User Right for cluster projects is amortised over the useful life of the asset from the date of commissioning.
3.3 Impairment of non-financial assets:
At each reporting date, the Company assesses whether there is any indication of impairment in the carrying amount of property, plant and
equipment and intangible assets. If such indication exists, the recoverable amount—being the higher of fair value less costs to sell and value in
use—is estimated.
Value in use is determined by discounting estimated future cash flows using a pre-tax discount rate that reflects current market assessments of the
time value of money and asset-specific risks.
If the recoverable amount of an asset or its cash-generating unit (CGU) is lower than its carrying amount, the difference is recognised as an
impairment loss in the Statement of Profit and Loss.
An impairment loss is reversed only if there has been a change in the assumptions used to determine the recoverable amount. The reversal is
limited to the carrying amount that would have existed had no impairment been recognised earlier.
3.4 Non-Current Assets Held for Sale:
Non-current assets and disposal groups are classified as held for sale when their recovery is expected through sale rather than continued use, and
the sale is highly probable within one year.
They are measured at the lower of carrying amount and fair value less costs to sell, and are not depreciated or amortised once classified as held for
sale.
3.5 Investment in associates and joint ventures:
An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and
operating policy decisions of the investee but is not control or joint control over those policies.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint
arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant
activities require unanimous consent of the parties sharing control.
Investment in associate and joint ventures are measured at cost. The investments carried at cost are tested for impairment periodically in
accordance with Ind AS 36 - Impairment of Assets. The carrying amount of the investment is tested for impairment as a single asset by comparing
its recoverable amount with its carrying amount, any impairment loss recognised reduces the carrying amount of the investment.
3.6 Foreign currency transaction and translation:
The functional and presentation currency of the Company is Indian Rupee (“T”) which is the currency of the primary economic environment in
which the Company operates.
In preparing the financial statements, transactions in foreign currencies are recognised at the rates of exchange prevailing at the dates of the
transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at that
date. Exchange differences on monetary items are recognised in the statement of profit and loss in the period in which they arise.
Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the
exchange rate prevailing at the date of transaction.
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