1.2.2 Material Accounting Policy information:
i. Foreign currency transactions and balances
Transactions in foreign currency are translated into the
respective functional currencies using the exchange rates
prevailing at the dates of the respective transactions.
Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation
at the exchange rates prevailing at reporting date of
monetary assets and liabilities denominated in foreign
currencies are recognized in the statement of profit
and loss and reported within foreign exchange gains/
(losses).
Non-monetary assets and liabilities denominated in a
foreign currency and measured at historical cost are
translated at the exchange rate prevalent at the date of
transaction.
ii. Investment in Subsidiaries, Joint Venture and
Associates
Investment in Subsidiaries, Joint Ventures and
Associates are measured at cost. Dividend income
is recognised when its right to receive the dividend is
established".
iii. Financial instruments
All financial instruments are recognized initially at fair
value. Transaction costs that are attributable to the
acquisition of the financial asset (other than financial
assets recorded at fair value through profit or loss)
are included in the fair value of the financial assets.
Purchase or sales of financial assets that require delivery
of assets within a time frame established by regulation
or convention in the market place (regular way trade) are
recognized on trade date. While, loans and borrowings
and payable are recognized net of directly attributable
transactions costs.
For the purpose of subsequent measurement, financial
instruments of the Company are classified in the
following categories: non-derivative financial assets
comprising amortized cost; non derivative financial
liabilities at amortized cost.
The classification of financial instruments depends
on the objective of the business model for which it is
held. Management determines the classification of its
financial instruments at initial recognition.
Financial instrument is derecognized only when the
company has transferred its right to receive/extinguish
its obligation to pay cash flow from such financial
instruments.
a) Non-derivative financial assets
Financial assets at amortized cost
A financial asset shall be measured at amortized
cost if both of the following conditions are met:
• the financial asset is held within a business
model whose objective is to hold financial
assets in order to collect contractual cash
flows and
• the contractual terms of the financial asset
give rise on specified dates to cash flows that
are solely payments of principal and interest
on the principal amount outstanding
They are presented as current assets, except
for those maturing later than 12 months after the
reporting date which are presented as non-current
assets. Financial assets are measured initially at
fair value plus transaction costs and subsequently
carried at amortized cost using the effective interest
method, less any impairment loss.
Amortized cost is represented by security deposits,
cash and cash equivalents, employee and other
advances and eligible current and non-current
assets.
Cash and cash equivalents comprise cash on hand,
in banks and short term demand deposits with
banks with original maturity period of three months
or less which can be withdrawn at any time without
prior notice or penalty on the principal.
For the purposes of the cash flow statement, cash
and cash equivalents include cash on hand, in
banks and demand deposits with banks, net of
outstanding bank overdrafts that are repayable on
demand and are considered part of the Company's
cash management system.
b) Non-derivative financial liabilities
Financial liabilities at amortized cost
Financial liabilities at amortized cost represented
by trade and other payables are initially recognized
at fair value, and subsequently carried at amortized
cost using the effective interest method.
iv. Property, Plant and Equipment
a) Recognition and measurement:
Normally Property, Plant and Equipment are
measured at cost less accumulated depreciation
and impairment losses, if any. Cost includes
expenditures directly attributable to the acquisition
of the asset. The Company has elected to apply
the optional exemption to use the previous GAAP
value as deemed cost at 1 April 2015, the date of
transition.
Spare parts, stand by equipment and service
equipment meeting the definition of PPE and having
value of more than ' 20 lakh in each case, are
capitalized as and when available for use.
Depreciation:
Normally the Company depreciates property, plant
and equipment over the estimated useful life of the
assets as prescribed in Schedule II of the Companies
Act 2013 on a straight-line basis. Depreciation is
charged on pro-rata basis on additions / disposals
of assets during the year. Wherever the useful life
is determined by technical assessment for certain
assets, such assets are depreciated as per their
assessed life and the same is disclosed in the notes
to financial statements under PPE. Assets acquired
under finance lease and leasehold improvements
are amortized over the lower of estimated useful life
and related term. Depreciation methods, useful lives
and residual values are reviewed at each reporting
date.
When parts of an item of property, plant and
equipment have different useful lives, they
are accounted for as separate items (major
components) of property, plant and equipment.
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. Repairs and
maintenance costs are recognized in the statement
of profit and loss when incurred. The cost and
related accumulated depreciation are eliminated
from the standalone financial statements upon sale
or disposition of the asset and the resultant gains or
losses are recognized in the statement of profit and
loss.
Fixed Assets costing ' 5,000 or less are fully
depreciated in the year of purchase.
b) Capital Work-in-Progress:
Assets in the course of construction are included
under capital work in progress and are carried
at cost less any recognized 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 charged
to revenue. Expenditure incurred for projects
after investment decisions are accounted for
under capital work in progress and 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.
c) Treatment of expenditure incurred on Assets not
owned by the Company
Expenditure incurred on any facility, the ownership
of which is not vested with the company, but
the incurrence of which is essential in bringing
an asset/projects of NMDC to the location and
condition necessary to be capable of operating in
the manner intended by the management, shall be
capitalized as a part of the overall cost of the said
asset/project. Else the same shall be charged to
revenue.
v. Intangible assets
Intangible assets are stated at cost less accumulated
amortization and impairment. Intangible assets are
amortized over their respective estimated useful lives on
a straight-line basis, from the date that they are available
for use. The estimated useful life of an identifiable
intangible asset is based on a number of factors including
the effects of obsolescence, demand, competition and
other economic factors (such as the stability of the
industry and known technological advances) and the
level of maintenance expenditures required to obtain the
expected future cash flows from the asset.
Mining rights are accounted as Intangible assets and
amortised over the period of life of the mining lease.
vi. Inventory
a) Raw materials, Stores and spares (including
loose tools and implements), work in process and
finished products are valued at lower of cost and
net realizable value of the respective units.
b) The basis of determining the cost is
Raw materials : Weighted average cost
Stores and spares : Weighted average cost
Stores in Transit : At cost
Work in process : Material cost plus
and finished appropriate share of
goods labour, related overheads
and levies.
c) In case of identified Obsolete/Surplus/Non-moving
items necessary provision is made and charged to
revenue.
d) Stationery, Medical, Canteen, School Stores, Cotton
Waste, Hospital Stores and Lab stores (excluding for
R & D Lab) charged off to Revenue on procurement.
e) No credit is taken in respect of stock of run of mine
ore, embedded ore, Iron ore slimes.
vii. Impairment
a) Financial assets
In accordance with Ind AS 109, the Company applies
expected credit loss (ECL) model for measurement
and recognition of impairment loss.
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 recognises 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
that 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 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 entity reverts to recognising
impairment loss allowance based on 12 month ECL
Lifetime ECLs 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 shortfalls),
discounted at the original EIR. When estimating the
cash flows, an entity is required to consider:
i) All contractual terms of the financial instrument
(including prepayment, extension etc.) over
the expected life of the financial instrument.
However, in rare cases when the expected
life of the financial instrument cannot be
estimated reliably, then the entity is required
to use the remaining contractual term of the
financial instrument.
ii) Cash flows from the sale of collateral held or
other credit enhancements that are integral to
the contractual terms.
ECL impairment loss allowance (or reversal)
recognised during the period is recognised as
income/expense in the statement of profit and loss.
The balance sheet presentation for various financial
instruments is described below:
Financial assets measured at amortised cost,
contractual revenue receivable: 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 net carrying amount.
Until the asset meets write off criteria, the Company
does not reduce impairment allowance from the
gross carrying amount.
b) Non-financial assets
The Company assesses at each reporting date
whether there is any objective evidence that a non
financial asset or a group of non financial assets is
impaired. If any such indication exists, the Company
estimates the amount of impairment loss.
An impairment loss is calculated as the difference
between an asset's carrying amount and
recoverable amount. Losses are recognised in
profit or loss and reflected in an allowance account.
When the Company considers that there are no
realistic prospects of recovery of the asset, the
relevant amounts are written off. If the amount of
impairment loss subsequently decreases and the
decrease can be related objectively to an event
occurring after the impairment was recognised,
then the previously recognised impairment loss is
reversed through profit or loss.
The recoverable amount of an asset or cash¬
generating unit (as defined below) is the greater
of its value in use and its fair value less costs to
sell. In assessing value in use, the estimated future
cash flows are discounted to their present value
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 the purpose
of impairment testing, assets are grouped together
into the smallest group of assets that generates
cash inflows from continuing use that are largely
independent of the cash inflows of other assets or
groups of assets (the "cash-generating unit").
viii. Employee benefits
a) Payments under Employees' Family Benefit
Scheme
Under the NMDC Employees' family benefit
scheme, monthly payments are made till the normal
date of retirement to the family members of those
employees who are discharged from service due
to medical reasons or death, on deposit of the
amount envisaged in the scheme, and liability for
the payments are accounted for on the basis of
actuarial valuation and the amount is administered
by a separate Trust.
b) Gratuity & Provident fund
Gratuity payable to eligible employees is
administered by a separate Trust. Payments to the
trust towards contributions and other demands are
made on the basis of actuarial valuation.
The company's contribution to the provident fund
is remitted to a separate trust based on a fixed
percentage of the eligible employees' salary.
Further, the company makes good the shortfall,
if any, between the return from investments of
trust and the notified rate of interest on actuarial
valuation basis.
c) Pension Fund
Defined contributions to NMDC Employees'
Contributory Pension Scheme are made on accrual
basis at a rate as approved from time to time to a
fund which is administered by a separate Trust.
d) Accrued Leave Salary
Liability towards Accrued Leave Salary, as at
the end of the year is recognized on the basis of
actuarial valuation and the amount is administered
by a separate trust.
e) Other Benefits
Liability towards Long Service Award, Settlement
Allowance and Post Retirement Medical Facilities to
employees as at the end of the year is recognized
on the basis of actuarial valuation. Such amounts
towards Settlement Allowance and Post Retirement
Medical Benefits are administered by a separate
trust.
Actuarial gains or losses are recognized in other
comprehensive income. Further, the profit or loss
does not include an expected return on plan assets.
Instead, net interest recognized in profit or loss is
calculated by applying the discount rate used to
measure the defined benefit obligation to the net
defined benefit liability or asset. The actual return
on the plan assets above or below the discount
rate is recognized as part of re-measurement
of net defined liability or asset through other
comprehensive income.
Re-measurements comprising actuarial gains
or losses and return on plan assets (excluding
amounts included in net interest on the net defined
benefit liability) are not reclassified to profit or loss
in subsequent periods.
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