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.

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 H 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 H 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

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. Untill 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.