3. Material Accounting Policies

3.1. Investments in subsidiaries, associates and joint ventures:

The Company records the investments in subsidiaries,
associates and joint ventures at cost less impairment toss, if
any.

When the Company issues financial guarantees on behalf
of subsidiaries, associates and joint ventures, it records
the initial fair value of financial guarantee as deemed
investment with a corresponding liability recorded as
deferred revenue under financial guarantee obligation.
Such deemed investment is added to the carrying amount
of investment in subsidiaries, associates and joint ventures.
Subsequently, the liability is measured in accordance with
Note no. 3.25 (iv). Deferred revenue is recognized in the
Statement of Profit and Loss over the remaining period of
financial guarantee issued as other income.

Interest free loans provided to subsidiaries are recognized
at fair value on the date of disbursement and the difference
on fair valuation is recognized as deemed investment in
subsidiaries. Such deemed investment is added to the
carrying amount of investment in subsidiaries. Loans
are accounted at amortized cost method using effective
interest rate. If there is an early repayment of loan made by
the subsidiaries, the proportionate amount of the deemed
investment recognized earlier is adjusted.

Where the Company is a sponsor in respect of Compulsory
Convertible Debentures issued by subsidiaries & joint

ventures and is mandatority required to purchase such
debentures, a financial liability is recognized at fair value
with a corresponding debit to deemed investment. Financial
liability is subsequently measured at amortized cost. The
deemed investment is added to the carrying amount of
investment in subsidiaries or joint ventures and carried at
cost.

Disposal of investment in subsidiaries, associates and joint
ventures

On disposal of investment in subsidiaries, associates and
joint ventures, the difference between net disposal proceeds
and the carrying amounts (including corresponding value
of ditution in deemed investment) are recognized in the
Statement of Profit and Loss.

3.2. Interests in joint operations

A joint operation is a joint arrangement whereby the parties
that have joint control of the arrangement have rights to
the assets, and obligations for the liabilities, relating to the
arrangement.

The Company has Joint Operations in the nature of
Production Sharing Contracts (PSC) and Revenue Sharing
Contracts (RSC) with the Government of India and various
body corporates for exploration, development and production
activities of hydrocarbons.

The Company's share in the assets and liabilities along with
attributable income and expenditure of the Joint Operations
is merged on line by line basis with the similar items in
the Financial Statements of the Company and adjusted
for depreciation, depletion, survey, exploratory well costs
written off, decommissioning provision, impairment and
sidetracking in accordance with the accounting poticies of
the Company.

The hydrocarbon reserves in such areas are taken in
proportion to the participating interest of the Company.

With respect to use of leased assets in the joint operations,
the Company recognizes lease liability and corresponding
right-of-use asset in accordance with the terms of related
joint operating agreement.

3.3. Government Grants

Government grants are recognized when there is reasonable
assurance that the Company will comply with the conditions
attached to them and that the grants will be received.

Capital grants which relates to an asset and whose primary
condition is that the Company should purchase, construct
or otherwise acquire non-current assets are recognized and
disclosed as 'deferred income' under non-current liability
in the Balance Sheet. It is further recognized as income
on a systematic basis over the expected useful lives of the
related assets.

Non-monetary grants received by the Company are
recognized at nominal value for grants and assets.

3.4. Property, Plant and Equipment (PPE) including Oil and Gas
Assets

(i) Oil and Gas Assets

Oil and Gas Assets (tangible & intangible) acquired/
constructed are initially recognized at cost and then
subsequently carried at cost less accumulated depletion and
impairment losses. These are created in respect of an area
/ field having proved developed oil and gas reserves, when
the well in the area / field is ready to commence commercial
production.

Cost of temporary occupation of land, successful exploratory
wells, all development wells (including service wells), allied
facilities, depreciation on support equipment used for
drilling and estimated future decommissioning costs are
capitalized and classified as Oil and Gas Assets.

Oil and Gas Assets are depleted using the “Unit of Production
Method". The rate of depletion is computed with reference
to an area covered by individual lease/license/asset/
amortization base by considering the proved developed
reserves and related capital costs incurred including
estimated future decommissioning / abandonment costs
net of salvage value. Acquisition cost of Oil and Gas Assets
is depleted by considering the proved reserves. These
reserves are estimated annually by the Reserve Estimates
Committee of the Company, which follows the International
Reservoir Engineering Procedures.

(ii) Other Property, Plant and Equipment

Property, Plant and Equipment (other than oil and gas
assets) in the course of construction for production, supply
or administrative purposes are carried at cost, less any
recognised impairment loss. The cost of an asset comprises
its purchase price or its construction cost (net of applicable
tax credits), any cost directly attributable to bring the asset
into the location and condition necessary for it to be capable
of operating in the manner intended by the Management
and decommissioning cost as per Note no 3.10. It includes
professional fees and, for qualifying assets, borrowing costs
capitalised in accordance with the Company's accounting
policy.

Parts of an item of PPE having different useful lives and
significant value and subsequent expenditure on Property,
Plant and Equipment arising on account of capital
improvement or other factors are accounted for as separate
components under the respective item of PPE. Expenditure
on dry docking of rigs and vessels are accounted for as
component of relevant assets.

Land and buildings held for use in the production or supply of
goods or services, or for administrative purposes, are stated

in the Balance Sheet at cost less accumulated depreciation
and impairment losses, if any. Freehold land and land under
perpetual lease are not depreciated.

Depreciation of PPE commences when the assets are ready
for their intended use.

Depreciation is provided on the cost of PPE (other than
freehold land, Oil and Gas Assets and properties under
construction) less their residual values, using the written
down value method (except for components of dry docking
capitalised) over the useful life of PPE as stated in the
Schedule II to the Companies Act, 2013 or based on technical
assessment by the Company. Estimated useful lives of these
assets are as under:

The estimated useful lives, residual values and depreciation
method are reviewed on an annual basis and if necessary,
changes in estimates are accounted for prospectively.

Depreciation on subsequent expenditure on PPE (other
than of Oil and Gas Assets) arising on account of capital
improvement or other factors is provided for prospectively
over the remaining useful life.

Depreciation on refurbished/revamped PPE (other than
of Oil and Gas Assets) which are capitalized separately is
provided for over the reassessed useful life.

Depreciation on expenditure on dry docking of rigs and
vessels capitalized as component of relevant rig / vessels is
charged over the dry dock period on straight line basis.

Depreciation on PPE (other than Oil and Gas Assets)
including support equipment and facilities used for
exploratory/ development drilling is initially capitalised as
part of drilling cost and expensed / depleted as per Note
no. 3.4 (i). Depreciation on equipment/ assets deployed
for survey activities is charged to the Statement of Profit
and Loss.

An item of PPE is de-recognised upon disposal or when no
future economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising on the
disposal or retirement of an item of PPE is determined as
the difference between the net sales/disposal proceeds and
the carrying amount of the asset and is recognised in the
Statement of Profit and Loss.

3.5. Lease Liabilities and Right-of-use Assets

The Company assesses whether a contract contains a lease,
at inception of the contract. To assess whether a contract

conveys the right to control the use of an identified asset, the
Company assesses whether:

(i) the contract involves use of an identified asset;

(ii) the Company obtains substantially all of the economic
benefits from the use of the asset through the period of
the lease and

(iii) the Company has the right to direct the use of the asset.

The Company has exercised the option of not applying Ind AS
116(Leases).

The Company as a 'lessee'

At the date of commencement of the lease, the Company
recognises a right-of-use assets (ROU assets) and a
corresponding lease liability for all hiring contracts /
arrangements in which it is a lessee, except for lease with
a term of twelve months or less (i.e. short term leases) and
lease of low value assets. For these short-term and low
value leases, the Company recognizes the lease payments
on straight-line basis over the term of the lease or any other
systematic basis if that basis is more representative of the
pattern of the lessee's benefit.

Certain lease arrangements include the options to extend or
terminate the lease before the end of the lease term. ROU
assets and lease liabilities includes these options when it
is reasonably certain that the option to extend the lease
will be exercised/option to terminate the lease will not be
exercised.

The lease liability is initially measured at present value of
the future lease payments over the reasonably certain lease
term. The lease payments are discounted using the interest
rate implicit in the lease, if it not readily determinable, using
the incremental borrowing rate. For leases with similar
characteristics, the Company, on a lease by lease basis,
applies either the incremental borrowing rate specific to the
lease or the incremental borrowing rate for the portfolio as
a whole.

Lease liabilities are remeasured with a corresponding
adjustment to the related right-of-use asset if the Company
changes its assessment regarding extension or termination
option.

The right-of-use assets are initially recognized at cost,
which comprises the amount of the initial measurement of
the lease liability adjusted for any lease payments made at
or before the inception date of the lease along with any initial
direct costs, restoration obligations and lease incentives
received.

Subsequently, the right-of-use assets is measured at
cost less any accumulated depreciation and accumulated
impairment losses, if any. The right-of-use assets is
depreciated using the straight-line method from the
commencement date over the shorter of lease term or
useful life of right-of-use assets.

The interest cost on lease Liability (computed using effective
interest method), is expensed in the statement of profit and
loss, unless eligible for capitalization as per accounting
policy below on Borrowing costs.

The Company accounts for each lease component within the
contract as a lease separately from non-lease components
of the contract in accordance with Ind AS 116 Leases and
allocates the consideration in the contract to each lease
component on the basis of the relative stand-alone price of
the lease component and the aggregate stand-alone price of
the non-lease components.

3.6. Intangible Assets

(i) Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated amortisation
and impairment losses. Amortisation is recognised on a
straight-line basis over their estimated useful lives not
exceeding five years from the date of capitalisation. The
estimated useful life is reviewed at the end of each reporting
period and the effect of any changes in estimate is accounted
for prospectively.

Intangible assets are derecognised on disposal, or when no
future economic benefits are expected from use or disposal.
Gains or losses arising from derecognition of an intangible
asset are determined as the difference between the net
disposal proceeds and the carrying amount of the asset,
and recognised in the Statement of Profit and Loss when the
asset is derecognised.

Research expenditure is recognized as an expense when it
is incurred. Development expenditure is recognised as an
intangible asset subject to fulfilment of specified conditions.

(ii) Intangible assets under development - Exploratory Wells
in Progress

All exploration and evaluation costs incurred in drilling
and equipping exploratory and appraisal wells, are initially
capitalized as Intangible assets under development -
Exploratory Wells in Progress till the time these are either
transferred to Oil and Gas Assets on completion as per Note
no.3.4 (i) or expensed as exploration and evaluation cost
(including allocated depreciation) as and when determined
to be dry or of no further use, as the case may be.

In case of Exploratory stratigraphic test well which is a
drilling effort, geologically directed, to obtain information
pertaining to a specific geologic condition, drilled without the
intention of being completed for hydrocarbon production. the
cost of drilling are initially capitalized as Intangible assets
under development - Exploratory Wells in Progress till the
time these are either transferred to Oil and Gas Assets when
area / field is ready to commence commercial production as
per Note no.3.4 (i) or expensed as exploration and evaluation
cost (including allocated depreciation) as when determined
to be dry or the License is surrendered.

Costs of exploratory wells are not carried over unless it
could be reasonably demonstrated that there are indications
of sufficient quantity of reserves and sufficient progress has
been made in assessing the reserves and the economic and
operating viability of the project. All such carried over costs
are subject to review for impairment as per the policy of the
Company.

(iii) Intangible oil & gas asset in progress

Cost of survey conducted in the development area with the
objective of production enhancement and better reservoir
management are initially capitalized as 'Intangible oil
& gas asset in progress' and transferred to 'Oil and Gas
Assets' on conclusion of survey [Acqusition Processing and
Interpretation (API)] activity as per Note no 3.8 (iii).

3.7. Impairment of tangible, intangible assets and right-of-use
assets

The Company reviews the carrying amount of its tangible
(Oil and Gas Assets, Development Wells in Progress (DWIP),
Property, Plant and Equipment including Capital Works-in¬
Progress), right-of use assets of a “Cash Generating Unit"
(CGU) and intangible assets at the end of each reporting
period to determine whether there is any significant
indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent of the
impairment loss (if any). When it is not possible to estimate
the recoverable amount of an individual asset, the Company
estimates the recoverable amount of the cash-generating
unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs
of disposal and value in use. 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 which the estimates of future
cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating
unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash-generating unit) is
reduced to its recoverable amount and impairment loss is
recognised in the Statement of Profit and Loss.

An assessment is made at the end of each reporting period
to see if there are any indications that impairment losses
recognized earlier, may no longer exist or may have come
down. The impairment loss is reversed, if there has been
a change in the estimates used to determine the asset's
recoverable amount since the previous impairment loss
was recognized. If it is so, the carrying amount of the asset
is increased to the lower of its recoverable amount and
the carrying amount that have been determined, net of
depreciation, had no impairment loss been recognized for
the asset in prior years. After a reversal, the depreciation
charge is adjusted in future periods to allocate the asset's
revised carrying amount, Less any residual value, on a
systematic basis over its remaining useful Life. Reversals of
Impairment loss are recognized in the Statement of Profit
and Loss.

Exploration and Evaluation assets are tested for Impairment
when further exploration activities are not planned in
near future or when sufficient data exists to indicate that
aLthough a deveLopment is LikeLy to proceed, the carrying
amount of the expLoration asset is unLikeLy to be recovered
in full from successful development or by sale. Impairment
loss is reversed subsequently, to the extent that conditions
for impairment are no longer present.

3.8. Exploration & Evaluation, Development and Production
Costs

(i) Pre-acquisition cost

Expenditure incurred before obtaining the right(s) to explore,
develop and produce oil and gas are expensed as and when
incurred.

(ii) Acquisition cost

Acquisition costs of Oil and Gas Assets are costs related
to right to acquire mineral interest and are accounted as
follows: -

(a) Exploration and development stage

Acquisition cost relating to projects under exploration or
development are initially accounted as Intangible Assets
under development - exploratory wells in progress or Oil
& Gas Assets under development - development wells
in progress respectively. Such costs are capitalized by
transferring to Oil and Gas Assets when a well is ready to
commence commercial production. In case of abandonment
/ relinquishment of Intangible Assets under development -
exploratory wells in progress, such costs are written off.

(b) Production stage

Acquisition costs of producing Oil and Gas Assets are
capitalized as proved property acquisition cost under Oil
and Gas Assets and amortized using the unit of production
method over proved reserves of underlying assets.

(iii) Survey cost

Cost of Survey and prospecting activities conducted in the
search of oil and gas in exploratory area are expensed as
exploration cost in the year in which these are incurred.

Cost of survey conducted in the development area with the
objective of production enhancement and better reservoir
management are initially capitalized as 'Intangible oil & gas
asset in progress' and transferred to 'Oil and Gas Assets' on
conclusion of survey (API) activity.

(iv) Oil & Gas asset under development - Development Wells in
Progress

All costs relating to Development Wells are initially
capitalized as 'Development Wells in Progress' and
transferred to 'Oil and Gas Assets' on “completion".

(v) Production costs

Production costs include pre-well head and post-well head
expenses including depreciation and applicable operating
costs of support equipment and facilities.

3.9. Side tracking costs

In the case of an exploratory well, cost of side-tracking is
treated in the same manner as the cost incurred on a new
exploratory well. The cost of abandoned portion of side
tracked exploratory wells is expensed as 'Exploration cost
written off'.

In the case of development wells, the entire cost of
abandoned portion and side tracking is capitalized.

In case of side tracking of producing wells and service wells
which form part of the development schemes are treated
as development wells and the cost incurred on the side
tracking is capitalized.

In the case of side tracking of producing wells and service
wells which do not form part of the development schemes
and the side-tracking results in additional proved developed
oil and gas reserves or increases the future economic
benefits therefrom beyond previously assessed standard
of performance, the cost incurred on side tracking is
capitalised, whereas the cost of abandoned portion of the
well is depleted in the normal way. Otherwise, the cost of
side tracking is expensed as 'Work over Expenditure'.

3.10. Decommissioning costs

Decommissioning costs is recognized when the Company
has a legal or constructive obligation to plug and abandon a
well, dismantle and remove a facility or an item of Property,
Plant and Equipment and to restore the site on which it is
located. The full eventual estimated provision towards costs
relating to dismantling, abandoning and restoring well sites
and allied facilities are recognized in respective assets
when the well is complete / facilities or Property, Plant and
Equipment are installed.

The amount recognized is the present value of the estimated
future expenditure determined using existing technology at
current prices and escalated using appropriate inflation rate
till the expected date of decommissioning and discounted
up to the reporting date using the appropriate risk-free
discount rate.

An amount equivalent to the decommissioning provision
is recognized along with the cost of exploratory well or
Property, Plant and Equipment. The decommissioning cost
in respect of dry well is expensed as exploratory well cost.

Any change in the present value of the estimated
decommissioning provision other than the periodic
unwinding of discount is adjusted to the decommissioning
provision and the carrying value of the related asset. In case
reversal of decommissioning provision exceeds the carrying
amount of the related asset including WDV of the capitalised
portion of decommissioning provision in the carrying amount
of the related asset, the excess amount is recognized in the
Statement of Profit and Loss. The unwinding of discount on
provision is charged in the Statement of Profit and Loss as
finance cost.

Provision for decommissioning cost in respect of assets
under Joint Operations is considered as per participating
interest of the Company on the basis of estimates approved
by the respective operating committee. Wherever the same
are not approved by the respective operating committee,
decommissioning cost estimates of the Company are
considered.

3.11. Inventories

Finished goods (other than Sulphur and carbon credits)
including inventories in pipelines / tanks are valued at cost
or net realisable value whichever is lower. Cost of finished
goods is determined on absorption costing method. It also
includes systematic allocation of directly attributable fixed
and variable production overheads. The value of inventories
includes amortization cost of relevant assets, production
related costs, excise duty and royalty (wherever applicable)
but excludes recoverable taxes.

Crude oil in semi-finished condition at Group Gathering
Stations (GGS) is valued at cost on absorption costing
method or net realisable value, whichever is lower.

Crude oil in unfinished condition in flow lines up to GGS /
platform is not valued as the same is not measurable.
Natural Gas is not valued as it is not stored except where
the same is parked as per the provision of relevant Gas Sale
Agreement (GSA).

Cost of finished goods and semi-finished goods are
determined on weighted average basis.

Inventory of stores and spare parts is valued at weighted
average cost or net realisable value, whichever is lower.
Provisions are made for obsolete and non-moving
inventories. Sulphur (being residual in nature) and carbon
credits are valued at net realisable value.

3.12. Revenue recognition

The Company derives revenues primarily from sale of
products and services, such as crude oil, natural gas, value
added products, pipeline transportation and processing
services.

Revenue from contracts with customers is recognized at the
point in time when the Company satisfies a performance
obligation by transferring control of a promised product
or service to a customer at an amount that reflects the
consideration to which the Company expects to be entitled
in exchange for the sale of products and service, net of
discount, taxes. The transfer of control on sale of crude oil,
natural gas and value-added products occurs at the point of

delivery, where usually the title is passed and the customer
takes physical possession, depending upon the contractual
conditions. Any retrospective revision in prices is accounted
for in the year of such revision.

Sale of crude oil and natural gas (net of levies) produced from
Exploratory/ Development Wells in Progress is deducted
from expenditure on such wells.

Any payment received in respect of contractual short lifted
gas/ VAPs quantity for which an obligation exists to make-up
such gas in subsequent periods is recognised as Contract
Liabilities in the year of receipt. Revenue in respect of such
contractual short lifted quantity of gas is recognized when
such gas is actually supplied or when the customer's right
to make-up is expired, whichever is earlier.

Revenue in respect of contractual short lifted quantity of
gas/ VAPs with no obligation for make-up is recognized
when collectability of the receivable is reasonably assured.

As per the Production Sharing Contracts for extracting the
Oil and Gas Reserves with Government of India, out of the
earnings from the exploitation of reserves after recovery of
cost, a part of the revenue is paid to Government of India
which is called Profit Petroleum. It is reduced from the
revenue from Sale of Products as Government of India's
Share in Profit Petroleum.

3.13. Other income

(i) Dividend income from investments is recognised when the
shareholder's right to receive the payment is established.

(ii) Income in respect of the following is recognized when
collectability of the receivable is reasonably assured:

(a) Interest on delayed realization from customers and
cash calls from JV partners;

(b) Liquidated damages from contractors/suppliers;

(iii) Interest income on deposit with banks is recognised at
effective interest rate applicable, interest income from other
financial assets is recognised at the effective interest rate
method on initial recognition.

3.14. Foreign Exchange Transactions

The functional currency of the Company is Indian Rupees
("?") which represents the currency of the primary economic
environment in which it operates.

Transactions in currencies other than the Company's
functional currency (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
using mean exchange rate prevailing on the last day of the
reporting period.

Exchange differences on monetary items are recognised
in the Statement of Profit and Loss in the period in which
they arise.

Non-monetary items denominated in foreign currency which
are measured in terms of historical cost are recorded using
the exchange rate at the date of the transaction.

3.15. Employee Benefits

Employee benefits include salaries, wages, Contributory
provident fund, gratuity, leave encashment towards un¬
availed leave, compensated absences, post-retirement
medical benefits and other terminal benefits.

All short term employee benefits are recognized at their
undiscounted amount in the accounting period in which they
are incurred.

(i) Defined contribution plans

Employee Benefit under defined contribution plans
comprising Post Retirement benefit scheme, Employee
pension scheme-1995, composite social security scheme
etc. is recognized based on the undiscounted amount of
obligations of the Company to contribute to the plan. The
same is paid to a fund administered through a separate trust.

(ii) Defined benefit plans

Defined employee benefit plans comprising of contributory
provident fund, gratuity, post-retirement medical benefits
and other terminal benefits, are recognized based on
the present value of defined benefit obligation which is
computed using the projected unit credit method, with
actuarial valuations being carried out at the end of each
annual reporting period. These are accounted either as
current employee cost or included in cost of assets as
permitted.

Net interest on the net defined liability is calculated by
applying the discount rate at the beginning of the period to
the net defined benefit liability or asset and is recognised
the Statement of Profit and Loss except those included in
cost of assets as permitted.

Remeasurement of defined retirement benefit plans
comprising actuarial gains and losses, the effect of the
changes to the asset ceiling (if applicable) and the return
on plan assets (excluding net interest as defined above), are
recognised in other comprehensive income in the period in
which they occur and are not subsequently reclassified to
profit or loss.

The Company contributes all ascertained liabilities with
respect to contributory provident fund, gratuity and Post¬
Retirement Medical Benefits to the ONGC's Provident
Fund Trust, ONGC's Gratuity Fund Trust (OGFT) and Post¬
Retirement Medical Benefit trust, respectively.

The retirement benefit obligation recognised in the Financial
Statements represents the actual deficit or surplus in the
Company's defined benefit plans. Any surplus resulting
from this calculation is limited to the present value of any
economic benefits available in the form of reductions in
future contributions to the plans.

(iii) Other long term employee benefits

Other long term employee benefit comprises of leave
encashment towards un-availed leave and compensated
absences. These are recognized based on the present value
of defined obligation which is computed using the projected
unit credit method, with actuarial valuations being carried
out at the end of each annual reporting period. These are
accounted either as current employee cost or included in
cost of assets as permitted.

Re-measurements of leave encashment towards un-availed
leave and compensated absences are recognized in the
Statement of profit and loss except those included in cost of
assets as permitted in the period in which they occur.

The company contributes all ascertained liability with
respect to unavailed leave to Life Insurnce Corporation of
India (LIC).

3.16. Administrative Expenses

Administrative expenses which are directly attributable
are allocated to activities and the balance is charged to
Statement of Profit and Loss as general administrative
expenses

3.17. Insurance claims

Insurance claims are accounted for on the basis of claims
admitted/expected to be admitted to the extent that the
amount recoverable can be measured reliably and it is
virtually certain to expect ultimate collection.

3.18. Income Taxes

Income tax expense represents the sum of the current tax
and deferred tax.

(i) Current tax

The tax currently payable is based on taxable profit for the
year. Taxable profit differs from 'profit before tax' as reported
in the Statement of Profit and Loss because of items of
income or expense that are taxable or deductible in other
years and items that are never taxable or deductible. The
Company's current tax is calculated using tax rates and laws
that have been enacted or substantively enacted by the end
of the reporting period and any adjustment to tax payable in
respect of previous year.

(ii) Deferred tax

Deferred tax is recognised using the balance sheet method,
providing for temporary differences between the carrying
amounts of assets and liabilities in the Financial Statements
and the corresponding tax bases used in the computation
of taxable profit. Deferred tax liabilities are generally
recognised for all taxable temporary differences. Deferred
tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable
that taxable profits will be available against which those
deductible temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at
the end of each reporting period and reduced to the extent
that it is no longer probable that sufficient taxable profits
will be available to allow all or part of the deferred tax asset
to be utilized.

Deferred tax liabilities and assets are measured at the tax
rates that are expected to apply in the period in which the
liability is settled or the asset realised, based on tax rates (and
tax laws) that have been enacted or substantively enacted
by the end of the reporting period. Deferred tax assets and
liabilities are offset if there is a legally enforceable right to
offset current tax liabilities and assets, and they relate to
income taxes levied by the same tax authority.

The measurement of deferred tax liabilities and assets
reflects the tax consequences that would follow from the
manner in which the Company expects, at the end of the
reporting period, to recover or settle the carrying amount of
its assets and liabilities.

Deferred tax assets are recognised for all deductible
temporary differences, and any unused tax losses to the
extent that it is probable that taxable profit will be available
in future against which the deductible temporary differences,
and unused tax losses can be utilised, 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 (i) neither the
accounting profit or loss nor taxable profit or loss and (ii)
does not give rise to equal taxable and deductible temporary
difference.

(iii) Current and deferred tax expense for the year

Current and deferred tax expense is recognised in the
Statement of Profit and Loss, except when they relate to
items that are recognised in other comprehensive income
or directly in equity, in which case, the current and deferred
tax are also recognised in other comprehensive income or
directly in equity respectively.

3.19.Borrowing or Finance Costs

Borrowing costs including finance cost on lease liability
specifically identified to the acquisition or construction of
qualifying assets or development wells or exploratory wells
is capitalized as part of such assets till the date of cessation
of activities related to qualifying assets. A qualifying asset
is one that necessarily takes substantial period of time to
get ready for intended use. All other borrowing costs are
charged to the Statement of Profit and Loss.

Borrowing cost also includes exchange differences arising
from foreign currency borrowings to the extent that they are
regarded as an adjustment to interest costs that is equivalent
to the extent to which the exchange loss does not exceed
the difference between the cost of borrowing in functional
currency (?) when compared to the cost of borrowing in a
foreign currency.

When there is an unrealised exchange loss which is treated
as an adjustment to interest and subsequently there is a
realised or unrealised gain in respect of the settlement or
translation of the same borrowing, the gain to the extent
of the loss previously recognised as an adjustment is
recognised as an adjustment to interest.

3.20. Rig Days Costs

Rig movement costs are booked to the next location drilled/
planned for drilling. Abnormal Rig days' costs are considered
as un-allocable and charged to the Statement of Profit and

Loss.