1.3.0 Material accounting policies
1.3.1 Statement of compliance
The Financial Statements have been prepared in
accordance with the Indian Accounting Standards (Ind
AS) issued by the Ministry of Corporate Affairs notified
under the Companies (Indian Accounting Standards)
Rules, 2015 as amended, presentation requirements of
Division II of Schedule III to the Companies Act, 2013 and
Guidance Note on Accounting for Oil and Gas Producing
Activities (Ind AS) issued by the Institute of Chartered
Accountants of India.
1.3.2 Basis of preparation
The Financial Statements are prepared on going concern
basis under the historical cost convention using accrual
basis of accounting except for assets and liabilities
which have been measured at fair value such as certain
financial assets and financial liabilities. (refer notes 43
for financial instruments measured at fair value).
Accounting policies have been consistently applied
except where a newly issued accounting standard is
initially adopted or a revision to an existing accounting
standard requires a change in the accounting policy
hitherto in use.
As the operating cycle cannot be identified in normal
course due to the special nature of industry, the same
has been assumed to have duration of 1 year. Accordingly,
all assets and liabilities have been classified as current
or non-current as per the Company's operating cycle
and other criteria set out in Ind AS-1 "Presentation of
Financial Statements" and Schedule III to the Companies
Act, 2013.
The Financial Statements are presented in Indian
Rupees and all values are rounded off to the nearest two
decimal crore, except otherwise stated.
1.4.0 Revenue recognition
1.4.1 Revenue from contracts with customers
The Company derives revenues primarily from sale
of products such as Crude Oil, Natural Gas, Liquefied
Petroleum Gas (LPG), Condensate, Renewable Energy
and sale of services such as Pipeline Transportation
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 and is
measured at the amount of transaction price allocated
to that performance obligation. Discount, taxes & duties
(other than excise duty) are excluded from revenue.
As per the Production or Revenue 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 eligible cost, a part of the
revenue is paid to Government of India which is called
Profit Petroleum or Revenue Sharing. It is reduced from
the revenue from Sale of Products as Government of
India's Share in Profit Petroleum or Revenue Sharing.
The transfer of control on sale of Crude Oil, Natural Gas,
Liquefied Petroleum Gas (LPG), Renewable energy and
Condensate occurs either at the point of delivery or the
point of receipt, where usually the title is passed and/
or the customer takes physical possession, depending
upon the contractual conditions. Any retrospective
revision in prices is accounted for in the year of such
revision.
Claims on Central Government / Petroleum Planning
& Analysis Cell (PPAC) towards gas pool revenue are
accrued based on quantity delivered to the customers
at discounted price, in respect of which revenue is
recognized when collectability of the receivable is
reasonably certain.
Revenue from sale of Renewable Energy Certificates
(REC) is recognized on sale of the certificates through
the Exchange. i.e., when the receivable is reasonably
certain.
Revenue in respect of contractual short- lifted quantity
of gas is recognized when the customer's right to such
quantity is expired and there is reasonable certainty
regarding its ultimate collection.
Sale and transportation of crude oil and natural gas are
based on mutually agreed terms between the parties/
governed by the Government directives issued from
time to time. Subsequent changes in terms, if any, are
recognized in the period of change. Such retrospective
revision in prices is not determinable at the time of sale.
1.4.2 Contract liabilities
The Company recognises contract liability for
consideration received for short lifted quantity of gas
under take or pay arrangements for which the customer
has right to take related volume in future (i.e. unsatisfied
performance obligations) and for the penalties that
may be raised by the contracting party in case of a
dispute and reports these amounts as advances from
customers or as penalties that may be payable in future
in the balance sheet. The un-accrued amounts are
not recognised as revenue till all related performance
obligations are fulfilled or the customer's right to such
quantities is expired.
1.4.3 Other income
(i) Dividend income from investments is recognized
when the Company's right to receive payment is
established.
(ii) Interest income is recognized on a time proportion
basis considering the amount outstanding and the
effective interest rate applicable which is the rate
that equalizes discounted estimated future cash
receipts through expected life of the financial
asset to that asset's net carrying amount on initial
recognition. Interest on income tax refund is
accounted for upon finalisation of assessments.
(iii) Insurance claim other than that for transit loss of
stores items are accounted for on final acceptance
by the Insurance Company.
(iv) Revenue on account of subsidies/grants and
interest on delayed realization from customers
are recognized when there is certainty of ultimate
realization.
(v) Recovery of liquidated damages is recognized
in the Statement of Profit & Loss as income at
the time of occurrence except in case of Joint
Venture Contracts (JVC) which are governed by the
respective Production Sharing/Revenue Sharing
Contracts. In case of return/refund of the liquidated
damages, the same is accounted for as other
expenses. In case of any dispute over the liquidated
damages, provision is created in the accounts.
(vi) Income from Business development services
such as technical and administrative support,
maintenance of Right of Way, cathodic protection,
facilities extended to other organisations etc. are
recognised at a point in time when the Company
satisfies its performance obligation.
(vii) Income in respect of OFC fibre leasing is recognised
periodically over the contract term.
(viii) Other claims are recognized when there is a
reasonable certainty of recovery.
1.5.0 Leases
1.5.1 The Company as lessor
The Company has classified Numaligarh Siliguri Product
Pipeline as operating lease as per the provisions of Ind
AS 116.
Rental income from operating leases is recognized
on a straight-line basis over the term of the relevant
lease. Initial direct costs incurred in negotiating and
arranging an operating lease are added to the carrying
amount of the leased asset and recognized as expense
on a straight-line basis over the lease term on the same
basis as lease income.
1.5.2 The Company as lessee
The Company has applied Ind AS 116 "Leases" to service
contracts of equipment, land, buildings, vehicles, etc.
to evaluate whether these contracts contain lease or
not. Based on evaluation of the terms and conditions
of the arrangements, the Company assesses such
arrangements to be leases.
The Company has exercised the option not to apply Ind
AS 116 to intangible assets.
1.5.2.1 Lease term
The Company determines the lease term as the non¬
cancellable period of a lease, together with both periods
covered by an option to extend the lease if the Company
is reasonably certain to exercise that option; and
periods covered by an option to terminate the lease if
the Company is reasonably certain not to exercise that
option. In assessing whether the Company is reasonably
certain to exercise an option to extend a lease, or not
to exercise an option to terminate a lease, it considers
all relevant facts and circumstances that create an
economic incentive for the Company to exercise the
option to extend the lease, or not to exercise the option
to terminate the lease.
1.5.2.2 Right of use assets:
The Company recognises right-of-use assets at the
commencement date of the lease (i.e., the date the
underlying asset is available for use). Right of use
assets are recognized at cost, less any accumulated
depreciation and impairment losses (Ind AS 36), if any.
The cost of right of use assets includes 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, any initial direct costs incurred and
restoration obligations, if any.
1.5.2.3 Depreciation:
The right-of-use assets are depreciated using
the straight-line method, beginning from the
commencement date over the lease term or useful life
of right-of-use assets whichever is earlier.
1.5.2.4 Lease liabilities:
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 incremental borrowing rate as applicable.
1.5.2.5 Finance cost on lease liabilities:
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 on "Borrowing costs".
1.5.2.6 Non lease component:
The Company's contracts involve a number of additional
services and components including personnel cost,
maintenance, drilling related activities, consumables
and other items. In most of such contracts, the
additional services/non-lease components constitute
significant portion of the overall contract value. Where
the additional services/non-lease components are
not separately priced, the Company allocates the
consideration paid based on the relative stand-alone
prices of the lease and non-lease components. Further,
these non-lease components are not included in the
measurement of lease liability.
1.5.2.7 Reassessment of lease liabilities:
The Company remeasures the carrying amount of lease
liabilities if there is a change in the lease term or a
change in the lease payments.
1.5.2.8 Short term lease and low value assets leases:
Leases for which lease term ends within 12 months
is classified as short-term leases. The Company has
elected short term leases and low value asset leases
for recognition exemption in terms of Ind AS 116.
The Company recognizes the lease rental payment
associated with short term lease and low-value asset
leases as expense in the Statement of Profit & Loss over
the lease term.
1.6.0 Foreign currency transactions and
translations
The Financial Statements are presented in Indian
Rupees, which is also the Company's functional
currency.
In preparing the Financial Statements of the Company,
transactions in currencies other than Indian Rupees
are recognized 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 retranslated at the closing rates
prevailing at that date. Non-monetary items carried at
fair value that are denominated in foreign currencies
are translated at the rate prevailing at the date when
the fair value was measured. Non-monetary items that
are measured in terms of historical cost in a foreign
currency are translated using the exchange rate as
on the dates of the initial transactions. Transaction
gains and losses realized upon settlement of foreign
currency transactions are included in determining net
profit / loss for the period in which the transaction is
settled.
Exchange differences on monetary items are recognized
in the statement of profit and loss in the period in which
they arise except for:
a) Exchange differences on foreign currency
borrowings relating to acquisition or construction
of qualifying assets to the extent they are regarded
as an adjustment to interest cost ;
b) In accordance with para D13AA of Ind AS 101,
First-time Adoption of Indian Accounting
Standards, the Company continues to exercise
policy adopted under previous IGAAP and
accordingly exchange differences arising on long¬
term foreign currency monetary items recognised
as at 31st March, 2016 were accumulated in a "Foreign
Currency Monetary Item Translation Difference
Account" and amortized over the balance period of
such long term foreign currency monetary item by
recognition as income or expense.
1.7.0 Borrowing costs
Borrowing cost consists of interest and other cost
incurred in connection with borrowing of funds and
includes exchange difference arising from foreign
currency borrowings to the extent that they are regarded
as an adjustment to interest cost. Borrowing cost also
includes finance cost on decommissioning and lease
liability.
Borrowing costs directly attributable to the acquisition
or construction of qualifying assets are capitalized to
the cost of those assets, until such time the assets are
substantially ready for their intended use.
Capitalisation of borrowing costs is suspended when
active development activity on the qualifying assets is
interrupted other than on temporary basis and charged
to the statement of profit and loss.
All other borrowing costs are recognized in the
statement of profit and loss in the period in which they
are incurred.
1.8.0 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.
(i) Grant related to Income (Revenue Grants)
The Company recognizes revenue grants in the
statement of profit and loss as a deduction in the
reporting related expense.
(ii) Grant relating to Assets (Capital Grants)
Government grants with the primary condition
that the Company should purchase construct
or otherwise acquire non-current assets are
recognized as deferred income in the balance
sheet and transferred to the statement of profit
and loss in the ratio of depreciation / depletion
calculated on the related assets.
1.9.0 Employee benefits
1.9.1 Retirement benefit costs and termination
benefits:
Payments to defined contribution plans (such as
superannuation benefit scheme fund) are charged to
the statement of profit and loss (other than expenses to
be capitalized), when employees have rendered service
entitling them to the contributions.
The cost of providing benefits under defined
benefit plans (such as provident fund, gratuity, leave
encashment, post-retirement medical benefits, defined
benefit pension, Social security schemes etc) are
determined separately for each plan using the projected
unit credit method, with actuarial valuations being
carried out half-yearly and annually. This attributes
the increase in present value of the defined benefit
obligation resulting from employee service in the
current period to determine current service cost. The
current service cost as stated above and past service
costs, resulting from a plan amendment are recognized
in the statement of profit and loss under 'employee
benefits expense'.
Net interest which is recognized in the statement
of profit and loss under 'employee benefits expense'
represents the net change in present value of plan
obligations and the value of plan assets resulting from
the passage of time, and is determined by applying
the discount rate to the present value of the benefit
obligation and to the fair value of plan assets at the
beginning of the year, taking into account expected
changes in the obligation or plan assets during the
year.
Re-measurement of the defined benefit liability and
asset, comprising actuarial gains and losses, and the
return on plan assets (excluding amounts included in net
interest described above) other than capitalised portion
are recognized in other comprehensive income in the
period in which they occur and are not subsequently
reclassified to the statement of profit and loss.
The Company presents remeasurement of defined
benefit plans as a part of retained earnings (refer
statement of changes in equity).
Surplus or deficit recognized in the Financial Statements
for each defined benefit plan is the difference between
the present value of the defined benefit obligation
and the fair value of plan assets. The deficit for each
plan managed through separate Trust fund is to be
settled directly to such Trust fund. Defined benefit plan
surpluses are only recognized to the extent they are
recoverable, naturally by way of refund or reductions in
future contributions to the plans.
Payments made under Voluntary Retirement Scheme or
any other early separation scheme are charged to the
statement of profit and loss on incurrence.
1.9.2 Short-term and other long-term employee
benefits
A liability is recognized for benefits accruing to
employees in respect of wages and salaries (including
performance related pay), annual leave, sick leave etc
in the period the related service is rendered at the
undiscounted amount of the benefits expected to be
paid in exchange for that service.
Liabilities recognized in respect of short-term employee
benefits are measured at the undiscounted amount of
the benefits expected to be paid in exchange for the
related service.
Liabilities recognized in respect of other long-term
employee benefits are measured at the present value
of the estimated future cash outflows expected to be
made by the Company in respect of services provided
by employees up to the reporting date.
1.10.0 Taxation
1.10.1 Current Tax
Income tax assets and liabilities are measured at the
amount expected to be recovered from or paid to the
taxation authorities. The tax rates and tax laws used
to compute the amount are those that are enacted or
substantively enacted, at the reporting date.
The Company evaluates positions taken in the tax
returns with respect to situations in which applicable
tax regulations are subject to interpretation at each
reporting date and considers whether it is probable
that a taxation authority will accept an uncertain tax
treatment.
In respect of disputed cases, when an appeal is decided
by appellate authority, the corresponding appeal effect
is given in the accounts only after receipt of appellate
order from the concerned Department/ Authority, if not
further contested.
1.10.2 Deferred tax
(i) Deferred tax is recognized using liability method
on 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.
(ii) Deferred tax liabilities are generally recognized for
all taxable temporary differences.
(iii) Deferred tax assets are generally recognized
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 utilized.
(iv) 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 the benefits of all or part of the deferred tax
asset to be utilized. Any such reduction shall be
reversed to the extent when it becomes probable
that sufficient taxable profit will be available.
(v) In assessing the recoverability of deferred tax
assets, the Company relies on the same forecast,
assumptions used elsewhere in the Financial
Statements and in other management reports/
estimates.
(vi) Deferred tax liabilities and assets are measured
at the tax rates that are expected to apply in the
period in which the liability is to be settled or the
asset to be realized. The tax rates and tax laws
used to compute the amount are those that are
enacted or substantively enacted, at the reporting
date in the countries where the joint operations
operates and generates taxable income.
(vii) The Company offsets deferred tax assets and
deferred tax liabilities as it has a legally enforceable
right to set off current tax assets and current tax
liabilities and the deferred tax assets and deferred
tax liabilities relate to income taxes levied by the
same taxation authority.
1.11.0 Oil and gas exploration, evaluation
and development expenditure
The Company has applied "Ind AS 106" and the "Guidance
Note on Accounting for Oil and Gas Producing Activities
(for entities to whom Ind AS is applicable)" issued by the
Institute of Chartered Accountants of India ("ICAI"), for
the accounting of Oil and Gas Assets and Exploration and
Evaluation assets. The Company considers Exploration
and Evaluation Assets as intangible assets.
1.11.1 Pre-Acquisition, Acquisition, Exploration and
Evaluation Costs
(i) Pre-Acquisition costs:
Pre-Acquisition costs includes expenses such as
data collection and analysis cost etc. which are
incurred prior to obtaining the rights to explore,
develop and produce Oil and Gas assets. These
costs are charged to the Statement of Profit and
Loss in the year of incurrence.
(ii) Acquisition costs:
a) Acquisition costs include cost of land acquired
for drilling operations, cost of temporary
occupation of the land, crop and surface
compensation paid to occupiers, registration
fee, legal cost, signature bonus, brokers'
fees, consideration paid for farm-in
arrangements and other costs incurred for
acquiring rights to explore, drill and produce
oil and gas.
b) These costs are initially recorded under
Exploration and Evaluation Assets except cost
of land acquired for drilling operations which
are disclosed as "Acquisition cost-land" under
capital work in progress.
c) On determination of proved developed
reserves, associated acquisition costs are
transferred to Property, Plant and Equipment
as "Oil & Gas Assets".
d) Acquisition cost relating to an exploratory
well that is determined to have no proved
reserves and its status is decided as dry or
of no further use for exploration purpose,
is charged to Statement of Profit and Loss.
In such cases, against the land value forming
part of acquisition cost, a nominal amount
of '100 per bigha is transferred to
Freehold land under Property, Plant and
Equipment and the remaining carrying value
of land is charged off to Statement of Profit
and Loss.
e) Cost for retaining the mineral interest in
properties like lease carrying cost, license
fees and other cost are charged as expense
when incurred.
(iii) Exploration & Evaluation Cost (E&E cost):
a) Geological and geophysical costs, including
seismic surveys for exploration purposes are
charged off to Statement of Profit and Loss,
as and when incurred.
b) Costs including allocated depreciation on
support equipment and facilities involved
in drilling and equipping exploratory and
appraisal wells (such as rig, mud plant, well
logging equipment, cementing unit etc.)
allocated interest on support equipment
taken on lease and cost of exploratory-type
drilling stratigraphic test wells are initially
shown as Exploration and Evaluation Assets
(E&E Assets), till the time these are either
transferred to Property, Plant and Equipment
as "Oil & Gas Assets", on establishment of
proved developed reserves or are charged off
as expense in Statement of Profit and Loss,
when determined to be dry or of no further
use.
c) E&E costs related to each exploratory well are
not carried over unless it could be reasonably
demonstrated that there are indications of
sufficient quantity of reserves and activities
are firmly planned in near future for further
assessing the reserves and economic and
operating viability of the project. Costs of
written off exploratory wells are not reinstated
in the books even if they start producing
subsequently.
d) Estimated decommissioning cost is included
in the carrying value of exploration and
evaluation asset.
1.11.2 Development Cost
Costs incurred on development activities such as
drilling of development wells and service wells, setting
of production and processing of plant and facilities
including allocated depreciation on support equipment
and facilities (such as rig, mud plant, well logging
equipment, cementing unit etc.) and allocated interest
on support equipment taken on lease are initially shown
under Capital Work in Progress as "Development Cost
wells" and are capitalized as "Oil & Gas Asset" under
Property, Plant and Equipment on completion of well.
Cost of dry development well, if any, is also capitalized as
Oil and Gas Asset under Property, Plant and Equipment
upon completion of the well.
1.11.3 Production Cost
Production Cost consists of direct and indirect costs
incurred to operate and maintain wells and related
equipment and facilities, including depreciation and
applicable operating cost of support equipment and
facilities. These costs are charged off to Statement of
Profit and Loss, as and when incurred.
1.11.4 Side-Tracking Expenditure
In case of exploratory wells, the cost of abandoned
portion of side tracked well is charged off to Statement
of Profit and Loss. In case of development wells, the
entire cost of abandoned portion and side- tracking
is capitalized. In case of existing producing wells, the
cost of side - tracking is capitalized if it increases the
proved developed reserves, otherwise it is charged off
to Statement of Profit and Loss.
1.12.0 Research & Development Expenditure
All revenue expenditure incurred for Research &
Development Projects/Schemes, net of grants-in-aid
(other than those related to asset) if any, are charged to
the Statement of Profit and Loss.
1.13.0 Property, Plant and Equipment (PPE)
including Capital Work in Progress (CWIP)
i. Property, plant and equipment including Oil and
Gas assets are stated at cost, less accumulated
depreciation, depletion and impairment losses.
Such cost includes the cost of replacing part of
the plant and equipment, if the recognition criteria
are met, the present value of the initial estimate
of any decommissioning or site abandonment or
restoration obligation, wherever applicable and
eligible borrowing costs, wherever applicable.
Refer to significant accounting judgements,
estimates and assumptions (Note 1.2.1) and
provisions (Note 1.15.2) for further information
relating to decommissioning cost and its provision.
ii. Assets which are in the course of construction are
initially kept under capital work in progress and
capitalized when the assets are available for use
in the manner as intended by the management.
Such cost includes the costs incurred during
construction period and the present value
of the initial estimate of any abandonment,
decommissioning or site restoration obligation,
wherever applicable. Capital work in progress is
stated at cost, net of accumulated impairment
loss, if any.
iii. Borrowing cost consisting of interest on term
loan and unwinding of interest on lease liability in
respect of leases entered for support equipment
are capitalised in CWIP or the relevant item of
PPE (as the case may be), provided the criteria for
recognition of borrowing cost as a component of
carrying value of item of PPE has been fulfilled.
iv. If any item held under CWIP is not as per the
defined requirement or specifications and has no
further use, a provision is recognized for the write
off of such item, until such item is actually written
off.
v. Items such as spare parts, stand-by equipment
and servicing equipment which meet the definition
of Property, Plant and Equipment are capitalised.
Other spare parts are carried as inventory and
recognized in the Statement of Profit and Loss on
consumption.
vi. Parts of an item of Property, Plant and Equipment
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 and are depreciated
separately based on their specific useful lives not
exceeding the remaining useful life of respective
plant and equipment. Where an asset or part of an
asset that was separately depreciated is replaced
and it is probable that future economic benefits
associated with the item will flow to the Company,
the expenditure is capitalized and the carrying
amount of the replaced asset is derecognized.
vii. Major shut-down and overhaul expenditure is
capitalized as the activities undertaken to improve
the future economic benefits expected to arise
from the asset. Inspection costs associated with
major maintenance programs from which future
economic benefits are expected to flow, are
capitalized and depreciated over the period to the
next inspection.
viii. Technical know-how /license fee relating to plants/
facilities and specific software that are integral
part of the related hardware are capitalized as part
of cost of the underlying asset.
ix. Oil and Gas assets forms part of PPE 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.
Oil and Gas assets which comprise of producing
wells, related acquisition cost and production
facilities are depleted using a unit-of-production
method. The capitalised cost of producing wells
and production facilities including estimated
decommissioning and abandonment cost (net
of salvage value, accumulated depreciation and
impairment charge) are depleted over proved
developed reserves. Acquisition cost is depleted
over proved reserves. Rate of depletion is
determined based on production from the Oil/
Gas field or a group of Oil/Gas fields identified
to the related reserves having homogeneous
geological features. Estimation of oil and
natural gas reserves are done annually at the year
end and the impact of changes in the estimated
proved reserves are d eal t with prospectively by
depleting the remaining carrying value of the
asset.
x. Other property, plant and equipment excluding
'Land-freehold' and 'Right of use (ROU) assets'
are depreciated based on useful life of the asset
under "Written down value method" as specified in
Schedule II to the Companies Act., 2013. Freehold
land are not depreciated.
xi. Low value items not exceeding '5,000 are fully
depreciated at the time of addition. Residual value
(net of estimated cost of disposal) of property plant
and equipment other than well asset is determined
considering past experience and technical
assessment (if applicable) and is upto 5% of the
original cost. The residual value of well assets are
determined based on technical assessment of
the net sale value of scrap that may be extracted
from the wells, depending upon the location and
condition of the wells. The typical useful life of
other major property, plant and equipment are as
follows:
xii. 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 furbished/revamped
PPE (other than of Oil and Gas Assets) which are
capitalized separately is provided for over the
reassessed useful life.
xiii. The expected useful life of property, plant and
equipment other than Oil and gas assets are
reviewed on an annual basis. The expected
useful life of Oil and Gas assets are reviewed by
estimating the reserves for the Oil and Gas assets
annually. Further, the residual value of PPE is also
reassessed annually. Impact arising due to changes
in useful life or the change in residual value, are
accounted for prospectively. Company considers
the impact of health, safety and environmental
legislation in its assessment of expected useful
lives and estimated residual values.
xiv. Any tangible asset other than well assets retired
from active use and future economic benefits are
expected to arise on disposal of the asset is carried
as plant & equipment at lower of ' 1000 or 5% of the
original cost and the balance written down value,
is charged off.
xv. An item of property, plant and equipment other
than well assets is derecognised upon disposal or
when no future economic benefits are expected
to arise from the continued use or disposal of the
asset. Any gain or loss arising on de-recognition
of the asset is included in the statement of
Profit & Loss in the period in which the item is
derecognized. Any gain or loss arising on actual
sale of the asset is included in the Statement of
Profit and Loss in the period in which the item is
actually sold as scrap.
xvi. Producing well assets are derecognized when the
designated oil/gas field or a group of oil/gas fields
ceases to produce.
xvii. Assets provided to employees as per the
Company's internal schemes are also classified as
property, plant and equipment and are depreciated
under written down value method based on the
useful life as defined in the internal schemes of
the Company or useful life as specified in Schedule
II of the Companies Act, whichever is lower. Such
assets are derecognised on expiry of useful life as
defined in the internal scheme or buy-back of such
assets by the employees as per aforesaid internal
schemes.
The assets provided to employees having its useful
life different than as specified in schedule II of the
Act are as follows:
Further, soft furniture given to employees as per
the aforesaid internal scheme, are fully depreciated
in the year of purchase.
xviii. Physical verification of the property, plant
and equipment (other than PPE items given to
employees as per the policy of the Company) is
carried out by the Company in a phased manner
to cover all the items over a period of three years.
The discrepancies noticed, if any, are accounted
for in the year in which such differences are
found and provision is created in respect of these
discrepancies, till the time the same is written off.
1.13.1 Intangible assets
The Company follows cost model for recognition and
measurement of intangible assets. Intangible assets
are stated at the amount initially recognized less
accumulated amortization and accumulated impairment
losses, if any.
Cost of right of way of land with indefinite useful lives
are not amortized but tested for impairment annually
at the cash-generating unit level. The assessment of
indefinite life is reviewed annually to determine whether
the indefinite life continues or not. If not, the change
in useful life from indefinite to finite is made on a
prospective basis.
Cost of computer software is amortized on straight
line basis over the useful life upto 5 years from the
date of capitalization. The amortisation period and
the amortisation method for Computer Software are
reviewed annually. Computer Software are assessed
for impairment whenever there is an indication that the
intangible asset may be impaired.
Any intangible asset when determined obsolete and no
further use, is written off.
1.13.2 Impairment of property, plant & equipment
(PPE), E&E assets and other Intangible assets
At the end of each reporting period, the Company reviews
whether there is an indication that its Property, Plant
and Equipment, Capital Work in Progress, Exploration
and Evaluation Assets and Intangible Assets may be
impaired. E&E Assets are reviewed for indicators of
impairment as per Ind AS 106. If any indication exists,
the Company estimates the asset's recoverable amount,
which is the higher of cash-generating unit's (CGU)
fair value less costs of disposal and its value in use.
The recoverable amount is determined for CGU as a
whole. For this purpose, Producing fields, LPG plant,
Transportation Pipeline and Renewable Energy Units
(other than captive power plants) are considered as
Cash Generating Units (CGU).
Corporate assets and common service assets are also
allocated to individual cash- generating units on a
reasonable and consistent basis. When the carrying
amount of all assets under the CGU exceeds the
recoverable amount of CGU, the asset is impaired and
is written down to its recoverable amount, by charging
the impairment loss in the Statement of Profit and Loss.
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 CGU.
An assessment is made at each reporting date to
determine whether there is an indication that previously
recognised impairment losses no longer exist or have
decreased. If such indication exists, the Company
estimates the CGU's recoverable amount. A previously
recognised impairment loss is reversed only if there has
been a favourable change in the assumptions used to
determine the asset's recoverable amount since the last
impairment loss was recognised.
When an impairment loss is subsequently reversed, the
carrying amount of the asset or group of assets covered
under the CGU is increased to the revised estimate of
its recoverable amount, up to the carrying amount
that would have been determined had no impairment
loss been recognized for the asset or group of assets
covered under the CGU in prior years. A reversal of an
impairment loss is recognized in the Statement of Profit
and Loss.
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.
1.14.0 Inventories
Inventory of Finished goods of Crude Oil, Liquefied
Petroleum Gas (LPG), and condensate are valued at
cost determined using absorption costing method or
net realizable value, whichever is lower. Cost of finished
goods is determined based on direct cost and directly
attributable services cost including depreciation and
depletion. The value of such inventories includes excise
duty, royalty and other levies, as applicable. Excise duty
on finished stocks lying at manufacturing locations is
provided for at the assessable value applicable at each
of the locations based on end use. Net realizable value
represents the estimated selling price of inventories
less all estimated costs necessary to effect the sale.
Crude oil in unfinished condition in the flow line up to
Group Gathering Station and Natural Gas in Pipeline are
not valued, as these pipeline fills are necessary for the
operation of the facility. Crude oil lying in flowlines from
Group Gathering Station (GGS) / Oil Collecting Station
(OCS) to tank farms are not valued, as these pipeline fills
will always remain and are necessary for the operation
of the facility. Crude oil in semi-finished condition in
tanks in GGS/OCS are measured and valued at cost
on absorption costing method or net realisable value,
whichever is lower.
Inventory of stores and spares (including inventory
in transit) and other raw materials are valued using
weighted average cost or net realizable value whichever
is lower.
Obsolete / unserviceable items, as and when identified,
are charged to cost. In addition, at each Balance Sheet
date, a provision equivalent to 95% of the book value
of inventory towards slow-moving items is made in
respect of all those items of stores & spares which have
not been consumed in last four years.
Renewable Energy Certificates (REC) received by the
Company on the basis of generation of renewable
energy and certified by the competent authority, are
held for trading and are not valued.
Physical verification of inventory including store and
spare items (excluding materials in-transit) is carried
out by the Company in a phased manner to cover all the
items. Stores and Spares items of high and medium
value are physically verified every year whereas
items carrying low value are physically verified over a
period of 3 years. The discrepancies noticed, if any, are
accounted for in the year in which such differences are
found.
|