2.1 Material accounting policies(a) Property, plant and equipment (PPE)
The cost of an item of property, plant and equipment
shall be recognised as an asset if, and only if it is
probable that future economic benefits associated
with the item will flow to the Company and the cost
of the item can be measured reliably.
Property, plant and equipment (including capital work
in progress) is stated at cost, net of accumulated
depreciation and accumulated impairment losses,
if any. Such cost includes the cost of replacing part
of the plant and equipment and borrowing costs for
long-term construction projects if the recognition
criteria are met. When significant parts of property,
plant and equipment are required to be replaced at
intervals, the Company depreciates them separately
based on their specific useful lives. Likewise, when
a major overhaul is performed, its cost is recognised
in the carrying amount of the plant and equipment
as a replacement if the recognition criteria are
satisfied. All other repair and maintenance costs
are recognised in the Statement of Profit and Loss
as incurred. The present value of the expected cost
for the decommissioning of an asset after its use is
included in the cost of the respective asset if the
recognition criteria for a provision are met. Material
items such as spare parts, stand-by equipment and
service equipment are classified as PPE when they
meet the definition of PPE as specified in Ind AS 16 -
Property, Plant and Equipment.
Cost of an item of property, plant and equipment
comprises its purchase price, including import duties
and non-refundable purchase taxes, after deducting
trade discounts and rebates, any directly attributable
cost of bringing the item to its working condition for
its intended use and estimated costs of dismantling
and removing the item and restoring the site on which
it is located.
The cost of a self-constructed item of property, plant
and equipment comprises the cost of materials and
direct labour, any other costs directly attributable to
bringing the item to working condition for its intended
use, and estimated costs of dismantling and removing
the item and restoring the site on which it is located.
Freehold Land and buildings are measured at
historical cost less accumulated depreciation on
buildings and impairment losses, if any.
An item of property, plant and equipment and any
significant part initially recognised is derecognised
upon disposal or when no future economic benefits
are expected from its use or disposal. Gains or losses
arising from derecognition of the asset are measured
as the difference between the net disposal proceeds
and the carrying amount of the asset and are
recognised in the Statement of Profit and Loss when
the asset is derecognised.
Subsequent expenditure is capitalised only if it
is probable that the future economic benefits
associated with the expenditure will flow to the
company and the subsequent expenditure can be
measured reliably.
The Company has reassessed useful life and
residual value of Property, Plant and Equipment and
depreciation method from Straight-Line Method to
Written Down Value for Power Plant based on internal
technical evaluation
Depreciation is calculated on the cost of items of
property, plant and equipment less their estimated
residual values using the straight-line method
over their estimated useful lives, and is generally
recognised in the statement of profit and loss.
Depreciation is provided under straight line basis
except for captive power plant which is calculated
using written down value method using the estimated
useful lives of the assets as follows -
Depreciation on property, plant and equipment
added / disposed-off during the year is provided on
pro-rata basis with reference to the date of addition/
disposal. The management has estimated, supported
by technical assessment by experts, the useful lives
of certain plant and equipment as 5 to 25 years. These
lives are lower than those indicated in Schedule II to
the Companies Act, 2013. The management believes
that these estimated useful lives are realistic and
reflect fair approximation of the period over which
the assets are likely to be used.
The residual values, useful lives, and methods of
depreciation of property, plant and equipment are
reviewed at each financial year end and adjusted
prospectively, if appropriate.
If significant parts of an item of property, plant and
equipment have different useful lives, then they are
accounted for as separate items (major components)
of property, plant and equipment. Any gain or loss on
disposal of an item of property, plant and equipment
is recognised in profit or loss.
The cost of property, plant and equipment at 1 April
2016, the Company's date of transition to Ind AS,
was determined with reference to its carrying value
recognised as per the previous GAAP (deemed cost),
as at the date of transition to Ind AS.
Production stripping costs
Production stripping costs are incurred to extract
the ore in the form of inventories and/or to improve
access to an additional component of an ore body or
deeper levels of material.
The Company recognises a stripping activity asset in
the production phase if, and only if, all of the following
conditions are met: it is probable that the future
economic benefit (improved access to the ore body)
associated with the stripping activity will flow to the
Company, the Company can identify the component
of the ore body for which access has been improved
and the costs relating to the improved access to that
component can be measured reliably.
Such costs are presented within mining assets.
After initial recognition, stripping activity assets
are carried at cost less accumulated amortisation
and impairment, if any. The expected useful life of
the identified component of the ore body is used to
depreciate or amortise the stripping asset.
(b) Intangible assets
Intangible assets acquired separately are measured
on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost
less accumulated amortisation and accumulated
impairment losses, if any. Internally generated
intangible assets, excluding capitalised development
costs, are not capitalised and expenditure is reflected
in the Statement of Profit and Loss in the year in
which the expenditure is incurred.
Cost of an item of intangible assets comprises its
purchase price, including import duties and non¬
refundable purchase taxes, after deducting trade
discounts and rebates, any directly attributable cost
of preparing the asset for its intended use.
Subsequent expenditure is capitalised only when it
increases the future economic benefits embodied in
the specific asset to which it relates.
The useful lives of intangible assets are assessed as
either finite or indefinite.
Intangible assets with finite lives are amortised over
the useful economic life and assessed for impairment
whenever there is an indication that the intangible
asset may be impaired. The amortisation period and
the amortisation method for an intangible asset with
a finite useful life are reviewed at least at the end
of each reporting period. Changes in the expected
useful life or the expected pattern of consumption
of future economic benefits embodied in the asset
are considered to modify the amortisation period or
method, as appropriate, and are treated as changes
in accounting estimates.
Intangible assets with indefinite useful lives are not
amortised, but are tested for impairment annually,
either individually or at the cash-generating unit level.
The assessment of indefinite life is reviewed annually
to determine whether the indefinite life continues to
be supportable. If not, the change in useful life from
indefinite to finite is made on a prospective basis.
A summary of the policies applied to the Company's
intangible assets is, as follows:
Gains or losses arising from derecognition of an
intangible asset are measured as the difference
between the net disposal proceeds and the carrying
amount of the asset and are recognised in the
Statement of Profit and Loss when the assets is
derecognised.
The cost of intangible assets at 1 April 2016,
the Company's date of transition to Ind AS, was
determined with reference to its carrying value
recognised as per the previous GAAP (deemed cost),
as at the date of transition to Ind AS.
(c) Current versus non-current classification
The Company presents assets and liabilities in the
balance sheet based on current /
non-current classification. The operating cycle is the
time between the acquisition of assets for processing
and their realisation in cash and cash equivalents.
The Company has identified twelve months as its
operating cycle for determining current and non¬
current classification of assets and liabilities in the
Balance sheet, other than deferred tax assets and
liabilities which are classified as non-current assets
and liabilities respectively.
For this purpose, current asset and liabilities include
the current portion of non-current assets and
liabilities respectively.
(d) Leases
The Company assesses at contract inception whether
a contract is, or contains, a lease. That is, if the
contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration.
Company as a lessee
The Company applies a single recognition and
measurement approach for all leases, except for
short-term leases and leases of low-value assets. The
Company recognises lease liabilities to make lease
payments and right-of-use assets representing the
right to use the underlying assets.
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 measured at cost, less any accumulated
depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities. The cost
of right-of-use assets includes the amount of lease
liabilities recognised, initial direct costs incurred, and
lease payments made at or before the commencement
date less any lease incentives received. Right-of-use
assets are depreciated on a straight-line basis over
the shorter of the lease term and the estimated useful
lives of the assets.
I f ownership of the leased asset transfers to the
Company at the end of the lease term or the
cost reflects the exercise of a purchase option,
depreciation is calculated using the estimated useful
life of the asset.
The right-of-use assets are also subject to impairment.
Refer to the accounting policies in section (e)
Impairment of non-financial assets.
Below are the life of right of use assets considered in
books:-
Lease Liabilities
At the commencement date of the lease, the Company
recognises lease liabilities measured at the present
value of lease payments to be made over the lease
term. The lease payments include fixed payments
(including in substance fixed payments) less any lease
incentives receivable, variable lease payments that
depend on an index or a rate, and amounts expected
to be paid under residual value guarantees.
In calculating the present value of lease payments,
the Company uses its incremental borrowing rate at
the lease commencement date because the interest
rate implicit in the lease is not readily determinable.
After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made.
In addition, the carrying amount of lease liabilities
is remeasured if there is a modification, a change in
the lease term, a change in the lease payments (e.g.,
changes to future payments resulting from a change
in an index or rate used to determine such lease
payments) or a change in the assessment of an option
to purchase the underlying asset (refer Note 18).
Short-term leases and leases of low-value assets
The Company has elected not to recognise right of
use assets and lease liabilities for short-term leases
that have a lease term of 12 months or lower and
leases of low-value assets. The Company recognises
the lease payments associated with these leases as
an expense over the lease term. The related cash
flows are classified as Operating activities in the
Statement of Cash Flows.
Company as a lessor
Leases in which the Company does not transfer
substantially all the risks and rewards incidental to
ownership of an asset are classified as operating
leases. Rental income arising is accounted for on a
straight-line basis over the lease terms. Initial direct
costs incurred in negotiating and arranging an
operating lease are added to the carrying amount of
the leased asset and recognised over the lease term
on the same basis as rental income. Contingent rents
are recognised as revenue in the period in which they
are earned.
(e) Impairment of non-financial assets
The Company assesses at each reporting date
whether there is an indication that an asset may be
impaired. If any indication exists, or when annual
impairment testing for an asset is required, the
Company estimates the asset's recoverable amount.
An asset's recoverable amount is the higher of an
asset's or cash-generating unit's (CGU) fair value less
costs of disposal and its value in use. The recoverable
amount is determined for an individual asset, unless
the asset does not generate cash inflows that are
largely independent of those from other assets or
groups of assets. Where the carrying amount of an
asset or CGU exceeds its recoverable amount, the
asset is considered impaired and is written down to
its recoverable amount. 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.
The Company bases its impairment calculation on
detailed budgets and forecast calculations which
are prepared separately for each of the Company's
cash-generating units to which the individual assets
are allocated. Impairment losses of continuing
operations, including impairment on inventories, are
recognised in the Statement of Profit and Loss.
For assets, 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 asset's or CGU's recoverable amount. A
previously recognised impairment loss is reversed only
if there has been a change in the assumptions used to
determine the asset's recoverable amount since the last
impairment loss was recognised. The reversal is limited
so that the carrying amount of the asset does not exceed
its recoverable amount, nor exceed the carrying amount
that would have been determined, net of depreciation,
had no impairment loss been recognised for the asset in
prior years. Such reversal is recognised in the Statement
of Profit and Loss.
Intangible assets with indefinite useful lives are
tested for impairment annually at the CGU level, as
appropriate, and when circumstances indicate that
the carrying value may be impaired.
After impairment, depreciation is provided on
the revised carrying amount of the asset over its
remaining useful life.
(f) Government grants and subsidies
Grants and subsidies from the government are
recognised when there is reasonable assurance that (i)
the Company will comply with the conditions attached
to them, and (ii) the grant/subsidy will be received.
When the grant or subsidy relates to revenue, it
is recognised as income on a systematic basis in
the Statement of Profit and Loss over the periods
necessary to match them with the related costs,
which they are intended to compensate. Where
the grant relates to an asset, it is deducted while
calculating carrying amount of the asset. The grant
is recognised in the Statement of Profit and Loss
over the life of the depreciable asset as a reduced
depreciation expense.
When the Company receives grants of non-monetary
assets, the asset and the grant are recorded at fair
value amounts and released to the Statement of Profit
and Loss over the expected useful life in a pattern of
consumption of the benefit of the underlying asset
i.e. by equal annual instalments. When loans or similar
assistance are provided by governments or related
institutions, with an interest rate below the current
applicable market rate, the effect of this favourable
interest is regarded as a government grant. The loan
or assistance is initially recognised and measured
at fair value and the government grant is measured
as the difference between the initial carrying value
of the loan and the proceeds received. The loan is
subsequently measured as per the accounting policy
applicable to financial liabilities in respect of loans /
assistances received.
(g) Inventories
Raw materials, fuels, stores and spares and packing
materials are valued at lower of cost and net realisable
value. However, these items are considered to be
realisable at cost, if the finished products, in which
they will be used, are expected to be sold at or above
cost. Cost is determined on weighted average basis
which includes expenditure incurred for acquiring
inventories like purchase price, import duties, taxes
(net of tax credit) and other costs incurred in bringing
the inventories to their present location and condition.
Work-in-progress and finished goods are valued at
lower of cost and net realisable value. Cost includes
direct materials and labour and a proportion of
manufacturing overheads based on normal operating
capacity. Cost of such inventories is computed on
annual weighted average basis.
Net realisable value (NRV) is the estimated selling
price in the ordinary course of business, less
estimated costs of completion and estimated costs
necessary to make the sale. The comparison of cost
and is made on item by item basis.
(h) Revenue from contract with customer
Revenue from contracts with customers is recognised
when control of the goods or services are transferred
to the customer at an amount that reflects the
consideration to which the Company expects to be
entitled in exchange for those goods or services.
The Company has generally concluded that it is
the principal in its revenue arrangements, because
it typically controls the goods or services before
transferring them to the customer.
Sale of goods
Revenue from sale of goods is recognised on the
basis of approved contracts regarding the transfer
of goods or services to a customer for an amount
that reflects the consideration to which the Company
expects to be entitled in exchange for those goods.
The normal credit term is 0 to 180 days upon delivery.
The revenue is measured based on the consideration
defined in the contract with a customer, including
variable consideration, such as discounts, volume
rebates, or other contractual reductions. As the
period between the date on which the Company
transfers the promised goods to the customer and
the date on which the customer pays for these goods
is generally one year or less, no financing components
are considered.
The Company considers whether there are
other promises in the contract that are separate
performance obligations to which a portion of the
transaction price needs to be allocated.
Variable consideration -This includes incentives,
volume rebates, discounts etc. It is estimated at
contract inception considering the terms of various
schemes with customers and constrained until it is
highly probable that a significant revenue reversal
in the amount of cumulative revenue recognised will
not occur when the associated uncertainty with the
variable consideration is subsequently resolved. It is
reassessed at end of each reporting period.
(i) Retirement and other employee benefits
Short-term employee benefits
Short-term employee benefit obligations are
measured on an undiscounted basis and are expensed
as the related service is provided. A liability is
recognised for the amount expected to be paid under
short-term cash bonus, if the Company has a present
legal or constructive obligation to pay this amount as
a result of past service provided by the employee and
the obligation can be estimated reliably.
Defined contribution plans
Retirement benefit in the form of Provident Fund,
Employees State Insurance Corporation (ESIC) and
Superannuation Schemes are defined contribution
schemes. The Company has no obligation, other than
the contribution payable to the respective funds.
The Company recognises contribution payable to the
scheme as an expenditure, when an employee renders
the related service. If the contribution payable to
the scheme for service received before the balance
sheet date exceeds the contribution already paid,
the deficit payable to the scheme is recognised as
a liability after deducting the contribution already
paid. If the contribution already paid exceeds the
contribution due for services received before the
balance sheet date, then excess is recognised as an
asset to the extent that the pre-payment will lead to,
for example, a reduction in future payment or a cash
refund.
Defined benefit plans
Gratuity liability is a defined benefit obligation and
is provided for on the basis of actuarial valuation
done on projected unit credit method at the balance
sheet date.
Remeasurements of the net defined benefit liability,
which comprise actuarial gains and losses, the return
on plan assets (excluding interest) and the effect
of the asset ceiling (if any, excluding interest), are
recognised immediately in Other Comprehensive
Income. The Company determines the net interest
expense / (income) on the net defined benefit liability
/ (asset) for the period by applying the discount rate
determined by reference to market yields at the end
of the reporting period on government bonds. This
rate is applied on the net defined benefit liability /
(asset), both as determined at the start of the annual
reporting period, taking into account any changes
in the net defined benefit liability / (asset) during
the period as a result of contributions and benefit
payments. Net interest expense and other expenses
related to defined benefit plans are recognised in
profit or loss.
When the benefits of a plan are changed or when a
plan is curtailed, the resulting change in benefit that
relates to past service ('past service cost' or 'past
service gain') or the gain or loss on curtailment is
recognised immediately in profit or loss. The Company
recognises gains and losses on the settlement of a
defined plan when the settlement occurs.
Other long-term employee benefits
The Company treats accumulated leaves expected
to be carried forward beyond twelve months, as long¬
term employee benefit for measurement purposes.
Such long-term compensated absences are provided
for based on the actuarial valuation using the
projected unit credit method at the end of each
financial year. The Company presents the leave as
current liability in the balance sheet, to the extent
it does not have an unconditional right to defer its
settlement beyond 12 months after the reporting
date. Where the Company has unconditional legal
and contractual right to defer the settlement for
the period beyond 12 months, the same is presented
as non-current liability. Actuarial gains/losses are
immediately taken to the Statement of Profit and
Loss and are not deferred.
(j) Taxes
Income Tax
Income tax expense comprises current and deferred
tax. It is recognised in profit or loss except to the extent
that it relates to a business combination, or items
recognised directly in equity or in Other comprehensive
income. The Company has determined that interest and
penalties related to income taxes, including uncertain
tax treatments, do not meet the definition of income
taxes, and therefore accounted for them under Ind AS 37
Provisions, Contingent Liabilities and Contingent Assets.
(i) Current Taxes
Current tax comprises the expected tax payable
or receivable on the taxable income or loss for
the year and any adjustment to the tax payable
or receivable in respect of previous years. The
amount of current tax payable or receivable is
the best estimate of the tax amount expected
to be paid or received that reflects uncertainty
related to income taxes, if any. It is measured
using tax rates enacted or substantively enacted
at the reporting date.
Current tax assets and liabilities are offset only if
there is a legally enforceable right to set off the
recognised amounts, and it is intended to realise
the asset and settle the liability on a net basis or
simultaneously.
(ii) Deferred tax
Deferred tax is recognised in respect of
temporary differences between the carrying
amounts of assets and liabilities for financial
reporting purposes and the corresponding
amounts used for taxation purposes. Deferred
tax is also recognised in respect of carried
forward tax losses and tax credits. Deferred tax
is not recognised for:
Ý temporary differences on the initial
recognition of assets or liabilities in a
transaction that:
Ý is not a business combination; and
Ý at the time of the transaction (i) affects
neither accounting nor taxable profit
or loss and (ii) does not give rise to
equal taxable and deductible temporary
differences
Ý temporary differences related to
investments in subsidiaries, associates and
joint arrangements to the extent that the
Company is able to control the timing of
the reversal of the temporary differences
and it is probable that they will not reverse
in the foreseeable future; and
Ý taxable temporary differences arising on
the initial recognition of goodwill.
Deferred tax assets are recognised for unused
tax losses, unused tax credits and deductible
temporary differences to the extent that it
is probable that future taxable profits will
be available against which they can be used.
Future taxable profits are determined based
on the reversal of relevant taxable temporary
differences. If the amount of taxable temporary
differences is insufficient to recognise a
deferred tax asset in full, then future taxable
profits, adjusted for reversals of existing
temporary differences, are considered, based
on the business plans of the Company. Deferred
tax assets are reviewed at each reporting date
and are reduced to the extent that it is no longer
probable that the related tax benefit will be
realised; such reductions are reversed when the
probability of future taxable profits improves.
Deferred tax is measured at the tax rates that are
expected to apply to the period when the asset
is realised or the liability is settled, based on the
laws that have been enacted or substantively
enacted by the reporting date.
The measurement of deferred tax reflects the tax
consequences that would follow from the manner
in which the Company expects, at the reporting
date, to recover or settle the carrying amount
of its assets and liabilities. For this purpose,
the carrying amount of investment property is
presumed to be recovered through sale.
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 on the same taxable entity, or on
different tax entities, but they intend to settle
current tax liabilities and assets on a net basis
or their tax assets and liabilities will be realised
simultaneously
Minimum alternate tax (MAT) paid in a year is
charged to the Statement of Profit and Loss as
current tax for the year. The Company recognises
MAT credit available as deferred tax asset only
when there is convincing evidence that sufficient
taxable profit will be available to allow all or part
of MAT credit to be utilised during the specified
period, i.e., the period for which such credit is
allowed to be utilised. In the year in which the
Company recognises MAT credit as an asset, it
is created by way of credit to the Statement of
Profit and Loss and shown as part of deferred
tax asset. The Company reviews the "MAT credit
entitlement” asset at each reporting date and
writes down the asset to the extent that it is no
longer probable that it will pay normal tax during
the specified period.
(k) Segment reporting
Identification of segments
An operating segment is a component of the
Company that engages in business activities from
which it may earn revenues and incur expenses,
whose operating results are regularly reviewed by the
company's Managing Director and Chief Executive
Officer to make decisions for which discrete financial
information is available. Based on the management
approach as defined in Ind AS 108, the Chief Operating
Decision Maker ("CODM”) evaluates the Company's
performance and allocates resources based on
an analysis of various performance indicators by
business segments and geographic segments. The
analysis of geographical segments is based on the
areas in which the customers of the Company are
located.
(l) Earnings Per Share
Basic earnings per share are calculated by dividing
the net profit or loss for the year attributable to
equity shareholders by the weighted average
number of equity shares outstanding during the
year. The weighted average number of equity shares
outstanding during the period is adjusted for events
such as bonus issue, bonus element in a rights issue,
share split, and reverse share split (consolidation
of shares) that have changed the number of equity
shares outstanding, without a corresponding change
in resources.
For the purpose of calculating diluted earnings per
share, the net profit or loss for the year attributable
to equity shareholders and the weighted average
number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity
shares.
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