1.01 General Information
Reliance Communications Limited ("RCOM" or "the Company" or "Corporate Debtor") is registered under the Companies
Act, 1956 having Registered Office at H Block, 1st Floor, Dhirubhai Ambani Knowledge City, Navi Mumbai 400710 and its
securities are listed on the BSE Limited and the National Stock Exchange of India Limited.
RCOM has established a pan-India, next generation, digital network that is capable of supporting best-of-class services
spanning the entire communications value chain. RCOM owns and operate the world's largest next generation IP enabled
connectivity infrastructure, comprising of fibre optic cable systems in India and globally. The Company, during the earlier
year, had discontinued Wireless business.
Corporate Insolvency Resolution Process ("CIR Process") had been initiated in case of the Company and two of its subsidiaries
under the Provisions of the Insolvency and Bankruptcy Code, 2016 (the Code). In case of one subsidiary, NCLT has ordered
for initiation of liquidation proceedings (Refer Note 2.39 (c)). Pursuant to the order, the management of affairs of the
Company and two subsidiaries and powers of board of directors of the Company and two subsidiaries stand vested with the
Resolution Professional ("RP") appointed by the NCLT.
1.02 Basis of Preparation of Financial Statements
The Financial Statements are prepared under historical cost convention / fair valuation under a Scheme approved by the
Hon'ble High Court, in accordance with the generally accepted accounting principles (GAAP) in India and in compliance with
the Indian Accounting Standards (Ind AS) specified under Section 133 the Companies Act, 2013 ("the Act") except matters
specified in Note 2.14, 2.31, 2.48 and 2.53, read with relevant rules of the Companies (Indian Accounting Standards)
Rules 2015, the Companies (Indian Accounting Standards) Amendment Rules 2016 and other provisions of the Act, to
the extent notified and applicable as well as applicable guidance note and pronouncements of the Institute of Chartered
Accountants of India (ICAI). All assets and liabilities have been classified as current or non-current as per the Company's
normal operating cycle and other criteria set out under Ind AS and in Schedule III to the Act. Based on the nature of the
services and their realisation in cash & cash equivalents, the Company has ascertained its operating cycle as twelve months
for the purpose of current or non-current classification of assets and liabilities.
1.03 Functional Currency and Presentation Currency
These financial statements are presented in Indian Rupees ("Rupees" or "'") which is functional currency of the Company.
All amounts are rounded off to the nearest crore, unless stated otherwise.
1.04 Property, Plant and Equipment
(i) Property, plant and equipment (PPE) are stated at cost net of Modvat / Cenvat / GST less accumulated depreciation,
amortisation and impairment loss, if any. Subsequent expenditure is capitalised only if it is probable that the future
economic benefits associated with the expenditure will flow to the Company.
(ii) Cost of an item of PPE comprises of 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 present value of estimated costs of dismantling and removing the item and restoring the site on
which it is located.
(iii) As per Para 46A of Accounting Standard 11, 'The Effects of Changes in Foreign Exchange Rates', related to acquisition
of depreciable assets pursuant to the notifications dated December 29, 201 1 and August 9, 2012 issued by Ministry
of Corporate Affairs (MCA), under the Companies (Accounting Standard) (Second Amendment) Rules 2011, the cost
of depreciable capital assets includes foreign exchange differences arising on translation of long term foreign currency
monetary items as at the balance sheet date in so far as they relate to the acquisition of such assets is capitalised and
subsequently on adoption of Indian Accounting Standard also the same is allowed for the transactions recorded upto
March 31, 2016.
(v) Leasehold Land is depreciated over the period of the lease term.
(vi) Any gain or loss on disposal of an item of property, plant and equipment is recognised in statement of Profit or Loss.
(vii) Depreciation methods, useful lives and residual values are reviewed periodically at each reporting date and adjusted
prospectively if appropriate.
(viii) Depreciation on all the assets capitalised pursuant to para 46A of AS 11 is provided over the remaining useful life of
the depreciable capital asset.
(ix) Depreciation on additions is calculated pro rata from the following month of addition.
(x) Expenses incurred relating to project, prior to commencement of commercial operations, are considered as project
development expenditure and shown under Capital Work in Progress.
1.05 Intangible Assets
(i) Intangible assets acquired are measured on initial recognition at cost. Cost includes all direct costs relating to acquisition
of Intangible assets and borrowing cost relating to qualifying assets.
(ii) Telecom Licenses are stated at cost as applicable less accumulated amortisation less impairment, if any.
(iii) Indefeasible Rights of Connectivity (IRC) are stated at cost less accumulated amortisation.
(iv) Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the
expenditure will flow to the Company.
(v) Intangible assets, namely Entry Fees/ fees for Telecom Licenses and Brand License are amortised on the basis
of Straight Line Method, over the balance period of Licenses. IRC and Software are amortised from the date of
acquisition or commencement of commercial services, whichever is later.
(vi) There are no intangible assets assessed with indefinite useful life. The life of amortisation of the intangible assets is as
follows.
(a) Telecom Licenses - 12.5 to 20 years
(b) Brand License - 1 0 years
(c) Indefeasible Right of Connectivity - 15, 20 years
(d) Software - 5 years
(vii) Amortization method, useful life and residual values are reviewed periodically at each reporting period.
(viii) Any gain or loss on disposal of an item of Intangible Assets is recognised in the Statement of Profit and Loss.
1.06 Non-current assets held for sale and discontinued operations
Non current assets (or disposal group) are classified as assets held for sale when their carrying amount is to be recovered
principally through a sale transaction. Non-current assets (or disposal group) classified as held for sale are measured at the
lower of their carrying amount and / or fair value less costs to sell. This condition is regarded as met only when the sale
is highly probable and the asset (or disposal group) is available for immediate sale in its present condition, subject only to
terms that are usual and customary for sale of such assets and sale is expected to be concluded within twelve months from
the date of such classification.
Assets and liabilities classified as held for sale are presented separately in the balance sheet. A disposal group qualifies as
discontinued operations if it is a component of the company that either has been disposed off or is classified as held for sale,
and; represents a separate major line of business or geographical area of operations, or part of a single co-ordinated plan
to dispose of a separate major line of business or geographical area of operations, or a subsidiary acquired exclusively with
a view to resale. Non-current assets are not depreciated or amortised while they are classified as held for sale.
When the group is committed to sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that
subsidiary are classified as held for sale when the criteria described are met, regardless of whether the group will retain a
non controlling interest in its former subsidiary after the sale.
Loss is recognised for any initial or subsequent write down of such non current assets (or disposal group) to fair value less
costs to sell. A gain is recognised for any subsequent increase in fair value less costs to sell an asset (or disposal group) but
not in excess of any cumulative loss previously recognised.
If the criteria for assets held for sale are no longer met, it ceases to be classified as held for sale and are measured at
the lower of (i) its carrying amount before the asset was classified as held for sale, adjusted for any depreciation or any
amortisation that would have been recognised had that asset not been classified as held for sale, and (ii) its recoverable
amount at the date when the disposal group ceases to be classified as held for sale.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that
represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to
dispose of such a line of business or area of operations, or is a Subsidiary acquired exclusively with a view to resale. The
results of discontinued operations or presented separately in the Statement of Profit and Loss.
1.07 Impairment of Non Financial Assets
Intangible assets that have an indefinite useful life are tested annually for impairment or more frequently if events or
changes in circumstances indicate that they may be impaired. Other assets are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. An asset is treated as impaired when
the carrying cost of assets exceeds its recoverable value. An impairment loss is charged to the Statement of Profit and
Loss in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting period is
increased/reversed where there has been change in the estimate of recoverable value. The recoverable value is the higher
of the assets' net selling price and value in use.
1.08 Inventories of Stores and Spares
Inventories of stores and spares are accounted for at cost and all other costs incurred in bringing the inventory to their
present location and condition, determined on weighted average basis or net realizable value, whichever is less. Net
realizable value is the estimated selling price in the ordinary course of business less estimated costs necessary to make the
sale.
1.09 Employee Benefits
Short term employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee
benefits. These benefits include compensated absences such as paid annual leave and sickness leave. The undiscounted
amount of short term employee benefits expected to be paid in exchange for the services rendered by the employees are
recognised as an expense during the period.
Long term employee benefits
(i) Defined contribution plan
The Company's contribution towards Employees' Superannuation Plan is recognised as an expense during the period
in which it accrues.
(ii) Defined benefit plans
Provident Fund
Provident Fund contributions are made to a Trust / Regional Provident Fund Commissioner (RPFC) administered by the
Trustees /other recognised fund. Interest payable to the Provident Fund members, shall not be at a rate lower than
the statutory rate. Liability is recognised for any shortfall in the income of the fund vis-a-vis liability of the interest as
per statutory rates to the members. The Company's contribution towards Employees' Provident Fund is recognised as
an expense during the period in which it accrues (refer note 2.42).
Gratuity Plan
The Company's gratuity benefit scheme is a defined benefit plan. The Company's net obligation in respect of the
gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return
for their services in the current and prior periods; that benefit is discounted to determine its present value, mortality
rate and the fair value of plan assets is deducted. Mortality rate is based on publicly available mortality table in India.
The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using
the Projected Unit Credit Method.
Obligation is measured at present value of the estimated future cash flows. Discount rates used for determining present
value of obligation under the defined benefit plan, are based on market yield of Government Securities as at the
balance sheet date that have terms approximating to the terms of the related obligation.
Remeasurement which comprise of actuarial gain and losses, the return of plan assets (excluding interest) and the
effect of asset ceiling ( if any, excluding interest) are recognised in OCI.
Plan Assets of Defined Benefit Plans have been measured at fair value.
(iii) Other Long term employment benefits
Compensated absences which are not expected to occur within twelve months after the end of the period in which
the employee renders the related services are recognised as a liability at the present value of the defined benefit
obligation at the balance sheet date, determined based on actuarial valuation using Projected Unit Credit Method.
Discount rates used for determining the present value of the obligation under the defined benefit plan, are based
on the market yields of Government Securities as at the Balance Sheet date. Remeasurement gain and losses are
recognised in the Statement of Profit and Loss in the period in which they arise.
1.10 Borrowing Cost
Borrowing costs attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of
such assets upto the commencement of commercial operations. A qualifying asset is one that necessarily takes substantial
period of time to get ready for intended use. Other borrowing costs are recognised as an expense in the year in which they
are incurred.
1.11 Foreign Currency Transactions
(i) Transactions denominated in foreign currencies are recorded at the exchange rates prevailing at the time of the transaction.
(ii) Monetary items denominated in foreign currencies at the yearend are restated at the year end rates.
(iii) Non Monetary foreign currency items are carried at cost (i.e. translated using the exchange rates at the time of initial
transactions).
(iv) Exchange difference on monetary items is recognised in the Statement of Profit and Loss in the period in which they
arises except for;
(a) Exchange difference on foreign currency borrowings relating to depreciable capital asset is included in cost of
assets.
(b) Exchange difference on foreign currency transactions, on which receipt and/ or payments is not planned, initially
recognised in OCI and reclassified from equity to profit and loss on repayment of the monetary items.
(v) Accounting of transactions that include the receipt or payment of advance consideration in a foreign currency the date
of transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non monetary
prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction
is established for each payment or receipt.
(vi) All long term foreign currency monetary items consisting of loans taken before March 31, 2016 and which relate to the
acquisition of depreciable capital assets at the end of the period/ year are restated at the rate prevailing at the balance
sheet date. Exchange difference including attributable to the interest arising as a result is added to or deducted from the
cost of the assets as per notification dated December 29, 201 1 and August 9, 2012 issued by the Ministry of Company
Affairs (MCA), Government of India and depreciated over the balance life of the capital asset. Exchange difference on
other long term foreign currency loans is accumulated in "Foreign Currency Monetary Item Translation Difference Account
(FCMITDA)" which will be amortized over the balance period of monetary assets or liabilities.
1.1 2 Revenue Recognition
(i) Revenue is recognised to the extent it is probable that the economic benefits will flow to the Company and revenue
can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the
consideration received or receivable.
(ii) Revenue from Contracts with Customers
The Company has applied the practical expedient in Ind AS 115, "Revenue from Contracts with Customers" with effect
from April 1, 2018, using the cumulative effect method. Revenue is recognised when control over goods or services
is transferred to a customer. A customer obtains control when he has the ability to direct the use of and obtain the
benefits from the good or service, there is transfer of title, supplier has right to payment etc. - with the transfer of risk
and rewards now being one of the many factors to be considered within the overall concept of control.
The Company determines whether revenue should be recognised 'over time' or 'at a point in time. As a result, it is
required to determine whether control is transferred over time. If not, only then revenue be recognised at a point in
time, or else over time. The Company also determines if there are multiple distinct promises in a contract or a single
performance obligation (PO). These promises may be explicit, implicit or based on past customary business practices.
The consideration gets allocated to multiple POs and revenue recognised when control over those distinct goods or
services is transferred.
The entities may agree to provide goods or services for consideration that varies upon certain future events which may
or may not occur. This is variable consideration, a wide term and includes all types of negative and positive adjustments
to the revenue. This could result in earlier recognition of revenue compared to current practice - especially impacting
industries where revenue is presently not recorded untill all contingencies are resolved. Further, the entities will have
to adjust the transaction price for the time value of money. Where the collections from customers are deferred the
revenue will be lower than the contract price, and in case of advance collections, the effect will be opposite resulting
in revenue exceeding the contract price with the difference accounted as a finance expense.
(iii) The Company sells rights of use (ROUs) that provide to the customers with network capacity, typically over a period
of 5 to 20 years without transferring legal title or giving an option to purchase network capacity. Capacity services
revenues are accounted as operating lease and recognised in the Company's income statement over the life of the
contract. Bills raised on the customers/ payments received from the customers for long term contracts and for which
revenue is not recognised are included in deferred revenue. Revenue on non cancellable ROUs are recognised as
licensing income over the period of the contract.
(iv) Revenue is recognised as and when the services are provided on the basis of actual usage of the Company's network.
Revenue on upfront charges for services with lifetime validity and fixed validity periods are recognised over the
estimated useful life of the subscribers and specified fixed validity period, as appropriate. The estimated useful life is
consistent with estimated churn of the subscribers.
(v) A receivable represents the Company's right to an amount of consideration that is unconditional i.e. only the passage
of time is required before payment of consideration is due and the amount is billable
(vi) Interest income on investment is recognised on time proportion basis. Interest income is accounted using the applicable
Effective Interest Rate (EIR), which is the rate that exactly discounts estimated future cash receipts over the expected
life of the financial assets to that asset's net carrying amount on initial recognition. Dividend is considered when right
to receive is established. The Company recognises income from the units in the Fixed Income Schemes of Mutual
Funds where income accrued is held till declaration or payment thereof for the benefit of the unit holders.
1.13 Taxes on Income and Deferred Tax
Income Tax comprises of current and deferred tax. It is recognised in the Statement of Profit and Loss except to the extent
that it relates to a business combination or to an item recognised directly in equity or OCI.
Provision for income tax is made on the basis of taxable income for the year at the current rates. Tax expense comprises
of current tax and deferred tax at the applicable enacted or substantively enacted rates. Current tax represents amount
of Income Tax payable/ recoverable in respect of taxable income/ loss for the reporting period. Deferred tax represents
the effect of temporary difference between carrying amount of assets and liabilities in the financial statement and the
corresponding tax base used in the computation of taxable income. Deferred tax liabilities are generally accounted for all
taxable temporary differences. Deferred tax asset is recognised for all deductible temporary differences, carried forward of
unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which
such deductible temporary differences can be utilised.
MAT (Minimum Alternate Tax) is recognized as an asset only when and to the extent it is probable evidence that the
Company will pay normal income tax and will be able to utilize such credit during the specified period. In the year in which
the MAT credit becomes eligible to be recognized as an asset, the said asset is created by way of a credit to the Statement
of Profit and loss and is included in Deferred Tax Assets. The Company reviews the same at each balance sheet date and
if required, writes down the carrying amount of MAT credit entitlement to the extent there is no longer probable that
Company will be able to absorb such credit during the specified period.
1.14 Government Grants
Subsidies granted by the Government for providing telecom services in rural areas are recognised as other operating income
in accordance with relevant terms and conditions of the scheme and agreement.
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