2. Material Accounting Policies:
2.1 Statement of compliance
The Standalone Financial Statements have been prepared in accordance with Indian Accounting Standards (Ind AS)
as notified under the Companies (Indian Accounting Standards) Rules, 2015 read with section 133 and presentation
requirements of Division II of schedule III to the Companies Act, 2013 (as amended from time to time) including the
relevant provisions of the Electricity Act, 2003 and the rules issued thereunder.
2.2 Basis of preparation and presentation
The Standalone Financial Statements have been prepared on a historical cost basis, except for the following assets
and liabilities which have been measured at fair value
- derivative financial instruments;
- certain financial assets and liabilities measured at fair value (Refer accounting policy regarding financial
instruments);
- employee benefit expenses (Refer Note 26 for accounting policy).
The Company has prepared the financial statements on the basis that it will continue to operate as a going concern.
The Standalone Financial Statements provide comparative information in respect of the previous period.
The Standalone Financial Statements are presented in Indian Rupees (?) and all amounts are in Crore unless otherwise
stated.
3. Other Material Accounting Policies
3.1 Foreign Currencies
The functional currency of the Company is Indian Rupee (').
Income and expenses in foreign currencies are recorded at exchange rates prevailing on the date of the transaction.
Foreign currency denominated monetary assets and liabilities are translated at the exchange rate prevailing on
the balance sheet date and exchange gains and losses arising on settlement and restatement are recognised in the
Statement of Profit and Loss. Non-monetary assets and liabilities that are measured in terms of historical cost in
foreign currencies are not retranslated. Exchange differences on monetary items are recognised in the Statement
of Profit and Loss in the period in which they arise except for exchange differences on foreign currency borrowings
relating to assets under construction for future productive use, which are included in the cost of those assets when they
are regarded as an adjustment to interest costs on those foreign currency borrowings.
3.2 Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current / non-current classification.
An asset is treated as current when it is:
- expected to be realised or intended to be sold or consumed in normal operating cycle,
- held primarily for the purpose of trading,
- expected to be realised within twelve months after the reporting period, or
- cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve
months after the reporting period.
All other assets are classified as non-current.
A liability is treated as current when it is:
- it is expected to be settled in normal operating cycle,
- it is held primarily for the purpose of trading,
- it is due to be settled within twelve months after the reporting period, or
- there is no unconditional right to defer the settlement of the liability for at least twelve months after the
reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
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.
3.3 Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract
is a contract under which the unavoidable costs (i.e., the costs that the Company cannot avoid because it has the
contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under
it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of
the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it. The cost of fulfilling a contract
comprises the costs that relate directly to the contract (i.e., both incremental costs and an allocation of costs directly
related to contract activities).
3.4 Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual
provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the
fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities measured at fair value through profit or loss are
recognised immediately in the statement of profit and loss.
3.5 Financial Assets
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular
way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame
established by regulation or convention in the market place. All recognised financial assets are subsequently measured
in their entirety at either amortised cost or fair value through profit or loss or fair value through other comprehensive
income, depending on the classification of the financial assets.
3.5.1 Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost using the effective interest rate method if these financial
assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the
contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
3.5.2 Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a
business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
On initial recognition, the Company makes an irrevocable election on an instrument-by-instrument basis to present
the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instruments,
other than equity investment which are held for trading. Subsequently, they are measured at fair value with gains and
losses arising from changes in fair value recognised in other comprehensive income and accumulated in the 'Equity
Instruments through Other Comprehensive Income'. The cumulative gain or loss is not reclassified to profit or loss on
disposal of the investments.
3.5.3 Financial assets at fair value through profit or loss (FVTPL)
Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial
recognition to present subsequent changes in fair value in other comprehensive income for investments in equity
instruments which are not held for trading. Other financial assets are measured at fair value through profit or loss
unless it is measured at amortised cost or at fair value through other comprehensive income.
3.5.4 Investment in subsidiaries, jointly controlled entities and associates
Investment in subsidiaries, jointly controlled entities and associates are measured at cost less impairment as per Ind
AS 27 - 'Separate Financial Statements'.
Impairment of investments:
The Company reviews its carrying value of investments carried at cost annually, or more frequently when there is
indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is recorded
in the Statement of Profit and Loss.
When an impairment loss subsequently reverses, the carrying amount of the Investment is increased to the revised
estimate of its recoverable amount, so that the increased carrying amount does not exceed the cost of the Investment.
A reversal of an impairment loss is recognised immediately in Statement of Profit or Loss.
3.5.5 Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is
primarily derecognised (i.e. removed from the Company’s balance sheet) when:
- the right to receive cash flows from the asset have expired, or
- the Company has transferred its right to receive cash flows from the asset or has assumed an obligation to pay
the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and
either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company
has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the asset.
When the Company has transferred its right to receive cash flows from an asset or has entered into a pass-through
arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither
transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset,
the Company continues to recognise the transferred asset to the extent of the Company’s continuing involvement. In
that case, the Company also recognises an associated liability. The transferred asset and the associated liability are
measured on a basis that reflects the rights and obligations that the Company has retained.
3.5.6 Impairment of financial assets
The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is
impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company
recognises lifetime expected credit losses for all contract assets and / or all trade receivables that do not constitute
a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the
12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the
financial asset has increased significantly since initial recognition.
3.6 Financial liabilities and equity instruments
3.6.1 Classification as debt or equity
Debt and equity instruments issued by a Company are classified as either financial liabilities or as equity in accordance
with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
3.6.2 Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of
its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue
costs.
3.6.3 Financial liabilities
Financial liabilities are subsequently measured at amortised cost using the effective interest method or FVTPL. Gains
and losses are recognised in statement of profit and loss when the liabilities are derecognised as well as through the
Effective Interest Rate (EIR) amortisation process. Amortised cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as
finance costs in the Statement of Profit and Loss.
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities
designated upon initial recognition as FVTPL. Financial liabilities are classified as held for trading if these are incurred
for the purpose of repurchasing in the near term. Financial liabilities at FVTPL are stated at fair value, with any gains
or losses arising on remeasurement recognised in the Statement of Profit and Loss.
3.6.4 Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When
an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms
of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition
of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is
recognised in the Statement of Profit and Loss.
3.6.5 Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to
reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance
with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value,
adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability
is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109
- 'Financial Instruments' and the amount recognised less cumulative amortisation.
3.6.6 Acceptances
The Company enters into deferred payment arrangements (acceptances) whereby lenders, such as banks and other
financial institutions, make payments to suppliers’ banks for purchases of coal. The banks and financial institutions are
subsequently repaid by the Company at a later date, providing working capital benefits. These arrangements are in
the nature of credit extended in the normal operating cycle and are recognized as acceptances. Interest borne by the
Company on such arrangements is accounted as finance cost. Other financial liabilities are subsequently measured at
amortized cost using the effective interest method. Payments made by banks and financial institutions to the operating
vendors are treated as a non-cash item, and settlement of operational acceptances by the Company is treated as
Cash flows from operating activity, reflecting the substance of the payment.
3.7 Derivative financial instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange
rate risks, including foreign exchange forward contracts. Derivatives are initially recognised at fair value at the date
the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each
reporting period. The resulting gain or loss is recognised in Statement of Profit and Loss immediately.
3.8 Reclassification of financial assets and liabilities
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition,
no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets
which are debt instruments, a reclassification is made only if there is a change in the business model for managing
those assets. Changes to the business model are expected to be infrequent. The Company’s senior management
determines change in the business model as a result of external or internal changes which are significant to the
Company’s operations. Such changes are evident to external parties. A change in the business model occurs when the
Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies
financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of
the immediately next reporting period following the change in business model. The Company does not restate any
previously recognised gains, losses (including impairment gains or losses) or interest.
3.9 Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is currently
an enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise
the assets and settle the liabilities simultaneously.
3.10 Dividend distribution to equity shareholders of the Company
The Company recognises a liability to make dividend distributions to its equity holders when the distribution is
authorised and the distribution is no longer at its discretion. A corresponding amount is recognised directly in equity.
3.11 Cash Flow Statement
Cash flows are reported using the indirect method, where by profit before tax is adjusted for the effects of transactions
of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of
income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and
financing activities of the Company are segregated.
3.12 Operating Cycle
Considering the nature of business activities, the operating cycle has been assumed to have a duration of 12 months.
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.
3.13 Service Concession Arrangements (SCA)
Service Concession Arrangements (SCA) refers to an arrangement between the grantor and the operator to provide
services that give the public access to major economic and social facilities utilising private sector funds and expertise.
With respect to SCA, revenue and costs are allocated between those relating to construction services and those
relating to operation and maintenance services, and accounted for separately. The infrastructure used in a concession
are classified as an intangible asset or a financial asset, depending on the nature of the payment entitlements under
the SCA. When the Company has an unconditional right to receive cash or another financial asset from or at the
direction of the grantor, such right is recognised as a financial asset and is subsequently measured at amortised cost.
When the demand risk is with the Group and it has right to charge the user for use of facility, the right is recognised as
an intangible asset and is subsequently measured at cost less accumulated amortisation and impairment losses. The
intangible assets are amortised over a period of service concession arrangements.
4.1 Critical accounting estimates and judgements
In the application of the Company's accounting policies, management of the Company is required to makejudgements,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from
other sources. The estimates and associated assumptions are based on historical experience and other factors that
are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future periods. Detailed information about each of
these estimates and judgements is included in relevant notes together with information about the basis of calculation
for each affected line item in the Standalone Financial Statements.
The areas involving critical estimates or judgements are:
Estimations used for impairment of Property, Plant and Equipment of certain cash generating units (CGU) - Note 5a,
5b and 5c
Estimation of defined benefit obligation - Note 26
Estimation of Share Based Payments - Note 33
Estimates related to accrual of regulatory deferrals and revenue recognition - Note 19 and Note 31
Judgement to estimate the amount of provision required or to determine required disclosure related to litigation and
claims against the Company - Note 39 and Note 40
Estimates and judgements are continually evaluated. They are based on historical experience and other factors,
including expectations of future events that may have a financial impact on the Company and that are believed to be
reasonable under the circumstances.
4.2 Refer Note 5,6,10,14,16,18,19,23,26,36,31,32,33,34,36,39 and 41 for material accounting policies of respective
captions.
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