The Financial Statements are prepared to comply in all material aspects
with all the applicable accounting principles in India, the applicable
accounting standards, notified u/s 211(3C) of the Companies Act, 1956
and the relevant provisions of the Companies Act, 1956.
[b] Basis of Accounting
The Financial Statements are prepared under the historical cost
convention, modified by revaluation of certain fixed assets as detailed
[c] Fixed Assets
Fixed assets are stated at cost of acquisition including appropriate
incidental / installation expenses. Cost of young tea plantation is
capitalised. In respect of revalued assets, the appreciation in value
of assets over its book value are credited to Revaluation Reserve.
The assets acquired on hire purchase for which ownership will vest at a
future date are capitalised at the cash cost of the leased assets.
Equated monthly payments are apportioned between finance charge and
repayment of principal amount.
Subsidies received from Government in respect of fixed assets are
deducted from cost of respective assets.
Impairment loss, if any, ascertained as per the Accounting Standard of
the Companies (Accounting Standards) Rules, 2006 is recognised.
Software cost is capitalised where it is expected to provide future
enduring economic benefits. Software capitalisation costs include
license fees, cost of packages and implementation/system integration
services. The costs are capitalised in the year in which the relevant
software is implemented for use.
Profit or loss on disposal of fixed assets is recognised in the Profit
and Loss Account.
Expenditure incurred in connection with Oil and Gas project
The Company has adopted “Full Cost Method” as per “Guidance Note on
Accounting for Oil & Gas Producing Activities” by the Institute of
Chartered Accountants of India. As per “Full Cost Method”, all cost
incurred for acquisition of E&P assets, exploration and development
alongwith other expenses including financing cost and exchange
fluctuating cost on borrowings are capitalized and treated as a cost
centre under “Capital Work in Progress”. When discovery of oil and gas
is made and the well is ready to commence commercial production, the
exploratory / development cost under cost centre corresponding to the
proved oil and gas reserve is capitalized from “Capital Work in
Progress” to the “Fixed Assets”.
Producing properties are created in respect of an oil field having
developed oil reserves when the well in the field is ready to commence
[i] Depreciation, other than on Oil and Gas producing properties, is
provided on the Written Down Value method at the rates prescribed in
Schedule XIV to the Companies Act, 1956. Cost of certain fixed assets
located in leasehold properties under the head Building and Furniture
as mentioned below have been depreciated over their respective lease
periods which is higher than the Schedule XIV rates. Building and
Furniture : Lease period - between 3 to 9 years.
Cost of certain fixed assets at estates under the head Buildings and
Vehicles are depreciated at rates based on the estimated life of each
asset and the aggregate depreciation so calculated is higher than the
Schedule XIV rates.
The following depreciation rates are considered and applied: Building
25% and 33.33% Vehicles 30%
[ii] Capitalised software costs are amortised over its useful life of
five years on a straight line basis.
[iii] In respect of revalued assets the incremental depreciation on
account of revaluation is recouped from Revaluation Reserve. Land and
Development including leasehold land are not depreciated.
[iv] Depreciation in respect of oil and gas producing assets is
calculated on the capitalized cost according to the “Unit of Production
Method”, under which the oil and gas assets are written off at the same
rate as the quantitative depletion of the related reserve. Unit of
Production depletion rates are revised when there is an indication of
the need for revision based on revised reserve estimate, which is
carried out once in a year. Such revisions are also accounted for
prospectively to give effect in the Books of Accounts of the Company.
[v] Assets like Building, Plant and Machinery etc. included in Oil and
Gas producing properties for which depreciation rates have been
prescribed in Schedule XIV of the Companies Act,1956 are depreciated on
Written Down Value method at the rates prescribed in Schedule XIV of
the Companies Act, 1956. Other assets are depreciated according to the
''unit of production'' method as prescribed by The Institute of Chartered
Accountants of India in the ''Guidance Note on Accounting for Oil and
Gas Producing Activities''.
[e] Borrowing Costs
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying assets are capitalised. Other
borrowing costs are charged to revenue.
Investments of a long-term nature are stated at cost, less adjustment
for any diminution, other than temporary, in the value thereof. Current
investments are stated at lower of cost and market value.
Inventories are stated at lower of cost and net realisable value. Cost
is determined on weighted average basis. Cost comprises expenditure
incurred in the normal course of business in bringing such inventories
to their present location and condition and includes appropriate
production overheads, where applicable.
Provision is made for obsolete, slow moving and defective stocks, where
[h] Foreign Currency Transactions
Transactions in foreign currency are recorded at exchange rates
prevailing on the date of the transaction. Transactions in foreign
currency with a Joint Venturer for Oil and Gas project are recorded at
monthly average exchange rate prevailing at the time of such
transaction. Monetary items denominated in foreign currency are
restated at the exchange rate prevailing on the Balance Sheet date.
Foreign currency non-monetary items carried in terms of historical cost
are reported using the exchange rate at the date of the transactions.
Exchange differences arising on settlement of transactions and /or
restatements are dealt in the Profit and Loss Account.
Exchange differences relating to long term foreign currency monetary
items, to the extent they are used for financing the acquisition of
fixed assets are adjusted against the cost of such fixed assets and the
balance is accumulated in ''Foreign Currency Monetary Item Translation
Difference Account'' and amortised over the balance life of the long
term monetary item or 31st March, 2011, whichever is earlier.
Derivative financial instruments, i.e. forward exchange contracts are
used to hedge its risk associated with foreign currency fluctuations
relating to the underlying transactions, highly probable forecast
transactions and firm commitments. In respect of forward exchange
contracts with underlying transactions, the premium or discount arising
at the inception of such contract is amortised as expense or income
over the life of contract.
Sales represent invoiced value of goods sold less Sales Tax / Value
[j] Other Income
Interest income, income from investments and other incentives except
export incentives are accounted for on accrual basis.
[k] Replanting and Other Subsidies
Replanting and other subsidies of revenue nature are recognised as
income in the Profit and Loss Account.
[l] Compensation of Land
Compensation, if any, in respect of land surrendered / vested in
Government under various State Land legislations is accounted for as
and when received.
Rentals in respect of operating leases are charged off to Profit and
[n] Retirement Benefits
The Company operates defined contribution schemes for Provident and a
Pension Fund. Contributions to these funds are made regularly to the
appropriate authority/Trust . The interest rate payable to the members
of the Trust is not lower than the statutory rate of interest declared
by the Central Government under the Employees Provident Funds and
Miscellaneous Provisions Act,1952 and shortfall, if any, is made good
by the Company.
The Company also provides for retirement benefits with defined benefits
in the form of Gratuity and Pension. Annual contributions for Gratuity
and Pension are made by the Company, based on actuarial valuation
carried out every year end, to Trust and Life Insurance Corporation of
India (LICI) respectively.
Leave encashment on retirement and post retirement medical benefits are
determined on the basis of independent actuarial valuation at the year
end and such liabilities are provided for in these accounts.
Actuarial gains and losses, where applicable, are determined and
recognised in the Profit and Loss Account.
The Company recognises gains and losses on curtailment or settlement of
a defined benefit plan in the Profit and Loss Account as and when the
curtailment or settlement occurs.
Short term employee benefits are recognised as an expense in the Profit
and Loss Account for the year in which the related service is rendered.
[o] Oil Production Cost
Production costs include pre well head and post well head expenses
including depreciation and applicable operating costs of support
equipments and facilities.
A provision is recognised when there is a present obligation as a
result of a past event, it is probable that an outflow of resources
will be required to settle the obligation and in respect of which
reliable estimate can be made.
[q] Taxes on Income
Current tax represents the amount of tax payable in respect of taxable
income for the period based on computation of tax as per prevailing
taxation laws under the Income Tax Act, 1961.
Provision for deferred taxation is made using the liability method, at
current rates of taxation, on timing differences to the extent it is
probable that a liability or asset will crystalise.
Deferred tax assets are not recognised unless there is reasonable
certainty and in case of brought forward loss and unabsorbed
depreciation there is virtual certainty that sufficient future taxable
income will be available against which such deferred tax assets can be
realised. Deferred tax assets are only recognised to the extent there
are deferred tax liabilities of offsetting them.
[r] Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent
liabilities at the date of the financial statements and the results of
operations during the reporting period. Examples of such estimates
include estimates of income taxes, future obligations under employment
retirement benefit plans, provision for doubtful debts and advances and
estimated useful life of tangible and intangible assets. Actual results
could differ from these estimates. Any revision to accounting estimates
is recognised prospectively in the current and future periods.