1.0 Accounting Convention:
Financial statements are prepared under the historical cost convention
and on accrual basis of accounting and going concern concept, in
accordance with the generally accepted accounting principles in India
and the relevant provisions of the Companies Act, 1956 including
accounting standards notified there under, except otherwise stated,
2.0 Subsidies / Grants from Government:
2.1 Subsidies / Grants on capital account are deducted from the cost of
respective assets to which they relate. The unspent amount at the
Balance Sheet date, if any, is shown as current liabilities,
2.2 Subsidies / Grants on revenue account are credited to Statement of
Profit & Loss under the head- Other Income and the relevant expenses
are debited to the respective heads. The unspent amount at the Balance
Sheet date, if any, is shown as current liabilities.
2.3 Subsidies / Grants from Government received as an implementing
2.3.1 Certain Grant / Funds received under S&T, PRE, EMSC, CCDA etc as
an implementing agency and used for creation of assets are treated as
Capital Reserve and depreciation thereon is debited to Capital Reserve
Account. The ownership of the asset created through grants lies with
the authority from whom the grant is received,
2.3.2 Grant / Funds received as Nodal/Implementing Agency are accounted
for on the basis of receipts and disbursement,
3.0 Fixed Assets:
Value of land includes cost of acquisition and cash rehabilitation
expenses and resettlement cost incurred for concerned displaced
persons. Other expenditure incurred on acquisition of land viz.
compensation in lieu of employment etc. are, however, treated as
3.2 Plant & Machinery:
Plant & Machinery includes cost and expenses incurred for erection /
installation and other attributable costs of bringing those assets to
working conditions for their intended use.
3.3 Railway Siding:
Pending commissioning, payments made to the railway authorities for
construction of railway sidings are shown in Note 12 - Long Term
Loans & Advances under Advances for Capital,
Expenses net of income of the projects / mines under development are
booked to Development Account and grouped under Capital
Work-in-Progress till the projects / mines are brought to revenue
account. Except otherwise specifically stated in the project report to
determine the commercial readiness of the project to yield production
on a sustainable basis and completion of required development activity
during the period of constructions, projects and mines under
development are brought to revenue considering the following criteria:
(a) From beginning of the financial year immediately after the year in
which the project achieves physical output of 25% of rated capacity as
per approved project report, or
(b) 2 years of touching of coal, or
(c) From the beginning of the financial year in which the value of
production is more than total expenses. ,
- Whichever event occurs first,
4.0 Prospecting & Boring and other Development Expenditure:
The cost of exploration and other development expenditure incurred in
one Five year plan period will be kept in Capital work-
in-progress till the end of subsequent two Five year plan periods
for formulation of projects, before it is written-off, except in the
case of Blocks identified for sale or proposed to be sold to outside
agency which will be kept in inventory till finalisation of sale,
Current investments are valued at the lower of cost and fair value as
at the Balance Sheet date.
Investments in mutual fund are considered as current investments.
Non-Current investments are valued at cost.
6.1 Book stock of coal / coke is considered in the accounts where the
variance between book stock and measured stock is upto +/- 5% and in
cases where the variance is beyond +/- 5% the measured stock is
considered. Such stock are valued at net realisable value or cost
whichever is lower,
6.1.1 Coal & coke fines are valued at lower of cost or net realisable
6.1.2 Slurry (coking/semi-coking), middling of washeries and by
products are valued at net realisable value.
6.2 Stores & Spares:
6.2.1 The closing stock of stores and spare parts has been considered
in the accounts as per balances appearing in priced stores ledger of
the Central Stores and as per physically verified stores lying at the
6.2.2 Stock of stores & spare parts at central & area stores are valued
at cost calculated on the basis of weighted average method. The
year-end inventory of stores & spare parts lying at collieries /
sub-stores / drilling camps/ consuming centres, initially charged off,
are valued at issue price of Area Stores, Cost / estimated cost.
Workshop jobs including work-in- progress are valued at cost.
6.2.3 Stores & spare parts include loose tools.
6.2.4 Provisions are made at the rate of 100% for unserviceable,
damaged and obsolete stores and at the rate of 50% for stores & spares
not moved for 5 years.
6.3 Stock of stationery (other than lying at printing press), bricks,
sand, medicine (except at Central Hospitals), aircraft spares and
scraps are not considered in inventory,
7.1. Depreciation on fixed assets is provided on straight line method
at the rates and manner specified in Schedule XIV of the Companies Act,
1956 (as amended) except for telecommunication equipment and
photocopying machine, which are charged at higher rates on the basis of
their technically estimated life, as follows :-
Telecommunication equipment : - 15.83% p.a. and 10.55% p.a.
Photocopying machine : - 10.55% p.a.
Depreciation on Earth Science Museum and high volume samplers and
respiratory dust are charged @5.15% and 33.33% respectively on the
basis of their technically estimated life.
Further, depreciation on certain equipments /HEMM is charged over the
technically estimated life at higher rates viz. 11.88%; 13.57% and
15.83% as applicable.
Depreciation on SDL and LHD (equipments) are charged @19% p.a. and
@15.83% p.a. respectively on the basis of technical estimation.
Depreciation on the assets added / disposed off during the year is
provided on pro-rata basis with reference to the month of addition /
disposal, except on those assets attracting 100% depreciation p.a. (SLM
basis), which are fully depreciated in the year of their addition.
Assets attracting 100% depreciation are taken out from the Assets after
expiry of two years following the year in which these are fully
7.2 Value of land acquired under Coal Bearing Area (Acquisition &
Development) Act, 1957 is amortised on the basis of the balance life of
the project. Value of leasehold land is amortised on the basis of lease
period or balance life of the project whichever is earlier,
7.3 Prospecting, Boring and Development expenditure are amortised from
the year when the mine is brought under revenue in 20 years or working
life of the project whichever is less.
8.0 Impairment of Asset:
Impairment loss is recognised wherever the carrying amount of an asset
is in excess of its recoverable amount and the same is recognized as an
expense in the statement of profit and loss and carrying amount of the
asset is reduced to its recoverable amount.
Reversal of impairment losses recognised in prior years is recorded
when there is an indication that the impairment losses recognised for
the asset no longer exist or have decreased,
9.0 Foreign Currency Transactions:
9.1 Balance of foreign currency transactions is translated at the rates
prevailing on the Balance Sheet date and the corresponding effect is
given in the respective accounts. Transactions completed during the
period are adjusted on actual basis,
9.2 Transactions covered by cross currency swap options contracts to be
settled on future dates are recognised at the rates prevailing on the
Balance Sheet date, of the underlying foreign currency. Effects arising
out of such contracts are taken into accounts on the date of
10.0 Retirement benefits / other employee benefits:
a) Defined contributions plans:
The company has defined contribution plans for payment of Provident
Fund and Pension Fund benefits to its employees, Such Provident Fund
and Pension Fund are maintained and operated by the Coal Mines
Provident Fund (CMPF) Authorities, As per the rules of these schemes,
the company is required to contribute a specified percentage of pay
roll cost to the CMPF Authorities to fund the benefits.
b) Defined benefits plans:
The liability on the Balance Sheet date on account of gratuity and
leave encashment is provided for on actuarial valuation basis by
applying projected unit credit method. [Further the company has created
a Trust with respect to establishment of Funded Group Gratuity (cash
accumulation) Scheme through Life Insurance Corporation of India.
Contribution is made to the said fund based on the actuarial
c) Other employee benefits:
Further liability on the Balance Sheet date of certain other employee
benefits viz. benefits on account of LTA/ LTC; Life Cover Scheme, Group
Personal Accident Insurance Scheme, Settlement Allowance, Retired
Executive Medical Benefit Scheme and compensation to dependants of
deceased in mines accidents etc. are also valued on actuarial basis by
applying projected unit credit method,
11.0 Recognition of Income and Expenditure:
Income and Expenditure are generally recognised on accrual basis and
provision is made for all known liabilities,
a) Revenue in respect of sales is recognised when the property in the
goods with the risks and rewards of ownership are transferred to the
b) Sale of coal are net of statutory dues and accepted deduction made
by customer on account of quality of coal,
c) The revenue recognition is done where there is reasonable certainty
of collection. On the other hand, revenue recognition is postponed in
case of uncertainty as assessed by management.
Dividend income is recognised when right to receive is established,
12.0 Borrowing Costs:
Borrowing Cost directly attributable to the acquisition or construction
of qualifying assets is capitalised. Other borrowing costs are
recognised as expenses in the period in which they are incurred,
Provision of current income tax is made in accordance with the Income
Tax Act., 1961. Deferred tax liabilities and assets are recognised at
substantively enacted tax rates, subject to the consideration of
prudence, on timing difference, being the difference between taxable
income and accounting income that originate in one period and are
capable of reversal in one or more subsequent period.
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
embodying economic benefit will be required to settle the obligation,
in respect of which a reliable estimate can be made. Provisions are not
discounted to present value and are determined based on best estimate
required to settle the obligation at the balance sheet date.
15.0 Contingent Liability:
Contingent liability is a possible obligation that arises from past
events and the existence of which will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of the enterprise or a present obligation
that arises from past events but is not recognised because it is not
probable that an outflow of resources embodying economic benefit will
be required to settle the obligations or reliable estimate of the
amount of the obligations can not be made.
Contingent liabilities are not provided for in the accounts and are
disclosed by way of Notes.
16.0 Overburden Removal (OBR) Expenses :
In open cast mines with rated capacity of one million tonnes per annum
and above, cost of OBR is charged on technically evaluated average
ratio (COAL:OB) at each mine with due adjustment for advance stripping
and ratio-variance account after the mines are brought to revenue. Net
of balances of advance stripping and ratio variance at the Balance
Sheet date is shown as cost of removal of OB under the head Non -
Current Assets/ Long Term Provisions as the case may be.
The reported quantity of overburden as per record is considered in
calculating the ratio for OBR accounting where the variance between
reported quantity and measured quantity is within the lower of the two
alternative permissible limits, as detailed hereunder:-
17.0 Prior Period Adjustments and Prepaid Expenses:
Income / expenditures relating to prior period and prepaid expenses,
which do not exceed Rs. 0.10 Crore in each case, are treated as income
/ expenditure of current year.