1.0 Accounting Convention:
Financial statements are prepared on the basis of historical cost and
on accrual basis following going concern concept, accounting standards
and generally accepted accounting principles 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 year
end, 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 year end, if
any, is shown as current liabilities.
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 revenue
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 underdevelopment 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 250/c 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 finalization 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
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 +/- 50/c and in
cases where the variance is beyond +/- 5o/0 the measured stock is
considered. Such stock are valued at net realisable value or cost
whichever is lower, cost being ascertained on annual average basis.
6.1.1 Slurry, middling of washeries 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 / 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 1OO% 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 equipments. Depreciation
on such equipments is charged over the technically estimated life, at
higher rates, viz. :- @15.83o/o p.a. and @10.55o/0 p.a.
Further, depreciation on certain equipments/HEMM is charged over the
technically estimated life at higher rates viz. 11.880/c; 13.570/0 and
15.83o/o as applicable.
Depreciation on SDL and LHD (equipments) are charged @19% p.a. and
@15.83o/0 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 100o/o depreciation p.a.
(SLM basis), which are fully depreciated in the year of their addition.
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 Year-end balance of foreign currency transactions is translated at
the year-end rates and the corresponding effect is given in the
respective accounts. Transactions completed during the year 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 year-end rates of the
underlying foreign currency. Effects arising out of such contracts are
taken into accounts on the date of settlement.
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 year-end liability 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 valuation.
c) Other employee benefits:
Further year-end liability 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 cannot 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 (COALOB) 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 end of the
year is shown as cost of removal of OB under the head Non - Current
Assets/ Long Term Provisions as the case may be.
17.0 Prior Period Adjustments:
Income / expenditure items relating to prior period(s) which do not
exceed Rs 0.05 crore in each case are treated as income / expenditure
for the current year.