SENSEX NIFTY India | Accounting Policy > Mining & Minerals > Accounting Policy followed by Coal India - BSE: 533278, NSE: COALINDIA

Coal India

BSE: 533278|NSE: COALINDIA|ISIN: INE522F01014|SECTOR: Mining & Minerals
Nov 24, 16:00
0.2 (0.07%)
VOLUME 83,436
Nov 24, 15:59
1.05 (0.39%)
VOLUME 876,297
Mar 15
Accounting Policy Year : Mar '16
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, 2013, including
 accounting standards notified therein, except otherwise stated.
 1.1 Use of estimate
 In preparing the financial statements in conformity with Accounting
 Principles generally accepted in India, management is sometimes
 required to make estimates and assumptions that affect the reported
 amounts of assets and liabilities and the disclosures of contingent
 liabilities as at the date of financial statements and the amount of
 revenue and expenses during the reported period. Actual results may
 differ from those estimates. Any revision to such estimate is
 recognized in the period in which the same is determined.
 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 as income and the relevant expenses are debited to the
 respective heads of expenses. 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:
 3.1 Land:
 Value of land includes cost of acquisition, cash rehabilitation
 expenses, resettlement cost and compensation in lieu of employment
 incurred for concerned displaced persons.
 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 Development:
 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
 3.4 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.
 3.5 Leases:
 3.5.1 Operating Lease
 i) Assets given on lease are capitalised and depreciated as per the
 depreciation policy. Lease rentals received are recognised as income
 over the lease period.
 ii) Lease rentals paid for assets taken on lease are recognised as
 expense over the lease period.
 3.5.2 Finance Lease
 i) Assets taken on finance lease are capitalized at lower of the fair
 value of the asset and present value of the minimum lease payments.
 An amount equal to the capitalized amount is shown as lease liability.
 The principal component in lease rental is adjusted against lease
 liability and interest component is charged to the Statement of Profit
 & Loss as finance cost.
 The asset is depreciated as per the depreciation policy. If the leased
 asset is returnable to the lessor on expiry of lease period, full cost
 is depreciated over its useful life or lease period, whichever is less.
 ii) Assets given on finance lease are shown as lease receivables at an
 amount equal to net investment in the leased asset. Principal component
 of the lease receipts are adjusted against outstanding lease
 receivables and interest is recognised as income.
 4.0 Railway Sidings pending commissioning:
 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.
 5.0 Investments:
 Long term investments are carried at cost less provision for diminution
 other than temporary, if any, in value of such investments.  Current
 investments are carried at lower of cost or fair value.
 6.0 Inventories:
 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 (which also includes loose tools)
 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. Similarly stock of stationary at printing press and medicines at
 central hospital are valued at cost.
 6.2.3 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.
 6.2.4 Provisions are made at the rate of 100% for unserviceable,
 damaged and obsolete stores and spares and at the rate of 50% for
 stores & spares not moved for 5 years.
 7. 0 Depreciation/amortisation:
 7.1 Depreciation on fixed assets is provided on straight line method on
 the basis of useful life specified in Schedule II of Companies Act 2013
 except for assets mentioned below, for which depreciation is provided
 on the basis of technically estimated useful life which are lower than
 that envisaged as per schedule II of Companies Act, 2013 to depict a
 more true and fair rate of depreciation:
 Telecommunication equipment : - 6 years and 9 years
 Photocopying machine : - 4 years
 Fax machine : - 3 years
 Mobile phone : - 3 years
 Digitally enhance cordless telephone : - 3 years
 Printer & Scanner : - 3 years
 Earth Science Museum : - 19 years
 High volume respiratory dust samplers : - 3 years
 Certain equipment /HEMM : - 7 years and 6 years as applicable.
 SDL (equipment) : - 5 years
 LHD (equipment) :- 6 years
 7.2 The residual value of all assets for depreciation purpose is
 considered as 5% of the original cost of the asset except those item of
 assets covered under Para 7.3
 7.3 In case of assets namely Coal tub, winding ropes, haulage ropes,
 stowing pipes & safety lamps the technically estimated useful life has
 been determined to be one year with a nil residual value.
 7.4 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 with one year useful life and nil
 residual value as mention under Para 7.3, which are fully depreciated
 in the year of their addition. These Assets are taken out from the
 Assets after expiry of two years following the year in which these are
 fully depreciated.
 7.5 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.
 7.6 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.
 7.7 Cost of Software recognized as intangible asset, is amortised on
 straight line method over a period of legal right to use or three
 years, whichever is less; with a nil residual value.
 8.0 Impairment of Asset:
 Fixed assets are reviewed for impairment whenever events or changes in
 circumstances indicate that their carrying amount may not be
 An impairment loss is recognised in the statement of profit and loss if
 the carrying amount exceeds its recoverable amount.  Recoverable amount
 is higher of an asset''s net selling price and value in use. An
 impairment loss recognised on asset is reversed when conditions
 warranting impairment provision no longer exists.
 9.0 Foreign Currency Transactions:
 Transactions in foreign currency are initially recorded at exchange
 rates prevailing on the date of transactions.
 Monetary items denominated in foreign currencies (such as cash,
 receivables, payables etc.) outstanding at the end of reporting period,
 are translated at exchange rate prevailing as at the end of reporting
 Non-monetary items denominated in foreign currency, (such as
 investments, fixed assets etc.) are valued at the exchange rate
 prevailing on the date of the transaction.
 Exchange differences arising on the settlement of monetary items or on
 reporting an monetary items at rates different from those at which they
 were initially recorded during the period, or reported in previous
 financial statements, are recognised as income or as expenses in the
 period in which they arise.
 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 Employee benefits:
 10.1 Short term benefits
 All short term employee benefits are recognized in the period in which
 they are incurred.
 10.2 Post-employment benefits and other long term 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 valuation.
 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, Post
 Retirement Medical Benefits 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 Revenue Recognition:
 11.1 Sales
 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
 buyer and there is no significant uncertainty as to its realisability.
 b.  Sale of coal is net of statutory dues and accepted deduction made
 by customer on account of quality of coal.
 11.2 Interest
 Interest income is recognised on a time proportion basis taking into
 account the amount outstanding and the rate applicable.
 11.3 Dividend
 Dividend income is recognised when right to receive is established.
 11.4 Other Claims
 Other claims (including interest on delayed realization from customers)
 are accounted for, when there is certainty that the claims are
 12.0 Borrowing Costs:
 Borrowing Cost directly attributable to the acquisition or construction
 of qualifying assets is capitalised. A qualifying asset is one that
 necessarily takes substantial period of time to get ready for intended
 use. Other borrowing costs are recognised as expenses in the period in
 which they are incurred.
 13.0 Taxation:
 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, as on the balance sheet date, 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
 14.0 Provision, Contingent Liabilities and Contingent Assets:
 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.
 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 additional information.
 Contingent asset are neither recognised nor disclosed in the financial
 15.0 Earning per share:
 Basic earnings per share are computed by dividing the net profit after
 tax by the weighted average number of equity shares outstanding during
 the period. Diluted earnings per shares is computed by dividing the
 profit after tax by the weighted average number of equity shares
 considered for deriving basic earnings per shares and also the weighted
 average number of equity shares that could have been issued upon
 conversion of all dilutive potential equity shares.
 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:-
 However, where the variance is beyond the permissible limits as above,
 the measured quantity is considered.
 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.
Source :
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