a) Basis of Accounting
The financial statements are prepared as a going concern under
historical cost convention on accrual basis in accordance with
Companies Act 1956 read together with early adoption of Accounting
Standard (AS) 30 ''Financial instruments: Recognition and Measurement''
by the Company, and the consequential limited revisions to certain
Accounting Standards by The Institute of Chartered Accountants of India
(ICAI) which have been measured at their fair value. Accounting
polices not stated explicitly otherwise are consistent with generally
accepted accounting principles.
b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Differences between actual results and
estimates are recognised in the periods in which the results are known
c) Fixed Assets (Tangible and Intangible)
Fixed assets (including research and development assets) are recognised
at cost of acquisition including expenditure up to the date of
commissioning, net of Cenvat or value added tax less accumulated
depreciation, amortisation and impairment loss. Grant received towards
fixed assets is reduced from the cost of the related assets.
Mine development expenditure includes leases, costs incurred for
acquiring or developing properties or rights up to the stage of
d) Capital Work-In-Progress
Projects under which tangible fixed assets are not yet ready for their
intended use are carried at cost, comprising direct cost, related
e) Impairment of Fixed Assets
The carrying amount of assets/cash generating units are reviewed at
each balance sheet date, if there is any indication of impairment based
on internal or external factors. An asset is treated as impaired when
the carrying cost of assets exceeds its recoverable value. An
impairment loss is recognised in the Statement of Profit and Loss where
the carrying amount of an asset exceeds its recoverable amount. The
impairment loss recognised in prior accounting periods is reversed if
there has been a change in the estimate of recoverable amount.
f) Depreciation and Amortisation
Depreciation on fixed assets is provided using the straight- line
method at rates prescribed under Schedule XIV of the Companies Act,
1956 subject to the following deviations:
- Additions and disposals are reckoned on the first day and the last
day of the month respectively.
- Individual items of plant and machinery and vehicles costing upto Rs.
25000 are wholly depreciated.
- In respect of additions arising on account of insurance spares, on
additions or extension forming an integral part of existing plants and
on the revised carrying amount of the assets identified as impaired on
which depreciation has been provided over residual life of the
respective fixed assets.
Intangible assets are amortised over its expected useful life.
Amortisation of leasehold land has been done in proportion to the
period of lease.
Mine development expenditure is amortised in proportion to the annual
ore raised to the remaining mineable ore reserves. In the year of
abandonment of mine, the residual mine development expenditure is
g) Financial Asset Investments
- Investments are recorded as long term investments unless they are
expected to be sold within one year.
- Investments in joint venture are valued at cost less provision for
impairment, if any. Investments are reviewed for impairment.
- Investments classified as ''held for trading'' that have a market price
are measured at fair value and gains and losses arising on account of
fair valuation is routed through Statement of Profit and Loss.
Investments in unquoted equity instruments that do not have a market
price and whose fair value cannot be reliably measured, are measured at
- Investments classified as Available for Sale are initially recorded
at cost and then re-measured at subsequent reporting dates to fair
value. Unrealised gains/losses on such investments are recognised
directly in Investment Revaluation Reserve Account. At the time of
disposal, de-recognition or impairment of the investments, cumulative
gain or loss previously recognised in the Investment Revaluation
Reserve Account is recognised in the Statement of Profit and Loss.
- Ore, concentrate (Mined Metal), work-in-progress and finished goods
(including significant by-products) are valued at lower of cost and net
realisable value on weighted average basis.
- Stores and spares are valued at lower of cost and net realisable
value on weighted average basis.
- Immaterial by-products, aluminum scrap, chemical lead scrap, anode
scrap and coke fines are valued at net realisable value.
i) Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit /
(loss) before extraordinary items and tax is adjusted for the effects
of transactions of non-cash nature and any deferrals or accruals of
past or future cash receipts or payments. The cash flows from
operating, investing and financing activities of the Company are
segregated based on the available information.
j) Revenue and Expenses
Revenue on sale of products (net of volume rebates) is recognised on
delivery of product and / or on passage of title to the buyer. Export
benefits are recognised on recognition of export sales.
All other revenue and expenses are recognised on accrual basis. Revenue
relating to interest on staff loans, insurance or railway claims is
recognised when recoverability is certain.
Expenditure on projects is:
- capitalised when projects are commissioned.
- written off in other cases.
Technical knowhow, not directly identifiable to any plans, layout of
buildings or plant and machinery, etc. are written off. Expenditure
relating to fixed assets not owned by Company is charged to revenue.
Prior period or prepaid expenses exceeding Rs. 0.05 Crores is
All revenue expenses on research and development are written off.
k) Government Grants, Subsidies and Export Incentives
Government grants and subsidies are recognised when there is reasonable
assurance that the Company will comply with the conditions attached to
them and the grants / subsidies will be received.
Export benefits are accounted for in the year of exports based on
eligibility and when there is no uncertainty in receiving the same.
l) Foreign Currency Transactions
(1) Transactions denominated in foreign currencies are normally
recorded at the exchange rate prevailing at the time of the
(2) Monetary items denominated in foreign currencies at the year-end
are restated at year end rates. In case of monetary items which are
hedged by derivative instruments, the valuation is done as per
Accounting Standard - 30, Financial Instruments: Recognition and
Measurement. The fair value of foreign currency contracts are
calculated with reference to current forward exchange rates for the
contracts with similar maturity profile.
(3) Non-monetary foreign currency items are carried at cost.
(4) Any income or expense on account of exchange difference either on
settlement or on translation is recognised in the Statement of Profit
m) Derivative Financial Instruments
In order to hedge its exposure to foreign exchange, interest rate and
commodity price risks, the Company enters into forward option or any
other derivative financial instruments. The Company does not hold
derivative financial instruments for speculative purposes. Derivative
financial instruments are initially recorded at their fair value on the
date of the derivative transaction and are re-measured at their fair
value at subsequent balance sheet dates.
Changes in the fair value of derivatives that are designated and
qualify as fair value hedges are recorded in the Statement of Profit
and Loss. The hedged item is recorded at fair value and any gain or
loss is recorded in the Statement of Profit and Loss and is offset by
the gain or loss from the change in the fair value of the derivative.
Changes in the fair value of derivatives that are designated and
qualify as cash flow hedges are recorded in equity. Amounts deferred
to equity are recycled in the Statement of Profit and Loss in the
periods when the hedged item is recognised in the Statement of Profit
Derivative financial instruments that do not qualify for hedge
accounting are marked to market at the balance sheet date and gains or
losses are recognised in the Statement of Profit and Loss immediately.
Hedge accounting is discontinued when the hedging instrument expires or
is sold, terminated or exercised, or no longer qualifies for hedge
accounting. Any cumulative gain or loss on the hedging instrument
recognised in equity is kept in equity until the forecast transaction
occurs. If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognised in equity is transferred to net
profit or loss for the year.
Derivatives embedded in other financial instruments or other host
contracts are treated as separate derivatives when their risks and
characteristics are not closely related to those of host contracts and
the host contracts are not carried at fair value with unrealised gains
or losses reported in the Statement of Profit and Loss.
n) Borrowing Cost
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised as part of cost of
such asset till such time as the asset is ready for its intended use.
All other borrowing costs are recognised as an expense in the period in
which they are incurred.
o) Segment Reporting
The Company identifies primary segments based on the dominant source,
nature of risks and returns and the internal organisation and
management structure. The operating segments are the segments for which
separate financial information is available and for which operating
profit/ loss amounts are evaluated regularly by the executive
management in deciding how to allocate resources and in assessing
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified
to segments on the basis of their relationship to the operating
activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which
are primarily determined based on market or fair value factors.
Revenue, expenses, assets and liabilities which relate to the Company
as a whole and are not allocable to segments on reasonable basis have
been included under unallocated revenue / expenses / assets /
p) Employee Benefits
i) Short term
Short term employee benefits including termination benefits are
recognised as an expense at the undiscounted amount incurred during the
ii) Long term
1. Defined contribution plan and family pension scheme:
The Company''s contribution to the recognised provident fund and family
pension scheme paid or payable during the year is recognised to the
Statement of Profit and Loss. The shortfall, if any, between the return
guaranteed by the statute and actual earnings of the Fund is provided
for by the Company and contributed to the Fund.
2. Defined benefit plan: Gratuity
The Company accounts for the net present value of its obligations for
gratuity benefits based on an independent external actuarial valuation
carried out annually and determined using the projected unit credit
method. The Company makes annual contributions to funds administered by
trustees and managed by insurance company for amounts notified by the
said insurance company. Actuarial gains and losses are immediately
recognised in the Statement of Profit and Loss.
3. Other long term benefit plan : Compensated absences
The Company has a scheme for leave encashment for employees, the
liability for which is determined on the basis of an actuarial
valuation carried out at the end of the year.
q) voluntary Retirement Expenses
Voluntary retirement expenses are charged to the Statement of Profit
The Company''s income taxes include taxes on the Company''s taxable
profits, adjustment attributable to earlier periods and changes in
Provision for current tax is made after taking into account rebate and
relief available under the Income tax Act, 1961.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset, if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax resulting from timing difference between book and
taxable profit is accounted for using the tax rates and laws that have
been enacted or substantively enacted as on the balance sheet date. The
deferred tax asset is recognised only to the extent that there is a
reasonable certainty that the future taxable profit will be available
against which the deferred tax asset can be realised.
Dividend payment including tax thereon is appropriated from profits for
the year and provision is made for proposed final dividend and tax
thereon is subject to consent of the shareholders at the annual general
t) Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent liabilities are not recognised but are disclosed in the
notes. Contingent assets are neither recognised nor disclosed in the