Oil Country Tubular Limited (OCTL) is a unique integrated facility
established in 1989 and is one of the leading Companies in the world,
processing a wide range of Oil Country Tubular Goods viz., Drill Pipes,
Heavy Weight Drill Pipes, Tubing, Casing, Drill Collars and other Oil
Field Accessories required for the Oil Drilling and Exploration. The
facility was setup in the State of Andhra Pradesh, India. The Company
also commissioned End Finishing and Second Heat Treatment Plant, Wind
Energy System with a capacity of 0.8 MW. With the addition of these
facilities, the total capital outlay is ''2511 Million.
2. SIGNIFICANT ACCOUNTING POLICIES:
A) Basis of Preparation of Financial Statements:
The Financial Statements are prepared on going concern assumption and
under the historical cost convention, except for certain fixed assets
which are revalued in accordance with generally accepted Accounting
principles in India and the provisions of the Companies Act, 1956.
B) Use of Estimates:
The preparation of financial statements requires certain estimates and
assumption to be made that effect the reported amount of assets and
liabilities as on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Difference
between the actual results and estimates are recognised in the period
in which the results are known/ materialised.
C) Fixed Assets:
Fixed assets are stated at cost net of canvas / value added tax and
includes amounts added on revaluation, less accumulated depreciation,
and impairment of loss, if any. All costs including financing costs
till commencement of production, net changes on foreign exchange
contracts and adjustments arising from exchange rate variations
attributable to the fixed assets are capitalised.
Investments in Un-Quoted Shares are stated at Cost.
Depreciation on Buildings and Plant and Machinery is provided on
straight-line method at the rates specified in Schedule - XIV of the
Companies Act 1956. Depreciation on other fixed assets is provided on
written down value method at the rates specified in Schedule - XIV of
the Companies Act, 1956.
F) Impairment of Asset:
The Carrying amount of asset is reviewed at each balance sheet date to
determine whether there is any indication of impairment. If any such
indication exists, the recoverable amount of the asset is estimated.
The recoverable amount is the greater of the asset''s net selling price
and value in use, which is determined based on the estimated future
cash flow discounted to their present values. An impairment loss is
recognised whenever the carrying amount of an asset or its cash
generating unit exceeds its recoverable amount. Impairment loss is
reversed if there is change in the estimates used to determine the
Items of inventories are valued at lower of cost or net realisable
value after providing for obsolescence, if any. Cost of inventories
comprises of cost of purchase, cost of conversion and other costs
incurred in bringing them to their respective present location and
condition. Cost of raw material is determined on weighted average
method. Scrap is valued at estimated realisable value.
H) Foreign Currency Transactions:
Foreign Currency Transactions are recorded at the exchange rates
prevailing at the transaction date. Current Assets and Current
Liabilities relating to Foreign Currency Transactions remaining
unsettled at the Balance Sheet date are translated at the year- end
rates. The result gain / loss, if any, is recognised in Profit & Loss
Account. As per the Notification issued by MCA, the Exchange
Fluctuation arising on reporting of Long Term Foreign Currency Monetary
items which is related to Depreciable Assets is capitalised.
I) Revenue Recognition:
Sales are recognised on the basis of dispatch of goods. In respect of
Export Sales, the revenue is recognised on the basis of Bill of Lading.
Miscellaneous sales are recognised on the basis of dispatch of goods.
Other income such as interest etc., are recognised on accrual basis.
J) Employee Benefits:
The Company contributes towards Group Gratuity Fund (defined benefit
retirement plan) administered by the Life Insurance Corporation of
India, for eligible employees. Under this scheme, the settlement
obligation remains with the Company, while the Life Insurance
Corporation of India administers the scheme and determines the premium
to be contributed by the Company. The plan provides for a lump-sum
payment to the vested employees on retirement or termination of
employment, based on the respective employees'' salary and the years of
service with the Company. Liability with regard to gratuity fund is
accrued, based on actuarial valuation conducted by an independent
actuary, using the projected unit credit method as at March 31, every
2. Provident Fund:
Retirement benefit in the form of Provident Fund is a defined
contribution scheme and the contributions are charged off to the Profit
and Loss account of the year when the contributions to the fund are
due. There are no other obligations other than the contributions to be
remitted to the Provident Fund Authorities.
3. Leave Encashment:
Provision for Leave Encashment is recognised in the books as per the
K) Borrowing Cost:
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that takes necessarily
substantial period of time to get ready for its intended use. All other
borrowing costs are charged to revenue.
L) Provision for Current and Deferred Tax:
Provision for current tax is made after taking into consideration
benefits admissible and applicability of Minimum Alternate Tax under
the provisions of the Income tax Act, 1961. Deferred tax resulting from
timing difference between taxable and accounting income is accounted
for using the tax rates and laws that are enacted or substantively
enacted as on the balance sheet date. Deferred tax asset is not
recognised in the books as mater of prudence.
M) Research and Development:
Capital expenditure incurred has been disclosed under their natural
heads of account and revenue expenditure incurred is charged off as a
distinct item in the Profit and Loss account.
Claims by and against the company, including liquidated damages, are
recognised on acceptance basis.
The Company has no information as to whether any of its vendors
constitute a Supplier within the meaning of Section 2 (n) of the
Micro, Small and Medium Enterprises Development Act, 2006 as no
declarations were received under the said Act from them.
The company has made current tax provision for Minimum Alternate Tax
(MAT) u/s 115 JB of the Income Tax Act, 1961. As per the provisions of
Section 115JAA, MAT Credit receivable has been recognised in the books
of account as an asset to the extent there is convincing evidence that
the company will pay normal income tax during the specified period. MAT
credit is recognised as an asset in accordance with the guidance note
issued by the Institute of Chartered Accountants of India. The said
asset is created by way of a credit to Statement of Profit And loss and
shown as MAT Credit Entitlement. The company will review the same at
each balance sheet date and write down the carrying amount of MAT
Credit entitlement to the extent there is no longer convincing evidence
to the effect that Company will pay normal Income tax during the