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Power Grid Corporation of India
BSE: 532898|NSE: POWERGRID|ISIN: INE752E01010|SECTOR: Power - Generation/Distribution
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« Mar 12
Accounting Policy Year : Mar '13
1.1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS
 
 The financial statements are prepared on accrual basis of accounting
 under the historical cost convention and in accordance with generally
 accepted accounting principles in India and the relevant provisions of
 the Companies Act, 1956 including Accounting Standards notified there
 under.
 
 1.2 USE OF ESTIMATES
 
 The preparation of financial statements requires estimates and
 assumptions that affect the reported amount of assets, liabilities,
 revenue and expenses during the reporting period. Although, such
 estimates and assumptions are made on a reasonable and prudent basis
 taking into account all available information, actual results could
 differ from these estimates and assumptions and such differences are
 recognized in the period in which the results are crystallized.
 
 1.3 RESERVES ANDSURPLUS
 
 Self insurance reserve is created @ 0.1% p.a. on Gross Block of Fixed
 Assets (except assets covered under mega insurance policy) as at the
 end of the year by appropriating current year profit towards future
 losses which may arise from un-insured risks. The same is shown as
 Self insurance reserve under ''Reserves & Surplus''.
 
 1.4 GRANTS-IN-AID
 
 1.4.1 Grants-in-aid received from Central Government or other
 authorities towards capital expenditure for projects, betterment of
 transmission systems and specific depreciable assets are shown as
 grants-in-aid till the utilization ofgrant.
 
 1.4.2 On capitalization of related assets, grants received for specific
 depreciable assets are treated as deferred income and recognized in the
 Statement of Profit and Loss overthe useful life of related asset and
 in proportion to which depreciation on these assets is provided.
 
 1.5 FIXED ASSETS
 
 1.5.1 Fixed assets are shown at historical cost comprising of purchase
 price and any attributable cost of bringing the assets to its working
 condition for its intended use.
 
 1.5.2 In the case of commissioned assets, deposit works/cost- plus
 contracts where final settlement of bills with contractors is yet to be
 affected, capitalization is done on provisional basis subject to
 necessary adjustments in the year offinal settlement.
 
 1.5.3 Assets and systems common to more than one transmission system
 are capitalised on the basis of technical estimates/ assessments
 
 1.5.4 Transmission system assets are considered when they are ''Ready
 for intended use'', for the purpose of capitalization, after test
 charging/successful commissioning of the systems/assets and on
 completion of stabilization period wherever technically required.
 
 1.5.5 The cost of land includes provisional deposits,
 payments/liabilities towards compensation, rehabilitation and other
 expenses wherever possession of land is taken.
 
 1.5.6 Expenditure on levelling, clearing and grading of land is
 capitalised as part of cost of the related buildings.
 
 1.5.7 Insurance spares, which can be used only in connection with an
 item of fixed asset and whose use is expected to be at irregular
 intervals are capitalized and depreciated overthe residual useful life
 ofthe related plant & machinery. In case the year of purchase and
 consumption is same, amount of insurance spares are charged to revenue.
 
 1.5.8 Mandatory spares in the nature of sub-station equipments /capital
 spares i.e. stand-by/service/rotational equipment and unit assemblies
 either procured along with the equipments or subsequently, are
 capitalized and depreciation is charged in accordance with the relevant
 accounting standard. In case the year of purchase & consumption is
 same, amount of mandatory spares are charged to revenue.
 
 1.6 CAPITAL WORK - IN - PROGRESS (CWIP)
 
 1.6.1 Cost of material consumed, erection charges thereon along with
 other related expenses incurred for the projects are shown as CWIPtill
 the date of capitalization.
 
 1.6.2 Expenditure of Corporate office, Regional Offices and Projects,
 attributable to construction of fixed assets are identified and
 allocated on a systematic basis to the cost of the related assets.
 
 1.6.3 Interest during construction and expenditure (net) allocated to
 construction as per policy No. 1.6.2 above (allocated to the projects
 on prorate basis to their capital expenditure), are apportioned to
 capital work in progress (CWIP) on the closing balance of specific
 asset or part of asset being capitalized. Balance, if any, left after
 such capitalization is kept as a separate item under the CWIPSchedule .
 
 1.6.4 Deposit works/cost-plus contracts are accounted for on the basis
 of statement received from the contractors or technical assessment of
 work completed.
 
 1.6.5 Unsettled liability for price variation/ exchange rate variation
 in case of contracts are accounted for on estimated basis as per terms
 ofthe contracts.
 
 1.7 INTANGIBLE ASSETS
 
 1.7.1 The cost of software (which is not an integral part of the
 related hardware) acquired for internal use and resulting in
 significant future economic benefits, is recognized as an intangible
 assets in the books of accounts when the same is ready for its use.
 
 1.7.2 Afforestation charges paid for acquiring right-of-way of laying
 transmission lines are accounted for as intangible assets and same are
 amortized following the rates and methodology notified by Central
 Electricity Regulatory Commission (CERC) Tariff Regulation.
 
 1.8 CONSTRUCTION STORES
 
 Construction stores are valued at cost.
 
 1.9 BORROWING COST
 
 1.9.1 All the borrowed funds (except short term funds for working
 capital) are earmarked to specific projects. The borrowing costs
 (including bond issue expenses, interest, discount on bonds, front end
 fee, guarantee fee, management fee etc.) are allocated to the projects
 in proportion to the funds so earmarked.
 
 1.9.2 The borrowing costs so allocated are capitalised or charged to
 revenue, based on whether the project is under construction or in
 operation.
 
 1.10 TRANSACTION IN FOREIGN CURRENCY
 
 1.10.1 Transactions in foreign currencies are initially recorded at the
 exchange rate prevailing on the date of transaction. Foreign currency
 monetary items are translated with reference to the rates of exchange
 ruling on the date of the Balance Sheet. Non-monetary items denominated
 in foreign currency are reported at the exchange rate ruling on the
 date of transaction.
 
 1.10.2 Foreign Exchange Rate Variation (FERV) arising on settlement /
 translation of foreign currency loans relating to fixed assets/ capital
 work-in-progress are adjusted to the carrying cost of related assets.
 
 1.10.3 FERV accounted for as per policy no 1.10.2 is
 recoverable/payable from the beneficiaries on actual payment basis as
 per Central Electricity Regulatory Commission (CERC) norms w.e.f. 1st
 April, 2004 or Date of Commercial Operation (DOCO) which ever is later.
 
 The above FERV to the extent recoverable or payable as per the CERC
 norms is accounted for as follows:
 
 a) FERV recoverable/payable adjusted to carrying cost of fixed assets
 is accounted for as ''Deferred foreign currency fluctuation
 asset/liability a/c'' with a corresponding credit/debit to ''Deferred
 income/expenditure from foreign currency fluctuation a/c''.
 
 b) ''Deferred income/expenditure from foreign currency fluctuation a/c''
 is amortized in the proportion in which depreciation is charged on such
 FERV.
 
 c) The amount recoverable/payable as per CERC norms on year to year
 basis is adjusted to the ''Deferred foreign currency fluctuation
 asset/liability a/c'' with corresponding credit/ debit to the trade
 receivables.
 
 1.10.4 FERV earlier charged to Statement of Profit and Loss & included
 in the capital cost for the purpose of tariff is adjusted against
 ''Deferred foreign currency fluctuation asset/liability a/c'' in the
 following manner:
 
 i) Depreciation component of transmission charges (being 90% of such
 FERV) is adjusted against Deferred foreign currency fluctuation
 asset/liability a/c in the transmission charges.
 
 ii) Balance 10% is adjusted against the transmission charges over the
 tenure of respective loan.
 
 1.10.5 FERV arising out of settlement/translation of long term monetary
 items (other than foreign currency loans) relating to fixed assets/CWIP
 are adjusted in the carrying cost of related assets.
 
 1.10.6 FERV arising during the construction period from
 settlement/translation of monetary items denominated in foreign
 currency (other than long term) to the extent recoverable/payable to
 the beneficiaries as capital cost as per CERC tariff Regulation are
 accounted as ''Deferred foreign currency fluctuation asset/liability
 a/c''. Transmission charges recognised on such amount is adjusted
 against above account.
 
 1.10.7 Other exchange differences are recognized as income or expenses
 in the period in which they arise.
 
 1.11 INVESTMENTS
 
 1.11.1 Current investments are valued at lower of cost and fairvalue
 determined on an individual investment basis.
 
 1.11.2 Long term investments are carried at cost. Provision is made for
 diminution other than temporary, in the value of such investments.
 
 1.12 INVENTORIES
 
 1.12.1. Inventories are valued at lower of the cost, determined on
 weighted average basis and net realizable value.
 
 1.12.2 Steel scrap and conductor scrap are valued at estimated
 realizable value or book value, whichever is less.
 
 1.12.3 Mandatory spares of consumable nature and transmission line
 items are treated as inventory after commissioning ofthe system.
 
 1.12.4 Surplus materials as determined by the management are held for
 intended use and are included in the inventory.
 
 1.12.5 The diminution in the value of obsolete, unserviceable and
 surplus stores and spares is ascertained on review and provided for.
 
 1.13 REVENUE RECOGNITION
 
 1.13.1 Transmission Income is accounted for based on tariff orders
 notified by the CERC. In case of transmission projects where final
 tariff orders are yet to be notified, transmission income is accounted
 for as per tariff norms and other amendments notified by the CERC in
 similar cases. Difference, if any, is adjusted based on issuance of
 final notification of tariff orders by the CERC.  Transmission Income
 in respect of additional capital expenditure incurred after the date of
 commercial operation is accounted based on actual expenditure incurred
 on year to year basis as per tariff norms of the CERC.
 
 1.13.2 Income from short term open access is accounted for on the basis
 of regulations notified by the CERC.
 
 1.13.3 The Transmission system Incentive / disincentive is accounted
 for based on certification of availability by the respective Regional
 Power Committees and in accordance with the norms notified / approved
 by the CERC.
 
 1.13.4 ADVANCE AGAINST DEPRECIATION
 
 1.13.4.1 Advance against depreciation (AAD), forming part of tariff
 pertaining upto the block period 2004-09, to facilitate repayment of
 loans, is reduced from transmission income and considered as deferred
 income to be included in transmission income in subsequent years.
 
 1.13.4.2 The outstanding deferred income in respect of AAD is
 recognized as transmission income, after twelve years from the end of
 the financial year in which the asset was commissioned, to the extent
 depreciation recovered in the tariff during the year is lower than
 depreciation charged in the accounts.
 
 1.13.5 Surcharge recoverable from trade receivables and liquidated
 damages / warranty claims / interest on advances to suppliers are
 recognized when no significant uncertainty as to measurability and
 collectability exists.
 
 1.13.6 Telecom income is accounted for on the basis of terms of
 agreements/ purchase orders from the customers.
 
 1.13.7 Income from sole consultancy contracts are accounted for on
 technical assessment of progress of services rendered.
 
 1.13.8 In respect of ''Cost-plus-consultancy contracts'', involving
 execution on behalf of the client, income is accounted for (wherever
 initialadvancesreceived) inphasedmanneras under:
 
 a.  10% ontheissueofNoticelnvitingTenderforexecution
 
 b.  5% on the Award of Contracts for execution
 
 c.  Balance 85% on the basis of actual progress of work including
 supplies
 
 1.13.9 Income from Sale of Goods is recognized on the transfer of
 significant risks and reward of ownership to the buyer.
 
 1.13.10 Application Fees received on account of Long Term Open Access
 (LTOA) Charges is accounted for as and when received in accordance with
 CERC Guidelines.
 
 1.13.11 Scrap other than steel scrap & conductor scrap are accounted
 for as and when sold.
 
 1.13.12 Dividend income is recognized when right to receive payment is
 established.
 
 1.14 LEASED ASSETS - UNIFIED LOAD DESPATCH CENTRE (ULDC)
 
 1.14.1 State sector unified load dispatch centre (ULDC) assets leased
 to the beneficiaries are considered as Finance Lease. Net investment in
 such leased assets along with accretion in subsequent years is
 accounted for as Lease Receivables under long term loans & advances.
 Wherever grant-in-aid is received for construction of State Sector
 ULDC, lease receivable is accounted for net of such grant.
 
 1.14.2 Finance income on leased assets are recognised based on a
 pattern reflecting a constant periodic rate of return on the net
 investment as per the levellised tariff notified/to be notified by the
 CERC.
 
 1.14.3 FERV on foreign currency loans relating to leased assets is
 adjusted to the amount of lease receivables and is amortised over the
 remaining tenure of lease. FERV recovery (as per CERC norms) from the
 constituents is recognised net of such amortised amount.
 
 1.15 DEPRECIATION/AMORTIZATION
 
 1.15.1 Depreciation / amortization is provided on straight line method
 following the rates and methodology notified by the CERC for the
 purpose of recovery of tariff except for the following assets in
 respect of which depreciation / amortization is provided at the rates
 mentioned below:
 
 a) Computers & Peripherals 30%
 
 b) Mobile Phones 33.33%
 
 c) Software 33.33%
 
 1.15.  2 ULDC assets are depreciated on Straight Line Method @ 6.67%
 per annum as determined by the CERC for levellized tariff.
 
 1.15.  3 Depreciation on assets of telecom and consultancy business, is
 provided for on straight line method as per rates specified in Schedule
 XIV of the Companies Act, 1956.
 
 1.15.4 Depreciation on additions to/deductions from fixed assets during
 the year is charged on pro-rata basis.
 
 1.15.5 Where the cost of depreciable asset has undergone a change due
 to increase/decrease in long term monetary items on account of exchange
 rate fluctuation, price adjustment, change in duties or similar
 factors, the unamortized balance of such asset is depreciated
 prospectively at the rates and methodology as specified by the CERC
 Tariff Regulations, except for telecom assets where residual life is
 determined on the basis of rates of depreciation as specified in
 Schedule XIV of the Companies Act, 1956.
 
 1.15.6 Plant and machinery, loose tools and items of scientific
 appliances, included under different heads of assets, costing Rs.
 5000/- or less, orwhere the written down value isRs. 5000/- or less as
 at the beginning ofthe year, are charged off to revenue.
 
 1.15.7 Other fixed assets costing upto Rs. 5000/- are fully depreciated
 in the year of acquisition.
 
 1.15.8 Leasehold Land is fully amortized over 25 years or lease period
 whichever is lower in accordance with the rates and methodology
 specified in the Central Electricity Regulatory Commission (Terms and
 Conditions of Tariff) Regulations, 2009. Lease hold Land acquired on
 perpetual lease is not amortised.
 
 1.15.9 In the case of assets of National thermal power corporation
 limited (NTPC), National hydro-electric power corporation limited
 (NHPC), North-eastern electric power corporation limited (NEEPCO),
 Neyveli lignite corporation limited (NLC) transferred w.e.f.  April
 1,1992, Jammu and Kashmir Lines w.e.f. April 1,1993, and Tehri hydro
 development corporation limited (THDC) w.e.f. August 1,1993,
 depreciation is charged based on gross block as indicated in
 transferor''s books with necessary adjustments so that the life of the
 assets as laid down in the CERC notification for tariff is maintained.
 
 1.16 EXPENDITURE
 
 1.16.1 Pre-paid/prior-period expenses/income of items up to Rs.100000/-
 are charged to natural heads of account.
 
 1.16.2 Expenditure of research and development, other than Capital
 Expenditure , are charged to revenue in the year of incurrence.
 
 1.16.3 Capital expenditure on assets not owned by the company is
 charged off to revenue as and when incurred
 
 1.17 IMPAIRMENT OF ASSETS
 
 Cash generating units as defined in Accounting Standard -28 on
 ''Impairment of Assets'' are identified at the balance sheet date with
 respect to carrying amount vis-a-vis. recoverable amount thereof and
 impairment loss, if any, is recognised in Statement of profit & loss.
 Impairment loss, if need to be reversed subsequently, is accounted for
 in the year of reversal.
 
 1.18 EMPLOYEE BENEFITS
 
 1.18.1 Company contribution paid/payable during the year to defined
 pension contribution scheme and provident fund scheme is recognized in
 the Statement of Profit and Loss. The same is paid to a fund
 administered through a separate trust.
 
 1.18.2 The liability for retirement benefits of employees in respect of
 Gratuity, is ascertained annually on actuarial valuation at the year
 end, is provided and funded separately.
 
 1.18.3 The liabilities for compensated absences, leave encashment, post
 retirement medical benefits, settlement allowance & farewell gift to
 employees are ascertained annually on actuarial valuation at the year
 end and provided for.
 
 1.18.4 Short term employee benefit are recognized at the undiscounted
 amount in the Statement of Profit and Loss in the year in which the
 related services are rendered.
 
 1.18.5 Actuarial gains/losses are recognized immediately in the
 Statement of Profit & Loss.
 
 1.19 PROVISIONS AND CONTINGENT LIABILITIES
 
 A provision is recognized when the company has a present obligation as
 a result of past event and it is probable that an outflow of resources
 will be required to settle the obligation, in respect of which a
 reliable estimate can be made based on technical valuation and past
 experience. Provisions are not discounted to its present value and are
 determined based on management estimate required to settle the
 obligation at the balance sheet date. No provision is recognized for
 liabilities whose future outcome cannot be ascertained with reasonable
 certainties. Such contingent liabilities are not recognized but are
 disclosed on the basis of judgment of the management /independent
 expert. These are reviewed at each balance sheet date and adjusted to
 reflect the current management estimate.
 
 1.20 INCOME TAX
 
 Income Tax comprises of current and deferred tax. Current income taxes
 are measured at the amount expected to be paid to the income tax
 authorities in accordance with Income Tax Act, 1961. Deferred tax
 resulting from timing difference between accounting and taxable profit
 is accounted for using the tax rates and the tax laws enacted or
 substantively enacted at the balance sheet date. Deferred tax assets
 are recognized only to the extent that there is reasonable certainty
 that sufficient future taxable income will be available against which
 such deferred tax assets can be realized.
Source : Dion Global Solutions Limited
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