1.01 Basis of Preparation of Financial Statements
The Financial Statements are prepared under historical cost convention
and fair valuation under a Scheme approved by the Hon''ble High Court,
in accordance with the generally accepted accounting principles (GAAP)
in India and provisions of the Companies Act, 1956 read with the
Companies (Accounting Standards) Rules, 2006 (Accounting Standards
Rules) as well as applicable pronouncements of the Institute of
Chartered Accountants of India (ICAI).
All assets and liabilities have been classified as current or
non-current as per the Company''s normal operating cycle and other
criteria set out in Revised Schedule VI to the Companies Act, 1956.
Based on the nature of the services and their realisation in cash and
cash equivalents, the Company has ascertained its operating cycle as
twelve months for the purpose of current or non-current classification
of assets and liabilities.
1.02 Use of Estimates
The preparation and presentation of Financial Statements requires
estimates and assumptions to be made that affect the reported amount of
assets and liabilities and disclosure of contingent liabilities 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 is recognised in the period in which the results
are known/ materialised.
1.03 Fixed Assets
(i) Fixed Assets are stated at cost/ fair value net of Modvat/ Cenvat,
Value Added Tax and include amount added on revaluation less
accumulated depreciation, amortisation and impairment loss, if any
(ii) All costs including financing cost of qualifying assets till
commencement of commercial operations, net charges of foreign exchange
contracts and adjustments arising upto March 31, 2007 from exchange
rate variations, relating to borrowings attributable to fixed assets
(iii) Expenses incurred relating to project, prior to commencement of
commercial operation, are considered as project development expenditure
and shown under Capital Work in Progress.
(iv) Telecom Licenses are stated at fair value or at cost as
applicable, less accumulated amortisation.
(v) Indefeasible Rights of Connectivity (IRC) are stated at cost less
(vi) In respect of accounting period commencing on or after April 1,
2011, consequent to the insertion of para 46A of AS 11 ''The Effects of
Changes in Foreign Exchange Rates'', notified under the Companies
(Accounting Standard) (Second Amendment) Rules 2011, the cost of
depreciable capital assets includes foreign exchange differences
arising on translation of long term foreign currency monetary items as
at the balance sheet date in so far as they relate to the acquisitions
of such assets.
In respect of Operating Leases, lease rentals are expensed on straight
line basis with reference to lease terms and considerations except for
lease rentals pertaining to the period up to the date of commencement
of commercial operations, which are capitalised.
1.05 Depreciation/ Amortisation
(i) Depreciation on Fixed Assets is provided on Straight Line Method at
the rates and in the manner prescribed in Schedule XIV to the Companies
Act, 1 956 except in case of the following assets which are depreciated
as given below,
(a) Telecom Electronic Equipments - 18 years
(b) Furniture, Fixtures and Office Equipments - 10 years
(c) Customer Premises Equipments - 3 years
(d) Vehicles - 5 years
(e) Ducts and Cables - 18 years
(ii) Leasehold Land is depreciated over the period of the lease term.
(iii) Intangible assets, namely Telecom Licenses and Brand Licence are
amortised equally over the period of Licenses. IRC and Software are
amortised from the date of acquisition or commencement of commercial
services, whichever is later. The life of amortisation of the
intangible assets are as follows.
(a) Telecom Licenses - 12.5 to 20 years
(b) Brand License - 10 years
(c) Indefeasible Right of Connectivity - 15, 20 years
(d) Software - 5 years
(iv) Depreciation on foreign exchange differences capitalised pursuant
to para 46A of AS 11 ''The Effects of Changes in Foreign Exchange Rates''
vide notification dated December 29, 2011 by Ministry of Corporate
Affairs (MCA), Government of India is provided over the balance useful
life of depreciable capital assets.
(v) Depreciation on additions is calculated pro rata from the following
month of addition.
1.06 Impairment of Assets
An asset is treated as impaired when the carrying cost of assets
exceeds its recoverable value. An impairment loss is charged to the
Statement of Profit and Loss in the year in which an asset is
identified as impaired. The impairment loss recognised in prior
accounting period is increased/ reversed where there has been change in
the estimate of recoverable value. The recoverable value is the higher
of the assets'' net selling price and value in use.
Current Investments are carried at lower of cost and market value
computed Investment wise. Long Term Investments are stated at cost or
fair value as required under order of the High Court. Provision for
diminution in the value of long term investments is made only if such a
decline is other than temporary in the opinion of the management.
1.08 Inventories of Stores and Spares
Inventories of stores and spares are accounted for at cost, determined
on weighted average basis or net realisable value, whichever is less.
1.09 Employee Benefits
Short term employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short term employee benefits. These
benefits include compensated absences such as paid annual leave and
sickness leave. The undiscounted amount of short term employee benefits
expected to be paid in exchange for the services rendered by employees
are recognised as an expense during the period.
Long term employee benefits
(i) Defined contribution plan
The Company''s contribution towards Employees'' Superannuation Plan is
recognised as an expense during the period in which it accrues.
(ii) Defined benefit plans Provident Fund
Provident Fund contributions are made to a Trust administered by the
Trustees. Interest payable to the Provident Fund members, shall not be
at a rate lower than the statutory rate. Liability is recognised for
any shortfall in the income of the fund vis-a-vis liability of the
interest to the members as per statutory rates.
The Company''s gratuity benefit scheme is a defined benefit plan. The
Company''s net obligation in respect of the gratuity benefit scheme is
calculated by estimating the amount of future benefit that employees
have earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present value and
the fair value of any plan assets is deducted.
The present value of the obligation under such defined benefit plan is
determined based on actuarial valuation using the Projected Unit Credit
The obligation is measured at the present value of the estimated future
cash flows. The discount rates used for determining the present value
of the obligation under defined benefit plan, are based on the market
yields on Government Securities as at the Balance Sheet date.
Actuarial gains and losses are recognised immediately in the Statement
of Profit and Loss .
(iii) Other Long term employment benefits
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related services are recognised as a liability at the present value of
the defined benefit obligation at the Balance Sheet date, determined
based on actuarial valuation using Projected Unit Credit Method. The
discount rates used for determining the present value of the obligation
under defined benefit plan, are based on the market yields on
Government Securities as at the Balance Sheet date.
1.10 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 upto the commencement of commercial operations. A
qualifying asset is one that necessarily takes substantial period of
time to get ready for intended use. Other borrowing costs are
recognised as expense in the year in which they are incurred.
1.11 Issue Expenses and Premium on Foreign Currency Convertible Bonds
The premium payable/ paid on redemption of Foreign Currency Convertible
Bonds (FCCBs) is charged to Securities Premium Account over the period
of the issue. Issue expenses are debited to Securities Premium account
at the time of the issue.
1.12 Foreign Currency Transactions
(i) Transactions denominated in foreign currencies are recorded at the
exchange rates prevailing at the time of the transaction.
(ii) Monetary items denominated in foreign currencies at the year end
are restated at year end rates. In case of monetary items, which are
covered by forward exchange contracts, the difference between the
transaction rate and rate on the date of the contract is recognised as
exchange difference and the premium paid on forward contracts is
recognised over the life of the contract.
(iii) Non monetary foreign currency items are carried at cost.
(iv) Exchange difference arising either on settlement or on translation
of monetary items other than those mentioned above is recognised in the
Statement of Profit and Loss.
(v) Any loss arising out of marking of a class of derivative contracts
to market price is recognised in the Statement of Profit and Loss.
Income, if any, arising out of marking a class of derivative contracts
to market price is not recognised in the Statement of Profit and Loss.
(vi) All long term foreign currency monetary items consisting of
liabilities which relate to acquisition of depreciable capital assets
at the end of the period/ year have been restated at the rate
prevailing at the Balance Sheet date. The exchange difference arising
as a result has been added or deducted from the cost of the assets as
per the notification issued by the Ministry of Corporate Affairs (MCA)
dated December 29, 2011. Exchange difference on other long term
foreign currency monetary items is accumulated in Foreign Currency
Monetary Item Translation Difference Account which will be amortized
over the balance period of monetary assets or liabilities.
1.13 Revenue Recognition
(i) Revenue is recognised as and when the services are provided on the
basis of actual usage of the Company''s network. Revenue on upfront
charges for services with lifetime validity and fixed validity periods
of one year or more are recognised over the estimated useful life of
subscribers and specified fixed validity period, as appropriate. The
estimated useful life is consistent with estimated churn of the
(ii) Interest income on investment is recognised on time proportion
basis. Dividend is considered when right to receive is established.
1.14 Provision for Doubtful Debts and Loans and Advances
Provision is made in the accounts for doubtful debts, loans and
advances in cases where the management considers the debts, loans and
advances to be doubtful of recovery.
1.15 Taxes on Income and Deferred Tax
Provision for Income Tax is made on the basis of taxable income for the
year at current rates. Tax expense comprises of Current Tax and
Deferred Tax at the applicable enacted or substantively enacted rates.
Current Tax represents the amount of Income Tax payable/ recoverable in
respect of the taxable income/ loss for the reporting period. Deferred
Tax represents the effect of timing difference between taxable income
and accounting income for the reporting period that originate in one
period and are capable of reversal in one or more subsequent periods.
The Deferred Tax Asset is recognised and carried forward only to the
extent that there is a reasonable certainty that the assets will be
realised in future. However, where there is unabsorbed depreciation or
carried forward loss under taxation laws, Deferred Tax Assets are
recognised only if there is virtual certainty of realisation of assets.
1.16 Government Grants
Subsidies granted by the Government for providing telecom services in
rural areas are recognised as Other Operating Income in accordance with
the relevant terms and conditions of the scheme and agreement.
1.17 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. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. When there is a possible obligation
or a present obligation in respect of which the likelihood of outflow
of resources is remote, no provision or disclosure is made. Contingent
assets are neither recognised nor disclosed in the Financial
1.18 Earning per Share
In determining Earning per Share, the Company considers the net profit
after tax and includes the post tax effect of any extraordinary /
exceptional item. The number of shares used in computing Basic Earning
per Share is the weighted average number of shares outstanding during
the period. The number of shares used in computing Diluted Earning per
Share comprises the weighted average shares considered for deriving
Basic Earnings per Share and also the weighted average number of shares
that could have been issued on the conversion of all dilutive potential
equity shares unless the results would be anti - dilutive. Dilutive
potential equity shares are deemed converted as of the beginning of the
period, unless issued at a later date.
1.19 Employee Stock Option Scheme
In respect of stock Options granted pursuant to the Company''s Employee
Stock Options Scheme, the intrinsic value of the Options (excess of
market price of the share over the exercise price of the Option) is
treated as discount and accounted as employee compensation cost over
the vesting period. Employee compensation cost recognised earlier on
grant of Options is reversed in the period when the Options are
surrendered by any employee.