SENSEX NIFTY India | Accounting Policy > Refineries > Accounting Policy followed by Reliance Industries - BSE: 500325, NSE: RELIANCE

Reliance Industries

BSE: 500325|NSE: RELIANCE|ISIN: INE002A01018|SECTOR: Refineries
May 26, 16:00
32.9 (2.53%)
VOLUME 320,020
May 26, 15:54
34.85 (2.68%)
VOLUME 4,898,634
Mar 15
Accounting Policy Year : Mar '16
 These financial statements have been prepared to comply with the
 Generally Accepted Accounting Principles in India (Indian GAAP),
 including the Accounting Standards notified under the relevant
 provisions of the Companies Act, 2013.
 The financial statements are prepared on accrual basis under the
 historical cost convention, except for certain Fixed Assets which are
 carried at revalued amounts. The financial statements are presented in
 Indian rupees rounded of to the nearest rupees in crore.
 The preparation of financial statements in conformity with Indian GAAP
 requires judgments, estimates and assumptions to be made that affect
 the reported amount of assets and liabilities, 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 are recognised in the period
 in which the results are known/materialised. The management believes
 that the estimates used in the preparation of the financial statements
 are prudent and reasonable.
 Tangible Assets
 Tangible Assets are stated at cost net of recoverable taxes, trade
 discounts and rebates and include amounts added on revaluation, less
 accumulated depreciation and impairment loss, if any. The cost of
 Tangible Assets comprises its purchase price, borrowing cost and any
 cost directly attributable to bringing the asset to its working
 condition for its intended use, net charges on foreign exchange
 contracts and adjustments arising from exchange rate variations
 attributable to the assets.
 Subsequent expenditures related to an item of Tangible Asset are added
 to its book value only if they increase the future benefits from the
 existing asset beyond its previously assessed standard of performance.
 Projects under which assets are not ready for their intended use are
 disclosed under Capital Work-in-Progress.
 Intangible Assets
 Intangible Assets are stated at cost of acquisition net of recoverable
 taxes less accumulated amortisation/depletion and impairment loss, if
 any. The cost comprises purchase price, borrowing costs, and any cost
 directly attributable to bringing the asset to its working condition
 for the intended use and net charges on foreign exchange contracts and
 adjustments arising from exchange rate variations attributable to the
 intangible assets.
 a) Operating Leases: Rentals are expensed on a straight line basis with
 reference to the lease terms and other considerations.
 b) (i) Finance leases prior to 1st April, 2001: Rentals are expensed
 with reference to lease terms and other considerations.
 (ii) Finance leases on or after 1st April, 2001: The lower of the fair
 value of the assets and present value of the minimum lease rentals is
 capitalised as Fixed Assets with corresponding amount disclosed as
 lease liability. The principal component in the lease rental is
 adjusted against the lease liability and the interest component is
 charged to Profit and Loss Statement.
 c) However, rentals referred to in (a) or (b) (i) above and the
 interest component referred to in (b) (ii) above, pertaining to the
 period upto the date of commissioning of the asset are capitalised.
 Tangible Assets
 Depreciation on Fixed Assets is provided to the extent of depreciable
 amount on the Written Down Value (WDV) Method except in case of assets
 pertaining to Refining segment, SEZ units / developer and Petrochemical
 Plants capitalised after April 1, 2015 where depreciation is provided
 on Straight Line Method (SLM). Depreciation is provided based on useful
 life of the assets as prescribed in Schedule II to the Companies Act,
 2013 except in respect of the following assets, where useful life is
 different than those prescribed in Schedule II are used;
 In respect of additions or extensions forming an integral part of
 existing assets and insurance spares, including incremental cost
 arising on account of translation of foreign currency liabilities for
 acquisition of Fixed Assets, depreciation is provided as aforesaid over
 the residual life of the respective assets.
 The Company assesses at each reporting date as to whether there is any
 indication that an asset (tangible and intangible) may be impaired. An
 asset is treated as impaired, when the carrying cost of the asset
 exceeds its recoverable amount. Recoverable amount is higher of an
 asset''s or cash generating unit''s net selling price and its value in
 use. Value in use is the present value of estimated future cash flows
 expected to arise from the continuing use of an asset and from its
 disposal at the end of its useful life.
 An impairment loss is charged to Profit and Loss Account in the year in
 which an asset is identified as impaired. The impairment loss
 recognised in prior accounting period is reversed if there has been a
 change in the estimate of recoverable amount.
 a.  Transactions denominated in foreign currencies are recorded at the
 exchange rate prevailing on the date of the transaction or that
 approximates the actual rate at the date of the transaction.
 b.  Monetary items denominated in foreign currencies at the year end
 are restated at year end rates. In case of items which are covered by
 forward exchange contracts, the difference between the year end 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.
 c.  Non-monetary foreign currency items are carried at cost.
 d.  In respect of integral foreign operations, all transactions are
 translated at rates prevailing on the date of transaction or that
 approximates the actual rate at the date of transaction. Monetary
 assets and liabilities are restated at the year end rates.
 e.  Any income or expense on account of exchange difference either on
 settlement or on translation is recognised in the Profit and Loss
 Statement, except in case of long term liabilities, where they relate
 to acquisition of Fixed Assets, in which case they are adjusted to the
 carrying cost of such assets.
 Current investments are carried at lower of cost and quoted/fair value,
 computed category-wise. Non Current investments are stated at cost.
 Provision for diminution in the value of Non Current investments is
 made only if such a decline is other than temporary.
 Investments that are readily realisable and intended to be held for not
 more than 12 months from the date of acquisition are classified as
 current investment. All other investments are classified as non-current
 Items of inventories are measured at lower of cost and net realisable
 value after providing for obsolescence, if any, except in case of
 by-products which are valued at net realisable value. Cost of
 inventories comprises of cost of purchase, cost of conversion and other
 costs including manufacturing overheads net of recoverable taxes
 incurred in bringing them to their respective present location and
 Cost of raw materials, process chemicals, stores and spares, packing
 materials, trading and other products are determined on weighted
 average basis.
 Revenue is recognised only when risks and rewards incidental to
 ownership are transferred to the customer, it can be reliably measured
 and it is reasonable to expect ultimate collection. Revenue from
 operations includes sale of goods, services, service tax, excise duty
 and sales during trial run period, adjusted for discounts (net), and
 gain/loss on corresponding hedge contracts.
 Dividend income is recognised when the right to receive payment is
 Interest income is recognised on a time proportion basis taking into
 account the amount outstanding and the interest rate applicable.
 Excise Duty / Service Tax
 Excise duty / Service tax is accounted on the basis of both, payments
 made in respect of goods cleared / services provided and provisions
 made for goods lying in bonded warehouses.
 Short Term Employee Benefits
 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 when the employees render the services.
 Post-Employment Benefits
 Defined Contribution Plans
 A defined contribution plan is a post-employment benefit plan under
 which the Company pays specified contributions to a separate entity.
 The Company makes specified monthly contributions towards Provident
 Fund, Superannuation Fund and Pension Scheme. The Company''s
 contribution is recognised as an expense in the Profit and Loss
 Statement during the period in which the employee renders the related
 Defined Benefit Plans
 The liability in respect of defined benefit plans and other
 post-employment benefits is calculated using the Projected Unit Credit
 Method and spread over the period during which the benefit is expected
 to be derived from employees'' services.
 Actuarial gains and losses in respect of post-employment and other long
 term benefits are charged to the Profit and Loss Statement.
 Employee Separation Costs
 Compensation to employees who have opted for retirement under the
 voluntary retirement scheme of the Company is charged to the Profit and
 Loss Statement in the year of exercise of option by the employee.
 Borrowing costs include exchange differences arising from foreign
 currency borrowings to the extent they are regarded as an adjustment to
 the interest 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
 necessarily takes substantial period of time to get ready for its
 intended use. All other borrowing costs are charged to the Profit and
 Loss Statement in the period in which they are incurred.
 Revenue expenditure pertaining to research is charged to the Profit and
 Loss Statement. Development costs of products are charged to the Profit
 and Loss Statement unless a product''s technological feasibility has
 been established, in which case such expenditure is capitalised.
 In respect of derivative contracts, premium paid, gains/losses on
 settlement and losses on restatement are recognised in the Profit and
 Loss Statement except in case where they relate to the acquisition or
 construction of Fixed Assets, in which case, they are adjusted to the
 carrying cost of such assets.
 Tax expense comprises of current tax and deferred tax. Current tax is
 measured at the amount expected to be paid to the tax authorities,
 using the applicable tax rates. Deferred income tax reflect the current
 period timing differences between taxable income and accounting income
 and reversal of timing differences of earlier years/period. Deferred
 tax assets are recognised only to the extent that there is a reasonable
 certainty that sufficient future income will be available except that
 deferred tax assets, in case there are unabsorbed depreciation or
 losses, are recognised if there is virtual certainty that sufficient
 future taxable income will be available to realise the same.
 Deferred tax assets and liabilities are measured using the tax rates
 and tax law that have been enacted or substantively enacted by the
 Balance Sheet date.
 Premium on redemption of bonds/debentures, net of tax impact, are
 adjusted against the Securities Premium Reserve.
 Provision is recognised in the accounts when there is a present
 obligation as a result of past event(s) and it is probable that an
 outflow of resources will be required to settle the obligation and a
 reliable estimate can be made. Provisions are not discounted to their
 present value and are determined based on the best estimate required to
 settle the obligation at the reporting date. These estimates are
 reviewed at each reporting date and adjusted to reflect the current
 best estimates.
 Contingent liabilities are disclosed unless the possibility of outflow
 of resources is remote.
 Contingent assets are neither recognised nor disclosed in the financial
 The Company has adopted Full Cost Method of accounting for its'' Oil and
 Gas activities and all costs incurred are accumulated considering the
 country as a cost centre. Costs incurred on acquisition of interest in
 oil and gas blocks and on exploration and evaluation are accounted for
 as Intangible Assets under Development. Upon a reserve being either
 ''proved'' or deemed to be ''dry'', the costs accumulated in Intangible
 Assets under Development are capitalised to intangible assets.
 Development costs incurred thereafter in respect of ''proved'' reserves
 are capitalised to the said intangible asset. All costs relating to
 production are charged to the Profit and Loss Statement.
 Oil and Gas Joint Ventures are in the nature of Jointly Controlled
 Assets. Accordingly, assets and liabilities as well as income and
 expenditure are accounted on the basis of available information on a
 line-by-line basis with similar items in the Company''s financial
 statements, according to the participating interest of the Company.
Source :
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