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Reliance Industries
BSE: 500325|NSE: RELIANCE|ISIN: INE002A01018|SECTOR: Refineries
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« Mar 13
Accounting Policy Year : Mar '14
A.  BASIS OF PREPARATION OF FINANCIAL STATEMENTS
 
 These financial statements have been prepared to comply with Accounting
 Principles Generally accepted in India (Indian GAAP), the Accounting
 Standards notified under the Companies (Accounting Standards) Rules,
 2006 and the relevant provisions of the Companies Act, 1956.
 
 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 off to the nearest rupees in crore.
 
 B.  USE OF ESTIMATES
 
 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.
 
 C.  FIXED ASSETS
 
 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
 shown as 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.
 
 D.  LEASES
 
 a) Operating Leases: Rentals are expensed on a straight line basis with
 reference to 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 shown as lease
 liability. The principal component in the lease rental is adjusted
 against the lease liability and the interest component is charged to
 Statement of Profit and Loss.
 
 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 up to the date of commissioning of the asset are capitalised.
 
 d) All assets given on finance lease are shown as receivables at an
 amount equal to net investment in the lease. Initial direct costs in
 respect of lease are expensed in the period in which such costs are
 incurred. Income from lease assets is accounted by applying the
 interest rate implicit in the lease to the net investment.
 
 E.  DEPRECIATION, AMORTISATION AND DEPLETION
 
 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 and SEZ units / developer where
 depreciation is provided on Straight Line Method (SLM). Depreciation is
 provided at the rates and in the manner prescribed in Schedule XIV to
 the Companies Act, 1956 except in respect of the following assets,
 where rates higher than those prescribed in Schedule XIV are used;
 
 F.  IMPAIRMENT
 
 An asset is treated as impaired when the carrying cost of asset 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
 reversed if there has been a change in the estimate of recoverable
 amount.
 
 G.  FOREIGN CURRENCYTRANSACTIONS
 
 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 yearend 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 branches, which are 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. Branch 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 Statement of Profit
 and Loss, 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.
 
 H.  INVESTMENTS
 
 Current investments are carried at lower of cost and quoted/fair value,
 computed category-wise. Long-term investments are stated at cost.
 Provision for diminution in the value of long-term investments is made
 only if such a decline is other than temporary.
 
 I.  INVENTORIES
 
 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 incurred in bringing them to
 their respective present location and condition.
 
 Cost of raw materials, process chemicals, stores and spares, packing
 materials, trading and other products are determined on weighted
 average basis.
 
 J.  REVENUE RECOGNITION
 
 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
 established.
 
 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.
 
 K.  EMPLOYEE BENEFITS
 
 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.
 These benefits include performance incentive and compensated absences.
 
 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 Companys contribution is
 recognised as an expense in the Statement of Profit and Loss during the
 period in which the employee renders the related service.
 
 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 Statement of Profit and Loss.
 
 Employee Separation Costs
 
 Compensation to employees who have opted for retirement under the
 voluntary retirement scheme of the Company is charged to the Statement
 of Profit and Loss in the year of exercise of option by the employee.
 
 L.  BORROWING COSTS
 
 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 Statement of
 Profit and Loss in the period in which they are incurred.
 
 M.  RESEARCH AND DEVELOPMENT EXPENSES
 
 Revenue expenditure pertaining to research is charged to the Statement
 of Profit and Loss. Development costs of products are charged to the
 Statement of Profit and Loss unless a products technological
 feasibility has been established, in which case such expenditure is
 capitalised.
 
 N.  FINANCIAL DERIVATIVES AND COMMODITY HEDGING TRANSACTIONS
 
 In respect of derivative contracts, premium paid, gains/losses on
 settlement and losses on restatement are recognised in the Statement of
 Profit and Loss 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.
 
 O.  INCOME TAXES
 
 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
 for the period 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.
 
 P.  PREMIUM ON REDEMPTION OF BONDS / DEBENTURES
 
 Premium on redemption of bonds/debentures, net of tax impact, are
 adjusted against the Securities Premium Reserve.
 
 Q.  PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
 
 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
 statements.
 
 R.  ACCOUNTING FOR OIL AND GAS ACTIVITY
 
 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 capital work-in-progress. Upon a reserve being either proved or
 deemed to be dry, the costs accumulated in capital work-in-progress
 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
 Statement of Profit and Loss.
 
 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 Companys financial
 statements, according to the participating interest of the Company.
Source : Dion Global Solutions Limited
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