(a) Basis of accounting and preparation of financial statements
The accounts have been prepared to comply in all material aspects with
applicable accounting principles in India, the Accounting Standards
(AS) notified in the Companies (Accounting Standards) Rules 2006 and
relevant provisions of the Companies Act, 1956 (the Act). The financial
statements have been prepared in the format prescribed by the Revised
Schedule VI to the Act.
(b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires estimates and assumptions to be
made that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities on the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting year. Differences between actual results and estimates are
recognised in the periods in which the results are known /materialise.
(c) Fixed Assets
Fixed assets are stated at their historical cost of acquisition or
construction, less accumulated depreciation/ amortization and
impairment loss. Cost includes all costs incurred to bring the assets
to their working condition and location (Also refer note 24.9) and Site
Restoration cost obligations where outflow of resources is considered
Assets retired from active use and held for disposal are stated at
lower of net book value or net realisable value.
Expenditure related to and incurred during the construction period of
switches and cell sites are capitalised as part of the construction
cost and allocated to the relevant fixed assets.
Capital inventory comprises of switching equipment, field unit cards,
and capital stores that are carried under Capital Work-ln-Progress till
such time as they are issued for new installation or replacement.
The Company capitalises software and related implementation costs as
intangible assets, where it is reasonably estimated that the software
has an enduring useful life.
License fees paid by the Company for acquiring licenses to operate
telecommunication / internet telephony services are capitalised as
Indefeasable Rights to Use (''IRU'') bandwidth capacities by the
Company are capitalised as intangible assets.
Assets acquired pursuant to an agreement for exchange of similar assets
are recorded at the net book value of the assets given up, with an
adjustment for any balancing receipt or payment of cash or any other
form of consideration.
i) Fixed assets are depreciated on a straight line basis, based on the
following estimates of their useful economic lives:
Depreciation rates derived from the above are not less than the rates
prescribed in Schedule XIV to the Companies Act, 1956.
ii) Leasehold land and premises are amortised uniformly over the period
iii) License fees is amortized uniformly over the original license
period of 20 years / extended period as permitted by DoT, as
applicable, from the date of commencement of operations. Since the
Company has intention of being in business for a period well beyond 10
years and the telecommunication business cannot be carried on without
the Telecom license, the useful life of the asset will exceed the
rebuttable presumption of 10 years under AS 26 on Intangible
Assets (Refer note 24.12).
iv) Indefeasible Right to Use (''IRU'') bandwidth capacities by the
Company are amortised over a period of fifteen years based on
management estimate of useful life of the assets or period of the
agreement whichever is lower.
v) Depreciation on additions and deletions to assets during the year is
charged to revenue pro rata to the period of their use.
vi) The Company provides for obsolescence of its slow moving capital
inventory by way of depreciation, at the rate of 33.33% p.a. of cost.
e) Foreign Currency transactions
i. Transactions in foreign currency are recorded at the original rates
of exchange in force at the time transactions are effected.
ii. Foreign currency denominated assets and liabilities are reported
a) Monetary items are translated into rupees at the exchange rates
prevailing at the balance sheet date. Non-Monetary items such as fixed
assets are carried at their historical rupee values.
b) Gains/losses arising on settlement of foreign currency transactions
or restatement of foreign currency denominated assets and liabilities
(monetary items) are recognised in the statement of profit and loss,
except for long term assets/liabilities which pertain to acquisition of
fixed assets which are adjusted in the cost of fixed assets (Refer note
iii. In case of forward exchange covers, the premium or discount
arising at the inception of the contract is amortised as expense or
income over the life of the contract.
iv. Pursuant to the announcement on accounting for derivatives issued
by the Institute of Chartered Accountants of India (ICAI), the Company
in accordance with the principle of prudence as enunciated in
Accounting Standard 1 on ''Disclosure of Accounting Policies''
provides for losses in respect of all outstanding derivative contracts
at the Balance Sheet date by marking them to market. Any gains arising
on such mark to market are not recognized as income. (Refer note 24.10
f) Employee benefits
Retirement benefit costs are expensed to revenue as incurred.
Contributions to the Provident and Superannuation Funds are made in
accordance with the rules of the Funds.
The Company participates in a group gratuity cum life assurance scheme
administered by the Life Insurance Corporation (LIC). Provision for the
year in respect of gratuity is made on the basis of actuarial valuation
as at the end of the year.
Leave encashment is provided for on the basis of actuarial valuation as
at the end of the year.
g) Revenue recognition
Revenue from telecommunication services is recognised as the service is
performed on the basis of actual usage of the Company''s network in
accordance with contractual obligations and is recorded net of service
tax. The amount charged to subscribers for specialised features which
entitle them to access the network of the Company and where all other
services and products are paid for separately, are recognised as and
when such features are activated.
Unbilled revenues resulting from unified access services provided from
the last billing cycle date to the end of each period are estimated and
recorded. Revenues from Unified Access Services rendered through
prepaid cards are recognized based on usage by the customers during the
year and over the validity period in case of upfront collection.
Revenue is recognised when it is earned and no significant uncertainty
exists as to its ultimate realisation or collection.
h) Government Grants
Subsidies granted by Government for providing telecom services in rural
areas are recognized as income in accordance with the relevant terms
and conditions of the scheme/agreement with DoT.
i) Borrowing costs
Borrowing costs attributable to the acquisition of a qualifying asset,
as defined in AS 16 on Borrowing Costs, are capitalised as part
of the cost of acquisition. Other borrowing costs are expensed as
j) Earnings per share
The Company reports basic and diluted earnings per share in accordance
with AS 20 on Earnings Per Share. Basic earning per share is
computed by dividing the net profit or loss for the year by the
weighted average number of Equity shares outstanding during the year.
Diluted earnings per share is computed by dividing the net profit or
loss for the year by the weighted average number of Equity shares
outstanding during the year as adjusted for the effects of all dilutive
potential equity shares, except where the results are anti-dilutive.
k) Operating Leases
Assets taken on lease under which all significant risks and rewards of
ownership are effectively retained by the lessor are classified as
operating leases. Lease payments under operating leases are recognized
as expenses as incurred in accordance with the respective lease
I) Cash Flow Statement
The Cash Flow statement is prepared by the indirect method set out in
AS 3 on Cash Flow Statements and presents Cash flows by
operating, investing and financing activities of the Company.
m) Finance and Treasury charges
Net finance and treasury charges are disclosed in the financial
statements. Interest and other income earned from treasury operations
are reduced from the costs of treasury operations.
Inventories are valued at lower of cost and net realizable value. Cost
of Inventories comprises of all cost of purchases and other costs
incurred in bringing the inventories to their present location and
condition. Cost of traded goods is determined on weighted average
o) Income Tax
Current Income tax is measured at the amount expected to be paid to the
tax authorities in accordance with Indian Income Tax Act, 1961.
Deferred income tax reflect the current year 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 reasonable certainty that
sufficient future income will be available except that deferred tax
assets in case there are unabsorbed depreciation and losses, are
recognised if there is virtual certainty that sufficient future taxable
income will be available to realise the same.
p) Impairment of assets
An asset is considered as impaired in accordance with AS 28 on
Impairment of Assets when at the balance sheet date there are
indications of impairment and the carrying amount of the asset, or
where applicable the cash generating unit to which the asset belongs,
exceeds its recoverable amount (i.e. the higher of the asset''s net
selling price and value in use). In assessing the value in use, the
estimated future cash flows expected from the continuing use of the
asset and from its ultimate disposal are discounted to their present
values using a pre- determined discount rate. The carrying amount is
reduced to the recoverable amount and the reduction is recognized as an
impairment loss in the Statement of profit and loss.
Current investments are carried at lower of cost and fair value. Long
term investments are carried at cost. Provision is made to recognise a
decline other than temporary in the carrying amount of long term
r) Contingent Liabilities
Contingent Liabilities as defined in AS 29 on Provision, Contingent
Liabilities and Contingent Assets are disclosed by way of notes to
accounts. Provision is made if it becomes probable that an outflow of
future economic benefits will be required for an item previously dealt
with as a contingent liability.