1.1 Basis for preparation of financial statements:
The Financial statements have been prepared and presented to comply in
all material respects with relevant provisions of the Companies Act,
1956 and notified accounting standards by Companies Accounting
Standards Rules, 2006 (as amended). The financial statements have been
prepared under the historical cost convention on an accrual basis in
accordance with the generally accepted accounting principles in India.
Accounting policies have been followed consistently except as stated
1.2 Use of estimates:
The preparation of financial statements requires certain estimates and
assumptions. These estimates and assumptions affect the reported amount
of assets and liabilities on the date of the financial statements and
the reported amount of revenues and expenses during the reporting
period. Difference between the actual result and estimates are
recognized in the period in which the results are known / materialized.
1.3 Capital receipts:
(i) Grant received under the Accelerated Power Development and Reforms
Programme (APDRP) of the Ministry of Power, Government of India, is
treated as capital receipt and accounted as capital reserve.
(ii) Service line contributions received from consumers are treated as
capital receipt and accounted as capital reserve.
1.4 Fixed assets:
Fixed assets are stated at cost of acquisition or construction less
accumulated depreciation. Cost includes purchase price, taxes and
duties, labour cost and other direct costs incurred up to the date the
asset is ready for its intended use. Allocation of indirect expenses to
capital account is done on the basis of technical evaluation by the
Certain computer software costs are capitalized and recognized as
Intangible assets based on materiality, accounting prudence and
significant benefits expected to flow there from for a period longer
than one year.
1.5 Impairment of fixed assets:
Fixed assets are reviewed for impairment losses whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognized for the amount by which
the carrying amount of the assets exceeds its recoverable amount, which
is the higher of an assets'' net selling price and value in use.
1.6 Borrowing costs:
Borrowing costs comprising interest, finance charges etc. to the extent
related / attributed to the qualifying assets, such as new projects and
/ or specific assets created in the existing business, are capitalized
up to the date of completion and ready for their intended use. Other
borrowing costs are charged to the statement of profit and loss in the
period of their accrual.
1.7 Depreciation and amortisation:
(i) Depreciation for the year is provided on additions / deductions of
the assets during the period from / up to the month in which the asset
is added / deducted.
(ii) Depreciation for the year has been shown after reducing the
proportion of the amount of depreciation provided on assets created
against the service line contribution & APDRP grant received.
(iii) In respect of fixed assets pertaining to Ahmedabad Generation,
Ahmedabad Distribution and Surat Distribution, depreciation is provided
on straight line method at the rates as per CERC regulations as
applicable in the year of addition.
(v) In respect of assets pertaining to SUGEN, depreciation is provided
on straight line method considering the rates as provided in Appendix
III of the CERC (Terms and Conditions of Tariff) Regulation 2009.
(vi) In respect of assets pertaining to Windmill (Jamnagar),
depreciation is provided on straight line method at the rates mentioned
in CERC order issued on ‘Determination of the tariff for procurement of
power by distribution licensees from Wind Energy Generators and other
(vii) Leasehold land is amortized over the lease period.
(viii) Computer software costs are amortised over its useful life which
is estimated at 3 years.
Investments are classified into current and long term investments.
Current investments are stated at the lower of cost and fair value.
Long term investments are stated at cost less provision for diminution
other than temporary, if any, in the value of such investments.
Inventories of stores, spare parts, coal, fuel and loose tools are
valued at weighted average cost and net realizable value whichever is
1.10 Revenue recognition:
(i) Revenue (income) is recognized when no significant uncertainty as
to the measurability or collectability exists. Revenue recognized in
excess of billing has been reflected under Other Current Assets as
(ii) Gross proceeds from CER is recognized when all the significant
risks and rewards of ownership of CER have been passed to the buyer,
usually on delivery of the CER.
(iii) Dividend is accounted when the right to receive payment is
(iv) Interest on overdue receivables of energy bills, insurance, coal
and other claims, casual income etc. are accounted on grounds of
prudence, as and when recovered.
1.11 Transactions in foreign currency:
(i) Transactions denominated in foreign currencies are normally
recorded at the exchange rate prevailing at the time of the
(ii) Monetary items denominated in foreign currencies at the period end
are restated at period end rates.
(iii) Non-monetary foreign currency items are carried at cost.
(iv) Any income or expense on account of exchange difference either on
settlement or on transaction of revenue in nature, is recognized in the
statement of profit and loss.
1.12 Retirement and other employee benefits:
Retirement benefits in the form of provident fund, family pension fund
and superannuation schemes, which are defined contribution schemes, are
charged to the statement of profit and loss of the period in which the
contributions to the respective funds accrue.
The Company has created employees group gratuity fund which has taken a
group gratuity insurance policy from Life Insurance Corporation of
India (LIC). Premium on the above policy as intimated by LIC is charged
to the statement of profit and loss. The adequacy of balances available
is compared with actuarial valuation obtained at the period-end and
shortfall, if any, is provided for in the statement of profit and loss.
Provision for leave encashment is determined and accrued on the basis
of actuarial valuation.
Actuarial gains and losses are immediately recognized in the statement
of profit and loss and are not deferred.
Provision for current tax is made on the basis of estimated taxable
income for the current accounting period and in accordance with the
provisions of the Income Tax Act, 1961. Deferred tax resulting from
timing differences between accounting and taxable profit for the
period is accounted for using the tax rates and laws that have been
enacted or substantively enacted as at the balance sheet date. Deferred
tax asset is recognized and carried forward only to the extent that
there is a reasonable certainty that sufficient future taxable income
will be available against which such assets can be realized.
1.14 Provisions, contingent liabilities and contingent assets:
Provisions involving substantial degree of estimation in measurement
are recognized when there is a probable present obligation and outflow
of resources as a result of past events.
Liabilities which are of contingent nature are not provided but are
disclosed at their estimated amount in the notes. Contingent assets are
neither recognized nor disclosed in financial statements.