COAL INDIA Accounting Policy

1.0 Accounting Convention:

Financial statements are prepared under the historical cost convention
and on accrual basis of accounting and going concern concept, in
accordance with the generally accepted accounting principles in India
and the relevant provisions of the Companies Act, 2013, including
accounting standards notified therein, except otherwise stated.

1.1 Use of estimate

In preparing the financial statements in conformity with Accounting
Principles generally accepted in India, management is sometimes
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
liabilities as at the date of financial statements and the amount of
revenue and expenses during the reported period. Actual results may
differ from those estimates. Any revision to such estimate is
recognized in the period in which the same is determined.

2.0 Subsidies / Grants from Government:

2.1 Subsidies / Grants on capital account are deducted from the cost of
respective assets to which they relate. The unspent amount at the
Balance Sheet date, if any, is shown as current liabilities.

2.2 Subsidies / Grants on revenue account are credited to Statement of
Profit & Loss as income and the relevant expenses are debited to the
respective heads of expenses. The unspent amount at the Balance Sheet
date, if any, is shown as current liabilities.

2.3 Subsidies / Grants from Government received as an implementing

2.3.1 Certain Grant / Funds received under S&T, PRE, EMSC, CCDA etc. as
an implementing agency and used for creation of assets are treated as
Capital Reserve and depreciation thereon is debited to Capital Reserve
Account. The ownership of the asset created through grants lies with
the authority from whom the grant is received.

2.3.2 Grant / Funds received as Nodal/Implementing Agency are accounted
for on the basis of receipts and disbursement.

3.0 Fixed Assets:

3.1 Land:

Value of land includes cost of acquisition, cash rehabilitation
expenses, resettlement cost and compensation in lieu of employment
incurred for concerned displaced persons.

3.2 Plant & Machinery:

Plant & Machinery includes cost and expenses incurred for erection /
installation and other attributable costs of bringing those assets to
working conditions for their intended use.

3.3 Development:

Expenses net of income of the projects / mines under development are
booked to Development Account and grouped under Capital
Work-in-Progress till the projects / mines are brought to revenue
account. Except otherwise specifically stated in the project report to
determine the commercial readiness of the project to yield production
on a sustainable basis and completion of required development activity
during the period of constructions, projects and mines under
development are brought to revenue considering the following criteria:

(a) From beginning of the financial year immediately after the year in
which the project achieves physical output of 25% of rated capacity as
per approved project report, or

(b) 2 years of touching of coal, or

(c) From the beginning of the financial year in which the value of
production is more than total expenses. - Whichever event occurs

3.4 Prospecting & Boring and other Development Expenditure:

The cost of exploration and other development expenditure incurred in
one "Five year" plan period will be kept in Capital work-in-progress
till the end of subsequent two "Five year" plan periods, for
formulation of projects, before it is written-off, except in the case
of Blocks identified for sale or proposed to be sold to outside agency
which will be kept in inventory till finalisation of sale.

3.5 Leases:

3.5.1 Operating Lease

i) Assets given on lease are capitalised and depreciated as per the
depreciation policy. Lease rentals received are recognised as income
over the lease period.

ii) Lease rentals paid for assets taken on lease are recognised as
expense over the lease period.

3.5.2 Finance Lease

i) Assets taken on finance lease are capitalized at lower of the fair
value of the asset and present value of the minimum lease payments.

An amount equal to the capitalized amount is shown as lease liability.

The principal component in lease rental is adjusted against lease
liability and interest component is charged to the Statement of Profit
& Loss as finance cost.

The asset is depreciated as per the depreciation policy. If the leased
asset is returnable to the lessor on expiry of lease period, full cost
is depreciated over its useful life or lease period, whichever is less.

ii) Assets given on finance lease are shown as lease receivables at an
amount equal to net investment in the leased asset. Principal component
of the lease receipts are adjusted against outstanding lease
receivables and interest is recognised as income.

4.0 Railway Sidings pending commissioning:

Pending commissioning, payments made to the railway authorities for
construction of railway sidings are shown in Note 12 ? "Long Term Loans
& Advances" under Advances for Capital.

5.0 Investments:

Long term investments are carried at cost less provision for diminution
other than temporary, if any, in value of such investments. Current
investments are carried at lower of cost or fair value.

6.0 Inventories:

6.1 Book stock of coal / coke is considered in the accounts where the
variance between book stock and measured stock is upto /- 5% and in
cases where the variance is beyond /- 5% the measured stock is
considered. Such stock are valued at net realisable value or cost
whichever is lower.

6.1.1 Coal & coke fines are valued at lower of cost or net realisable

6.1.2 Slurry (coking/semi-coking), middling of washeries and by
products are valued at net realisable value.

6.2 Stores & Spares:

6.2.1 The closing stock of stores and spare parts has been considered
in the accounts as per balances appearing in priced stores ledger of
the Central Stores and as per physically verified stores lying at the

6.2.2 Stock of stores & spare parts (which also includes loose tools)
at central & area stores are valued at cost calculated on the basis of
weighted average method. The year-end inventory of stores & spare parts
lying at collieries / sub-stores / drilling camps/ consuming centres,
initially charged off, are valued at issue price of Area Stores, Cost /
estimated cost. Workshop jobs including work-in-progress are valued at
cost. Similarly stock of stationary at printing press and medicines at
central hospital are valued at cost.

6.2.3 Stock of stationery (other than lying at printing press), bricks,
sand, medicine (except at Central Hospitals), aircraft spares and
scraps are not considered in inventory.

6.2.4 Provisions are made at the rate of 100% for unserviceable,
damaged and obsolete stores and spares and at the rate of 50% for
stores & spares not moved for 5 years.

7. 0 Depreciation/amortisation:

7.1 Depreciation on fixed assets is provided on straight line method on
the basis of useful life specified in Schedule II of Companies Act 2013
except for assets mentioned below, for which depreciation is provided
on the basis of technically estimated useful life which are lower than
that envisaged as per schedule II of Companies Act, 2013 to depict a
more true and fair rate of depreciation:

Telecommunication equipment : - 6 years and 9 years

Photocopying machine : - 4 years

Fax machine : - 3 years

Mobile phone : - 3 years

Digitally enhance cordless telephone : - 3 years

Printer & Scanner : - 3 years

Earth Science Museum : - 19 years

High volume respiratory dust samplers : - 3 years

Certain equipment /HEMM : - 7 years and 6 years as applicable.

SDL (equipment) : - 5 years

LHD (equipment) :- 6 years

7.2 The residual value of all assets for depreciation purpose is
considered as 5% of the original cost of the asset except those item of
assets covered under Para 7.3

7.3 In case of assets namely Coal tub, winding ropes, haulage ropes,
stowing pipes & safety lamps the technically estimated useful life has
been determined to be one year with a nil residual value.

7.4 Depreciation on the assets added / disposed off during the year is
provided on pro-rata basis with reference to the month of addition /
disposal, except on those assets with one year useful life and nil
residual value as mention under Para 7.3, which are fully depreciated
in the year of their addition. These Assets are taken out from the
Assets after expiry of two years following the year in which these are
fully depreciated.

7.5 Value of land acquired under Coal Bearing Area (Acquisition &
Development) Act, 1957 is amortised on the basis of the balance life of
the project. Value of leasehold land is amortised on the basis of lease
period or balance life of the project whichever is earlier.

7.6 Prospecting, Boring and Development expenditure are amortised from
the year when the mine is brought under revenue in 20 years or working
life of the project whichever is less.

7.7 Cost of Software recognized as intangible asset, is amortised on
straight line method over a period of legal right to use or three
years, whichever is less; with a nil residual value.

8.0 Impairment of Asset:

Fixed assets are reviewed for impairment whenever events or changes in
circumstances indicate that their carrying amount may not be

An impairment loss is recognised in the statement of profit and loss if
the carrying amount exceeds its recoverable amount. Recoverable amount
is higher of an asset''''s net selling price and value in use. An
impairment loss recognised on asset is reversed when conditions
warranting impairment provision no longer exists.

9.0 Foreign Currency Transactions:

Transactions in foreign currency are initially recorded at exchange
rates prevailing on the date of transactions.

Monetary items denominated in foreign currencies (such as cash,
receivables, payables etc.) outstanding at the end of reporting period,
are translated at exchange rate prevailing as at the end of reporting

Non-monetary items denominated in foreign currency, (such as
investments, fixed assets etc.) are valued at the exchange rate
prevailing on the date of the transaction.

Exchange differences arising on the settlement of monetary items or on
reporting an monetary items at rates different from those at which they
were initially recorded during the period, or reported in previous
financial statements, are recognised as income or as expenses in the
period in which they arise.

Transactions covered by cross currency swap options contracts to be
settled on future dates are recognised at the rates prevailing on the
Balance Sheet date, of the underlying foreign currency. Effects arising
out of such contracts are taken into accounts on the date of

10.0 Employee benefits:

10.1 Short term benefits

All short term employee benefits are recognized in the period in which
they are incurred.

10.2 Post-employment benefits and other long term employee benefits:

a) Defined contributions plans:

The company has defined contribution plans for payment of Provident
Fund and Pension Fund benefits to its employees. Such Provident Fund
and Pension Fund are maintained and operated by the Coal Mines
Provident Fund (CMPF) Authorities. As per the rules of these schemes,
the company is required to contribute a specified percentage of pay
roll cost to the CMPF Authorities to fund the benefits.

b) Defined benefits plans:

The liability on the Balance Sheet date on account of gratuity and
leave encashment is provided for on actuarial valuation basis by
applying projected unit credit method. Further the company has created
a Trust with respect to establishment of Funded Group Gratuity (cash
accumulation) Scheme through Life Insurance Corporation of India.
Contribution is made to the said fund based on the actuarial valuation.

c) Other employee benefits:

Further liability on the Balance Sheet date of certain other employee
benefits viz. benefits on account of LTA/ LTC; Life Cover Scheme, Group
Personal Accident Insurance Scheme, Settlement Allowance, Post
Retirement Medical Benefits Scheme and compensation to dependants of
deceased in mines accidents etc. are also valued on actuarial basis by
applying projected unit credit method.

11.0 Revenue Recognition:

11.1 Sales

a. Revenue in respect of sales is recognised when the property in the
goods with the risks and rewards of ownership are transferred to the
buyer and there is no significant uncertainty as to its realisability.

b. Sale of coal is net of statutory dues and accepted deduction made
by customer on account of quality of coal.

11.2 Interest

Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the rate applicable.

11.3 Dividend

Dividend income is recognised when right to receive is established.

11.4 Other Claims

Other claims (including interest on delayed realization from customers)
are accounted for, when there is certainty that the claims are

12.0 Borrowing Costs:

Borrowing Cost directly attributable to the acquisition or construction
of qualifying assets is capitalised. A qualifying asset is one that
necessarily takes substantial period of time to get ready for intended
use. Other borrowing costs are recognised as expenses in the period in
which they are incurred.

13.0 Taxation:

Provision of current income tax is made in accordance with the Income
Tax Act., 1961. Deferred tax liabilities and assets are recognised at
substantively enacted tax rates, as on the balance sheet date, subject
to the consideration of prudence, on timing difference, being the
difference between taxable income and accounting income that originate
in one period and are capable of reversal in one or more subsequent

14.0 Provision, Contingent Liabilities and Contingent Assets:

A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
embodying economic benefit will be required to settle the obligation,
in respect of which a reliable estimate can be made. Provisions are not
discounted to present value and are determined based on best estimate
required to settle the obligation at the balance sheet date.

Contingent liability is a possible obligation that arises from past
events and the existence of which will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of the enterprise or a present obligation
that arises from past events but is not recognised because it is not
probable that an outflow of resources embodying economic benefit will
be required to settle the obligations or reliable estimate of the
amount of the obligations cannot be made.

Contingent liabilities are not provided for in the accounts and are
disclosed by way of additional information.

Contingent asset are neither recognised nor disclosed in the financial

15.0 Earning per share:

Basic earnings per share are computed by dividing the net profit after
tax by the weighted average number of equity shares outstanding during
the period. Diluted earnings per shares is computed by dividing the
profit after tax by the weighted average number of equity shares
considered for deriving basic earnings per shares and also the weighted
average number of equity shares that could have been issued upon
conversion of all dilutive potential equity shares.

16.0 Overburden Removal (OBR) Expenses :

In open cast mines with rated capacity of one million tonnes per annum
and above, cost of OBR is charged on technically evaluated average
ratio (COAL:OB) at each mine with due adjustment for advance stripping
and ratio-variance account after the mines are brought to revenue. Net
of balances of advance stripping and ratio variance at the Balance
Sheet date is shown as cost of removal of OB under the head Non -
Current Assets/ Long Term Provisions as the case may be.

The reported quantity of overburden as per record is considered in
calculating the ratio for OBR accounting where the variance between
reported quantity and measured quantity is within the lower of the two
alternative permissible limits, as detailed hereunder:-

However, where the variance is beyond the permissible limits as above,
the measured quantity is considered.

17.0 Prior Period Adjustments and Prepaid Expenses:

Income / expenditures relating to prior period and prepaid expenses,
which do not exceed Rs. 0.10 Crore in each case, are treated as income
/ expenditure of current year.

CIN: U67190WB2003PTC096617. Trading in Commodities is done through our Group Company Dynamic Commodities Pvt. Ltd. The company is also engaged in Proprietory Trading apart from Client Business.

Disclaimer: There is no guarantee of profits or no exceptions from losses. The investment advice provided are solely the personal views of the research team. You are advised to rely on your own judgment while making investment / Trading decisions. Past performance is not an indicator of future returns. Investment is subject to market risks. You should read and understand the Risk Disclosure Documents before trading/Investing.

Disclosure: We, Dynamic Equities Private Limited are also engaged in Proprietory Trading apart from Client Business. In case of any complaints/grievances, clients may write to us at

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