FUTURE RELIANCE POWER Accounting Policy

Notes to the financial statements as of and for the year ended March 31, 2017


1) General information:


Reliance Power Limited ("the Company") together with its subsidiaries ("the Reliance Power Group") is primarily engaged in the business of generation of power. The projects under development include coal, gas, hydro, wind and solar based energy projects. The portfolio of the Reliance Power Group also includes Ultra Mega Power Projects (UMPPs),


The Company is a public limited company which is listed on two recognized stock exchanges in India and is incorporated and domiciled in India under the provisions of the Companies Act. The registered office of the Company is located at H Block, 1st Floor, Dhirubhai Ambani Knowledge City, Navi Mumbai - 400710.


These financial statements were authorized for issue by the Board of Directors on April 13, 2017,


2) Significant accounting policies and critical accounting estimate and judgments:


2.1 Basis of preparation, measurement and significant accounting policies


The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated,


(a) Basis of preparation


Compliance with Ind AS


The financial statements of the Company have been prepared in accordance with Indian Accounting Standards ("Ind AS") notified under the Companies (Indian Accounting Standards) Rules, 2015 and relevant provisions of the Companies Act, 2013 ("the Act"). These are the Company''''s first Ind AS financial statements and Ind AS 101, ''''First-time Adoption of Indian Accounting Standards'''' has been applied. The policies set out below have been consistently applied during the years presented,


For all periods up to and including the year ended March 31, 2016, the Company prepared its financial statements in accordance with the accounting standards notified under Companies (Accounting Standard) Rules, 2006 (as amended) and other relevant provisions of the Act ("Previous GAAP"),


These financial statements for the year ended March 31, 2017 are the first financial statements which the Company has prepared in accordance with Ind AS. An explanation of how the transition from Previous GAAP to Ind AS has affected the Company''''s financial position, financial performance and cash flows including reconciliations and descriptions of the effect of the transition is provided in note 3 below,


Historical cost convention


The financial statements have been prepared under the historical cost convention, as modified by the following:


- Certain financial assets and financial liabilities at fair value;


- Assets held for sale - measured at fair value less cost to sell;


- Defined benefit plans - plan assets that are measured at fair value;


- Equity instruments in subsidiaries at fair value.


Fair value measurement


Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Company uses valuation techniques that are appropriate in the circumstances for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs,


All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:


- Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities


- Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable


- Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable


Current vis-a-vis non-current classification


The assets and liabilities reported in the balance sheet are classified on a "current/non-current basis", with separate reporting of assets held for sale and liabilities. Current assets, which include cash and cash equivalents, are assets


that are intended to be realized, sold or consumed during the normal operating cycle of the Company or in the


12 months following the balance sheet date; current liabilities are liabilities that are expected to be settled during the normal operating cycle of the Company or within the 12 months following the close of the financial year. The deferred tax assets and liabilities are classified as non-current assets and liabilities,


(b) Recent accounting pronouncements:


Standards issued but not yet effective Amendment to Ind AS 7:


The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirements,


(c) Property, plant and equipment:


Freehold land is carried at historical cost. All other items of Property, plant and equipment are stated at historical cost which includes capitalized borrowing cost, less depreciation and impairment loss, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset''''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred,


Expenditure incurred on assets which are not ready for their intended use comprising direct cost, related incidental expenses and attributable borrowing cost are disclosed under Capital Work-in-Progress,


Transition to Ind AS:


On transition to Ind AS, the Company has elected to adopt the fair value of all of its property, plant and equipment as at April 01, 2015 as deemed cost.


Depreciation methods, estimated useful lives and residual value:


Depreciation is provided to the extent of depreciable amount on Straight Line Method (SLM) based on useful life of the following class of assets as prescribed in Part C of Schedule II to the Companies Act, 2013 except in case of motor vehicles where the estimated useful life has been considered as five years based on a technical evaluation by the management,


Estimated useful lives, residual values and depreciation methods are reviewed annually, taking into account commercial and technological obsolescence as well as normal wear and tear and adjusted prospectively, if appropriate.


(d) Intangible assets:


Intangible assets are stated at cost of acquisition net of recoverable taxes less accumulated amortization/ depletion and impairment loss, if any. The cost comprises of purchase price, borrowing costs and any cost directly attributable to bringing the asset to its working condition for the intended use.


Expenditure incurred on acquisition of intangible assets which are not ready to use at the reporting date is disclosed under "Intangible assets under development".


Amortization method and periods


Amortization is charged on a straight-line basis over the estimated useful lives. The estimated useful lives and amortization method are reviewed at the end of each annual reporting period, with the effect of any changes in the estimate being accounted for on a prospective basis.


Computer software is amortized over an estimated useful life of 3 years.


On transition to Ind AS, the Company has elected to continue with the carrying value of all of intangible assets recognized as at April 01, 2015 measured as per the Previous GAAP and use that carrying value as the deemed cost of intangible assets,


(e) Impairment of non-financial assets:


Assets which are subject to depreciation or amortization are tested for impairment 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 asset''''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period,


(f) Trade Receivable:


Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest rate method, less provision for impairment,


(g) Financial instruments:


A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instruments of another entity,


Investments and other financial assets


i. Classification


The Company classifies its financial assets in the following measurement categories:


- those to be measured subsequently at fair value (either through Other Comprehensive Income or through profit or loss) and


- those measured at amortized cost.


The classification depends on the entity''''s business model for managing the financial assets and the contractual terms of the cash flows.


For assets measured at fair value, gains and losses will either be recorded in the statement of profit and loss or Other Comprehensive Income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments in subsidiaries, the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through Other Comprehensive Income.


The Company reclassifies debt investments when and only when its business model for managing those assets changes.


ii. Measurement


At initial recognition, the Company measures financial assets at its fair value plus, in the case of financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in the statement of profit and loss.


Debt instruments


Subsequent measurement of debt instruments depends on the Company''''s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:


Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at Amortized cost. A gain or loss on a debt investment that is subsequently measured at Amortized cost is recognized in the statement of profit and loss when the asset is derecognized or impaired. Interest income from these financial assets is included in other income using the effective interest rate method,


Fair Value through Other Comprehensive Income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets'''' cash flows represent solely payments of


principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognized in the Statement of profit and loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in other gains/ (losses). Interest income from these financial assets is included in other income using the effective interest rate method,


Fair Value through Profit or Loss (FVTPL): Assets that do not meet the criteria for Amortized cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss is recognized in the Statement of profit and loss in the period in which it arises. Interest income from these financial assets is included in other income,


Equity investments


The Company subsequently measures all equity investments in subsidiaries at fair value. The Company''''s management has elected to present fair value gains and losses on equity investments in OCI, and there is no subsequent reclassification of fair value gains and losses to profit or loss. Dividends from such investments are recognized in the Statement of profit and loss as other income when the Company''''s right to receive payments is established,


Changes in the fair value of financial assets at FVPL are recognized in the Statement of Profit and Loss, Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value,


iii. Impairment of financial assets:


The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at Amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.


For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109, ''''Financial Instruments'''', which requires expected lifetime losses to be recognized from initial recognition of the receivables.


iv. Derecognition of financial assets


A financial asset is derecognized only when:


- The Company has transferred the rights to receive cash flows from the financial asset or


- retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients,


Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognized, Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognized. Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognized if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognized to the extent of continuing involvement in the financial asset,


v. Income recognition: Interest income


Interest income from debt instruments is recognized using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example prepayment, extension, call and similar options) but does not consider the expected credit losses,


Dividend


Dividends are recognized in profit or loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the Company, and the amount of the dividend can be measured reliably.


(h) Contributed equity:


Equity shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax from the proceeds,


(i) Financial liabilities:


i. Classification as debt or equity


Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definition of a financial liability and an equity instrument.


An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.


ii. Initial recognition and measurement:


All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.


The Company''''s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and financial guarantee contracts.


iii. Subsequent measurement:


The measurement of financial liabilities depends on their classification, as described below:


Borrowings: Borrowings are subsequently carried at Amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the Statement of Profit and Loss over the period of the borrowings using the effective interest rate method,


Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawdown. In this case, the fee is deferred until the drawdown occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawdown, the fee is capitalized as a pre-payment for liquidity services and Amortized over the period of the facility to which it relates,


Trade and other payables: These amounts represent obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Those payable are classified as current liabilities if payment is due within one year or less otherwise they are presented as non-current liabilities. Trade and other payables are subsequently measured at Amortized cost using the effective interest rate method,


Financial guarantee contracts: Financial guarantee contracts are recognized as a financial liability at the time when guarantee is issued. The liability is initially at fair value and subsequently at the higher of the amount determined in accordance with Ind AS 37 and the amount initially recognized less cumulative amortization, where appropriate.


Where guarantees in relation to loans of subsidiaries are provided for no compensation, the fair values are expensed out in the Statement of Profit and Loss. On transition to Ind AS, the Company has recognized fair value changes as part of the retained earnings,


iv. Derecognition:


Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss as other gains / (losses). When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the Statement of Profit and Loss.


Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. Where there is a breach of a material provision of a long-term loan arrangement on or before the end of the reporting period with the effect that the liability becomes payable on demand on the reporting date, the entity does not classify the liability as current, if the lender agreed, after the reporting period and before the approval of the financial statements for issue, not to demand payment as a consequence of the breach.


(j) Borrowing costs:


General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.


Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.


Other borrowing costs are expensed in the period in which they are incurred.


(k) Provisions, Contingent liabilities and Contingent assets:


Provisions


Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.


Provisions are measured at the present value of management''''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognized as interest expense,


Contingent liabilities


Contingent liabilities are disclosed when there is a possible obligation arising from past events, 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 Company. A present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or reliable estimate of the amount cannot be made, is termed as contingent liability


Contingent assets


A contingent asset is disclosed, where an inflow of economic benefits is probable,


(l) Foreign currency translation:


i. Functional and presentation currency


Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the Company operates (''''the functional currency''''). The financial statements are presented in ''''Indian Rupees'''' (''''), which is the Company''''s functional and presentation currency


ii. Transactions and balances


(i) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.


(ii) All exchange differences arising on reporting on foreign currency monetary items at rates different from those at which they were initially recorded are recognized in the Statement of Profit and Loss.


(iii) In respect of foreign exchange differences arising on restatement or settlement of long term foreign currency monetary items, the Company has availed the option available in Ind AS 101 to continue the policy adopted for accounting for exchange differences arising from translation of long-term foreign currency monetary items outstanding as on March 31, 2016, wherein:


- Foreign exchange differences on account of depreciable asset, are adjusted in the cost of depreciable asset and would be depreciated over the balance life of asset.


- In other cases, foreign exchange difference is accumulated in "foreign currency monetary item translation difference account" and Amortized over the balance period of such long term asset/ liabilities.


(iv) Non-monetary items denominated in foreign currency are stated at the rates prevailing on the date of the transactions / exchange rate at which transaction is actually effected,


(m) Revenue recognition:


Revenue is measured at the fair value of the consideration received or receivable, and represent amounts receivable for goods supplied, stated net of discounts, returns and value added taxes,


i. Sale of energy


Revenue from sale of energy is recognized when it is measurable and it is probable that future economic benefits will flow to the entity in accordance with tariff provided in Power Purchase Agreement (PPA) read with the regulations of Maharashtra Electricity Regulatory Commission (MERC).


ii. Service income


Service income represents income from support services recognized as per the terms of the service agreements entered into with the respective parties.


iii. Income on Generation based incentive


I ncome on Generation based incentive is accounted on accrual basis considering eligibility for project for availing the incentive,


(n) Employee benefits:


Short-term obligations


Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognized in respect of employees'''' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the Balance Sheet.


Other long-term employee benefit obligations


The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in Statement of Profit and Loss.


The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur,


Post employee obligations


The Company operates the following post-employment schemes:


- defined benefit plans such as gratuity


- defined contribution plans such as provident fund and superannuation fund Gratuity obligations


The liability or asset recognized in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method,


The present value of the defined benefit obligation denominated in '''' is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation.


The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the Statement of Profit and Loss.


Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in Other Comprehensive Income. They are included in Retained Earnings in the Statement of Changes in Equity and in the Balance Sheet.


Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in profit or loss as past service cost,


Defined contribution plans Provident Fund


The Company pays provident fund contributions to publicly administered provident funds as per local regulations, The Company has no further payment obligations once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognized as employee benefit expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available,


Superannuation


Certain employees of the Company are participants in a defined contribution plan wherein, the Company has no further obligations to the plan beyond its monthly contributions which are contributed to a trust fund, the corpus of which is invested with Reliance Life Insurance Company Limited.


(o) Employee stock option scheme (ESOS):


ESOS Scheme:


The employees of the Company are entitled for grant of stock options (equity shares), based on the eligibility criteria set in ESOS Plan of the Company,


The fair value of options granted under the ESOS Plan is recognized as an employee benefit expense with a corresponding increase in equity. The total expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity


ESOS Trust:


The Company''''s ESOS Scheme is administered through Reliance Power ESOS Trust ("RPET"). The Company treats the RPET as its extension and shares held by RPET are treated as treasury shares and accordingly RPET has been consolidated in the Company''''s books,


Transition to Ind AS:


Under Ind AS, with respect to the grant of shares which were vested prior to transition date, the Company has elected to take optional exemption in accordance with Ind AS 101 and did not fair value the options which are vested before the transition date.


(p) Non-current assets held for sale:


Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell,


Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet,


(q) Income tax:


The income tax expense or credit for the period is the tax payable on the current period''''s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses,


The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.


Deferred income tax is provided in full, on temporary differences arising between the tax base of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled,


Deferred tax assets are recognized for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses,


Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously


Current and deferred tax is recognized in the Statement of profit and loss, except to the extent that it relates to items recognized in Other Comprehensive Income or directly in equity. In this case, the tax is also recognized in Other Comprehensive Income or directly in equity respectively


(r) Cash and cash equivalents:


For the purpose of presentation in the Statement of Cash Flows, cash and cash equivalents include cash on hand, demand deposits with banks, short-term balances (with an original maturity of three months or less from date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.


(s) Earnings per share:


Basic earnings per share


Basic earnings per share is calculated by dividing:


- the profit attributable to owners of the Company


- by the weighted average number of equity shares outstanding during the financial year.


Diluted earnings per share


Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:


- the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and


- the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares,


(t) Cash flow statement:


Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.


(u) Segment reporting:


Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision-Maker. The Chief Operating Decision-Maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer and the Chief Financial Officer that makes strategic decisions,


(v) Business combinations:


Business combinations involving entities that are controlled by the Company are accounted for using the pooling of interests method as follows:


i. The assets and liabilities of the combining entities are reflected at their carrying amounts.


ii. No adjustments are made to reflect fair values, or recognize any new assets or liabilities.


iii. Adjustments are only made to harmonies accounting policies.


iv. The financial information in the financial statements in respect of prior periods is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. However, where the business combination had occurred after that date, the prior period information is restated only from that date.


v. The balance of the Retained Earnings appearing in the financial statements of the transferor is aggregated with the corresponding balance appearing in the financial statements of the transferee or is adjusted against General Reserve.


vi. The identities of the reserves are preserved and the reserves of the transferor become the reserves of the transferee.


vii. The difference, if any, between the amounts recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of share capital of the transferor is transferred to Capital Reserve and is presented separately from Other Capital Reserves,


(w) Dividends:


Provision is made for the amount of any dividend declared, being appropriately authorized and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.


2.2 Critical accounting estimates and judgments:


The presentation of financial statements under Ind AS requires management to take decisions and make estimates and assumptions that may impact the value of revenues, costs, assets and liabilities and the related disclosures concerning the items involved as well as contingent assets and liabilities at the balance sheet date. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.


The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:


(a) Useful lives of Power Plant


The Company has estimated its useful lives of wind power assets based on the expected wear and tear, industry trends etc. In actual, the wear and tear can be different. When the useful lives differ from the original estimated useful lives, the Company will adjust the estimated useful lives accordingly. It is possible that the estimates made based on existing experience are different to the actual outcomes within the next financial period and could cause a material adjustment to the carrying amount of Property, Plant and Equipment (Refer note 4.1),


(b) Income taxes


There are transactions and calculations for which the ultimate tax determination is uncertain and would get finalized on completion of assessment by tax authorities. Where the final tax outcome is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made,


The Company is eligible to claim tax holiday on income generated from wind power generation. The deferred tax on temporary differences which are reversing after the tax holiday period have been estimated considering future projections and Company''''s plan to start claiming tax holiday in certain years. It is possible that this estimate may be different to the actual outcome within the next financial periods and could cause material adjustments to the deferred tax recognized in financial statements (Refer note 17),


(c) Fair value measurement and valuation process


The Company measured its investments in equity shares of subsidiaries at fair value and certain financial assets and liabilities for financial reporting purposes,


The fair values of investments in subsidiaries are not quoted in an active market and are determined by using valuation techniques, primarily earnings multiples and discounted cash flows. The models used to determine fair values including estimates / judgments involved are validated and periodically reviewed by the management. The inputs used in the valuation models include unobservable data of the Companies which are categorized within level 3 fair value measurements. They are based on historical experience, technical evaluation and other factors, including expectations of future events. Considering the level of estimation involved and unobservable inputs, the Company has engaged a third party qualified valuer to perform the valuation. Based on the actual performance of respective subsidiaries project, the inputs considered for valuation may vary materially and could cause a material adjustment to carrying amount of investments (Refer note 18 and 19),


3) Transition to Ind AS:


These are the Company''''s first financial statements prepared in accordance with Ind AS. The Company has adopted Indian Accounting Standards (Ind AS) as notified by the Ministry of Corporate Affairs with effect from April 01, 2016, with a transition date of April 01, 2015. For all periods upto and including the year ended March 31, 2016, the Company prepared its financial statements in accordance with the previously applicable Indian GAAP (Previous GAAP),


The adoption of Ind AS has been carried out in accordance with Ind AS 101, ''''First-time Adoption'''' of Indian Accounting Standards. Ind AS 101 requires that all Ind AS standards and interpretations that are issued and effective for the first Ind AS


financial statements be applied retrospectively and consistently for all financial years presented. Accordingly, the Company has prepared financial statements which comply with Ind AS for year ended March 31, 2017, together with the comparative information as at and for the year ended March 31, 2016. The Company''''s opening Ind AS Balance Sheet has been prepared as at April 01, 2015, the date of transition to Ind AS.


A. Exemptions and exceptions availed


In preparing these Ind AS financial statements, the Company has availed certain exemptions and exceptions in accordance with Ind AS 101, as explained below. The resulting difference between the carrying values of the assets and liabilities in the financial statements as at the transition date under Ind AS and Previous GAAP have been recognized directly in equity (retained earnings or another appropriate category of equity). This note explains the adjustments made by the Company in restating its Previous GAAP financial statements, including the Balance Sheet as at April 01, 2015 and the financial statements as at and for the year ended March 31, 2016,


(a) Ind AS optional exemptions


i. Deemed cost


Ind AS 101 permits a first-time adopter to measure all of its property, plant and equipment as recognized in the financial statements as at the date of transition to Ind AS at fair value or Previous GAAP carrying value and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38, "Intangible Assets". Accordingly, the Company has elected to measure all of its property, plant and equipment (PPE) at their fair values. The Company has elected to use Previous GAAP carrying value as deemed cost for Intangible Assets covered by Ind AS 38, "Intangible Assets'''',


ii. Long term foreign currency monetary items


I nd AS 101 permits a first-time adopter to continue the accounting policy adopted for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognized in the financial statements for the year ending March 31, 2016. The Company has opted to follow this exemption,


iii. Share-based payment transactions


I nd AS 101 provides an exemption that a first-time adopter is not required to apply Ind AS 102, ''''Share-based Payment'''' to equity instruments that were vested on or before the date of transition to Ind AS. The Company has elected to follow this exemption,


iv. Business combinations


I nd AS 101 provides an exemption for all transactions qualifying as business combinations, not to restate any business combinations under Ind AS 103, occurring before the transition date. The Company has elected to apply this exemption and accordingly the Company has not restated business combinations occurring before April 01, 2015.


v. Designation of previously recognized financial instruments


Ind AS 101 allows an entity to designate investments in equity instruments at FVOCI on the basis of facts and circumstances at the date of transition to Ind AS. The Company has availed this exemption for its equity investments in subsidiaries.


(b) Ind AS mandatory exceptions


The Company has applied the following exceptions from full retrospective application of Ind AS as mandatorily required under Ind AS 101:


i. Estimates


An entity''''s estimates in accordance with Ind ASs at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with Previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error,


I nd AS estimates as at April 01, 2015 are consistent with the estimates as at the same date made in conformity with Previous GAAP. The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under Previous GAAP:


- Impairment of financial assets based on expected credit loss model


- Equity investments in subsidiaries carried at FVOCI.


ii. Classification and measurement of financial assets


Ind AS 101 requires an entity to assess classification and measurement of financial assets (debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS. Consequently, the Company has applied the above assessment based on facts and circumstances existing at the transition date.


B. Reconciliations between Previous GAAP and Ind AS


I nd AS 101 requires an entity to reconcile equity, total comprehensive income and cash flows for prior periods. The regrouped Previous GAAP information is derived based on the audited financial statements of the Company for year ended March 31, 2016.


The following tables represent the reconciliations from Previous GAAP to Ind AS,


C. Notes to first-time adoption of Ind AS:


i. Fair valuation of investment in subsidiaries through Other Comprehensive Income


Under the Previous GAAP, investments in equity instruments were classified as long-term investments based on the intended holding period and reliability. Long-term investments were carried at cost less provision for other than temporary decline in the value of such investments. Under Ind AS, as the Company has opted for policy to recognize fair value changes through Other Comprehensive Income, fair value changes with respect to investments in subsidiaries designated as at FVOCI have been recognized in FVOCI Equity investments reserve as at the date of transition and subsequently through the Other Comprehensive Income for the year ended March 31, 2016. This has increased other reserves by '''' 62,335 lakhs as on April 01,2015 and a gain of Rs, 26,277 lakhs was accounted for in OCI for the year ended March 31, 2016.


ii. Fair valuation of investment in debentures of Coastal Andhra Power Limited at Amortized cost


Under the Previous GAAP, investment in debentures of wholly owned subsidiary - Coastal Andhra Power Limited (10,000 Secured Debentures of Rs, 1,000,000 each amounting to Rs, 100,000 lakhs) being long-term investment were carried at cost less provision for other than temporary decline in the value of such investments. Under Ind AS, as the Company has opted to recognize investments in debentures of Coastal Andhra Power Limited at fair value on initial recognition and subsequent measurement at amortized cost, the Company has recognized a gain of Rs, 16,730 lakhs in the Retained Earnings on the date of transition. Further, based on approval of its Board of Directors in the meeting held on March 25, 2016, part of these debentures were converted into 5,500 fully paid equity shares of Rs, 10 each and balance Rs, 45,000 lakhs as Interest free Inter Corporate Deposits payable to the Company. Accordingly on conversion, the company has recognized a loss of Rs, 31,756 lakhs in the Statement of Profit and Loss for the year ended March 31, 2016.


iii. Fair valuation through profit and loss account of investment in debentures of Chitrangi Power Private Limited


Under the Previous GAAP, investment in debentures of wholly owned subsidiary - Chitrangi Power Private Limited (1 2,700 Compulsory Convertible Unsecured Debentures of Rs, 1,000,000 each), being long term investment were carried at cost less provision for other than temporary decline in the value of such investments. Under Ind AS, as the Company has opted to recognize investments in debentures of Chitrangi Power Private Limited at fair value through Statement of Profit and Loss, the Company has recognized a loss of Rs, 84,186 lakhs in the Retained Earnings on the date of transition. Further, based on approval of its respective Board of Directors on March 30, 2016, debentures were converted into Interest free Inter Corporate Deposit payable to the Company. Accordingly, the Company has recognized the gain on conversion of Rs, 78,886 lakhs in the Statement of Profit and Loss for the year ended March 31, 2016.


iv. Deemed cost - Property, plant and equipments (PPE)


Under the Previous GAAP, Property, plant and equipment were carried at cost. Under Ind AS, the Company has opted the policy to carry such Property, plant and equipment at fair value on the date of transition as deemed cost. Accordingly, the Company has recognized fair value changes of Rs, 1,200 lakhs in plant and equipment and Rs, 728 lakhs in free hold land as on April 01, 2015 and also recognized deferred tax liability of Rs, 415 lakhs on the


date of transition. On account of aforesaid adjustments, the Company has charged additional depreciation of Rs, 56 lakhs and has reversed deferred tax liability of Rs, 20 lakhs, during the year 2015-16,


v. Share Based Payments - Trust


The Company''''s ESOS scheme is administered through Reliance Power ESOS Trust ("RPET"). Under the Previous GAAP, in accordance with "Guidance Note on Accounting for Employee Share-based Payments" the trust was considered as separate entity and was not allowed to be consolidated with the Company. Under Ind AS, as the trust in substance acts as an agent and the Company as a sponsor retains the majority of the risks and rewards relating to funding arrangement. Hence, shares held by the trust of Rs, 13,931 lakhs have been presented as treasury shares and cash and bank balance of Rs, 69 lakhs have been included with cash and cash equivalent of the Company (Also refer note 10),


vi. Borrowings at Amortized cost


Ind AS 109 requires transaction costs incurred towards origination of borrowings to be deducted from the carrying amount of borrowings on initial recognition. These costs are recognized in the profit or loss over the tenure of the borrowing as part of the interest expense by applying the effective interest rate method. Consequently, the total equity as at March 31, 2016 is increased by Rs, 120 Lakhs (April 01, 2015 - Rs, 171 Lakhs) and profit for the year ended March 31, 2016 is decreased by Rs, 51 Lakhs.


vii. Financial guarantee obligations


Under Ind AS, financial guarantees are accounted as financial liabilities and measured initially at fair value, Accordingly, the Company has created financial guarantee obligations of Rs, 27,051 lakhs as on April 01, 2015, On account of the aforesaid adjustment, the Company has recognized Other Income of Rs, 5,337 lakhs in the Statement of Profit and Loss for the year ended March 31, 2016,


viii. Remeasurements of post-employment benefit obligations


Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognized in Other Comprehensive Income instead of profit or loss. Under the Previous GAAP, these remeasurements were forming part of the profit or loss for the year. As a result of this change, the profit for the year ended March 31, 2016 increased by Rs,

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.
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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 compliance@dynamiclevels.com

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