Notes to Standalone Financial Statements for the Year ended 31st March, 2017
1. Corporate and General Information
Steel Authority of India Limited (referred to as "the Company") is domiciled and incorporated in India. The Company, a Public Sector Undertaking conferred with Maharatna status by Government of India, is one of the largest steel producers in the Country. The registered office of the Company is situated at Ispat Bhawan, Lodhi Road, New Delhi-110 003. The securities of the Company are listed on the National, Bombay and London Stock Exchanges.
These financial statements have been approved by the Board of Directors of the Company in their meeting held on 30th May, 2017.
2. Basis of Preparation
2.1 Statement of Compliance
The financial statements of the Company have been prepared on accrual basis of accounting in accordance with the Indian Accounting Standards (Ind AS) as prescribed under Section 133 of Companies Act, 2013, as notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended), and other accounting principles generally accepted in India. The Company has uniformly applied the accounting policies during the periods presented. These are the Company''''s first Ind AS financial statements and Ind AS 101, First-time Adoption of Indian Accounting Standards has been applied.
For all the periods up to and including 31st March 2016, the Company had prepared its financial statements in accordance with Generally Accepted Accounting Principles (GAAP) in India, which includes, Accounting Standards prescribed under Section 133 of the Companies Act 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the Companies Act, 2013 (collectively referred to as ''''Indian GAAP''''). The Company followed the provisions of IndAS 101 in preparing its opening Ind AS Balance Sheet as of the date of transition, viz., 1st April, 2015. Certain of the Company''''s Ind AS Accounting Policies used in the opening Balance Sheet differed from its Indian GAAP Accounting Policies applied as at 31st March, 2015 and accordingly the adjustments were made to restate the opening balances as per Ind AS. The resulting adjustments, arising from events and transactions before the date of transition to Ind AS, were recognized directly through retained earnings as at 1st April, 2015 as required by Ind AS 101.
2.2 Basis of Measurement
The financial statements are prepared on a historical cost basis except for the following assets and liabilities which have been measured at fair value:
- certain financial assets and liabilities which are classified as fair value through profit and loss or fair value through other comprehensive income;
- assets held for sale, at the lower of the carrying amounts and fair value less cost to sell;
- defined benefit plans and plan assets.
2.3 Functional and Presentation Currency
The Financial Statements have been presented in Indian Rupees (?), which is the Company''''s functional currency. All financial information presented in '''' have been rounded off to the nearest two decimals of Crore unless otherwise stated.
2.4 Use of Estimates and Management Judgments
In preparing the financial statements in conformity with Company''''s Accounting Policies, management is required to make estimates and assumptions that affect reported amounts of assets and liabilities and the disclosure of contingent liabilities as at the date of the financial statements, the amounts of revenue and expenses during the reported period and notes to the Financial Statements. Actual results could differ from those estimates. Any revision to such estimates is recognized in the period in which the same is determined.
3. Significant Accounting Policies
A summary of the significant accounting policies applied in the preparation of the financial statements is given below. These accounting policies have been applied consistently to all the periods presented in the financial statements.
3.1 Property, Plant and Equipment
3.1.1 Recognition and Measurement Tangible Assets
Property, plant and equipment held for use in the production or/and supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost, less any subsequent accumulated depreciation and impairment losses. The initial cost at cash price equivalence of property, plant and equipment acquired comprises its purchase price, including import duties and non-refundable purchase taxes, any directly attributable costs of bringing the assets to its working condition and location and present value of any obligatory decommissioning costs for its intended use. Plant and Machinery also include assets held under finance lease.
In case of self-constructed assets, cost includes the costs of all materials used in construction, direct labour, allocation of overheads, directly attributable borrowing costs including trial run expenses (net of revenue) Spares having useful life of more than one year and having value of Rs, 10 lakhs or more in each case, are capitalized under the respective heads as and when available for use.
Profit or loss arising on the disposal of property, plant and equipment is recognized in the Statement of Profit and Loss.
3.1.2 Subsequent Cost
Subsequent expenditure is recognized as an increase in the carrying amount of the asset or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits derived from the cost incurred will flow to the Company and the cost of the item can be measured reliably. The carrying amount of replaced item (s) is derecognized. .
Any repairs of Rs, 50 lakhs or more of property, plant and equipment are recognized in the carrying amount of the item if it is probable that the future economic benefits of the costs incurred will flow to the Company. The carrying amount of the replaced item(s) is derecognized.
Depreciation on tangible assets and investment property is provided on straight line method, considering residual value of 5% of the cost of the asset, over the useful lives of the assets, as specified in Schedule II of the Companies Act, 2013 except in case of Factory Buildings, Plant and Machinery, Water Supply & Sewerage and Railway Lines & Sidings and components thereof, where useful life is determined by technical experts. The useful life assumed by the technical experts is as under:
For these classes of assets, based on technical evaluation carried out by external technical experts, the Company believes that the useful lives as given above best represent the period over which Company expects to use these assets. Hence, the useful lives for these assets are different from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013.
The estimated useful lives and residual values of depreciable/ amortisable assets are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.
Where the historical cost of a depreciable asset undergoes a change, the depreciation on the revised unamortised depreciable amount is provided over the residual useful life of the asset. Depreciation on addition/ deletion during the year is provided on pro-rata basis with reference to the month of addition/ deletion. Assets costing up to Rs, 5000/- are fully depreciated in the year in which they are put to use.
Depreciation on capital spares is provided over the useful life of the spare or remaining useful life of the mother asset, as reassessed, whichever is lower.
3.2 Intangible Assets
3.2.1 Recognition and Measurement
Mining Rights are treated as Intangible Assets and all related costs thereof are amortised on the basis of annual production to the total estimated mineable reserves. In case the mining rights are not renewed, the balance related cost will be charged to revenue in the year of decision of non- renewal.
Acquisition Cost i.e. cost associated with acquisition of licenses, and rights to explore including related professional fees, payment towards statutory forestry clearances, as and when incurred, are treated as addition to the Mining Rights. Other Intangible Assets
Software which is not an integral part of related hardware, is treated as intangible asset and amortised over a period of five years or its licence period, whichever is less.
Research and Development
Development expenditure is capitalised only if it can be measured reliably and the related asset and process are identifiable and controlled by the Company. Research and other development expenditure is recognized as revenue expenditure as and when incurred.
3.2.2 Subsequent Cost
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognized in the Statement of Profit and Loss.
3.3 Impairment of Non-Financial Assets
The Company reviews the carrying amount of its assets on each Balance Sheet date for the purpose of ascertaining impairment indicators if any, by considering assets of entire one Plant as Cash Generating Unit (CGU). If any such indication exists, the assets'''' recoverable amount is estimated, as higher of the Net Selling Price and the Value in Use. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in the Statement of Profit and Loss.
3.4 Stripping Cost
The stripping cost incurred during the production phase of a surface mine is recognized as an asset if such cost provides a benefit in terms of improved access to ore in future periods and following criteria are met:
- It is probable that the future economic benefits (improved access to an ore body) associated with the stripping activity will flow to the entity,
- The entity can identify the component of an ore body for which access has been improved, and
- The costs relating to the improved access to that component can be measured reliably.
The expenditure, which cannot be specifically identified to have been incurred to access ore is charged to revenue, based on stripping ratio as per 5 year mining plan for mines, except collieries which is based on project report.
3.5 Borrowing Costs
Borrowing costs directly attributable to the acquisition or construction of a qualifying asset, which takes substantial period of time, are capitalized as a part of the cost of that asset, during the period of time that is necessary to complete and prepare the asset for its intended use.
The Company considers a period of twelve months or more as a substantial period of time.
Transaction costs in respect of long-term borrowings are amortized over the tenure of respective loans using effective interest method. Other borrowing costs are recognized in the Statement of Profit & Loss in the period in which these are incurred.
Raw materials, Stores & Spares and Finished/Semi-finished products (including process scrap) are valued at lower of cost and net realizable value of the items of the respective Plants/Units. In case of identified obsolete/ surplus/ non-moving items, necessary provision is made and charged to revenue. The net realizable value of semi-finished special products, which have realizable value at finished stage only, is estimated for the purpose of comparison with cost.
Residue products and other scrap are valued at estimated net realizable value. The basis of determining cost is:
Raw materials - Periodical weighted average cost Minor raw materials - Moving weighted average cost Stores & Spares - Moving weighted average cost Materials in-transit - at cost
Finished/Semi-finished products - material cost plus appropriate share of labour, related overheads and duties.
3.7 Government Grants
Government grants are recognized when there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received.
Government grants are recognized in Statement of Profit and Loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate. Where the Grant relates to an asset value, it is recognized as deferred income, and amortized over the expected useful life of the asset. Other grants are recognized in the statement of Profit & Loss concurrent to the expenses to which such grants relate/ are intended to cover.
Where the Company receives non-monetary grants, the asset and the grant are recorded gross at fair amounts and released to the income statement over the expected useful life and pattern of consumption of the benefit of the underlying asset.
3.8 Foreign Currency Transactions
Foreign currency transactions are translated into the functional currency of the Company using the exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement and remeasurement of monetary items denominated in foreign currency are recognized in the Statement of Profit and Loss at period-end exchange rates.
The Company opted for accounting the exchange differences arising on reporting of long term foreign currency monetary items in line with Companies (Accounting Standards) Amendment Rules 2009 relating to Accounting Standard-11 notified by Government of India on 31st March, 2009 (as amended on 29th December 2011), which will continue in accordance with Ind-AS 101 for all pre-existing long term foreign currency monetary items as at 31st March 2016. Accordingly, exchange differences relating to long term monetary items, arising during the year, in so far as they relate to the acquisition of fixed assets, are adjusted in the carrying amount of such assets.
Non-monetary items are not retranslated at period-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.
3.9 Employee Benefits Defined Contribution Plan
A defined contribution plan is a plan under which the Company pays fixed contributions into a separate entity. Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions. Contributions towards Provident Funds are charged to the Statement of Profit and Loss of the period when the contributions to the Funds are due.
Defined Benefit Plan
Defined benefit plans are the amount of the benefit that an employee will receive on completion of services by reference to length of service, last drawn salary or direct costs related to such benefits. The legal obligation for any benefits remains with the Company.
The liability recognized for Defined Benefit Plans is the present value of the Defined Benefit Obligation (DBO) at the reporting date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. Management estimates the present value of the DBO annually through valuations by an independent actuary using the projected unit credit method. Actuarial gains and losses are included in Statement of Profit and Loss or Other Comprehensive Income of the year.
Remeasurement, comprising of actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected in the balance sheet with a charge or credit recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to the statement of profit and loss.
Short Term Employee Benefits
Short term employee benefits comprise of employee costs such as salaries, bonus, ex-gratia, annual leave and sick leave which are accrued in the year in which the associated services are rendered by employees of the Company.
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related services.
Expenditure incurred on Voluntary Retirement Scheme is charged to the Statement of Profit and Loss immediately.
3.10 Revenue Recognition
Revenue is measured at the fair value of consideration received or receivable. Sale of goods
Sales include excise duty and are net of sales taxes, rebates and price concessions. Sales are recognized at the time of dispatch of materials to the buyers including the cases where delivery documents are endorsed in favour of the buyers. Where the contract prices are not finalized with government agencies, sales are accounted for on provisional basis.
Marine export sales are recognized on:
i) the issue of bill of lading, or
ii) negotiation of export bills upon expiry of laycan period, in cases where realization of material value without shipment is provided in the letters of credit of respective contracts, whichever is earlier.
Export incentives under various schemes are recognized as income on certainty of realization.
The iron ore fines not readily useable/saleable are included in inventory and revenue is recognized on disposal.
Interest and dividend income
Interest income is reported on an accrual basis using the effective interest method. Dividends are recognized at the time the right to receive is established.
3.11 Adjustment pertaining to Earlier Years
Income/Expenditure relating to a prior period, which do not exceed 0.5% of Turnover in each case, are treated as income/expenditure of current year.
3.12 Claims for Liquidated Damages and Price Escalation
Claims for liquidated damages are accounted for as and when these are considered recoverable by the Company, on final settlement. These are adjusted to the capital cost or recognized in Statement of Profit and Loss, as the case may be on final settlement of Liquidated damages.
Suppliers'''' and Contractors'''' claims for price escalation are accounted for to the extent such claims are accepted by the Company.
Company as a Lessee Finance leases
Finance leases, which effectively transfer to the lessee substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments under such leases are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalized.
If there is no reasonable certainty that the Company will obtain the ownership by the end of lease term, capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
Assets acquired on leases where a significant portion of risk and rewards of ownership are retained by the lessor are classified as operating leases. Lease rental are charged to statement of profit and loss on straight-line basis except where scheduled increase in rent compensate the lessor for expected inflationary costs.
Company as a Less or Finance leases
Leases which effectively transfer to the lessee substantially all the risks and benefits incidental to ownership of the leased item are classified and accounted for as finance lease. Lease rental receipts are apportioned between the finance income and capital repayment based on the implicit rate of return. Contingent rents are recognized as revenue in the period in which they are earned. Operating leases
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. The respective leased assets are included in the balance sheet based on their nature. Rental income is recognized on straight-line basis over the lease term except where scheduled increase in rent compensates the Company with expected inflationary costs.
3.14 Investment Properties
Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are measured initially at cost including transaction costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation and impairment losses. Any gain or loss on disposal of investment property is determined as the difference between net disposal proceeds and the carrying amount of the property and is recognized in the Statement of Profit and Loss.
3.15 Non-current assets held for sale
Company classifies a non-current asset as held for sale if its carrying amount will be recovered principally through a sale transaction. This condition is regarded as met only when the asset is available for immediate sale in its present condition and its sale is highly probable.
Non-current assets including discontinued operations, classified as held for sale are measured at the lower of the carrying amounts and fair value less costs to sell and presented separately in the financial statements. Once classified as held for sale, the assets are not subject to depreciation or amortization.
Any profit or loss arising from the sale or re-measurement of discontinued operations is presented as part of a single line item in statement of profit and loss.
3.16 Mine Closure
Mine Closure Provision include the dismantling and demolition of infrastructure, the removal of residual materials and the remediation of disturbed areas for mines. This provision is based on all regulatory requirements and related estimated cost based on best available information. Mine closure costs are provided for in the accounting period when the obligation arises based on the net present value of the estimated future costs of restoration to be incurred during the life of the operation and post closure.
The initial close-down and restoration provision is capitalized within "Property, Plant and Equipment". Subsequent movements in the close-down and restoration provisions for on-going operations, including those resulting from new disturbance related to expansions or other activities qualifying for capitalization, updated cost estimates, changes to the estimated lives of operations, changes to the timing of closure activities and revisions to discount rates are also capitalized within "Property, Plant and Equipment". These costs are depreciated over the lives of the assets to which they relate. Any changes in closure provisions relating to closed operations are charged /credited to the Statement of Profit and Loss. The amortization or "unwinding" of the discount applied in establishing the provisions is charged as Finance Cost.
3.17 Provisions, Contingent Liabilities and Contingent Assets Provisions and Contingent Liabilities
A Provision is recognized when the Company has present obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions are discounted to their present value, where the time value of money is material. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as a separate asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Contingent liability is a possible obligation arising 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 Company or a present obligation that arises from past events but is not recognized because it is not possible 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. The Company discloses the existence of contingent liabilities in Other Notes to Financial Statements.
In cases where the possible outflow of economic resources as a result of present obligation is considered improbable or remote, no Provision is recognized or disclosure is made.
Contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits. Contingent Assets are not recognized though are disclosed, where an inflow of economic benefits is probable.
3.18 Income Taxes
Tax expense recognized in statement of profit and loss comprises the sum of deferred tax and current tax not recognized in Other Comprehensive Income (OCI) or directly in equity.
Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income-tax Act. Current income tax relating to items recognized outside statement of profit and loss is recognized either in OCI or in equity.
Deferred income taxes are calculated using the liability method. Deferred tax liabilities are generally recognized in full for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that the underlying tax loss, unused tax credits (MAT Credit entitlement) or deductible temporary difference will be utilized against future taxable income. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognized outside statement of profit and loss is recognized either in OCI or in equity.
3.19 Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term highly liquid investments (original maturity less than 3 months) that are readily convertible into known amount of cash and are subject to an insignificant risk of changes in value.
3.20 Equity and Reserves
Share Capital represents the nominal value of shares that have been issued. Securities premium includes any premium received on issue of Share Capital. Other components of equity include the following:
- Re-measurement of defined benefit liability comprises the actuarial gain or loss from changes in demographic and financial assumptions and return on plan assets.
- Bond Redemption Reserve.
- Other transactions recorded directly in Other Comprehensive Income.
- Retained earnings include all current and prior period retained profits
3.21 Financial Instruments
Recognition, initial measurement and de-recognition
Financial assets and financial liabilities are recognized and are measured initially at fair value adjusted by transactions costs, except for those financial assets which are classified at Fair Value through Profit & Loss (FVTPL) at inception. Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled or expires.
Classification and subsequent measurement of financial assets
For the purpose of subsequent measurement, financial assets are classified into the following categories upon initial recognition:
- amortized cost
- financial assets at fair value through profit or loss (FVTPL)
- financial assets at fair value through other comprehensive income (FVOCI) All financial assets except for those at FVTPL are subject to review for impairment at least at each reporting date.
A financial asset is measured at amortized cost using effective interest rates if both of the following conditions are met:
a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
The Company''''s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.
Financial assets at FVTPL
Financial assets at FVTPL include financial assets that are either do not meet the criteria for amortized cost classification or that are equity instruments held for trading or that meet certain conditions and are designated at FVTPL upon initial recognition. All derivative financial instruments also fall into this category. Assets in this category are measured at fair value with gains or losses recognized in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists.
Financial assets at FVOCI
FVOCI financial assets are either debt instruments that are managed under hold to collect and sell business model or are non-trading equity instruments that are irrevocable designated to this category at inception.
FVOCI financial assets are measured at fair value. Gains and losses are recognized in other comprehensive income, except for interest and dividend income, impairment losses and foreign exchange differences on monetary assets, which are recognized in statement of profit or loss.
Classification and subsequent measurement of financial liabilities Financial liabilities are measured subsequently at amortized cost using the effective interest method, except for financial liabilities held for trading or designated at FVTPL, that are carried subsequently at fair value with gains or losses recognized in profit or loss. All derivative financial instruments are accounted for at FVTPL.
Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the contracts are not measured at FVTPL.
Impairment of Financial Assets
In accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss for financial assets.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive.
The Company applies approach as specified in Indian Accounting Standards (Ind AS) 109 Financial Instruments, which requires expected lifetime losses to be recognized from initial recognition of receivables.
Other Financial Assets
For recognition of impairment loss on other financial assets and risk exposure,the Company determines whether there has been a significant increase in the credit risk since initial recognition.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the counterparty.
3.22 Investments in subsidiaries, joint ventures and associates
The Company has accounted for its subsidiaries and associates, joint ventures at cost in its standalone financial statements in accordance with Ind AS- 27, Separate Financial Statements.
3.23 Significant Judgments, Assumptions and Estimations in applying Accounting Policies
3.23.1 Classification of Leases
The Company enters into leasing arrangements for various assets. The classification of the leasing arrangement as a finance lease or operating lease is based on an assessment of several factors, including, but not limited to, transfer of ownership of leased asset at end of lease term, lessee''''s option to purchase and estimated certainty of exercise of such option, proportion of lease term to the asset''''s economic life, proportion of present value of minimum lease payments to fair value of leased asset and extent of specialized nature of the leased asset.
3.23.2 Close-down and Restoration Obligations
Close-down and restoration costs are normal consequence of mining or production, and majority of close-down and restoration expenditure are incurred in the years following the closure of mine, although the ultimate cost to be incurred is uncertain, the Company estimate their costs using current restoration techniques.
3.23.3 Recognition of Deferred Tax Assets
The extent to which deferred tax assets can be recognized is based on an assessment of the probability of the Company''''s future taxable income against which the deferred tax assets can be utilized. In addition, significant judgment is required in assessing the impact of any legal or economic limits.
The Company estimates the cost of inventories taking into account the most reliable evidence, such as cost of materials and overheads considered attributable to the production of such inventories including actual cost of production, etc. Management also estimates the net realizable values of inventories, taking into account the most reliable evidence available at each reporting date. The future realization of these inventories may be affected by future technology or other market-driven changes that may reduce future selling prices.
3.23.5 Defined Benefit Obligation (DBO)
Employee benefit obligations are measured on the basis of actuarial assumptions which include mortality and withdrawal rates as well as assumptions concerning future developments in discount rates, medical cost trends, anticipation of future salary increases and the inflation rate. The Company considers that the assumptions used to measure its obligations are appropriate. However, any changes in these assumptions may have a material impact on the resulting calculations.
3.23.6 Fair Value Measurements
The Company applies valuation techniques to determine the fair value of financial instruments (where active market quotes are not available) and non-financial assets. This involves developing estimates and assumptions consistent with the market participants to price the instrument. The Company''''s assumptions are based on observable data as far as possible, otherwise on the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm''''s length transaction at the reporting date.
3.23.7 Provisions and Contingencies
The assessments undertaken in recognizing provisions and contingencies have been made in accordance with Indian Accounting Standards (Ind AS) 37, ''''Provisions, Contingent Liabilities and Contingent Assets''''. The evaluation of the likelihood of the contingent events is applied best judgment by management regarding the probability of exposure to potential loss.
3.23.8 Mines Closure and Restoration Obligations
Environmental liabilities and Asset Retirement Obligation (ARO): Estimation of environmental liabilities and ARO require interpretation of scientific and legal data, in addition to assumptions about probability and future costs.
3.23.9 Useful lives of depreciable/ amortizable assets (tangible and intangible) Management reviews its estimate of the useful lives of depreciable/ amortizable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to actual normal wear and tear that may change the utility of plant and equipment.
(i) Contractual obligations
Refer note 40.1 for disclosure of contractual commitments for the acquisition of property, plant and equipment.
a) Includes 67,718.76 acres ( 67,681.64 acres as on 31st March, 2016, 67,354.96 acres as on 1st April, 2015) owned / possessed / taken on lease by the Company, in respect of which title/lease deeds are pending for registration.
(b) Includes 34,061.08 acres (34,061.08 acres as on 31st March, 2016, 35,334.08 acres as on 1st April, 2015) in respect of which title is under dispute.
(c) 9,007.46 acres (8,856.73 acres as on 31st March, 2016, 8,851.69 acres as on 1st April, 2015) transferred/agreed to be transferred or made available for settlement to various Joint Ventures / Central / State / Semi-Government authorities, in respect of which conveyance deeds remain to be executed/registered.
(d) 6,384.17 acres (7,181.43 acres as on 31st March, 2016, 6,345.43 acres as on 1st April, 2015) given on lease to various agencies/employees/ex-employees.
(e) Includes 4,436.70 acres (4,440.70 acres as on 31st March, 2016, 4,211.42 acres as on 1st April, 2015) under unauthorized occupation.
(f) 1,762.92 acres (1,762.92 acres as on 31st March, 2016, 1,762.92 acres as on 1st April, 2015) of Land which is not in the actual possession, shown as deemed possession.
(g) Rs, 68.71 crore is lying under deposits (in respect of land already acquired) with the District & Sessions Judge, Bokaro during the year 2007 towards compensation payable to land losers.
(h) Vide Notification of Acquisition in the Gazette of India (Extraordinary) bearing No S.O. 1309(E) dated 08.06.2012 and No. S.O. 2484E dated 13.10.2012, National Highway Authority of India Ltd.(NHAI) had notified its intention to acquire 9.553 acres
(i) Includes 21.13 acres freehold land notified for acquisition by Government of Jharkhand vide Gazette notification no. 42 & 43 dated 26th August, 2009, determining compensation of Rs, 13.91 crore only for 15.62 acres. Management proposes to contest the same with appropriate authorities. Pending further action in the matter, no effect of above has been given in the accounts.
(iii) Other Assets:
(a) Buildings include net block of Rs, 21.18 crore (Rs, 21.73 crore as on 31st March, 2016, Rs, 22.15 crore as on 1st April, 2015) for which conveyance deed is yet to be registered in the name of the Company.
(b) Includes 6,035 residential quarters/houses under unauthorised occupation.