NOTE 1: CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the course of applying the policies outlined in all notes under note 4 above, the management of the Company are required to make judgments, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
Such estimates and associated assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future period, if the revision affects current and future periods.
2 Regulatory matters:
(i) Regulatory deferral accounts1
Ind AS - 114 “Regulatory Deferral Accounts” permits the Company to apply the requirements of this standard in its first Ind AS financial statements if and only if it conducts rate-regulated activities and recognized amounts that qualify as regulatory deferral account balances in its financial statements in accordance with its previous GAAP. As the Company had consistently elected not to recognize the regulatory deferral balances in its previous GAAP, the requirement of IND AS 114 does not apply to the Company.
(ii) Depreciation rates, depreciation method and residual value of property, plant and equipment
In terms of Part B of Schedule II of the Companies Act, 2013, the Company has followed the depreciation rates, depreciation method and residual value of the items of property, plant and equipment as notified by the respective regulators in accordance with the Electricity Act, 2003 with respect to the assets falling under regulated business.
(iii) Security deposits
Considering the historical experience and practical expediency, the Company has exercised its judgment on timing of settlement of security deposit collected from the customers and has accordingly classified the material portion of security deposit as non-current liability.
(iv) Renewable power obligation
The Company has substantially complied with the renewable power obligation, as prescribed by the regulatory authority and do not expect any implication, as in the past.
(v) Environment clearance riski
AMGEN plant is using coal as a fuel. Ministry of Environment Forest and Climate Change (MOEFCC) has made the emission norms for all thermal power plants significantly stringent which would increase the cost of compliance, which cost is expected to be pass through.
3 Property, plant and equipment:
(i) Service concession arrangements
The Company has assessed applicability of Appendix A of Ind AS - 11 “Service Concession Arrangements” with respect to its distribution and transmission assets portfolio. In assessing the applicability, the Company have exercised judgment in relation to the provisions of the Electricity Act, 2003, transmission / distribution license and / or agreements etc. Based on such assessment, it has concluded that Appendix A of Ind AS 11 is not applicable.
(ii) Impairment of property plant and equipment2
At the end of each reporting period, the Company reviews the carrying amounts of its property, plant and equipment to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Recoverable amount of property plant and equipment is the higher of its fair value less costs of disposal and value in use. Value in use is usually determined on the basis of discounted estimated future cash flows. This involves management estimates on anticipated PLF, fuel availability at economical rates, economic and regulatory environment, discount rates and other factors. Any subsequent changes to cash flow due to changes in the above mentioned factors could impact the carrying value of assets.
4 Impairment of financial assets:
(i) Trade receivables2
The Company estimates the credit allowance as per practical expedient based on historical credit loss experience as enumerated in note 67.
(ii) Impairment of investments2
At the end of each reporting period, the Company reviews the carrying amounts of it’s investments when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for.
(i) Current taxi
The Company has treated certain expenditure as being deductible for tax purposes. However, the tax legislation in relation to this expenditure is not clear and the Company has applied their judgment and interpretation for the purpose taking their tax position.
(ii) Deferred tax assets2
Deferred tax assets are recognized for unused tax losses / credits to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
6 Control assessment:
Control over Torrent Power Grid Limited (“TPGL”)i
The Company has shareholders agreement with Power Grid Corporation of India Limited (PGCIL) wherein the Company holds 74% whilst PGCIL holds 26% of equity shares of Torrent Power Grid Limited (TPGL). As per the shareholders agreement, PGCIL has certain protective rights. PGCIL has also certain participative rights which, the Company believes, are not substantive considering the operation of TPGL and the regulatory environment in which it operates. Consequently, the Company has considered TPGL as it’s subsidiary.
In the normal course of business, contingent liabilities may arise from litigation and other claims against the Company. Potential liabilities that are possible but not probable of crystallizing or are very difficult to quantify reliably are treated as contingent liabilities. Such liabilities are disclosed in the notes but are not recognized. Potential liabilities that are remote are neither recognized nor disclosed as contingent liability. The management decides whether the matters needs to be classified as ‘remote’, ‘possible’ or ‘probable’ based on expert advice, past judgments, experiences etc.
The Company has agreement with one of its vendor for the gas supply where it has not complied with the term and conditions with regards to procurement of gas. Considering the industry issue and past experience, the Company believes that the liability with regard to this matter is remote.
8 Employee benefit plans:
Defined benefit plans and other long-term employee benefits2
The present value of obligations under defined benefit plan and other long term employment benefits is determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual development in the future. These include the determination of the discount rate, future salary escalations, attrition rate and mortality rates etc. Due to the complexities involved in the valuation and its long term nature, these obligations are highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
9 Long term supply and long term maintenance accruals2:
The Company has applied it’s reasonable estimate for operating parameters and price escalations linked to indices for the purpose of determining the accrual under long term supply and long term maintenance contracts.
1 Critical accounting judgments
2 Key sources of estimation uncertainties
1. Assets pledged as security:
Entire movable and immovable properties with a carrying amount of ''''16,911.44 Crore (31st March, 2016 - ''''15,101.86 Crore,1st April, 2015 - ''''14,923.90 Crore) have been mortgaged and hypothecated to secure borrowings of the Company (note 24).
2. Capital work in progress:
Capital work-in-progress includes the amount of expenditure recognized as pre-operative expenditure in the course of construction of property, plant and equipment of Rs,2.18 Crore (31st March, 2016 - Rs,5.61 Crore, 1st April, 2015 - Rs,2.60 Crore) (note 49).
3. Capital commitment:
Refer note 46 (c) for disclosure of contractual commitments for the acquisition of property, plant and equipment.
4. Borrowing cost capitalization:
Adjustments during the year include borrowing costs of Rs,4.50 Crore (Previous year - Rs,2.88 Crore), which are directly attributable to purchase / construction of qualifying assets in accordance with Ind AS - 23 “Borrowing Costs.
5. Capital work-in-progress include borrowing costs of Rs,2.42 Crore (31st March, 2016- Rs,0.05 Crore and 1st April, 2015 Rs,0.56 Crore), which are directly attributable to purchase / construction of qualifying assets in accordance with Ind AS - 23 “Borrowing Costs.
6. Foreign currency exchange difference capitalisation:
Adjustments during the year include Rs,0.90 Crore gain (Previous year - Rs,22.10 Crore loss) on account of foreign currency exchange difference.
7. Adjustments during the year include financial compensation received from the EPC contractor towards discharging the EPC contractor from the obligation to attend, complete or resolve the open points and the related warranty claims in terms of the original contract Rs, Nil (Previous year - Rs,88.29 Crore).
8. Adjustments during the year include recovery made from a contractor towards settlement Rs,0.28 Crore (Previous yearRs, Nil)
9. Land includes freehold land amounting to Rs,0.04 Crore (31st March, 2016 - Rs,0.04 Crore, 1st April, 2015 - Rs,0.04 Crore) for which documentations are in progress.
2. 25,74,22,311 equity shares (25,74,22,311 equity shares as at 31st March, 2016 and 25,24,38,986 equity shares as at 1st April, 2015) of Rs,10 each fully paid up are held by the Parent Company - Torrent Private Limited.
3. Terms / Rights attached to equity shares :
The Company has only one class of equity shares having par value of Rs,10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees.The dividend, if any, proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
5. Aggregate number of equity shares allotted as fully paid up pursuant to contract(s) without payment being received in cash:
During FY 2015-16, the Company has allotted 81,68,476 equity shares of Rs,10 each at par to the shareholders of Torrent Cables Limited pursuant to the scheme of amalgamation of Torrent Energy Limited and Torrent Cables Limited with Torrent Power Limited as approved by the HonRs,ble Gujarat High Court vide order dated 13th August, 2015.
6. Distributions made and proposed:
The amount of per share dividend recognized as distributions to equity shareholders for the period ended 31st March, 2017 is Rs, Nil (Previous year- Rs,6.00) per equity share.
The Board of Directors at its meeting held on 23rd May, 2017 have recommended a dividend of 22.00% (Rs,2.20 per equity share of par value Rs,10 each).The proposal is subject to the approval of shareholders at the Annual General Meeting and if approved, would result in a cash outflow of approximately Rs,12726 Crore (inclusive of dividend distribution tax of Rs,21.53 Crore)._
1. Share capital suspense:
81,68,476 equity shares of Rs,10/- each allotted as fully paid-up to the shareholders of Torrent Cables Limited pursuant to the scheme of amalgamation without payment being received in cash.
2. Securities premium reserve:
Securities premium reserve reflects issuance of the shares by the Company at a premium, whether for cash or otherwise i.e. a sum equal to the aggregate amount of the premium received on shares is transferred to a “securities premium account” as per the provisions of the Companies Act, 2013. The reserve is utilised in accordance with the provisions of the Act.
3. Debenture redemption reserve (DRR):
The Company has issued redeemable non-convertible debentures. Consequently, the Company is required under the Companies (Share capital and Debentures) Rules, 2014 (as amended), to create DRR, equal to 25% of the value of debentures, out of profits of the company available for payment of dividend. The Company creates DRR, for the required amount, over the tenure of the debentures, before redemption begins.
4. Contingency reserve:
As per provisions of the GERC MYT Regulations read with Tariff orders passed by GERC, Distribution Licensee makes an appropriation to the contingency reserve to meet with certain exigencies. Investments in Bonds issued by Government of India has been made against such reserve.
5. Special reserve:
As per MYT Regulations (2007), one third amount of controllable gain shall be retained in a special reserve by the Generating Company or Licensee for the purpose of absorbing the impact of any future losses on account of controllable factors.
6. General reserve:
General reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. The general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income.
7. Retained earnings:
The same reflects surplus / deficit after taxes in the statement of profit and loss. The amount that can be distributed by the Company as dividends to its equity shareholders is determined based on the balance in this reserve, after considering the requirements of the Companies Act, 2013.
As per the consistent policy followed by the Company, it accounts for the truing-up adjustment claims as and when billed to the consumers. Hon’ble Gujarat Electricity Regulatory Commission (GERC) vide its Tariff Order dated 31st March 2016 has approved recovery of Regulatory Charge of 45 paisa / kWh to address the gap of earlier years for the Company’s distribution areas at Ahmadabad and Surat, against which, review petitions were filed. Subsequently, Hon’ble GERC had issued a Order dated 1st July 2016 revising the Regulatory Charge to 18 paisa / kWh and 17 paisa / kWh for Ahmadabad and Surat license area, respectively, with effect from 1st July, 2016 against which the Company had filed an appeal before Hon’ble Appellate Tribunal for Electricity (APTEL). The Hon’ble APTEL, vide judgment dated 30th March, 2017, has remanded back the matter to Hon’ble GERC for review of Tariff Order dated 31st March 2016 and directed to hear the review Petitions afresh and to pass appropriate order thereon. Pending further orders from Hon’ble GERC, the Company has continued to bill to the consumers the Regulatory Charge of 18 paisa / kWh and 17 paisa / kWh for Ahmadabad and Surat license area, respectively.
NOTE 11: OPERATING LEASE
The Company’s significant leasing arrangements, other than land, are in respect of residential flats, office premises, plant and machinery and equipment taken on lease. The arrangements range between 11 months and 10 years generally and are usually renewable by mutual consent on mutually agreeable terms. Under these arrangements, generally refundable interest free deposits have been given. The Company has not entered into any material financial lease. The Company does not have any non-cancellable lease.
Leasing arrangements with respect to land range between 25 years to 99 years generally.
NOTE 12: EMLOYEE BENEFIT PLANS 53.1 Defined contribution plan:
The Company operates defined contribution retirement benefit plans for all qualifying employees. The assets of the plans are held separately from those of the Company in funds under the control of trustees. Where employees leave the plans prior to full vesting of the contributions, the contributions payable by the Company are reduced by the amount of forfeited contributions.
The Company’s contribution to provident fund, superannuation fund and employee state insurance scheme are determined under the relevant schemes and / or statute and charged to the statement of profit or loss.
The Company’s contribution to provident fund and superannuation fund aggregating to Rs,31.44 Crore (Previous year -Rs,2760 Crore ) has been recognized in the statement of profit and loss under the head employee benefits expense.
13 Defined benefit plans:
The Company operates a gratuity plan covering qualifying employees. The benefit payable is the greater of the amount calculated as per the Payment of Gratuity Act, 1972 or the Company scheme applicable to the employee. The benefit vests upon completion of five years of continuous service and once vested it is payable to employees on retirement or on termination of employment. The gratuity benefits payable to the employees are based on the employee’s service and drawn salary at the time of leaving. The employees do not contribute towards this plan and the full cost of providing these benefits are met by the Company. In case of death while in service, the gratuity is payable irrespective of vesting.
The Company makes annual contribution to the gratuity scheme administered by the Life Insurance Corporation of India through its Gratuity Trust Fund. The liability in respect of plan is determined on the basis of an actuarial valuation.
(b) Risk exposure to defined benefit plans
The plans typically expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.
The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on Indian government securities; if the return on plan asset is below this rate, it will create a plan deficit.
A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the plan’s debt investments.
The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.
The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.
The most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out at 31st March, 2017. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method.
(g) Sensitivity analysis
Significant actuarial assumptions for the determination of the defined obligation are discount rate and expected salary increase. The sensitivity analysis given below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognized in the balance sheet.
(h) The weighted average duration of the gratuity plan based on average future service is 16 years (Previous year - 16 years).
(i) Expected contributions to the plan for the next annual reporting period is Rs,30.27 Crore.
(j) Cash flow projection from the fund
Projected benefits payable in future years from the date of reporting
53.3 Other long-term employee benefit obligations :
The lease obligation covers the Company’s liability for sick and earned leave. Under these compensated absences plans, leave encashment is payable to all eligible employees on separation from the Company due to death, retirement, superannuation or resignation; at the rate of daily salary, as per accumulation of leave days as at the end of relevant period. Refer note 27, 33 and 39 with respect to item of balance sheet and profit or loss where such provision / charge has been presented.
The Company does not have any dilutive potential ordinary shares and therefore diluted earnings per share is the same as basic earnings per share.
NOTE 14: IMPAIRMENT ASSESSMENT OF DGEN POWER PLANT
The Company has implemented the 1200 MW gas based power plant at Dahej (DGEN), which started its commercial operations from November 2014. In FY 15-16, the Company could operate the plant for intermittent periods and for the current period it did not operate the plant but maintained it in cold standby mode for immediate start-up, when required.
On account of supply exceeding the demand, there has been substantial reduction in the LNG prices all-over the world. The over-supply position in the world market is expected to continue as more LNG plants are being commissioned in coming 2 to 3 years and as global demand for LNG is expected to be subdued. With this scenario, both the issues relating to gas based power plants in terms of availability and affordability of gas are expected to be resolved to a large extent. Considering the above, the estimated value in use do not indicate any requirement for impairment provision in the carrying amount of the fixed assets of ''''4,861.81 Crore of DGEN plant as at 31st March, 2017.
NOTE 15: OPERATING SEGMENT
The CODM evaluates the Company’s performance and applies the resources to its segment viz. “Generation, Transmission and Distribution of Power” Further, the Company’s cable business is not a reportable segment in terms of revenue, profit, assets and liabilities. Hence the Company does not have any reportable segment as per Ind AS - 108 “Operating Segments”
(a) Capital management
The Company manages its capital structure in a manner to ensure that it will be able to continue as a going concern while optimizing the return to stakeholders through the appropriate debt and equity balance.
The Company’s capital structure is represented by equity (comprising issued capital, retained earnings and other reserves as detailed in notes 22,23) and debt (borrowings as detailed in note 24).
The Company’s management reviews the capital structure of the Company on an annual basis. As part of this review, the management considers the cost of capital and the risks associated with each class of capital. The Company’s plan is to ensure that the gearing ratio (debt equity ratio) is well within the limit of 2:1.
(c) Financial risk management objectives
The Company’s principal financial liabilities, other than derivatives, comprise borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations, routine and projects capital expenditure. The Company’s principal financial assets include loans, advances, trade and other receivables and cash and cash equivalents that derive directly from its operations.
The Company’s activities expose it to a variety of financial risks viz regulatory risk, interest rate risk, credit risk, liquidity risk etc. The Company’s primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The Company’s senior management oversees the management of these risks. It advises on financial risks and the appropriate financial risk governance framework for the Company.
The Company’s substantial operations are subject to regulatory interventions, introduction of new laws and regulations including changes in competitive framework. The rapidly changing regulatory landscape poses a risk to the Company. Also, in particular, the distribution segment lacks due recognition or incentives for its efficient operations in the current regulatory framework. Although, the regulator has approved revision in the Fuel and Power Purchase Price Adjustment (FPPPA) mechanism to allow the full recovery of increased power purchase cost and other expenses through true-up mechanism, yet the full recovery of such costs is getting delayed. Further, the issue of non-pass through of renewable energy certificate costs (to fulfil RPO obligation) through the FPPPA mechanism continues to burden the distribution business. All these issues lead to postponement of recovery of the costs, resulting into deferred recovery and carrying costs.
UNOSUGEN project was set up as an expansion to SUGEN Mega Power project. UNOSUGEN tariff has been determined by Central Electricity Regulatory Commission (CERC). However, such tariff is yet to be adopted by relevant regulatory authority pursuent to the electricity regulations.
The proposed segregation of carriage and content in the Electricity Amendment Bill, 2014 would bring about a substantial change in the way the distribution business is conducted, though not impacting the return on equity on the investments in the distribution infrastructure.
Fuel availability and affordability risk
Unavailability of domestic gas has been adversely affecting the Company’s gas based generation plants since 2012. Lower priority to power sector in the Gas Allocation Policy also poses risk to the Company. Earlier, due to higher cost of imported Liquid Natural Gas (LNG), there was unwillingness of long term buyers to off take power generated from such LNG. However, in the present scenario, the LNG prices have dropped significantly due to international gas glut. In spite of this, the gas based generation capacity of the Company could not be operated at the desired level due to lack of power demand. The Company has tied up its fuel requirements for the period April to December, 2017 for SUGEN plant and it is hopeful for the sustained availability of imported LNG at reasonable rates and increase in power demand due to various Government initiatives.
Foreign exchange risk
The Company is exposed to foreign exchange risks arising from various currency exposures, primarily with respect to the USD and EUR. Foreign exchange risks arise from future commercial transactions and recognized assets and liabilities, when they are denominated in a currency other than Indian Rupee.
The Company’s exposure with regards to foreign exchange risk which are not hedged are given in note 50. However, these risks are not significant to the company’s operation.
Interest rate risk
Most of the Company’s borrowings are on a floating rate of interest. The Company has exposure to interest rate risk, arising principally on changes in Marginal Cost of Funds based Lending Rate (MCLR). The Company uses a mix of interest rate sensitive financial instruments to manage the liquidity and fund requirements for its day to day operations like non-convertible debentures and short term credit lines besides internal accruals.
Interest rate risk sensitivity:
The below mentioned sensitivity analysis is based on the exposure to interest rates for floating rate borrowings. For this it is assumed that the amount of the floating rate liability outstanding at the end of the reporting period was outstanding for the whole year. If interest rates had been 50 basis points higher or lower, other variables being held constant, following is the impact on profit.
(1) Exposures to credit risk:
The Company is exposed to the counterparty credit risk arising from the possibility that counterparties (primarily trade receivables, suppliers. contractors etc.) might fail to comply with contractual obligations. This exposure may arise with regard to unsettled amounts and the cost of substituting products and services that are not provided.
(2) Credit risk management:
Credit risk is managed and limited in accordance with the type of transaction and the creditworthiness of the counterparty. The Company has established criteria for admission, approval systems, authorization levels, exposure measurement methodologies, etc. The concentration of credit risk is limited due to the fact that the customer base is large. None of the customers accounted for more than 10% of the receivables and revenue for the year ended 31st March, 2017 and 31st March, 2016. However, the Company is dependent on the domestic market for its business and revenues.
The Company’s credit policies and practices with respect to distribution areas are designed to limit credit exposure by collecting security deposits prior to providing utility services or after utility service has commenced according to applicable regulatory requirements. In respect to generation business, Company generally has letter of credits / bank guarantees to limit its credit exposure.
(3) Other credit enhancements
The Company does not hold any collateral or other credit enhancements to cover its credit risks associated with its financial assets.
(4) Age of receivables and expected credit loss
The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experienced and adjusted for forward- looking information. The expected credit loss allowance is based on ageing of the days the receivables are due and the rates as given in the provision matrix.
The age of receivables and provision matrix at the end of the reporting period is as follows.
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are required to be settled by delivering the cash or another financial asset. The Company’s approach to manage liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses.
The Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods is given below. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows. The contractual maturity is based on the earliest date on which the Company may be required to pay.
NOTE 16: FAIR VALUE MEASUREMENT AND RELATED DISCLOSURES
Fair value of the Company’s financial assets that are measured at fair value on a recurring basis:
Some of the Company’s financial assets are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets are determined.
(b) Financial assets and liabilities at amortized cost
The carrying amounts of cash and cash equivalent, other bank balances, trade receivables, loans, other financial assets, current borrowings, trade payables, other financial liabilities are considered to be the same as their fair values, due to their short-term nature.
Specified Bank Notes’ shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E), dated the 8th November, 2016.
Closing balance as at 8th November, 2016 includes amount refunded by employees against advance given to them.
Details of loans given, investments made and guarantee given covered u/s 186 (4) of the Companies Act, 2013 are given under the respective heads.
The figures for the previous year have been regrouped / reclassified, wherever necessary, to make them comparable with the figures for the current year.
Figures are rounded off to nearest lakh. Figures below ''''50,000 are denoted by ‘*.
19 : Notes to reconciliations
(a) Under previous GAAP, proposed dividends and related dividend distribution tax are recognized as a provision in the year to which they relate, irrespective of when they are declared. Under Ind AS, dividends to shareholders declared after the end of the reporting period but before the financial statements are authorized for issue are not recognized as a liability at the end of the reporting period, but are disclosed separately in the notes. Accordingly, at the date of transition to Ind AS, a decrease to the extent of such proposed dividend has been recognized in short term provisions and adjusted against retained earnings.
(b) Under previous GAAP, upfront fees paid to the lenders is charged to statement of profit and loss as and when incurred. However, Ind AS - 109 “Financial instruments” requires long term debt to be recognized at amortized cost and upfront fees are charged on the basis of effective interest rate method. The difference resulting from the said treatment has been adjusted against retained earnings as at the date of transition.
(c) Under previous GAAP, deferred taxes were recognized for the tax effect of timing differences between accounting income and taxable income for the year i.e., income statement approach. However, under Ind AS - 12 “deferred taxes” are computed for temporary differences between the carrying amount of an asset or liability in the balance sheet and their respective tax base i.e. balance sheet approach. Further, deferred tax liability has been created on the fair value of the fixed assets taken over by the Company at the time of past business combination with a corresponding adjustment to retained earnings as at the date of transition.
(d) Under the previous GAAP, the Company had accounted for long term trade payables at the undiscounted value. In contrast, Ind AS requires that where the effect of time value of money is material, the amount of trade payables should be the present value of the amount expected to be required to settle the obligation. The difference arising out of such discounting as at the date of transition has been adjusted against retained earnings.
(e) The grant under the Accelerated Power Development and Reforms Programme (APDRP) of the Ministry of Power, Government of India, received by the Company was treated as capital receipt and accounted as capital reserve in previous GAAP. Depreciation on the related assets was also routed through such assets.
Under Ind AS, Government grants related to assets have been presented in the balance sheet only by setting up the grant as deferred revenue.
NOTE 20 : FIRST TIME IND AS ADOPTION RECONCILIATIONS (Contd.)
(f) Under previous GAAP, the Company accounted long term investments (i.e. non-quoted and quoted) at cost less provision other than temporary diminution in the value of investments. Current investments are stated at the lower of cost and fair value. As per the requirements of Ind AS 109, the investments in mutual fund units are to be at fair value. The differences arising out of the above treatment as at the date of transition have been adjusted against retained earnings.
(g) Under previous GAAP, Leasehold land is recorded and classified as fixed assets. However, under Ind AS, lease hold land is recognized as operating lease considering infinite useful life criterion.
(h) Under previous GAAP, amount received from consumer towards overhead / service line contributions was accounted as capital reserve by the Company as the amount was not refundable and subsequently, proportionate amount was transferred to income statement during the expected life of the asset to match the depreciation on total cost of such asset.
Under Ind AS, taking into cognizance of application of Appendix C to Ind AS 18, the balance as at the date of transition towards service line contribution has been transferred to deferred revenue.
(i) Under previous GAAP, the Company accounted the revenue net of excise duties and sales tax. As per requirement of Ind AS, revenue has been shown including excise duty and excise duty has been shown as a part of expenses. Further any sales incentives, discounts or rebates in any form, including cash discounts given to customers has been considered as selling price reductions and accounted as reduction from revenue.
(j) As per the requirement of Ind AS 40, the land held to earn rentals or for capital appreciation or both has been classified as investment property.
NOTE 21: APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved for issue by the board of directors on 23rd May, 2017.