Note .1 General Information
National Aluminums Company Limited is a Navaratna Company a Central Public Sector Enterprise (CPSE) under Ministry of Mines, Government of India, incorporated under the relevant provisions of the Companies Act and is listed in the stock exchanges in India. The Company is engaged in the business of manufacturing and selling of Alumina and Aluminums. The Company is operating a 22.75 lakh TPA Alumina Refinery plant located at Damanjodi in Koraput district of Odisha and 4.60 lakh TPA Aluminums Smelter located at Angul, Odisha. The Company has a captive bauxite mines adjacent to refinery plant to feed the bauxite requirement of Alumina Refinery and also a 1200 MW captive thermal power plant adjacent to Smelter plant to meet the power consumption of Smelter. Besides, the Company is also operating four wind power plants with total capacity of 198.40 MW located in the state of Andhra Pradesh (Gandikota), Rajasthan (Jaisalmer& Devikot) and Maharashtra (Sangli)to harness the renewable energy and to comply with its Renewable Purchase Obligation.
Note.2 Statement of Compliance:
In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted Indian Accounting Standards (referred to as “Ind AS”)notified under the Companies (Indian Accounting Standards) Rules, 2015 with effect from I April, 2016, with a transition date of 1st April 2015.All the notified accounting standards which are applicable to the Company have been taken into consideration and complied without any exception while preparing the first Ind AS compliant financial statements of the Company.
Note.3 Significant Accounting Policies:
3.1 Basis of preparation
The financial statements of the Company have been prepared in accordance with Ind AS and relevant provisions of the Companies Act, 2013.
The financial statements have been prepared on historical cost basis, except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
All assets and liabilities have been classified as current or non-current as per Company''''s operating cycle and other criteria set out in Schedule-III of the Companies Act 2013. Based on the nature of business, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.
3.2 Use of estimates:
These financial statements have been prepared based on estimates and assumptions in conformity with the recognition and measurement principles of Ind AS.
Estimates and underlying assumptions are reviewed on an ongoing basis and revisions if any in such estimates are accounted appropriately in the year of revision.
Key sources of estimation uncertainty at the reporting date, which may cause a material adjustment to the carrying amounts of assets and liabilities for future years are stated in Note No.4.
3.3 Investments in associates and joint ventures
An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
Investment in associate and joint ventures are measured at cost in accordance with Ind AS 109 - Financial Instruments.
Investment in associate and joint ventures are subject to impairment wherever there is indication of negative reserve in the accounts of associates/ JV Companies. However, such impairment is limited to the value of investment.
3.4 Property, Plant and Equipment
Property, plant and equipment, other than freehold lands, held for use in the production and/or supply of goods or services, or for administrative purposes, are stated at cost, less accumulated depreciation and accumulated impairment losses. Freehold lands, unless impaired, are stated at cost.
3.5 Initial Measurement
The initial cost comprises purchase price, non-refundable purchase taxes, other directly expenditure attributable to acquisition, borrowing cost, if any, incurred for bringing the assets to its location and condition necessary for it to be capable of operating in the manner intended by Management, and the initial estimates of the present value of any asset restoration obligation or obligatory decommissioning and dismantling costs.
Expenditure incurred on development of freehold land is capitalized as part of the cost of the land.
In case of self-constructed assets, cost includes the costs of all materials used in construction, direct labour, allocation of overheads and directly attributable borrowing costs, if any.
Spare parts having unit value of more than Rs.5 lakh that meets the criteria for recognition as Property Plant and Equipment are recognized as Property, Plant and Equipment. Besides, spares of critical nature and irregular in use, which can be identified to a particular equipment and having unit value more than Rs.l lakh is also recognized as Property, Plant and Equipment.
3.6 Subsequent expenditure
Expenditure on major inspection/maintenance or repairs including cost of replacing the parts of assets and overhaul costs where it is probable that future economic benefits associated with the expenditure will be available to the Company over a period of more than one year, are capitalized and the carrying amount of the identifiable parts so replaced is derecognized.
3.7 Capital work-in-progress
Assets in the course of construction for production and/or supply of goods or services or administrative purposes, or for which classification is not yet determined, are included under capital work in progress and are carried at cost, less any recognized impairment loss. Such capital work in progress, on completion, is transferred to the appropriate category of property, plant and equipment.
Expenses for assessment of new potential projects incurred till investment decision are charged to revenue. Expenditure incurred for projects after investment decisions are accounted for under capital work in progress and capitalized subsequently.
3.8 Depreciation and amortization
Depreciation on assets are provided on a straight line basis over their useful life of the asset, which has been determined considering the useful lives prescribed under Schedule II of the Companies Act, 2013 and technical estimations carried out by the Management.
Component of an item of property Plant and Equipment with a cost that is significant in relation to the total cost of that item is depreciated separately if its useful life differs from the others components of the asset. The Company has chosen a benchmark of Rs. I Crore as significant value for identification of a separate component except Pot relining which is considered as a component of each electrolytic pot due to its inherent nature and useful life.
The residual value of plant and machinery, vehicles, mobile equipment and earth moving equipments, railway facilities, rolling stock, and residential quarters are maintained at 5% of the original cost and for all other assets, the residual value is considered as Nil. The estimated useful lives are reviewed at each year end and the effect of change, if any, is accounted for prospectively.
Useful lives of the assets considered for depreciation are described hereunder:
(a) Useful life of immovable property, plant and equipment at bauxite mines if exceeds the period up to which bauxite reserve is available at respective mines is limited to that period. Such assets are depreciated over the period up to which bauxite reserve is available.
(b) Useful life of captive thermal power generation plant at Angul is considered as 30 years.
(c) Useful life of Steam Power Plant (SPP) at Damanjodi is considered as 25 years.
(d) Useful life of Red mud pond and Ash pond at Alumina Refinery and Ash ponds at captive power plant are based on their estimated remaining useful lives, evaluated on the basis of technical estimates made periodically.
(e) Useful life of assets laid on leasehold land excluding assets of Bauxite mines are considered to be lower of balance lease period or the useful life of the asset and are depreciated accordingly
(f) Assets laid on land not owned by the Company are depreciated over a period of five years from the date on which the asset is capable of operating in the manner intended by the management unless a longer / shorter life can be justified.
(g) Individual Assets costing Rs.10,000/- or less are depreciated fully in the year in which they are put to use.
(h) Property plant and equipment other than mentioned above are subject to the following useful lives.
3.9 Disposal of assets
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal is recognized in the statement of profit and loss.
3.10 Stripping costs:
Stripping costs in surface mining is recognized as an asset when they represent significantly improved access to ore provided all the following conditions are met:
(a) it is probable that the future economic benefit associated with the stripping activity will be realised;
(b) the component of the ore body for which access has been improved can be identified; and
(c) the costs relating to the stripping activity associated with the improved access can be reliably measured.
The stripping cost incurred during the production phase is added to the existing “stripping cost” asset to the extent the current period stripping ratio exceeds the planned stripping ratio.
The stripping activity asset is subsequently depreciated on a unit of production basis over the life of the identified component of the ore body that became more accessible as a result of the stripping activity and is then stated at cost less accumulated depreciation and any accumulated impairment losses.
3.11 Intangible Assets
3.11.1 Intangible assets acquired separately
Intangible assets acquired are reported at cost less accumulated amortization and accumulated impairment losses, if any. Intangible assets having finite useful life are amortized over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each annual reporting period, and the effect of any changes in estimate is accounted for on a prospective basis.
3.11.2 Internally-generated intangible assets - research and development expenditure
Expenditure on research activities, except capital expenditure considered as Property, plant and equipment, is recognized as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development is recognized if, and only if, all the conditions stipulated in Ind AS 38 - Intangible Asset are met.
3.11.3 Mining Rights
The costs of mining rights include amounts paid towards Net Present Value (NPV) and upfront money as determined by the regulatory authorities.
Cost of mining rights are amortized over the total estimated remaining commercial reserves of mining property and are subject to
I impairment review.
3.11.4 Mines Development Expenses
Expenditure incurred for mines development prior to commercial production i.e., primary development expenditure other than land, buildings, plant and equipment is capitalized until the mining property is capable of commercial production.
3.11.5 User Rights:
Amount of expenditure incurred in a cluster project having future economic benefits, with exclusive use of co-beneficiaries but without physical control on the assets are capitalized as user rights.
Operating software acquired separately (RDBMS, Sybase, ERP/SAP) are capitalized as software.
3.11.7 License and Franchise
Amount of expenditure incurred for obtaining license for use of technology is capitalized as Intangibles under the head “License and
3.11.8 Derecognition of intangible assets
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, are recognized in the statement of profit and loss when the asset is derecognized.
The basis of amortization of intangible assets, based on useful life is as follows:
(a) Licenses in the nature of technical know-how for processing plants which are available for the useful life of the respective processing plants are amortized over a period of ten years.
(b) Software classified as intangible assets carries a useful life of 3 years.
(c) Mining Rights and Mines Development Expenses are amortized over the period of availability of reserves.
(d) User Right for cluster projects is amortized over a period of 10 years from the date of commissioning.
3.12 Impairment of tangible and intangible assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss, if any. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use) of the asset is estimated to determine the extent of impairment loss, if any When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit (CGU) to which the asset belongs. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount and the difference between the carrying amount and recoverable amount is recognized as impairment loss in the statement of profit or loss.
3.13 Functional & Foreign Currencies
Items included in the financial statements are measured using the currency of the primary economic environment i.e Indian Rupee in which the Company operates. The Company''''s functional and reporting currency is Indian Rupees (INR). The financial statements are presented in Indian Rupees.
In preparing the financial statements, transactions in foreign currencies i.e currencies other than the entity''''s functional currency are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at that date.
Exchange differences on monetary items are recognized in the statement of profit and loss in the period in which they arise.
3.14 Provisions and contingencies
Provisions are recognized when there is a present obligation (legal or constructive) as a result of a past event and it is probable (“more likely than not”) that it is required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the estimated cash outflows to settle the present obligation, its carrying amount is the present value of those cash outflows. The discount rate used is a pre tax risk free return that reflects current market assessments of the time value of money in that jurisdiction and the risks specific to the liability.
(a) Restoration, rehabilitation and decommissioning
An obligation to incur restoration, rehabilitation and environmental costs arises when environmental disturbance is caused by the development or ongoing production of a mine and other manufacturing facilities. The Company has recognized the obligated restoration, rehabilitation and decommissioning liability as per statutory mandate.
Net present value of such costs are provided for and a corresponding amount is capitalized at the commencement of each project. These costs are charged to the statement of profit or loss over the life of the asset by way of depreciation and unwinding of the discounted liability The cost estimates are reviewed periodically and are adjusted to reflect known developments which may have an impact on the cost estimates or life of operations. The cost of the related asset is adjusted for changes in the provision due to factors such as updated cost estimates, changes in lives of operations, new disturbance and revisions of discount rates. The adjusted cost of the asset is depreciated prospectively over the lives of the assets to which they relate. The unwinding of the discount is shown as finance and other cost in the statement of profit or loss.
(b) Environmental liabilities
Environment liabilities are recognized when the Company becomes obliged, legally or constructively to rectify environmental damage or perform remediation work.
Provision is recognized once it has been established that the Company has a present obligation based on consideration of the information which becomes available up to the date of reporting.
3.14.2 Contingent Liabilities
Contingent liabilities are possible obligations that arises from past events, the existence of which would be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company Contingent liabilities are disclosed in the financial statements unless the possibility of any outflow in settlement is remote.
3.14.3 Contingent Assets
Contingent assets are not recognized in the financial statement, but are disclosed where inflow of economic benefits is probable.
At the inception of a lease, the lease arrangement is classified as either a finance lease or an operating lease, based on the substance of the lease arrangement.
3.15.1 Assets taken on finance lease
Financial leases are those that transfer substantially all the risks and rewards incidental to ownership to the lessee.
Finance leases are capitalized at the commencement of lease, at the lower of the fair value of the property or the present value of the minimum lease payments. The corresponding liability to the less or is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income over the period of the lease.
3.15.2 Assets taken on operating lease
Leases other than finance leases are operating leases, and the leased assets are not recognized in the Company''''s balance sheet. Upfront lease payments, if any, made under operating leases are recognized in the statement of profit and loss over the term of the lease. Rent and maintenance charges paid for assets/facilities taken on operating leases are charged to revenue in the period in which
Inventory of raw material, including bulk material such as coal and fuel oil are valued at cost net of tax credit wherever applicable. Stores and spares other than those meeting the criteria for recognition as Property, Plant and Equipment are valued at cost net of tax credit wherever applicable.
Stores and spares (other than major spares considered as Property, Plant and Equipment) held but not issued for more than 5 years are valued at 5% of the cost.
Materials and other supplies held for use in the production (other than considered as non-moving) are not written down below cost, if the finished products in which they will be incorporated are expected to be sold at or above cost. These are stated below the cost at net realizable value if the finished products in which they are to be incorporated are sold below cost.
Cost of raw materials, stores and spares as stated above are determined on moving weighted average price.
Inventories of finished goods, semi-finished goods, intermediary products and work in process including process scrap are valued at lower of cost and net realizable value. Cost is generally determined at moving weighted average price of materials, appropriate share of labor and related overheads. Net realizable value is the estimated selling price in the ordinary course of business available on the reporting date less estimated cost necessary to make the sale.
Inventory of scraps internally generated are valued at net realizable value.
3.17 Trade receivable
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. If collection is expected to be collected within a period of 12 months or less from the reporting date, they are classified as current assets otherwise as non-current assets.
Trade receivables are measured at their transaction price unless it contains a significant financing component or pricing adjustments embedded in the contract.
3.18 Financial Instruments
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are initially measured at fair value. Transaction cost that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value measured on initial recognition of financial asset or financial liabilities.
3.18.1 Financial assets
a) Cash or Cash Equivalent:
The Company considers all short term Bank deposits having a maturity period of three months or less as cash & cash equivalent. Term deposits in Bank with a maturity period of more than 3 months are considered as other Bank Balance.
b) Financial assets at amortized cost:
Financial assets are subsequently measured at amortized costs if the financial assets are held within a business model whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
c) Financial assets at Fair value through Other Comprehensive Income (OCI)
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
d) Financial assets at Fair value through Profit or loss
Financial assets are measured at fair value through profit or loss unless it is measured at amortized cost or at fair value through other comprehensive item on initial recognition. The transaction cost directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognized in the statement of profit or loss.
3.19 Financial liabilities
Trade and other payables are initially measured at transaction costs. Other financial liabilities are measured at amortized cost using the effective interest method.
3.20 De-recognition of financial assets
The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
3.2 1 Impairment of financial assets
At each reporting date, the Company assess whether the credit risk on a financial instrument has increased significantly since initial recognition.
If, at the reporting date, the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. If, the credit risk on that financial instrument has increased significantly since initial recognition, the Company measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses.
The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date is recognized as an impairment gain or loss in the statement of profit and loss.
3.22 Derecognition of financial liability
The Company derecognizes financial liabilities when, and only when, the Company''''s obligations are discharged, cancelled or expired.
3.23 Offsetting financial instruments
Financial assets and liabilities of the Company 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.
Derivative instruments such as forward foreign exchange contracts are recognized at fair value at the date the derivative contracts are entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in statement of profit or loss immediately
3.25 Borrowing cost
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. All other borrowing cost is recognized in profit or loss in the period in which they are incurred.
3.25a Accounting for 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 the 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. Government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are recognized in the balance sheet by setting up the grant as deferred income and are transferred to profit or loss on a systematic basis over the useful life of the related assets.
Other government grants (grants related to income) are recognized as income over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis. Grants related to income are presented under other income in the statement of profit and loss.
3.26 Employee Benefits
3.26.1 Short-term employee benefits
A liability is recognized for benefits accruing to employees in respect of wages and salaries, short term compensated absences etc. in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid.
3.26.2 Post-employment and long term employee benefits
a) Defined contribution plans
A defined contribution plan is plan under which the Company pays fixed contributions to a separate entity. Contributions to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them for such contributions.
b) Defined benefit plans
For defined benefit plans, the cost of providing benefits is determined through actuarial valuation using the Projected Unit Credit Method, carried out at each balance sheet date. Re-measurement gains and losses of the net defined benefit liability are recognized immediately in other comprehensive income. The service cost, net of interest on the net defined benefit liability is treated as a net expense within employment costs.
Past service cost is recognized as an expense when the plan amendment or curtailment occurs or when any related restructuring costs or termination benefits are recognized,
The retirement benefit obligation recognized in the balance sheet represents the present value of the defined-benefit obligation as reduced by the fair value of plan assets.
c) Other long-term employee benefits
Liabilities recognized in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date. The expected costs of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit retirement plans. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to the statement of profit and loss in the period in which they arise. These obligations are valued annually by independent actuaries.
3.27 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenues are reduced by the estimated rebates and other similar allowances.
3.27.1 Sales of Goods
The Company derives revenue primarily from sale of alumina and aluminum products.
The Company recognizes revenue when all the following criteria are satisfied:
(i) significant risks and rewards of ownership has been transferred to the customer;
(ii) there is no continuing management involvement with the goods usually associated with ownership, nor effective control over the goods sold has been retained;
(iii) the amount of revenue can be measured reliably;
(iv) It is probable that the economic benefits associated with the transaction will flow to the Company
(v) recovery of the consideration is assured reasonably.
3.27.2 Sale of Energy
Sale of wind power is recognized on the basis of energy transmitted to DISCOMs at the price notified by respective authorities. Sale of power from captive power plant is considered on the basis of quantity injected to state GRID excluding wheeling to Refinery but including inadvertent energy injection, at the price notified by appropriate authority.
Revenue from sale of energy is recognized if
i. the amount of revenue can be measured reliably;
ii. It is probable that the economic benefits associated with the transaction will flow to the Company
iii. recovery of the consideration is assured reasonably
3.27.3 Income from dividend and interest
Dividends income from investments is recognized when the right to receive the dividend is established.
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably Interest income is accrued on a time proportion basis, by reference to the principal outstanding and effective interest rate.
c) Income from Incentives from Government Agencies
Incentives from government agencies in the nature of duty draw back and merchandise export incentive (MEIS) on exports and incentives on generation of renewable sources of energy are recognized as per the relevant statute on compliance of the conditions provided there under.
3.28 Income Taxes
Tax expense represents the sum of current tax and deferred tax.
3.28.1 Current taxes
Current tax expense is based on taxable profit for the year as per the Income Tax Act,I96I. Current tax liabilities (assets) for the current and prior period are measured at amounts expected to be paid (or recovered) using the tax rates and tax laws that have been enacted or substantively enacted by the end of reporting period and includes any adjustment to tax payable in respect of previous years.
3.28.2 Deferred taxes
Deferred tax expense or income is recognized on temporary difference between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base used in computation of taxable profits.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Tax relating to items recognized directly in other comprehensive income forms part of the statement of comprehensive income.
Deferred tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and adjusted to the extent it has become probable that sufficient taxable profits will be available to allow the asset to be recovered
3.29 Exceptional items
Exceptional items are items of income and expenses within profit or loss from ordinary activities but of such size, nature or incidence whose disclosure is felt necessary for better explanation of the performance of the Company.
3.30 Restatement of material error / omissions
The value of errors and omissions is construed to be material for restating the opening balances of assets and liabilities and equity for the earliest prior period presented, if the sum total effect of earlier period income / expenses exceeds Rs.50 crore.
Note No. 4 Critical accounting judgments and key sources of estimation uncertainty
The preparation of the financial statements requires management to make complex and/or subjective judgments, estimates and assumptions about matters that are inherently uncertain. These estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent liabilities and assets at the date of the financial statements and also revenues and expenses during the reported period.
The estimates and associated assumptions are based on past experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised.
4.1 Critical judgments in applying accounting polices:
The following is the critical judgment, apart from those involving estimations that the management have made in the process of applying the Company''''s accounting policies and that have the most significant effect on the amounts recognized in the financial statements:
The management has decided that reporting of Company''''s financial assets at amortized cost would be appropriate in the light of its business model and have confirmed the Company''''s positive intention and ability to hold these financial assets to collect contractual
4.2 Key sources of estimation of uncertainty:
The following are the key assumptions concerning the future, and other key sources of estimation of uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:
Investments in Associates and other investments, loans and advances, property, plant and equipment and intangible assets are reviewed for impairment whenever events and changes in circumstances indicate that the carrying value may not be fully recoverable or at least annually.
Future cash flow estimates of Cash Generating Units which are used to calculate the asset''''s fair value are based on expectations about future operations primarily comprising estimates about production and sales volumes, commodity prices, reserves and resources, operating rehabilitations and restoration costs and capital expenditure.
4.2.2 Useful lives of property, plant and equipment
The Company reviews the useful life of property, plant and equipment at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.
4.2.3 Assessment of Mining Reserve:
Changes in the estimation of mineral reserves where useful lives of assets are limited to the life of the project ,which in turn is limited to the life of the probable and economic feasibility of reserve, could impact the useful lives of the assets for charging depreciation. Bauxite reserves at Mines is estimated by experts in extraction, geology and reserve determination and based on approved mining plan submitted to Indian Beuro of Mines (IBM).
4.2.4 Obligation for post employment benefit Liability
Liability for post employment benefit and long term employee benefit is based on valuation by the actuary which is in turn based on realistic actuarial assumptions.
4.2.5 Provisions & Contingent Liabilities:
The amount recognized as a provision, including tax, legal, restoration and rehabilitation, contractual and other exposures or obligations is the best estimate of the consideration required to settle the related liability, including any interest charges, taking into account the risks and uncertainties surrounding the obligation. The Company assess its liabilities and contingent liabilities based upon the best information available, relevant tax and other laws, contingencies involved and other appropriate requirements.
4.2.6 Fair value measurements and valuation processes:
For financial reporting purposes, fair value measurements are categorized into Level I, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
- Level I inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date;
- Level 2 inputs are inputs, other than quoted prices included within Level I, that are observable for the asset or liability either directly or indirectly; and
- Level 3 inputs are unobservable inputs for the asset or liability.
Note 5. First time adoption- mandatory exceptions, optional exemptions
The Company has adopted all the applicable accounting standards (Ind AS) in accordance with Ind AS I0I - First Time Adoption of Indian Accounting Standards. The Company has transited from Indian GAAP which is its previous GAAP as defined in Ind AS I0I with necessary disclosures relating to reconciliation of Shareholders'''' equity and the comprehensive net income as per Previous GAAP to Ind AS.
The financial statements for the year ended 3Ist March 20I7 are the Company''''s first financial statements prepared in accordance with Ind AS. Prior to adoption of Ind AS, the Company had been preparing its financial statements in accordance with Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 and other generally accepted accounting principles in India (‘together referred to as “Indian GAAP”) for all periods up to and including the year ended 3I March 20I6.
5.1 Overall principle
The Company has prepared the opening balance sheet as per Ind AS as on I April, 20I5 (the transition date) by recognizing all assets and liabilities whose recognition is required by Ind AS, not recognizing items of assets and liabilities which are not permitted by Ind AS, by reclassifying items from previous GAAP to Ind AS as required under Ind AS, and applying Ind AS in measurement of recognized assets and liabilities. However, this principle is subject to certain exception and certain optional exemptions availed by the Company as detailed below:
5.1.1 Derecognition of finial assets and financial liabilities
The Company has applied the derecognition requirements of financial assets and financial liabilities prospectively for transactions occurring on or after I April, 20I5 (the transition date).
5.1.2 Classification of debt instruments
The Company has determined the classification of its debt instruments in terms of whether they meet the amortized cost criteria or the fair value through other comprehensive income (FVTOCI) criteria based on the facts and circumstances that existed as of the transition date.
5.1.3 Impairment of financial assets
The Company has applied the impairment requirements of Ind AS I09 retrospectively; however, as permitted by Ind AS I0I, it has used reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date that financial instruments were initially recognized in order to compare it with the credit risk at the transition date. Further, the Company has not undertaken an exhaustive search for information when determining at the date of transition to Ind ASs, whether there have been significant increases in credit risk since initial recognition, as permitted by Ind AS I0I.
5.1.4 Assessment of embedded derivatives
The Company has assessed whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative on the basis of the conditions that existed at the later of the date it first became a party to the contract and the date when there has been a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract.
5.1.5 Past Business combinations
The Company has elected not to apply Ind AS I03 Business Combinations retrospectively to past business combinations that occurred before the transition date of I April, 20I5. Consequently,
- The Company has kept the same classification for the past business combinations as in its previous GAAP financial statements;
- The Company has not recognized assets and liabilities that were not recognized in accordance with previous GAAP in the balance sheet of the acquirer and would also not qualify for recognition in accordance with Ind AS in the separate balance sheet of the acquire;
- The Company has excluded from its opening balance sheet those items recognized in accordance with previous GAAP that do not qualify for recognition as an asset or liability under Ind AS;
The above exemption in respect of business combinations has also been applied to past acquisitions of investments in associates and interest in joint ventures, as defined in Ind AS I03.
5.1.6 Deemed cost for property, plant and equipment and intangible assets
The Company has elected to continue with the carrying value of all of its plant and equipment and intangible assets recognized as of I April, 20I5 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
5.1.7 Deemed cost for investment in subsidiaries, associates and joint ventures
The Company has elected to continue with the carrying value of all of its investment in associates and joint venture recognized as if I April, 20I5 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
11.1 The sale of goods (Alumina and Aluminums) is made against either advances received from customer or letter of credit . The advance received from customer is adjusted on supply of material. There is no credit period allowed for such sales and accordingly no interest is charged. The average credit period for sale of wind power is 30 days from the date of metering which is considered as collection period. There is no commercial arrangement for sale of inadvertent thermal power generated at captive power plant. It is linked to the wheeling arrangement in view of the plant requirement. The amount of receivable on account of such inadvertent power sale (net of payable for power purchase) takes a longer period for collection. There is no net receivable for such sale as the purchases are at substantially higher rate compared to sale. Since there is no commercial arrangement for sale of wind and thermal power, no interest is recognized.
11.2 Out of the trade receivable as at March 3I, 20I7, Rs.23.2I crores is due from Jodhpur DISCOM for sale of wind power and Rs. 82.I7 crore is outstanding from M/s Glencore International on account of export of metal. There is no other customers who represent more than 5% of the total balance of trade receivables.
11.3 The company has used a practical approach by computing the expected credit loss allowance for trade receivable based on a case to case basis. Since there is no credit period for sale of alumina and aluminum and the sale is either made against an advance or secured backed by letter of credit (LC) given by the customer, no provision is made against such receivables. For sale of wind power, although there is no credit arrangement, the Company makes provision for allowances based on the industrial credit loss experience and adjusted for forward looking information.
16.1 The cost of inventories recognized as an expense during the year is Rs. 3487.46 crore ( during 20I5-I6 : Rs. 3I23.34 crore)
16.2 The cost of inventories recognized as an expense includes Rs. I3.02 crore ( during 20I5-I6 Rs. I0.84 crore) in respect of write-downs of inventory for non moving items.
16.3 The inventories are hypothecated/pledged against cash credit facility.
16.4 The method of valuation of inventories has been stated in note 3.I6 - Significant accounting policy.
I7.B.I Earmarked balance with scheduled banks represents amount deposited in scheduled banks towards unclaimed dividends.
I7.B.2 Amount due for credit to Investor''''s Education and Protetion Fund at the end of the current year Rs. Nil. (previous year Rs. Nil)
(i) Fully paid equity shares, which have a par value of Rs. 5 each, carry one vote per share and carry a right to dividends.
(ii) The Company has bought back 64,43,09,628 no. of equity shares of Rs. 5 each during the year which has led to decrease in the equity share capital from Rs. 1,288.62 Crores to Rs. 966.46 Crores (from 2,57,72,38,5I2 no. of equity shares to I,93,29,28,884 no. of equity shares of Rs. 5 each).
(iii) The shares bought back during the year were extinguished on September 26, 20I6.
19.3 The amount in the general reserve that can be distributed by the Company as dividends to its equity shareholders is determined based upon the Company''''s financial statements and also considering the requirements of the Companies Act, 20I3. Thus, the amount reported above under retained earnings are not distributable in its entirety.
19.4 The liability for post retirement medical benefits based on actuarial valuation as on 3I.03.20I5 under previous GAAP was revised from Rs. 6.82 crore to Rs.72.32 crore due to error of omission. The differential amount was recognized as a change to the retained earnings as on the transition date. Accordingly an amount of Rs.42.83 crore and Rs. 22.66 crore has been adjusted with retained earning account and deferred tax liability respectively.
19.5 “As per the earlier GAAR the Company has provided an amount of Rs.I93.29 crore as final dividend for financial year 20I5-I6 and dividend distribution tax of Rs.39.35 crore . After adoption of Ind AS, the said amount has been taken to retained earnings from which an amount of Rs.I44.97 crore and Rs.29.5I crore has been released towards final dividend and dividend distribution tax as approved by share holders in 36th AGM held on 30th Sept''''20I6. Reduction in the amount of final dividend for 20I5-I6 and dividend distribution tax is due to reduction of share capital on account of buyback of shares of the Company prior to distribution of dividend."
19.6 During the year the Company has paid interim dividend of Rs.2.80 per equity share amounting in total Rs. 54I.22 crore. For financial year 20I5-I6, the Company paid interim dividend of Rs. 322.I6 crore and final dividend of Rs. I44.97 crore.