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moneycontrol.com भारत | लेखांकन नीति > Oil Drilling And Exploration > लेखांकन नीति फॉलोड से कैर्न इंडिया - बीएसई: 532792, NSE: CAIRN

कैर्न इंडिया

बीएसई: 532792  |  NSE: CAIRN  |  ISIN: INE910H01017  |  Oil Drilling And Exploration

खोजें कैर्न इंडिया कनेक्शन मार्च 15
लेखांकन नीति साल : मार्च '16
1 CORPORATE INFORMATION
 
 Cairn India Limited (''the Company'') was incorporated in India on 21
 August 2006. The equity shares of the Company are listed in India on
 the Bombay stock exchange and the National stock exchange.
 
 The Company is primarily engaged in the business of surveying,
 prospecting, drilling, exploring, acquiring, developing, producing,
 maintaining, refining, storing, trading, supplying, transporting,
 marketing, distributing, importing, exporting and generally dealing in
 minerals, oils, petroleum, gas and related by-products and other
 activities incidental to the above. As part of its business activities,
 the Company also holds interests in its subsidiary companies which have
 been granted rights to explore and develop oil exploration blocks.
 
 The Company is a participant in various Oil and Gas blocks/fields,
 which are in the nature of jointly controlled assets, granted by the
 Government of India through Production Sharing Contracts (''PSC'')
 entered into between the Company and Government of India and other
 venture partners.
 
 *Operatorship has been transferred to Oil and Natural Gas Corporation
 (ONGC) w.e.f 7 July 2014
 
 ** intended to be relinquished in the next year
 
 The participating interests were same in the previous year.
 
 2 BASIS OF PREPARATION
 
 The financial statements of the Company have been prepared in
 accordance with the generally accepted accounting principles in India
 (Indian GAAP). The Company has prepared these financial statements to
 comply in all material respects with the accounting standards notified
 under section 133 of the Companies Act 2013, read together with
 paragraph 7 of the Companies (Accounts) Rules 2014. The financial
 statements have been prepared on an accrual basis and under the
 historical cost convention. The accounting policies, in all material
 respects, have been consistently applied by the Company and are
 consistent with those used in the previous year.
 
 On 30 March 2016, the Ministry of Corporate Affairs notified the
 Companies (Accounting Standards) Amendment Rules, 2016, resulting in
 amendment in certain Accounting Standards. The Company is of the view
 that the said amendments shall come into effect from accounting periods
 commencing on or after the publication of the notification i.e. from
 the period starting 1 April 2016 onwards and hence no impact of the
 same has been given in these financial statements.
 
 2.1 Summary of Significant accounting policies
 
 a.  Oil and gas assets
 
 The Company follows the successful efforts method of accounting for oil
 and gas assets as set out by the Guidance Note issued by the ICAI on
 Accounting for Oil and Gas Producing Activities (Revised 2013).
 
 Expenditure incurred on the acquisition of a license interest is
 initially capitalized on a license by license basis. Costs are held,
 undeleted, within exploratory & development work in progress until the
 exploration phase relating to the license area is complete or
 commercial oil and gas reserves have been discovered.
 
 Exploration expenditure incurred in the process of determining
 exploration targets which cannot be directly related to individual
 exploration wells is expensed in the period in which it is incurred.
 
 Exploration/appraisal drilling costs are initially capitalized within
 exploratory and development work in progress on a well by well basis
 until the success or otherwise of the well has been established. The
 success or failure of each exploration/appraisal effort is judged on a
 well by well basis.  Drilling costs are written off on completion of a
 well unless the results indicate that oil and gas reserves exist and
 there is a reasonable prospect that these reserves are commercial.
 
 Where results of exploration drilling indicate the presence of oil and
 gas reserves which are ultimately not considered commercially viable,
 all related costs are written off to the statement of profit and loss
 immediately. Following appraisal of successful exploration wells, when
 a well is ready for commencement of commercial production, the related
 exploratory and development work in progress are transferred into a
 single field cost centre within producing properties, after testing for
 impairment.
 
 Where costs are incurred after technical feasibility and commercial
 viability of producing oil and gas is demonstrated and it has been
 determined that the wells are ready for commencement of commercial
 production, they are capitalized within producing properties for each
 cost centre.
 
 Subsequent expenditure is capitalized when it enhances the economic
 benefits of the producing properties or replaces part of the existing
 producing properties. Any costs remaining associated with such part
 replaced are expensed off in the financial statements.
 
 Net proceeds from any disposal of an exploration asset within
 exploratory and development work in progress are initially credited
 against the previously capitalized costs and any surplus proceeds are
 credited to the statement of profit and loss. Net proceeds from any
 disposal of producing properties are credited against the previously
 capitalized cost and any gain or loss on disposal of producing
 properties is recognized in the statement of profit and loss, to the
 extent that the net proceeds exceed or are less than the appropriate
 portion of the net capitalized costs of the asset.
 
 Amounts which are not being paid by the joint venture partner in oil
 and gas blocks where the Company is the operator and have hence been
 funded by it are treated as exploration, development or production
 costs, as the case may be.
 
 b.  Site restoration costs
 
 At the end of the producing life of a field, costs are incurred in
 restoring the site of production facilities. The Company recognizes the
 full cost of site restoration as a liability when the obligation to
 rectify environmental damage arises. The site restoration expenses form
 part of the exploration & development work in progress or cost of
 producing properties, as the case may be, of the related asset. The
 amortization of the asset, calculated on a unit of production basis
 based on proved and developed reserves, is included in the depletion
 cost in the statement of profit and loss.
 
 c.  Impairment
 
 The Company assesses at each reporting date whether there is an
 indication that an asset may be impaired. If any indication exists, or
 when annual impairment testing for an asset is required, the Company
 estimates the asset''s recoverable amount. An asset''s recoverable amount
 is the higher of an asset''s or cash-generating units (CGU) fair value
 less cost of disposal and its value in use. The recoverable amount is
 determined for an individual asset, unless the asset does not generate
 cash infows that are largely independent of those from other assets or
 groups of assets. Where the carrying amount of an asset or CGU exceeds
 its recoverable amount, the asset is considered impaired and is written
 down to its recoverable amount. In assessing value in use, the
 estimated future cash fows are discounted to their present value using
 a pre-tax discount rate that reflects current market assessments of the
 time value of money and the risks specific to the asset. In determining
 net selling price, recent market transactions are taken into account,
 if available. If no such transactions can be identified, an appropriate
 valuation model is used. The Company bases its impairment calculation
 on detailed budgets and forecast calculations which are prepared
 separately for each of the Company''s cash-generating units to which the
 individual assets are allocated.
 
 After impairment, depreciation is provided on the revised carrying
 amount of the asset over its remaining useful life.
 
 An assessment is made at each reporting date as to whether there is any
 indication that previously recognized impairment losses may no longer
 exist or may have decreased. If such indication exists, the Company
 estimates the asset''s or cash-generating unit''s recoverable amount. A
 previously recognized impairment loss is reversed only if there has
 been a change in the assumptions used to determine the asset''s
 recoverable amount since the last impairment loss was recognized. The
 reversal is limited so that the carrying amount of the asset does not
 exceed its recoverable amount, nor exceed the carrying amount that
 would have been determined, net of depreciation, had no impairment loss
 been recognized for the asset in prior years. Such reversal is
 recognized in the statement of profit and loss.
 
 d.  Other tangible and intangible fixed assets
 
 Tangible assets, other than oil and gas assets, are stated at cost less
 accumulated depreciation and impairment losses, if any. Cost comprises
 the purchase price and any attributable cost of bringing the asset to
 its working condition for its intended use.
 
 Intangible assets, other than oil and gas assets, acquired separately
 are measured on initial recognition at cost. Following initial
 recognition, intangible assets are carried at cost less accumulated
 depreciation and impairment losses, if any.
 
 Borrowing costs relating to acquisition of fixed assets which take a
 substantial period of time to get ready for its intended use are also
 included to the extent they relate to the period till such assets are
 ready to be put to use.
 
 e.  Depletion, depreciation and amortization
 
 Oil and gas assets
 
 Depletion is charged on a unit of production basis, based on proved
 reserves for acquisition costs and proved and developed reserves for
 successful exploratory wells, development wells, processing facilities,
 distribution assets, estimated future abandonment cost and all other
 related costs (also refer note 40). These assets are depleted within
 each cost centre. Reserves for this purpose are considered on working
 interest basis which are reassessed at least annually. Impact of
 changes to reserves are accounted for prospectively.
 
 Leasehold lands are amortized over the lease period which is a maximum
 of 10 years. Leasehold improvements are amortized over the remaining
 period of the primary lease (3 to 12 years) or expected useful economic
 lives, whichever is shorter.
 
 f.  Leases
 
 As lessee
 
 Finance leases, which effectively transfer 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 are apportioned between the finance
 charges and reduction of the lease liability based on the implicit rate
 of return. Finance charges are recognized as an expense in the
 statement of profit and loss. 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 the lease term, capitalized leased assets are
 depreciated over the shorter of the estimated useful life of the asset
 or the lease term.
 
 Leases where the lessor effectively retains substantially all the risks
 and benefits of ownership of the leased item, are classified as
 operating leases. Operating lease payments are recognized as an expense
 in the statement of profit and loss on a straight-line basis over the
 lease term.
 
 g.  Investments
 
 Investments that are readily realizable and intended to be held for not
 more than a year from the date on which such investments are made, are
 classified as current investments. All other investments are classified
 as long-term investments. Current investments are measured at cost or
 market value, whichever is lower, determined on an individual
 investment basis. Long term investments are measured at cost. However,
 provision for diminution in value is made to recognize a decline other
 than temporary in the value of the long-term investments.
 
 h.  Inventories
 
 Inventories of oil and condensate held at the balance sheet date are
 valued at cost or net realizable value, whichever is lower. Cost is
 determined on a quarterly weighted average basis.
 
 Inventories of stores and spares related to exploration, development
 and production activities are valued at cost or net realizable value
 whichever is lower. Cost is determined on first in first out (FIFO)
 basis.
 
 Net realizable value is the estimated selling price in the ordinary
 course of business, less estimated costs of completion and estimated
 costs necessary to make the sale.
 
 i.  Joint Ventures
 
 The Company participates in several Joint Ventures involving joint
 control of assets for carrying out oil and gas exploration, development
 and producing activities. The Company accounts for its share of the
 assets and liabilities of Joint Ventures along with attributable income
 and expenses in such Joint Ventures, in which it holds a participating
 interest.
 
 j.  Revenue recognition
 
 Revenue is recognized to the extent that it is probable that the
 economic benefits will fow to the Company and the revenue can be
 reliably measured. The following specific recognition criteria must
 also be met before revenue is recognized.
 
 Revenue from operating activities
 
 From sale of oil, gas and condensate
 
 Revenue represents the Company''s share (net of Government''s share of
 profit petroleum) of oil, gas and condensate production, recognized on
 a direct entitlement basis, when Significant risks and rewards of
 ownership are transferred to the buyers. Government''s share of profit
 petroleum is accounted for when the obligation (legal or constructive),
 in respect of the same arises.
 
 As operator from the joint venture
 
 The Company recognizes revenue from joint ventures for services
 rendered in the form of parent company overhead based on the provisions
 of respective PSCs.
 
 Tolling income
 
 Tolling income represents the Company''s share of revenues from Pilotage
 and Oil Transfer Services from the respective joint ventures, which is
 recognized based on the rates agreed with the customers, as and when
 the services are rendered.
 
 Interest income
 
 Interest income is recognized on a time proportion basis.
 
 Treatment of Taxes
 
 The Company collects sales taxes and value added taxes (VAT) on behalf
 of the government and, therefore, these are not economic benefits
 fowing to the Company. Hence, they are excluded from revenue.
 
 Dividend income
 
 Revenue is recognized when the instrument/unit holders'' right to
 receive payment is established by the balance sheet date.
 
 k.  Borrowing costs
 
 Borrowing costs include interest and commitment charges on borrowings,
 amortization of costs incurred in connection with the arrangement of
 borrowings, exchange differences to the extent they are considered a
 substitute to the interest cost and finance charges under leases. Costs
 incurred on borrowings directly attributable to development projects,
 which take a substantial period of time to complete, are capitalized
 within the development/producing asset for each cost-centre.
 
 All other borrowing costs are recognized in the statement of profit and
 loss in the year in which they are incurred.
 
 l.  Foreign currency transactions and translations
 
 The Company translates foreign currency transactions into Indian Rupees
 at the rate of exchange prevailing at the transaction date. Monetary
 assets and liabilities denominated in foreign currency are translated
 into Indian Rupees at the rate of exchange prevailing at the balance
 sheet date. Non-monetary items which are carried in terms of historical
 cost denominated in a foreign currency are reported using the exchange
 rate at the date of the transaction.
 
 Exchange differences arising on the settlement of monetary items or on
 reporting the Company''s monetary items at rates different from those at
 which they were initially recorded during the year, or reported in
 previous financial statements, are recognized as income or as expenses
 in the period in which they arise.
 
 m.  Income taxes
 
 Tax expense comprises of current and deferred tax. Current income tax
 is measured at the amount expected to be paid to the tax authorities in
 accordance with the Indian Income Tax Act, 1961. Deferred income tax
 reflects the impact of current period timing differences between
 taxable income and accounting income for the period and reversal of
 timing differences of earlier period.
 
 Deferred tax assets and liabilities are measured, based on tax rates
 and laws enacted or substantively enacted at the balance sheet date.
 Deferred tax assets are recognized only to the extent that there is
 reasonable certainty that sufficient future taxable income will be
 available against which such deferred tax assets can be realized. If
 the Company has carry forward of unabsorbed depreciation and tax
 losses, deferred tax assets are recognized only if there is virtual
 certainty, supported by convincing evidence, that all such deferred tax
 assets can be realized against future taxable profits. Unrecognized
 deferred tax assets of earlier periods are re-assessed and recognized
 to the extent that it has become reasonably certain or virtually
 certain, as the case may be, that future taxable income will be
 available against which such deferred tax assets can be realized.
 
 In the situations where the Company is entitled to a tax holiday under
 the Income-tax Act, 1961 enacted in India or tax laws prevailing in the
 respective tax jurisdictions where it operates, no deferred tax (asset
 or liability) is recognized in respect of timing differences which
 reverse during the tax holiday period, to the extent the Company''s
 gross total income is subject to the deduction during the tax holiday
 period. Deferred tax in respect of timing differences which reverse
 after the tax holiday period is recognized in the year in which the
 timing differences originate. However, the Company restricts
 recognition of deferred tax assets to the extent that it has become
 reasonably certain or virtually certain, as the case may be, that
 sufficient future taxable income will be available against which such
 deferred tax assets can be realized. For recognition of deferred taxes,
 the timing differences which originate first are considered to reverse
 first.
 
 The carrying amount of deferred tax assets are reviewed at each balance
 sheet date. The Company writes-down the carrying amount of a deferred
 tax asset to the extent that it is no longer reasonably certain or
 virtually certain, as the case may be, that sufficient future taxable
 income will be available against which deferred tax asset can be
 realized. Any such write-down is reversed to the extent that it becomes
 reasonably certain or virtually certain, as the case may be, that
 sufficient future taxable income will be available.
 
 Minimum Alternative Tax (MAT) credit is recognized as an asset only
 when and to the extent there is convincing evidence that the Company
 will pay income tax under the normal provisions during the specified
 period, resulting in utilization of MAT credit. In the year in which
 the MAT credit becomes eligible to be recognized as an asset in
 accordance with the recommendations contained in Guidance Note issued
 by the Institute of Chartered Accountants of India, the said asset is
 created by way of a credit to the statement of profit and loss and
 shown as MAT Credit Entitlement.  The Company reviews the same at each
 balance sheet date and writes down the carrying amount of MAT Credit
 Entitlement to the extent there is no longer convincing evidence to the
 effect that the Company will utilize MAT credit during the specified
 period.
 
 n.  Earnings Per Share
 
 Basic earnings per share are calculated by dividing the net profit or
 loss for the year attributable to equity shareholders by the weighted
 average number of equity shares outstanding during the year. The
 weighted average number of equity shares outstanding during the year is
 adjusted for events of bonus issue, bonus element in a rights issue to
 existing shareholders, share split and reverse share split
 (consolidation of shares) that have changed the no of equity shares
 outstanding, without corresponding change in resources.
 
 For the purpose of calculating diluted earnings per share, the net
 profit or loss for the year attributable to equity shareholders and the
 weighted average number of shares outstanding during the year are
 adjusted for the effects of all dilutive potential equity shares, if
 any.
 
 o.  Provisions
 
 A provision is recognized when the Company has a present obligation as
 a result of past event and it is probable that an outfow of resources
 will be required to settle the obligation, in respect of which a
 reliable estimate can be made. Provisions are not discounted to its
 present value and are determined based on best estimate required to
 settle the obligation at the balance sheet date. These are reviewed at
 each balance sheet date and adjusted to reflect the current best
 estimates.
 
 p.  Cash and Cash equivalents
 
 Cash and cash equivalents comprise of cash at bank and in hand and
 short term investments, with an original maturity of 90 days or less.
 
 
 q.  Employee Benefits
 
 Retirement and Gratuity benefits
 
 Retirement benefits in the form of provident fund, superannuation fund
 and national pension scheme are defined contribution schemes. The
 Company has no obligation, other than the contribution payable to the
 provident fund, superannuation fund and national pension scheme. The
 Company recognizes contribution payable to the provident fund,
 superannuation fund and national pension scheme as an expenditure, when
 an employee renders the related service. If the contribution payable to
 the fund for service received before the balance sheet date exceeds the
 contribution already paid, the deficit payable to the fund is
 recognized as a liability after deducting the contribution already
 paid. If the contribution already paid exceeds the contribution due for
 services received before the balance sheet date, then excess is
 recognized as an asset to the extent that the pre payment will lead to,
 for example, a reduction in future payment or a cash refund.
 
 Gratuity liability is a defined benefit obligation and is provided for
 on the basis of an actuarial valuation on projected unit credit method
 made at the end of each financial year. The scheme is maintained and
 administered by an insurer to which the trustees make periodic
 contributions.
 
 Short term compensated absences are provided for based on estimates.
 Long term compensated absences and cash option award are provided for
 based on actuarial valuation made at the end of each financial year.
 The actuarial valuation is done on projected unit credit method.
 
 Actuarial gains / losses are immediately taken to statement of profit
 and loss and are not deferred.
 
 Employee Stock Compensation Cost
 
 In accordance with the Securities and Exchange Board of India (Share
 Based Employee Benefits) Regulations, 2014 and the Guidance Note on
 Accounting for Employee Share-based Payments, the Company measures
 compensation cost relating to employee stock options using the fair
 value method.
 
 Compensation expense is amortized over the vesting period of the option
 on a straight line basis.
 
 r.  Contingent liabilities
 
 A contingent liability is a possible obligation that arises from past
 events whose existence will be confirmed by the occurrence or
 non-occurrence of one or more uncertain future events beyond the
 control of the Company or a present obligation that is not recognized
 because it is not probable that an outfow of resources will be required
 to settle the obligation. A contingent liability also arises in
 extremely rare cases where there is a liability that cannot be
 recognized because it cannot be measured reliably. The Company does not
 recognize a contingent liability but discloses its existence in the
 financial statements.
 
 s.  Segment Reporting
 
 Identification of segments:
 
 The Company''s operating businesses are organized and managed separately
 according to the nature of products and services provided, with each
 segment representing a strategic business unit that offers different
 products and serves different markets. The analysis of geographical
 segments is based on the areas in which major operating divisions of
 the Company operate.
 
 t.  Derivative instruments
 
 As per the ICAI Announcement, accounting for derivative contracts,
 other than those covered under AS-11, is done on marked to market on a
 portfolio basis, and the net loss is charged to the income statement.
 Net gains are ignored.
 
 u.  Use of estimates
 
 The preparation of financial statements in conformity with generally
 accepted accounting principles requires management to make estimates
 and assumptions that affect the reported amounts of assets and
 liabilities and disclosure of contingent liabilities at the date of the
 financial statements and the results of operations during the reporting
 period end. Although these estimates are based upon management''s best
 knowledge of current events and actions, actual results could differ
 from these estimates.
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