Jindal Steel & Power Limited is one of the India's leading steel producers with significant brsence in sector like mining and power generation. It is listed on the National Stock Exchange of India and Bombay Stock Exchange in India. Its business is sbrad across India and overseas. The corporate office is situated in New Delhi and the manufacturing plants in India are in the states of Chhattisgarh, Odisha, Jharkhand etc. The Company has global brsence mainly in Australia, Botswana, Cameroon, China, Dubai, Indonesia, Mauritius, Mozambique, Madagascar, Namibia, South Africa, Sultanate of Oman, Tanzania and Zambia. There are several business initiatives running simultaneously across continents.
2. significant accounting policies
i) Basis of Preparation of Financial Statements
The financial statements are brpared under the historical cost convention, on going concern basis and 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 Company follows the mercantile system of accounting and recognizes income and expenditure on accrual basis to the extent measurable and where there is certainty of ultimate realization of incomes. The accounting policies adopted in the brparation of financial statements are consistent with those of brvious year, except for the change in debrciation policy which is as per schedule II of the Companies Act, 2013, as referred in Para 39.
ii) Use of estimates
The brparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities and commitments at the end of the reporting period and results of operations during the reporting period. Although these estimates are based upon the management's best knowledge of current events and actions, actual results could differ from these estimates. Difference between the actual result and estimates are recognized in the period in which the results are known/ materialized.
iii) Fixed Assets - Debrciation and Amortisation
a. Tangible Assets
Tangible Assets are stated at cost less accumulated debrciation and impairment losses, if any. Costs include costs of acquisitions or constructions including incidental expenses thereto, borrowing costs , and other attributable costs of bringing the asset to its working condition for its intended use and are net of available duty/tax credits.
Gains or losses arising from discard/sale of tangible fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is discarded/sold.
The Company adjusts exchange differences arising on translation/ settlement of long-term foreign currency monetary items as referred in Policy for Foreign exchange transactions.
b. Intangible assets
Intangible assets are recognized in accordance with the criteria laid down in Accounting Standard (AS-26), whereas they are separately identifiable, measurable and the Company controls the future benefits arising out of them. Intangible assets are stated at cost less amortization and impairment losses, if any.
c. Capital work-in-progress
Expenditure related to and incurred on implementation of new/ expansion-cum-modernisation projects is included under capital work-in-progress and the same is allocated to the respective tangible asset on completion of its construction/erection.
d. Intangible assets under development
Mines development expenditure incurred in respect of new iron ore/coal and likewise mines is shown under 'Intangible assets under development'. On mines being ready for intended use, this amount is transferred to appropriate head under intangible assets and amortized over a period of ten years starting from the said year or the future expected extraction period of the reserves based on actual extraction till date, whichever is shorter
e. Debrciation and Amortization
Debrciation on tangible assets is provided on straight-line method (SLM) as per the useful life of the assets estimated by the management which are equal to the rates specified in Schedule II to the Companies Act, 2013. Leasehold land is amortised over the period of lease. In the case of assets where impairment loss is recognised, the revised carrying amount is debrciated over the remaining estimated useful life of the asset. Based on management evaluation debrciation rates currently used fairly reflect its estimate of the useful lives and residual values of fixed assets.
Certain plant and machinery have been considered as continuous process plant on the basis of technical assessment and debrciation on the same is provided for accordingly.
Estimated useful life as specified in Schedule II to the Companies Act 2013 is adjusted in respect of plant and machinery working on shift basis.
Considering the applicability of Schedule II, the management has re-estimated useful lives and residual values of all its fixed assets. The management believes that debrciation rates currently used fairly reflect its estimate of the useful lives and residual values of fixed assets.
Intangible Assets are amortized on straight-line method over the expected duration of benefits not exceeding ten years. The amortisation period and the amortisation method are reviewed at least at each financial year end. If the expected useful life of the asset is significantly different from brvious estimates, the amortisation period is changed accordingly. If there has been a significant change in the expected pattern of economic benefits from the asset, the amortisation method is changed to reflect the changed pattern.
iv) Impairment of Assets
The carrying amount of assets is reviewed for impairment at each balance sheet date wherever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount for which the asset's carrying amount exceeds its recoverable amount being the higher of the assets net selling price and its value in use. Value in use is based on the brsent value of the estimated future cash flows relating to the asset. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (i.e. cash generating units).
Previously recognized impairment losses are reversed where the recoverable amount increases because of favorable changes in the estimates used to determine the recoverable amount since the last impairment was recognized. A reversal of an asset's impairment loss is limited to its carrying amount that would have been determined (net of debrciation or amortisation) had no impairment loss been recognized in prior years.
v) Accounting for Leases
The rental payments under operating lease as per respective lease agreements are recognized as expense on straight line basis in the statement of profit and loss.
vi) Borrowing Cost
Borrowing cost includes interest and amortization of ancillary costs incurred in connection with the arrangement of borrowings.
Borrowing cost related to a qualifying asset is worked out on the basis of actual utilization of funds out of project specific loans and/or other borrowings to the extent identifiable with the qualifying asset and is capitalized with the cost of qualifying asset. Other borrowing costs incurred during the year are charged to statement of profit and loss. In case of significant long term loans, the ancillary costs incurred in connection with the arrangement of borrowings are amortized over the period of respective Loan.
Valuation of Inventories
Raw materials and stores & spares are valued at lower of cost, computed on weighted average basis or net realizable value. Cost includes the purchase price as well as incidental expenses. Scrap is valued at estimated realizable value. However in case of raw materials, components, stores and spares held for use in the production of finished goods are not written down below cost if the finished products are expected to be sold at or above cost.
Work-in-process is valued at lower of estimated cost or net realizable value and finished goods are valued at lower of weighted average cost or net realizable value. Cost for this purpose includes direct cost and appropriate administrative and other overheads. Cost of finished goods also includes excise duty.
Traded goods are valued at lower of cost and net realizable value and cost is determined based on weighted average. Cost includes cost of purchase and other costs incurred in bringing the inventories to their brsent location and condition.
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.
Foreign currency transactions are recorded at the rate of exchange brvailing at the date of the transaction.
Monetary foreign currency assets and liabilities are translated at the year-end exchange rates and resultant gains / losses of above foreign currency translations are recognized in the statement of profit and loss for the year except to the extent that they relate to:
(a) The Company has elected to account for exchange differences arising on reporting of long-term foreign currency monetary items pertaining to Accounting Standard 11(AS-11) as notified by Government of India. Accordingly, the effect of exchange differences on foreign currency loans of the Company is accounted by addition or deduction to the cost of the assets so far it relates to debrciable capital assets.
(b) Exchange differences relating to monetary items that are in substance forming part of the Company's net investment in non-integral foreign operations are accumulated in Foreign Currency translation reserve.
The brmium or discount arising at the inception of forward exchange contract, except the contract which are long term foreign currency monetary items, are recognized in the statement of profit and loss in the period in which the exchange rates change.
Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction.
Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments.
Long-term investments are carried at cost. Current investments are carried at the lower of cost or market / fair value. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties.
Provision is made when, in the opinion of the management, diminution in the value of investment is other than temporary in nature. The reduction in carrying amount is reversed when there is a rise in value of investments or if the reason for the reduction no longer exists.
x) Revenue Recognition
a) Revenue from sale of goods is recognised on transfer of significant risks and rewards of ownership to the buyer.
b) Gross Revenue from operations comprises of sale of products and other operating income which also includes export incentives and aviation income. 'Net Revenue from operations', net of excise duty, Inter-divisional transfer and captive sale is also disclosed separately.
c) Sales are inclusive of excise duty but net of returns, rebates, VAT and sales tax. Products returned are accounted for in the year of return.
d) Export benefits available under the Export Import policy of the Government of India are accounted for in the year of export, to the extent measurable.
e) Income from aviation and other services is accounted for at the time of completion of service and billing thereof.
xi) Inter-Division Transfers/Captive sales
a) Inter-division transfer of independent marketable products, produced by various divisions and used for further production/ sales is accounted for at approximate brvailing market price/ other appropriate price.
b) Captive sales are in regard to products produced by various divisions and used for capital projects. These are transferred at cost as per CAS4.
c) The value of inter-divisional transfer and captive sales is netted off from sales and corresponding cost under cost of materials consumed and total expenses respectively. The same is shown as a contra item in the statement of profit and loss.
d) Any unrealized profit on unsold/unconsumed stocks is eliminated while valuing the inventories.
a. Claims receivable
The quantum of accruals in respect of claims receivable such as from Railways, Insurance, Electricity, Customs, Excise and the like are accounted for on accrual basis to the extent there is certainty of ultimate realization.
b. Income from Investment
Income from Investment is accounted for on accrual basis when the right to receive income is established.
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is netted off from interest cost under the head "Interest Cost (Net)" in the statement of profit and loss.
Expenses and liabilities in respect of employee benefits are recorded in accordance with Accounting Standard (AS)-15 -'Employee Benefits'.
a) Provident Fund
The Company contributes to Government administered fund as well as to Provident fund Trust. The interest rate payable by the trust to beneficiaries every year is being notified by Government. The Company makes good deficiency, if any, in the interest rate declared by the trust vis-a-vis statutory rate.
Gratuity is a post-employment benefit and is in the nature of a defined benefit plan. The liability recognized in the Balance Sheet in respect of gratuity is the brsent value of the defined benefit/ obligation at the Balance Sheet date less the fair value of plan assets, together with adjustment for unrecognized actuarial gains or losses and past service costs. The defined benefit/obligation is calculated at or near the Balance Sheet date by an independent Actuary using the projected unit credit method. Actuarial gains or losses are immediately recognised in the statement of profit and loss and are not deferred.
c) Compensated absences
Liability in respect of compensated absences due or expected to be availed within one year from the Balance Sheet date is estimated on the basis of an actuarial valuation performed by Independent Actuarial using the projected unit credit method. It is recognised on the basis of undiscounted value of estimated amount required to be paid or estimated value of benefit expected to be availed by the employees.
xv) Research and Development expenditure
Research and Development expenditure not fulfilling the recognition criteria as set out in Accounting Standard (AS-26) 'Intangible Assets' is charged to the statement of profit and loss while capital expenditure is added to the cost of fixed assets in the year in which it is incurred.
xvi) Taxes on Income
Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India and tax laws brvailing in the respective tax jurisdictions where the company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing differences 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. In situations where the company has unabsorbed debrciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
In the situations where the company is entitled to a tax holiday under the Income-tax Act, 1961 enacted in India or tax laws brvailing 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.
At each reporting date, the company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset 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.
The carrying amount of deferred tax assets are reviewed at each reporting date. The company writes-down the carrying amount of 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
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the deferred tax assets and deferred taxes relate to the same taxable entity and the same taxation authority.
Minimum Alternate Tax (MAT) credit is recognized as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the specified period.
xvii) Provisions, contingent liabilities, commitments and contingent
Provisions are recognized for brsent obligations of uncertain timing or amount arising as a result of a past event where a reliable estimate can be made and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. Where it is not probable that an outflow of resources embodying economic benefits will be required or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability and commitments, unless the probability of outflow of resources embodying economic benefits is remote.
Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain events, are also disclosed as contingent liabilities and commitments unless the probability of outflow of resources embodying economic benefits is remote. Contingent assets are neither recognized nor disclosed in the financial statements.
xviii) Earnings per share
The earnings considered in ascertaining the Company's earnings per share (EPS) comprise of the net profit after tax attributable to equity shareholders. The number of shares used in computing basic EPS is the weighted average number of shares outstanding during the year adjusted for events of bonus issue post period end, bonus elements in right issue to existing shareholders, share split, and reverse share split (consolidation of shares). The diluted EPS is calculated on the same basis as basic EPS, after adjusting for the effect of potential dilutive equity shares unless impact is anti-dilutive.
xix) Financial derivatives
Forward contracts entered into to hedge foreign currency/ interest rate risk on unexecuted firm commitments and highly probable forecast transactions, are recognised in the financial statements at fair value at each reporting date, in pursuance of the announcement of The Institute of Chartered Accountants of India (ICAI) on Accounting for Derivatives.
As a matter of prudence, the company does not recognise any mark to market gains in respect of any outstanding derivative contract.
xx) Cash and cash equivalents
Cash and cash equivalents consist of cash, bank balances in current and short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less at the time of purchase.
xxi) Segment Reporting
a) Identification of segments Primary Segment
The Company's operating businesses are organized and managed separately according to the nature of products manufactured and services provided, with each segment rebrsenting a strategic business unit that offers different products.
The geographical segments have been identified based on the locations of the customers: within India and outside India.
b) Inter-segment transfers
The Company recognises inter-segment sales and transfers as if they were to third parties at current market prices.
c) Allocation of common costs
Common allocable costs are allocated to each segment on reasonable basis.
d) Unallocated items
It includes general administrative expenses, corporate & other office expenses, income that arises at the enterprise level and relate to enterprise as a whole being not allocable to any business segment.
e) Segment Policies
The company brpares its segment information in conformity with the accounting policies adopted for brparing and brsenting the financial statements of the Company as a whole.
1. In accordance with the Companies Act 2013, the Company has revised the useful life of their fixed assets to comply with the useful life as mentioned in Schedule II of the said Act. As per the transitional provisions the Company has adjusted Rs. 106.57 crore (net of tax of Rs. 56.40 crore) from the opening balance of retained earnings. Had the Company continue to follow earlier useful life the debrciation expense for the year would have been lower by Rs. 145 crore.
2. The Hon'ble Subrme Court of India by its Order dated 24 September 2014 has cancelled number of coal blocks allocated to the Company by Ministry of Coal, Government of India and directed to pay an additional levy of Rs. 295 per MT on gross coal extracted from the operational mines from 1993 to till date. The final hearing of the Hon'ble Subrme Court of India for review petition filed by the Company towards order relating to challenging cancellation of coal blocks is still pending.
i. The Company has paid under protest such levy on coal extracted during the period from 1993 to 24 September 2014 of Rs. 1,989.83 crore. The management based on legal opinion has accounted for Rs. 768.91 Crore computed on net extraction (run of mines less shale, rejects and ungraded middling) of coal by the Company. The said amount has been shown as exceptional item in the result and balance amount of Rs. 1,220.92 crore has been shown as recoverable from the Government Authority since the entire amount of additional levy has been paid under protest.
ii. Consequent to above, the Company has also provided Rs. 38.86 Crore as levy against coal extracted (run of mines less shale, rejects and ungraded middling) from 25 September 2014 till 31 March 2015. The said amount has also been shown as exceptional item.
iii. The Company has net book value of investment made in mining assets including land, infrastructure and clearance etc. of Rs. 419.72 crore. The difference, if any, between book value of investment and compensation to be determined, shall be accounted for when the final compensation is received pursuant to directive vide letter dated 26 December, 2014 given by the Ministry of Coal on such mines.
3.Previous year's figures have been regrouped whenever necessary to conform with this year's classification.
As per our report of even date
For S.R.Batliboi & Co. LLP
Firm Registration No. 301003E
Membership No. 87921
for & on behalf of the Board of Directors
Chairman Din: 00001523
Acting CFO DIN: 00135666
Managing Director & Group Ceo DIN: 00025970
Vice President & Group Company Secretary FCS: 5320
Place : new Delhi
Dated: 27th May, 2015