File_2012_Document1

120 Jindal Steel & Power Limited Business Leadership Sustainable Operations Excellent Governance Robust FinancialsStandaloneAnnual Report 2011-12121NOTES to the financial statements as at and for the year ended 31st March, 2012 NOTES to the financial statements as at and for the year ended 31st March, 2012xi)xii)converted at the rates prevailing at the end of the year.Exchange difference arising on conversion is recognised inForeign Currency Translation Reserve.InvestmentsNon-current investments are carried at cost. Provision ismade when, in the opinion of the management, diminutionin the value of investment is other than temporary innature. The reduction in carrying amount is reversed whenthere is a rise in value of investments or if the reason for thereduction no longer exists. Current investments are carriedat the lower of cost or market / fair value.Revenue Recognitiona) Gross Revenue from operations comprises of saleof products and other operating income which alsoincludes export incentives and aviation income. ‘NetRevenue from operations’, net of excise duty andInter-divisional transfer is also disclosed separately.b) Sales is inclusive of excise duty but net of returns,rebates, VAT and sales tax. Products returned/rejected are accounted for in the year of return/rejection.c) Export sales are accounted for on the basis of the dateof bill of lading/airways bill.d) Export benefits available under the Export Importpolicy of the Government of India are accounted forin the year of export, to the extent measurable.e) Income from aviation and other services is accountedfor at the time of completion of service and billingthereof.xiii) Other Incomea) Claims receivableThe quantum of accruals in respect of claims receivablesuch as from Railways, Insurance, Electricity, Customs,Excise and the like are accounted for on accrual basisto the extent there is certainty of ultimate realisation.b) Income from InvestmentIncome from Investment is accounted for on accrualbasis when the right to receive income is established.xiv) Excise DutyExcise Duty liability on finished goods manufactured andlying in the factory is accounted for and the correspondingamount is considered for valuation thereof.xv)Employee BenefitsExpenses & liabilities in respect of employee benefits arerecorded in accordance with Accounting Standard (AS)-15–Employee Benefits’.a) Provident FundThe Company contributes to Government administeredfund as well as Provident fund Trust. The interest ratepayable by the trust to beneficiaries every year isbeing notified by Government. The Company makesgood deficiency, if any, in the interest rate declared bythe trust vis-à-vis statutory rate.b) GratuityGratuity is a post employment benefit and is in the natureof a defined benefit plan. The liability recognised in theBalance Sheet in respect of gratuity is the presentvalue of the defined benefit/obligation at the BalanceSheet date less the fair value of plan assets, togetherwith adjustment for unrecognised actuarial gains orlosses and past service costs. The defined benefit/obligation is calculated at or near the Balance Sheetdate by an independent Actuary using the projectedunit credit method. Actuarial gains or losses areimmediately recognised in the statement of profit &loss and not deferred.c) Compensated absencesLiability in respect of compensated absences dueor expected to be availed within one year from theBalance Sheet date is recognised on the basis ofundiscounted value of estimated amount requiredto be paid or estimated value of benefit expected tobe availed by the employees. Liability in respect ofcompensated absences becoming due or expectedto be availed more than one year after the BalanceSheet date is estimated on the basis of an actuarialvaluation performed by an independent Actuaryusing the projected unit credit method.d) Other short term benefitsExpense in respect of other short term benefits isrecognised on the basis of the amount paid or payablefor the period during which services are rendered bythe employee.xvi) Research and Development expenditureResearch and Development expenditure not fulfilling therecognition criteria as set out in Accounting Standard (AS-26) ‘Intangible Assets’ is charged to the statement of profitand loss while capital expenditure is added to the cost offixed assets in the year in which it is incurred.xvii) Employee Stock Option SchemeStock options granted to the employees of the Companyand its subsidiary under the Employees’ Stock OptionScheme(s) are evaluated on Intrinsic Value Method as perthe accounting treatment prescribed by the EmployeeStock Option Scheme and Employee Stock PurchaseScheme Guidelines, 1999 issued by the Securities andExchange Board of India.Accordingly, excess of market value of the stock optionas on date of grant over the exercise price of the optionsis recognised as deferred employee compensation and ischarged to the statement of profit and loss as employeecost on straight line method over the vesting period ofthe options. The options that lapse are reversed by acredit to employees’ compensation expenses, equal toamortised portion of value of lapsed portion and creditto deferred employee compensation expense, equal tothe unamortised portion. The balance in employee stockoption outstanding amount net of any unamortiseddeferred employee compensation is shown separately aspart of shareholder’s fund.xviii) Taxes on IncomeProvision for current tax is made considering variousallowances and benefits available to the Company underthe provisions of the Income Tax Act, 1961.In accordance with Accounting Standard (AS-22) ‘Accountingfor Taxes on Income’, deferred taxes resulting from timingdifferences between book and tax profits are accounted forat the tax rate substantively enacted by the Balance Sheetdate to the extent the timing differences are expected tobe crystallised. Deferred tax assets are recognised andreviewed at each Balance Sheet date to the extent there isreasonable/virtual certainty of realising such assets againstfuture taxable income.Minimum Alternate Tax (MAT) credit is recognised as anasset only when and to the extent there is convincingevidence that the Company will pay normal income taxduring the specified period.xix) Provisions, contingent liabilities, commitments andcontingent assetsProvisions are recognised for present obligations ofuncertain timing or amount arising as a result of a pastevent where a reliable estimate can be made and itis probable that an outflow of resources embodyingeconomic benefits will be required to settle the obligation.Where it is not probable that an outflow of resourcesembodying economic benefits will be required or theamount cannot be estimated reliably, the obligation isdisclosed as a contingent liability and commitments,unless the probability of outflow of resources embodyingeconomic benefits is remote.Possible obligations, whose existence will only be confirmedby the occurrence or non-occurrence of one or morexx)uncertain events, are also disclosed as contingent liabilitiesand commitments unless the probability of outflowof resources embodying economic benefits is remote.Contingent assets are neither recognised nor disclosed inthe financial statements.Intangible assets under developmentMines development expenditure incurred in respect of newiron ore/coal and likewise mines is shown under ‘Intangibleassets under development’ and amortised over a periodof ten years starting from the year of commencement ofcommercial production or the future expected extractionperiod of the reserves based on actual extraction till date,whichever is shorter.xxi) Earnings per shareThe earnings considered in ascertaining the Company’searnings per share (EPS) comprise of the net profit aftertax attributable to equity shareholders. The number ofshares used in computing basic EPS is the weighted averagenumber of shares outstanding during the period adjustedfor events of bonus issue post period end,bonus elementsin right issue to existing shareholders, share split, andreverse share split (consolidation of shares). The dilutedEPS is calculated on the same basis as basic EPS, afteradjusting for the effect of potential dilutive equity sharesunless impact is anti-dilutive.xxii) Financial derivativesForward contracts, other than those entered into to hedgeforeign currency risk on unexecuted firm commitmentsor highly probable forecast transactions, are treated asforeign currency transactions and accounted for as perAccounting Standard (AS-11). ‘The Effects of Changes inForeign Exchange Rates’. Exchange differences arising onsuch contracts are recognised in the period in which theyarise.All other derivative contracts, including forward contractsentered into to hedge foreign currency/ interest rate risk onunexecuted firm commitments and highly probable forecasttransactions, are recognised in the financial statementsat fair value at each reporting date, in pursuance of theannouncement of The Institute of Chartered Accountantsof India (ICAI) on Accounting for Derivatives.xxiii) Cash and cash equivalentsCash and cash equivalents consist of cash and short-termhighly liquid investments that are readily convertible tocash with original maturities of three months or less at thetime of purchase.