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174 Jindal Steel & Power LimitedBusiness Leadership Sustainable Operations Excellent Governance Robust FinancialsAnnual Report 2011-12175ConsolidatedNOTES to the consolidated financial statements as at and for the year ended 31st March, 2012 NOTES to the consolidated financial statements as at and for the year ended 31st March, 2012viii) Borrowing CostBorrowing cost related to a qualifying asset is worked outon the basis of actual utilisation of funds out of projectspecific loans and/or other borrowings to the extentidentifiable with the qualifying asset and is capitalised withthe cost of the qualifying asset. Other borrowing costsincurred during the period are charged to statement ofprofit and loss.ix)Segment Reportinga) Identification of SegmentsThe Company’s operating businesses are organisedand managed separately according to the natureof products manufactured and services provided,with each segment representing a strategic businessunit that offers different products. The analysis ofgeographical segments is based on the areas in whichmajor operating divisions of the Company operate.b) Inter-segment transfersThe Company accounts for inter-segment sales andtransfers as if the sales or transfers were to thirdparties at current market prices.c) Allocation of common costsCommon allocable costs are allocated to eachsegment on reasonable basis.d) Unallocated itemsIt includes general administrative expenses, headoffice expenses and other expenses & income thatarise at the enterprise level and relate to enterprise asa whole, and which are not allocable to any businesssegment.e) Segment PoliciesThe Company prepares its segment information inconformity with the accounting policies adopted forpreparing and presenting the financial statements ofthe Company as a whole.x) Valuation of InventoriesRaw materials and stores & spares are valued at lower ofcost, computed on weighted average basis or net realisablevalue. Cost includes the purchase price as well as incidentalexpenses. Scrap is valued at estimated realisable value.Work-in-process is valued at lower of estimated cost andnet realisable value and finished goods are valued at lowerof cost and net realisable value. Cost for this purposeincludes direct cost and appropriate administrative andother overheads.Net realisable value is the estimated selling price inthe ordinary course of business, less estimated costs ofcompletion and estimated costs necessary to make the sale.xi)xii)Inter-Division TransfersInter-division transfer of goods, as independent marketableproducts produced by various divisions of the samelegal entity for captive consumption, is accounted for atapproximate prevailing market price. The same is shown asa contra item to reflect the true working of the respectivedivisions in the Statement of Profit and Loss. Any unrealisedprofit on unsold stocks is eliminated while valuing theinventories. The value of such inter-divisional transfer isnetted off from sales and operational income and expensesunder cost of materials consumed and other expenses.Inter-divisional transfer/captive consumption related tofixed assets is at cost.Foreign Currency TransactionsForeign currency transactions are recorded at the rateof exchange prevailing at the date of the transaction.Monetary foreign currency assets and liabilities aretranslated at the year-end exchange rates and resultantgains/losses are recognised in the statement of profit &loss for the year, except to the extent that they relate tonew projects till the date of capitalisation which are carriedto pre-operative expenses and those relating to fixed assetswhich are adjusted to the carrying cost of the respective assets.In case of forward foreign exchange contracts, exchangedifferences are dealt with in the statement of profit & lossover the life of the contract except those relating to fixedassets in which case they are capitalised with the cost ofrespective fixed assets. Non-monetary foreign currencyitems are carried at historical cost.In case of foreign subsidiaries, with non-integral foreignoperations, revenue items are converted at the averagerate prevailing during the year. All assets and liabilities areconverted at the rates prevailing at the end of the year.Exchange difference arising on conversion is recognised inForeign Currency Translation Reserve.xiii) 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 forthe reduction no longer exists. Current investments arecarried at the lower of cost or market / fair value.xiv) 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.xv)b) Sales is inclusive of excise duty but net of returns,rebates, VAT and sales tax. Products returned/rejectedare accounted for in the year of return/rejection.c) Export sales are accounted for on the basis of thedate of 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.Other Incomea) Claims receivableThe quantum of accruals in respect of claims receivablesuch as from Railways, Insurance, Electricity, CustomsExcise 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 the income isestablished.xvi) Excise DutyExcise Duty liability on finished goods manufactured andlying in the factory is accounted for and the correspondingamount is considered for valuation thereof.xvii) 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 inthe nature of a defined benefit plan. The liabilityrecognised in the Balance Sheet in respect of gratuityis the present value of the defined benefit/obligationat the Balance Sheet date less the fair value of planassets, together with adjustment for unrecognisedactuarial gains or losses and past service costs. Thedefined benefit/obligation is calculated at or near theBalance Sheet date by an independent Actuary usingthe projected unit credit method. Actuarial gains orlosses are immediately recognised in the statementof 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.e) Overseas subsidiaries and their step downsubsidiaries are recognising employee benefits of thenature referred above as per applicable local laws ofthe country in which they have been incorporated/operating.xviii) 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.xix) 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 optionis 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 unamortised