Indian Oil Corporation Limited 3rd Integrated Annual Report
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NOTES TO FINANCIAL STATEMENTS
Note-1A : SIGNIFICANT ACCOUNTING POLICIES
III. New Standards/ amendments and other changes
effective April 1,2019
Ind AS 116, Leases
The Company has adopted this Ind AS w.e.f April 1,
2019. The effect of this standard along with relevant
disclosures are provided in Note-36.
Amendments to Ind AS 12, Income taxes Appendix
C - Uncertainty over Income Tax Treatment
The Company has adopted the amendments w.e.f
April 1, 2019. The impact of this amendment is not
material.
Amendment to Ind AS 19 –Employee Benefits
relating to Plan amendment, curtailment or
settlement
The Company has adopted the amendments w.e.f
April 1, 2019. As there is no major change in employee
benefit plans , the effect of this amendment is not
material.
Amendment to Ind AS 23, Borrowing Costs
The Company has adopted the amendments w.e.f
April 1, 2019. The effect of this amendment is not
material.
IV. Standards issued but not yet effective
Ministry of Corporate Affairs notifies new standard
or amendments to the existing standards. During the
year, no new standard or modifications in existing
standards has been notified which will be applicable
from April 1, 2020 or thereafter.
186 Financial Statements
NOTES TO FINANCIAL STATEMENTS
Note – 1B : SIGNIFICANT ACCOUNTING ESTIMATES & JUDGEMENTS
The preparation of the Company’s financial statements
requires management to make judgements, estimates and
assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities, and the accompanying
disclosures, and the disclosure of contingent liabilities.
These include recognition and measurement of financial
instruments, estimates of useful lives and residual value
of Property, Plant and Equipment and Intangible Assets,
valuation of inventories, measurement of recoverable
amounts of cash-generating units, measurement of
employee benefits, actuarial assumptions, provisions etc.
Uncertainty about these assumptions and estimates could
result in outcomes that require a material adjustment to
the carrying amount of assets or liabilities affected in
future periods. The Company continually evaluates these
estimates and assumptions based on the most recently
available information. Revisions to accounting estimates
are recognized prospectively in the Statement of Profit
and Loss in the period in which the estimates are revised
and in any future periods affected.
JUDGEMENTS
In the process of applying the company’s accounting
policies, management has made the following judgements,
which have the significant effect on the amounts
recognised in the financial statements:
Materiality
Ind AS requires assessment of materiality by the Company
for accounting and disclosure of various transactions in the
financial statements. Accordingly, the Company assesses
materiality limits for various items for accounting and
disclosures and follows on a consistent basis. Overall
materiality is also assessed based on various financial
parameters such as Gross Block of Assets, Net Block of
Assets, Total Assets, Revenue and Profit Before Tax. The
materiality limits are reviewed and approved by the Board.
Intangible Asset under Development
Acquisition costs and drilling of exploratory well costs
are capitalized as intangible asset under development
and are reviewed at each reporting date to confirm that
exploration drilling is still under way or work has been
determined / under way to determine that the discovery
is economically viable based on a range of technical
& commercial considerations and for establishing
development plans and timing , sufficient / reasonable
progress is being made. If no future activity is planned on
reasonable grounds / timeframes, Intangible asset under
development and property acquisition costs is written
off. Upon start of production from field and recognition
of proved reserves, cost carried as intangible asset under
development is transferred to producing properties. Also
refer Note-34 for related disclosures.
Contingencies
Contingent liabilities may arise from the ordinary course
of business in relation to claims against the Company,
including legal, contractor, land access and other claims.
By their nature, contingencies will be resolved only when
one or more uncertain future events occur or fail to occur.
The assessment of the existence, and potential quantum,
61st Annual Report 2019-20
of contingencies inherently involves the exercise of
significant judgement and the use of estimates regarding
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the outcome of future events.
From the
ESTIMATES AND ASSUMPTIONS
The key assumptions concerning the future and other key
sources of estimation at the reporting date, that have a
significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
About IndianOil
financial year, are described below.
Existing circumstances and assumptions about future
developments, however, may change due to market
changes or circumstances arising that are beyond the
control of the company. Such changes are reflected in the
Description of Capitals
assumptions when they occur.
Defined benefit plans/ Other Long term employee
benefits
The cost of the defined benefit plans and other long term
employee benefit plans are determined using actuarial
valuations. An actuarial valuation involves making various
Board of Directors, etc.
assumptions that may differ from actual developments in
the future. These include the determination of the discount
rate, future salary increases and mortality rates. Due to
the complexities involved in the valuation and its long-
term nature, a defined benefit obligation is highly sensitive
to changes in these assumptions. All assumptions are
reviewed at each reporting date.
The parameter most subject to change is the discount
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rate. The management considers the interest rates of
government securtities based on expected settlement
period of various plans.
Further details about various employee benefit obligations
are given in Note 35.
Discussion & Analysis
Fair value measurement of financial instruments
Management’s
When the fair values of financial assets and financial
liabilities recorded in the Balance Sheet cannot be
measured based on quoted prices in active markets,
their fair value is measured using valuation techniques
including the Discounted Cash Flow (DCF) model based
on level-2 and level-3 inputs. The inputs to these models
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are taken from observable markets where possible,
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but where this is not feasible, a degree of judgement is
required in establishing fair values. Judgements include
considerations of inputs such as price estimates, volume
estimates, rate estimates etc. Changes in assumptions
about these factors could affect the reported fair value
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of financial instruments. Also refer note 39 for further
disclosures of estimates and assumptions.
Report on
Impairment of Financial Assets
The impairment provisions for trade receivables are made
considering simplified approach based on assumptions
about risk of default and expected loss rates. The Company
Financial Statements
uses judgement in making these assumptions and
selecting the inputs to the impairment calculation based
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on the company’s past history and other factors at the end
of each reporting period. In case of other financial assets,
the Company applies general approach for recognition of
Financial Statements 187