Indian Oil Corporation Limited 3rd Integrated Annual Report
About the Report
NOTES TO FINANCIAL STATEMENTS
Note-1A : SIGNIFICANT ACCOUNTING POLICIES
6.4 Non-monetary items denominated in foreign currency,
(such as PPE, intangible assets , equity investments,
capital/ revenue advances other than expected to be
settled in cash etc.) are recorded at the exchange rate
prevailing on the date of the transaction, other than
those measured at fair value.
Non-monetary items measured at fair value in a
foreign currency are translated using the exchange
rates at the date when the fair value is determined.
The gain or loss arising on translation of non-monetary
items measured at fair value is treated in line with
the recognition of the gain or loss on the change in
fair value of the item (i.e., translation differences on
items whose fair value gain or loss is recognised in
Other Comprehensive Income (OCI) or the Statement
of Profit and Loss are also recognised in OCI or the
Statement of Profit and Loss, respectively).
6.5 (a) Any gains or losses arising due to differences in
exchange rates at the time of translation or settlement
are accounted for in the Statement of Profit and Loss
either under the head foreign exchange fluctuation or
interest cost, as the case may be, except those relating
to long-term foreign currency loans as mentioned in
Para (b) (i) below.
(b) (i) Exchange differences pertaining to long term
foreign currency loans obtained or re-financed on or
before March 31, 2016:
Exchange differences on long-term foreign currency
loans obtained or re-financed on or before March 31,
2016 relating to acquisition of depreciable assets
are adjusted to the carrying cost of the assets and
depreciated over the balance life of the assets . In
other cases, exchange differences are accumulated
in a “Foreign Currency Monetary Item Translation
Difference Account” and amortized over the balance
period of such long-term foreign currency loan by
recognising as gain or loss in the Statement of Profit
and Loss.
(ii) Exchange differences pertaining to long term
foreign currency loans obtained or re-financed on or
after April 1,2016:
The exchange differences pertaining to long term
foreign currency loans obtained or re-financed on or
after April 1, 2016 are recognized in the Statement of
Profit and Loss as exchange fluctuations or as finance
costs to the extent regarded as an adjustment to
borrowing costs.
7. INVENTORIES
7.1 Raw Materials & Stock-in-Process
7.1.1 Raw materials including crude oil are valued at
cost determined on weighted average basis or net
realizable value, whichever is lower.
7.1.2 Stock in Process is valued at raw materials cost plus
conversion cost as applicable or net realizable value,
whichever is lower.
7.1.3 Crude oil in Transit is valued at cost or net realizable
value, whichever is lower.
176 Financial Statements
7.1.4 Initial cost of inventories includes the transfer of
gains and losses on qualifying cash flow hedges,
recognised in OCI, in respect of the purchases of raw
materials.
7.2 Finished Products and Stock-in-Trade
7.2.1 Finished Products and Stock in Trade, other than
lubricants, are valued at cost determined on ‘First
in First Out’ basis or net realizable value, whichever
is lower. Cost of Finished Products produced is
determined based on raw materials cost and
processing cost.
7.2.2 Lubricants are valued at cost on weighted average
basis or net realizable value, whichever is lower.
Cost of lubricants internally produced is determined
based on cost of inputs and processing cost.
7.2.3 Imported products in transit are valued at cost or net
realisable value whichever is lower.
7.3 Stores and Spares
7.3.1 Stores and Spares (including Packing Containers
i.e. empty barrels, tins etc.)) are valued at weighted
average cost. Specific provision is made in respect
of identified obsolete stores & spares and chemicals
for likely diminution in value. Further, a provision @
5% is also made on the balance stores and spares
(excluding barrels, tins, stores in transit, chemicals/
catalysts, crude oil, and own products) towards
likely diminution in the value.
7.3.2 Stores and Spares in transit are valued at cost.
8. PROVISIONS, CONTINGENT LIABILITIES &
CONTINGENT ASSETS
8.1 Provisions
8.1.1 Provisions are recognized when the Company has
a present obligation (legal or constructive) as a
result of a past event, it is probable that an outflow
of resources embodying economic benefits will
be required to settle the obligation and a reliable
estimate can be made of the amount of the
obligation.
8.1.2 When the Company expects some or all of a provision
to be recovered from a third party, a receivable is
recognised as a separate asset but only when it is
virtually certain and amount of the receivable can
be measured reliably. The expense relating to a
provision is presented in the Statement of Profit and
Loss net of reimbursement, if any.
8.1.3 If the effect of the time value of money is material,
provisions are discounted using a current pre-tax
rate that reflects current market assessments of the
time value of money and, when appropriate, the risks
specific to the liability. When discounting is used,
the increase in the provision due to the passage of
time is recognised as a finance cost.
8.1.4 Decommissioning Liability
Decommissioning costs are provided at the present
value of expected cost to settle the obligation using
estimated cash flows and are recognised as part of
NOTES TO FINANCIAL STATEMENTS
Note-1A : SIGNIFICANT ACCOUNTING POLICIES
the cost of the particular asset. The cash flows are
discounted at a current pre-tax rate that reflects
the risks specific to the decommissioning liability.
The unwinding of the discount is expensed as
incurred and recognised in the Statement of Profit
and Loss as a finance cost. The estimated future
cost of decommissioning are reviewed annually and
adjusted as appropriate. Changes in the estimated
future cost or in the discount rate applied are added
to or deducted from the cost of the asset.
8.2 Contingent Liabilities and Contingent Assets
8.2.1 Show-cause notices issued by various Government
Authorities are generally not considered as
obligations.
8.2.2 When the demand notices are raised against such
show cause notices and are disputed by the Company,
these are classified as disputed obligations.
8.2.3 The treatment in respect of disputed obligations are
as under:
a) a provision is recognized in respect of present
obligations where the outflow of resources is
probable as per 8.1.1 above;
b) all other cases are disclosed as contingent
liabilities unless the possibility of outflow of
resources is remote.
8.2.4 Contingent liabilities are possible obligations that
arise from past events and whose existence will only
be confirmed by the occurrence or non-occurrence
of one or more future events not wholly within the
control of the Company. Where it is not probable that
an outflow of economic benefits will be required,
or the amount cannot be estimated reliably, the
obligation is disclosed as a contingent liability.
Contingent liabilities are disclosed on the basis of
judgment of the management/independent experts
and reviewed at each Balance Sheet date to reflect
the current management estimate.
8.2.5 Estimated amount of contracts remaining to be
executed on capital account are considered for
disclosure.
8.2.6 A contingent asset is disclosed where an inflow of
economic benefits is probable.
9. REVENUE
9.1 Revenue from Contracts with Customers
9.1.1 The Company is in the business of oil and gas
operations and it earns revenue primarily from sale
of petroleum products and petrochemical products.
In addition, the company also earns revenue from
other businesses which comprises Gas, Exploration
& Production and Others.
Revenue is recognised when control of the goods
or services are transferred to the customer at an
amount that reflects the consideration to which the
Company expects to be entitled in exchange for
those goods or services. Revenue is measured based
on the consideration specified in a contract with a
61st Annual Report 2019-20
customer and excludes amounts collected on behalf
of third parties.
Chairman’s Desk
From the
The Company has generally concluded that it is the
principal in its revenue arrangements, except a few
agency services, because it typically controls the
goods or services before transferring them to the
customer.
The Company considers whether there are
About IndianOil
other promises in the contract that are separate
performance obligations to which a portion of the
transaction price needs to be allocated (e.g., customer
loyalty points). In determining the transaction price
for the sale of products, the Company considers
the effects of variable consideration, the existence
Description of Capitals
of significant financing components, non-cash
consideration and consideration payable to the
customer (if any).
9.1.2 Revenue from the sale of petroleum products,
petrochemical products, Crude and gas are
recognised at a point in time, generally upon
delivery of the products. The Company recognizes
Board of Directors, etc.
revenue over time using input method (on the
basis of time elapsed) in case of non-refundable
deposits from dealers and service contracts. In
case of construction contracts, revenue and cost
are recognised by measuring the contract progress
using input method by comparing the cost incurred
and total contract cost. Contract modifications
Directors’ Report
are accounted for as a part of existing contract or
separate contract based on conditions prescribed in
Ind AS 115.
9.1.3 The Company has assumed that recovery of excise
duty flows to the Company on its own account.
This is for the reason that it is a liability of the
Discussion & Analysis
manufacturer which forms part of the cost of
Management’s
production, irrespective of whether the goods are
sold or not. Since the recovery of excise duty flows
to the Company on its own account, revenue includes
excise duty.
However, Sales Tax/ Goods and Services Tax (GST)
and Value Added Tax (VAT) is not received by
Responsibility Report
the company on its own account. Rather, it is tax
Business
collected on value added to the commodity by the
seller on behalf of the government. Accordingly, it is
excluded from revenue.
9.1.4 Variable consideration
Corporate Governance
If the consideration in a contract includes a variable
amount, the Company estimates the amount of
Report on
consideration to which it will be entitled in exchange
for transferring the goods to the customer. The
variable consideration is estimated at contract
inception and constrained until it is highly probable
that a significant revenue reversal in the amount
of cumulative revenue recognised will not occur
Financial Statements
when the associated uncertainty with the variable
Standalone
consideration is subsequently resolved
The Company provides volume rebates to certain
customers once the quantity of products purchased
during the period exceeds a threshold specified in
Financial Statements 177