Annual Report 2008-2009 - Bharat Petroleum

SCHEDULE ‘X’ – (CONSOLIDATED) (CONTD.)
3. USE OF ESTIMATES
The preparation of financial statements requires management to make certain estimates and assumptions that
affect the amounts reported in the financial statements and notes thereto. Differences between actual amounts
and estimates are recognised in the period in which they materialise.
4. FIXED ASSETS
4.1 LAND
Land acquired on lease where period of lease exceeds 99 years is treated as freehold.
4.2 FIXED ASSETS OTHER THAN LAND
4.2.1. Fixed Assets are stated at cost of acquisition (including incidental expenses) less accumulated
depreciation.
4.2.2. Expenditure on assets, other than plant and machinery, LPG cylinders and pressure regulators,
not exceeding Rs.1,000 per item is charged to revenue.
4.2.3. Machinery spares that are specific to a fixed asset are capitalised along with the fixed asset.
Replacement of such spares is charged to revenue.
4.3 EXPENDITURE DURING CONSTRUCTION PERIOD
Direct expenses including borrowing cost incurred during construction period on capital projects are
capitalised. Indirect expenses of the project group which are allocated to projects costing Rs. 5 crores
and above are also capitalised. Crop compensation expenses incurred in the process of laying pipelines
are capitalised.
4.4 INTANGIBLE ASSETS
4.4.1. Cost of right of way that is perennial in nature are not amortised.
4.4.2. Expenditure incurred for creating/acquiring other intangible assets of Rs. 0.50 crores and above,
from which future economic benefits will flow over a period of time, is amortised over the
estimated useful life of the asset or five years, whichever is lower, from the time the intangible
asset starts providing the economic benefit.
4.4.3. In other cases, the expenditure is charged to revenue in the year the expenditure is incurred.
4.4.4. Expenditure incurred on intangible assets is capitalised and amortised over a period of 5 years by
Indraprastha Gas Limited, Maharshtra Natural Gas Limited and Central UP Gas Limited and over
3 years in case of Petronet LNG Limited.
5. IMPAIRMENT OF ASSETS
The values of fixed assets in respect of Cash Generating Units are reviewed by the management for impairment
at each Balance Sheet date if events or circumstances indicate that the carrying values may not be recoverable.
If the carrying value is more than the net selling price of the asset or present value, the difference is recognised
as an impairment loss.
6. BORROWING COSTS
Borrowing costs attributable to acquisition, construction or production of qualifying asset are capitalised as part
of the cost of that asset, till the month in which the asset is ready for use. Other borrowing costs are recognised
as an expense in the period in which these are incurred.
7. DEPRECIATION
7.1 Depreciation on fixed assets is provided under the straight line method, at rates prescribed under
Schedule XIV to the Companies Act, 1956, except in following cases:
7.1.1 Premium paid for acquiring leasehold land for lease period not exceeding 99 years, is amortised
over the period of lease.
138 Bharat Petroleum Corporation Limited