Sterlite Industries (India) Limited - Sterlite Industries India Ltd.

We also review our property, plant and equipment, including mine properties, for possible impairment if there are events or changes in
circumstances that indicate that the carrying value of an asset may not be recoverable and exceeds its fair value. In assessing property, plant
and equipment for impairment, factors leading to significant reductions in profits such as changes in commodity prices, our business plans and
significant downward revisions in the estimated mining reserves are taken into consideration. The carrying value of the assets and associated
mining reserves is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition
of the assets. This involves management estimate of commodity prices, market demand and supply, economic and regulatory climates, longterm
mine plans and other factors. Any subsequent changes to cash flow due to changes in the above mentioned factors could impact on the
carrying value of the assets.
Asset Retirement Obligations
Liabilities have been recognized for costs associated with restoration and rehabilitation of mine sites as the obligation to incur such costs
arises and when a reasonable estimate of such costs can be made. Such costs are typical of extractive industries and they are normally incurred
at the end of the life of the mine. The costs are estimated on the basis of mine closure plans and the estimated discounted costs of dismantling
and removing these facilities. The costs of restoration are capitalized when incurred, reflecting our obligations at that time, and a corresponding
liability is created. The capitalized asset is charged to the income statement over the life of the asset through depreciation and the accretion of
the discount on the liability over the life of the operation. Management estimates are based on local legislation and/or other agreements. The
actual costs and cash outflows may differ from estimates because of changes in laws and regulations, changes in prices, analysis of site
conditions and changes in restoration technology.
Commitments, Contingencies and Guarantees
We also have significant capital commitments in relation to various capital projects which are not recognized on the balance sheet. In the
normal course of business, contingent liabilities may arise from litigation and other claims against us. Guarantees are also provided in the
normal course of business. There are certain obligations which management has concluded, based on all available facts and circumstances, are
not probable of payment or are very difficult to quantify reliably, and such obligations are treated as contingent liabilities and disclosed in the
notes but are not reflected as liabilities in the consolidated financial statements. Although there can be no assurance regarding the final outcome
of the legal proceedings in which we are involved, it is not expected that such contingencies will have a materially adverse effect on our
financial position or profitability.
Income Tax
In preparing our consolidated financial statements, we recognize income taxes in each of the jurisdictions in which we operate. In each
jurisdiction, we estimate the actual amount of taxes currently payable or receivable. We also estimate the tax bases of assets and liabilities
based on estimates, and such estimates may change when the tax returns are prepared. Deferred income tax assets and liabilities are measured
using enacted tax rates expected to apply to the year when the asset is realized or the liability is settled based on tax rates (and tax laws) that
have been enacted as of the balance sheet date. We do not record deferred taxes on unremitted earnings of foreign subsidiaries, based on timing
of the reversal of the temporary differences where it is probable that the temporary differences will not reverse in the foreseeable future or
management intends to reinvest such unremitted earnings indefinitely. Deferred tax assets are reviewed for recoverability and a valuation
allowance is recorded against deferred tax assets to the extent that it is more likely than not that the deferred tax asset will not be realized. If we
determine that we will ultimately be able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all
or a portion of the related valuation allowance will be reduced with a credit to income tax expense.
We evaluate each tax position to determine if it is more likely than not that a tax position is sustainable, based on its technical merits. If a tax
position does not meet the “more-likely-than-not” standard, a liability is established. Additionally, for a position that is determined to be
“more-likely-than-not” sustainable, we measure the benefit at the highest cumulative probability of being realized and establish a liability for
the remaining portion. A material change in the tax liabilities could have an impact on our results.
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