annual report - Jindal Group of Companies

SCHEDULE 18SIGNIFICANT ACCOUNTING POLICIES & NOTES ON ACCOUNTSA. SIGNIFICANT ACCOUNTING POLICIESa. Accounting ConventionsThe financial statements are prepared under the historical cost convention on accrual basis,in accordance with therequirements of the Companies Act, 1956 and in compliance with the applicable accounting standards referred to in subsection(3C) of the section 211 of the said Act. The accounting policies, except stated otherwise, have been consistentlyapplied by the Company.b. Use of EstimatesThe presentations of financial statements is in conformity with the generally accepted accounting principles which requiresestimates and assumptions to be made that affect the reportable amount of assets and liabilities on the date of financialstatements and the reportable amount of revenue and expenses during the reporting period. Differences between theactual results and estimates are recognised in the year in which the results are known / materialized.c. Fixed AssetsFixed Assets are stated at cost less accumulated depreciation and impairment losses, if any. Cost comprises the cost ofacquisition / purchase price inclusive of duties, taxes, incidental expenses, erection/commissioning expenses, interest etc.up to the date the asset is ready for its intended use. Credit of duty, if availed, is adjusted in the acquisition cost of therespective fixed assets.Capital Works-in-Progress is carried at cost, comprising direct cost, related incidental expenses and interest on borrowingsto the extent attributed to them including capital advances.d. DepreciationDepreciation on Fixed Assets is provided on pro-rata basis, for the period of use, on written down value method on theFixed Assets acquired and capitalised up to 31/03/2007 and on Straight Line method on assets acquired and capitalisedfrom 01/04/2007 on wards at the rates prescribed under Schedule XIV to the Companies Act, 1956, as amended till date.Cost of leasehold land is amortised over the period of lease.Assets costing up to Rs.10,000/- are fully depreciated in the year of acquisition.e. Impairment of AssetsAt each balance sheet date, the Company assesses whether there is any indication that an asset is impaired. If any suchindication exists, the Company estimates the recoverable amount. If the carrying amount of the asset exceeds its recoverableamount, an impairment loss is recognized in the profit and loss account to the extent the carrying amount exceeds recoverableamount.f. InvestmentsInvestments are classified as long term or current based on the Management intention at the time of purchase. Long-terminvestments are valued at their acquisition cost. Current investments are stated at lower of cost and fair market value. Theprovision for any diminution in the value of long- term investments is made only if such a decline is other than temporaryin the opinion of the management.g. InventoriesStores, Spares and other items required for operation are treated as consumed as and when sent to drilling rig. Stocks inhand are valued at cost or net realisable value, whichever is lower. Cost in respect of Stores & Spares is determined on FIFObasis.46