Note 34:
SIGNIFICANT ACCOUNTING POLICIES
For the Period ended 31.03.2015
1. Basis for Preparation of financial statements:
The financial statements of the company have been prepared in accordance with the
Generally Accepted Accounting Principles in India (Indian GAAP). The Company has
prepared these financial statements to comply in all material respects with the
accounting principles generally accepted in India, including the Accounting Standards
notified under the Companies Act, 2013. The financial statements have been prepared
on an accrual basis and under the historical cost convention and have been prepared on
the basis of going concern concept and under the historical cost convention. The
accounting policies adopted in the preparation of financial statements are consistent
with those of previous year.
The Company is a distribution licensee under Section 14 of the Electricity Act, 2003.
The provisions of the Electricity Act, 2003 read with the rules made there under
prevails wherever the same are inconsistent with the provisions of the Companies Act,
2013 in terms of Section 174 of the Electricity Act, 2003.Further, in certain areas
where different accounting treatment has been prescribed under GAAP and Electricity
(Supply) (Annual Accounts) Rules
1985 (ESAAR,1985) for an item of
income/expenditure or Asset/Liability, the accounting treatment prescribed under
ESAAR 1985 has been adopted as per Section 174 of the Electricity Act, 2003.
Further, assets and liabilities created under applicable electricity laws continue to be
depicted under appropriate heads in the Balance Sheet.
2. Use of Estimates:
In the preparation of the Financial Statements, the Company has made estimates and
assumptions that affect the reported amounts of assets and liabilities on the date of the
financial statements and the reported amounts of revenues and expenses during the
reported period to conform with the generally accepted accounting principles.
Differences between actual results and estimates are recognized in the period in which
results are known/materialized.
3. FIXED ASSETS
a) Fixed assets acquired/constructed are valued at actual cost of acquisition/construction
or at standard rate as the case may be, during the current year.
b) Assets transferred by M/s. Karnataka Power Transmission Corporation Ltd, (KPTCL)
at the time of transfer of Assets Rs 566.77 Cr have been stated at the cost of transfer
indicated by KPTCL in document.
c) In respect of Assets shared with KPTCL, the ownership and title vests with KPTCL
and as such, they are not reflected in the books of accounts of the Corporation. But
the share of maintenance expenditure in respect of such assets is charged to Profit &
Loss account and the accounts system was not enabled to monitor the same.
d) Contribution, Grants and Subsidies towards cost of capital assets have not been
reduced from the cost of assets but have been treated as “Capital Reserve”. The
depreciation pertaining to such fixed assets is
withdrawn from the grants for
implementing AS-12 from 2013-14 onwards.
4. DEPRECIATION
a)
The revised rate of Depreciation stated in Annexure-1 as per notification by
CERC vide Notification No.L-7/145 (160)/2008- CERC dated 19th January
2009 has been adopted with effect from 01.04.2009.
b)
Depreciation is calculated annually based on straight-line method over the
useful life of the asset under historical cost.
c)
Depreciation on all assets is provided up to 90% of the original cost.
Residual
d)
value of 10% is maintained in the books.
Plant and Machinery costing Rs. 500/- or less individually are written off
fully in the year in which they are installed and put to use.
e) Depreciation is charged from the first year of operation. In case of operation of
the assets for part of the year, depreciation is charged on Prorata basis.
f) In respect of released assets depreciation is charged up to the date of
dismantling and not for the whole year as was done in the earlier years.
g)
Rates of Depreciation are not in conformity with the rates prescribed in
Schedule XIV, of the Company’s Act 1956, but followed the CERC
Regulations.
5. CAPITAL WORKS IN PROGRESS
a.
Materials issued to Capital Works In Progress are valued at standard rate as per
O & M Schedule of rates for the year. O&M Rates are revised annually.
b.
Expenses allocable as Capital Expenditure and incurred by Divisions / Circles /
Zones and Administrative Offices are not capitalized, since the costing methods
and procedures are not fully evolved yet.
c.
Interest on borrowing cost are capitalized on the specific projects which take
substantial period of time to get ready for intended use.
6.
INVENTORY
a) Inventories are valued at Standard Rate, which is determined by Corporation
from time to time based on previous purchase price and prevailing market
rates (published as O & M Schedule of Rates). The difference between
actual cost and the Standard rate is debited or credited to Material Cost
Variance Account, as the case may be. The balance under this account is
transferred to Material Cost Variance Reserve. The debit balance under
Material Cost Variance is debited to P&L Account.
b) Dismantled assets are valued at written down value of assets
7. RECOGNITION OF REVENUE SURPLUS:
The Corporation follows the method of recognizing the Revenue surplus (Net Profit
after tax) for the year as per CERC guidelines, at a minimum of 15.5% ROE.
8. RETIREMENT BENEFITS:
a) Pension & Gratuity are provided based on the rates prescribed by ‘KPTCL &
ESCOMs Pension & Gratuity Trusts’. Presently the Rates of contribution w.e.f. 1st
April 2011 made towards Pension & Gratuity is as under.
Employee Benefit
Rate
On
Pension
30.00 %
Basic pay + D.P and DA
Gratuity
6.01 %
Basic pay + D.P
b) Leave encashment & family benefit fund is provided based on the cash Basis,
payable
as per company’s rules.
9.
REVENUE RECOGNITION
a) Revenue from sale of energy is accounted on accrual basis.
b) The sale of energy is as per the tariff fixed by the Karnataka Electricity
Regulatory Commission (KERC).
c) Revenue for the year is also adjusted by estimating un-billed revenue of
previous year and current year.
10. PROVISIONS FOR BAD & DOUBTFUL DEBTS
Provision for bad and doubtful debts is made in the accounting Divisions at
4 %( as
per para 4.2 of Annexure V of ESAAR, 1985) on the net balance of Sundry Debtors
for sale of power outstanding as at the end of the year till FY2009-10.
From 2010-11 Policy has been changed as per specially constituted committee
recommendation, the provision for bad and doubtful debts has been provided in the
following manner.
a. To treat the quantum of actual arrears outstanding under permanently disconnected
installations under LT1 (BJ installations consuming more than 18 units), LT2, LT3,
LT5 and HT tariff, wherever action has been taken under “Recovery of dues Act”, as
the provision for Bad and doubtful of recovery.
b. Not to consider the dues of IP (irrespective of disconnection), water supply &
streetlight dues as bad and doubtful of recovery.
11. ACCOUNTING OF GRANTS
a) Grants received for capital expenditure are included in Capital Reserves.
b) Contributions received from customers for capital expenditure are included in
capital reserve.
c) Other Revenue grants are credited to the Profit & Loss Account.
10. POWER PURCHASE
a) The Power Purchase cost is recognized based on the Government of Karnataka
Order No. EN 131 PSR 2003 Dated 10th May 2005 for accounting the cost of
power based on the billings made by Power Generators Pool allocated to
CHAMUNDESHWARI ELECTRICITY SUPPLY CORPORATION LIMITED,
MYSORE by the Government of Karnataka.
b) The KERC in its Tariff Order-2009 has determined the transmission charges
based on the installed generation capacity of the state.
11 Borrowing Cost:
Borrowing cost attributable to the acquisition, construction or production of
qualifying assets are added to the cost of those assets up to the date when the
assets are ready for intended use.
12 Earnings per Share:
Basic earnings per share are calculated by dividing the net profit for the period
attributable to equity shareholders by the weighted average number of equity
shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit for the
period attributable to equity shareholders and the weighted average number of
shares outstanding during the period are adjusted for the effects of all dilutive
potential equity share if any.
13 Accounting for Taxes on Income:
Tax expense comprises of current and deferred tax, Current income tax is
measured expected to be paid to the tax authorities in accordance with the
Income-tax Act, 1961. Deferred income taxes reflects the net impact of current
year timing differences between taxable income and accounting income for the
year and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws enacted or
substantively enacted at the Balance Sheet date. Deferred tax assets and deferred
tax liabilities are offset, if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on income levied by same governing taxation laws.
Deferred tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available against which
such deferred tax assets can be realised. In situations where the Company has
unabsorbed depreciation or carry forward tax losses, all deferred tax assets are
recognised only if there is virtual certainty supported by convincing evidence that
they can be realised against future taxable profits.
At each Balance Sheet date the Company re-assesses unrecognized deferred tax
asset. The Company recognises all unrecognized deferred tax assets to the extent
that it has become reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available against which such deferred tax
assets can be realized.
14.
Board has accepted the Accounts on 25.08.2015. Statutory Auditors have also certified
on 26.8.2015.In the light of observations of the Comptroller and Auditor General of
India during their supplementary audit conducted under Sec. 619(4) of the Companies
Act,2013, necessary corrections have been incorporated.
(Rs. in Lakhs)
Particulars
Prior to AG’s
Audit
After
Supplementary
Audit by AG
Impact on Profit/ loss
2403.42
4027.37
1623.94 (+)
(4533.77)
(2909.82)
1623.94 (+)
232101.96
230820.86
1281.10(-)
78183.72
78725.54
541.82(+)
305751.91
306636.58
884.66(+)
141705.93
141379.42
326.51(-)
40115.89
40152.12
36.23(+)
Impact on Reserves
and surplus
Trade Payables
Other
Current
liabilities
Total liabilities
Tangible Assets
Capital
Progress
Work
in
Increased(+)/
Decreased(-)
Trade receivables
Cash
&
Bank
Balances
Other current assets
235873.46
232914.48
2958.98(-)
5408.81
9408.81
4000.00(+)
18375.18
18509.11
133.93(+)
Total Assets
441479.27
442363.94
884.66(+)
Signatures to Notes 1 to 34
(A.Shivanna)
Chief Financial Officer
(N. Lakshmana)
Director (T)
PLACE: MYSORE
DATE:
In terms of our report of
even date attached herewith
For Ganesan and Company
Chartered Accountants
(G.HARIGOVIND)
Partner
Membership No 206563
(D.Kiran)
Managing Director