Indian Oil Corporation Limited 3rd Integrated Annual Report 61st Annual Report 2019-20

About the Report

NOTES TO FINANCIAL STATEMENTS NOTES TO FINANCIAL STATEMENTS
Note-1A : SIGNIFICANT ACCOUNTING POLICIES Note-1A : SIGNIFICANT ACCOUNTING POLICIES
Revenue grants are generally recorded under “Other 14.4 Production Phase case where the multiple fields are using common • An active programme to locate a buyer and
Operating Revenues” except some grants which production/transportation facilities and are complete the plan has been initiated (if

Chairman’s Desk
Production cost include pre-well head and post-
mainly includes north east excise duty and entry sufficiently economically interdependent the applicable),

From the
well head expenses including depreciation and
tax exemption, which are netted off with the related same are considered to constitute a single cash • The asset (or disposal group) is being actively
applicable operating costs of support equipment
expense. generating unit (CGU). marketed for sale at a price that is reasonable
and facilities are expensed off.
13.4 When loans or similar assistance are provided by 15. CURRENT VERSUS NON-CURRENT in relation to its current fair value,
Depletion is calculated using the Unit of Production • The sale is expected to qualify for recognition
governments or related institutions, with an interest CLASSIFICATION
method based upon proved and developed reserves. as a completed sale within one year from the
rate below the current applicable market rate or NIL
The Group presents assets and liabilities in the

About IndianOil
interest rate, the effect of this favourable interest 14.5 Abandonment Phase date of classification , and
Balance Sheet based on current/ non-current • Actions required to complete the plan indicate
is regarded as a government grant. The loan or
In case of development / production phase, classification as below. that it is unlikely that significant changes to
assistance is initially recognised and measured at
abandonment / decommissioning amount is the plan will be made or that the plan will be
fair value and the government grant is measured 15.1 An asset is treated as current when it is:
recognized at the present value of the estimated withdrawn.
as the difference between the initial carrying value
future expenditure. Any change in the present value • Expected to be realised or intended to be sold or
of the loan and the proceeds received. The loan is 16.3 Non-current Assets held for sale and disposal groups
of the estimated decommissioning expenditure consumed in normal operating cycle

Description of Capitals
subsequently measured as per the accounting policy are measured at the lower of their carrying amount
other than the unwinding of discount is adjusted • Held primarily for the purpose of trading
applicable to financial liabilities. Classification and the fair value less costs to sell. Assets and
to the decommissioning provision and the carrying • Expected to be realised within twelve months
of the grant is made considering the terms and liabilities classified as held for sale are presented
value of the corresponding asset. The unwinding of after the reporting period, or
condition of the grant i.e. whether grants relates to separately in the Balance Sheet.
discount on provision is charged in the Statement of • Cash or Cash Equivalents unless restricted from
assets or otherwise.
Profit and Loss as finance costs. being exchanged or used to settle a liability PPE and Intangible Assets once classified as held
14. OIL & GAS EXPLORATION ACTIVITIES for sale are not depreciated or amortized.
14.6 Impairment of E&P Assets for at least twelve months after the reporting
period

Board of Directors, etc.

14.1 Pre-acquisition Cost: 17. FINANCIAL INSTRUMENTS
14.6.1 Impairment testing in case of Development and
Expenditure incurred before obtaining the right(s) producing assets All other assets are classified as non-current.
A financial instrument is any contract that gives
to explore, develop and produce oil and gas are rise to a financial asset of one entity and a
In case of E&P related development and producing 15.2 A liability is treated as current when:
expensed as and when incurred. financial liability or equity instrument of another
assets, expected future cash flows are estimated • It is expected to be settled in normal operating
14.2 Exploration Stage: using management’s best estimate of future oil entity. Financial assets and financial liabilities are
cycle
and natural gas prices, production volumes, proved recognized when the Group becomes a party to the
Acquisition cost relating to projects under • It is held primarily for the purpose of trading contractual provisions of the instruments.
& probable reserves volumes and discount rate.
exploration are initially accounted as “Intangible

Directors’ Report
The expected future cash flows are estimated • It is due to be settled within twelve months after
Assets under Development”. The expenses on oil and the reporting period, or 17.1 Financial Assets
on the basis of value in use concept. The value
gas assets that is classified as intangible include: • There is no unconditional right to defer the Initial recognition and measurement
in use is based on the cash flows expected to be
- acquired rights to explore generated by the projected oil or gas production settlement of the liability for at least twelve
months after the reporting period All Financial Assets are recognised initially at
- exploratory drilling cost profiles up to the expected dates of cessation of fair value plus, in the case of Financial Assets
production of each producing field, based on current All other liabilities are classified as non-current. not recorded at fair value through profit or loss,
Cost of Survey and prospecting activities conducted

Discussion & Analysis

estimates of proved and probable reserves and transaction cost that are attributable to the
in the search of oil and gas are expensed as 16. NON-CURRENT ASSETS HELD FOR SALE

Management’s
on reasonable & supportable fiscal assumptions acquisition of the financial assets. Transaction costs
exploration cost in the year in which these are that represent management’s best estimate of the
incurred 16.1 The Group classifies non-current assets and directly attributable to the acquisition of financial
range of economic conditions that will exist over disposal groups as held for sale if their carrying assets measured at fair value through profit or loss
If the project is not viable based upon technical the remaining useful life of the asset. Management amounts will be recovered principally through a are recognised immediately in the Statement of
feasibility and commercial viability study, then all takes a long-term view of the range of economic sale rather than through continuing use. Actions Profit and Loss.
costs relating to Exploratory Wells are expensed in conditions over the remaining useful life of the required to complete the sale should indicate that
asset and, are not based on the relatively short- Subsequent measurement

Responsibility Report
the year when determined to be dry. it is unlikely that significant changes to the sale
term changes in the economic conditions. However, will be made or that the decision to sell will be For the purpose of subsequent measurement,

Business
If the project is proved to be viable, then all costs impairment of exploration and evaluation assets is
relating to drilling of Exploratory Wells shall be withdrawn. Management must be committed to Financial Assets are classified in four categories:
to be done in line with para 14.6.2 the sale expected within one year from the date of
continued to be presented as “Intangible Assets • Financial Assets at amortised cost
under Development”. 14.6.2 Impairment in case of Exploration and Evaluation classification.
• Debt Instruments at fair value through Other
assets 16.2 For these purposes, sale transactions include
14.3. Development Stage: Comprehensive Income (FVTOCI)
exchanges of non-current assets for other non-

Corporate Governance
Exploration and Evaluation assets are tested for • Equity Instruments at fair value through Other
Acquisition cost relating to projects under impairment where an indicator for impairment current assets when the exchange has commercial Comprehensive Income (FVTOCI)

Report on
development stage are presented as “Capital Work- exists. In such cases, while calculating recoverable substance. The criteria for held for sale classification
in-Progress”. • Financial Assets and derivatives at fair value
amount, in addition to the factors mentioned in is regarded met only when the assets or disposal
through profit or loss (FVTPL)
When a well is ready to commence commercial 14.6.1, management’ s best estimate of total current group is available for immediate sale in its present
production, the capitalised costs corresponding reserves and resources are considered (including condition, subject only to terms that are usual and 17.1.1 Financial Assets at Amortised Cost
to proved developed oil and gas reserves is possible and contingent reserve) after appropriately customary for sales (or disposal groups), its sale is
A Financial Asset is measured at the amortised cost
highly probable; and it will genuinely be sold, not

Financial Statements
reclassified as ‘Completed wells/ Producing wells’ adjusting the associated inherent risks. Impairment if both the following conditions are met:
loss is reversed subsequently, to the extent that abandoned. The Group treats sale of the asset or

Consolidated
from “Capital Work-in-Progress/ Intangible Assets
under Development” to the gross block of assets. conditions for impairment are no longer present. disposal group to be highly probable when: a) The asset is held within a business model
Examples of Oil and Gas assets that might be whose objective is to hold assets for collecting
14.6.3 Cash generating unit • The appropriate level of management is
classified as Tangible Assets include development contractual cash flows, and
committed to a plan to sell the asset (or disposal
drilling cost, piping and pumps and producing wells. In case of E&P assets, the Group generally considers group),
a project as cash generating unit. However, in

314 Financial Statements Financial Statements 315