REG - Indus Gas Limited - Financial Results <Origin Href="QuoteRef">INDII.L</Origin> - Part 2
22/09/2015 07:10
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requirements for
recognising revenue that apply to contracts with customers, except for those
covered by standards on leases, insurance contracts and financial
instruments.
The new standard establishes a control-based revenue recognition model and
provides additional guidance in many areas not covered in detail under
existing IFRSs, including how to account for arrangements with multiple
performance obligations, variable pricing, customer refund rights, supplier
repurchase options, and other common complexities.
This standard is effective for reporting periods beginning on or after 1
January 2017 with early adoption permitted. It applies to new contracts
created on or after the effective date and to the existing contracts that are
not yet complete as of the effective date.
The management is currently evaluating the impact that this new standard will
have on its consolidated financial statements.
5. SUMMARY OF ACCOUNTING POLICIES
The consolidated financial statements have been prepared on a historical
basis, except where specified below. A summary of the significant accounting
policies applied in the preparation of the accompanying consolidated financial
statements are detailed below:
5.1. BASIS OF CONSOLIDATION
The consolidated financial statements include the financial statements of the
parent company and all of its subsidiary undertakings drawn up to 31 March
2015. The Group consolidates entities which it controls. Control exists when
the parent has power over the entity, is exposed, or has rights, to variable
returns from its involvement with the entity and has the ability to affect
those returns by using its power over the entity. Power is demonstrated
through existing rights that give the ability to direct relevant activities,
those which significantly affect the entity's returns.
The Group recognises in relation to its interest in a joint operation:
a. its assets, including its share of any assets held jointly;
b. its liabilities, including its share of any liabilities incurred
jointly;
c. its revenue from the sale of its share of the output arising from the
joint operation;
d. its share of the revenue from the sale of the output by the joint
operation; and
e. its expenses, including its share of any expenses incurred jointly.
Intra-Group balances and transactions, and any unrealised gains and losses
arising from intra-Group transactions are eliminated in preparing the
consolidated financial statements. Amounts reported in the financial
statements of subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.
Profit or losses of subsidiaries acquired or disposed of during the year are
recognised from the date of control of acquisition, or up to the effective
date of disposal, as applicable.
5.2. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
In preparing consolidated financial statements, the Group's management is
required to make judgements, estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statement and the reported
amounts of revenues and expenses during the reporting period. Although these
estimates are based on management's best knowledge of current events and
actions, actual results may ultimately differ from those estimates. The
management's estimates for the useful life and residual value of tangible
assets, impairment of tangible and intangible assets and recognition of
provision for decommissioning represent certain particularly sensitive
estimates. The estimates and underlying assumptions are reviewed on an
on-going basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that period or
in the period of the revision and future periods if the revision affects both
current and future periods. Information about significant judgements,
estimates and assumptions that have the most significant effect on recognition
and measurement of assets, liabilities, income and expenses is provided in
Note 26.
5.3. FOREIGN CURRENCIES
The consolidated financial statements have been presented in US$.
Foreign currency transactions are translated into the functional currency of
the respective Group entities, using the exchange rates prevailing at the
dates of the transactions (spot exchange rate). Functional currency is the
currency of the primary economic environment in which the entity operates.
Foreign exchange gains and losses resulting from the settlement of such
transactions and from the re-measurement of monetary items at year-end
exchange rates are recognised in the profit or loss for the year.
Non-monetary items measured at historical cost are recorded in the functional
currency of the entity using the exchange rates at the date of the
transaction.
5.4. REVENUE RECOGNITION
Revenue from the sale of natural gas and condensate production (a by- product)
is recognised when the significant risks and rewards of ownership have been
transferred, which is when title passes to the customer. This occurs when
product is physically transferred into a vessel, pipe or other delivery
mechanism.
Revenue is stated after deducting sales taxes, excise duties and similar
levies.
Per the 'Take-or-Pay' agreement, GAIL (India) Limited ('GAIL' or the
'customer') is committed towards taking a certain minimum quantity of gas and
paying for any related shortfall. The Group's entitlement to receive revenue
for any shortfall is recorded as trade receivables with a corresponding credit
to deferred revenue. Until the expiry of the contracted period, the Group
continues to have an obligation to deliver the deficit to GAIL. Revenue for
the deficit quantity would be recognised at the earlier of delivery of
physical quantity towards the deficit to GAIL or at the expiry of the contract
period.Deferred revenue represents amounts received/due from GAIL for which
gas is yet to be delivered.
5.5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment comprises of Development assets and other
properties, plant and equipment used in the gas fields and for administrative
purposes. These assets are stated at cost plus decommissioning cost less
accumulated depreciation and any accumulated impairment losses.
Development assets are accumulated on a field by field basis and comprise of
costs of developing the commercially feasible reserve, expenditure on the
construction, installation or completion of infrastructure facilities such as
platforms, pipelines and other costs of bringing such reserves into
production. It also includes the exploration and evaluation costs incurred in
discovering the commercially feasible reserve, which have been transferred
from the exploration and evaluation assets as per the policy mentioned in note
5.6. As consistent with the full cost method, all exploration and evaluation
expenditure incurred up to the date of the commercial discovery have been
classified under development assets of that field.
The carrying values of property, plant and equipment are reviewed for
impairment when events or changes in circumstances indicate that the carrying
values may not be recoverable.
An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected from its use or disposal. Any gain or
loss arising on de-recognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the asset) is
included in the profit or loss of the year in which the asset is derecognised.
However, where the asset is being consumed in developing exploration and
evaluation intangible assets, such gain or loss is recognised as part of the
cost of the intangible asset.
The asset's residual values, useful lives and depreciation methods are
reviewed, and adjusted if appropriate, at each period end. No depreciation is
charged on development assets until production commences.
Depreciation on property, plant and equipment is provided at rates estimated
by the management. Depreciation is computed using the straight line method of
depreciation, whereby each asset is written down to its estimated residual
value evenly over its expected useful life. The useful lives estimated by the
management are as follows:
Extended well test equipment 20 years
Bunk houses 5 years
Vehicles 5 years
Other assets
Furniture and fixture 5 years
Buildings 10 years
Computer equipment 3 years
Other equipment 5 years
Land acquired is recognised at cost and no depreciation is charged as it has
an unlimited useful life.
Production assets are depreciated from the date of commencement of production,
on a field by field basis with reference to the unit of production method for
the commercially probable and proven reserves in the particular field.
Advances paid for the acquisition/ construction of property, plant and
equipment which are outstanding as at the end of the reporting period and the
cost of property, plant and equipment under construction before such date are
disclosed as 'Capital work-in-progress'.
5.6. EXPLORATION AND EVALUATION ASSETS
The Group adopts the full cost method of accounting for its oil and gas
interests, having regard to the requirements of IFRS 6: Exploration for and
Evaluation of Mineral Resources. Under the full cost method of accounting, all
costs of exploring for and evaluating oil and gas properties, whether
productive or not are accumulated and capitalised by reference to appropriate
cost pools. Such cost pools are based on geographic areas and are not larger
than a segment. The Group currently has one cost pool being an area of land
located in Rajasthan, India.
Exploration and evaluation costs may include costs of licence acquisition,
directly attributable exploration costs such as technical services and
studies, seismic data acquisition and processing, exploration drilling and
testing, technical feasibility, commercial viability costs, finance costs to
the extent they are directly attributable to financing these activities and an
allocation of administrative and salary costs as determined by management. All
costs incurred prior to the award of an exploration licence are written off as
a loss in the year incurred.
Exploration and evaluation costs are classified as tangible or intangible
according to the nature of the assets acquired and the classification is
applied consistently. Tangible exploration and evaluation assets are
recognised and measured in accordance with the accounting policy on property,
plant and equipment. To the extent that such a tangible asset is consumed in
developing an intangible exploration and evaluation asset, the amount
reflecting that consumption is recorded as part of the cost of the intangible
asset.
Exploration and evaluation assets are not amortised prior to the conclusion of
appraisal activities. Where technical feasibility and commercial viability is
demonstrated, the carrying value of the relevant exploration and evaluation
asset is reclassified as a development and production asset and tested for
impairment on the date of reclassification. Impairment loss, if any, is
recognised.
5.7. IMPAIRMENT TESTING FOR EXPLORATION AND EVALUATION ASSETS AND
PROPERTY, PLANT AND EQUIPMENT
An impairment loss is recognised for the amount by which an asset's or
cash-generating unit's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of fair value, reflecting market conditions
less costs to sell, and value in use based on an internal discounted cash flow
evaluation.
Where there are indicators that an exploration asset may be impaired, the
exploration and evaluation assets are grouped with all development/producing
assets belonging to the same geographic segment to form the Cash Generating
Unit (CGU) for impairment testing. Where there are indicators that an item of
property, plant and equipment asset is impaired, assets are grouped at the
lowest levels for which there are separately identifiable cash flows to form
the CGU. The combined cost of the CGU is compared against the CGU's
recoverable amount and any resulting impairment loss is written off in the
profit or loss of the year. No impairment has been recognised during the
year.
An assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the Group estimates the asset's
or CGU's recoverable amount. A previously recognised impairment loss is
reversed only if there has been a change in the assumptions used to determine
the asset's recoverable amount since the last impairment loss was recognised.
The reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that would have
been determined, net of depreciation, had no impairment loss been recognised
for the asset in prior years. Such reversal is recognised in profit or loss
unless the asset is carried at a re-valued amount, in which case the reversal
is treated as a revaluation increase.
5.8. FINANCIAL ASSETS
Financial assets and financial liabilities are recognised on the Group's
Statement of Financial Position when the Group has become a party to the
contractual provisions of the related instruments.
Financial assets of the Group, under the scope of IAS 39 'Financial
Instruments: Recognition and Measurement' fall into the category of loans and
receivables. When financial assets are recognised initially, they are measured
at fair value plus transaction costs. The Group determines the classification
of its financial assets at initial recognition.
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. Such assets
are subsequently carried at amortised cost using the effective interest
method, less provision for impairment. Gains and losses are recognised in
profit or loss when the loans and receivables are derecognised or impaired, as
well as through the amortisation process.
Loans and receivables are assessed for indicators of impairment at the end of
each reporting period. Loans and receivables are considered to be impaired
when there is objective evidence that, as a result of one or more events that
occurred after the initial recognition, the estimated future cash flows have
been affected.
De-recognition of loans and receivables occur when the rights to receive cash
flows from the instrument expire or are transferred and substantially all of
the risks and rewards of ownership have been transferred.
5.9. FINANCIAL LIABILITIES
The Group's financial liabilities include debts, trade and other payables and
loans from related parties.
Financial liabilities are recognised when the Group becomes a party to the
contractual agreements of the related instrument.
Financial liabilities are recognised at their fair value less transaction
costs and subsequently measured at amortised cost less settlement payments.
Amortised cost is computed using the effective interest method.
Trade and other payables and loans from related parties are interest free
financial liabilities with maturity period of less than twelve months and are
carried at a transaction value that is not materially different from their
fair value.
A financial liability is de recognised when the obligation under the liability
is discharged or cancelled or expires.
5.10. INVENTORIES
Inventories are measured at the lower of cost and net realisable value.
Inventories of drilling stores and spares are accounted at cost including
taxes, duties and freight. The cost of all inventories other than drilling
bits is computed on the basis of the first in first out method. The cost for
drilling bits is computed based on specific identification method.
5.11. SHARE BASED PAYMENTS
The Group operates equity-settled share-based plans for its employees,
directors, consultants and advisors. Where persons are rewarded using
share-based payments, the fair values of services rendered by employees and
others are determined indirectly by reference to the fair value of the equity
instruments granted. This fair value is appraised using the Black Scholes
model at the respective measurement date. In the case of employees and others
providing services, the fair value is measured at the grant date. The fair
value excludes the impact of non-market vesting conditions. All share-based
remuneration is recognised as an expense in profit or loss with a
corresponding credit to 'Share Option Reserve'.
If vesting periods or other vesting conditions apply, the expense is allocated
over the vesting period, based on the best available estimate of the number of
share options expected to vest. Non-market vesting conditions are included in
assumptions about the number of options that are expected to become
exercisable. Estimates are subsequently revised, if there is any indication
that the number of share options expected to vest differs from previous
estimates and any impact of the change is recorded in the year in which that
change occurs.
In addition where the effect of a modification leads to an increase in the
fair value of the options granted, such increase will be accounted for as an
expense immediately or over the period of the respective grant.
Upon exercise of share options, the proceeds received up to the nominal value
of the shares issued are allocated to share capital with any excess being
recorded as additional paid-in capital.
5.12. ACCOUNTING FOR INCOME TAXES
Income tax assets and/or liabilities comprise those obligations to, or claims
from, fiscal authorities relating to the current or prior reporting period
that are unpaid / un-recovered at the date of the Statement of Financial
Position. They are calculated according to the tax rates and tax laws
applicable to the fiscal periods to which they relate, based on the taxable
profit for the year. All changes to current tax assets or liabilities are
recognised as a component of tax expense in profit or loss.
Deferred income taxes are calculated using the balance sheet method on
temporary differences. This involves the comparison of the carrying amounts
of assets and liabilities in the financial statement with their tax base.
Deferred tax is, however, neither provided on the initial recognition of
goodwill, nor on the initial recognition of an asset or liability unless the
related transaction is a business combination or affects tax or accounting
profit. Tax losses available to be carried forward as well as other income tax
credits to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are always provided for in full. Deferred tax assets
are recognised to the extent that it is probable that they will be offset
against future taxable income. Deferred tax assets and liabilities are
calculated, without discounting, at tax rates and laws that are expected to
apply to their respective period of realization, provided they are enacted or
substantively enacted at the date of the statement of financial position.
Changes in deferred tax assets or liabilities are recognised as a component of
tax expense in profit or loss of the year, except where they relate to items
that are charged or credited directly to other comprehensive income or equity
in which case the related deferred tax is also charged or credited directly to
other comprehensive income or equity.
5.13. BORROWING COSTS
Any interest payable on funds borrowed for the purpose of obtaining qualifying
assets, which are assets that necessarily take a substantial period of time to
get ready for their intended use or sale, is capitalised as a cost of that
asset until such time as the assets are substantially ready for their intended
use or sale.
Investment income earned on the temporary investment of specific borrowings
pending their expenditure on qualifying assets is deducted from the borrowing
costs eligible for capitalisation.
Any associated interest charge from funds borrowed principally to address a
short-term cash flow shortfall during the suspension of development activities
is expensed in the period.
Transaction costs incurred towards an un-utilised debt facility are treated as
prepayments to be adjusted against the carrying value of debt as and when
drawn.
5.14. CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in hand, at bank in demand deposits and
deposit with maturities of 3 months or less from inception, which are readily
convertible to known amounts of cash. These assets are subject to an
insignificant risk of change in value. Cash and cash equivalents are
classified as loans and receivables under the financial instruments category.
5.15. LEASING ACTIVITIES
Finance leases which transfer substantially all the risks and benefits
incidental to ownership of the leased item, are capitalised at the inception
of the lease, at the fair value of the leased property or the present value of
the minimum lease payments, whichever is lower.
Lease payments are apportioned between the finance charges and reduction of
the lease liability so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are charged directly in
profit or loss of the year.
All leases other than finance leases are treated as operating leases.
Operating lease payments are recognised as an expense in profit or loss on the
straight line basis over the lease term.
Where the lease payments in respect of operating leases are made for
exploration and evaluation activities or development and production
activities, these are capitalized as part of the cost of these assets.
5.16. OTHER PROVISIONS AND CONTINGENT LIABILITIES
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation. Where the Group expects some or all of a provision to be
reimbursed, for example under an insurance contract, the reimbursement is
recognised as a separate asset but only when the reimbursement is virtually
certain. The expense relating to any provision net of any reimbursement is
recognized in profit or loss of the year. To the extent such expense is
incurred for construction or development of any asset, it is included in the
cost of that asset. If the effect of the time value of money is material,
provisions are determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time value of
money and, where appropriate, the risks specific to the liability. Where
discounting is used, the increase in the provision due to the passage of time
is recognised as other finance expenses.
Provisions include decommissioning provisions representing management's best
estimate of the Group's liability for restoring the sites of drilled wells to
their original status. Provision for decommissioning is recognised when the
Group has an obligation and a reliable estimate can be made. The amount
recognised is the present value of the estimated future expenditure. A
corresponding item of property, plant and equipment of an amount equivalent to
the provision is also recognised and is subsequently depreciated as part of
the asset. The unwinding discount is recognised as a finance cost.
Commitments and contingent liabilities are not recognised in the financial
statements. They are disclosed unless the possibility of an outflow of
resources embodying economic benefits is remote.
A contingent asset is not recognised but disclosed in the financial statements
when an inflow of economic benefits is probable but when it is virtually
certain than the asset is recognised in the financial statements.
In those cases where the possible outflow of economic resource as a result of
present obligations is considered improbable or remote, or the amount to be
provided for cannot be measured reliably, no liability is recognised in the
statement of financial position and no disclosure is made.
5.17. SEGMENT REPORTING
Operating segments are identified on the basis of internal reports about
components of the Group that are regularly reviewed by the chief operating
decision maker in order to allocate resources to the segments and to assess
their performance. The Company considers that it operates in a single
operating segment being the production and sale of gas.
5.18. ADOPTION OF NEW STANDARDS BECOMING APPLICABLE DURING THE YEAR
The Group has adopted the following new standards and amendment to standards,
including any consequential amendment to other standards, with a date of
initial application from 1 April 2014.
· IFRS 10 Consolidated Financial Statements
IFRS 10 supersedes IAS 27 'Consolidated and Separate Financial Statements'
(IAS 27) and SIC12 'Consolidation-Special Purpose Entities'. IFRS 10 revises
the definition of control and provides extensive new guidance on its
application. These new requirements have the potential to affect which of the
Group's investees are considered to be subsidiaries and therefore to change
the scope of consolidation. The requirements on consolidation procedures,
accounting for changes in non-controlling interests and accounting for loss of
control of a subsidiary are unchanged.
Management has reviewed its control assessments in accordance with IFRS 10 and
has concluded that there is no effect on the classification (as subsidiaries
or otherwise) of any of the Group's investees held during the period or
comparative periods covered by these consolidated financial statements.
· IFRS 11 Joint Arrangements
"Joint Arrangements" ("IFRS 11"), which replaces IAS 31, "Interests in Joint
Ventures" and SIC-13, "Jointly Controlled Entities - Non-monetary
Contributions by Ventures", requires a single method, known as the equity
method, to account for interests in joint ventures. The proportionate
consolidation method to account for joint ventures is no longer permitted to
be used. IAS 28, "Investments in Associates and Joint Ventures", was amended
as a consequence of the issuance of IFRS 11. In addition to prescribing the
accounting for investments in associates, it now sets out the requirements for
the application of the equity method when accounting for joint ventures. The
application of the equity method has not changed as a result of this
amendment.
The management has made the disclosures as required by IFRS 11 in these
consolidated financial statements. There was no impact on the results for the
year as a result of the adoption.
· IFRS 12 Disclosure of interests in other entities
IFRS 12 combines the disclosure requirements for subsidiaries, joint
arrangements, associates and unconsolidated structured entities within a
comprehensive disclosure standard.
It aims to provide more transparency on 'borderline' consolidation decisions
and enhance disclosures about unconsolidated structured entities in which an
investor or sponsor has involvement.
Subsequent to issuing the new standards the IASB made some changes to the
transitional provisions in IFRS 10, IFRS 11, and IFRS 12. The guidance
confirms that the entity is not required to apply IFRS 10 retrospectively in
certain circumstances and clarifies the requirements to present adjusted
comparatives. The guidance also makes changes to IFRS 11 and IFRS 12 which
provide similar relief from the presentation or adjustment of comparative
information for periods prior to the immediately preceding period. Further, it
provides additional relief by removing the requirement to present comparatives
for the disclosures relating to unconsolidated structured entities for any
periods before the first annual period for which IFRS 12 is applied.
Consequent to adoption of IFRS 12, the management has made these necessary
disclosures in the consolidated financial statements.
6. INTANGIBLE ASSETS : EXPLORATION AND EVALUATION ASSETS
Intangible assets comprise of exploration and evaluation assets. Movement in
intangible assets is as below:
Balance as at 1 April 2013 18,427,390
Additions A 59,380,804
Transfer to development assets B (77,808,194)
Balance as at 31 March 2014 -
Additions A 34,017,324
Transfer to development assets B (34,017,324)
Balance as at 31 March 2015 -
Balance as at 31 March 2015
-
AThe above includes borrowing costs of US$ 930,056 (previous year: US$
2,810,610). The weighted average capitalisation rate on funds borrowed
generally is 5.62 per cent per annum (previous year: 6.02 per cent per
annum).
B On 19 November 2013, Focus Energy Limited submitted an integrated
declaration of commerciality (DOC) to the Directorate General of Hydrocarbons,
ONGC, the Government of India and the Ministry of Petroleum and Natural Gas.
Upon submission of DOC, exploration and evaluation cost incurred on SSF and
SSG field was transferred to development cost. Focus continues to carry out
further appraisal activities in the Block, and exploration and evaluation cost
incurred subsequent to 19 November 2013, to the extent considered recoverable
as per DOC submitted by Focus, is immediately transferred on incurrence to
development assets.
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment comprise of the following:
Balance as at 1 April 2013 36,437 3,577,517 309,075,831 5,233,802 4,780,493 1,423,900 2,004,272 326,132,252
Additions/transfers 130,811 153,920 98,306,895 150,729 24,009 54,668 426,576 99,247,608
Disposals/transfers - - (317,476) - - - (1,024,519) (1,341,995)
Balance as at 31 March 2014 167,248 3,731,437 407,065,250 5,384,531 4,804,502 1,478,568 1,406,329 424,037,865
Additions/transfers - 6,217 84,319,739 532,992 - 14,180 353,232 85,226,360
Disposals/transfers - - (40,547) - (227,699) - (569,708) (837,954)
Balance as at March 2015 167,248 3,737,654 491,344,442 5,917,523 4,576,803 1,492,748 1,189,853 508,426,271
Accumulated Depreciation
Balance as at 1 April 2013 - 709,656 2,149,500 2,943,680 1,778,168 958,165 - 8,539,169
Depreciation for the year - 334,288 4,773,127 831,921 741,570 235,539 - 6,916,445
Balance as at 31 March 2014 - 1,043,944 6,922,627 3,775,601 2,519,738 1,193,704 - 15,455,614
Depreciation for the year - 325,707 7,584,042 741,184 358,992 166,259 - 9,176,184
Balance as at 31 March 2015 - 1,369,651 14,506,669 4,516,785 2,878,730 1,359,963 - 24,631,798
Carrying values
At 31 March 2014 167,248 2,687,493 400,142,623 1,608,930 2,284,764 284,864 1,406,329 408,582,251
At 31 March 2015 167,248 2,368,003 476,837,773 1,400,738 1,698,073 132,785 1,189,853 483,794,473
The balances above represent the Group's share in property, plant and
equipment as per Note 3.
Tangible assets comprise of development /production assets in respect of SGL
field and development assets in respect of SSF and SSG field.
Development assets of SGL field includes the amount of exploration and
evaluation expenditure transferred to development cost on the date of the
first commercial discovery declared by the Group in 2012 and also includes
expenditure incurred for the drilling of further wells in the SGL field to
enhance the production activity. Production assets in respect of SGL field
includes completed production facilities and under construction Gas gathering
station - 2. The Group commenced the production facility in October 2012, and
accordingly such production assets have been depreciated since this date.
Development assets of SSF and SSG are explained in Note 6. Pending the
assessment of these reserves by the Directorate General of Hydrocarbons, ONGC,
the Government of India and the Ministry of Petroleum and Natural Gas and
completion of development for production activities, no depreciation has been
charged on the same.
The additions in Development/Production assets also include borrowing costs
US$14,268,842 (previous year: US$ 10,281,753). The weighted average
capitalisation rate on funds borrowed generally is 5.62 per cent per annum
(previous year 6.02 per cent).
The depreciation has been included in the following headings-
Depreciation included in exploration and evaluation assets - 1,602,375
Depreciation included in development assets 1,592,142 540,943
Depreciation included in statement of comprehensive income under the head cost of sales 7,584,042 4,773,127
Total 9,176,184 6,916,445
Total
9,176,184
6,916,445
8. DEFERRED TAX ASSETS/ LIABILITIES (NET)
Deferred taxes arising from temporary differences are summarized as follows:
Deferred tax assetsUnabsorbed losses/creditsTotalDeferred tax liability 177,861,949 177,861,949 142,330,042 142,330,042
Development assets/ property, plant and equipment 204,307,272 155,017,768
Total 204,307,272 155,017,768
Net deferred tax liabilities 26,445,323 12,687,726
155,017,768
Net deferred tax liabilities
26,445,323
12,687,726
a) The Group has recognised deferred tax assets on all of its unused tax
losses/unabsorbed depreciation considering there is convincing evidence of
availability of sufficient taxable profit in the Group in the future as
summarized in Note 9.
b) The deferred tax movements during the current year have been recognised
in the Consolidated Statement of Comprehensive income
9. INCOME TAXES
Income tax is based on the tax rates applicable on profit or loss in various
jurisdictions in which the Group operates. The effective tax at the domestic
rates applicable to profits in the country concerned as shown in the
reconciliation below have been computed by multiplying the accounting profit
by the effective tax rate in each jurisdiction in which the Group operates.
The individual entity amounts have then been aggregated for the consolidated
financial statements. The effective tax rate applied in each individual entity
has not been disclosed in the tax reconciliation below as the amounts
aggregated for individual Group entities would not be a meaningful number.
Income tax credit is arising on account of the following:
Current tax - -
Deferred tax charge (13,757,596) (9,233,244)
Total (13,757,596) (9,233,244)
The relationship between the expected tax expense based on the domestic tax
rates for each of the legal entities within the Group and the reported tax
expense in profit or loss is reconciled as follows:
Accounting profit for the year before tax 30,002,187 21,005,177
Effective tax at the domestic rates applicable to profits in the country concerned 12,852,937 8,870,486
Impact of change in tax rate on deferred tax 147,873 -
Non allowable expenses 756,786 362,758
Tax expense 13,757,596 9,233,244
The reconciliation shown above has been based on the rate 42.84 per cent
(previous year: 42.23 per cent) as applicable under Indian tax laws.
Indus Gas profits are taxable as per the tax laws applicable in Guernsey where
zero per cent tax rate has been prescribed for corporates. Accordingly, there
is no tax liability for the Group in Guernsey. iServices and Newbury being
participants in the PSC are covered under the Indian Income tax laws as well
as tax laws for their respective countries. However, considering the existence
of double tax avoidance arrangement between Cyprus and India, and Mauritius
and India, profits in Newbury and iServices are not likely to attract any
additional tax in their local jurisdiction. Under Indian tax laws, Newbury and
iServices are allowed to claim the entire expenditure in respect of the Oil
Block incurred until the start of commercial production (whether included in
the exploration and evaluation assets or development assets) as deductible
expense in the first year of commercial production or over a period of 10
years. The Company has opted to claim the expenditure in the first year of
commercial production. As the Group has commenced commercial production in
2011 and has generated profits in Newbury and iServices, the management
believes there is reasonable certainty of utilisation of such losses in the
future years and thus a deferred tax asset has been created in respect of
these.
10. INVENTORIES
Inventories comprise of the following:
31 March 2015 31 March 2014
Drilling and production stores and spares 5,045,918 8,455,623
Fuel 46,703 49,294
Goods in transit 138,794 821,350
Total 5,231,415 9,326,267
The above inventories are held for use in the exploration, development and
production activities. These are valued at cost determined based on policy
explained in paragraph 5.10.
Inventories of US$ 395,942 (previous year: US$ 224,491) were recorded as an
expense under the heading 'cost of sales' in the consolidated statement of
comprehensive income during the year ended 31 March 2015.
Inventories of US$ 10,318,743 (previous year: US$ 10,061,574) were capitalised
as part of exploration and evaluation assets and development assets.
11. OTHER CURRENT ASSETS
31 March 2015 31 March 2014
Prepayments for
- debt raising cost 1,011,333 363,762
- others 306,364 44,883
Total 1,317,697 408,645
12. CASH AND CASH EQUIVALENTS
31 March 2015 31 March 2014
Cash at banks in current accounts 12,251,533 977,028
Total 12,251,533 977,028
The Group only deposits cash surpluses with major banks of high quality credit
standing.
13. EQUITY
Authorised share capital
The total authorised share capital of the Company is GBP 5,000,000 divided
into 500,000,000 shares of GBP 0.01 each. The total number of shares issued by
the Company as at 31 March 2015 is 182,973,924 (previous year: 182,973,924).
--For all matters submitted to vote in the shareholders meeting of the
Company, every holder of ordinary shares, as reflected in the records of the
Company on the date of the shareholders' meeting has one vote in respect of
each share held.
All shareholders are equally eligible to receive dividends and the repayment
of capital in the event of liquidation of the individual entities of the
Group.
Additional paid in capital
Additional paid-in capital represents excess over the par value of share
capital paid in by shareholders in return for the shares issued to them,
recorded net of expenses incurred on issue of shares.
Currency translation reserve
Currency translation reserve represents the balance of translation of the
entities financial statements into US$ until 30 November 2010 when its
functional currency was assessed as GBP. Subsequent to 1 December 2010, the
functional currency of Indus Gas was reassessed as US$.
Merger reserve
The balance on the merger reserve represents the fair value of the
consideration given in excess of the nominal value of the ordinary shares
issued in an acquisition made by the issue of shares of subsidiaries from
other entities under common control.
Share option reserve
The amount of share option reserve represents the accumulated expense
recognised by the company in its consolidated statement of comprehensive
income on account of share based options given by the Company.
Retained earning
Retained earnings include current and prior period retained profits.
14. LONG TERM DEBT FROM BANKS
Maturity 31 March 2015 31 March 2014
Non-current portion of long term debt 2018/2024 200,293,945 85,266,117
Current portion of long term debt from banks 18,389,976 17,301,889
Total 218,683,921 102,568,006
Current interest rates are variable and weighted average interest for the year
was 5.62 per cent per annum (previous year: 6.02 per cent per annum). The fair
value of the above variable rate borrowings are considered to approximate
their carrying amounts. The maturity profile (undiscounted) is explained in
Note 29.
Interest capitalised on loans above have been disclosed in Notes 6 and 7.
The term loans are secured by following:-
· First charge on all project assets of the Group both present and future,
to the extent of SGL Field Development and to the extent of capex incurred out
of this facility in the rest of RJ-ON/6 field.
· First charge on the current assets (inclusive of condensate receivable) of
the Group to the extent of SGL field.
· First charge on the entire current assets of the SGL Field and to the
extent of capex incurred out of this facility in the rest of RJON/6 field.
15. PROVISION FOR DECOMMISSIONING
Balance as at 1 April 2013 909,515
Increase in provision 170,431
Balance as at 31 March 2014 1,079,946
Increase in provision 201,916
Balance as at 31 March 2015 1,281,862
Balance as at 31 March 2015
1,281,862
As per the PSC, the Group is required to carry out certain decommissioning
activities on gas wells. The provision for decommissioning relates to the
estimation of future disbursements related to the abandonment and
decommissioning of gas wells. The provision has been estimated by the Group's
engineers, based on individual well filling and coverage. This provision will
be utilised when the related wells are fully depleted. The majority of the
cost is expected to be incurred within a period of next 9 years. The discount
factor being the risk adjusted rate related to the liability is estimated to
be 8 per cent for the year ended 31 March 2015 (previous year: 8 per cent).
16. PAYABLE TO RELATED PARTIES
Related parties payable comprise of the following:
Maturity 31 March 2015 31 March 2014
Current
Liability payable to Focus On demand 23,446,172 96,783,891
Payable to directors On demand 44,171 63,914
23,490,343 96,847,805
Other than current
Borrowings from Gynia Holdings Ltd.* 120,288,834 112,947,262
120,288,834 112,947,262
Total 143,779,177 209,795,067
Liability payable to Focus
Liability payable to Focus represents amounts due to them in respect of the
Group's share of contract costs, for its participating interest in Block
RJ-ON/6 pursuant to the terms of Agreement for Assignment dated 13 January
2006 and its subsequent amendments from time to time.
The management estimates the current borrowings to be repaid on demand within
twelve months from the statement of financial position date and these have
been classified as current borrowings.
* Borrowings from Gynia Holdings Ltd. carries interest rate of 6.5 per cent
per annum compounded annually. During the current year, the entire outstanding
balance (including interest) was made subordinate to the loans taken from the
banks (detailed in Note 14) and therefore, is payable along with related
interest subsequent to repayment of bank loan in year 2024. As at 31 March
2014, only US$ 52.6 million was subordinated to loans taken from banks.
Interest capitalised on loans above have been disclosed in Notes 6 and 7.
17. EMPLOYEE COST
Costs pertaining to the employees of Focus have been included in the cost of
sales and administrative expenses in the consolidated statement of
comprehensive income amounting to US$ 352,458 (previous year US$ 286,366) and
US$ 604,906 (previous year US$ 444,466) respectively. Cost pertaining to the
employees of the Group have been included under administrative expense is US$
728,605 (previous year US$ 315,914).
18. FOREIGN CURRENCY EXCHANGE (LOSS)/ GAIN, NET
The Group has recognised the following in the profit or loss on account of
foreign currency fluctuations:
31 March 2015 31 March 2014
(Loss)/gain on restatement of foreign currency monetary receivables and payables (1,330) 1,423
(Loss)/ gain arising on settlement of foreign currency transactions and restatement of foreign currency balances arising out of Oil block operations (15,139) 77,466
Total (16,469) 78,889
19. OPERATING LEASES
Lease payments capitalised under exploration and evaluation assets and
development/ production assets during the year ended 31 March 2015 amount to
US$ 38,203,891 (previous year US$ 40,284,032). No sublease payments or
contingent rent payments were made or received. No sublease income is expected
as all assets held under lease agreements are used exclusively by the Group.
All the operating leases of the Group can be cancelled and there are no future
minimum payments for the existing operating leases. The terms and conditions
of these operating leases do not impose any significant financial restrictions
on the Group.
20. SHARE BASED PAYMENT
The Company maintains an equity settled share-based payment scheme adopted and
approved by the directors on 29 May 2008. Presently, the Company has approved
three schemes for the Directors, Consultant and Nominated Advisor known as the
"Directors' option agreements", "Advisors Option agreement" and "Arden option
deed", respectively. The Company has no legal or constructive obligation to
repurchase or settle the options. In accordance with the Plan, upon vesting,
the stock options will be settled by the issuance of new shares on payment of
the exercise price.
The total amount to be expensed over the vesting period is determined by
reference to the fair value of the options granted. The fair values of options
granted were determined using the Black Scholes option pricing model that
takes into account factors specific to the share incentive plans along with
other external inputs. Vesting of these options have completed in earlier
years and there is no expense in respect of these options during the years
ended 31 March 2015 and 2014.
The total outstanding and exercisable share options and weighted average
exercise prices for the various categories of option holders during the
reporting periods are as follows:
Share options granted to Directors and Advisors
All the options granted to the Directors and Advisors are fully vested in
earlier years. During the year ended 31 March 2015, no option was exercised.
The outstanding balance and exercisable share options as at 31 March 2015 and
31 March 2014 were 180,000 shares having a weighted average price of US$ 1.64
per option. These options have expired post year end in June 2015.
Share options granted to Arden Partners
There was no movement in the outstanding options under this category during
the year ended 31 March 2015 as the Share options granted to Arden Partners on
28 May 2008 are fully vested and consequently, there is no accounting
implication during the reported period. The outstanding balance and
exercisable share options granted to Arden Partners as of 31 March 2015 and 31
March 2014 was 76,220 having a weighted average price of US$ 1.64 per option.
These options have expired post year end in June 2015.
21. EARNINGS PER SHARE
The calculation of the basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number
of shares in issue during the year.
Calculation of basic and diluted earnings per share is as follows:
31 March 2015 31 March 2014
Profits attributable to shareholders of Indus Gas Limited, for basic and dilutive 16,244,591 11,771,933
Weighted average number of shares (used for basic earnings per share) 182,973,924 182,973,924
No of equivalent shares in respect of outstanding options 143,942 55,454
Diluted weighted average number of shares (used forDiluted earnings per share) 183,117,866 183,029,378
Basic earnings per share 0.09 0.06
Dilutive earnings per share 0.09 0.06
22. RELATED PARTY TRANSACTIONS
The related parties for each of the entities in the Group have been summarised
in the table below:
I. Holding Company Gynia Holdings Ltd.
II. Ultimate Holding Company Multi Asset Holdings Ltd. (Holding Company ofGynia Holdings Ltd.)
III. Enterprises over which Key Management Personnel (KMP) exercise control (with whom there are transactions) Focus Energy Limited
III. Enterprises over which Key Management Personnel (KMP) exercise control
(with whom there are transactions)
Focus Energy Limited
Disclosure of transactions between the Group and related parties and the
outstanding balances as at 31 March 2015 and 31 March 2014 is as under:
Transactions with holding company
Transactions during the year with the holding company
Interest 7,341,572 6,893,495
Balances at the end of the year
Total payable* 120,288,834 112,947,262
*including interest
120,288,834
112,947,262
*including interest
Transactions with KMP and entity over which KMP exercise control
Transactions during the year
Remuneration to KMP
· Short term employee benefits 725,655 315,914
Total 725,655 315,914
Entity over which KMP exercise control
Cost incurred by Focus on behalf of the Group in respect of the Block 65,876,451 68,524,909
Remittances to Focus 138,690,000 26,774,123
Expenses reimbursed 524,170 812,786
Balances at the end of the year
Total payable* 23,446,172 96,783,891
Total payable*
23,446,172
96,783,891
*including interest
Directors' remuneration
Directors' remuneration is included under administrative expenses, evaluation
and exploration assets or development assets in the consolidated financial
statements allocated on a systematic and rational manner.
Remuneration by director is also separately disclosed in the directors' report
on page 12.
23. SEGMENT REPORTING
The Chief Operating Decision Maker, Chief Executive Officer of the Group,
reviews the business as one operating segment being the extraction and
production of gas. Hence, no separate segment information has been furnished
herewith.
All of the non-current assets other than financial instruments and deferred
tax assets (there are no employment benefit assets and rights arising under
insurance contracts) are located in India and amounted to US$ 483,800,708
(previous year: US$ 408,583,136).
The Group sells natural gas and its by product condensate gas. The natural gas
is supplied to a single customer, GAIL, in a single geographical segment,
being India. Sale of by product is not significant to be classified as a
separate reportable segment.
24. COMMITMENTS AND CONTINGENCIES
The Group has no contingencies as at 31 March 2015 (previous year Nil).
The Group has no commitments as at 31 March 2015 (previous year Nil).
25. RECLASSIFICATION
The statement of financial position as at 31 March 2014 has been restated due
to reclassification of tax asset from current classification to non-current.
The third statement of consolidated financial position has not been presented
since the error pertains to year ended 31 March 2014 and does not have any
material impact on the year(s) prior to that.
Detail of this reclassification is summarised below:-
Statement of financial position -
Particulars 31 March 2014 Reclassification 31 March 2014 (Restated)
Current
Tax assets 726,511 (726,511) -
Non-current
Tax assets - 726,511 726,511
26. ACCOUNTING ESTIMATES AND JUDGEMENTS
In preparing consolidated financial statements, the Group's management is
required to make judgments and estimates that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. The judgments and estimates are
based on management's best knowledge of current events and actions and actual
results from those estimates may ultimately differ.
Significant judgments applied in the preparation of the consolidated financial
statements are as under:
Determination of functional currency of individual entities
Following the guidance in IAS 21 "The effects of changes in foreign exchange
rates" the functional currency of each individual entity is determined to be
the currency of the primary economic environment in which the entity operates.
In the management's view each of the individual entity's functional currency
reflects the transactions, events and conditions under which the entity
conducts its business. The management believes that US$ has been taken as the
functional currency for each of the entities within the Group. US$ is the
currency in which each of these entities primarily generate and expend cash
and also generate funds for financing activities.
Full cost accounting for exploration and evaluation expenditure
The Group has followed 'full cost' approach for accounting exploration and
evaluation expenditure against the 'successful efforts' method. As further
explained in Notes 5.6 and 6, exploration and evaluation assets recorded using
'full cost' approach are tested for impairment prior to reclassification into
development assets on successful discovery of gas reserves.
Impairment of tangible assets
The Group follows the guidance of IAS 36 and IFRS 6 to
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