Accounting standards with reference to Genting Lanco Power (India) Pvt.Ltd.
1. Introduction to Accounting standards
2. Accounting standards 1,2 and 10
3. Introduction to Genting Lanco power (India) Pvt. Ltd
4. Financial Statement
5. As 1,2and 10 of Genting Lanco
Accounting is considered as the language of business. Each language has certain set of rules.
Similarly accounting has certain rules to be observed by the accountants so that it is understood by
all in the same sense these set of rules become accounting standards. Thus accounting standards
are certain set of rules and guidance based on the principles and methods of accounting to be
followed to have uniformity in terminology approach and presentation of results.
Accounting Standards in India are issued By the Institute of Chartered Accountants
of India (ICAI). At present there are 3 Accounting Standards issued by ICAI. They are:
AS 1 Disclosure of accounting policies
AS 2 Valuation Of Inventories:
AS 3 Cash Flow Statements
AS 4 Contingencies and events Occurring after the Balance sheet Date
AS 5 Net Profit or loss For the period, Prior period items and Changes in accounting Policies.
AS 6 Depreciation accounting.
AS 7 Construction Contracts.
AS 8 Accounting for Research and Development
AS 9 Revenue Recognition
AS 10 Accounting for Fixed Assets
AS 11 The Effects of Changes in Foreign Exchange Rates
AS 12 Accounting for Government Grants
AS 13 Accounting for Investments
AS 14 Accounting for Amalgamations
AS 15 Employee Benefits
AS 16 Borrowing Costs
AS 17 Segment Reporting
AS 18 Related Party Disclosures
AS 19 Leases
AS 20 Earnings Per Share
AS 21 Consolidated Financial Statements
AS 22 Accounting for Taxes on Income.
AS 23 Accounting for investments in Associates in Consolidated Financial Statements
AS 24 Discontinuing Operations
AS 25 Interim Financial Reporting
AS 26 Intangible Assets
AS 27 Financial Reporting of Interests in Joint Ventures
AS 28 Impairment of Assets
AS 29 Provisions,Contingent Liabilities and Contingent Assets
AS 30 Financial Instruments: Recognition and Measurement and Limited
Revisions to AS 2, AS 11 revised 2003, AS 21, AS 23, AS 26, AS 27, AS 28 and AS 29
AS 31 Financial Instruments: Presentation
AS 32 Financial Instruments: Disclosures, and limited revision to Accounting Standard
Objective of Accounting Standards
Standardize the diverse accounting policies
Add the reliability to the financial statement
Eradicate baffling variation in treatment of accounting aspects
Facilitate inter -firm and intra-firm comparison
Evaluation of accounting standard
Accounting standard Initiation
AS 1 to 15 1979 -1995
As 16 to 29 2000-2007
AS 30 to 31 later part of 2007
AS 1: DISCLOSURE OF ACCOUNTING POLICIES
Accounting polices refer to those principles and methods applied in the preparation and of
They promote the better understanding of the financial statements and their true and fair
The state of affairs and p&l are significantly affected by accounting policies hence their
disclosure is necessary for better understanding.
The is no pre-quoted list of accounting polices applicable in all circumstances.
The suitability of the policies varies from entity to entity.
The choice of accounting polices and their application is the responsibility of the management.
For, the responsibility for preparation and presentation of the financial statements is on the
The ICAI has recommended the following considerations to be taken on notice for the selection
of the policies.
AS 2:VALUATIONOF INVENTORY
AS 2 Standard Specifies:
a. What cost of Inventory should consist
b. How Net Realisable value is determined
Valuation of Inventories was first issued in June 1981 which was then revised and made
mandatory for all enterprises commencing business on or after April 1999.
Costs incurred in an organization form a major part to account and vouch for in financial
statements of any concern. Cost of closing stock , cost of work in progress , cost of finished
goods are costs which are incurred in current accounting period and carried forward to the next
accounting period. Similarly cost of opening Inventory which was incurred in previous
accounting year is brought forward in the current accounting year.
As assets are classified as resources which will enable cash inflow and economic growth to
the enterprise, costs form inseparable part of the assets. Costs to be included in Inventory
costs are those costs which are expected to generate future economic benefits to the
enterprise. Such costs include
1. Cost of acquisition
2. Cost of Change in location of the Inventory
3. Costs incurred in transforming the raw material into finished goods
costs incurred in maintaining the inventory do not generate any economic benefits to the
enterprise and hence are not included in the inventory costs. It becomes important to value
Inventory as it considerably impacts profit and loss for an accounting period. Higher the value
of closing stock, lower is the cost of goods sold, consequently high profits.
The Principle of prudence says that no profit should be booked while all foreseeable losses
should be recognised. Thus if net realisable value of inventory is less than inventory cost,
inventory is valued at net realisable value to reduce the booked profit in anticipation of loss and
on the contrary if net realisable value of the inventory is more than inventory cost, the
anticipated profit is ignored and inventory is valued at cost. Hence, Inventory is valued at cost
or net realisable value whichever is less.
Measurement of Inventories: Net realisable value is the estimated selling price in
normal/ordinary course of business less estimated costs of completion and required costs to
make the sale. The Valuation of Inventory is based on the very fact that no assets should be
carried at a value which is in excess of the value realisable by its use or sale or both.
AS 10: ACCOUNTING FOR FIXED ASSETS
Relevant definitions fixed asset is an asset held with the intention of being used for the
purpose of producing or providing goods or services and is not held for sale in the normal
course of business.
Elements of cost: the cost of a purchased fixed asset should consist of its purchase price
including import duties and other non-refundable taxes and levies and any directly attributable
cost of bringing the asset to its working condition for its intended use.
Self constructed fixed assets: The cost of a self-constructed fixed asset should comprise those
costs that relate directly to the specific asset and those that are attributable to the construction
activity in general and can be allocated to the specific asset.
Non monetary consideration: When a fixed asset is acquired in exchange or in part exchange
for another asset, the cost of the asset acquired should be recorded either at fair market value
or at the net book value of the asset given up , adjusted for any balance payment or receipt of
cash or other consideration.for this purpose fair market value may be determined by reference
either to the asset given up or to the asset acquired , whichever is more clearly evident.
Other considerations: Assets acquired on hire purchase : recorded at their cash value with a
suitable disclosure, that the enterprise does not have full ownership thereof.subsequent
expenditures related to an item of fixed asset should be added to its book value only if it
increases the future benefits from the existing asset beyond its previously assessed standard
When a revaluation is made, either an entire class of assets should be revalued, or the
selection of assets should be made on a systematic basis. The basis should be disclosed.the
revaluation in financial statements of a class of assets should not result in the net book value
of that class being greater than the recoverable amount of assets of that class.when a fixed
asset is revalued upwards, any accumulated depreciation existing at the date of the
revaluation should not be credited to the profit and loss account
Any profit/loss arising from retirement or disposal of fixed assets should be dealt as below:
1. losses arising from retirement or gains/losses arising from disposal of a fixed asset which is
carried at cost should be recognised in the profit and loss account.
2. where a revalued item of fixed asset is disposed off, any loss or gain should be charged or
credited to the profit and loss account. However, to the extent that such loss is related to an
upward revaluation which has not been subsequently reversed or utilised, it may be
charged directly to that account.
Goodwill: Goodwill needs to be accounted for only when some consideration in money or
money’s worth has been paid for it.
Disclosur : Gross and net book values of fixed assets at the beginning and end of an
accounting period along with additions, disposals, acquisitions and other movements during
the year. Expenditure incurred in the course of construction or acquisition. Revalued amounts
substituted for historical costs of fixed assets, the method adopted for revaluation, the nature
of indices used, the year of any appraisal made and whether an external value was involved in
carrying out the revaluation.
Balance sheet as on 31st march 2014
PARTICULAR Mar '14
Sources Of Funds
Total Share Capital 239.24
Equity Share Capital 239.24
Share Application Money 0.00
Preference Share Capital 0.00
Revaluation Reserves 0.00
Secured Loans 5,657.66
Unsecured Loans 0.00
Total Debt 5,657.66
Total Liabilities 8,331.55
Application Of Funds
Gross Block 1,033.25
Less: Accum. Depreciation 0.00
Net Block 1,033.25
Capital Work in Progress 3.76
Sundry Debtors 1,700.87
Cash and Bank Balance 122.63
Total Current Assets 3,245.94
Loans and Advances 6,603.01
Fixed Deposits 0.00
Total CA, Loans & Advances 9,848.95
Deferred Credit 0.00
Current Liabilities 10,754.07
Total CL & Provisions 10,850.02
Net Current Assets -1,001.07
Miscellaneous Expenses 0.00
Total Assets 8,331.55
Contingent Liabilities 18,688.21
Book Value (Rs) 11.11
Profit and loss a/c for the year ended on 31st
PARTICULARS Mar '14
Sales Turnover 2,236.40
Excise Duty 0.00
Net Sales 2,236.40
Other Income 102.07
Stock Adjustments 151.47
Total Income 2,489.94
Raw Materials 1,798.46
Power & Fuel Cost 0.00
Employee Cost 185.60
Other Manufacturing Expenses 481.09
Selling and Admin Expenses 0.00
Miscellaneous Expenses 239.81
Preoperative Exp Capitalised 0.00
Total Expenses 2,704.96
Operating Profit -317.09
Other Written Off 0.00
Profit Before Tax -959.99
Extra-ordinary items 0.00
PBT (Post Extra-ord Items) -959.99
Reported Net Profit -959.99
Total Value Addition 906.50
Preference Dividend 0.00
Equity Dividend 0.00
Corporate Dividend Tax 0.00
Per share data (annualised)
Shares in issue (lakhs) 24,078.05
Earning Per Share (Rs) -3.99
Equity Dividend (%) 0.00
Book Value (Rs) 11.11
Summary of significant accounting policies
1. Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial
statements and the results of operations during the reporting period. Although these estimates are
based upon management’s best knowledge of current events and actions, actual results could
differ from these estimates.
2. Revenue Recognition
Revenue is recognized based on the nature of activity to the extent it is probable that the
economic benefits will flow to the Company and revenue can be reliably measured. The
company collects service tax, sales taxes and value added taxes (VAT) on behalf of the
government and, therefore, these are not economic benefits flowing to the company. Hence,
they are excluded from revenue. The following specific recognition criteria must also be met
before revenue is recognised.
3. EPC and Construction Services
For EPC and construction contracts, contract prices are either fixed or subject to price escalation
clauses. Revenues are recognised on a percentage of completion method measured on the basis
of stage of completion which is as per joint surveys and work certified by the customers. Profit is
recognised in proportion to the value of work done (measured by the stage of completion) when
the outcome of the contract can be estimated reliably. The estimates of contract cost and the
revenue thereon are reviewed periodically by management and the cumulative effect of any
changes in estimates in proportion to the cumulative revenue is recognised in the period in which
such changes are determined. When the total contract cost is estimated to exceed total revenues
from the contract, the loss is recognised immediately. Amounts due in respect of price escalation
claims and/or variation in contract work are recognized as revenue only if the contract allows for
such claims or variations and/or there is evidence that the customer has accepted it and are
capable of being reliably measured.
Liquidated Damages / Penalty as per the contracts / Additional Contract Claims under the contract
entered into with Vendors and Contractors are recognised at the end of the contract or as agreed
4. Sale of Power
Revenue from sale of energy is recognized on the accrual basis in accordance with the provisions
of Power Purchase Agreement. Claims for delayed payment charges and any other claims, which
the company is entitled to under the Power Purchase Agreement, are accounted for in the year of
5. Sale of Coal
Revenue from the sale of coal is recognized when the substantial risks and rewards of ownership
are transferred to the buyer as per the respective agreements and revenue can be reliably
6. Carbon Credits
Revenue from sale of Verified Emission Reductions (VERs) and Certified Emission Reductions
(CERs) is recognized on sale of eligible credits.
7. Insurance Claims
Insurance claims are recognized on actual receipt / acceptance of the claim.
8. Management Consultancy
Income from project management / technical consultancy is recognized as per the terms of the
agreement on the basis of services rendered.
Revenue is recognised on a time proportion basis taking into account the amount outstanding and
the rate applicable.
Revenue is recognised when the shareholders’ right to receive payment is established by the Balance
AS 2: Inventories
Inventories Construction materials, raw materials, Consumables, Stores and Spares and Finished Goods are
valued at lower of cost and net realizable value. Cost is determined on weighted average cost method.
Construction Work-in-progress related to project works is valued at lower of cost or net realizable value,
where the outcome of the related project is estimated reliably. Cost includes cost of materials, cost of
borrowings and other related overheads. Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated costs necessary to make the sale. In case
of LHTPPL, Development Work-in-progress related to project works is valued at cost or estimated net
realizable value whichever is lower, till such time the outcome of the related project is ascertained reliably and
at contractual rates thereafter. Cost includes cost of land, cost of materials, cost of borrowings to the extent it
relates to specific project and other related project overheads.
Raw Materials (including Stock in transit ` 0.05 (March 31,2013 : ` 15.68)) Crores 258.14
Construction/Development Work In Progress 2638.88
Finished Goods 12.05
Consumables, Stores and Spares (including Stock in transit ` 0.15 (March 31,2013 : ` 0.09))
Details of Closing Inventory
Oil - (HFO, LDO & HSD) 105.97
86 Material in Transit & Under Inspection 13.29
Semi Finished Goods 0.33
Cells & other Solar Equipments 4.85
Inventory Others 14.59
Solar Modules 1.38
AS 10: Accounting For Fixed Assets
1. Tangible Fixed Assets
Tangible assets are stated at cost, less accumulated depreciation and impairment losses if any. Cost comprises the
purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing
costs relatingtoacquisitionof tangible assetswhichtakessubstantial periodof time togetreadyfor itsintendeduse are
alsoincludedtothe extenttheyrelate tothe periodtill suchassetsare ready to be put to use. Assets under installation
or under construction as at the Balance Sheet date are shown as Capital Work in Progress. The activities necessary to
prepare an asset for its intended use or sale extend to more than just physical construction of the asset. It may also
include technical (DPR,environmental,planning,Landacquisitionandgeological study)andadministrative work such as
obtaining approvals before the commencement of physical construction. The company adjusts exchange differences
arising on translation/settlement of long term foreign currency monetary items pertaining to the acquisition of a
depreciable asset to the cost of the asset and depreciates the same over the remaining life of the asset.
2. Intangible Fixed Assets
Intangible assetsare recognizedwhenitisprobable thatthe future economicbenefits that are attributable to the asset
will flow to the enterprise and the cost of the asset can be measured reliably.
3. Impairment of Assets
The carrying amountsof assetsare reviewed at each balance sheet date if there is any indication of impairment based
on internal / external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its
recoverable amount.The recoverable amountisthe greaterof the asset’snetsellingprice andvalue in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that
reflectscurrent market assessments of the time value of money and risks specific to the asset. Net selling price is the
amountobtainable fromthe sale of anassetin an arm’slengthtransactionbetweenknowledgeable,willingparties, less
the costs of disposal. After impairment, depreciation is provided on the revised carrying amount of the asset over its
remaining useful life.
1. Tangible Assets
2. Intangible Assets
Building Plant and
As on 31st
6.05 - 296.81 3912.43 45.75 15.58 308.15 33.95
Particulars Computer software Other intangible assets Total
As non 31st
march 2014 6.00 45.58 51.58