Investor Presentaiton

ANNUAL REPORT 2018-2019 Notes to the Financial Statements (Continued) 124 ANNUAL REPORT 2018-2019 Notes to the Financial Statements (Continued) 38 Basis of measurement B Inventories The financial statements have been prepared on historical cost basis except for asset retirement obligations (ARO) which is measured at present value of expected future expenditure. 39 Significant accounting policies The Company has consistently applied the following accounting policies to all periods presented in these financial statements. Set out below is an index of the significant accounting policies, the details of which are available on the current and following pages: Н ABCDEFGHIKLMNOPORS J Q Revenue from contract with customer Inventories Property, plant and equipment Capital work in progress Finance income and finance cost Foreign currency transaction Income tax Financial instruments Share capital Provisions Employee benefits Workers' profit participation fund (WPPF) Impairment Leases Contingencies Capital redemption reserve Earnings per share (EPS) Statement of cash flows Dividends A Revenue from contract with customer Revenue is recognised in the statement of profit or loss and other comprehensive income upon supply of electricity to BPDB, quantum of which is determined by survey of meter reading as per Power Purchase Agreement/Contract for Supply of Electricity on Rental Basis with BPDB for the Company. Revenue from contract with customer - Policy applicable from 1 July 2018 as per IFRS 15. Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Revenue is measured based on the transaction price, which is the consideration, adjusted for discounts and other incentives, if any, as specified in the contract with the customer. Revenue also includes taxes or other amounts collected from customers. i) Revenue from Power Supply The Company's contracts with customers for the sale of electricity generally include one performance obligation. The Company has concluded that revenue from sale of electricity should be recognised at the point in time when electricity is transferred to the customer. The Company adopted IFRS 15 using the modified retrospective method of adoption. The adoption of the standard did not have not any impact on the financial statements of the Company. 0 Inventories are measured and stated at cost less allowance for obsolescence. These are for use in the operation and maintenance of power plants. As inventories are for internal use, the value is unlikely to diminish. Property, plant and equipment i. Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset and bringing to the location and condition necessary for it to be capable of operating in the intended manner. The cost of self constructed asset includes the cost of material, direct labour and any other cost directly attributable to bringing the assets to a working condition for their intended use. The costs of obligations for dismantling and removing the item and restoring the site (generally called 'asset retirement obligation') are recognised and measured in accordance with IAS 37: Provisions, Contingent Liabilities and Contingent Assets. If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment. Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss. ii. Subsequent expenditure Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company. iii. Depreciation Depreciation on power plant has been charged considering 30 years of useful life and residual value at 15% of original cost, on straight line basis on the ground that the management intends to continue with operation after completion of Power Purchase Agreement (PPA) and Contract for Supply of Electricity on Rental Basis. Addition during the period is depreciated for full period irrespective of date of capitalisation, while no depreciation is charged in the period of disposal. For initial year of the project, depreciation has been charged from the date of commercial operation in respect of power plant. The estimated useful lives of property, plant and equipment are as follows: Asset category Power plant Motor vehicles Building and construction Furniture and fixtures Office equipment(KPCL-II & KPCL- III are in 4 years) Office renovation In Years 30 4 10 5 5 5 Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. iv. Retirement and disposals An asset is derecognised on disposal or when no future economic benefits are expected from its use and subsequent disposal. Gains or losses arising from the retirement or disposal of an asset is determined by the difference between the net disposal proceeds and the carrying amount of the asset and is recognised in profit or loss. v. Capitalisation of borrowing cost Finance cost that is directly attributable to the construction of power plant is included in the cost of the asset in compliance with IAS 23: Borrowing Costs. Capitalisation of borrowing costs ceases upon receipt of commercial operations date (COD) certificate from BPDB which confirms that the plant is ready for intended use. 125

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