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The
company operates tax recognised Provident, Gratuity
and Pension Funds for all its eligible employees.
The Provident Fund is a defined contribution plan.
All others are defined benefit plans. Actuarial valuations
of the defined benefit funds are carried out on periodical
basis and the latest valuations were carried out
on July 1, 2002. The fair value of the funds assets
and liabilities at the valuation date were Rs. 29.5
million and Rs. 26.0 million respectively for the
management staff gratuity fund, Rs. 14.6 million
and Rs.11.5 million respectively for the non-management
staff gratuity fund, Rs. 234.4 million and Rs. 215.7
million respectively for the management staff pension
fund, and Rs. 3.1 million and Rs. 18.2 million respectively
for the non-management staff pension fund. The unrecognised
past service cost at the latest valuation date was
Rs. 11.0 million which is being amortised over its
vesting period.
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The
Projected Unit Credit method, using following significant
assumptions, is used for valuation
of the aforementioned funds:: |
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Expected
rate of increase in salaries 9% per annum for management
staff pension and gratuity funds. |
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Expected
rate of increase in salaries 9% per annum for non-management
staff pension and gratuity funds. |
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Expected
rate of income on investments 9% per annum for all
funds. |
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Actuarial
gains / losses are amortised over a period of 11 years
for the management staff gratuity and pension funds
and 17 years for non-management staff pension and gratuity
funds, if it exceeds the 10%
corridor limit. The unrecognised gain as at valuation date was Rs. 23.5 million. |
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During
the year, the company contributed Rs. 4.7 million for
employees provident fund. |
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The
movements in defined benefit plans are as follows: |
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Pension
funds
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Gratuity funds
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Total
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Rupees
in `000
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| Cost
for 2002-2003 |
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| Current
service cost |
9,992
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|
2,253
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11,245
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| Interest
Cost |
21,118
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|
3,199
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|
24,317
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| Expected
return on plan assets |
(21,416)
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(3,758)
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(25,174)
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| Amortisation
of past service cost |
688
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-
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688
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| Amortisation
of loss / (gain) |
22
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(166)
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(144)
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9,404
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|
1,528
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10,932
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| Perpayment
or (liability) in 2002-2003 |
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| (Liability)
/ Prepayment as at July 1, 2002 |
(1,892)
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305
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1,587
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| Expenes |
9,404
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(1,528)
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10,932
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| Contribution |
15,041
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3,795
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(19,836)
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| Prepayment as at June 30, 2003 |
3,745
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3,572
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7,317
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| Taxation |
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Current |
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Charge
for current taxation in the accounts is based on the higher
of taxable income at the current rates of taxation or
half percent of turnover. |
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Deferred |
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Deferred
income tax is provided in full, using the liability
method, on temporary differences arising between
the tax base
of assets and liabilities
and their carrying amounts in the financial statements.
From the current year the company has recognised
a deferred tax debit balance
in these financial tatements by following IAS 12
- " Income Taxes (revised
2000)".
Upto
the previous year the company accounted for deferred taxation
using the liability method on all significant timing
differences but did not
account for any deferred tax debit balance. The change
in accounting policy is made on adoption of IAS-12
(Revised) that is applicable from
the current year. Had the policy not been changed
the profit after taxation
would have been lower by Rs. 31.5 million. The adjustment
arising due to change in accounting
policy has been accounted for in the current year
profit and loss account. The comparative information
has not been restated due
to the applicability of pricing formula as explained
in accounting policy 2.11 (c) below.
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Fixed
assets and depreciation |
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Fixed
assets are stated at cost less accumulated depreciation
except capital work-in-progress which is stated at cost.
Depreciation is charged to income by applying the straight
line method whereby the cost of an asset is written off
over its estimated service life to the Company. |
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Depreciation
is charged to income by applying the
straight-line method whereby the cost of an asset
is written off
over its estimated service
life to the company. Depreciation is charged for
full month
in the month of acquisition and no depreciation is
charged in the month of disposal.
Cost of leasehold land is amortised fairly over the
period of lease.
Company
accounts for impairment, where indication exists, by reducing
its carrying value to the assessed recoverable amount.
Costs
associated with developing or maintaining computer software
programs are recognised as an expense when incurred.
However, costs that are directly associated with identifiable and unique
software products
controlled by the company and that have probable economic
benefit exceeding their cost beyond one year, are recognised as intangible
assets.
Maintenance and normal repairs are charged
to income as and when incurred. Renewals
and improvements are capitalised and assets so
replaced, if any, are retired.
Gains and losses on disposal of fixed
assets are determined by comparing proceeds with carrying
amounts and are included
in income currently.
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Investments |
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Investment
in the associated company is stated at cost. |
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Stores,
spares and chemicals |
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These
are valued at moving average cost less provision for obsolescence.
Items in transit are valued at cost comprising invoice
value plus other charges incurred thereon. |
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Stock-in-trade |
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Stock
of crude oil has been valued at cost determined on "first-in first-out" method
except crude oil in transit which is valued at cost. Finished
products are valued at lower of cost and net realisable
value. Cost in relation to finished
products represents cost of crude oil and appropriate
manufacturing overheads. Net realisable value is the
estimated selling price in the ordinary course of business, less
the estimated costs
of completion and estimated costs necessary to make the
sale. |
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Trade debts |
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Trade debts are carried at original invoice
amount. |
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Cash and cash equivalents |
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Cash and cash equivalents
are carried in the balance sheet at cost. For
the purposes of the cashflow statement, cash and cash
equivalents comprises cash on hand, with banks on current,
saving and
deposit accounts, running finance under mark-up arrangements
and short-term finance.
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Revenue
recognition |
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(a) |
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Local
sales are recorded on the basis of products pumped in
oil marketing companies'tanks. Sale
of furnace oil loaded through gantry is recognised when
it is loaded into tank lorries. |
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(b) |
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Export
sales are recorded on the basis of products delivered
to the tankers and shipped to the customers. |
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(c) |
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The
Refineries were operating till June 30, 2002 under
the 1992 Import Parity Pricing
formula whereby the rate of return on paid-up capital
was limited to a range of 10 to 40%. The above formula
was handled by the Government
until it was handed over to Oil Companies Advisory
Committee (OCAC) with certain
amendments, effective July 1, 2001.
The formula was further amended, effective
July 1, 2002, for certain refineries including the
company.
Under this tariff protection
formula the concerned refineries have been allowed
to charge a deemed duty
on some of their products enabling them to run their
operations on a self-financing basis.
Profit after taxation above 50% of paid-up
capital, so generated, is to be transferred to a
Special Reserves
Account to offset against
future losses or to make investments for expansion
or upgradation of the respective
refineries.
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Borrowing Costs |
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Borrowing
costs are recognised as an expense in the period in
which these are incurred. |
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Provisions |
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Provisions
are recognised when the Company has a present legal or
constructive obligation as a result of past events, is
probable that an outflow of resources will be required
to settle the obligation and a reliable estimate of the
amount can be made. |
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Foreign
currencies translation |
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Transactions
in foreign currencies are translated to rupees at
the rates of exchange prevailing on the date of the
respective transactions. Monetary
assets and liabilities in foreign currencies are translated
to rupees at rates which approximate those to prevailing
at the balance sheet date. Gains
and losses resulting from the above are recognised in the profit and loss account. |
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Financial Instruments |
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All the financial assets
and liabilities are recognised at the time when
the Company becomes a party to the contractual provisions
of the instrument.
The carrying values of all financial assets and
liabilities reflected in the financial statements
approximate their fair
values. Any gains and losses
on derecognition of financial assets and liabilities
are taken to profit and loss account
currently.
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