Disclosure of Accounting Policies
Specimen Disclosure 1 – Simple Format – Property Plant and Equipment
An item of property, plant and equipment that qualifies to be recognized as an asset, on initial recognition, is measured at cost. Cost includes purchase price, taxes and duties and other costs directly attributable to bringing the asset to the working condition for its intended use. Where applicable, borrowing cost incurred up to the date the asset is ready for use and the initial estimate of the present value of decommissioning, restoration and similar liabilities are included. However, cost excludes duties and taxes wherever credit of such duties and taxes is availed of. The item is thereafter carried at its cost less accumulated depreciation and accumulated impairment losses, if any.
Specimen Disclosure 2 – Detailed Format – Property, Plant and Equipment (PPE)
An item of property, plant and equipment that qualifies to be recognized as an asset, on initial recognition, is measured at cost. Cost includes purchase price, taxes and duties and other costs directly attributable to bringing the asset to the working condition for its intended use. Where applicable, borrowing cost incurred up to the date the asset is ready for use and the initial estimate of the present value of decommissioning, restoration and similar liabilities are included. However, cost excludes duties and taxes wherever credit of such duties and taxes is availed of. The item is thereafter carried at its cost less accumulated depreciation and accumulated impairment losses, if any.
Items such as spare parts, stand-by equipment and servicing equipment that meet the definition of property, plant and equipment are capitalized at cost and depreciated over their estimated useful life.
The cost of self-constructed assets, if any, includes cost of materials, direct labour and other costs attributable to make it ready for use, as also costs of dismantling and removing the items and restoring the site on which they are located.
Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
Cost of assets not ready for intended use, as on the reporting date, is shown as capital work in progress. Advances given towards acquisition of an item of PPE outstanding at each reporting date are disclosed as Other Non-Current Assets under the head Capital Advances.
Gains and losses on disposal of assets are determined by comparing the sale proceeds with the carrying amount. These are included, on a net basis, in the Statement of Profit or Loss, under the head “other income / other expenses” in statement of income.
Assets retired from active use, if any, are carried at lower of carrying amount and net realisable value.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the and the cost of the item can be measured reliably. The carrying amount of replaced part is de-recognised. If subsequent costs are in the nature of repairs and maintenance expenses, they are charged to Profit and Loss.
Depreciation of PPE (other than freehold land) is provided on written down (if it is Straight-line, say so) value method based on the useful lives estimated by the entity. The useful lives so determined are generally in alignment with regulatory prescriptions.
On tangible fixed assets added / disposed of during the year, depreciation is charged on pro-rata basis from the date of addition / till the date of disposal.
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the entity will obtain ownership by the end of lease term. Depreciation on contract-specific assets are charged, co-terminus over the contract period. The management’s estimation of useful lives of the PPE were as follows:
| Nature of PPE | Estimate of useful life in years |
| Buildings | |
| Plant and Equipment | |
| Furniture and fittings | |
| Office Equipment | |
| Motor Vehicles |
The residual values of assets are measured at not more than 5% of the original cost thereof. The depreciation method, residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period.
Specimen Disclosure 3 – Capital Works in Progress
Properties under construction are stated at cost less accumulated impairment losses if any, until construction or development is completed, at which time they are reclassified to be accounted for as an item of Property Plant and Equipment. Cost capitalised include cost of land and other directly related development expenditure, including borrowing costs incurred in developing the asset.
Cost of assets under development and not ready for intended use, as on the reporting date, is shown as capital work in progress. Advances given towards acquisition of an item of PPE outstanding at each reporting date are disclosed under the head Advance for Capital Assets.
Specimen Disclosure 4 – Depreciation – WDV – Schedule II
Depreciation of PPE (other than freehold land) is provided on written down value method based on the useful lives as prescribed by Schedule II of the Companies Act 2013.
On tangible fixed assets added / disposed of during the year, depreciation is charged on pro-rata basis from the date of addition / till the date of disposal.
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the entity will obtain ownership by the end of lease term. Depreciation on contract-specific assets are charged, co-terminus over the contract period.
The residual values of assets are measured at not more than 5% of the original cost thereof. The depreciation method, residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period.
Specimen Disclosure 5 – Depreciation – SLM – Schedule II
Depreciation of PPE (other than freehold land) is provided on Straight-Line method based on the useful lives as prescribed by Schedule II of the Companies Act 2013.
On tangible fixed assets added / disposed of during the year, depreciation is charged on pro-rata basis from the date of addition / till the date of disposal.
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the entity will obtain ownership by the end of lease term. Depreciation on contract-specific assets are charged, co-terminus over the contract period.
The residual values of assets are measured at not more than 5% of the original cost thereof. The depreciation method, residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period.
Specimen Disclosure 6 – Depreciation – WDV – Estimated Useful Life
Depreciation of PPE (other than freehold land) is provided on written down value method based on the useful lives estimated by the entity. The useful lives so determined are generally in alignment with regulatory prescriptions.
On tangible fixed assets added / disposed of during the year, depreciation is charged on pro-rata basis from the date of addition / till the date of disposal.
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the entity will obtain ownership by the end of lease term. Depreciation on contract-specific assets are charged, co-terminus over the contract period.
The management’s estimation of useful lives of the PPE were as follows:
Buildings – XX Years
| Plant and Machinery | |
| Furniture and Fittings | |
| Office Equipment | |
| Vehicles | |
| Renewable Energy Devices |
The residual values of assets are measured at not more than 5% of the original cost thereof. The depreciation method, residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period.
Specimen Disclosure 7 – Depreciation – SLM – Estimated Useful Life
Depreciation of PPE (other than freehold land) is provided on Straight-Line method based on the useful lives estimated by the entity. The useful lives so determined are generally in alignment with regulatory prescriptions.
On tangible fixed assets added / disposed of during the year, depreciation is charged on pro-rata basis from the date of addition / till the date of disposal.
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the entity will obtain ownership by the end of lease term. Depreciation on contract-specific assets are charged, co-terminus over the contract period.
The management’s estimation of useful lives of the PPE were as follows:
| Plant and Machinery | |
| Furniture and Fittings | |
| Office Equipment | |
| Vehicles | |
| Renewable Energy Devices |
The residual values of assets are measured at not more than 5% of the original cost thereof. The depreciation method, residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period.
Specimen Disclosure 8 – Depreciation – SLM plus WDV Combined – Schedule II
Depreciation of PPE (other than freehold land) is provided on using either Straight-line or WDV method based on suitability for the asset on the useful lives as prescribed by Schedule II of the Companies Act 2013.
On tangible fixed assets added / disposed of during the year, depreciation is charged on pro-rata basis from the date of addition / till the date of disposal.
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the entity will obtain ownership by the end of lease term. Depreciation on contract-specific assets are charged, co-terminus over the contract period.
The residual values of assets are measured at not more than 5% of the original cost thereof. The depreciation method, residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period.
Specimen Disclosure 9 – Depreciation – SLM plus WDV Combined – Estimated Useful Life
Depreciation of PPE (other than freehold land) is provided using either Straight-line or WDV method based on suitability for the asset on the useful lives estimated by the entity. The useful lives so determined are generally in alignment with regulatory prescriptions.
On tangible fixed assets added / disposed of during the year, depreciation is charged on pro-rata basis from the date of addition / till the date of disposal.
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the entity will obtain ownership by the end of lease term. Depreciation on contract-specific assets are charged, co-terminus over the contract period.
The management’s estimation of useful lives of the PPE were as follows:
| Plant and Machinery | |
| Furniture and Fittings | |
| Office Equipment | |
| Vehicles | |
| Renewable Energy Devices |
The residual values of assets are measured at not more than 5% of the original cost thereof. The depreciation method, residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period.
Some Disclosures Extracted from Published Accounts
TATA MOTORS – ANNUAL REPORT 2022
PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment are stated at cost of acquisition or construction less accumulated depreciation and accumulated impairment, if any.
Freehold land is measured at cost and is not depreciated.
Heritage assets, comprising antique vehicles purchased by the Company, are not depreciated as they are considered to have a residual value in excess of cost.
Residual values are re-assessed on an annual basis.
Cost includes purchase price, non-recoverable taxes and duties, labour cost and direct overheads for self-constructed assets and other direct costs incurred up to the date the asset is ready for its intended use.
Interest cost incurred for constructed assets is capitalised up to the date the asset is ready for its intended use, based on borrowings incurred specifically for financing the asset or the weighted average rate of all other borrowings, if no specific borrowings have been incurred for the asset.
Depreciation is provided on the Straight-Line Method (SLM) over the estimated useful lives of the assets considering the nature, estimated usage, operating conditions, past history of replacement, anticipated technological changes, manufacturer’s warranties and maintenance support. Taking into account these factors, the Company and its domestic group companies have decided to retain the useful life hitherto adopted for various categories of property, plant and equipment, which are different from those prescribed in Schedule II of the Act.
Estimated useful lives of assets are as follows:
| Type of Asset | Estimated Useful Life(Years) |
| Buildings, Roads, Bridges, and culverts | 4 to 60 years |
| Plant, machinery, and equipment | 3 to 30 years |
| Computers and other IT assets | 3 to 6 years |
| Vehicles | 3 to 11 years |
| Furniture, fixtures and office appliances | 3 to 21 years |
The useful lives and method of deprecation is reviewed at least at each year-end. Changes in expected useful lives are treated as change in accounting estimates.
Depreciation is not recorded on capital work-in-progress until construction and installation are complete and the asset is ready for its intended use.
An item of property, plant and equipment is derecognized on disposal. Any gain or loss arising from derecognition of an item of property, plant and equipment is included in profit or loss when it is derecognized.
ITC LIMITED – ANNUAL REPORT 2022
Property, Plant and Equipment – Tangible Assets
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation and impairment, if any. For this purpose, cost includes deemed cost which represents the carrying value of property, plant and equipment recognised as at 1st April, 2015 measured as per the previous Generally Accepted Accounting Principles (GAAP).
Cost is inclusive of inward freight, duties and taxes and incidental expenses related to acquisition. In respect of major projects involving construction, related pre-operational expenses form part of the value of assets capitalised. Expenses capitalised also include applicable borrowing costs for qualifying assets, if any. All upgradation/ enhancements are charged off as revenue expenditure unless they bring similar significant additional benefits.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in Statement of Profit and Loss.
Depreciation of these assets commences when the assets are ready for their intended use which is generally on commissioning. Items of property, plant and equipment are depreciated in a manner that amortizes the cost (or other amount substituted for cost) of the assets after commissioning, less its residual value, over their useful lives as specified in Schedule II of the Companies Act, 2013 on a straight line basis. Land is not depreciated.
The estimated useful lives of property, plant and equipment of the Company are as follows:
| Type of Asset | Estimated Useful Life(Years) |
| Buildings | 30 to 60 years |
| Leasehold Improvements Shorter of lease period or estimated useful lives | Leasehold Improvements Shorter of lease period or estimated useful lives |
| Plant, machinery, and equipment | 7 to 25 years |
| Furniture and fixtures | 8 to 10 years |
| Vehicles | 8 to 10 years |
| Office Equipment | 5 years |
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.
Property, plant and equipment’s residual values and useful lives are reviewed at each Balance Sheet date and changes, if any, are treated as changes in accounting estimate.
RELIANCE INDUSTRIES LIMITED – ANNUAL REPORT 2022
Property, Plant and Equipment
Property, Plant and Equipment are stated at cost, net of recoverable taxes, trade discount and rebates less accumulated depreciation and impairment losses, if any. Such cost includes purchase price, borrowing cost and any cost directly attributable to bringing the assets to its working condition for its intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the assets. In case of land the Company has availed fair value as deemed cost on the date of transition to Ind AS.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.
Property, Plant and Equipment which are significant to the total cost of that item of Property, Plant and Equipment and having different useful life are accounted separately.
Other Indirect Expenses incurred relating to project, net of income earned during the project development stage prior to its intended use, are considered as pre-operative expenses and disclosed under Capital Work-in-Progress.
Depreciation on Property, Plant and Equipment is provided using written down value method on depreciable amount except in case of certain assets of Oil to Chemicals segment which are depreciated using straight line method. Depreciation is provided based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 except in respect of the following assets, where useful life is different than those prescribed in Schedule II;
| Particulars | Depreciation |
| Fixed Bed Catalyst (useful life: 2 years or more) | Over its useful life as technically assessed |
| Fixed Bed Catalyst (useful life: up to 2 years) | 100% depreciated in the year of addition |
| Plant and Machinery (useful life: 25 to 50 years) | Over its useful life as technically assessed |
The residual values, useful lives and methods of depreciation of Property, Plant and Equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Gains or losses arising from derecognition of a Property, Plant and Equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.
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