By Himanshu V. Kishnadwala, Chartered Accountant
New Page 1VIDEOCON INDUSTRIES LTD.
7. Joint ventures for oil and gas fields :
In respect of joint ventures in the nature of Production
Sharing Contracts (PSC) entered into by the Company for oil and gas exploration
and production activities, the Company’s share in the assets and liabilities as
well as income and expenditure of joint venture operations are accounted for
according to the participating interest of the Company as per the PSC and the
joint-operating agreements on a line-by-line basis in the Company’s financial
statements.
Exploration, development and production costs :
The Company follows the ‘Successful Efforts Method’ of
accounting for oil and gas exploration, development and production activities as
explained below :
(a) Exploration and production costs are expensed in the
year/period in which these are incurred.
(b) Development costs are capitalised and reflected as
‘Producing Properties’. Costs include recharges to the joint venture by the
operator/affiliate in respect of the actual cost incurred and as set out in
the Production Sharing Contract (PSC). Producing properties are depleted using
the ‘Unit of Production Method’.
Abandonment costs :
Abandonment Costs relating to dismantling, abandoning and
restoring offshore well sites and allied facilities are provided for on the
basis of ‘Unit of Production Method’. Aggregate abandonment costs to be incurred
are estimated, based on technical evaluation by experts.
Revenue recognition :
(a) Revenue is recognised on transfer of significant risk and reward in respect of ownership.
(b) Sale of crude oil and natural gas are exclusive of sales tax. Other sales/turnover includes sales value of goods, services, excise duty, duty drawback and other recoveries such as insurance, transportation and packing charges, but excludes sale tax and recovery of financial and discounting charges.
