TRANSITION TO IND AS

Section 1

Ind AS Transition - Background

Contents:

 Ind AS Roadmap

 RIL’s Ind AS Transition

Ind AS Roadmap

FY 2015-16 FY 2016-17

Indian GAAP Financials Restated to Ind AS First Ind AS Financial Statements

1st Apr 1st Apr 31st March

2015 Q1 Q2 Q3 Q4 2016
Q1 Q2 Q3 2017

Comparative Periods

Opening Quarterly Reporting

Date of First Ind AS
Ind AS BS Reporting Date
Adoption to Quarterly
Date of Under First Ind AS
Ind AS Results
Transition Ind AS Result

3
RIL’s Ind AS Transition

Transition to Ind AS:

 Applicability: RIL being a listed entity and having net-worth above Rs.500 crores as on March 31, 2014 has adopted Ind AS
from April 1, 2016. This is in accordance with the Companies (Indian Accounting Standard) Rules 2015.

 First Ind AS Quarter: Results for the quarter ended 30 June 2016 are in compliance with Ind AS notified by the Ministry of
Corporate Affairs. Consequently, result for the quarter ended 31 March 2016, 30 June 2015 and previous year ended 31
March 2016 have been restated to comply with Ind AS to make them comparable.

 This communication presents the reviewed reconciliation of reserves as at March 31, 2016 and profit for the earlier periods.

RIL’s journey towards Ind AS:

 In its journey towards Ind AS, RIL has identified, recognised and measured the GAAP differences between previous Indian
GAAP and Ind AS.

 The Ind AS results have been reviewed by statutory auditors.

 The key GAAP differences have also been principally evaluated by one of the leading international accounting firm in India.

4
Section 2

Ind AS Transition – Impact assessment

Contents:

 Reserve and Profit Reconciliation

 Notes to Reconciliation
Reserve and Profit Reconciliation
(INR crores)
RIL – Standalone RIL – Consolidated
Reserve Reserve
Profit Reconciliation Profit Reconciliation
Reconciliation Reconciliation
Note
Nature of Adjustments
Ref. Quarter Ended Quarter Ended Year Ended As at Quarter Ended Quarter Ended Year Ended As at
31-Mar-16 30-Jun-15 31-Mar-16 31-Mar-16 31-Mar-16 30-Jun-15 31-Mar-16 31-Mar-16
Net Profit before Other
Comprehensive Income / Reserves 7,320 6,318 27,417 236,944 7,398 6,222 27,630 240,703
as per previous Indian GAAP
1. Change in accounting policy for Oil &
Gas Activity - From Full Cost Method
1 (149) 152 279 (20,114) (318) 65 (1,270) (39,570)
(FCM) to Successful Efforts Method
(SEM)
2. Fair valuation as deemed cost for
2 - - - 41,292 (99) - 3,959 45,272
Property, Plant and Equipment
3. Fair Valuation for financial assets 3 266 (119) 167 4,110 229 (263) (230) 4,188

4. Deferred Tax 4 (156) 51 (306) (11,947) (180) 60 (311) (13,665)

5. Others 5 (54) (33) (131) (130) (100) (60) (234) (215)

Total (93) 51 9 13,211 (468) (198) 1,914 (3990)

Net Profit before OCI / Reserves as

7,227 6,369 27,426 250,155 6,930 6,024 29,544 236,713
per Ind AS 6
Notes to Reconciliation - Main

1. Change in accounting policy for Oil & Gas Activity - From FCM to SEM : (Ind AS 101)

Accounting Standard (Erstwhile IGAAP) Ind AS (New IGAAP)

As per erstwhile IGAAP, Guidance Note recognises two methods of The Company has adopted Successful Efforts Method which is
accounting for Oil & Gas Activity viz; Full cost method and Successful complied to Ind AS.
Efforts Method.

Impact on RIL
 In its transition to Ind AS, RIL has retrospectively changed its accounting policy regarding oil & gas activity to Successful Efforts Method
(SEM). The impact of change in accounting policy to SEM is recognised in the opening reserves on the date of transition.

 Major differences impacting such change are in the areas of expenditure on surrendered blocks, unproved wells, abandoned wells and expired
leases and licenses and seismic cost which has been expensed under SEM; and depletion on producing property is calculated using ‘Proved
Developed Reserve, as against ‘Proved Reserve’ in FCM.

Impact (INR crores) RIL – Standalone RIL – Consolidated

Quantification

(Domestic E&P) (Domestic E&P + Shale Assets)

Reserve as at March 31, 2016 (20,114) (39,570)

Profit / (loss) (FY16) 279 (1,270)

7
Notes to Reconciliation - Main

2. Fair Value as Deemed Cost for Property Plant and Equipment: (Ind AS 101)

Accounting Standard (Erstwhile IGAAP) Ind AS (New IGAAP)

As per Accounting Standard Property, Plant and Equipment is Ind AS 101 allows entity to elect to measure Property, Plant and
recognised at cost less depreciation. Equipment on the transition date at its fair value or previous GAAP
carrying value (book value) as deemed cost.

Impact on RIL
 As part of Property, Plant and Equipment, RIL has elected to measure land and certain shale gas assets at their fair values and used these fair
values as deemed cost on the date of transition.
 Land admeasuring approximately 33,000 acres have been fair valued . In case of shale gas assets RIL has compared fair value of the Proved
Developed Producing (PDP) wells against their respective Ind AS book values and in case their book value exceeds fair value, then, the book
value is written down to fair value. The resulting impact of fair valuation of land and shale gas assets is Rs 51,101 crores and a negative impact
of Rs.5,829 crores respectively is reflected in the reserves as on 31/3/16

Impact (INR crores) RIL – Standalone RIL – Consolidated

Quantification

Reserve as at March 31, 2016 41,292 45,272

Profit / (loss) (FY16) Nil 3,959

8
Notes to Reconciliation - Main

3. Fair valuation of Financial Assets: (Ind AS 109)

Accounting Standard (Erstwhile IGAAP) Ind AS (New IGAAP)

As per Accounting Standard investments are measured at lower of cost On transition, financial assets including investments are measured at
and net realizable value. fair values except for investments in subsidiaries, associates and JVs'
which are recorded at cost.

Impact on RIL
 All financial assets (other than Investment in subsidiaries, associates and JVs’ which are recorded at cost) are initially recognized at fair value.
The subsequent measurement of such assets are based on its categorization either Fair Value through Profit & Loss (FVTPL) or Fair Value
through Other Comprehensive Income (FVTOCI) or at Amortised Cost based on business model assessment and contractual cash flow
characteristics.

 In case of RIL, investments are categorized as either Fair value through Profit and loss (FVTPL) or Fair value through Other Comprehensive
Income (FVTOCI) or at Amortised Cost based on its business model assessment and contractual cash flow characteristics.

Impact (INR crores) RIL – Standalone RIL – Consolidated

Quantification

Reserve as at March 31, 2016 4,110 4,188

Profit / (loss) (FY16) 167 (230)

9
Notes to Reconciliation - Main

4. Deferred Tax: (Ind AS 12)

Accounting Standard (Erstwhile IGAAP) Ind AS (New IGAAP)

As per Accounting Standards Deferred taxes are accounted as per As per Ind AS Deferred taxes are accounted as per balance sheet
income statement approach. approach.

Impact on RIL
 RIL has recognised the deferred tax impact on account of GAAP adjustments identified on transition to Ind AS. Further, as per Ind AS 12 the
Company has recognised the deferred tax following the principles of ‘Balance Sheet Approach’.

 The change in deferred tax amount is primarily on account of;

a) GAAP adjustments
b) Impact of past revaluation of fixed assets
c) Changes in income tax rates.

Impact (Amount in crores) RIL – Standalone RIL – Consolidated

Quantification

Reserve as at March 31, 2016 (11,947) (13,665)

Profit / (loss) (FY16) (306) (311)

10
Notes to Reconciliation - Others

Accounting Standard (Erstwhile

Nature Ind AS (New IGAAP) Impact
IGAAP)
a) Present valuation of As per Accounting Standard it is recorded As per Ind AS, such obligation is Negligible
Asset Retirement at cost. recognised and measured at present
obligation value.

b) Loan processing fees/ As per Accounting Standard such As per Ind AS such expenditure are Negligible
transaction cost: expenditure are charged to Profit and loss amortised over the period of the loan
account or capitalised as the case may be.

c) Proposed dividend: As per Accounting Standard, provision for As per Ind AS, liability for proposed RIL Standalone & CFS:
proposed divided is made in the year to dividend is recognised in the year in P&L - FY16: Rs. Nil
which it relate. which it has been declared and Reserve as at 31/3/2016:
approved. Nil

d) Fair valuation of As per Accounting Standard, it is As per Ind AS, ESOP is measured at fair Negligible
ESOP: measured at intrinsic value. value.

11
Notes to Reconciliation - Others

Accounting Standard (Erstwhile

Nature Ind AS (New IGAAP) Impact
IGAAP)
e) Actuarial gains and As per Accounting Standard such As per Ind AS these are recognised in Negligible
losses: expenditure are charged to Profit and loss OCI.
account or capitalised as the case may be.

f) Joint venture As per Accounting Standard, Joint Joint arrangements are classified into Negligible
accounting: ventures are classified into 3 types: two types: 1) Joint operations, and 2) (Only presentation impact
1. Jointly controlled operations Joint ventures. in Consolidated Financial
2. Jointly controlled assets and In case of RIL, interest in Oil & GAS joint Statement )
3. Jointly controlled entities. ventures will be considered as joint
operations and accordingly accounted
Joint ventures are accounted using using proportionate consolidation
proportionate consolidation method in method.
the Consolidated Financial Statements.
In CFS, 25 joint venture entities which
were accounted using proportionate
consolidation method in erstwhile
IGAAP are now accounted with equity
method as per Ind AS.

g) Functional currency AS per Accounting standards there is no RIL has evaluated and determined its Nil
concept of functional currency. functional currency as INR and hence no
impact on account of functional currency.
12
Notes to Reconciliation - Others

Accounting Standard (Erstwhile

Nature Ind AS (New IGAAP) Impact
IGAAP)
h) Financial Instruments Exchange differences arising on translation of Exchange fluctuations on translation or Nil
(other than point 3 foreign currency items are recognised in settlement of foreign currency monetary
above) : Profit & Loss Statement except for long term items are recognised in profit & loss
monetary items which are adjusted to cost of statement. However, Ind AS 101 permits
the assets. an entity to continue the policy adopted in
previous GAAP for exchange differences on
In respect of derivative contracts, premium long term foreign currency items which
paid, gains/losses on settlement and losses on RIL has opted for and will continue till 31st
restatement are recognised in Profit & Loss March, 2020 as per MCA circular .
Statement except in case where they relate to
the acquisition or construction of fixed assets, With effect from 1st April, 2016, all
in which case, they are adjusted to the derivative contracts are recognised either
carrying cost of such assets. Fair Value through Profit & Loss (FVTPL)
or Fair Value through Other
Comprehensive Income (FVTOCI) based
on contractual cash flow characteristics
and hedge effectiveness.

i) Leasing arrangement Accounting standard does not provide any RIL has assessed all arrangement with Nil
specific guidance to determine whether any third parties in terms of whether they are
arrangement contains lease. in the nature of lease and no such
arrangement has been identified.
13
Summary – No material impact on RIL

 Transition to Ind AS does not affect the Company’s ongoing business operations

 Key elements of transition are:

─ Accounting for Oil & Gas activity

─ Recognizing fair value of select Property, plant and equipment and financial instruments

─ Accounting for deferred tax

 Transition to Ind AS has very limited impact on the Company’s capital structure and reported
profits

14