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Accounting Policies of Edelweiss Financial Services Ltd. Company

Mar 31, 2013

1.1 Basis of preparaton of abridged fnancial statements

The accompanying abridged fnancial statements have been prepared pursuant to Rule 7A of the Companies (Central Government''s) General Rules and Forms, 1956 and are based on the annual accounts for the year ended 31 March 2013. The abridged fnancial statements are presented in Indian Rupees in millions.

1.2 Use of estmates

The preparaton of the abridged fnancial statements in conformity with the generally accepted accountng principles requires the management to make estmates and assumptons that afect the reported amount of assets, liabilites, revenues and expenses and disclosure of contngent liabilites on the date of the abridged fnancial statements. Actual results could difer from the estmates. Any revision to accountng estmates is recognised prospectvely in current and future periods.

1.3 Revenue recogniton

a. Investment banking fee income is recognised on an accrual basis in accordance with the terms and contracts entered into between the Company and the counterparty.

b. Interest income is recognised on accrual basis.

c. Dividend income is recognised when the right to receive payment is established.

d. Proft earned on sale of investments is recognised on trade date basis. Proft/loss on sale of investments is determined based on the weighted average cost of the investments sold.

e. The ratng support fee for the borrowing programme of the subsidiaries is accrued on straight line basis over the ratng period and as per the contractual terms agreed with the subsidiaries.

f. Portolio management fees are accounted on accrual basis as follows:

i. In case of percentage based fees, in accordance with the Portolio Management Agreement entered with the respectve clients and with the SEBI Regulatons as amended from tme to tme, on a quarterly basis.

ii. In case of return based fee, as a percentage of the annual proft, on an annual basis.

1.4 Benchmark linked debentures

The Company had issued certain non-convertble debentures, the return of which is linked to performance of specifed indices/commodites over the period of the debenture. Such debentures have a component of an embedded derivatve which is fair valued at year end. The resultant ''net unrealised loss or gain'' on the fair valuaton of these embedded derivatves is recognised in the statement of proft and loss. The debt component of such debentures is measured at amortsed cost using yield to maturity basis.

1.5 Fixed assets and depreciaton

Tangible fxed assets

Fixed assets are stated at cost less accumulated depreciaton. The cost of fxed assets comprises of purchase price and any atributable cost of bringing the asset to its working conditon for its intended use.

Depreciaton is provided on a writen down value basis from the date the asset is ready for its intended use or put to use, whichever is earlier. In respect of assets sold, depreciaton is provided upto the date of disposal.

Leasehold improvements are amortsed on a straight-line basis over the estmated useful lives of the assets or the period of lease, whichever is shorter.

Intangible fxed assets

Intangibles such as sofware are amortsed over a period of 3 years or over the estmated useful life, whichever is shorter. All fxed assets individually costng less than Rs. 5,000 are fully depreciated in the year of purchase.

1.6 Impairment of assets

The Company assesses at each balance sheet date whether there is any indicaton that an asset may be impaired based on internal/external factors. If any such indicaton exists, the Company estmates the recoverable amount of the asset. If such recoverable amount of the asset is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reducton is treated as an impairment loss and is recognised in the statement of proft and loss. If, at the balance sheet date there is an indicaton that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is refected at the recoverable amount subject to a maximum of the depreciable historical cost.

1.7 Investments

Investments are classifed into long term investments and current investments. Investments which are intended to be held for one year or more are classifed as long term investments and investments which are intended to be held for less than one year are classifed as current investments.

Long term investments are carried at cost less diminuton in value which is other than temporary, determined separately for each investment.

Current investments are carried at lower of cost or fair value. The comparison of cost and fair value is done separately in respect of each investment. In case of investments in mutual funds, the net asset value of units declared by the mutual funds is considered as the fair value.

1.8 Foreign currency transactons and currency derivatves

Foreign currency transactons are recorded at the rates of exchange prevailing on the date of the transacton. Exchange diferences, if any, arising out of transactons setled during the year are recognised in the statement of proft and loss for the year.

Monetary assets and liabilites denominated in foreign currencies as at the balance sheet date are translated at the closing exchange rates on that date. The exchange diferences, if any, are recognised in the statement of proft and loss and related assets and liabilites are accordingly restated in the balance sheet.

The Company enters into currency derivatve transactons to economically hedge its foreign exchange exposure. These derivatve transactons are measured at fair value as at the balance sheet date. Fair value is determined using quoted market prices in an actvely traded market, for the instrument.

1.9 Employee benefts

The accountng policy followed by the company in respect of its employee beneft schemes in accordance with Accountng Standard 15 (Revised 2005), is set out below:

Provident fund

The Company contributes to a recognised provident fund which is a defned contributon scheme. The contributons are accounted for on an accrual basis and recognised in the statement of proft and loss.

Gratuity

The Company''s gratuity scheme is a defned beneft plan. The Company''s net obligaton in respect of the gratuity beneft is calculated by estmatng the amount of future beneft that the employees have earned in return for their service in the current and prior periods, that beneft is discounted to determine its present value, and the fair value of plan assets, if any, is deducted. The present value of the obligaton under such beneft plan is determined based on actuarial valuaton using the Projected Unit Credit Method. The obligaton is measured at present values of estmated future cash fows. The discount rates used for determining the present value are based on the market yields on government securites as at the balance sheet date.

Benefts in respect of gratuity are funded with an Insurance Company approved by Insurance Regulatory and Development Authority (IRDA).

Actuarial gains and losses arising from experience adjustments and change in actuarial assumptons are recognised in the statement of proft and loss in the period in which they arise.

Compensated absences

The eligible employees of the Company are permited to carry forward certain number of their annual leave enttlement to subsequent years, subject to a ceiling. The Company recognises the charge to the statement of proft and loss and corresponding liability on account of such non- vestng accumulated leave enttlement based on a valuaton by an independent actuary.

1.10 Taxaton

Tax expense comprises income tax (i.e. amount of tax for the year determined in accordance with the Income Tax Act, 1961), deferred tax charge or beneft (refectng the tax efect of tming diferences between accountng income and taxable income for the year) and minimum alternate tax.

Income tax

Provision for income tax is recognised based on estmated tax liability computed afer adjustng for allowances, disallowances and exemptons in accordance with the Income Tax Act, 1961.

Deferred tax

The deferred tax charge or beneft and the corresponding deferred tax liabilites and assets are recognised using the tax rates that have been enacted or substantally enacted as at the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the asset can be realised in future, however, where there is unabsorbed depreciaton or carried forward loss under taxaton laws, deferred tax assets are recognised only if there is a virtual certainty of realisaton of the assets. Deferred tax assets are reviewed as at each balance sheet date and writen down or writen up to refect the amount that is reasonably/virtually certain, as the case may be, to be realised.

Minimum alternate tax (MAT)

MAT credit asset is recognised where there is convincing evidence that the asset can be realised in future. MAT credit assets are reviewed at each balance sheet date and writen down or writen up to refect the amount that is reasonably certain to be realised.

1.11 Operatng leases

Lease payments for assets taken on operatng lease are recognised as an expense in the statement of proft and loss on a straight-line basis over the lease term.

1.12 Earnings per share

The Company reports basic and diluted earnings per share in accordance with Accountng Standard 20 - Earnings Per Share prescribed by the Companies (Accountng Standards) Rules, 2006. Basic earnings per share is computed by dividing the net proft afer tax atributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

Diluted earnings per share refect the potental diluton that could occur if securites or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed by dividing the net proft afer tax by the weighted average number of equity shares and dilutve potental equity shares outstanding at year end.

1.13 Employee stock opton plans (''ESOPs'')

The Company follows the intrinsic value method to account for compensaton cost of its stock based employee compensaton plans. The compensaton cost is amortsed on a straight-line basis.

1.14 Provisions and contngencies

The Company creates a provision when there is present obligaton as a result of a past event that probably requires an outlow of resources and a reliable estmate can be made of the amount of the obligaton. A disclosure for a contngent liability is made when there is a possible obligaton or a present obligaton that may, but probably will not, require an outlow of resources. When there is a possible obligaton or a present obligaton in respect of which the likelihood of outlow of resources is remote, no provision or disclosure is made.

Provisions are reviewed at each balance sheet date and adjusted to refect the current best estmate. If it is no longer probable that the outlow of resources would be required to setle the obligaton, the provision is reversed.

Contngent assets are not recognised in the abridged fnancial statements. However, contngent assets are assessed contnually and if it is virtually certain that an economic beneft will arise, the asset and related income are recognised in the period in which the change occurs.

1.15 Change in accountng policies

From 1 April 2011, the Company by virtue of its holding company actvites has adopted the practce of charging its actual borrowing cost on the loans extended to its group companies.


Mar 31, 2012

1.1 Basis of preparation of financial statements

The accompanying financial statements are prepared and presented under the historical cost convention, on the accrual basis of accounting and comply with the Accounting Standards prescribed by Companies (Accounting Standards) Rules, 2006, the relevant provisions of the Companies Act, 1956 ('the Act') and the Revised Schedule VI to the Act, which has become effective from the current year. Figures of the previous year have been redrawn to conform to the Revised Schedule VI classification. The financial statements are presented in Indian rupees in millions.

1.2 Use of estimates

The preparation of the financial statements in conformity with the generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent liabilities on the date of the financial statements. Actual results could differ from the estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

1.3 Revenue recognition

a. Investment banking fee income is recognised on an accrual basis in accordance with the terms and contracts entered into between the Company and the counterparty.

b. Interest income is recognised on accrual basis.

c. Oividend income is recognised when the right to receive payment is established.

d. Profit earned on sale of investments is recognised on trade date basis. Profit/loss on sale of investments is determined based on the weighted average cost of the investments sold.

e. The rating support fee for the borrowing programme of the subsidiaries is accrued on straight line basis over the rating period and as per the contractual terms agreed with the subsidiaries.

f. Fee income from subsidiaries for Brand Equity, Brand Protection, Brand Promotion services provided by the Company is recognised on accrual basis in accordance with the contractual terms and conditions as agreed with the subsidiaries. The Company has ceased to charge such fees from its subsidiaries with effect from 01 April 2011.

g. Portfolio management fees are accounted on accrual basis as follows:

i. In case of percentage based fees, in accordance with the Portfolio Management Agreement entered with the respective clients and with the SEBI Regulations as amended from time to time, on a quarterly basis.

ii. In case of return based fee, as a percentage of the annual profit, on an annual basis.

1.4 Benchmark linked debentures

The Company has issued certain non-convertible debentures, the return of which is linked to performance of specified indices/commodities over the period of the debenture. Such debentures have a component of an embedded derivative which is fair valued at year end. The resultant 'net unrealised loss or gain' on the fair valuation of these embedded derivatives is recognised in the statement of profit and loss. The debt component of such debentures is measured at amortised cost using yield to maturity basis.

1.5 Fixed assets and depreciation Tangible fixed assets

Fixed assets are stated at cost less accumulated depreciation. The cost of fixed assets comprises of purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

Depreciation is provided on a written down value basis from the date the asset is ready for its intended use or put to use, whichever is earlier. In respect of assets sold, depreciation is provided upto the date of disposal.

1.5 Fixed assets and depreciation {Continued)

Leasehold improvements are amortised on a straight-line basis over the estimated useful lives of the assets or the period of lease, whichever is shorter.

Intangible fixed assets

Intangibles such as software is amortised over a period of 3 years or its estimated useful life whichever is shorter.

All fixed assets individually costing less than Rs 5,000 are fully depreciated in the year of purchase.

1.6 Impairment of assets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired based on internal/ external factors. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the statement of profit and loss. If, at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of the depreciable historical cost.

1.7 Investments

Investments are classified into long term investments and current investments. Investments which are intended to be held for one year or more are classified as long term investments and investments which are intended to be held for less than one year are classified as current investments.

Long term investments are carried at cost less diminution in value which is other than temporary, determined separately for each investment.

Current investments are carried at lower of cost or fair value. The comparison of cost and fair value is done separately in respect of each investment. In case of investments in mutual funds, the net asset value of units declared by the mutual funds is considered as the fair value.

1.8 Foreign currency transactions and currency derivatives

Foreign currency transactions are recorded at the rates of exchange prevailing on the date of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the statement of profit and loss of the year.

Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing exchange rates on that date. The exchange differences, if any, are recognised in the statement of profit and loss and related assets and liabilities are accordingly restated in the balance sheet.

The Company enters into currency derivative transactions to economically hedge its foreign exchange exposure. These derivative transactions are measured at fair value as at the balance sheet date. Fair value is determined using quoted market prices in an actively traded market, for the instrument.

1.9 Employee benefits.

The accounting policy followed by the company in respect of its employee benefit schemes in accordance vyith Accounting Standard 15 (Revised 2005), is set out below: .

Provident fund

The Company contributes to a recognised provident fund which is a defined contribution scheme. The contributions are accounted for on an accrual basis and recognised in the statement of profit and loss.

Gratuity

The Company's gratuity scheme is a defined benefit plan. The Company's net obligation in respect of the gratuity benefit is calculated by estimating the amount of future benefit that the employees have earned, in return for their service in the current and prior periods, that benefit is discounted to determine its present value, and the fair value of any plan as Sets, if any, is deducted; The present value of the obligation under such benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method. The obligation is measured at present values of estimated future cash flows, the discounted rates used for determining the present value are based on the market yields on government securities as at the balance sheet date.

Benefits in respect of gratuity are funded with an Insurance Company approved by Insurance Regulatory and Development Authority (IRDA).

Actuarial gains and losses arising from experience adjustments and change in actuarial assumptions are recognised in the statement of profit and loss in the period in which they arise.

Compensated absences

The eligible employees of the Company are permitted to carry forward certain number of their annual leave entitlement to subsequent years, subject to a ceiling. The Company recognises the charge to the statement of profit and loss and corresponding liability on account of such non-vesting accumulated leave entitlement based on a valuation by an independent actuary.

1.10 Taxation

Tax expense comprises income tax (i.e. amount of tax for the year determined in accordance with the Income Tax Act, 1961), deferred tax charge or benefit (reflecting the tax effect of timing differences between accounting income and taxable income for the year) and minimum alternate tax.

Income tax

Provision for income tax is recognised based on estimated tax liability computed after adjusting for allowances, disallowances and exemptions in accordance with the Income Tax Act, 1961.

Deferred tax

The deferred tax charge or benefit and the corresponding deferred tax liabilities and assets are recognised using the tax rates that have been enacted or substantially enacted-as at the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the asset can be realised in future, however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of the assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably/virtually certain, as the case may be, to be realised.

Minimum Alternate Tax (MAT)

MAT credit asset is recognized where there is convincing evidence that the asset carrbe realized in future. MAT credit assets are reviewed at each balance sheet date and written down or written up to reflect the amount that is reasonably certain to be realised.

1.11 Operating leases

Lease payments for assets taken on operating lease are recognised as an expense in the statement of profit and loss on a straight-line basis over the lease term.

1.12 Earnings per share

The Company reports basic and diluted earnings per share in accordance with Accounting Standard 20 - Earnings Per Share prescribed by the Companies (Accounting Standards) Rules, 2006. Basic earnings per share is computed by dividing the net profit after tax attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares and dilutive potential equity shares outstanding at year end.

1.13 Employee stock option plans

The Company follows the intrinsic value method to account for compensation cost of its stock based employee compensation plans. The compensation cost is amortised on a straight-line basis.

1.14 Provisions and contingencies

The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed.

Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an economic benefit will arise, the asset and related income are recognised in the period in which the change occurs.

1.15 Change in accounting policies

The Company has ceased to charge Brand Equity, Brand Protection, Brand Promotion fees to its subsidiaries from 1 April 2011.

From 1 April 2011, the Company by virtue of its holding company activities has adopted the practice of charging its actual borrowing cost on the loans extended to its group companies.


Mar 31, 2007

1.1 Principles of consolidation

a) The consolidated financial statements relate to Edelweiss Capital Limited ("the Company) and its subsidiary entities and associates ("the Group). The consolidated financial statements have been prepared on the following basis:

- In respect of Subsidiary Enterprises (including partnership firm), the financial statements have been consolidated on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses, after as far as possible eliminating intra-group balances and intra-group transactions resulting in unrealised profits or losses in accordance with Accounting Standard 21 - Consolidated Financial Statements issued by the Institute of Chartered Accountants of India.

- In case of Associate Enterprises (including partnership firm), the financial statements have been consolidated as per Accounting Standard 23 - Accounting for investment in Associates issued by the Institute of Chartered Accountants of India.

- Assets and liabilities of the foreign subsidiaries are translated into Indian Rupees at the rate of exchange prevailing as at the balance sheet date. Revenue and expense are translated into Indian Rupees at the average exchange rate prevailing during the year and the resulting net translation adjustment has been disclosed as Foreign Exchange Translation Reserve in Reserves and Surplus.

- The excess of cost over the Companys investments in the subsidiary company is recognised in the consolidated financial statements as Goodwill which has been charged off in the Profit and Loss Account in the year of acquisition. The excess of Companys share in equity and reserves of the subsidiary company over the cost of acquisition is treated as Capital Reserve.

- The share of Minority Interest in the net profit of subsidiaries / partnership firms for the year is identified and adjusted against the income of the group to arrive at the net income attributable to the Company.

- The share of Minority Interest in the net assets of subsidiaries / partnership firms is identified and presented in the consolidated financial statements separate from liabilities and the equity of the Company.

- The consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances and are presented in the same manner as the Companys separate financial statements.

b) Investments other than in subsidiaries and associates have been accounted as per Accounting Standard 13 on Accounting for Investments.

d) During the year, the Company has increased its stake in Edelcap Securities and Transaction Services Private Limited (Formerly Tiffin Investments Private Limited) from 49% to 100% on 12 December 2006 through Crossborder Investments Private Limited, a 100% subsidiary of the Company.

1.1 Principles of consolidation (Continued)

e) During the financial year 2005-06, the Company has diluted its interest in Edelweiss Insurance Brokers Limited, a subsidiary company, from 99.95% to 79.96% on 24 October 2005 and from 79.96% to 71.91% on 31 March 2006. In the absence of separate financial statements drawn on the said dates of dilution, it is assumed that the profits of the subsidiary has arisen evenly through out the year for arriving at the share of profit of the minority interest in the consolidated financial statements.

f) EC Global Limited, a subsidiary company of Crossborder Investments Private Limited, was incorporated on 29 December 2004. The first financial statements drawn by the subsidiary covering the period 29, December 2004 to 31 March 2006 has been considered for the purpose of consolidation for the previous year. The subsidiary had no commercial operations during the period 29 December 2004 to 31 March 2006 and as such had no impact on the previous years consolidated financial statements.

1.2 Basis of preparation of financial statements

The accompanying financial statements are prepared under the historical cost convention, on the accrual basis of accounting and comply with the accounting standards issued by the Institute of Chartered Accountants of India (to the extent applicable) and in accordance with the generally accepted accounting principles and the provisions of the Companies Act, 1956 as adopted consistently by the Company. The financial statements are presented in Indian rupees in millions.

1.3 Use of estimates

The preparation of the financial statements in conformity with the generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying financial statements are based upon managements evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying financial statements. Any differences of actual to such estimates are prospectively made in current or future periods.

1.4 Revenue recognition

- Advisory and transactional services fee income is accounted for, on an accrual basis in accordance with the terms & contracts entered into between the Company and the counterparty.

- Brokerage income is recognised on trade date basis and is inclusive of service tax.

- Profit / (loss) on Error trades are included in "Income from Arbitrage and Trading in Securities and Derivatives" and "Income from Arbitrage and Trading in Commodity Derivatives" under the respective heads.

- Brokerage and Commission income earned from Insurance companies is recognised on accrual basis exclusive of service tax.

- Portfolio management fees are accounted on accrual basis as follows:

a. In case of percentage based fees, as a percentage of the unaudited Net Asset Value at the end of each financial quarter, on a quarterly basis.

b. In case of return based fee, as a percentage of the annual profit, on an annual basis.

- Interest income is recognised on accrual basis.

- Dividend income is recognised when the right to receive payment is established.

- Revenue from fund management services is recognised in accordance with the terms and conditions of the investment management agreement between the Company and the Fund. The amount recognised as revenue is exclusive of service tax.

- In respect of other heads of income, income from depository operations etc., the Company follows the practice of accruing income on a prudent basis.

- Revenue from rendering of trustee services is recognised in accordance with the terms and conditions of the Compensation Agreement between the Company and the Fund. The amount recognised as revenue is exclusive of service tax.

1.5 Equity index / stock - futures

a) "Initial Margin", representing initial margin paid, and "Margin Deposits", representing additional margin over and above initial margin, for entering into contracts for Equity index / stock futures, which are released on final settlement/ squaring-up of underlying contracts, are disclosed as under Loans and Advances.

b) Equity index / stock futures are marked-to-market on a daily basis. Debit or credit balance disclosed under Loans and Advances or Current Liabilities, respectively, in the "Mark-to-Market Margin - Equity Index / Stock Futures Account", represents the net amount paid or received on the basis of movement in the prices of Index / Stock Futures till the balance sheet date.

c) As on the balance sheet date, profit / loss on open positions in index / stock futures are accounted for as follows:

- Credit balance in the "Mark-to-Market Margin - Equity Index / Stock Futures Account", being anticipated profit, is ignored and no credit for the same is taken in the profit and loss account.

- Debit balance in the "Mark-to-Market Margin - Equity Index / Stock Futures Account", being anticipated loss is adjusted in the profit and loss account.

d) On final settlement or squaring-up of contracts for equity index / stock futures, the profit or loss is calculated as the difference between settlement / squaring-up price and contract price. Accordingly, debit or credit balance pertaining to the settled / squared-up contract in "Mark-to-Market Margin - Equity Index / Stock Futures Account" is recognised in the profit and loss account. When more than one contract in respect of the relevant series of equity index futures contract to which the squared-up contract pertains is outstanding at the time of the squaring-up of the contract, the contract price of the contract so squared-up is determined using weighted average method for calculating profit / loss on squaring-up.

1.6 Equity index / stock - options

a) "Equity Index / Stock Options Margin Account", representing initial margin paid, and "Margin Deposit", representing additional margin paid over and above initial margin, for entering into contracts for equity index / stock options, which are released on final settlement / squaring-up of underlying contracts, are disclosed under Loans and Advances.

b) "Equity Index / Stock Option Premium Account" represents premium paid or received for buying or selling the options, respectively.

c) As at the balance sheet date, in the case of long positions, provision is made for the amount by which the premium paid for those options exceeds the premium prevailing on the balance sheet date, and in the case of short positions, for the amount by which premium prevailing on the balance sheet date exceeds the premium received for those options, and reflected in "Provision for Loss on Equity Index / Stock Option Account".

d) When the option contracts are squared-up before expiry of the options, the premium prevailing on that date is recognised in profit and loss account. If more than one option contract in respect of the same index / stock with the same strike price and expiry date to which the squared-up contract pertains is outstanding at the time of squaring-up of the contract weighted average method is followed for determining profit or loss. On expiry of the contracts and on exercising the options, the difference between final settlement price and the strike price is transferred to the profit and loss account. In both the above cases premium paid or received for buying or selling the option, as the case may be, is recognised in the profit and loss account for all squared-up / settled contracts.

1.7 Commodities stock - futures

a) "Initial Margin", representing initial margin paid, and "Margin Deposits", representing additional margin over and above initial margin, for entering into contracts for commodities futures, which are released on final settlement / squaring-up of underlying contracts, are disclosed under Loans and Advances.

b) Commodities futures are marked-to-market on a daily basis. Debit or credit balance disclosed under Loans and Advances or Current Liabilities respectively, in the "Mark-to-Market Margin - Commodities Stock Futures Account", represents the net amount paid or received on the basis of movement in the prices of Commodities Futures till the balance sheet date.

c) As on the balance sheet date, profit / loss on open positions in Commodities Futures are accounted for as follows:

- Credit balance in the "Mark-to-Market Margin - Commodities Stock Futures Account", being anticipated profit, is ignored and no credit for the same is taken in the profit and loss account.

- Debit balance in the "Mark-to-Market Margin - Commodities Stock Futures Account", being anticipated loss, is adjusted in the profit and loss account.

1.7 Commodities stock - futures (Continued)

d) On final settlement or squaring-up of contracts for Commodities Futures, the profit or loss is calculated as the difference between settlement / squaring-up price and contract price. Accordingly, debit or credit balance pertaining to the settled / squared-up contract in "Mark-to-Market Margin - Commodities Stock Futures Account" is recognised in the profit and loss account. When more than one contract in respect of the relevant series of commodities futures contract to which the squared-up contract pertains is outstanding at the time of the squaring-up of the contract, the contract price of the contract so squared-up is determined using weighted average method for calculating profit / loss on squaring-up.

1.8 Fixed assets and depreciation

Fixed assets are stated at cost less accumulated depreciation. The cost of fixed assets comprises of purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

The Company provides pro-rata depreciation from the month in which asset is acquired / put to use. In respect of assets sold, pro-rata depreciation is provided upto the month in which the asset is sold.

1.9 Impairment of assets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit which the asset belongs to, is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the profit and loss account. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.

1.10 Stock-in-trade

a) The securities acquired with the intention of short-term holding and trading positions are considered as stock-in- trade and disclosed as current assets.

b) The securities and commodities held as stock-in-trade under current assets are valued at lower of average cost and market value. In case of units of Mutual Funds, Net Asset Value is considered as market value.

1.11 Investments

Investments are classified into long term investments and current investments. Investments which are intended to be held for one year or more are classified as long term investments and investments which are intended to be held for less than one year are classified as current investments.

Long term investments are accounted at cost and any decline in the carrying value other than temporary in nature is provided for. Current investments are valued at cost or market / fair value, whichever is lower. In case of investments in units of a Mutual Fund, the Net Asset Value of units is considered as the market / fair value, whichever is lower.

1.12 Foreign currency transactions

Foreign currency transactions are recorded at the rates of exchange prevailing on the date of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the profit and loss account.

Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing exchange rate on that date. The exchange differences, if any, are recognised in the profit and loss account and related assets and liabilities are accordingly restated in the balance sheet except those related to acquisition of fixed assets which are adjusted in the carrying amount of the related fixed assets.

1.13 Retirement benefits

Contribution payable to the recognised provident fund, which is a defined contribution scheme, are charged to the profit and loss account in the period in which they occur.

Gratuity which is a defined benefit is accrued based on the actuarial valuation as at the balance sheet date carried out by an independent actuary.

Unused leave of staff lapses at year end and accordingly is not encashable.

1.14 Debenture redemption reserve

In terms of Section 117C of the Companies Act, 1956, amounts equivalent to the principal value of the debentures is transferred to Debenture Redemption Reserve proportionately over the term of the debentures.

1.15 Taxation

Income-tax expense comprises of current tax (i.e. amount of tax for the period determined in accordance with the Income- Tax law), deferred tax charge or credit (reflecting the tax effect of timing differences between accounting income and taxable income for the period) and fringe benefit tax.

Deferred taxation

The deferred tax charge or credit and the corresponding deferred tax liabilities and assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the asset can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of the assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written-up to reflect the amount that is reasonable / virtually certain (as the case may be) to be realised.

Fringe benefit tax

Provision for Fringe benefit tax (FBT) is made on the basis of applicable FBT on the taxable value of chargeable expenditure of the Company as prescribed under the Income Tax Act, 1961.

Securities transaction tax

Securities transaction tax (STT) to the extent allowable u/s 88E of the Income Tax Act,1961 has been included in provision for Income Tax.

1.16 Preliminary expenses

Preliminary expenses are charged to the profit and loss account in the year in which they are incurred.

1.17 Operating leases

Lease rentals in respect of operating lease are charged to the profit and loss account as per the terms of the lease arrangement on a straight line basis.

1.18 Earnings per share

The basic earnings per share is computed by dividing the net profit attributable to the equity shareholders by weighted average number of equity shares outstanding during the reporting year.

Number of equity shares used in computing diluted earnings per share comprises of the weighted average number of shares considered for deriving basic earnings per share and also weighted average number of equity shares which would have been issued on the conversion of all dilutive potential shares. In computing diluted earnings per share only potential equity shares that are dilutive are included.

1.19 Employee Stock Option Plans

Pursuant to the Guidance Note issued by the Institute of Chartered Accountants of India on Accounting for Employee Share-based Payments, the independent valuer computes the fair value of its shares using the earnings capitalization method considering weighted average adjusted profit after tax for last 3 years of all the subsidiary companies. Accordingly the difference, if any between the fair value and the issue price is charged to the profit and loss account as the compensation cost on account of Employee Stock Option Plan over the period of grant and vesting date.

1.20 Provisions and contingencies

The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed.

Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an economic benefit will arise, the asset and related income are recognised in the period in which the change occurs.

1.21 Reserve Bank of India Prudential Norms

Crossborder Investments Private Limited and ECL Finance Limited, the subsidiaries of the Company follow the guidelines issued by the Reserve Bank of India, in respect of income recognition, provisioning for non-performing assets and valuation of investments.

 
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