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Accounting Policies of IFCI Ltd. Company

Mar 31, 2015

1. Basis of Preparation of Financial Statements

The accompanying financial statements have been prepared on accural basis under historical cost convention, and conform in all material aspects to the Generally Accepted Accounting Principles in India which encompasses applicable accounting standards relevant provisions of the Companies Act, 2013, the applicable guidelines issued by the Reserve Bank of India (RBI) for Non-Banking Financial Companies, other statutory provisions and regulatory framework.

2. Use of Estimates

The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

3. Revenue Recognition

(a) Interest and other dues are recognized on accrual basis except in the case of income on Non-Performing Assets (NPAs) which is recognized, as and when received, as per the prudential norms prescribed by the RBI for Non-Banking Financial Companies.

(b) Front-end fees, Premium on pre-payment of loans/reduction in interest rates and LC Commission are accounted for on cash basis.

(c) Dividends declared by the respective Companies till the close of the accounting period are accounted for as income.

(d) Rental on leased assets is accounted for from the commencement date, as prescribed in the lease agreement entered with the lessees.

(e) The front-end fees/underwriting commission/commitment fee received in respect of devolvement of underwriting and direct subscription is reduced from the cost of related investments.

(f) Interim returns by promoter/promoter group companies at a pre-agreed rate of return, as per buy-back agreements, on certain equity investments are taken to income on receipt basis.

(g) Surplus/gains on sale of investments is net of losses thereon.

4. Investments

(a) Investments are classified under two categories i.e. current and long term and are valued in accordance with the RBI Guidelines as applicable to Non-Banking Financial Companies (NBFCs).

(i) ''Long term Investments'' are carried at acquisition cost. The RBI Guidelines prescribe Accounting Standard 13 on Accounting for Investments'' for valuation of long-term investments. Accordingly, provision is made for diminution other than temporary on an individual basis. However, long term investment in equity shares with firm buy- back commitment are assessed for diminution other than temporary only when there is a default in buy-back commitment by the promoter/promoter group and provision is made accordingly on individual basis.

(ii) ''Current Investments'' are carried at the lower of cost or fair value on an individual basis. However, appreciation if any, within the category, is available for set off.

(b) Security Receipts issued by an Asset Reconstruction Company (ARC)/Securitization Company (SC) are valued in accordance with RBI guidelines. Accordingly, the net asset value (NAV is considered net of management fee & other expenses) obtained from the ARC is reckoned for valuation of such investments. Appreciation in the value, if any, is ignored and depreciation is provided for.

(c) Bonds in the nature of current investment are valued in accordance with the calculators provided on the FIMMDA platform for the purpose.

5. Derivatives

(a) Equity Index/Stock Futures and Currency Futures are marked to market on daily basis. Debit or Credit Balances disclosed under Current Assets or Current liabilities respectively represent the net amount paid or received on the basis of movement of prices in the Index/Stock Futures and Currency Futures till the Balance Sheet date. Equity Index/Stock Options are recognized in the books to the extent of premium paid.

(b) As at the Balance Sheet date, the profit or loss on open positions are accounted for as follows:

The unrealized profit determined Scrip wise/Index wise, being anticipated profit, is ignored and no credit is taken in the statement of profit and loss.

The unrealized loss determined Scrip wise/Index wise, being anticipated loss, is recognized in the statement of profit and loss. Equity Index/Stock Options are carried at cost where they are used as an instrument for hedging.

(c) On final settlement or squaring-up of contracts for Equity Index/Stock Futures, the profit or loss is calculated as difference between settlement/squaring-up price and contract price. Accordingly, debit or credit balance pertaining to the settled/squared-up contract is recognized as profit or loss upon expiry/squaring-up of the contracts. When more than one contract in respect of the relevant series of Equity Index/Stock 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.

(d) Initial and additional margin paid 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 under Current Assets.

6. Foreign Exchange Transactions

(a) The expenses and income in foreign exchange transactions are accounted for at the rates prevailing on the date of transactions/at the forward rate, if booked, for such transaction.

(b) Assets and liabilities held in foreign currencies and accrued income and expenditure in foreign currencies are translated into Indian Rupees at the rates advised by Foreign Exchange Dealers Association of India (FEDAI) prevailing towards the close of the accounting period. Gains/losses, if any, on valuation of various assets and liabilities are taken to Statement of Profit & Loss.

7. Tangible Fixed Assets and Depreciation

(a) Fixed Assets are carried at cost (including capitalized interest) less accumulated depreciation and impairment loss, if any. Residual value in respect of Buildings and Vehicles is considered as 5% of the cost and in case of other assets Rs. ''Nil''.

(b) Depreciation is provided on the Straight Line Method (SLM) over the useful life of the assets as prescribed under Schedule II to the Companies Act, 2013. The ''Written Down Value'' (WDV) of the fixed assets having remaining useful life as on March 31, 2015 is being depreciated over such remaining useful life on SLM basis.

(c) Depreciation on revalued amount of Leasehold Land & Buildings is provided on SLM basis over the remaining useful life of asset as on March 31, 2015. An amount equivalent to the ''depreciation on revalued amount'' provided during the period is withdrawn from the revaluation reserve and adjusted against the depreciation cost in Profit & Loss A/c.

(d) Leasehold land is amortized over the lease period on SLM basis.

8. Intangible Assets and Amortization

Intangible assets are recognized at cost of acquisition. Cost of acquisition includes all expenditure that can be directly attributed or allocated on a reasonable and consistent basis, to create, produce or making the asset ready for its intended use.

Intangible assets include computer software having perpetual license and are amortized on Straight Line Method over the period of six year from the date of capitalization.

9. Impairment of Assets

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value and impairment loss is charged to the P&L statement in the year in which an asset is identified as impaired. The impairment loss recognised in earlier accounting period is reversed if there has been a change in the estimates of recoverable amount.

10. Provisions/Write off against Loans and Other Credit Facilities

(a) All credit exposures are classified into performing and non-performing assets (NPAs) as per the RBI Guidelines as applicable to Non- Banking Financial Companies. Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI. Provisions are made on standard, sub-standard and doubtful assets at rates prescribed by RBI. Loss assets and unsecured portion of doubtful assets are fully provided/written off as per the extant RBI guidelines. Additional provisions are made against specific non-performing assets over and above what is stated above, if in the opinion of the management, increased provisions are necessary.

(b) For restructured/rescheduled assets, provision is made in accordance with the amended guidelines issued by RBI.

(c) Recovery against debts written off/provided for is credited to revenue. Income is recognized where amounts are either recovered and/ or adjusted against securities/properties or advances there-against or are considered recoverable in terms of RBI Guidelines.

(d) Provision in respect of purchase and sale of NPAs is accounted as per guidelines prescribed by RBI.

11. Borrowing Cost

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use.

All other borrowing costs are charged to revenue.

12. Leases

Lease arrangements where the risks and rewards incidental to the ownership of an asset vest substantially with the lessor are recognized as operating leases. Lease rent under operating leases are recognized in the Profit & Loss Statement with reference to the lease terms.

13. Miscellaneous Expenditure

Expenses on issue of Shares and Debentures/Bonds are charged to Securities Premium Reserve in accordance with Section 52 of Companies Act, 2013.

14. Employee Benefits

(a) Monthly contributions to the Provident Fund being in the nature of defined contribution is charged against revenue. The Provident Fund is administered through duly constituted and approved administrators.

(b) Prior to 01.04.2008, the employees were governed by the provisions of the pension scheme in operation at the time of their retirement and are accordingly entitled to DA relief and family pension as and when due. The contribution made on account of same is charged to revenue as and when due. The Company switched to defined contribution scheme for employees existing on 01.04.2008 and opting for the same. The administration of Pension Fund in respect of the employees has been entrusted by Trustees to Life Insurance Corporation of India (LIC) by entering into a Group Superannuation Cash Accumulation Scheme.

(c) The Company has a defined benefit employee scheme in the form of Gratuity. The Trustees of the scheme have entrusted the administration of related fund to LIC. Expense for the year is determined on the basis of actuarial valuation of the Company''s year- end obligation in this regard and the value of year end assets of the scheme. Contribution is deposited with LIC based on intimation received by the Company.

(d) Provision for leave encashment is being made on actuarial valuation basis.

(e) The Company has a post-retirement medical benefit scheme for employees and their dependants subject to certain limits for hospitalization and normal medical treatment. The amount is charged to the Staff Welfare Fund as and when incurred.

15. Employee Stock Option Plan

The Company had formulated Employee Stock Option Schemes (ESOS) in 2011-12 in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The Schemes provided for grant of options to employees (including employees deputed in subsidiaries/associates/joint ventures) to acquire equity shares of the Company that vest in a graded manner and that are to be exercised within a specified period. In accordance with the SEBI Guidelines, the excess, if any, of the closing market price on the day prior to the grant of the options under ESOS over the exercise price was amortized on a straight-line basis over the vesting period.

16. Income Taxation

Tax Expense comprises of current & deferred tax. Current tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act. Deferred Tax is recognized, subject to consideration of prudence, on timing differences, being difference between taxable income and accounting income/expenditure that originate in one period and are capable of reversal in one or more subsequent year(s). Deferred taxes are reviewed for their carrying values at each balance sheet date.

17. Provisions and Contingencies

Provisions are recognized when the Company has a legal and constructive obligation as a result of a past event, for which it is probable that cash outflow will be required and a reliable estimate can be made of the amount of the obligation. Contingent liabilities are disclosed when the Company has a possible or present obligation where the probability of occurrence of outflow of resources cannot be ascertained to settle the same. Contingent assets are neither recognized nor disclosed.

18. Cash and Cash equivalent

Cash and cash equivalents include balance with banks in current accounts and term deposits, cash & cheques in hand and money lent on collateralized lending & borrowing obligations transactions.


Mar 31, 2014

1. Basis of Preparation of Financial Statements

The accompanying financial statements have been prepared on a historical cost convention, and conform in all material aspects to the Generally Accepted Accounting Principles in India which encompasses applicable accounting standards notified by the Companies (Accounting Standards) Rules, 2006, relevant provisions of the Companies Act, 1956 the applicable guidelines issued by the Reserve Bank of India (RBI) for Non-Banking Financial Companies, other statutory provisions and regulatory framework. The Company adopts the accrual concept in the preparation of accounts. The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

2. Revenue Recognition

(a) Interest and other dues are recognized on accrual basis except in the case of income on Non-Performing Assets (NPAs) which is recognized, as and when received, as per the prudential norms prescribed by the RBI for Non-Banking Financial Companies.

(b) Front-end fees, Premium on pre-payment of loans/reduction in interest rates and LC Commission are accounted for on cash basis.

(c) Dividends declared by the respective Companies till the close of the accounting period are accounted for as income.

(d) Rental on leased assets is accounted for from the commencement date, as prescribed in the lease agreement entered with the lessees.

(e) The front-end fees/underwriting commission/commitment fee received in respect of devolvement of underwriting and direct subscription is reduced from the cost of related investments.

(f) Interim returns by promoter/promoter group companies at a pre-agreed rate of return, as per buy-back agreements, on certain equity investments are taken to income on receipt basis.

(g) Surplus/gains on sale of investments is net of losses thereon.

3. Investments

(a) Investments are classified under two categories i.e. current and long term and are valued in accordance with the RBI Guidelines as applicable to Non-Banking Financial Companies (NBFCs).

(i) ''Long term Investments'' are carried at acquisition cost. The RBI Guidelines prescribe Accounting Standard 13 on ''Accounting for Investments'' for valuation of long-term investments. Accordingly, provision is made for diminution other than temporary on an individual basis. However, long term investment in equity shares with firm buy- back commitment are assessed for diminution other than temporary only when there is a default in buy-back commitment by the promoter/promoter group and provision is made accordingly on individual basis.

(ii) ''Current Investments'' are carried at the lower of cost or fair value on an individual basis. However, appreciation if any, within the category, is available for set off.

(b) Security Receipts issued by an Asset Reconstruction Company (ARC)/Securitisation Company (SC) are valued in accordance with RBI guidelines. Accordingly, the net asset value obtained from the ARC is reckoned for valuation of such investments. Appreciation in the value, if any, is ignored and depreciation is provided for.

(c) Bonds in the nature of current investment are valued in accordance with the calculators provided on the FIMMDA platform for the purpose.

4. Derivatives

(a) Equity Index/Stock Futures and Currency Futures are marked to market on daily basis. Debit or Credit Balances disclosed under Current Assets or Current liabilities respectively represent the net amount paid or received on the basis of movement of prices in the Index/ Stock Futures and Currency Futures till the Balance Sheet date. Equity Index/Stock Options are recognized in the books to the extent of premium paid.

(b) As at the Balance Sheet date, the profit or loss on open positions are accounted for as follows:

– The unrealized profit determined Scrip wise/Index wise, being anticipated profit, is ignored and no credit is taken in the statement of profit and loss. – The unrealized loss determined Scrip wise/Index wise, being anticipated loss, is recognized in the statement of profit and loss. – Equity Index/Stock Options are carried at cost where they are used as an instrument for hedging.

(c) On final settlement or squaring-up of contracts for Equity Index/Stock Futures, the profit or loss is calculated as difference between settlement/ squaring-up price and contract price. Accordingly, debit or credit balance pertaining to the settled/ squared-up contract is recognized as profit or loss upon expiry/squaring-up of the contracts. When more than one contract in respect of the relevant series of Equity Index/Stock 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.

(d) Initial and additional margin paid 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 under Current Assets.

5. Foreign Exchange Transactions

(a) The expenses and income in foreign exchange transactions are accounted for at the rates prevailing on the date of transactions/at the forward rate, if booked, for such transaction.

(b) Assets and liabilities held in foreign currencies and accrued income and expenditure in foreign currencies are translated into Indian Rupees at the rates advised by Foreign Exchange Dealers Association of India (FEDAI) prevailing towards the close of the accounting period. Gains/losses, if any, on valuation of various assets and liabilities are taken to Statement of Profit & Loss.

6. Tangible Fixed Assets and Depreciation

(a) Fixed Assets are carried at cost (including capitalized interest) less accumulated depreciation and impairment loss, if any.

(b) Depreciation on assets given on lease is provided on Straight Line Method (SLM) over the useful life of the asset as prescribed under Schedule XIV to the Companies Act, 1956 or over the primary period of lease of assets, whichever is higher.

(c) Leasehold Land is amortized over the lease period.

(d) Depreciation on increase in the value of Leasehold Land & Building due to revaluation is provided on straight-line basis over the balance useful life of asset. An equal amount is withdrawn from the revaluation reserve and adjusted against the depreciation on revalued value of assets.

(e) Leasehold Improvements are amortized over the remaining lease period.

(f) Mobile phones are fully depreciated in the year of acquisition itself.

(g) Depreciation on all other assets is provided on the Written Down Value (WDV) method at the rates prescribed under Schedule XIV to the Companies Act, 1956 except in respect of Office Building and Plant & Machinery at Corporate Office which is provided on SLM.

(h) Depreciation is calculated on a pro-rata basis, including the month of addition and excluding the month of sale/disposal. Assets having individual value of less than Rs. 5,000/- are charged to the Statement of Profit & Loss in the year of purchase.

7. Intangible Assets and Amortization

Intangible assets are recorded at the consideration paid for acquisition. Consideration includes all expenditure that can be directly attributed or allocated on a reasonable and consistent basis, to create, produce or making the asset ready for its intended use.

Intangible assets include computer software having perpetual license and are amortized @40% per annum on Written Down Value (WDV) method under Schedule XIV of the Companies Act, 1956.

8. Impairment of Assets

Impairment loss is provided to the extent the carrying amount of assets exceeds their recoverable amounts. Recoverable amount is the higher of an asset''s net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Net selling price is the amount obtainable from sale of the asset in an arm''s length transaction between knowledgeable, willing parties, less the costs of disposal. If at the balance sheet date, there is an indication that a previously assessed impairment loss no longer exists, then such loss is reversed and the asset is restated to the extent of the carrying value of the asset that would have been determined (net of amortization/depreciation), had no impairment loss been recognized.

9. Provisions/Write off against Loans and Other Credit Facilities

(a) All credit exposures are classified into performing and non-performing assets (NPAs) as per the RBI Guidelines as applicable to Non- Banking Financial Companies. Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI. Provisions are made on standard, sub-standard and doubtful assets at rates prescribed by RBI. Loss assets and unsecured portion of doubtful assets are provided/written off as per the extant RBI guidelines. Additional provisions are made against specific non-performing assets over and above what is stated above, if in the opinion of the management, increased provisions are necessary.

(b) For restructured/rescheduled assets, provision is made in accordance with the amended guidelines issued by RBI.

(c) Recovery against debts written off/provided for is credited to revenue. Income is recognized where amounts are either recovered and/ or adjusted against securities/properties or advances there-against or are considered recoverable in terms of RBI Guidelines.

(d) Provision in respect of purchase and sale of NPAs is accounted as per guidelines prescribed by RBI.

10. Grants received from Government of India Under Interest Differential Fund (IDF)

Grants received from Government of India under Interest Differential Fund (IDF) is of a capital nature and to be utilized for specified purposes for promotional activities of Industrial Development. Accordingly, the money so received, is shown under ''Reserves and Surplus'' in the Balance Sheet. The amounts invested and loans made out of the fund for approved purposes are shown under ''Investments'' and ''Loans'' respectively.

11. Borrowing Cost

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use. All other borrowing costs are charged to revenue.

12. Leases

Lease arrangements where the risks and rewards incidental to the ownership of an asset vest substantially with the lessor are recognized as operating leases. Lease rent under operating leases are recognized in the Profit & Loss Statement with reference to the lease terms.

13. Miscellaneous Expenditure

Expenses on issue of Shares and Debentures/Bonds are charged to Securities Premium Reserve in accordance with Section 78 of Companies Act, 1956.

14. Employee Benefits

(a) Monthly contributions to the Provident Fund being in the nature of defined contribution is charged against revenue. The Provident Fund is administered through duly constituted and approved administrators.

(b) Prior to 01.04.2008, the employees were governed by the provisions of the pension scheme in operation at the time of their retirement and are accordingly entitled to DA relief and family pension as and when due. The contribution made on account of same is charged to revenue as and when due. The Company switched to defined contribution scheme for employees existing on 01.04.2008 and opting for the same. The administration of Pension Fund in respect of the employees has been entrusted by Trustees to Life Insurance Corporation of India (LIC) by entering into a Group Superannuation Cash Accumulation Scheme.

(c) The Company has a defined benefit employees scheme in the form of Gratuity. The Trustees of the scheme have entrusted the administration of related fund to LIC. Expense for the year is determined on the basis of actuarial valuation of the Company''s year-end obligation in this regard and the value of year end assets of the scheme. Contribution is deposited with LIC based on intimation received by the Company.

(d) Provision for leave encashment is being made on actuarial valuation basis.

(e) The Company has a post retirement medical benefit scheme for employees and their dependants subject to certain limits for hospitalization and normal medical treatment. The amount is charged to the Staff Welfare Fund as and when incurred.

15. Employee Stock Option Plan

The Company had formulated Employee Stock Option Schemes (ESOS) in 2011-12 in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The Schemes provided for grant of options to employees (including employees deputed in subsidiaries/associates/joint ventures) to acquire equity shares of the Company that vest in a graded manner and that are to be exercised within a specified period. In accordance with the SEBI Guidelines, the excess, if any, of the closing market price on the day prior to the grant of the options under ESOS over the exercise price was amortised on a straight-line basis over the vesting period.

16. Taxation

Tax Expense comprises of current & deferred income tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act. Deferred Ta x is recognized, subject to consideration of prudence, on timing differences, being difference between taxable income and accounting income/expenditure that originate in one period and are capable of reversal in one or more subsequent year(s). Deferred taxes are reviewed for their carrying values at each balance sheet date.

17. Provisions and Contingencies

Provisions are recognized when the Company has a legal and constructive obligation as a result of a past event, for which it is probable that cash outflow will be required and a reliable estimate can be made of the amount of the obligation. Contingent liabilities are disclosed when the Company has a possible or present obligation where the probability of occurrence of outflow of resources cannot be ascertained to settle the same. Contingent assets are neither recognized nor disclosed.

1.5 Employees Stock Option Scheme

The Company had, during the financial year 2011-12, granted options for 71,96,993 shares under Employees Stock Option Scheme 2011, subject to the vesting conditions mentioned in the Scheme. During the current year, the Board in its meeting dated November 12, 2013 has withdrawn the scheme, subject to all the regulatory compliances required in this regard and no further vesting under the scheme shall be held. Pending such compliances, the granted options that have not vested under the scheme, have not been cancelled.


Mar 31, 2011

1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The accompanying financial statements have been prepared on historical basis and conform in all material aspects to Generally Accepted Accounting Principles in India which encompasses applicable statutory provisions, regulatory framework and Accounting Standards. The Company adopts the accrual concept in the preparation of accounts. The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

2. REVENUE RECOGNITION

2(a) Income on Non-Performing Assets (NPAs) is recognized, as and when received.

2(b) Front-end fee, Premium on pre-payment of loans/reduction in interest rates and LC Commission are accounted for on realization basis.

2(c) Dividends declared by the respective companies till the close of the accounting period are accounted for as income, once the right to receive is established.

2(d) Rental on leased assets is accounted for from the commencement date, as prescribed in the lease agreement entered with the lessees. In respect of lease transactions commenced on/or before 31.03.2001, income from leases (except in case of Non-Performing Assets) is recognized on the basis of implicit rate in the lease to the net investment outstanding on the lease over the primary lease period.

2(e) The front-end fee/underwriting commission/commitment fee received in respect of devolvement of underwriting and direct subscription is reduced from the cost of related investments.

2(f) Surplus on sale of investments is net of losses thereon.

3. INVESTMENTS

3(a) Investments are classified under current and long term categories and valued in accordance with the Reserve Bank of India (RBI) Guidelines as applicable to Non- Banking Financial Companies (NBFCs) and Accounting Standard-13 on 'Accounting for Investments' issued by The Institute of Chartered Accountants of India (ICAI).

(i) 'Long term Investments' are carried at acquisition cost. A provision is made for diminution other than temporary on an individual basis.

(ii) 'Current Investments' are carried at the lower of cost or fair value on an individual basis. However, appreciation if any, within the category, is available for set off.

3(b) Security Receipts issued by an Asset Reconstruction Company (ARC)/ Securitisation Company (SC) are valued in accordance with RBI guidelines. Accordingly, the net asset value obtained from the ARC is reckoned for valuation of such investments. Appreciation in the value, if any, is ignored and depreciation is provided for.

4. DERIVATIVES

4(a) Equity Index/Stock Futures are marked to market on daily basis. Debit or Credit Balances disclosed under Current Assets or Current liabilities respectively represent the net amount paid or received on the basis of movement of prices in the Index Stock Futures till the Balance Sheet date. Equity Index/Stock Options are recognized in the books to the extent of premium paid.

4(b) As at the Balance Sheet date, the profit or loss on open positions are accounted for as follows:

- The unrealized profit determined Scrip wise/Index wise, being anticipated profit, is ignored and no credit is taken in the profit and loss account.

- The unrealized loss determined Scrip wise/Index wise, being anticipated loss, is recognized in the profit and loss account.

- Equity Index/Stock Options are carried at cost where they are used as an instrument for hedging.

4(c) On final settlement or squaring-up of contracts for Equity Index/Stock Futures, the profit or loss is calculated as difference between settlement/squaring-up price and contract price. Accordingly, debit or credit balance pertaining to the settled/ squared-up contract is recognized as profit or loss upon expiry/squaring-up of the contracts. When more than one contract in respect of the relevant series of Equity Index/Stock 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.

4(d) Initial and additional margin paid 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 under Current Assets.

5. FOREIGN EXCHANGE TRANSACTIONS

5(a) The expenses and income in foreign exchange transactions are accounted for at the rates prevailing on the date of transactions/at the forward rate, if booked, for such transaction.

5(b) Assets and liabilities held in foreign currencies and accrued income and expenditure in foreign currencies are translated into Indian Rupees at the rates advised by Foreign Exchange Dealers Association of India (FEDAI) prevailing towards the close of the accounting period. Gains/losses, if any, on valuation of various assets and liabilities are taken to Profit & Loss Account.

6. FIXED ASSETS AND DEPRECIATION

6(a) Fixed Assets are carried at cost (including capitalized interest) less accumulated depreciation and impairment loss, if any. Accumulated depreciation on assets in respect of lease transactions commenced on or before 31.03.2001 is adjusted for the balance in the 'Accumulated Lease Equalization Account'.

6(b) Depreciation on assets given on lease is provided on Straight Line Method (SLM) at the rates prescribed under Schedule XIV to the Companies Act, 1956 or over the primary period of lease of assets, whichever is higher.

6(c) Depreciation in respect of Office Building and Plant & Machinery at Corporate Office is provided on SLM and on all other assets on the Written Down Value (WDV) method at the rates prescribed under Schedule XIV to the Companies Act, 1956. Assets having individual value of less than Rs. 5000/- are charged to the Profit & Loss Account in the year of purchase.

6(d) Leasehold land is amortized over the lease period.

6(e) Depreciation on increase in value of Leasehold Land & Building due to revaluation is provided on straight-line basis over the balance useful life of asset and adjusted out of revaluation reserve.

6(f) Mobile phones are fully depreciated in the year of acquisition itself.

6(g) Art works capitalized under Furniture and Fixtures are not being depreciated.

7. IMPAIRMENT OF ASSETS

Impairment loss is provided to the extent the carrying amount of assets exceeds their recoverable amounts. Recoverable amount is the higher of an asset's net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Net selling price is the amount obtainable from sale of the asset in an arm's length transaction between knowledgeable, willing parties, less the costs of disposal. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exits, then such loss is reversed and the asset is restated to the extent of the carrying value of the asset that would have been determined (net of amortization/depreciation), had no impairment loss been recognized.

8. PROVISIONS/WRITE OFF AGAINST LOANS AND OTHER CREDIT FACILITIES

8(a) All credit exposures are classified into performing and non-performing assets (NPAs) as per the RBI Guidelines. Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI. Provisions are made on standard, sub-standard and doubtful assets at rates prescribed by RBI. Loss assets and unsecured portion of doubtful assets are provided/written off as per the extant RBI guidelines. Additional provisions are made against specific non-performing assets over and above what is stated above, if in the opinion of the management, increased provisions are necessary.

8(b) For restructured/rescheduled assets, provision is made in accordance with the guidelines issued by RBI.

8(c) Recovery against debts written off/provided for is credited to revenue. Income is recognized where amounts are either recovered and/ or adjusted against securities/ properties or advances there-against or are considered recoverable in terms of RBI Guidelines.

8(d) Provision in respect of purchase and sale of NPAs is accounted as per guidelines prescribed by RBI.

9. GRANTS RECEIVED FROM GOVERNMENT OF INDIA UNDER INTEREST DIFFERENTIAL FUND (IDF)

Grants received from Government of India under Interest Differential Fund (IDF) is of a capital nature and to be utilized for specified purposes for promotional activities of Industrial Development. Accordingly, the money so received, net of expenditure for the approved purposes is shown under 'Reserves and Surplus' in the Balance Sheet. The amounts invested and loans made out of the fund for approved purposes are shown under 'Investments' and 'Loans' respectively.

10. BORROWING COST

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets.

A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use. All other borrowing costs are charged to revenue.

11. MISCELLANEOUS EXPENDITURE

11(a) Expenses on issue of Shares and Bonds are charged as per guidelines contained in Accounting Standard 26 - "Intangible Assets".

11(b) Voluntary Retirement Scheme (VRS) expenses are charged off as and when incurred.

12. EMPLOYEE BENEFITS

12(a) Monthly contributions to the Retirement Funds viz. Provident Fund and Pension Fund being in the nature of defined contribution is charged against revenue. The Provident Fund is administered through duly constituted and approved administrators. The administration of Pension Fund in respect of existing employees opting for the same has been entrusted by Trustees to Life Insurance Corporation of India (LIC) by entering into a Group Superannuation Cash Accumulation Scheme. The existing pension optees, however, continue to be governed by the provisions of the scheme in operation at the time of their retirement and are accordingly entitled to DA relief and family pension as and when due. The contribution made on account of same is charged to Accounts as and when due.

12(b) The Company has a defined benefit employees scheme in the form of Gratuity. The Trustees of the scheme have entrusted the administration of related fund to LIC. Expense for the year is determined on the basis of actuarial valuation of the Company's year-end obligation in this regard and the value of year end assets of the scheme. Contribution is deposited with LIC based on intimation received by the Company.

12(c) The Company has a post retirement medical benefit scheme for employees and their dependants subject to certain limits for hospitalization and normal medical treatment. The same is charged against revenue as and when incurred.

13. TAXATION

Tax Expense comprises of current & deferred income tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act. Deferred Tax is recognized, subject to consideration of prudence, on timing differences, being difference between taxable income and accounting income/ expenditure that originate in one period and are capable of reversal in one or more subsequent year(s). Deferred taxes are reviewed for their carrying values at each balance sheet date.

14. PROVISIONS AND CONTINGENCIES

Provisions are recognized when the Company has a legal and constructive obligation as a result of a past event, for which it is probable that cash outflow will be required and a reliable estimate can be made of the amount of the obligation. Contingent liabilities are disclosed when the Company has a possible or present obligation where it is not probable that an outflow of resources will be required to settle it. Contingent assets are neither recognized nor disclosed.

 
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