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Accounting Policies of Satin Creditcare Network Ltd. Company

Mar 31, 2015

1. General Information

Satin Credit care Network Limited ("The Company") is a public limited company and incorporated under the provision of the Companies Act, 1956. The Company is a non deposit accepting micro finance non banking financial company, registered as NBFC-MFI with The Reserve Bank of India ("RBI").The Company is engaged in the micro-finance activities.

1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements have been prepared under historical cost convention in accordance with the generally accepted accounting principles and the applicable accounting standards notified under Section 133 of the Companies Act,2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and relevant provision of the Companies Act, 2013 as applicable and the guidelines issued by the Reserve Bank of India. Accounting policies have been consistently applied except where a newly sieved accounting standard or a guideline is initially adopted or a revision to the existing accounting standard requires a change in the accounting policy hitherto in use. The management evaluates all recently issued or revised accounting standards on an ongoing basis.

All assets and liabilities have been classified as current or non-current as per the criteria set out in the Schedule III to the Companies Act, 2013. The Company has ascertained its operating cycle as 12 months for the purpose of current, non-current classification of assets and liabilities.

2 USE OF ESTIMATES

The preparation of financial statements is in conformity wit h the Indian Generally Accepted Accounting Principles (GAAP) and requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Any revision to accounting estimates is recognized prospective!)1 in current and future periods. Changes in estimates are reflected in the financial statements in which changes are made and their effects disclosed in the notes to the financial statements.

3. TANGIBLE ASSETS

All Tangible assets owned by the Company are stated at historic cost less accumulated depreciation. Tangible assets Juiced mi account of amalgamation are stated at the acquisition value agreed in die amalgamation agreement. Capital work in progress comprises outstanding advances paid to acquire fixed assets and the cost of fixed assets that are not ready for their intended use as at the Balance sheet date.

4. INTANGIBLE ASSETS

Intangible assets are recorded at the consideration paid for the acquisition of such assets and are carried at cost less accumulated depreciation and impairment s. Computer software cost are capitalized and amortised as prescribed in Schedule II of Companies Act 2013.

5. DEPRECIATION

Depreciation on tangible assets is provided on the Written-down method over the useful lives of assets estimated by the Management. Depreciation for assets purchased/sold during a [triad is proportionately charged. Intangible assets are amortized over their respective individual estimated useful lives on a written-down basis, commencing from the date the asset is available to the Company for its use. The Management estimates the useful lives for the other fixed assets as follows:

The useful lives of the assets has been based on the Part C of the Schedule II of the Companies Act, 2013.Depreciation and amortisation methods, useful lives and residual values are reviewed at each financial year end.

6. INVESTMENTS

(i) Investments that are readily realizable and are intended to be held for not more than one year from the date, on which these investments are made, are classified as current investments. All other investments are classified as Long term investments.

(ii) The Company values its Investments based on the accounting standard issued by the Institute of Chartered Accountants of Indians under:

a. Investment held as long-term investments is valued at cost. Provision for diminution in value is not made unless there is a permanent fall in their net realizable value.

b. Current investments are valued at lower of cost or net realizable value.

7. CURRENT ASSETS

A. Trade Receivables:

Loan portfolio comprises of Trade receivables under finance contracts with the borrowing as on the Balance Sheet date.

B. Cash and Cash Equivalents:

Cash and cash equivalents for the purposes of Cash Flow Statement comprises cash on hand, demand deposits with banks and other short term highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

Cash flows are reported using the indirect method whereby profit / (loss) before extraordinary any items and tax is adjusted for the effects of transactions of non-cash nature and any deferral s or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.

8. REVENUE RECOGNITION

(i) The Reserve Bank of India's prudential norms on income recognition and provisioning for bad and doubtful debts has been followed.

(ii) Subject to the above, specific incomes have been accounted for as under

a. Interest income on loans is recognized under the internal rate of set urn method on accrual basis except in case of non-performing assets where it is recognized upon realization as per RBI norms.

b. Interest income on deposits with bank is recognized on a time proportion accrual basis taking into account the amount outstanding and the rate applicable.

c. Loan processing fee is recognized as income on accrual basis.

d. Profit on securitization of loan portfolio through bankruptcy remote Special Purpose Vehicle (SPV) is recognized over the residual life of the securitization transaction in terms of RBI Guidelines. Profit on sale of loan assets through direct assignment, without any recourse obligation or otherwise is amortized over the residual life of the loan.Net loss, if any, arising on account of securitization and direct assignment of loan assets is recognized immediately at time of sale.

e. Miscellaneous Income: Any other Income is accounted for as and when accrued

9. ASSET CLASIFICATIION AND PROVISIONING NORMS

The Company being a NBFC-MFI adopts the following norms based on the guidelines' instructions issued by the Reserve Bank of India:-

Asset Classification Norms:-

(i) Standard asset means the asset in respect of which, no default in repayment of principal or payment of interest is perceived and which does not disclose any problem nor carry more than normal risk attached to the business;

(ii) Non Performing asset means an asset for which, interest/principal payment has remained overdue for a period of 90 days or more.

Provisioning Norms

The aggregate loan provision is maintained by the Company at any point of time shall not be less than the higher of:-

a) 1% of the outstanding loan portfolio, or

b) 50% of the aggregate loan installments which are overdue for more than 90 days and less than 180 days and 100% of the aggregate loan installments which are overdue at 180 days or more.

10. BORROWING COSTS

Borrowing costs, which are directly attributable to the acquisition /cons (ruction of fixed assets, till the time such assets are ready foreign tended use, are capitalized as a part of the cost of assets.

Borrowing costs consist of interest and other borrowing costs that the Company incurred in connection with borrowing of the funds. Interest cost is expensed off on the accrual basis. Other Incidental Borrowing Costs namely Processing Fee, Due Diligence charges and Stamp duty charges are amortized over the period of the loan. All other borrowing costs other than mentioned above are expensed in the period they arc incurred. In case any loan is prepaid/ cancelled then the unamortized borrowing cost, if any, is finally expensed of on the date of prepayment/cancellation. In case of unamortized identified borrowing cost is out standing at the year end, it is classified under loans and advances as unamortized cost of borrowings.

11. FOREIGN CURRENCY

Transactions in foreign currency are recorded at the rates of exchange prevalent on the date of transaction. Exchange difference, if any, arising from foreign currency transaction are dealt in the Statement of Profit & Loss at year end rates. Monetary items (Payables, loans etc.) denominated in foreign currency are reported using the closing exchange rate on each Balance Sheet date.

12 SHARE/ DEBUNTURE ISSUE EXPENSES

All expenses pertaining to issue of share capital (both equity and preference share capital) and Debentures are adjusted /written off with Securities premium Reserve Account, if any, after the date of allotment as per the provisions of the Companies Act,20l3.

13. PROVISIONS AND CONTINGENT LIABILITIES

Provisions involving substantial degree of estimation in measurement Are recognized when there is present obligation as a result of past events and it is probable that there will be an out flow of resources. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance sheet date and are not discounted to its present value. Further the company being a NBFC-MFI also complies with the guidelines issued by the Reserve Bank of India regarding the various provisioning norms.

Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that the outflow of resources will be required to settle or a reliable estimate of the amount cannot be made, is termed as a contingent liability. Contingent liabilities are not recognized but are disclosed in the notes. Contingent Assets are neither recognized nor disclosed in the financial statements.

14 EMPLOYEES RETIREMENT BENEFITS

Employee benefits includes provident fund, employee state insurance scheme, gratuity fund and compensated absences.

a) Short-term employee benefits including Salaries, short term compensated absences (such as a paid annual leave) where the absences are expected to occur within twelve months after the end of the period in which the employees render t he related service, profit sharing and bonuses payable within twelve months after the end of the period i n which the employees render the related services and non-monetary benefits for current employees are estimated and measured an an un-d is counted basis.

b) Defined Contribution Plan

Company's contribution paid/payable during the year to Provident Fund, Pension fund and employee state insurance scheme are recognized in the statement of Profit and Loss based on amount of contribution required to be made and when services are rendered by the employees.

c) Defined Benefit Plan

Liabilities for gratuity funded in terms of a scheme administered by the Life Insurance Corporation of India, are determined by actuarial valuation on Projected Unit Credit Method made at the end of each Balance Sheet date, provision for liabilities pending remittance to the fund is carried in the Balance Sheet.

d) Login term employee benefits

Liability for compensated absences is provided based on actuarial valuation carried out at the end of the financial period using projected unit Credit Method and is not funded. Past services cost is recognized immediately to the extent that the benefits are already used and otherwise is amortized on straight line base over the average period unit the benefits become vested. The retirement benefits obligation recognized in the balance sheet represents the present value of the defined benefits obligation as adjusted for unrecognized past service cost, as redeemed by the fair value of scheme assets.

Compensated absences which are not expected to occur within 12 months after the end of period in which the employee rendered the related services are recognized as a liability at the present value of the defined benefits obligation as at the balance sheet date.

Actuarial gains and losses are recognized immediately in the statement of Profit and Loss as income or expense in the period in which they occur. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to market yields at the Balance Sheet date on Government bonds.

15. IMPAIRMENT OF ASSETS

The Company assesses at each balance sheet date whether there is an indication that an asset may be impaired. An asset is treated at impaired when the carrying cost of assets exceeds its recoverable value. An impairment loss is charged to Statement of Profit and Loss in the year in which the asset is identified as impaired. The Impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

16. TAXATION

Tax expense for the period, comprising of current tax and decried tax are included in the determination of the net profit or loss for the period.

(i) Current tax expense is made based on the estimated tax liability as Per the appropriate provisions of the Income Tax Act, 1961 and considering the previous final assessment orders. The provision for current tax for the year will benefit off any provisions related to t hat year.

(ii) Excess/short provision of income tax relating to earlier years is disclosed separately in the accounts.

(iii) Deferred Tax Assets and Li abilities for timing differences between tax profit and book profit is accounted for using the tax rates and laws that have been enacted or substantially erected as on balance sheet date. Deferred Tax Assets are recognized to the extent there is reasonable certainty that the* assets can be realized in future. At each Balance Sheet date, the Company reassesses unrecognized deferred tax assets, if any.

(iv) Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set of assets and liabilities representing the current tax and where the deferred tax assets and deferred tax liabilities relate to taxes on income 1evied by the same governing taxation laws.

17. EARNING PER SHARE

In determining earning per share, the Company considers the net profit after tax and includes the post tax effect of any extra- ordinary exceptional item. The number of shares used in computing basic earning per share is the weighted average number of shares outstanding during the period. The number of shares used in computing diluted earnings per share comprises the weighted average shares considered for deriving basic earnings per share and also the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares. The diluted potential equity shores ore adjusted for the proceeds receivable, has the shares been actually issued at fair value. Dilutive potential equity shares are deemed converted at the beginning of the period, unless issued at a later date. The number of shares and potential dilutive equity shares are adjusted for any stock splits and bonus shares issued effected prior to the approval of the financial statements by the board of directors.

18 EMPLOYEE STOCK OPTION SCHEME(ESOS)

The Company has formulated Employee Stock Option Schemes (ESOS) in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999) as amended from time to time. These schemes provide for grant of options to employees of the Company that vest in a graded manner and that are to be exercised within a specified period. Farther, the new guidelines by Securities and Exchange Board of India (SEBI) came into force ie. SEBI (Share Based Employee Benefit) Regulations, 2014 (new regulation) according to which certain modification were required to be made in the test deed formulated under SEBI (Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999). Aj a result of new Regulations coming into effect, the earlier SEBI (Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999) Guidelines have been repealed. With the evolution of new SEBI Law, the existing Employee Welfare Trust need was realigned, so as to abide by the requirements of the new Regulations floated by the Market Regulator. Measurement and disclosure of ESOS is done in accordance with new regulation and guidance note on Accounting for employee share based payments issued by The Institute of Chartered Accountants of India. The Company measures compensation cost relating to employee stock schemes accordingly as per the guidance note. The compensation expense is recognized over the vesting period of the options on the Straight line basis.

19. LEASES

Leases in which a significant portion of the risks and rewards of ownership are retained by the Less or are classified as operating leases. Payments made under operating leases are chained to the Statement of Profit and Loss on a straight line basis over the period of lease. The Company leases certain tangible assets and such leases where the Company has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the inception of the 1 ease at the lower of the fair value of the leased as and the present value of the minimum lease payments.

20. OPERATING CYCLE

Based on the nature of activities of the Company and the normal time between acquisition of assets and their realization in cash or cash equivalents, the company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current


Mar 31, 2014

Note No.1 General Information

Satin Credit care Network Limited ("The Company") is a public limited company and incorporated under the provision of the Companies Act, 1956. The Company is a non deposit accepting micro finance non banking financial company registered as NBFC-MFI with The Reserve Bank of India ("RBI"). Its equity shares are listed at Delhi Stock Exchange Limited, Jaipur Stock Exchange Limited and Ludhiana Stock Exchange Limited. The Company is engaged in the micro-finance activities.

1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements have been prepared under historical cost convention in accordance with the generally accepted accounting principles and the applicable accounting standards notified under Section 211(3C) of the Companies Act,1956 and the amended Companies (Accounting Standards) Rules 2006, and the other relevant provisions of the Companies Act 1956(which continue to be applicable in respect of Section 133 of the Companies Act,2013 in terms of Circular 15/2013 dated 13th September,2013 and Circular no.4/2014 dated 04.04.2014 issued by the Ministry of Corporate Affairs) and the guidelines issued by the Reserve Bank of India. Accounting policies have been consistently applied except where a newly issued accounting standard or a guideline is initially adopted or a revision to the existing accounting standard requires a change in the accounting policy hitherto in use. The management evaluates all recently issued or revised accounting standards on an ongoing basis.

All assets and liabilities have been classified as current or non-current as per the criteria set out in the Schedule VI to the Companies Act, 1956. The Company has ascertained its operating cycle as 12 months for the purpose of current, non-current classification of assets and liabilities.

2. USE OF ESTIMATES

The preparation of financial statements is in conformity with the Indian Generally Accepted Accounting Principles (GAAP) and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.

3. TANGIBLE ASSETS

All Tangible assets owned by the Company are stated at historic cost less accumulated depreciation. Tangible assets acquired on account of amalgamation are stated at the acquisition value agreed in the amalgamation agreement. Capital work in progress comprises outstanding advances paid to acquire fixed assets and the cost of fixed assets that are not ready for their intended use as at the Balance sheet date.

4. INTANGIBLE ASSETS

Computer software cost are capitalized and amortized using the written down value method. Goodwill acquired on account of amalgamation is written off in equal installments over a period of five years.

5. DEPRECIATION

Depreciation is provided at the rates prescribed in Schedule XIV of the Companies Act, 1956 on written down value method. Depreciation for assets acquired on amalgamation has been charged from the effective date of merger. Fixed assets costing up to Rs. 5,000/- are fully depreciated in the year of purchase itself.

6. INVESTMENTS

(i) Investments that are readily realizable and are intended to be held for not more than one year from the date, on which these investments are made, are classified as current investments. All other investments are classified as Long term investments.

(ii) The Company values its Investments based on the accounting standard issued by the Institute of Chartered Accountants of India as under:

a. Investment held as long-term investments is valued at cost. Provision for diminution in value is not made unless there is a permanent fall in their net realizable value.

b. Current investments are valued at lower of cost or net realizable value.

7. CURRENT ASSETS

A. Trade Receivables:

Loan portfolio comprises of Trade receivables under finance contracts with the borrowers as on the Balance Sheet date.

B. Cash and Cash Equivalents:

Cash and cash equivalents for the purposes of Cash Flow Statement comprises cash on hand, demand deposits with banks and other short term highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.

8. REVENUE RECOGNITION

(i) The Reserve Bank of India's prudential norms on income recognition and provisioning for bad and doubtful debts has been followed.

(ii) Subject to the above, specific incomes have been accounted for as under:

a. Interest income on loans is recognized under the internal rate of return method on accrual basis except in case of non-performing assets where it is recognized upon realization as per RBI norms.

b. Interest income on deposits with bank is recognized on a time proportion accrual basis taking into account the amount outstanding and the rate applicable.

c. Loan processing fee is recognized as income on accrual basis.

d. Profit on securitization of loan portfolio through bankruptcy remote Special Purpose Vehicle (SPV) is recognized over the residual life of the securitization transaction in terms of RBI Guidelines. Profit on sale of loan assets through direct assignment, without any recourse obligation or otherwise is amortized over the residual life of the loan. Net loss arising on account of securitization and direct assignment of loan assets is recognized at time of sale.

e. Miscellaneous Income: DM dend Income, Miscellaneous Income is accounted for as and when accrued.

9. ASSET CLASSIFICATION AND PROVISIONING NORMS

The Company being a NBFC-MFI adopts the following norms based on the guidelines/instructions issued by the Reserve Bank of India:-

Asset Classification Norms:

(i) Standard asset means the asset in respect of which, no default in repayment of principal or payment of interest is perceived and which does not disclose any problem nor carry more than normal risk attached to the business;

(ii) Non Performing asset means an asset for which, interest/principal payment has remained overdue for a period of 90 days or more.

Provisioning Norms:

The aggregate loan provision is maintained by the Company at any point of time shall not be less than the higher of:-

a) 1% of the outstanding loan portfolio, or

b) 50% of the aggregate loan installments which are overdue for more than 90 days and less than 180 days and 100% of the aggregate loan installments which are overdue for 180 days or more.

10. BORROWING COSTS

Borrowing costs, which are directly attributable to the acquisition /construction of fixed assets, till the time such assets are ready for intended use, are capitalized as a part of the cost of assets.

Borrowing costs consist of interest and other borrowing costs that the Company incurred in connection with borrowing of the funds. Interest cost is expensed off on the accrual basis. Other Incidental Borrowing Costs namely Processing Fee, Due Diligence charges and Stamp duty charges are amortized over the period of the loan. All other borrowing costs other than mentioned above are expensed in the period they are incurred. In case any loan is prepaid/ cancelled then the unamortized borrowing cost, if any, is fully expensed off on the date of prepayment/cancellation. In case of unamortized identified borrowing cost is outstanding at the year end, it is classified under loans and advances as unamortized cost of borrowings.

11. FOREIGN CURRENCY

Transactions in foreign currency are recorded at the rates of exchange prevalent on the date of transaction. Exchange difference, if any, arising from foreign currency transaction are dealt in the Statement of Profit & Loss at year end rates.

12. SHARE/DEBENTURE ISSUE EXPENSES

All expenses pertaining to issue of share capital (both equity and preference share capital) and Debentures are adjusted / written off with Securities premium Reserve Account, if any, after the date of allotment as per the provisions of the Companies Act, 1956.

13. PROVISIONS AND CONTINGENT LIABILITIES

Provisions involving substantial degree of estimation in measurement are recognized when there is present obligation as a result of past events and it is probable that there will be an outflow of resources. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance sheet date and are not discounted to its present value. Further the company being a NBFC-MFI also complies with the guidelines issued by the Reserve Bank of India regarding the various provisioning norms.

Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that the outflow of resources will be required to settle or a reliable estimate of the amount cannot be made, is termed as a contingent liability. Contingent liabilities are not recognized but are disclosed in the notes. Contingent Assets are neither recognized nor disclosed in the financial statements.

14. EMPLOYEE RETIREMENT BENEFITS

Contributions to Provident Fund and Employee State Insurance are being paid and accounted as per the respective rules and debited to Statement of Profit and Loss. The Company has no further obligations beyond its monthly contributions.

Employees Gratuity liability has been calculated and managed through a trust by the Life Insurance Corporation of India. As per the valuation conducted by the insurance company the shortfall is paid as the premium for the year and which is debited as an expense in the Statement of Profit and Loss.

Provision for encashment of leave is being made on the basis of actuarial valuation made at the end of each financial year and is charged to Statement of Profit and Loss.

15. IMPAIRMENT OF ASSETS

The Company assesses at each balance sheet date whether there is an indication that an asset may be impaired. An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. An impairment loss is charged to Statement of Profit and Loss in the year in which the asset is identified as impaired. The Impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

16. TAXATION

Tax expense for the period, comprising of current tax and deferred tax are included in the determination of the net profit or loss for the period.

(i) Current tax expense is made based on the estimated tax liability as per the appropriate provisions of the Income Tax Act, 1961 and considering the previous final assessment orders. The provision for current tax for the year will be net off any provisions related to that year.

(ii) Excess/short provision of income tax relating to earlier years is disclosed separately in the accounts.

(iii) Deferred Tax Assets and Liabilities for timing differences between tax profit and book profit is accounted for using the tax rates and laws that have been enacted or substantially enacted as on balance sheet date. Deferred Tax Assets are recognized to the extent there is reasonable certainty that these assets can be realized in future. At each Balance Sheet date, the Company reassesses unrecognized deferred tax assets, if any.

(iv) Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets and liabilities representing the current tax and where the deferred tax assets and deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.

17. EARNING PER SHARE

In determining earning per share, the Company considers the net profit after tax and includes the post tax effect of any extra- ordinary / exceptional item. The number of shares used in computing basic earning per share is the weighted average number of shares outstanding during the period. The number of shares used in computing diluted earnings per share comprises the weighted average shares considered for deriving basic earnings per share and also the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares. The diluted potential equity shares are adjusted for the proceeds receivable, had the shares been actually issued at fair value. Dilutive potential equity shares are deemed converted at the beginning of the period, unless issued at a later date. The number of shares and potential dilutive equity shares are adjusted for any stock splits and bonus shares issued effected prior to the approval of the financial statements by the board of directors.

18. EMPLOYEE STOCK OPTION SCHEME (ESOS)

The Company has formulated Employee Stock Option Schemes (ESOS) in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Guidelines, 1999) as amended from time to time. These schemes provide for grant of options to employees of the Company that vest in a graded manner and that are to be exercised within a specified period. Measurement and disclosure of ESOS is done in accordance with guidance note on Accounting for employee share based payments issued by The Institute of Chartered Accountants of India. The Company measures compensation cost relating to employee stock schemes accordingly as per the guidance note. The compensation expense is recognized over the vesting period of the options on the straight line basis.

19. LEASES

Leases in which a significant portion of the risks and rewards of ownership are retained by the Lessor are classified as operating leases. Payments made under operating leases are charged to the Statement of Profit and Loss on a straight line basis over the period of lease. The Company leases certain tangible assets and such leases where the Company has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the inception of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments.

20. OPERATING CYCLE

Based on the nature of activities of the Company and the normal time between acquisition of assets and their realization in cash or cash equivalents, the company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non current

 
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