Accounting Policies of Indiabulls Housing Finance Ltd. Company
Mar 31, 2023
1 Corporate information
Indiabulls Housing Finance Limited ("the Company") ("IBHFL") ("IHFL") is a public limited Company domiciled in India with its registered office at Building No. 27, 5th Floor, KG Marg, New Delhi-110001. The Company is engaged in the business to provide finance and to undertake all lending and finance to any person or persons, co-operative society, association of persons, body of individuals, companies, institutions, firms, builders, developers, contractors, tenants and others either at interest or without and/or with or without any security for construction, erection, building, repair, remodelling, development, improvement, purchase of houses, apartments, flats, bungalows, rooms, huts, townships and/or other buildings and real estate of all descriptions or convenience there on and to equip the same or part thereof with all or any amenities or conveniences, drainage facility, electric, telephonic, television, and other installations, either in total or part thereof and /or to purchase any free hold or lease hold lands, estate or interest in any property and such other activities as may be permitted under the Main Objects of the Memorandum of Association of the Company.
The Board of Directors of Indiabulls Housing Finance Limited (100% subsidiary of "IBFSL") and Indiabulls Financial Services Limited ("IBFSL", "Erstwhile Holding Company") at their meeting held on April 27, 2012 had approved the Scheme of Arrangement involving the reverse merger of IBFSL with the Company in terms of the provisions of Sections 391 to 394 of the Companies Act, 1956 (the "Scheme of Arrangement"). The Appointed Date of the proposed merger fixed under the Scheme of Arrangement was April 1, 2012. The Hon''ble High Court of Delhi, vide its Order dated December 12, 2012, received by the Company on February 8, 2013, approved the Scheme of Arrangement. In terms of the Court approved Scheme of Arrangement, with the filing of the copy of the Order, on March 8, 2013, with the office of ROC, NCT of Delhi & Haryana (the Effective Date), IBFSL, as a going concern, stands amalgamated with IBHFL with effect from the Appointed Date, being April 1, 2012.
Indiabulls Financial Services Limited ("IBFSL") was incorporated on January 10, 2000 as a Private Limited Company. On March 30, 2001, the Company was registered under Section 45-IA of the Reserve Bank of India (RBI) Act, 1934 to carry on the business of a Non-Banking Financial Company. The Company was converted into a public limited Company pursuant to Section 44 of the Companies Act, 1956 on February 03, 2004.
The Company was incorporated on May 10, 2005. On December 28, 2005 the Company was registered under Section 29A of the National Housing Bank Act, 1987 to commence / carry on the business of a Housing Finance
Institution without accepting public deposits. The Company is required to comply with provisions of the National Housing Bank Act, 1987, the Housing Finance Companies (NHB) Directions, 2010 (as amended from time to time), Master Direction - Non Banking Financial Company - Housing Finance Company ("NBFC-HFC") (Reserve Bank) Directions, 2021 ("Master Directions") and other guidelines / instructions / circulars issued by the National Housing Bank from time to time.
The standalone financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) along with other relevant provisions of the Act, the Master Direction - Non-Banking Financial Company - Housing Finance Company (Reserve Bank) Directions, 2021, RBI/2020-21/73 DOR.FIN.HFC.CC.No.120/03.10.136/2020-21,
17 February, 2021 (''the RBI Master Directions'') and notification for Implementation of Indian Accounting Standard vide circular RBI/2019-20/170 DOR(NBFC). CC.PD.No.109/22.10.106/2019-20 dated 13 March 2020 (''RBI Notification for Implementation of Ind AS'') issued by Reserve Bank of India (RBI). These standalone financial statements have been approved by the Board of Directors and authorized for issue on 22 May 2023.
The standalone financial statements have been prepared on a historical cost basis, except for fair value through other comprehensive income (FVOCI) instruments, derivative financial instruments, other financial assets held for trading and financial assets and liabilities designated at fair value through profit or loss (FVTPL), all of which have been measured at fair value. Further the carrying values of recognised assets and liabilities that are hedged items in fair value hedges, and otherwise carried at amortised cost, are adjusted to record changes in fair value attributable to the risks that are being hedged. The standalone financial statements are presented in Indian Rupees (INR). The figures are rounded off to the nearest crore.
(ii) Presentation of financial statements
The Company presents its balance sheet in order of liquidity. Financial assets and financial liabilities are generally reported gross in the balance sheet. They are only offset and reported net when, in addition to having an unconditional legally enforceable right to offset the recognised amounts without being contingent on a future event, the parties also intend to settle on a net basis in all of the following circumstances:
A. The normal course of business
B. The event of default
C. The event of insolvency or bankruptcy of the Company and/or its counterparties
3 Significant accounting policies3.1 Significant accounting Judgements, estimates and assumptions
The preparation of financial statements in conformity with Ind AS requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.
A. Impairment loss on financial assets
The measurement of impairment losses across all categories of financial assets except assets valued at FVTPL, enquires judgment, in particular, the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances.
The Company''s expected credit loss (ECL) calculations are outputs of complex models with a number of underlying assumptions regarding the choice of variable inputs and their interdependencies. Elements of the ECL models that are considered accounting judgments and estimates include:
⢠The Company''s model, which assigns Probability of Defaults (PDs)
⢠The Company''s criteria for assessing if there has been a significant increase in credit risk and so allowances for financial assets should be measured on a Long Term ECL (LTECL) basis
⢠The segmentation of financial assets when their ECL is assessed on a collective basis
⢠Development of ECL models, including the various formulas and the choice of inputs
⢠Determination of associations between macroeconomic scenarios and, economic inputs, and the effect on PDs, Exposure at Default (EADs) and Loss Given Default (LGDs)
⢠Selection of forward-looking macroeconomic scenarios and their probability weightings, to derive the economic inputs into the ECL models
Classification and measurement of financial assets depends on the results of the Solely Payments of Principal and Interest (SPPI) and the business model test. The Company determines the business model at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. This assessment includes judgment reflecting all relevant evidence including how the performance of the assets is evaluated and their performance measured, the risks that affect the performance of the assets and how these are managed and how the managers of the assets are compensated. The Company monitors financial assets measured at amortised cost that are de-recognised prior to their maturity to understand the reason for their disposal and whether the reasons are consistent with the objective of the business for which the asset was held. Monitoring is part of the Company''s continuous assessment of whether the business model for which the remaining financial assets are held continues to be appropriate and if it is not appropriate whether there has been a change in business model and so a prospective change to the classification of those assets.
C. Defined employee benefit assets and liabilities
The cost of the defined benefit gratuity plan and other post-employment benefits and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them.
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
F. Effective interest rate method
The Company''s EIR methodology, recognises interest income using a rate of return that represents the best estimate of a constant rate of return over the expected behavioural life of loans and recognises the effect of potentially different interest rates charged at various stages and other characteristics of the product life cycle. This estimation, by nature, requires an element of judgement regarding the expected behaviour and life-cycle of the instruments, as well expected changes to the Company''s base rate and other fee income/expense that are integral parts of the instrument.
Cash and cash equivalent comprises cash in hand, demand deposits and time deposits held with bank, debit balance in cash credit account.
3.3 Recognition of income and expensea) Interest income
The Company earns revenue primarily from giving loans. Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably
measured. Interest revenue is recognized using the effective interest method (EIR). The effective interest method calculates the amortized cost of a financial instrument and allocates the interest income. The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period, to the gross carrying amount of the financial asset or liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the EIR, but not future credit losses.
The Company recognises interest income by applying the EIR to the gross carrying amount of financial assets other than credit-impaired assets. When a financial asset becomes credit-impaired and is, therefore, regarded as ''Stage 3'', the Company recognises the interest to the extent recoverable. If the financial assets cures and is no longer credit-impaired, the Company reverts to recognising interest income.
Interest expense includes issue costs that are initially recognized as part of the carrying value of the financial liability and amortized over the expected life using the effective interest method. These include fees and commissions payable to arrangers and other expenses such as external legal costs, provided these are incremental costs that are directly related to the issue of a financial liability.
c) Other charges and other interest
Additional interest and Overdue interest is recognised on realization basis.
d) Commission on Insurance Policies
Commission on insurance policies sold is recognised when the Company under its agency code sells the insurance policies and when the same is accepted by the principal insurance Company.
Dividend income is recognized when the Company''s right to receive the payment is established, it is probable that the economic
benefits associated with the dividend will flow to the entity and the amount of the dividend can be measured reliably. This is generally when shareholders approve the dividend.
The Company''s financial statements are presented in Indian Rupees (INR) which is also the Company''s functional currency.
Transactions in foreign currencies are initially recorded by the Company at their respective functional currency spot rates at the date the transaction first qualifies for recognition.
Foreign currency denominated monetary assets and liabilities are translated at the functional currency spot rates of exchange at the reporting date and exchange gains and losses arising on settlement and restatement are recognized in the statement of profit and loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognized in OCI or profit or loss are also recognized in OCI or profit or loss, respectively).
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:
⢠Office Premises - 1-12 Years
The right-of-use assets are also subject to impairment. Refer to the accounting policies in note 3.8 Impairment of non-financial assets.
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable. The lease payments also include payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments or a change in the assessment of an option to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option).
Determining the lease term of contracts with renewal and termination options - Company as lessee
The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
Leases - Estimating the incremental borrowing rate
The Company cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Company ''would have to pay'', which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease.
3.6 Property, plant and equipment (PPE) and Intangible assetsPPE
PPE are stated at cost (including incidental expenses directly attributable to bringing the asset to its working condition for its intended use) less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Subsequent expenditure related to PPE is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of item can be measured reliably. Other repairs and maintenance costs are expensed off as and when incurred.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognised.
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.
3.7 Depreciation and amortization Depreciation
Depreciation on PPE is provided on straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013, except for Vehicles.
Vehicles are amortised on a straight line basis over a period of five years from the date when the assets are available for use. The life has been assessed based on past usage experience and considering the change in technology.
Depreciation on additions to PPE is provided on a pro-rata basis from the date the asset is put to use. Leasehold improvements are amortised over the period of Lease. Depreciation on sale / deduction from PPE is provided for up to the date of sale / deduction, as the case may be.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate
Intangible assets consisting of Software are amortised on a straight line basis over a period of four years from the date when the assets are available for use. The amortisation period and the amortisation method for these softwares with a finite useful life are reviewed at least at each financial year-end.
3.8 Impairment of non-financial assets
The carrying amount of assets is reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets, net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
3.9 Provisions, Contingent Liability and Contingent Assets
A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions are determined based on the best estimate required to settle the obligation at the balance sheet date. Contingent liability is disclosed for (1) Possible obligations which will be confirmed only by future events not wholly within the control of the Company or (2) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent Assets are not recognised in the financial statements.
3.10 Retirement and other employee benefits
Retirement benefit in the form of provident fund and Employee State Insurance Scheme is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund and Employee State Insurance scheme. The Company recognizes contribution payable to the provident fund and Employee State Insurance scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
The Company has unfunded defined benefit plans Gratuity plan and Compensated absences plan for all eligible employees, the liability for which is determined on the basis of actuarial valuation at each year end. Separate actuarial valuation is carried out for each plan using the projected unit credit method. Superannuation (Pension & Medical coverage) payable to a Director on retirement is also actuarially valued at the end of the year using the Projected Unit Credit Method.
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding
amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Tax expense comprises current and deferred tax. Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities in accordance with Income tax Act, 1961, Income Computation and Disclosure Standards and other applicable tax laws. The tax rates and tax laws used to compute the amount are those that are enacted at the reporting date.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when
the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting year.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
Equity-settled share based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share based payments is expensed on a straight line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in Statement of Profit and Loss such that the cumulative expenses reflects the revised estimate, with a corresponding adjustment to the Stock Compensation Adjustment Reserve.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
3.14.1 Financial Assets3.14.1.1 Initial recognition and measurement
Financial assets, with the exception of loans and advances to customers, are initially recognised on the trade date, i.e., the date that the Company becomes a party to the contractual provisions of the instrument. Loans and advances to customers are recognised when funds are disbursed to the customers. The classification of financial instruments at initial recognition depends on their purpose and characteristics and the management''s intention when acquiring them. All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
3.14.1.2 Classification and Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
⢠Debt instruments at amortised cost
⢠Debt instruments at fair value through other comprehensive income (FVTOCI)
⢠Debt instruments and equity instruments at fair value through profit or loss (FVTPL)
⢠Equity instruments measured at fair value through other comprehensive income (FVTOCI)
3.14.1.3 Debt instruments at amortised costs
A ''debt instrument'' is measured at the amortised cost if both the following conditions are met:
⢠The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
⢠Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
Business model: The business model reflects how the Company manages the assets in order to generate cash flows. That is, where the Company''s objective is solely to collect the contractual cash flows from the assets, the same is measured at amortized cost or where the Company''s objective is to collect both the contractual cash flows and cash flows arising from the sale of assets, the same is measured at fair value through other comprehensive income (FVTOCI). If neither of these is applicable (e.g. financial assets are held for trading purposes), then the financial assets are classified as part of ''other'' business model and measured at FVPL.
SPPI: Where the business model is to hold assets to collect and earn contractual cash flows (i.e. measured at amortized cost), the Company assesses whether the financial instruments'' cash flows represent solely payments of principal and interest (the ''SPPI test''). In making this assessment, the Company considers whether the contractual cash flows are consistent with a basic lending arrangement i.e. interest includes only consideration for the time value of money, credit risk, other
basic lending risks and a profit margin that is consistent with a basic lending arrangement. Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified and measured at fair value through profit or loss. The amortized cost, as mentioned above, is computed using the effective interest rate method.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in interest income in the statement of profit or loss. The losses arising from impairment are recognised in the statement of profit and loss.
3.14.1.4 Debt instruments at FVOCI
A ''debt instrument'' is classified as at the FVTOCI if both of the following criteria are met:
The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets
Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). However, the Company recognizes interest income, impairment losses & reversals and foreign exchange gain or loss in the Statement of Profit and Loss. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to Statement of
Profit and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
3.14.1.5 Debt instruments at FVTPL
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch''). Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-byinstrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from Other Comprehensive Income to Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within
equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
3.14.2 Financial Liabilities3.14.2.1 Initial recognition and measurement
Financial liabilities are classified and measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for trading or it is designated as on initial recognition. All financial liabilities are recognised initially at fair value and, in the case of borrowings and payables, net of directly attributable transaction costs.
The Company''s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and derivative financial instruments.
After initial recognition, interest - bearing borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss. This category generally applies to borrowings.
3.14.3 Derivative financial instruments
The Company holds derivatives to mitigate the risk of changes in exchange rates on foreign currency exposures as well as
interest fluctuations. The counterparty for these contracts is generally a bank. Derivatives that are not designated a hedge are categorized as financial assets or financial liabilities, at fair value through profit or loss. Such derivatives are recognized initially at fair value and attributable transaction costs are recognized in the Statement of Profit and Loss when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting gains or losses are included in Statement of Profit and Loss.
3.14.4 Reclassification of financial assets and liabilities
The Company doesn''t reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances in which the Company acquires, disposes of, or terminates a business line. Financial liabilities are never reclassified.
3.14.5 De recognition of financial assets and liabilities3.14.5.1 Financial Assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is de-recognised when the rights to receive cash flows from the financial asset have expired. The Company also derecognised the financial asset if it has transferred the financial asset and the transfer qualifies for de recognition.
The Company has transferred the financial asset if, and only if, either:
⢠It has transferred its contractual rights to receive cash flows from the financial asset, or
⢠It retains the rights to the cash flows, but has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement
Pass-through arrangements are transactions whereby the Company retains the contractual rights to receive the cash flows of a financial asset (the ''original asset''), but assumes a contractual obligation to pay those cash flows to one or more entities (the ''eventual recipients''), when all of the following three conditions are met:
⢠The Company has no obligation to pay amounts to the eventual recipients unless it has collected equivalent amounts from the original asset, excluding short-term advances with the right to full recovery of the amount lent plus accrued interest at market rates.
⢠The Company cannot sell or pledge the original asset other than as security to the eventual recipients.
⢠The Company has to remit any cash flows it collects on behalf of the eventual recipients without material delay.
In addition, the Company is not entitled to reinvest such cash flows, except for investments in cash or cash equivalents including interest earned, during the period between the collection date and the date of required remittance to the eventual recipients.
A transfer only qualifies for derecognition if either:
⢠The Company has transferred substantially all the risks and rewards of the asset, Or
⢠The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
The Company considers control to be transferred if and only if, the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without imposing additional restrictions on the transfer.
When the Company has neither transferred nor retained substantially all the risks and rewards and has retained control of the
asset, the asset continues to be recognised only to the extent of the Company''s continuing involvement, in which case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration the Company could be required to pay.
If continuing involvement takes the form of a written or purchased option (or both) on the transferred asset, the continuing involvement is measured at the value the Company would be required to pay upon repurchase. In the case of a written put option on an asset that is measured at fair value, the extent of the entity''s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price. The profit or loss on derecognition is recognized in the Statement of profit and loss.
Derecognition due to modification of terms and conditions
The Company de-recognizes a financial asset, when the terms and conditions have been renegotiated to the extent that, substantially, it becomes a new loan, with the difference recognised as a derecognition gain or loss, to the extent that an impairment loss has not already been recorded. The newly recognised loans are classified as Stage 1 for ECL measurement purposes, unless the new loan is deemed to be Purchase Oriented Credit Impaired ("POCI")
If the modification does not result in cash flows that are substantially different, the modification does not result in derecognition. Based on the change in cash flows discounted at the original EIR, the Group records a modification gain or loss, to the extent that an impairment loss has not already been recorded.
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognised in profit or loss.
3.15 Impairment of financial assets3.15.1 Overview of the Expected Credit Loss (ECL) principles
The Company is recording the allowance for expected credit losses for all loans and other debt financial assets not held at FVTPL, together with loan commitments and financial guarantee contracts, (in this section all referred to as ''financial instruments''). Equity instruments are not subject to impairment under IND AS 109.
The ECL allowance is based on:
a) 12 months'' expected credit loss (12mECL) where there is no significant increase in credit risk since origination and
b) on the the credit losses expected to arise over the life of the asset (the lifetime expected credit loss or LTECL)
The 12mECL is the portion of LTECL that represents the ECL that results from default events on a financial instrument that are possible within the 12 months after the reporting date.
Both LTECL and 12mECL are calculated on individual and collective basis, depending on the nature of the underlying portfolio of financial instruments. The Company has established a policy to perform an assessment, at the end of each reporting period, of whether a financial instrument''s credit risk has increased significantly since initial recognition.
Based on the above process, the Company groups its loans into Stage 1, Stage 2, Stage 3, as described below:
Stage 1: When loans are first recognised, the Company recognises an allowance based on 12mECL. Stage 1 loans also include facilities where the credit risk has improved and the loan has been reclassified from Stage 2 or Stage 3.
Stage 2: When a loan has shown a significant increase in credit risk since origination, the Company records an allowance for the LTECL. Stage 2 loans also include facilities, where the credit risk has improved and the loan has been reclassified from Stage 3.
Stage 3: Loans considered credit-impaired. The Company records an allowance for the LTECL.
The Company calculates ECL based on a probability-weighted scenarios and historical data to measure the expected cash shortfalls, discounted at an approximation to the EIR. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive.
The mechanics of the ECL calculations are outlined below and the key elements are, as follows:
⢠PD - The Probability of Default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the portfolio.
⢠EAD - The Exposure at Default is an exposure at a default date.
⢠LGD - The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realisation of any collateral. It is usually expressed as a percentage of the EAD.
The maximum period for which the credit losses are determined is the expected life of a financial instrument.
The mechanics of the ECL method are summarised below:
Stage 1: The 12mECL is calculated as the portion of LTECL that represent the ECL that result from default events on a financial instrument that are possible within the 12 months after the reporting date. The Company calculates the 12mECL allowance based on the expectation of a default occurring in the 12 months following the reporting date. These expected 12-month default probabilities are applied to an EAD and multiplied by the expected LGD.
Stage 2: When a loan has shown a significant increase in credit risk since origination, the Company records an allowance for the LTECL. The mechanics are similar to those explained above, but PDs and LGDs
are estimated over the lifetime of the instrument.
Stage 3: For loans considered credit-impaired , the Company recognizes the lifetime expected credit losses for these loans. The method is similar to that for Stage 2 assets, with the PD set at 100%.
estimating LTECL for undrawn loan commitments, the Company estimates the expected portion of the loan commitment that will be drawn down over its expected life. The ECL is then based on the present value of the expected shortfalls in cash flows if the loan is drawn down. The expected cash shortfalls are discounted at an approximation to the expected EIR on the loan.
For loan commitments, the ECL is recognised within Provisions.
3.15.3 Forward looking information
While estimating the expected credit losses, the Company reviews macro-economic developments occurring in the economy and market it operates in. On a periodic basis, the Company analyses if there is any relationship between key economic trends like GDP, Property Price Index, Unemployment rates, Benchmark rates set by the Reserve Bank of India, inflation etc. with the estimate of PD, LGD determined by the Company based on its internal data. While the internal estimates of PD, LGD rates by the Company may not be always reflective of such relationships, temporary overlays are embedded in the methodology to reflect such macro-economic trends reasonably.
Financial assets are written off partially or in their entirety when the recovery of amounts due is considered unlikely. If the amount
to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to Statement of Profit and Loss.
The Company measures financial
instruments, such as, derivatives at fair value at each balance sheet date using valuation techniques.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for the asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a nonfinancial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
⢠Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
⢠Level 2 â Valuation techniques
for which the lowest level input
that is significant to the fair value measurement is directly or indirectly observable
⢠Level 3 â Valuation techniques
for which the lowest level input
that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Company recognises a liability to make cash distributions to equity holders when the distribution is authorised and the distribution is no longer at the discretion of the Company. Final dividends on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Company''s Board of Directors.
The Company makes use of derivative instruments to manage exposures to interest rate and foreign currency. In order to manage particular risks, the Company applies hedge accounting for transactions that meet specified criteria.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the
Company''s risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction, the nature of the risk being hedged, hedge ratio and how the entity will assess the effectiveness of changes in the hedging instrument''s fair value in offsetting the exposure to changes in the hedged item''s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:
Fair value hedges hedge the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment, or an identified portion of such an asset, liability or firm commitment, that is attributable to a particular risk and could affect profit or loss.
For designated and qualifying fair value hedges, the cumulative change in the fair value of a hedging derivative is recognised in the statement of profit and loss in net gain on fair value changes. Meanwhile, the cumulative change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item in the balance sheet and is also recognised in the statement of profit and loss in net gain on fair value changes.
The Company classifies a fair value hedge relationship when the hedged item (or group of items) is a distinctively identifiable asset or liability hedged by one or a few hedging instruments. The financial instruments hedged for interest
rate risk in a fair value hedge relationships fixed rate debt issued and other borrowed funds.
If the hedging instrument expires or is sold, terminated or exercised, or where the hedge no longer meets the criteria for hedge accounting, the hedge relationship is discontinued prospectively. If the relationship does not meet hedge effectiveness criteria, the Company discontinues hedge accounting from the date on which the qualifying criteria are no longer met. For hedged items recorded at amortised cost, the accumulated fair value hedge adjustment to the carrying amount of the hedged item on termination of the hedge accounting relationship is amortised over the remaining term of the original hedge using the recalculated EIR method by recalculating the EIR at the date when the amortisation begins. If the hedged item is derecognised, the unamortised fair value adjustment is recognised immediately in the statement of profit and loss.
A cash flow hedge is a hedge of the exposure to variabili
Mar 31, 2022
1 Corporate information
Indiabulls Housing Finance Limited (''the Company'' or ''the Holding Company'') is a public limited company domiciled in India with its registered office at Building No. 27, 5th Floor, KG Marg, New Delhi-110001. The Company together with its subsidiaries (collectively, ''the Group'') is primarily engaged in the business to provide finance and to undertake all lending and finance to any person or persons, co-operative society, association of persons, body of individuals, companies, institutions, firms, builders, developers, contractors, tenants and others either at interest or without and/or with or without any security for construction, erection, building, repair, remodeling, development, improvement, purchase of houses, apartments, flats, bungalows, rooms, huts, townships and/or other buildings, other finance and real estate of all descriptions or convenience there on and to equip the same or part thereof with all or any amenities or conveniences, drainage facility, electric, telephonic, television, and other installations, either in total or part thereof and /or to purchase any free hold or lease hold lands, estate or interest in any property and such other activities as may be permitted.
The Board of Directors of Indiabulls Housing Finance Limited (100% subsidiary of "IBFSL") and Indiabulls Financial Services Limited ("IBFSL", "Erstwhile Holding Company") at their meeting held on April 27, 2012 had approved the Scheme of Arrangement involving the reverse merger of IBFSL with the Company in terms of the provisions of Sections 391 to 394 of the Companies Act, 1956 (the "Scheme of Arrangement"). The Appointed Date of the proposed merger fixed under the Scheme of Arrangement was April 1, 2012. The Hon''ble High Court of Delhi, vide its Order dated December 12, 2012, received by the Company on February 8, 2013, approved the Scheme of Arrangement. In terms of the Court approved Scheme of Arrangement, with the filing of the copy of the Order, on March 8, 2013, with the office of ROC, NCT of Delhi & Haryana (the Effective Date), IBFSL, as a going concern, stands amalgamated with IBHFL with effect from the Appointed Date, being April 1, 2012.
Indiabulls Financial Services Limited ( "IBFSL") was incorporated on January 10, 2000 as a Private Limited Company. On March 30, 2001, the Company was registered under Section 45-IA of the Reserve Bank of India (RBI) Act, 1934 to carry on the business of a Non-Banking Financial Company. The Company was converted into a public limited Company pursuant to Section 44 of the Companies Act, 1956 on February 03, 2004.
The consolidated financial statements of the Group have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time).
The consolidated financial statements have been prepared on a historical cost basis, except for fair value through other comprehensive income (FVOCI) instruments, derivative financial instruments, other financial assets held for trading and financial assets and liabilities designated at fair value through profit or loss (FVTPL), all of which have been measured at fair value. Further the carrying values of recognised assets and liabilities that are hedged items in fair value hedges, and otherwise carried at amortised cost, are adjusted to record changes in fair value attributable to the risks that are being hedged. The consolidated financial statements are presented in Indian Rupees (INR) and all values are rounded to the nearest Crores, except when otherwise indicated.
(ii) Presentation of financial statements
The Group presents its balance sheet in order of liquidity. Financial assets and financial liabilities are generally reported gross in the balance sheet. They are only offset and reported net when, in addition to having an unconditional legally enforceable right to offset the recognised amounts without being contingent on a future event, the parties also intend to settle on a net basis in all of the following circumstances:
A. The normal course of business
B. The event of default
C. The event of insolvency or bankruptcy of the Group and/or its counterparties.
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at March 31, 2022 including controlled structured entities. The Group consolidates a subsidiary when it controls it. Control is achieved when the Group is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to
affect those returns through its power over the investee.
Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
(i) The contractual arrangement with the other vote holders of the investee
(ii) Rights arising from other contractual arrangements
(iii) The Group''s voting rights and potential voting rights
(iv) The size of the Group''s holding of voting rights relative to the size and dispersion of the holdings of the other voting rights holders.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.
Consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances.
The financial statements of all entities used for the purpose of consolidation are drawn up to same reporting date as that of the parent company, i.e., year ended on March 31.
Consolidation procedure:
a. Combine like items of assets, liabilities, equity, income, expenses and cash flows of the parent with those of its subsidiaries. For this purpose, income and expenses of the subsidiary are based on the amounts of the assets and liabilities recognised in the consolidated financial statements at the acquisition date.
b. Offset (eliminate) the carrying amount of the parent''s investment in each subsidiary and the parent''s portion of equity of each subsidiary.
c. Eliminate in full intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between entities of the Group (profits or losses resulting from intragroup transactions that are recognised in assets, such as inventory and PPE, are eliminated in full). Intragroup losses may indicate an impairment that requires recognition in the consolidated financial statements. Ind AS 12 Income Taxes applies to temporary differences that arise from the elimination of profits and losses resulting from intragroup transactions.
Profit or loss and each component of OCI are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group''s accounting policies. All intra-group assets, liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
If the Group loses control over a subsidiary, it:
(i) Derecognises the assets (including goodwill) and liabilities of the subsidiary
(ii) Derecognises the carrying amount of any noncontrolling interests
(iii) Derecognises the cumulative translation
differences recorded in equity
(iv) Recognises the fair value of the consideration
received
(v) Recognises the fair value of any investment retained
(vi) Recognises any surplus or deficit in profit or loss.
(vii) Reclassifies the parent''s share of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities
A change in the ownership interest of a subsidiary, without loss of control, is accounted for as an equity transaction.
4 Significant accounting policies4.1 Significant accounting judgements, estimates and assumptions
The preparation of Consolidated financial statements in conformity with Ind AS requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management''s best knowledge
of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.
A. Impairment loss on financial assets
The measurement of impairment losses across all categories of financial assets except assets valued at FVTPL, enquires judgement, in particular, the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances.
The Group''s expected credit loss (ECL) calculations are outputs of complex models with a number of underlying assumptions regarding the choice of variable inputs and their interdependencies. Elements of the ECL models that are considered accounting judgements and estimates include:
⢠The Group''s model, which assigns Probability of Defaults (PDs)
⢠The Group''s criteria for assessing if there has been a significant increase in credit risk and so allowances for financial assets should be measured on a Long Term ECL (LTECL) basis
⢠The segmentation of financial assets when their ECL is assessed on a collective basis
⢠Development of ECL models, including the various formulas and the choice of inputs
⢠Determination of associations between macroeconomic scenarios and, economic inputs, and the effect on PDs, Exposure at Default (EADs) and Loss Given Default (LGDs)
⢠Selection of forward-looking macroeconomic scenarios and their probability weightings, to derive the economic inputs into the ECL models.
Classification and measurement of financial assets depends on the results of the Solely Payment of Principal and Interest (SPPI) and the business model test. The Group determines the business model at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. This assessment includes judgement reflecting all relevant evidence including how the performance of the assets is evaluated and their performance measured, the risks that affect the performance of the assets and how these are managed and how the managers of the assets are compensated. The Group monitors financial assets measured at amortised cost that are de-recognised prior to their maturity to understand the reason for their disposal and whether the reasons are consistent with the objective of the business for which the asset was held. Monitoring is part of the Group''s continuous assessment of whether the business model for which the remaining financial assets are held continues to be appropriate and if it is not appropriate whether there has been a change in business model and so a prospective change to the classification of those assets.
C. Defined employee benefit assets and liabilities
The cost of the defined benefit gratuity plan and other post-employment benefits and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them.
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
F. Effective interest rate method
The Group''s EIR methodology, recognises interest income using a rate of return that represents the best estimate of a constant rate of return over the expected behavioural life of loans and recognises the effect of potentially different interest rates charged at various stages and other characteristics of the product life cycle. This estimation, by nature, requires an element of judgement regarding the expected behaviour and life-cycle of the instruments, as well expected changes to the Group''s base rate and other fee income/expense that are integral parts of the instrument.
Cash and cash equivalent comprises cash in hand, demand deposits and time deposits held with bank, debit balance in cash credit account.
4.3 Recognition of income and expensea) Interest income
The Group earns revenue primarily from giving loans. Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Interest revenue is recognized using the effective interest method (EIR). The effective interest method calculates the amortized cost of a financial instrument and allocates the interest income. The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period, to the gross carrying amount of the financial asset or liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the EIR, but not future credit losses.
The Group recognises interest income by applying the EIR to the gross carrying amount of financial assets other than credit-impaired assets. When a financial asset becomes credit-impaired and is, therefore, regarded as ''Stage 3'', the Group recognises the interest to the extent recoverable. If the financial assets cures and is no longer credit-impaired, the Group reverts to recognising interest income.
Interest expense includes issue costs that are initially recognized as part of the carrying value of the financial liability and amortized over the expected life using the effective interest method. These include fees and commissions payable to arrangers and other expenses such as external legal costs, provided these are incremental costs that are directly related to the issue of a financial liability.
c) Other charges and other interest
Additional interest and Overdue interest is recognised on realisation basis.
d) Commission on Insurance Policies
Commission on insurance policies sold is recognised when the Group under its agency code sells the insurance policies and when the same is accepted by the principal insurance Company.
e) Income from Advisory Services
Income from Advisory Services includes investment management fees from the mutual fund and portfolio management services which is charged as a percentage of the Assets Under Management (AUM) and is recognised on accrual basis.
Dividend income is recognized when the Group''s right to receive the payment is established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of the dividend can be measured reliably. This is generally when shareholders approve the dividend.
The Group''s financial statements are presented in Indian Rupees (INR) which is also the Group''s functional currency.
Transactions in foreign currencies are initially recorded by the Group at their respective functional currency spot rates at the date the transaction first qualifies for recognition.
Foreign currency denominated monetary assets and liabilities are translated at the functional currency spot rates of exchange at the reporting date and exchange gains and losses arising on settlement and restatement are recognized in the statement of profit and loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognized in OCI or profit or loss are also recognized in OCI or profit or loss, respectively).
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Group applies a single recognition and measurement approach for all leases, except for short-term leases (generally leases upto 12 months). The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:
⢠Office Premises - 1-12 Years
The right-of-use assets are also subject to impairment. Refer to the accounting policies in Note 4.8 Impairment of nonfinancial assets.
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable. The lease payments also include payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the
interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments or a change in the assessment of an option to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option).
Determining the lease term of contracts with renewal and termination options - Group as lessee
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
Leases - Estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group ''would have to pay'', which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease.
4.6 Property, plant and equipment (PPE) and Intangible assetsPPE
PPE are stated at cost (including incidental expenses directly attributable to bringing the asset to its working condition for its intended use) less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the
asset to its working condition for its intended use. Subsequent expenditure related to PPE is capitalized only when it is probable that future economic benefits associated with these will flow to the Group and the cost of item can be measured reliably. Other repairs and maintenance costs are expensed off as and when incurred.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognised.
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.
4.7 Depreciation and amortizationDepreciation
Depreciation on PPE is provided on straightline method as per the useful life prescribed in Schedule II to the Companies Act, 2013, except for Vehicles.
Vehicles are amortised on a straight line basis over a period of five years from the date when the assets are available for use. The life has been assessed based on past usage experience and considering the change in technology.
Depreciation on additions to PPE is provided on a pro-rata basis from the date the asset is put to use. Leasehold improvements are amortised over the period of Lease. Depreciation on sale / deduction from PPE is provided for up to the date of sale / deduction, as the case may be.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate
Intangible assets consisting of Software are amortised on a straight line basis over a period of four years from the date when the assets are available for use.
The amortisation period and the amortisation method for these softwares with a finite useful life are reviewed at least at each financial year-end.
4.8 Impairment of non-financial assets
The carrying amount of assets is reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets, net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
4.9 Provisions, Contingent Liability and Contingent Assets
A provision is recognised when the Group has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions are determined based on the best estimate required to settle the obligation at the balance sheet date. Contingent liability is disclosed for (1) Possible obligations which will be confirmed only by future events not wholly within the control of the Group or (2) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent Assets are not recognised in the financial statements.
4.10 Retirement and other employee benefits
Retirement benefit in the form of provident fund and Employee State Insurance Scheme is a defined contribution scheme. The Group has no obligation, other than the contribution payable to the provident fund and Employee State Insurance scheme. The Group recognizes contribution payable to the provident fund and Employee State Insurance scheme as an expense, when an employee renders the related service.
If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
The Group has unfunded defined benefit plans Gratuity plan and Compensated absences plan for all eligible employees, the liability for which is determined on the basis of actuarial valuation at each year end. Separate actuarial valuation is carried out for each plan using the projected unit credit method. Superannuation (Pension & Medical coverage) payable to a Director on retirement is also actuarially valued at the end of the year using the Projected Unit Credit Method.
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Tax expense comprises current and deferred tax. Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities in accordance with Income tax Act, 1961, Income Computation and Disclosure Standards and other applicable tax laws. The tax rates and tax laws used to compute the amount are those that are enacted at the reporting date.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting year.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding (net of treasury shares) during the period are adjusted for the effects of all dilutive potential equity shares.
Equity-settled share based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share based payments is expensed on a straight line basis over the vesting period, based on the Group''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in Statement of Profit and Loss such that the cumulative expenses reflects the revised estimate, with a corresponding adjustment to the Stock Compensation Adjustment Reserve.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
4.14.1 Financial Assets4.14.1.1 Initial recognition and measurement
Financial assets, with the exception of loans and advances to customers, are initially recognised on the trade date, i.e., the date that the Group becomes a party to the contractual provisions of the instrument. Loans and advances to customers are recognised when funds are disbursed to the customers. The classification of financial instruments at initial recognition depends on their purpose and characteristics and the management''s intention when acquiring them. All financial assets are recognised
initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
4.14.1.2 Classification and Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
⢠Debt instruments at amortised cost
⢠Debt instruments at fair value through other comprehensive income (FVTOCI)
⢠Debt instruments and equity instruments at fair value through profit or loss (FVTPL)
⢠Equity instruments measured at fair value through other comprehensive income (FVTOCI)
4.14.1.3 Debt instruments at amortised costs
A ''debt instrument'' is measured at the amortised cost if both the following conditions are met:
⢠The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
Business model: The business model reflects how the Group manages the assets in order to generate cash flows. That is, where the Group''s objective is solely to collect the contractual cash flows from the assets, the same is measured at amortized cost or where the Group''s objective is to collect both the contractual cash flows and cash flows arising from the sale of assets, the same is measured at fair value through other comprehensive income (FVTOCI). If neither of these is applicable (e.g. financial assets are held for trading purposes), then the financial assets are classified as part of ''other'' business model and measured at FVPL.
SPPI: Where the business model is to hold assets to collect and earn contractual cash flows (i.e. measured at amortized cost), the Group assesses whether the financial instruments'' cash flows represent solely payments of principal and interest (the ''SPPI test''). In making this assessment, the Group considers whether the contractual cash flows are consistent with a basic lending arrangement i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent with a basic lending arrangement. Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified and measured at fair value through profit or loss. The amortized cost, as mentioned above, is computed using the effective interest rate method.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in interest income in the statement of profit or loss. The losses arising from impairment are recognised in the statement of profit and loss.
4.14.1.4 Debt instruments at FVOCI
A ''debt instrument'' is classified as at the FVTOCI if both of the following criteria are met:
The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and The asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value.
Fair value movements are recognized in the other comprehensive income (OCI). However, the Group recognizes interest income, impairment losses & reversals and foreign exchange gain or loss in the Statement of Profit & Loss. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to Statement of profit and loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
4.14.1.5 Debt instruments at FVTPL
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
In addition, the Group may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch''). Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of profit and loss.
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading classified as at FVTPL. For all other equity instruments, the Group may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Group makes such election on an instrument-byinstrument basis. The classification is made on initial recognition and is irrevocable.
If the Group decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the Other Comprehensive Income. There is no recycling of the amounts from Other Comprehensive Income to Statement of Profit &Loss, even on sale of investment. However, the Group may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of profit and loss.
4.14.2 Financial Liabilities4.14.2.1 Initial recognition and measurement
Financial liabilities are classified and measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for trading or it is designated as on initial recognition. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group''s financial liabilities include trade and other payables, borrowings including bank overdrafts and derivative financial instruments.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss. This category generally applies to borrowings.
4.14.3 Derivative financial instruments
The Group holds derivatives to mitigate the risk of changes in exchange rates on foreign currency exposures as well as interest fluctuations. The counterparty for these contracts is generally a bank. Derivatives that are not designated a hedge are categorized as financial assets or financial liabilities, at fair value through profit or loss. Such derivatives are recognized initially at fair value and attributable transaction costs are recognized in net profit in the Statement of Profit and Loss when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting gains or losses are included in Statement of Profit and Loss.
4.14.4 Reclassification of financial assets and liabilities
The Group doesn''t reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances in which the Group acquires, disposes of, or terminates a business line. Financial liabilities are never reclassified.
4.14.5 De recognition of financial assets and liabilities4.14.5.1 Financial Assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is de-recognised when the rights to receive cash flows from the financial asset have expired. The Group also de-recognised the financial asset if it has transferred the financial asset and the transfer qualifies for de recognition.
The Group has transferred the financial asset if, and only if, either:
⢠It has transferred its contractual rights to receive cash flows from the financial asset
Or
⢠It retains the rights to the cash flows, but has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement
Pass-through arrangements are transactions whereby the Group retains the contractual rights to receive the cash flows of a financial asset (the ''original asset''), but assumes a contractual obligation to pay those cash flows to one or more entities (the ''eventual recipients''), when all of the following three conditions are met:
⢠The Group has no obligation to pay amounts to the eventual recipients unless it has collected equivalent amounts from the original asset, excluding short-term advances with the right to full recovery of the amount lent plus accrued interest at market rates.
⢠The Group cannot sell or pledge the original asset other than as security to the eventual recipients.
⢠The Group has to remit any cash flows it collects on behalf of the eventual recipients without material delay.
In addition, the Group is not entitled to reinvest such cash flows, except for investments in cash or cash equivalents including interest earned, during the period between the collection date and the date of required remittance to the eventual recipients.
A transfer only qualifies for derecognition if either:
⢠The Group has transferred
substantially all the risks and rewards of the asset
Or
⢠The Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
The Group considers control to be transferred if and only if, the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without imposing additional restrictions on the transfer.
When the Group has neither transferred nor retained substantially all the risks and rewards and has retained control of the asset, the asset continues to be recognised only to the extent of the Group''s continuing involvement, in which case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the
original carrying amount of the asset and the maximum amount of consideration the Group could be required to pay.
If continuing involvement takes the form of a written or purchased option (or both) on the transferred asset, the continuing involvement is measured at the value the Group would be required to pay upon repurchase. In the case of a written put option on an asset that is measured at fair value, the extent of the entity''s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price. The profit or loss on derecognition is recognised in the Statement of profit and loss.
Derecognition due to modification of terms and conditions
The Group de-recognizes a financial asset, when the terms and conditions have been renegotiated to the extent that, substantially, it becomes a new loan, with the difference recognised as a derecognition gain or loss, to the extent that an impairment loss has not already been recorded. The newly recognised loans are classified as Stage 1 for ECL measurement purposes, unless the new loan is deemed to be Purchase Oriented Credit Impaired ("POCI":)
If the modification does not result in cash flows that are substantially different, the modification does not result in derecognition. Based on the change in cash flows discounted at the original EIR, the Group records a modification gain or loss, to the extent that an impairment loss has not already been recorded.
4.14.5.2 Financial Liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value
of the original financial liability and the consideration paid is recognised in profit or loss.
4.15 Impairment of financial assets
4.15.1 Overview of the ECL principles
The Group is recording the allowance for expected credit losses for all loans and other debt financial assets not held at FVTPL, together with loan commitments and financial guarantee contracts, (in this section all referred to as ''financial instruments''). Equity instruments are not subject to impairment under IND AS 109.
The ECL allowance is based on:
a) 12 months'' expected credit loss (12mECL) where there is no significant increase in credit risk since origination and
b) on the the credit losses expected to arise over the life of the asset (the lifetime expected credit loss or LTECL)
The 12mECL is the portion of LTECL that represents the ECL that results from default events on a financial instrument that are possible within the 12 months after the reporting date.
Both LTECL and 12mECL are calculated on individual and collective basis, depending on the nature of the underlying portfolio of financial instruments. The Group has established a policy to perform an assessment, at the end of each reporting period, of whether a financial instrument''s credit risk has increased significantly since initial recognition.
Based on the above process, the Company groups its loans into Stage 1, Stage 2, Stage 3, as described below:
Stage 1 : When loans are first recognised, the Company recognises an allowance based on 12mECL. Stage 1 loans also include facilities where the credit risk has improved and the loan has been reclassified from Stage 2 or Stage 3.
Stage 2: When a loan has shown a significant increase in credit risk since origination, the company records an
allowance for the LTECL. Stage 2 loans also include facilities, where the credit risk has improved and the loan has been reclassified from Stage 3.
Stage 3: Loans considered credit-impaired. The Company records an allowance for the LTECL.
4.15.2 The calculation of ECL
The Group calculates ECL based on a probability-weighted scenarios and historical data to measure the expected cash shortfalls, discounted at an approximation to the EIR. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive.
The mechanics of the ECL calculations are outlined below and the key elements are, as follows:
⢠PD - The Probability of Default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the portfolio.
⢠EAD - The Exposure at Default is an exposure at a default date.
⢠LGD - The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realisation of any collateral. It is usually expressed as a percentage of the EAD.
The mechanics of the ECL method are summarised below:
Stage 1: The 12mECL is calculated as the portion of LTECL that represent the ECL that result from default events on a financial instrument that are possible within the 12 months after the reporting date. The Group calculates the 12mECL allowance based on the expectation of a default occurring in the 12 months following the reporting date. These expected 12-month default probabilities are applied to an EAD and multiplied by the expected LGD.
Stage 2: When a loan has shown a significant increase in credit risk since origination, the Company records an allowance for the LTECL. The mechanics are similar to those explained above, but PDs and LGDs are estimated over the lifetime of the instrument.
Stage 3: For loans considered credit-impaired, the Company recognizes the lifetime expected credit losses for these loans. The method is similar to that for Stage 2 assets, with the PD set at 100%.
Loan commitments: When
estimating LTECL for undrawn loan commitments, the Company estimates the expected portion of the loan commitment that will be drawn down over its expected life. The ECL is then based on the present value of the expected shortfalls in cash flows if the loan is drawn down. The expected cash shortfalls are discounted at an approximation to the expected EIR on the loan.
For loan commitments, the ECL is recognised within Provisions.
4.15.3 Forward looking information
While estimating the expected credit losses, the Group reviews macro-economic developments occurring in the economy and market it operates in. On a periodic basis, the Group analyses if there is any relationship between key economic trends like GDP, Property Price Index, Unemployment rates, Benchmark rates set by the Reserve Bank of India, inflation etc. with the estimate of PD, LGD determined by the Group based on its internal data. While the internal estimates of PD, LGD rates by the Group may not be always reflective of such relationships, temporary overlays are
embedded in the methodology to reflect such macro-economic trends reasonably.
Financial assets are written off partially or in their entirety when the recovery of amounts due is considered unlikely. If the amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to Statement of Profit and Loss.
The Group measures financial instruments, such as, derivatives at fair value at each balance sheet date using valuation techniques.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
In the principal market for the asset or liability, or
In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest
level input that is significant to the fair value measurement as a whole:
⢠Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
⢠Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
⢠Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Group recognises a liability to make cash distributions to equity holders when the distribution is authorised and the distribution is no longer at the discretion of the Group. Final dividends on shares are recorded as a liabil
Mar 31, 2018
(1) SIGNIFICANT ACCOUNTING POLICIES
(i) Basis of Accounting:
The financial statements are prepared under the historical cost convention on an accrual basis in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) and Accounting Standards (AS) under Section 133 of the Companies Act, 2013 and the relevant provisions of the Companies Act, 2013 (âthe 2013 Actâ) / Companies Act, 1956 (âthe 1956 Actâ) as applicable. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.
(ii) Use of Estimates:
The preparation of the financial statements in conformity with Indian GAAP 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 year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise.
(iii) Prudential Norms:
The Company follows The Housing Finance Companies (NHB) Directions, 2010 (âNHB Directions, 2010â) as amended from time to time, in respect of income recognition, income from investments, accounting of investments, asset classification, disclosures in the Balance Sheet and provisioning of loans and advances. Accounting Standards (AS) under Section 133 of the Companies Act, 2013 and Guidance Notes issued by The Institute of Chartered Accountants of India (âICAIâ) are followed insofar as they are not inconsistent with the NHB Directions, 2010.
(iv) Revenue Recognition:
Interest Income from financing and investing activities and others is recognised on an accrual basis. In terms of the NHB Directions, 2010, interest income on Non-performing assets (âNPAsâ) is recognised only when it is actually realised.
Processing Fees in respect of loans given is recognised on log in / disbursement as per the terms of the contract.
Income from Fee Income from Services is recognised on an accrual basis.
Commission on insurance policies sold is recognised when the Company under its agency code sells the insurance policies and when the same is accepted by the principal insurance company.
Additional interest / overdue charges are recognised on realisation basis
Repayment of loans is as stipulated in the respective loan agreements or by way of Equated Monthly Installments (EMIâ s) comprising principal and interest. EMIs commence generally once the entire loan is disbursed however on request of customer it commences even before the entire loan is disbursed. In case of pending commencement of EMIs, Pre-EMI interest is payable every month and accounted for on accrual basis.
Dividend income on Equity Shares is recognised when the right to receive the dividend is unconditional as at the Balance Sheet date. In terms of the Housing Finance Companies (NHB) Directions 2010, Dividend Income on units of Mutual Fund(s) held by the Company are recognised on cash basis as per the NHB Directions, 2010.
The net gain / loss on account of sale of Investments in Debentures / Bonds / Certificate of Deposit / Commercial papers and Government Securities is recognised on trade date basis. Interest Income is recognised on accrual basis.
(v) Securitisation / Assignment of Loan portfolio:
Derecognition of loans assigned / securitised in the books of the Company, recognition of gain / loss arising on securitisation / assignment and accounting for credit enhancements provided by the Company is based on the guidance note issued by The Institute of Chartered Accountants of India.
Derecognition of loans assigned / securitised in the books of the Company is based on the principle of surrender of control over the loans resulting in a âtrue saleâ of loans.
Residual income on Assignment / Securitisation of Loans is recognised over the life of the underlying loans and not on an upfront basis.
Credit enhancement in the form of cash collateral, if provided by the Company, by way of deposits and pass through certificates is included under Cash and cash equivalents / Non-current Assets / Investments, as applicable.
(vi) Fixed Assets:
(a) Tangible Assets: Property, Plant and Equipment:
Tangible fixed assets are stated at cost, net of tax / duty credits availed, less accumulated depreciation / impairment losses, if any. Cost includes original cost of acquisition, including incidental expenses related to such acquisition and installation.
(b) Intangible Assets:
Intangible assets are stated at cost, net of tax / duty credits availed, less accumulated amortisation / impairment losses, if any. Cost includes original cost of acquisition, including incidental expenses related to such acquisition.
(vii) Depreciation and Amortisation:
Depreciation on tangible fixed assets is provided on straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013, except for Vehicles and on some office equipments:
Vehicles are amortised on a straight line basis over a period of five years from the date when the assets are available for use. The life has been assessed based on past usage experience and considering the change in technology.
Some of the Office equipments (mobile phones) are amortised on a straight line basis over a period of two years from the date when the assets are available for use. The life has been assessed based on past usage experience and considering the change in technology.
Depreciation on additions to fixed assets is provided on a pro-rata basis from the date the asset is put to use. Leasehold improvements are amortised over the period of Lease. Depreciation on sale / deduction from fixed assets is provided for up to the date of sale / deduction, as the case may be.
Assets costing less than Rs.5,000 each are fully depreciated in the year of capitalisation.
Intangible assets consisting of Software are amortised on a straight line basis over a period of four years from the date when the assets are available for use.
(viii) 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. The recoverable amount is the higher of an assetâs net selling price and its value in use. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs 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 if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount.
(ix) Taxes on Income:
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961, Income Computation and Disclosure Standards and other applicable tax laws.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which during the specified period gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognised as an asset in the Balance Sheet when it is highly probable that future economic benefit associated with it will flow to the Company.
Deferred tax is recognised on all timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws substantively enacted as at the Balance Sheet date, to the extent that the timing differences are expected to crystallise / capable of reversal in one or more subsequent periods.
Deferred Tax Assets are recognised where realisation is reasonably certain whereas in case of carried forward losses or unabsorbed depreciation, deferred tax assets are recognised only if there is virtual certainty of realisation backed by convincing evidence that there will be sufficient future taxable income available to realise such assets. Deferred Tax Assets are reviewed for the appropriateness of their respective carrying values at each Balance Sheet date.
Current and deferred tax relating to items directly recognised in reserves are recognised in reserves and not in the Statement of Profit and Loss.
(x) Share / Debenture Issue Expenses and Premium/ Discount on Issue:
Share / Debenture issue expenses, net of tax, are adjusted against the Securities Premium Account, as permissible under Section 52(2) of the Companies Act, 2013, to the extent of balance available and thereafter, the balance portion is charged to the Statement of Profit and Loss, as incurred.
Premium / Discount on Issue of debentures, net of tax, are adjusted against the Securities Premium Account, as permissible under 52(2) of the Companies Act, 2013, to the extent of balance available and thereafter, the balance portion is charged to the Statement of Profit and Loss, as incurred.
(xi) Investments:
Investments are classified as long term and current investments. Long term investments are carried individually at cost less provision, if any, for diminution other than temporary in the value of such investments. In terms of NHB Directions, 2010, quoted Current investments are valued at lower of cost or market value on a Portfolio basis. Unquoted current investments in units of Mutual Funds are valued as per Net Asset Value of the Plan. Provision for diminution in value of investments is made in accordance with the NHB Directions, 2010 and Accounting Standard (AS) - 13 âAccounting for Investmentsâ.
(xii) Employee benefits:
The Companyâs contribution to Provident Fund and Employee State Insurance Scheme are considered as defined contribution plans and are charged as an expense based on the amount of contribution required to be made and when services are rendered by the employees. The Company has unfunded defined benefit plans as Compensated Absences and Gratuity for all eligible employees, the liability for which is determined on the basis of an actuarial valuation at the end of the year using the âProjected Unit Credit Methodâ. Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognised in the Statement of Profit and Loss as income or expenses, as applicable. Superannuation (Pension & Medical coverage) payable to a Director on retirement is actuarially valued at the end of the year using the Projected Unit Credit Method. Actuarial gains and losses comprise experience adjustments and the effects of change in actuarial assumptions and are recognised in the Statement of Profit and Loss as income or expenses as applicable.
(xiii) Commercial Papers:
The liability is recognised at the face value of the Commercial Paper at the time of its issue. The discount on issue of Commercial Papers is amortised over the tenure of the instrument.
(xiv) Borrowing Costs:
Borrowing costs that are attributable to the acquisition, construction or production of qualifying assets are capitalised as part of cost of the asset. Ancillary costs in connection with long-term external commercial borrowings are amortised to the Statement of Profit and Loss over the tenure of the loan. All other borrowing costs are charged to the Statement of Profit and Loss.
(xv) Deferred Employee Stock Compensation Cost:
Deferred employee stock compensation cost for stock options are recognised on the basis of generally accepted accounting principles and are measured by the difference between the intrinsic value of the Companyâs shares of stock options at the grant date and the exercise price to be paid by the option holders. The compensation expense is amortised over the vesting period of the options. The fair value of options for disclosure purpose is measured on the basis of a valuation certified by an independent firm of Chartered Accountants in respect of stock options granted.
(xvi) Leases:
In case of assets taken on operating lease, the lease rentals are charged to the Statement of Profit and Loss on a straight line basis in accordance with Accounting Standard (AS) 19 - Leases.
(xvii) Segment reporting:
The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organisation and management structure. The operating segments are the segments for which separate financial information is available and for which operating profit / loss amounts are evaluated regularly by the Management in deciding how to allocate resources and in assessing performance. Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under âunallocated revenue / expenses / assets / liabilities.
(xviii) Derivative financial instruments and hedging activities:
The Companyâs activities expose it to the financial risks of changes in foreign exchange rates and interest rates. The Company uses derivative contracts such as foreign exchange forward, cross currency contracts, interest rate swaps, foreign currency futures, options and swaps to hedge its exposure to movements in foreign exchange rates and interest rates. The use of these foreign exchange and forward contracts reduce the risk or cost to the Company and the Company does not use those for trading or speculation purposes.
The Company uses hedging instruments that are governed by the policies of the Company which are approved by the Board of Directors, which provide written principles on the use of such financial derivatives consistent with the risk management strategy of the Company.
Effective April 1, 2016, the Company has followed Guidance Note on Accounting for Derivative Contracts for accounting of derivate instrument, to the extent that the adoption did not conflict with existing accounting standards and other authoritative pronouncements of the Company Law and other regulatory requirements.
Derivative financial instruments are initially measured at fair value on the contract date and are subsequently re-measured to fair value at each reporting date. Derivatives are classified as assets when the fair value is positive (positive marked to market value) or as liabilities when the fair value is negative (negative marked to market value). Derivative assets and liabilities are recognised on the balance sheet at fair value. Changes in the fair value of derivatives other than those designated as hedges are recognised in the Statement of Profit and Loss.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, no longer qualifies for hedge accounting or the Company chooses to end the hedging relationship.
Effective January 1, 2017, the company has designated certain Interest Rate Swaps (IRS) as hedging instrument. Interest rate swaps are held to manage the interest rate exposures and are designated as fair value or cash flow hedges, as applicable. The Accounting for such designated contracts is as follows:
Fair value hedges
The Company uses IRS instruments to convert a proportion of its fixed rate debt to floating rates in order to hedge the interest rate risk arising, principally, from issue of non-convertible debentures. Company designates these as fair value hedges of interest rate risk. Changes in the fair values of derivatives designated as fair value hedges and changes in fair value of the related hedged item are recognised directly in Statement of Profit and Loss thus ineffective portion being recognised in the Statement of Profit and Loss.
Cash Flow hedges
The Company uses Interest Rate Swaps (IRS) Contracts (Floating to Fixed) to hedge its risks associated with interest rate fluctuations relating interest rate risk arising from foreign currency loans / external commercial borrowings. The Company designates such IRS contracts in a cash flow hedging relationship by applying the hedge accounting principles set out in âGuidance Note on Accounting for Derivative Contractsâ issued by the ICAI. These IRS contracts are stated at fair value at each reporting date. Changes in the fair value of these IRS contracts that are designated and effective as hedges of future cash flows are recognised directly in âCash Flow Hedge Reserveâ under Reserves and surplus and the ineffective portion is recognised immediately in the Statement of Profit and Loss. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting.
(xix) Foreign Currency Transactions and Translations:
i. Transactions denominated in foreign currencies are recorded at the exchange rates prevailing on the date of transaction.
ii. Monetary items denominated in foreign currencies at the year end are translated at year end rates. In case of Forward Foreign Exchange Contract (FEC) and Cross Currency Swaps(CCS), the difference between the year-end rate and the rate on the date of the contract is recognised as exchange difference and the premium on such forward contracts is recognised over the life of the forward contract. Any profit/ loss arising on cancellation or renewal of forward contract is recognised as income or expense for the period in which such cancellation or renewal is made.
iii. Non monetary foreign currency items are carried at cost.
iv. Exchange differences arising on settlement/ restatement of short-term foreign currency monetary assets and liabilities of the Company are recognised as income or expense in the Statement of Profit and Loss.
v. The exchange differences arising on settlement/ restatement of long-term monetary items which do not relate to acquisition of depreciable fixed assets are amortised over the maturity period / upto the date of settlement of such monetary items, whichever is earlier, and charged to the Statement of Profit and Loss. The unamortised exchange differences are carried in the Balance Sheet as âForeign Currency Monetary Item Translation Difference Accountâ net of the tax effect thereon, where applicable.
(xx) Provisions, Contingent Liabilities and Contingent Assets:
A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the balance sheet date. Contingent liability is disclosed for (1) Possible obligations which will be confirmed only by future events not wholly within the control of the Company or (2) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation can not be made. Contingent Assets are not recognised in the financial statements.
Mar 31, 2017
(1) SIGNIFICANT ACCOUNTING POLICIES
(i) Basis of Accounting:
The financial statements are prepared under the historical cost convention on an accrual basis in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) and Accounting Standards (AS) under Section 133 of the Companies Act, 2013 and the relevant provisions of the Companies Act, 2013 (âthe 2013 Actâ) / Companies Act, 1956 (âthe 1956 Actâ) as applicable. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year, except for change in the accounting policy for recording of marked to market profit on derivative contracts as more fully described in Note 1(xviii).
(ii) Use of Estimates:
âThe preparation of the financial statements in conformity with Indian GAAP 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 year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise.
(iii) Prudential Norms:
The Company follows The Housing Finance Companies (NHB) Directions, 2010 (âNHB Directions, 2010â) as amended from time to time, in respect of income recognition, income from investments, accounting of investments, asset classification, disclosures in the Balance Sheet and provisioning. Accounting Standards (AS) under Section 133 of the Companies Act, 2013 and Guidance Notes issued by The Institute of Chartered Accountants of India (âICAIâ) are followed insofar as they are not inconsistent with the NHB Directions, 2010.
(iv) Revenue Recognition:
Interest Income from financing and investing activities and others is recognised on an accrual basis. In terms of the NHB Directions, 2010, interest income on Non-performing assets (âNPAsâ) is recognised only when it is actually realised.
Processing Fees in respect of loans given is recognised on log in / disbursement as per the terms of the contract.
Income from Fee Income from Services is recognised on an accrual basis.
Commission on insurance policies sold is recognised when the Company under its agency code sells the insurance policies and when the same is accepted by the principal insurance company.
Additional interest/overdue charges is recognised on realisation basis.
Repayment of loans is as stipulated in the respective loan agreements or by way of Equated Monthly Installments (EMIâs) comprising principal and interest. EMIs commence generally once the entire loan is disbursed however on request of customer it commences even before the entire loan is disbursed. In case of pending commencement of EMIs, Pre-EMI interest is payable every month and accounted for on accrual basis.
Dividend income on Equity Shares is recognised when the right to receive the dividend is unconditional as at the Balance Sheet date. In terms of the Housing Finance Companies (NHB) Directions 2010, Dividend Income on units of Mutual Fund(s) held by the Company are recognised on cash basis as per the NHB Directions, 2010.
The net gain/loss on account of Investments in Debentures/Bonds/Certificate of Deposit/ Commercial papers and Government Securities is recognised on trade date basis. Interest Income is recognised on accrual basis.
(v) Securitisation / Assignment of Loan portfolio:
Derecognition of loans assigned/securitised in the books of the Company, recognition of gain / loss arising on securitisation /assignment and accounting for credit enhancements provided by the Company is based on the guidelines issued by The Institute of Chartered Accountants of India.
Derecognition of loans assigned / securitised in the books of the Company is based on the principle of surrender of control over the loans resulting in a âtrue saleâ of loans.
Residual income on Assignment / Securitisation of Loans is recognised over the life of the underlying loans and not on an upfront basis.
Credit enhancement in the form of cash collateral, if provided by the Company, by way of deposits and pass through certificates included under Cash and cash equivalents / Non-current Assets / Investments, as applicable.
(vi) Fixed Assets:
(a) Tangible Assets: Property, Plant and Equipment:
Tangible fixed assets are stated at cost, net of tax / duty credits availed, less accumulated depreciation / impairment losses, if any. Cost includes original cost of acquisition, including incidental expenses related to such acquisition and installation.
(b) Intangible Assets:
Intangible assets are stated at cost, net of tax / duty credits availed, less accumulated amortisation / impairment losses, if any. Cost includes original cost of acquisition, including incidental expenses related to such acquisition.
(vii) Depreciation and Amortisation:
Depreciation on tangible fixed assets is provided on straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013, except for Vehicles:
Vehicles are amortised on a straight line basis over a period of five years from the date when the assets are available for use. The life has been assessed based on past usage experience and considering the change in technology.
Some of the Office equipments(mobile phones) are amortised on a straight line basis over a period of two years from the date when the assets are available for use. The life has been assessed based on past usage experience and considering the change in technology.
Depreciation on additions to fixed assets is provided on a pro-rata basis from the date the asset is put to use. Leasehold improvements are amortised over the period of Lease. Depreciation on sale / deduction from fixed assets is provided for up to the date of sale / deduction, as the case may be.
Assets costing less than Rs.5,000 each are fully depreciated in the year of capitalisation.
Intangible assets consisting of Software are amortised on a straight line basis over a period of four years from the date when the assets are available for use.
(viii) 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. The recoverable amount is the higher of an assetâs net selling price and its value in use. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs 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 if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount.
(ix) Taxes on Income:
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961, Income Computation and Disclosure Standards and other applicable tax laws.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which during the specified period gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognised as an asset in the Balance Sheet when it is highly probable that future economic benefit associated with it will flow to the Company.
Deferred tax is recognised on all timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws substantively enacted as at the Balance Sheet date, to the extent that the timing differences are expected to crystallise / capable of reversal in one or more subsequent periods.
Deferred Tax Assets are recognised where realisation is reasonably certain whereas in case of carried forward losses or unabsorbed depreciation, deferred tax assets are recognised only if there is virtual certainty of realisation backed by convincing evidence that there will be sufficient future taxable income available to realise such assets. Deferred Tax Assets are reviewed for the appropriateness of their respective carrying values at each Balance Sheet date.
Current and deferred tax relating to items directly recognised in reserves are recognised in reserves and not in the Statement of Profit and Loss.
(x) Share/Debenture Issue Expenses and Premium/Discount on Issue:
Share / Debenture issue expenses, net of tax, are adjusted against the Securities Premium Account, as permissible under Section 52(2) of the Companies Act, 2013, to the extent of balance available and thereafter, the balance portion is charged to the Statement of Profit and Loss, as incurred.
Premium / Discount on Issue of debentures, net of tax, are adjusted against the Securities Premium Account, as permissible under 52(2) of the Companies Act, 2013, to the extent of balance available and thereafter, the balance portion is charged to the Statement of Profit and Loss, as incurred.
(xi) Investments:
Investments are classified as long term and current investments. Long term investments are carried individually at cost less provision, if any, for diminution other than temporary in the value of such investments. In terms of NHB Directions, 2010, quoted Current investments are valued at lower of cost or market value. Unquoted current investments in units of Mutual Funds are valued as per Net Asset Value of the Plan. Provision for diminution in value of investments is made in accordance with the NHB Directions, 2010 and Accounting Standard (AS) - 13 âAccounting for Investmentsâ.
(xii) Employee benefits:
The Companyâs contribution to Provident Fund and Employee State Insurance Scheme are considered as defined contribution plans and are charged as an expense based on the amount of contribution required to be made and when services are rendered by the employees. The Company has unfunded defined benefit plans as Compensated Absences and Gratuity for all eligible employees, the liability for which is determined on the basis of an actuarial valuation at the end of the year using the âProjected Unit Credit Methodâ. Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognised in the Statement of Profit and Loss as income or expenses, as applicable. Superannuation (Pension & Medical coverage) payable to a Director on retirement is actuarially valued at the end of the year using the Projected Unit Credit Method. Actuarial gains and losses comprise experience adjustments and the effects of change in actuarial assumptions and are recognised in the Statement of Profit and Loss as income or expenses as applicable.
(xiii) Commercial Papers:
The liability is recognised at the face value of the Commercial Paper at the time of its issue. The discount on issue of Commercial Papers is amortised over the tenure of the instrument.
(xiv) Borrowing Costs:
Borrowing costs that are attributable to the acquisition, construction or production of qualifying assets are capitalised as part of cost of the asset. Ancillary costs in connection with long-term external commercial borrowings are amortised to the Statement of Profit and Loss over the tenure of the loan. All other borrowing costs are charged to the Statement of Profit and Loss.
(xv) Deferred Employee Stock Compensation Cost:
Deferred employee stock compensation cost for stock options are recognised on the basis of generally accepted accounting principles and are measured by the difference between the intrinsic value of the Companyâs shares of stock options at the grant date and the exercise price to be paid by the option holders. The compensation expense is amortised over the vesting period of the options. The fair value of options for disclosure purpose is measured on the basis of a valuation certified by an independent firm of Chartered Accountants in respect of stock options granted.
(xvi) Leases:
In case of assets taken on operating lease, the lease rentals are charged to the Statement of Profit and Loss on a straight line basis in accordance with Accounting Standard (AS) 19 -Leases.
(xvii) Segment reporting:
The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organisation and management structure. The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the Management in deciding how to allocate resources and in assessing performance. Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under âunallocated revenue / expenses / assets / liabilities.
(xviii) Derivative financial instruments and hedging activities:
The Companyâs activities expose it to the financial risks of changes in foreign exchange rates and interest rates. The Company uses derivative contracts such as foreign exchange forward, cross currency contracts, interest rate swaps, foreign currency futures, options and swaps to hedge its exposure to movements in foreign exchange rates and interest rates. The use of these foreign exchange and forward contracts reduce the risk or cost to the Company and the Company does not use those for trading or speculation purposes.
The Company uses hedging instruments that are governed by the policies of the Company which are approved by the Board of Directors, which provide written principles on the use of such financial derivatives consistent with the risk management strategy of the Company.
Effective April 1, 2016, the Company has followed Guidance Note on Accounting for Derivative Contracts for accounting of derivate instrument, to the extent that the adoption did not conflict with existing accounting standards and other authoritative pronouncements of the Company Law and other regulatory requirements.
Derivative financial instruments are initially measured at fair value on the contract date and are subsequently re-measured to fair value at each reporting date. Derivatives are classified as assets when the fair value is positive (positive marked to market value) or as liabilities when the fair value is negative (negative marked to market value). Derivative assets and liabilities are recognised on the balance sheet at fair value. Changes in the fair value of derivatives other than those designated as hedges are recognised in the Statement of Profit and Loss.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, no longer qualifies for hedge accounting or the Company chooses to end the hedging relationship.
Effective January 1, 2017, the company has designated certain Interest Rate Swaps (IRS) as hedging instrument. Interest rate swaps are held to manage the interest rate exposures and are designated as fair value or cash flow hedges, as applicable. The Accounting for such designated contracts is as follows:
Fair value hedges
The Company uses IRS instruments to convert a proportion of its fixed rate debt to floating rates in order to hedge the interest rate risk arising, principally, from issue of non-convertible debentures. Company designates these as fair value hedges of interest rate risk. Changes in the fair values of derivatives designated as fair value hedges and changes in fair value of the related hedged item are recognised directly in Statement of Profit and Loss thus ineffective portion being recognised in the Statement of Profit and Loss.
Cash Flow hedges
The Company uses Interest Rate Swaps (IRS) Contracts (Floating to Fixed) to hedge its risks associated with interest rate fluctuations relating interest rate risk arising from foreign currency loans / external commercial borrowings. The Company designates such IRS contracts in a cash flow hedging relationship by applying the hedge accounting principles set out in â Guidance Note on Accounting for Derivative Contracts â issued by the ICAI. These IRS contracts are stated at fair value at each reporting date. Changes in the fair value of these IRS contracts that are designated and effective as hedges of future cash flows are recognised directly in âCash Flow Hedge Reserveâ under Reserves and surplus and the ineffective portion is recognised immediately in the Statement of Profit and Loss. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting.
(xix) Foreign Currency Transactions and Translations:
i. Transactions denominated in foreign currencies are recorded at the exchange rates prevailing on the date of transaction.
ii. Monetary items denominated in foreign currencies at the year end are translated at year end rates. In case of Forward Foreign Exchange Contract (FEC) and Cross Currency Swaps(CCS), the difference between the year-end rate and the rate on the date of the contract is recognised as exchange difference and the premium on such forward contracts is recognised over the life of the forward contract. Any profit/ loss arising on cancellation or renewal of forward contract is recognised as income or expense for the period in which such cancellation or renewal is made.
iii. Non monetary foreign currency items are carried at cost.
iv. Exchange differences arising on settlement / restatement of short-term foreign currency monetary assets and liabilities of the Company are recognised as income or expense in the Statement of Profit and Loss.
v. The exchange differences arising on settlement / restatement of long-term monetary items which do not relate to acquisition of depreciable fixed assets are amortised over the maturity period / upto the date of settlement of such monetary items, whichever is earlier, and charged to the Statement of Profit and Loss. The unamortised exchange differences are carried in the Balance Sheet as âForeign Currency Monetary Item Translation Difference Accountâ net of the tax effect thereon, where applicable.
(xx) Provisions, Contingent Liabilities and Contingent Assets:
A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the balance sheet date. Contingent liability is disclosed for (1) Possible obligations which will be confirmed only by future events not wholly within the control of the Company or (2) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation can not be made. Contingent Assets are not recognised in the financial statements.
Mar 31, 2015
(i) Basis of Accounting:
The financial statements are prepared under the historical cost
convention on an accrual basis in accordance with the Generally
Accepted Accounting Principles in India (Indian GAAP) and Accounting
Standards (AS) under Section 133 of the Companies Act, 2013 read with
Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant
provisions of the Companies Act, 2013 ("the 2013 Act") / Companies Act,
1956 ("the 1956 Act") as applicable. The accounting policies adopted in
the preparation of the financial statements are consistent with those
followed in the previous year.
(ii) Use of Estimates:
The preparation of the financial statements in conformity with Indian
GAAP 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 year. The Management
believes that the estimates used in preparation of the financial
statements are prudent and reasonable. Future results could differ due
to these estimates and the differences between the actual results and
the estimates are recognised in the periods in which the results are
known / materialise.
(iii) Prudential Norms:
The Company follows The Housing Finance Companies (NHB) Directions,
2010 ("NHB Directions, 2010") as amended from time to time, in respect
of income recognition, income from investments, accounting of
investments, asset classification, disclosures in the Balance Sheet
and provisioning. Accounting Standards (AS) and Guidance Notes issued
by The Institute of Chartered Accountants of India ("ICAI") are
followed insofar as they are not inconsistent with the NHB Directions,
2010.
(iv) Revenue Recognition:
Interest Income from financing and investing activities and others is
recognised on an accrual basis. In terms of the NHB Directions, 2010,
interest income on Non-performing assets ('NPAs') is recognised only
when it is actually realised.
Processing Fees in respect of loans given is recognised on log in /
disbursement as per the terms of the contract.
Income from Fee Income from Services is recognised on an accrual basis.
Commission on insurance policies sold is recognised when the Company
under its agency code sells the insurance policies and when the same is
accepted by the principal insurance company.
Additional /overdue interest/ charges is recognised only when it is
reasonably certain that the ultimate collection will be made.
Repayment of loans is as stipulated in the respective loan agreements
or by way of Equated Monthly Installments (EMI's) comprising principal
and interest. EMIs commence generally once the entire loan is disbursed
however on request of customer it commences even before the entire loan
is disbursed . In case of pending commencement of EMIs, Pre-EMI
interest is payable every month and accounted for on accrual basis.
Dividend income on Equity Shares is recognised when the right to
receive the dividend is unconditional as at the Balance Sheet date. In
terms of the Housing Finance Companies (NHB) Directions 2010, Dividend
Income on units of Mutual Fund(s) held by the Company are recognised on
cash basis as per the NHB Directions, 2010.
The net gain/loss on account of Investments in
Debentures/Bonds/Certificate of Deposit/ Commercial papers and
Government Securities is recognised on trade date basis. Interest
Income is recognised on accrual basis.
(v) Securitisation / Assignment of Loan portfolio:
Derecognition of loans assigned/securitised in the books of the
Company, recognition of gain / loss arising on securitisation
/assignment and accounting for credit enhancements provided by the
Company is based on the guidelines issued by The Institute of Chartered
Accountants of India.
Derecognition of loans assigned / securitised in the books of the
Company is based on the principle of surrender of control over the
loans resulting in a "true sale" of loans.
Residual income on Assignment / Securitisation of Loans is recognised
over the life of the underlying loans and not on an upfront basis.
Credit enhancement in the form of cash collateral, if provided by the
Company, by way of deposits is included under Cash and bank balances /
Loans and Advances, as applicable.
(vi) Fixed Assets:
(a) Tangible Assets:
Tangible fixed assets are stated at cost, net of tax / duty credits
availed, less accumulated depreciation / impairment losses, if any.
Cost includes original cost of acquisition, including incidental
expenses related to such acquisition and installation.
(b) Intangible Assets:
Intangible assets are stated at cost, net of tax / duty credits
availed, less accumulated amortisation / impairment losses, if any.
Cost includes original cost of acquisition, including incidental
expenses related to such acquisition.
(vii) Depreciation and Amortisation:
Depreciation on tangible fixed assets is provided on straight-line
method as per the useful life prescribed in Schedule II to the
Companies Act, 2013, except for Vehicles:
Vehicles are amortised on a straight line basis over a period of five
years from the date when the assets are available for use. The life has
been assessed based on past usage experience and considering the change
in technology.
Depreciation on additions to fixed assets is provided on a pro-rata
basis from the date the asset is put to use. Leasehold improvements are
amortised over the period of Lease. Depreciation on sale / deduction
from fixed assets is provided for up to the date of sale / deduction,
as the case may be.
Assets costing less than Rs. 5,000 each are fully depreciated in the
year of capitalisation. Intangible assets consisting of Software are
amortised on a straight line basis over a period of four years from the
date when the assets are available for use.
(viii) 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. The
recoverable amount is the higher of an asset's net selling price and
its value in use. If such recoverable amount of the asset or the
recoverable amount of the cash generating unit to which the asset
belongs 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 if a
previously assessed impairment loss no longer exists, the recoverable
amount is reassessed and the asset is reflected at the recoverable
amount.
(ix) Taxes on Income:
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the applicable tax rates and the
provisions of the Income Tax Act, 1961 and other applicable tax laws.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is highly
probable that future economic benefit associated with it will flow to
the Company. Deferred tax is recognised on all timing differences,
being the differences between the taxable income and the accounting
income that originate in one period and are capable of reversal in one
or more subsequent periods. Deferred tax is measured using the tax
rates and the tax laws substantively enacted as at the Balance Sheet
date, to the extent that the timing differences are expected to
crystallise / capable of reversal in one or more subsequent periods.
Deferred Tax Assets are recognised where realisation is reasonably
certain whereas in case of carried forward losses or unabsorbed
depreciation, deferred tax assets are recognised only if there is
virtual certainty of realisation backed by convincing evidence that
there will be sufficient future taxable income available to realise
such assets. Deferred Tax Assets are reviewed for the appropriateness
of their respective carrying values at each Balance Sheet date.
Current and deferred tax relating to items directly recognised in
reserves are recognised in reserves and not in the Statement of Profit
and Loss.
(x) Share/Debenture Issue Expenses and Premium/ Discount on Issue:
Share / Debenture issue expenses, net of tax, are adjusted against the
Securities Premium Account, as permissible under Section 52(2) of the
Companies Act, 2013, to the extent of balance available and thereafter,
the balance portion is charged to the Statement of Profit and Loss, as
incurred.
Premium / Discount on Issue of debentures, net of tax, are adjusted
against the Securities Premium Account, as permissible under 52(2) of
the Companies Act, 2013, to the extent of balance available and
thereafter, the balance portion is charged to the Statement of Profit
and Loss, as incurred.
(xi) Investments:
Investments are classified as long term and current investments. Long
term investments are carried individually at cost less provision, if
any, for diminution other than temporary in the value of such
investments. In terms of NHB Directions, 2010, quoted Current
investments are valued at lower of cost or market value. Unquoted
current investments in units of Mutual Funds are valued as per Net
Asset Value of the Plan. Provision for diminution in value of
investments is made in accordance with the NHB Directions, 2010 and
Accounting Standard (AS) - 13 'Accounting for Investments'.
(xii) Employee benefits:
The Company's contribution to Provident Fund and Employee State
Insurance Scheme are considered as defined contribution plans and are
charged as an expense based on the amount of contribution required to
be made and when services are rendered by the employees. The Company
has unfunded defined benefit plans as Compensated Absences and Gratuity
for all eligible employees, the liability for which is determined on
the basis of an actuarial valuation at the end of the year using the
'Projected Unit Credit Method'. Actuarial gains and losses comprise
experience adjustments and the effects of changes in actuarial
assumptions and are recognised in the Statement of Profit and Loss as
income or expenses, as applicable. Superannuation (Pension & Medical
coverage) payable to a Director on retirement is actuarially valued at
the end of the year using the Projected Unit Credit Method. Actuarial
gains and losses comprise experience adjustments and the effects of
change in actuarial assumptions and are recognised in the Statement of
Profit and Loss as income or expenses as applicable.
(xiii) Commercial Papers:
The liability is recognised at the face value of the Commercial Paper
at the time of its issue. The discount on issue of Commercial Papers
is amortised over the tenure of the instrument.
(xiv) Borrowing Costs:
Borrowing costs that are attributable to the acquisition, construction
or production of qualifying assets are capitalised as part of cost of
the asset. Ancillary costs in connection with long-term external
commercial borrowings are amortised to the Statement of Profit and Loss
over the tenure of the loan. All other borrowing costs are charged to
the Statement of Profit and Loss.
(xv) Deferred Employee Stock Compensation Cost:
Deferred employee stock compensation cost for stock options are
recognised on the basis of generally accepted accounting principles and
are measured by the difference between the intrinsic value of the
Company's shares of stock options at the grant date and the exercise
price to be paid by the option holders. The compensation expense is
amortised over the vesting period of the options. The fair value of
options for disclosure purpose is measured on the basis of a valuation
certified by an independent firm of Chartered Accountants in respect of
stock options granted.
(xvi) Leases:
In case of assets taken on operating lease, the lease rentals are
charged to the Statement of Profit and Loss on a straight line basis in
accordance with Accounting Standard (AS) 19 - Leases.
(xvii) Segment reporting:
The Company identifies primary segments based on the dominant source,
nature of risks and returns and the internal organisation and
management structure. The operating segments are the segments for which
separate financial information is available and for which operating
profit/loss amounts are evaluated regularly by the Management in
deciding how to allocate resources and in assessing performance.
Revenue, expenses, assets and liabilities which relate to the Company
as a whole and are not allocable to segments on reasonable basis have
been included under "unallocated revenue / expenses / assets /
liabilities.
(xviii) Derivative Transactions:
The Company has entered into Interest Rate Swap (IRS), Cross Currency
Swaps(CCS), Forward Contracts(FC) and Foreign Currency Options(FCO).
All outstanding IRS, CCS, FC contracts and FCO contracts are marked-to-
market as at the year end. Losses are recognised in the Statement of
Profit and Loss based on category of contracts and gains towards
category of contracts are ignored, in line with the Announcement made
by the ICAI dated March 29, 2008. Any profit/loss arising on
cancellation/unwinding of IRS, CCS, FC contracts and FCO contract are
recognised as income or expenses for the period. Premium / discount on
IRS / CCS / FC / FCO contract which are not intended for trading or
speculation purposes, are amortised over the period of the contracts if
such contracts relate to monetary items as at the Balance Sheet date,
except in case where they relate to the acquisition or construction of
fixed assets, in which case, they are adjusted to the carrying cost of
such assets.
(xix) Foreign Currency Transactions and Translations:
i. Transactions denominated in foreign currencies are recorded at the
exchange rates prevailing on the date of transaction.
ii. Monetary items denominated in foreign currencies at the year end
are translated at year end rates. In case of Forward Foreign Exchange
Contract (FEC), the difference between the year-end rate and the rate
on the date of the contract is recognised as exchange difference and
the premium on such forward contracts is recognised over the life of
the forward contract. Any profit/loss arising on cancellation or
renewal of forward contract is recognised as income or expense for the
period in which such cancellation or renewal is made.
iii. Non monetary foreign currency items are carried at cost.
iv. Exchange differences arising on settlement / restatement of
short-term foreign currency monetary assets and liabilities of the
Company are recognised as income or expense in the Statement of Profit
and Loss.
v. The exchange differences arising on settlement / restatement of
long-term monetary items which do not relate to acquisition of
depreciable fixed assets are amortised over the maturity period / upto
the date of settlement of such monetary items, whichever is earlier,
and charged to the Statement of Profit and Loss. The unamortised
exchange differences are carried in the Balance Sheet as "Foreign
Currency Monetary Item Translation Difference Account" net of the tax
effect thereon, where applicable.
(xx) Provisions, Contingent Liabilities and Contingent Assets:
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of
resources will be required to settle the obligation in respect of which
a reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
balance sheet date. Contingent liability is disclosed for (1) Possible
obligations which will be confirmed only by future events not wholly
within the control of the Company or (2) Present obligations arising
from past events where it is not probable that an outflow of resources
will be required to settle the obligation or a reliable estimate of the
amount of the obligation can not be made. Contingent Assets are not
recognised in the financial statements.
(2) Corporate Information:
The Board of Directors of Indiabulls Housing Finance Limited (100%
subsidiary of "IBFSL") and Indiabulls Financial Services Limited
("IBFSL", "Erstwhile Holding Company") at their meeting held on April
27, 2012 had approved the Scheme of Arrangement involving the reverse
merger of IBFSL with the Company in terms of the provisions of Sections
391 to 394 of the Companies Act, 1956 (the "Scheme of Arrangement").
The Appointed Date of the proposed merger fixed under the Scheme of
Arrangement was April 1, 2012. The Hon'ble High Court of Delhi, vide
its Order dated December 12, 2012, received by the Company on February
8, 2013, approved the Scheme of Arrangement. In terms of the Court
approved Scheme of Arrangement, with the filing of the copy of the
Order, on March 8, 2013, with the office of ROC, NCT of Delhi & Haryana
(the Effective Date), IBFSL, as a going concern, stands amalgamated
with IBHFL with effect from the Appointed Date, being April 1, 2012.
Indiabulls Financial Services Limited ( "IBFSL") was
incorporated on January 10, 2000 as a Private Limited Company. On March
30, 2001, the Company was registered under Section 45-IA of the Reserve
Bank of India (RBI) Act, 1934 to carry on the business of a Non-Banking
Financial Company. The Company was converted into a public limited
Company pursuant to Section 44 of the Companies Act, 1956 on February
03, 2004.
Indiabulls Housing Finance Limited ("the Company") ("IBHFL") was
incorporated on May 10, 2005. On December 28, 2005 the Company was
registered under Section 29A of the National Housing Bank Act, 1987 to
commence / carry on the business of a Housing Finance Institution
without accepting public deposits. The Company is required to comply
with provisions of the National Housing Bank Act, 1987, the Housing
Finance Companies (NHB) Directions, 2010 and other guidelines /
instructions / circulars issued by the National Housing Bank from time
to time.
The Company is engaged in the business to provide finance and to
undertake all lending and finance to any person or persons,
co-operative society, association of persons, body of individuals,
companies, institutions, firms, builders, developers, contractors,
tenants and others either at interest or without and/or with or without
any security for construction, erection, building, repair, remodeling,
development, improvement, purchase of houses, apartments, flats,
bungalows, rooms, huts, townships and/or other buildings and real
estate of all descriptions or convenience there on and to equip the
same or part thereof with all or any amenities or conveniences,
drainage facility, electric, telephonic, television, and other
installations, either in total or part thereof and /or to purchase any
free hold or lease hold lands, estate or interest in any property and
such other activities as may be permitted under the Main Objects of the
Memorandum of Association of the Company.
Mar 31, 2014
(i) Basis of Accounting:
The financial statements are prepared under the historical cost
convention on an accrual basis in accordance with the Generally
Accepted Accounting Principles in India (Indian GAAP) to comply with
the Accounting Standards notified under Section 211(3C) of the
Companies Act, 1956 (Accounting Standards) Rules, 2006 (as amended)
("the 1956 Act") (which continue to be applicable in respect of Section
133 of the Companies Act, 2013 ("the 2013 Act") in terms of General
Circular 15/2013 dated 13 September, 2013 of the Ministry of Corporate
Affairs) and the relevant provisions of the 1956 Act/ 2013 Act, as
applicable.The accounting policies adopted in the preparation of the
financial statements are consistent with those followed in the previous
year.
(ii) Prudential Norms:
The Company follows The Housing Finance Companies (NHB) Directions,
2010 ("NHB Directions, 2010") as amended from time to time, in respect
of income recognition, income from investments, accounting of
investments, asset classification, disclosures in the Balance Sheet and
provisioning. Accounting Standards (AS) as notified by the Companies
(Accounting Standards) Rules, 2006, as amended and Guidance Notes
issued by The Institute of Chartered Accountants of India ("ICAI") are
followed insofar as they are not inconsistent with the NHB Directions,
2010.
(iii) Use of Estimates:
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
(iv) Revenue Recognition:
Interest Income from financing and investing activities and others is
recognised on an accrual basis. In terms of the NHB Directions, 2010,
interest income on Non-performing assets (''NPAs'') is recognised only
when it is actually realised.
Processing Fees in respect of loans given is recognised on sanction /
disbursement as per the terms of the contract.
Income from Fee based Advisory Services is recognised on an accrual
basis.
Commission on insurance policies sold is recognised when the Company
under its agency code sells the insurance policies and when the same is
accepted by the principal insurance company.
Repayment of loans is as stipulated in the respective loan agreements
or by way of Equated Monthly Installments (EMI''s) comprising principal
and interest. EMI''s commence once the entire loan is disbursed.
Pending commencement of EMI''s, Pre-EMI interest is payable every month
and accounted for on accrual basis.
Dividend income on Equity Shares is recognised when the right to
receive the dividend is unconditional as at the Balance Sheet date. In
terms of the Housing Finance Companies (NHB) Directions 2010, Dividend
Income on units of Mutual Fund(s) held by the Company are recognised on
cash basis as per the NHB Directions, 2010.
The net gain/loss on account of Investments in
Debentures/Bonds/Certificate of Deposit/ Commercial papers and
Government Securities is recognised on trade date basis. Interest
Income is recognised on accrual basis.
(v) Securitisation / Assignment of Loan portfolio:
Derecognition of loans assigned/securitised in the books of the
Company, recognition of gain / loss arising on securitisation
/assignment and accounting for credit enhancements provided by the
Company is based on the guidelines issued by The Institute of Chartered
Accountants of India.
Derecognition of loans assigned / securitised in the books of the
Company is based on the principle of surrender of control over the
loans resulting in a "true sale" of loans.
Residual income on Assignment / Securitisation of Loans is recognised
over the life of the underlying loans and not on an upfront basis.
Credit enhancement in the form of cash collateral, if provided by the
Company, by way of deposits is included under Cash and bank balances /
Loans and Advances, as applicable.
(vi) Fixed Assets:
(a) Tangible Assets:
Tangible fixed assets are stated at cost, net of tax / duty credits
availed, less accumulated depreciation / impairment losses, if any.
Cost includes original cost of acquisition, including incidental
expenses related to such acquisition and installation.
(b) Intangible Assets:
Intangible assets are stated at cost, net of tax / duty credits
availed, less accumulated amortisation / impairment losses, if any.
Cost includes original cost of acquisition, including incidental
expenses related to such acquisition.
(vii) Depreciation and Amortisation:
Depreciation on tangible fixed assets is provided on straight-line
method at the rates specified in Schedule XIV to the Companies Act,
1956. Depreciation on additions to fixed assets is provided on a
pro-rata basis from the date the asset is put to use. Leasehold
improvements are amortised over the period of Lease.
Depreciation on sale / deduction from fixed assets is provided for up
to the date of sale / deduction, as the case may be. Assets costing
less than Rs. 5,000 each are fully depreciated in the year of
capitalisation.
Intangible assets consisting of Software are amortised on a straight
line basis over a period of four years from the date when the assets
are available for use.
(viii) 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. The
recoverable amount is the higher of an asset''s net selling price and
its value in use. If such recoverable amount of the asset or the
recoverable amount of the cash generating unit to which the asset
belongs 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 if a
previously assessed impairment loss no longer exists, the recoverable
amount is reassessed and the asset is reflected at the recoverable
amount.
(ix) Taxes on Income:
Current tax is determined as the tax payable in respect of taxable
income for the year and is computed in accordance with relevant tax
regulations.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax resulting from timing differences
between accounting income and taxable income is accounted for at the
tax rates and the tax laws substantively enacted as at the Balance
Sheet date, to the extent that the timing differences are expected to
crystallise / capable of reversal in one or more subsequent periods.
Deferred Tax Assets are recognised where realisation is reasonably
certain whereas in case of carried forward losses or unabsorbed
depreciation, deferred tax assets are recognised only if there is
virtual certainty of realisation backed by convincing evidence that
there will be sufficient future taxable income available to realise
such assets. Deferred Tax Assets are reviewed for the appropriateness
of their respective carrying values at each Balance Sheet date.
(x) Share/Debenture Issue Expenses and Premium/Discount on Issue:
Share / Debenture issue expenses, net of tax, are adjusted against the
Securities Premium Account, as permissible under Section 78(2) of the
Companies Act, 1956, to the extent of balance available and thereafter,
the balance portion is charged to the Statement of Profit and Loss, as
incurred.
Premium / Discount on Issue of debentures, net of tax, are adjusted
against the Securities Premium Account, as permissible under Section
78(2) of the Companies Act, 1956, to the extent of balance available
and thereafter, the balance portion is charged to the Statement of
Profit and Loss, as incurred.
(xi) Investments:
Investments are classified as long term and current investments. Long
term investments are carried individually at cost less provision, if
any, for diminution other than temporary in the value of such
investments. In terms of NHB Directions, 2010, quoted Current
investments are valued at lower of cost or market value. Unquoted
current investments in units of Mutual Funds are valued as per Net
Asset Value of the Plan. Provision for diminution in value of
investments is made in accordance with the NHB Directions, 2010 and
Accounting Standard (AS) - 13 ''Accounting for Investments'' as notified
by the Companies (Accounting Standards) Rules, 2006, as amended.
(xii) Employee benefits:
The Company''s contribution to Provident Fund and Employee State
Insurance Scheme are considered as defined contribution plans and are
charged as an expense based on the amount of contribution required to
be made and when services are rendered by the employees. The Company
has unfunded defined benefit plans as Compensated Absences and Gratuity
for all eligible employees, the liability for which is determined on
the basis of an actuarial valuation at the end of the year using the
''Projected Unit Credit Method''. Actuarial gains and losses comprise
experience adjustments and the effects of changes in actuarial
assumptions and are recognised in the Statement of Profit and Loss as
income or expenses, as applicable. Superannuation (Pension & Medical
coverage) payable to a Director on retirement is actuarially valued at
the end of the year using the Projected Unit Credit Method. Actuarial
gains and losses comprise experience adjustments and the effects of
change in actuarial assumptions and are recognised in the Statement of
Profit and Loss as income or expenses as applicable.
(xiii) Commercial Papers:
The liability is recognised at the face value of the Commercial Paper
at the time of its issue. The discount on issue of Commercial Papers
is amortised over the tenure of the instrument.
(xiv) Borrowing Costs:
Borrowing costs that are attributable to the acquisition, construction
or production of qualifying assets are capitalised as part of cost of
the asset. All other borrowing costs are charged to the Statement of
Profit and Loss.
(xv) Deferred Employee Stock Compensation Cost: Deferred employee stock
compensation cost for stock options are recognised on the basis of
generally accepted accounting principles and are measured by the
difference between the intrinsic value of the Company''s shares of stock
options at the grant date and the exercise price to be paid by the
option holders. The compensation expense is amortised over the vesting
period of the options. The fair value of options for disclosure purpose
is measured on the basis of a valuation certified by an independent
firm of Chartered Accountants in respect of stock options granted.
(xvi) Leases:
In case of assets taken on operating lease, the lease rentals are
charged to the Statement of Profit and Loss on a straight line basis in
accordance with Accounting Standard (AS) 19 Â Leases as notified by the
Companies (Accounting Standards) Rules, 2006, as amended.
(xvii) Segment reporting:
The Company identifies primary segments based on the dominant source,
nature of risks and returns and the internal organisation and
management structure. The operating segments are the segments for which
separate financial information is available and for which operating
profit/loss amounts are evaluated regularly by the executive Management
in deciding how to allocate resources and in assessing performance.
Revenue, expenses, assets and liabilities which relate to the Company
as a whole and are not allocable to segments on reasonable basis have
been included under "unallocated revenue / expenses / assets /
liabilities.
(xviii) Derivative Transactions:
The Company has entered into Interest Rate Swap (IRS) and Foreign
Currency Options(FCO). All outstanding IRS contracts and FCO contracts
are marked-to-market as at the year end. Losses are recognised in the
Statement of Profit and Loss based on category of contracts and gains
towards category of contracts are ignored, in line with the
Announcement made by the ICAI dated March 29, 2008. Any profit/loss
arising on cancellation/unwinding of IRS contracts and FCO contract are
recognised as income or expenses for the period. Premium / discount on
IRS / FCO contract which are not intended for trading or speculation
purposes, are amortised over the period of the contracts if such
contracts relate to monetary items as at the Balance Sheet date, except
in case where they relate to the acquisition or construction of fixed
assets, in which case, they are adjusted to the carrying cost of such
assets.
(xix) Foreign Currency Transactions and Translations:
i. Transactions denominated in foreign currencies are recorded at the
exchange rates prevailing on the date of transaction.
ii. Monetary items denominated in foreign currencies at the year end
are translated at year end rates. In case of Forward Foreign Exchange
Contract (FEC), the difference between the year-end rate and the rate
on the date of the contract is recognised as exchange difference and
the premium on such forward contracts is recognised over the life of
the forward contract. Any profit/loss arising on cancellation or
renewal of forward contract is recognised as income or expense for the
period.
iii. Non monetary foreign currency items are carried at cost.
iv. Exchange differences arising on settlement / restatement of
short-term foreign currency monetary assets and liabilities of the
Company are recognised as income or expense in the Statement of Profit
and Loss.
v. The exchange differences arising on settlement / restatement of
long-term monetary items which do not relate to acquisition of
depreciable fixed assets are amortised over the maturity period / upto
the date of settlement of such monetary items, whichever is earlier,
and charged to the Statement of Profit and Loss. The unamortised
exchange differences are carried in the Balance Sheet as "Foreign
Currency Monetary Item Translation Difference Account" net of the tax
effect thereon, where applicable.
(xx) Provisions, Contingent Liabilities and Contingent Assets:
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Contingent liability is disclosed for
(1) Possible obligations which will be confirmed only by future events
not wholly within the control of the Company or (2) Present obligations
arising from past events where it is not probable that an outflow of
resources will be required to settle the obligation or a reliable
estimate of the amount of the obligation can not be made. Contingent
Assets are neither recognised nor disclosed.
Mar 31, 2013
(i) Basis of Accounting:
The financial statements are prepared under the historical cost
convention on an accrual basis in accordance with the Generally
Accepted Accounting Principles in India (Indian GAAP) and Accounting
Standards (AS) as notified by the Companies (Accounting Standards)
Rules, 2006, as amended.
(ii) Prudential Norms:
The Company follows The Housing Finance Companies (NHB) Directions,
2010 ("NHB Directions, 2010") as amended from time to time, in respect
of income recognition, income from investments, accounting of
investments, asset classification, disclosures in the Balance Sheet and
provisioning. Accounting Standards (AS) as notified by the Companies
(Accounting Standards) Rules, 2006, as amended and Guidance Notes
issued by The Institute of Chartered Accountants of India ("ICAI") are
followed insofar as they are not inconsistent with the NHB Directions,
2010.
(iii) Use of Estimates:
The preparation of financial statements in conformity with Indian GAAP
requires the Management to make estimates and assumptions that affect
the reported amount of assets and liabilities on the date of the
financial statements and the reported amount of revenues and expenses
during the reporting period. Differences between the actual result and
estimates are recognised in the year in which the results are known /
materialised.
(iv) Revenue Recognition:
Interest Income from financing and investing activities and others is
recognised on an accrual basis. In terms of the NHB Directions, 2010,
interest income on NonÂperforming assets (''NPAs'') is recognised only
when it is actually realised.
Processing Fees in respect of loans given is recognised on sanction /
disbursement
as per the terms of the contract. Income from Fee based Advisory
Services is recognised on an accrual basis. Commission on insurance
policies sold is recognised when the Company under its agency code
sells the insurance policies and when the same is accepted by the
principal insurance company. Repayment of loans is as stipulated in
the respective loan agreements or by way of Equated Monthly
Installments (EMI''s) comprising principal and interest. EMI''s commence
once the entire loan is disbursed. Pending commencement of EMI''s,
PreÂEMI interest is payable every month and accounted for on accrual
basis. Dividend income on Equity Shares is recognised when the right
to receive the dividend is unconditional as at the Balance Sheet date.
In terms of the Housing Finance Companies (NHB) Directions 2010,
Dividend Income on units of Mutual Fund(s) held by the Company are
recognised on cash basis as per the NHB Directions, 2010.
(v) Securitisation / Assignment of Loan portfolio:
Derecognition of loans assigned/ securitised in the books of the
Company, recognition of gain / loss arising on securitisation /
assignment and accounting for credit enhancements provided by the
Company is based on the guidelines issued by The Institute of Chartered
Accountants of India. Derecognition of loans assigned / securitised in
the books of the Company is based on the principle of surrender of
control over the loans resulting in a "true sale" of loans.
Residual income on Assignment / Securitisation of Loans is recognised
over the life of the underlying loans and not on an upfront basis.
Credit enhancement in the form of cash collateral, if provided by the
Company, by way of deposits is included under Cash and bank balances /
Loans and Advances, as applicable.
(vi) Fixed Assets:
(a) Tangible Assets:
Tangible fixed assets are stated at cost, net of tax / duty credits
availed, less accumulated depreciation / impairment losses, if any.
Cost includes original cost of acquisition, including incidental
expenses related to such acquisition and installation.
(b) Intangible Assets:
Intangible assets are stated at cost, net of tax / duty credits
availed, less accumulated amortisation / impairment losses, if any.
Cost includes original cost of acquisition, including incidental
expenses related to such acquisition.
(vii) Depreciation / Amortisation:
Depreciation on tangible fixed assets is provided on straightÂline
method at the rates specified in Schedule XIV to the Companies Act,
1956. Depreciation on additions to fixed assets is provided on a
proÂrata basis from the date the asset is put to use. Leasehold
improvements are amortised over the period of Lease. Depreciation on
sale / deduction from fixed assets is provided for up to the date of
sale/ deduction, as the case may be. Assets costing less than Rs. 5,000
each are fully depreciated in the year of capitalisation. Intangible
assets consisting of Software are amortised on a straight line basis
over a period of four years from the date when the assets are available
for use.
(viii) 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. The
recoverable amount is the higher of an asset''s net selling price and
its value in use. If such recoverable amount of the asset or the
recoverable amount of the cash generating unit to which the asset
belongs is less than its carrying amount, the carrying amount is
eeduced 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 if a
previously assessed impairment loss no longer exists, the recoverable
amount is reassessed and the asset is reflected at the recoverable
amount.
(ix) Taxes on Income:
Current tax is determined as the tax payable in respect of taxable
income for the year and is computed in accordance with relevant tax
regulations. Deferred tax resulting from timing differences between
accounting income and taxable income is accounted for at the tax rates
and the tax laws substantively enacted as at the Balance Sheet date, to
the extent that the timing differences are expected to crystallise /
capable of reversal in one or more subsequent periods.
Deferred Tax Assets are recognised where realisation is reasonably
certain whereas in case of carried forward losses or unabsorbed
depreciation, deferred tax assets are recognised only if there is
virtual certainty of realisation backed by convincing evidence that
there will be sufficient future taxable income available to realise
such assets. Deferred Tax Assets are reviewed for the appropriateness
of their respective carrying values at each Balance Sheet date.
(x) Share/Debenture Issue Expenses and Premium/Discount on Issue: Share
/ Debenture issue expenses, net of tax, are adjusted against the
Securities Premium Account, as permissible under Section 78(2) of the
Companies Act, 1956, to the extent of balance available and thereafter,
the balance portion is charged to the Statement of Profit and Loss, as
incurred.
Premium / Discount on Issue of debentures, net of tax, are adjusted
against the Securities Premium Account, as permissible under Section
78(2) of the
Companies Act, 1956, to the extent of balance available and thereafter,
the balance portion is charged to the Statement of Profit and Loss, as
incurred.
(xi) Investments:
Investments are classified as long term and current investments. Long
term investments are carried individually at cost less provision, if
any, for diminution other than temporary in the value of such
investments. In terms of NHB Directions, 2010, quoted Current
investments are valued at lower of cost or market value. Unquoted
current investments in units of Mutual Funds are valued as per Net
Asset Value of the Plan. Provision for diminution in value of
investments is made in accordance with the NHB Directions, 2010 and
Accounting Standard (AS) Â 13 ''Accounting for Investments'' as notified
by the Companies (Accounting Standards) Rules, 2006, as amended.
(xii) Employee benefits:
The Company''s contribution to Provident Fund is charged to the
Statement of Profit and Loss. The Company has unfunded defined benefit
plans as Compensated Absences and Gratuity for all eligible employees,
the liability for which is determined on the basis of an actuarial
valuation at the end of the year using the ''Projected Unit Credit
Method''. Actuarial gains and losses comprise experience adjustments and
the effects of changes in actuarial assumptions and are recognised in
the Statement of Profit and Loss as income or expenses, as applicable.
Superannuation (Pension & Medical coverage) payable to a Director on
retirement is actuarially valued at the end of the year using the
Projected Unit Credit Method. Actuarial gains and losses comprise
experience adjustments and the effects of change in actuarial
assumptions and are recognised in the Statement of Profit and Loss as
income or expenses as applicable.
(xiii) Commercial Papers:
The liability is recognised at the face value of the Commercial Paper
at the time of its issue. The discount on issue of Commercial Papers is
amortised over the tenure of the instrument.
(xiv) Borrowing Costs:
Borrowing costs that are attributable to the acquisition, construction
or production of qualifying assets are capitalised as part of cost of
the asset. All other borrowing costs are charged to the Statement of
Profit and Loss.
(xv) Deferred Employee Stock Compensation Cost:
Deferred employee stock compensation cost for stock options are
recognised on the basis of generally accepted accounting principles and
are measured by the difference between the intrinsic value of the
Company''s shares of stock options at the grant date and the exercise
price to be paid by the option holders. The compensation expense is
amortised over the vesting period of the options. The fair value of
options for disclosure purpose is measured on the basis of a valuation
certified by an independent firm of Chartered Accountants in respect of
stock options granted.
(xvi) Leases:
In case of assets taken on operating lease, the lease rentals are
charged to the Statement of Profit and Loss on a straight line basis in
accordance with Accounting Standard (AS) 19 Â Leases as notified by the
Companies (Accounting Standards) Rules, 2006, as amended.
(xvii) Segment reporting:
The Company identifies primary segments based on the dominant source,
nature of risks and returns and the internal organisation and
management structure. The operating segments are the segments for
which separate financial information is available and for which
operating profit/ loss amounts are evaluated regularly by the executive
Management in deciding how to allocate resources and in assessing
performance.
(xviii) Derivative Transactions:
The Company has entered into Interest Rate Swap (IRS) and Foreign
Currency Options(FCO). All outstanding IRS contracts and FCO contracts
are marked- to-market as at the year end. Losses are recognised in the
Statement of Profit and Loss based on category of contracts and gains
towards category of contracts are ignored, in line with the
Announcement made by the ICAI dated March 29, 2008. Any profit/loss
arising on cancellation/ unwinding of IRS contracts and FCO contract
are recognised as income or expenses for the period. Premium / discount
on IRS / FCO contract which are not intended for trading or speculation
purposes, are amortised over the period of the contracts if such
contracts relate to monetary items as at the Balance Sheet date, except
in case where they relate to the acquisition or construction of fixed
assets, in which case, they are adjusted to the carrying cost of such
assets.
(xix) Foreign Currency Transactions and
Translations:
i. Transactions denominated in foreign currencies are recorded at the
exchange rates prevailing on the date of transaction.
ii. Monetary items denominated in foreign currencies at the year end
are translated at year end rates. In case of Forward Foreign Exchange
Contract (FEC), the difference between the year-end rate and the rate
on the date of the contract is recognised as exchange difference and
the premium on such forward contracts is recognised over the life of
the forward contract. Any profit/ loss arising on cancellation or
renewal of forward contract is recognised as income or expense for the
period.
iii. Non monetary foreign currency items are carried at cost.
iv. Exchange differences arising on settlement / restatement of short-
term foreign currency monetary assets and liabilities of the Company
are recognised as income or expense in the Statement of Profit and
Loss. v. The exchange differences arising on settlement / restatement
of long- term monetary items which do not relate to acquisition of
depreciable fixed assets are amortised over the maturity period / upto
the date of settlement of such monetary items, whichever is earlier,
and charged to the Statement of Profit and Loss. The unamortised
exchange differences are carried in the Balance Sheet as "Foreign
Currency Monetary Item Translation Difference Account" net of the tax
effect thereon, where applicable.
(xx) Provisions, Contingent Liabilities and Contingent Assets:
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Contingent liability is disclosed for
(1) Possible obligations which will be confirmed only by future events
not wholly within the control of the Company or (2) Present obligations
arising from past events where it is not probable that an outflow of
resources will be required to settle the obligation or a reliable
estimate of the amount of the obligation can not be made. Contingent
Assets are neither recognised nor disclosed.
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