Accounting Policies of LIC Housing Finance Ltd. Company
Mar 31, 2023
Significant Accounting Policies
2.1 Statement of Compliance
Standalone Financial Statements of the Company have
been prepared in accordance with the accounting principles
generally accepted in India including Indian Accounting
Standards ("the Ind ASâ) prescribed under section 133 of
the Companies Act, 2013 ("the Actâ) read with Rule 3 of
the Companies (Indian Accounting Standards) Rules, 2015
as amended from time to time and the guidelines issued
by the National Housing Bank ("NHBâ) and Reserve Bank
of India (RBI) to the extent applicable.
The Balance Sheet, the Statement of Profit and Loss and
the Statement of Changes in Equity are prepared and
presented in the format prescribed in the Division III of
Schedule III to the Act. The Statement of Cash Flows has
been prepared and presented as per the requirements
of Ind AS 7 "Statement of Cash Flowsâ. The Company
presents its Balance Sheet in the order of liquidity.
2.2 Basis of preparation of Ind-AS Financial Statements
The Company has prepared these Standalone Financial
Statements, which comprises the Balance Sheet as
at March 31, 2023, the Statement of Profit and Loss,
the Statement of Cash Flows and the Statement of
Changes in Equity for the year ended March 31, 2023, and
accounting policies and other explanatory information
(together hereinafter referred to as "Standalone Financial
Statementsâ or "Financial Statementsâ) on the historical
cost basis except for certain financial instruments and
certain employee benefit assets, which are measured at
fair values at the end of each reporting period, as explained
in the accounting policies below.
Fair value is the price that would be received on sale of an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date,
regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating
the fair value of an asset or a liability, the Company takes
into account the characteristics of the asset or liability
if market participants would take those characteristics
into account when pricing the asset or liability at the
measurement date.
In addition, for financial reporting purposes, fair value
measurements are categorized within the fair value
hierarchy into Level 1, 2, or 3 based on the degree
to which the inputs to the fair value measurements
are observable and the significance of the inputs to
the fair value measurements in its entirety, which are
described as follows:
⢠Level 1 inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities that
the entity can access at the measurement date;
⢠Level 2 inputs are inputs, other than quoted prices
included within level 1, that are observable for the
asset or liability, either directly or indirectly; and
⢠Level 3 inputs are unobservable inputs for the
asset or liability.
The financial statements are presented in Indian Rupees
(INR) and all values are rounded to the nearest Crore
except when otherwise stated.
The Company has recognised revenue pursuant to a
contract (other than a contract listed in paragraph 5
of Ind AS 115) only if the counterparty to the contract is
a customer. A customer is a party that has contracted
with an entity to obtain services that are an output of the
entity''s ordinary activities in exchange for consideration.
i. Interest Income:
Interest income from a financial asset is recognised
when it is probable that the economic benefits will
flow to the Company and the amount of income can
be measured reliably.
Interest income is accrued on a timely basis, by
reference to the principal outstanding and at
applicable effective interest rate (EIR). The effective
interest method is a method of calculating the
amortised cost of a financial asset and allocating
interest income over the relevant period. The effective
interest rate is the rate that exactly discounts
estimated future cash receipts (including all fees paid
or received that form an integral part of the effective
interest rate, transaction costs and other premiums or
discounts) through the expected life of the financial
asset, or, where appropriate, a shorter period, to the
net carrying amount on initial recognition.
ii. Dividend Income:
Dividend income from investment is recognised
when the Company''s right to receive the payment
has been established provided that it is probable that
economic benefits will flow to the Company and the
amount of income can be measured reliably.
iii. Fees and Commission Income:
Fees and commission income includes fees
other than those that are an integral part of EIR.
The Company recognises the fees and commission
income in accordance with the terms of the relevant
contracts / agreements and when it is probable that
the Company will collect the consideration.
iv. Other Income:
Other Income represents income earned from the
activities incidental to the business and is recognised
when the right to receive the income is established as
per the terms of the contract.
As Lessee
The Company, as lessee has recognised lease liabilities and
right-of-use assets, has applied the following approach to
all of its leases (a) measured the lease liability at the date
of transition to Ind AS by measuring that lease liability at
the present value of the remaining lease payments and
discounted using the lessee''s incremental borrowing rate
at the date of transition to Ind AS 116. Lease arrangements
entered during the year are measured at incremental
borrowing rate computed at the beginning of the year.
Lease liabilities are re-measured with a corresponding
adjustment to the related right of use asset if there is
change to its assessment whether it will exercise an
extension or a termination option. (b) Right Of Use assets
are recognized and measured at cost, consisting of initial
measurement of lease liability plus any lease payments
made to the lessor at or before the commencement
date less any lease incentives received, initial estimate
of restoration costs and any initial direct costs incurred
by lessee. They are subsequently measured at cost less
accumulated depreciation and impairment losses. Right of
Use Assets are depreciated from the commencement date
on a straight- line basis over the shorter of the lease term
or useful life of the underlying asset. They are evaluated for
recoverability whenever events or changes indicate that
their carrying amounts may not be recoverable.
The Company has not applied Ind AS 116 to Short Term
Leases, which are defined as leases with a lease term
of 12 months or less and leases of low-value assets.
The Company recognises the lease payments associated
with these leases as an expense over the lease term.
As a Lessor
Leases for which the company is a lessor is classified as a
finance or operating lease. Whenever the terms of the lease
transfer substantially all the risks and rewards of ownership
to the lessee, the contract is classified as a finance lease.
All other leases are classified as operating leases.
When the Company is an intermediate lessor, it accounts
for its interest in the head lease and the sublease separately.
The sublease is classified as a finance or operating
lease by reference to the right-of-use asset arising from
the head lease.
For operating leases, rental income is recognized on a
straight line basis over the term of the relevant lease.
2.5 Functional Currency and Foreign Exchange
Transactions
The functional currency of the Company is determined on
the basis of the primary economic environment in which it
operates. The Company has accordingly assessed INR as
its functional currency.
The transactions in currencies other than the entity''s
functional currency are recognised at the rate of exchange
prevailing at the date when the transaction first qualifies
for recognition.
Monetary assets and liabilities denominated in foreign
currencies are translated at the functional currency spot
rates of exchange at the reporting date.
Non-monetary items carried at fair value that are
denominated in foreign currencies are retranslated at
the rates prevailing at the date when fair value was
determined. Non-monetary items measured at historical
cost are not translated.
Exchange difference arising on monetary items is
recognised in the Statement of Profit and Loss in the year
in which they arise.
Borrowing costs include interest, commission/brokerage
on deposits and exchange differences arising from foreign
currency borrowings to the extent they are regarded as
adjustment to interest cost. Interest expenses are accrued
on a timely basis, by reference to the principal outstanding
and at the effective interest rate (EIR) applicable.
The effective interest method is a method of calculating
the amortised cost of a financial liability and allocating
interest expenses over the relevant period. The effective
interest rate is the rate that exactly discounts estimated
future cash payments (including all fees paid that form an
integral part of the effective interest rate, transaction costs
and other premiums or discounts) through the expected
life of the debt instrument, or, where appropriate, a shorter
period, to the net carrying amount on initial recognition.
Retirement benefit cost and termination benefits
Payments to defined contribution retirement benefit
plans are recognised as an expense when employees have
rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of
providing benefits is determined using the Projected Unit
Credit Method, with actuarial valuations being carried
out at the end of each reporting date. Re-measurement,
comprising actuarial gains and losses, the effect of
the changes to the asset ceiling (if applicable) and the
return on plan assets (excluding interest), is reflected
immediately in the Balance Sheet with a charge or credit
recognised in other comprehensive income in the year in
which they occur. Re-measurement recognised in other
comprehensive income is reflected immediately in retained
earnings and will not be reclassified to profit or loss.
Past service cost is recognised in profit or loss in the year
of a plan amendment or when the Company recognises
corresponding restructuring cost whichever is earlier.
Net interest is calculated by applying the discount rate to
the net defined benefit liability or asset. Defined benefit
costs are categorised as follows:
⢠service cost (including current service cost,
past service cost, as well as gains and losses on
curtailments and settlements);
⢠net interest expense or income; and
⢠re-measurement
The Company presents the first two components of
defined benefit costs in profit or loss in the line item
''Employee benefits expenses''. Curtailment gains and
losses are accounted for as past service costs.
The retirement benefit obligation recognised in the
balance sheet represents the actual deficit or surplus in the
Company''s defined benefit plans. Any surplus resulting
from this calculation is limited to the present value of any
economic benefits available in the form of refunds from
the plans or reductions in future contributions to the plans.
A liability for a termination benefit is recognised at the
earlier of when the Company can no longer withdraw the
offer of the termination benefit and when the Company
recognises any related restructuring costs.
Short-term and other long-term employee benefits
A liability is recognised for benefits to employees in
respect of wages and salaries, annual leave, sick leave
and short-term employee benefits in the year the related
service is rendered at the undiscounted amount of the
benefits expected to be paid in exchange for that service.
Liabilities recognised in respect of other long-term
employee benefits are measured at the present value
of the estimated future cash outflows expected to be
made by the Company in respect of services provided by
employees up to the reporting date.
Income tax expense represents the sum of current tax
and deferred tax.
Current Taxes
Current income tax is the amount of expected tax payable
based on taxable profit for the year as determined in
accordance with the applicable tax rates and the provisions
of Income Tax Act, 1961.
Deferred Taxes
Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used
in the computation of taxable profit. Deferred tax liabilities
are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible
temporary differences to the extent that it is probable
that taxable profits will be available against which
those deductible temporary difference can be utilised.
Such deferred tax assets and liabilities are not recognised if
the temporary differences arise from the initial recognition
of assets and liabilities in a transaction that affects neither
the taxable profit nor the accounting profit. In addition,
deferred tax liabilities are not recognised if the temporary
difference arises from the initial recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at
the end of each reporting year 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 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
by the end of the reporting year.
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.
Minimum Alternate Tax (MAT) paid in accordance with
the tax laws in India, which give future economic benefits
in the form of adjustment to future income tax liability,
is considered as a deferred 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 the future economic benefit
associated with it will flow to the Company.
Current and Deferred Tax for the year
Current and Deferred tax are recognised in profit or loss,
except when they are relating to items that are recognised
in the other comprehensive income or directly in equity,
in which case, the current and deferred tax are also
recognised in other comprehensive income or directly in
equity respectively. Deferred tax assets and liabilities are
offset when they relate to income taxes levied by the same
taxation authority and the relevant entity intends to settle
its current tax assets and liabilities on a net basis.
2.9 Property, Plant and Equipment
Property, Plant and Equipment are recorded at their
cost of acquisition, net of refundable taxes or levies, less
accumulated depreciation and impairment losses, if any.
The cost thereof comprises of its purchase price, including
import duties and other non-refundable taxes or levies and
any directly attributable cost for bringing the asset to its
working condition for its intended use.
An item of property, plant and equipment is derecognised
upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset.
Any gain or loss arising on disposal or retirement of an
item of property, plant and equipment is determined as
the difference between the sale proceeds and the carrying
amount of the asset and is recognised in the Statement
of Profit and Loss. Property, plant and equipment except
freehold land held for use for administrative purposes,
are stated in the balance sheet at cost less accumulated
depreciation and accumulated impairment losses, if any.
Depreciable amount for assets is the cost of an asset,
or other amount substituted for cost, less its estimated
residual value. Depreciation is recognised so as to write
off the cost of assets (other than freehold land) less their
residual values over their useful lives, using the straight -
line method as per the useful life prescribed in the Schedule
II to the Companies Act, 2013, except in respect of Vehicles
(Motor cars) where useful life is estimated as 5 years based
on estimated usage of the assets.
Depreciation on additions to Fixed Assets is provided on
pro-rata basis from the date of acquisition or installation.
Depreciation on assets whose cost individually does not
exceed ''5,000/- is fully provided in the year of purchase.
Depreciation on Assets sold, discarded, demolished or
scrapped, is provided upto the date on which the said
Asset is sold, discarded, demolished or scrapped.
The Company has applied depreciation requirements
as per Ind AS 116 in depreciating the right of use assets.
The Right of Use Asset is depreciated for the life of
the lease term.
The Company reviews the residual value, useful lives and
depreciation method annually and, if expectations differ
from previous estimates, the change is accounted for as a
change in accounting estimate on a prospective basis.
2.10 Intangible Assets and amortisation thereof
Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated amortisation
and accumulated impairment losses. Amortisation is
recognised on a straight-line basis based on their estimated
useful lives. The estimated useful life and amortisation
method are reviewed at the end of each reporting period,
with effect of any changes in estimate being accounted for
on a prospective basis. Intangible assets with indefinite
useful lives that are acquired separately are carried at cost
less accumulated impairment losses, if any.
Computer software is amortised over the period of three
to five years on a straight-line basis.
An item of Intangible Asset is derecognised upon disposal
or when no future economic benefits are expected from its
use or disposal. Any gain or loss arising on derecognition
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.
Capital Work in Progress
Capital Work in Progress includes assets not ready for the
intended use and are carried at cost, comprising direct
cost and related incidental expenses less accumulated
impairment losses, if any.
2.11 Impairment of Property, Plant & Equipment and
Intangible Assets
At the end of each reporting year, the Company reviews
the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss (if
any). Where it is not possible to estimate the recoverable
amount of an individual asset, the Company estimates the
recoverable amount of the cash-generating unit to which
the asset belongs. Where a reasonable and consistent basis
of allocation can be identified, corporate assets are also
allocated to individual cash-generating units, or otherwise
they are allocated to the smallest group of cash-generating
units for which a reasonable and consistent allocation basis
can be identified.
Intangible assets with indefinite useful lives and intangible
assets not yet available for use are tested for impairment
at least annually, and whenever there is an indication that
the asset may be impaired.
The Company has applied Ind AS 36, Impairment of Assets,
to determine whether the right-of-use asset is impaired
and to account for any impairment loss identified.
Recoverable amount is the higher of fair value less cost
to sell 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 the
risks specific to the assets for which the estimates of future
cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating
unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash-generating unit) is
reduced to its recoverable amount. An impairment loss is
recognised immediately in the Statement of Profit and Loss.
Mar 31, 2022
Note 1: Corporate Information:
LIC Housing Finance Limited ("the Companyâ) is a Public Limited Company, having corporate identification number CIN: L65922MH1989PLC052257, is incorporated under the provisions of the Companies Act, 1956 (as amended by the Companies Act, 2013). The shares of the Company are listed on the Bombay Stock Exchange, the National Stock Exchange and the Luxembourg Stock Exchange.
The Company is engaged in the business of providing finance for purchase, construction, repairs, renovation of houses/buildings. The Company''s Registered Office and Corporate Office is at Mumbai with a wide network of Operating Offices in India and Representative Office at Dubai.
The Standalone Financial Statements for the year ended March 31, 2022 were authorized for issuance in accordance with resolution of the Board of Directors on 18th May, 2022.
Note 2: Significant Accounting Policies, Accounting Judgements, Estimates and Assumptions:(A) Significant Accounting Policies:2.1 Statement of Compliance
Standalone Financial Statements of the Company have been prepared in accordance with the accounting principles generally accepted in India including Indian Accounting Standards ("the Ind ASâ) prescribed under section 133 of the Companies Act, 2013 ("the Actâ) read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time and the guidelines issued by the National Housing Bank ("NHBâ) and Reserve Bank of India (RBI) to the extent applicable.
The Balance Sheet, the Statement of Profit and Loss and the Statement of Changes in Equity are prepared and presented in the format prescribed in the Division III of Schedule III to the Act. The Statement of Cash Flows has been prepared and presented as per the requirements of Ind AS 7 "Statement of Cash Flowsâ. The Company presents its Balance Sheet in the order of liquidity.
2.2 Basis of preparation of Ind-AS Financial Statements
The Company has prepared these Standalone Financial Statements, which comprises the Balance Sheet as at March 31, 2022, the Statement of Profit and Loss, the Statement of Cash Flows and the Statement of Changes in Equity for the year ended March 31, 2022, and accounting policies and other explanatory information (together hereinafter referred to as "Standalone Financial Statementsâ or "Financial Statementsâ) on the historical cost basis except for certain financial instruments and certain employee benefit assets, which are measured at
fair values at the end of each reporting period, as explained in the accounting policies below.
Fair value is the price that would be received on sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.
In addition, for financial reporting purposes, fair value measurements are categorized within the fair value hierarchy into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurements in its entirety, which are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
The financial statements are presented in Indian Rupees (INR) and all values are rounded to the nearest crore except when otherwise stated.
The Company has recognised revenue pursuant to a contract (other than a contract listed in paragraph 5 of Ind AS 115) only if the counterparty to the contract is a customer. A customer is a party that has contracted with an entity to obtain services that are an output of the entity''s ordinary activities in exchange for consideration.
i. Interest Income:
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.
Interest income is accrued on a timely basis, by reference to the principal outstanding and at applicable effective interest rate (EIR). The effective interest method is a method of calculating the
amortised cost of a financial asset and allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
ii. Dividend Income:
Dividend income from investment is recognised when the Company''s right to receive the payment has been established provided that it is probable that economic benefits will flow to the Company and the amount of income can be measured reliably.
iii. Fees and Commission Income:
Fees and commission income includes fees other than those that are an integral part of EIR. The Company recognises the fees and commission income in accordance with the terms of the relevant contracts / agreements and when it is probable that the Company will collect the consideration.
iv. Other Income:
Other Income represents income earned from the activities incidental to the business and is recognised when the right to receive the income is established as per the terms of the contract.
As Lessee
The Company, as lessee has recognised lease liabilities and right-of-use assets, has applied the following approach to all of its leases (a) measured the lease liability at the date of transition to Ind AS by measuring that lease liability at the present value of the remaining lease payments and discounted using the lessee''s incremental borrowing rate at the date of transition to Ind AS 116. Lease arrangements entered during the year are measured at incremental borrowing rate computed at the beginning of the year. Lease liabilities are re-measured with a corresponding adjustment to the related right of use asset if there is change to its assessment whether it will exercise an extension or a termination option. (b) Right Of Use assets are recognized and measured at cost, consisting of initial measurement of lease liability plus any lease payments made to the lessor at or before the commencement date less any lease incentives received, initial estimate of restoration costs and any initial direct costs incurred by lessee. They are subsequently measured at cost less accumulated depreciation and impairment losses. Right of
Use Assets are depreciated from the commencement date on a straight- line basis over the shorter of the lease term or useful life of the underlying asset. They are evaluated for recoverability whenever events or changes indicate that their carrying amounts may not be recoverable.
The Company has not applied Ind AS 116 to Short Term Leases, which are defined as leases with a lease term of 12 months or less and leases of low-value assets. The Company recognises the lease payments associated with these leases as an expense over the lease term.
As a Lessor
Leases for which the company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
When the Company is an intermediate lessor, it accounts for its interest in the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
For operating leases, rental income is recognized on a straight line basis over the term of the relevant lease.
2.5 Functional Currency and Foreign Exchange Transactions
The functional currency of the Company is determined on the basis of the primary economic environment in which it operates. The Company has accordingly assessed INR as its functional currency.
The transactions in currencies other than the entity''s functional currency are recognised at the rate of exchange prevailing at the date when the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when fair value was determined. Non-monetary items measured at historical cost are not translated.
Exchange difference arising on monetary items is recognised in the Statement of Profit and Loss in the year in which they arise.
Borrowing costs include interest, commission/brokerage on deposits and exchange differences arising from foreign currency borrowings to the extent they are regarded as adjustment to interest cost. Interest expenses are accrued on a timely basis, by reference to the principal outstanding and at the effective interest rate (EIR) applicable. The effective interest method is a method of calculating the amortised cost of a financial liability and allocating interest expenses over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees paid that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Retirement benefit cost and termination benefits
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each reporting date. Re-measurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the Balance Sheet with a charge or credit recognised in other comprehensive income in the year in which they occur. Re-measurement recognised in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Past service cost is recognised in profit or loss in the year of a plan amendment or when the Company recognises corresponding restructuring cost whichever is earlier. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:
service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
net interest expense or income; and
re-measurement
The Company presents the first two components of defined benefit costs in profit or loss in the line item ''Employee benefits expenses''. Curtailment gains and losses are accounted for as past service costs.
The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in the Company''s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
A liability for a termination benefit is recognised at the earlier of when the Company can no longer withdraw the offer of the termination benefit and when the Company recognises any related restructuring costs.
Short-term and other long-term employee benefits
A liability is recognised for benefits to employees in respect of wages and salaries, annual leave, sick leave and short-term employee benefits in the year the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date.
Income tax expense represents the sum of current tax and deferred tax.
Current Taxes
Current income tax is the amount of expected tax payable based on taxable profit for the year as determined in accordance with the applicable tax rates and the provisions of Income Tax Act, 1961.
Deferred Taxes
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary difference can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary differences arise from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at the end of each reporting year 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 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 by the end of the reporting year.
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.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws in India, which give future economic benefits in the form of adjustment to future income tax liability, is considered as a deferred 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 the future economic benefit associated with it will flow to the Company.
Current and Deferred Tax for the year
Current and Deferred tax are recognised in profit or loss, except when they are relating to items that are recognised in the other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis.
2.9 Property, Plant and Equipment
Property, Plant and Equipment are recorded at their cost of acquisition, net of refundable taxes or levies, less accumulated depreciation and impairment losses, if any. The cost thereof comprises of its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost for bringing the asset to its working condition for its intended use.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the Statement of Profit and Loss. Property, plant and equipment except freehold land held for use for administrative purposes,
are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses, if any.
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation is recognised so as to write off the cost of assets (other than freehold land) less their residual values over their useful lives, using the straight -line method as per the useful life prescribed in the Schedule II to the Companies Act, 2013, except in respect of Vehicles (Motor cars) where useful life is estimated as 5 years based on estimated usage of the assets.
|
Type of Asset |
Useful Lives (in years) |
|
Building |
60 |
|
Furniture & Fixture |
10 |
|
Vehicles |
5 |
|
Office Equipment |
5 |
|
Computers |
3 |
|
Servers And Networks Equipment |
6 |
Depreciation on additions to Fixed Assets is provided on pro-rata basis from the date of acquisition or installation. Depreciation on assets whose cost individually does not exceed ''5,000/- is fully provided in the year of purchase. Depreciation on Assets sold, discarded, demolished or scrapped, is provided upto the date on which the said Asset is sold, discarded, demolished or scrapped.
The Company has applied depreciation requirements as per Ind AS 116 in depreciating the right of use assets. The Right of Use Asset is depreciated for the life of the lease term.
The Company reviews the residual value, useful lives and depreciation method annually and, if expectations differ from previous estimates, the change is accounted for as a change in accounting estimate on a prospective basis.
2.10 Intangible Assets and amortisation thereof
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis based on their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses, if any.
Computer software is amortised over the period of three to five years on a straight-line basis.
An item of Intangible Asset is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition 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.
Capital Work in Progress
Capital Work in Progress includes assets not ready for the intended use and are carried at cost, comprising direct cost and related incidental expenses less accumulated impairment losses, if any.
2.11 Impairment of Property, Plant & Equipment and Intangible Assets
At the end of each reporting year, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
The Company has applied Ind AS 36, Impairment of Assets, to determine whether the right-of-use asset is impaired and to account for any impairment loss identified.
Recoverable amount is the higher of fair value less cost to sell 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 the risks specific to the assets for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the Statement of Profit and Loss.
2.12 Provisions and Contingent Liabilities
Provisions involving substantial degree of estimation in measurement are recognised when the Company has a present obligation (legal or constructive), as a result of past events, and it is probable that an outflow of resources, that can be reliably estimated, will be required to settle such an obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
The expense relating to a provision is presented in the Statement of Profit and Loss net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
A Contingent Liability is a possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company or a present obligation that arises from past events that may, but probably will not, require an outflow of resources.
Both provisions and contingent liabilities are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Contingent Liabilities are not recognised but are disclosed in the notes. A contingent asset is disclosed in the Financial Statements, where an inflow of economic benefits is probable.
Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
2.13 Investment in Subsidiaries and Associates
Investment in subsidiaries and associates are recognized and carried at cost. Where the carrying amount of an investment is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount and the difference is transferred to the Statement of Profit and Loss. On disposal of investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to the Statement of Profit and Loss.
Financial assets and financial liabilities are recognized when an entity becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at Fair Value through Profit or Loss (FVTPL)) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at Fair Value through Profit or Loss are recognised immediately in Statement of Profit and Loss.
A. Financial Assets
a) Recognition and initial measurement
The Company initially recognises loans and advances, deposits and debt securities purchased on the date on which they originate. Purchases and sale of financial assets are recognised on the trade date, which is the date on which the Company becomes a party to the contractual provisions of the instrument.
All financial assets are recognised initially at fair value except investment in subsidiaries and associates. In the case of financial assets not recorded at FVTPL, transaction costs that are directly attributable to its acquisition of financial assets are included therein.
b) Classification of Financial Assets and Subsequent Measurement
On initial recognition, a financial asset is classified to be measured at -
Amortised cost; or
Fair Value through Other Comprehensive Income (FVTOCI) - debt investment; or
Fair Value through Other Comprehensive Income (FVTOCI) - equity investment; or
Fair Value through Profit or Loss (FVTPL)
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated at FVTPL:
The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A debt instrument is classified as FVTOCI only if it meets both of the following conditions and is not recognised at FVTPL:
The asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognised in the Other Comprehensive Income (OCI). However, the Company recognises 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 equity to Statement of Profit and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are 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-by-instrument 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 recognised in the OCI. There is no recycling of the amounts from
OCI to Statement of Profit and Loss, even on sale of investment. However, on sale/disposal 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 recognised in the Statement of Profit and Loss.
All other financial assets are classified as measured at FVTPL.
In addition, on initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVTOCI as at FVTPL if doing so eliminates or significantly reduces accounting mismatch that would otherwise arise.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains and losses arising on re-measurement recognised in Statement of Profit and Loss. The net gain or loss recognised in Statement of Profit and Loss incorporates any dividend or interest earned on the financial asset and is included in the ''other income'' line item. Dividend on financial assets at FVTPL is recognised when:
The Company''s right to receive the dividends is established,
It is probable that the economic benefits associated with the dividends will flow to the Company,
The dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
c) Business Model Test
The Company determines its business model at the level that best reflects how it manages a group of financial assets to achieve its business objective.
The Company''s business model is not assessed on instrument to instrument basis, but at a higher level of aggregated portfolios and is based on observable factors such as:
How the performance of the business model and the financial assets held within that business model are evaluated and reported to the Company''s key management personnel;
The risks that affect the performance of the business model (and the financial assets held
within that business model) and, in particular, the way in which those risks are managed.
At initial recognition of a financial asset, the Company determines whether newly recognised financial assets are part of an existing business model or whether they reflect a new business model.
d) Solely Payments of Principal and Interest (âSPPIâ) on the principal amount outstanding
The Company assesses the contractual terms of financial assets to identify whether they meet the SPPI test.
''Principal'' for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may change over the life of the financial asset (for example, if there are repayments of principal or amortization of the premium/discount)
The most significant elements of interest within a lending arrangement are typically the consideration for the time value of money and credit risk. To make the SPPI assessment, the Company applies judgement and considers relevant factors.
Contractual terms that introduce exposure to risks or volatility in the contractual cash flows that are unrelated to a basic lending arrangement, such as exposure to changes in equity prices or commodity prices, do not give rise to contractual cash flows that are SPPI.
e) Derecognition of Financial Assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the asset''s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had
been recognised in other comprehensive income and accumulated in equity is recognised in Statement of Profit and Loss if such gain or loss would have otherwise been recognised in Statement of Profit and Loss on disposal of that financial asset.
On derecognition of a financial asset other than in its entirety (e.g. when the Company retains an option to repurchase part of a transferred asset), the Company allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss if such gain or loss would have otherwise been recognised in Statement of Profit and Loss on disposal of that financial asset. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.
Modification of contractual cash flows
When the contractual cash flows of a financial asset are renegotiated or otherwise modified, and the renegotiation or modification does not result in the derecognition of that financial asset, the Company recalculates the gross carrying amount of the financial asset and shall recognise a modification gain or loss in profit or loss. The gross carrying amount of the financial asset shall be recalculated as at the present value of the renegotiated or modified contractual cash flows that are discounted at the financial asset''s original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets) or, when applicable, the revised effective interest rate. Any costs or fees incurred adjust the carrying amount of the modified financial asset and are amortised over the remaining term of the modified financial asset.
f) Impairment of Financial Assets
The Company applies the expected credit loss (ECL) model for recognising impairment loss on financial assets. The Company applies a three-stage approach for measuring ECL for the following categories of financial assets that are not measured at Fair Value through Profit or Loss:
debt instruments measured at amortised cost and Fair Value through Other Comprehensive Income; and
financial guarantee contracts.
No ECL is recognised on equity investments, classified as FVTPL.
Expected credit losses is the weighted average of credit losses with the respective risks of default occurring as the weights. Credit loss is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). The Company estimates cash flows by considering all contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) through the expected life of that financial instrument.
Financial assets migrate through the following three stages based on the change in credit risk since initial recognition:
Stage 1: 12-months ECL
The Company assesses ECL on exposures where there has not been a significant increase in credit risk since initial recognition and that were not credit impaired upon origination. For these exposures, the Company recognises as a collective provision the portion of the lifetime ECL associated with the probability of default events occurring within the next 12 months. The Company does not conduct an individual assessment of exposures in Stage 1 as there is no evidence of one or more events occurring that would have a detrimental impact on estimated future cash flows.
Stage 2: Lifetime ECL - not credit impaired
The Company collectively assesses ECL on exposures where there has been a significant increase in credit risk since initial recognition but are not credit impaired. For these exposures, the Company recognises as a collective provision, a lifetime ECL (i.e. reflecting the remaining lifetime of the financial asset). Similar to Stage 1, the Company does not conduct an individual assessment on Stage 2 exposures as the increase in credit risk is not, of itself, an event that could have a detrimental impact on future cash flows.
Stage 3: Lifetime ECL - credit impaired
The Company identifies, both collectively and individually, ECL on those exposures that are assessed as credit impaired based on whether one or more events, that have a detrimental impact on the estimated future cash flows of that asset have occurred. For exposures that have become credit impaired, a lifetime ECL is recognised as a collective or specific provision, and interest revenue is calculated by applying the effective interest rate to the amortised cost (net of provision) rather than the gross carrying amount.
Determining the stage for impairment
At each reporting date, the Company assesses whether there has been a significant increase in credit risk for exposures since initial recognition by comparing the risk of default occurring over the remaining expected life from the reporting date and the date of initial recognition. The Company considers reasonable and supportable information that is relevant and available without undue cost or effort for this purpose. This includes quantitative and qualitative information and also, forward-looking analysis.
An exposure will migrate through the ECL stages as asset quality deteriorates. If, in a subsequent period, asset quality improves and also reverses any previously assessed significant increase in credit risk since origination, then the provision for impairment losses reverts from lifetime ECL to 12-months ECL. Exposures that have not deteriorated significantly since origination are considered to have a low credit risk. The provision for impairment losses for these financial assets is based on a 12-months ECL. When an asset is uncollectible, it is written off against the related provision. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off reduce the amount of the expense in the income statement.
The Company assesses whether the credit risk on an exposure has increased significantly on an individual or collective basis. For the purposes of a collective evaluation of impairment, financial instruments are grouped on the basis of shared credit risk characteristics, taking into account instrument type, class of borrowers, credit risk ratings, date of initial recognition, remaining term to maturity, industry and other relevant factors.
Measurement of ECL
ECL are derived from unbiased and probability-weighted estimates of expected loss, and are measured as follows:
Financial assets that are not credit-impaired at the reporting date: as the present value of all cash shortfalls over the expected life of the financial asset discounted by the effective interest rate. The cash shortfall is the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. 12-month expected credit losses is a portion of the life-time expected credit losses and represents the lifetime cash shortfalls that will result if default occurs within the 12 months after the reporting date and thus, are not cash shortfalls that are predicted over the next 12 months.
Financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the present value of estimated future cash flows discounted by the effective interest rate.
For further details on how the Company calculates ECL including the use of forward looking information, refer to the Credit quality of financial assets in Note 38.4 Financial risk management.
ECL is recognised using a provision for impairment losses in Statement of Profit and Loss. In the case of debt instruments measured at Fair Value through Other Comprehensive Income, the measurement of ECL is based on the three-stage approach as applied to financial assets at amortised cost. The Company recognises the provision charge in profit and loss, with the corresponding amount recognised in other comprehensive income, with no reduction in the carrying amount of the asset in the Balance Sheet.
Further, for the purpose of measuring lifetime expected credit loss allowance for trade receivables, the Company has used a practical expedient as permitted under Ind AS 109. This expected credit loss
is computed based on a provision matrix which takes into account historical credit loss experience and adjusted for forward-looking information.
g) Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
I ncome is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL and Interest income is recognised in Statement of Profit and Loss.
h) Reclassification of Financial Assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
|
Original classification |
Revised classification |
Accounting treatment |
|
Amortised cost |
FVTPL |
Fair value is measured at reclassification date. Difference between previous amortized cost and fair value is recognised in Statement of Profit and Loss. |
|
FVTPL |
Amortised Cost |
Fair value at reclassification date becomes its new gross carrying amount. EIR is calculated based on the new gross carrying amount. |
|
Amortised cost |
FVTOCI |
Fair value is measured at reclassification date. Difference between previous amortised cost and fair value is recognised in OCI. No change in EIR due to reclassification. |
|
FVTOCI |
Amortised cost |
Fair value at reclassification date becomes its new amortised cost carrying amount. However, cumulative gain or loss in OCI is adjusted against fair value. Consequently, the asset is measured as if it had always been measured at amortised cost. |
|
FVTPL |
FVTOCI |
Fair value at reclassification date becomes its new carrying amount. No other adjustment is required. |
|
FVTOCI |
FVTPL |
Assets continue to be measured at fair value. Cumulative gain or loss previously recognised in OCI is reclassified to Statement of Profit and Loss at the reclassification date. |
B. Financial Liabilities and Equity Instruments
a) Classification as Debt or Equity
Debt and equity instruments issued by a company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
b) Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of directly attributable transaction costs.
c) Financial Liabilities
Financial liabilities are classified as 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 a derivative (that does not meet hedge accounting requirements) or it is designated as such on initial recognition.
A financial liability is classified as held for trading if:
It has been incurred principally for the purpose of repurchasing it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:
such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise;
the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company''s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
it forms part of a contract containing one or more embedded derivatives, and Ind AS 109 permits the entire combined contract to be designated as at FVTPL in accordance with Ind AS 109.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in Statement of Profit and Loss. The net gain or loss recognised in Statement of Profit and Loss incorporates any interest paid on the financial liability and is included in the ''other gains and losses'' line item in the Statement of Profit and Loss.
d) Other Financial Liabilities
Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortised cost using the effective interest method.
e) Derecognition of Financial Liabilities
The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired. An exchange with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
The Company physically repossess properties or other assets in retail portfolio to settle outstanding recoverable and the surplus (if any) post auction is refunded to the loanees. These assets are acquired by the company under SARFEASI Act, 2002 has been classified as assets held for sale, as their carrying amounts will be recovered through a sale of asset. In accordance with Ind AS 105, the company is committed to sell these assets under possession, are measured on balance sheet at the lower of carrying value or fair value and no depreciation is charged on them.
The Company uses derivative instruments to manage exposures to interest rate and foreign currency risks.
The hedging transactions entered into by the Company is within the overall scope of the Derivative Policy and within the Risk Management framework of the company as approved by the Board from time to time and for the risks identified to be hedged in accordance with the same policies. All derivative contracts are recognised on the Balance Sheet and measured at fair value. Hedge accounting is applied to all the derivative instruments as per Ind AS 109. Hedge effectiveness is ascertained periodically on a forward looking basis and is reviewed at each reporting period. Hedge effectiveness is measured by the degree to which changes in the fair value or cash flows of the hedged item that are attributed to
the hedged risk are offset by changes in the fair value or cashflows of the hedging instrument.
Hedges that meet the criteria for hedge accounting are accounted for, as described below:
Fair Value Hedges
Fair value hedge is a hedge of the exposure to changes in fair value of a recognized asset or liability or unrecognized commitment, or a component of any such item, that is attributable to a particular risk and could affect profit or loss. 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 is recorded as part of the carrying value of the hedged item in the Balance Sheet and is also recognized as net gain on fair value changes in the Statement of Profit and Loss . 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 relationship is 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.
Cash Flow Hedges
Cash flow hedge is a hedge of the exposure to variability in the cash flows of a specific asset or liability, or of a forecasted transaction, that is attributable to a particular risk. It is possible to only hedge the risks associated with a portion of an asset, liability, or forecasted transaction, as long as the effectiveness of the related hedge can be measured. The accounting for a cash flow hedge will be to recognize the effective portion of any gain or loss in Other Comprehensive Income (OCI), and recognize the ineffective portion of any gain or loss in Finance cost in the Statement of Profit and Loss. When a hedging instrument expires, is sold, terminated, exercised, or when a hedge
no longer meets the criteria for hedge accounting, any cumulative gain or loss that has been recognised in OCI at that time remains in OCI and is recognised when the hedged forecast transaction is ultimately recognised in the Statement of Profit and Loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in OCI is immediately transferred to the Statement of Profit and Loss.
Interest rate benchmark reforms:
Hedging relationships that are directly affected by interest rate benchmark reform gives rise to uncertainties about:
a) the interest rate benchmark (contractually or non-contractually specified) designated as a hedged risk; and/or
b) the timing or the amount of interest rate benchmark-based cash flows of the hedged item or of the hedging instrument.
This may adversely affect the existing hedging relationships so long as the uncertainties exist. In order to provide relief to such hedging relationships the accounting standard Ind AS 109 provides for some relief measures which should be mandatorily applied for such cases.
Accordingly, the Company applies the relief by assuming the following:
1. that the interest rate benchmark on which the hedged cash flows are based is not altered as a result of the reform.
2. when performing prospective assessments, the Company assumes that the interest rate bench
Mar 31, 2021
NOTE 1: CORPORATE INFORMATION:
LIC Housing Finance Limited ("the Companyâ) is a Public Limited Company, having corporate identification number CIN: L65922MH1989PLC052257, is incorporated under the provisions of the Companies Act, 1956 (as amended by the Companies Act, 2013). The shares of the Company are listed on the Bombay Stock Exchange, the National Stock Exchange and the Luxemburg Stock Exchange.
The Company is engaged in the business of providing finance for purchase, construction, repairs, renovation of houses/buildings. The Company''s Registered Office and Corporate Office is at Mumbai with a wide network of Operating Offices in India and Representative Offices at Dubai and Kuwait.
The Standalone Financial Statements for the year ended March 31, 2021 were authorized for issuance in accordance with resolution of the Board of Directors on 15th June 2021.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS:
(A) Significant Accounting policies:
2.1 Statement of Compliance
Standalone Financial Statements of the Company have been prepared in accordance with the accounting principles generally accepted in India including Indian Accounting Standards ("the Ind ASâ) prescribed under section 133 of the Companies Act, 2013 ("the Actâ) read with rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time and the guidelines issued by the National Housing Bank ("NHBâ) and Reserve Bank of India (RBI) to the extent applicable.
The Balance Sheet, the Statement of Profit and Loss and the Statement of Changes in Equity are prepared and presented in the format prescribed in the Division III of Schedule III to the Act. The Statement of Cash Flows has been prepared and presented as per the requirements of Ind AS 7 "Statement of Cash Flowsâ. The Company presents its Balance Sheet in the order of liquidity.
2.2 Basis of preparation of Ind-AS Financial Statements
The Company has prepared these Standalone Financial Statements, which comprises the Balance Sheet as at March 31, 2021, the Statement of Profit and Loss, the Statement of Cash Flows and the Statement of Changes in Equity for the year ended March 31, 2021, and accounting policies and other explanatory information (together hereinafter referred to as "Standalone Financial Statementsâ or "Financial Statementsâ) on the historical cost basis except for certain financial instruments and certain employee benefit assets, which are measured at
fair values at the end of each reporting period, as explained in the accounting policies below.
Fair value is the price that would be received on sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.
In addition, for financial reporting purposes, fair value measurements are categorized within the fair value hierarchy into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurements in its entirety, which are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
The financial statements are presented in Indian Rupees (INR) and all values are rounded to the nearest crore except when otherwise stated.
2.3 revenue recognition
The Company has recognised revenue pursuant to a contract (other than a contract listed in paragraph 5 of Ind AS 115) only if the counterparty to the contract is a customer. A customer is a party that has contracted with an entity to obtain services that are an output of the entity''s ordinary activities in exchange for consideration.
i. Interest Income:
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.
Interest income is accrued on a time proportion basis, by reference to the principal outstanding and at applicable effective interest rate (EIR). The effective interest method is a method of calculating the
amortised cost of a financial asset and allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
ii. Dividend Income:
Dividend income from investment is recognised when the Company''s right to receive the payment has been established provided that it is probable that economic benefits will flow to the Company and the amount of income can be measured reliably.
iii. Fees and Commission Income:
Fees and commission income includes fees other than those that are an integral part of EIR. The Company recognises the fees and commission income in accordance with the terms of the relevant contracts / agreements and when it is probable that the Company will collect the consideration.
iv. Other Income:
Other Income represents income earned from the activities incidental to the business and is recognised when the right to receive the income is established as per the terms of the contract.
The Company has adopted Ind AS 116 ''Leases'' with the date of initial application being April 1, 2019 and has reassessed the existing lease contracts on the date of initial application date, i.e. 01.04.2019 for application of Ind AS 116. The Company has applied Ind AS 116 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at April 1, 2019. As a result, the comparative information has not been restated. As permitted by para C8(c)(ii) of Ind AS 116, at the date of initial application, the right to use asset has been measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet immediately before the date of initial application. As a result there is no cumulative effect of initial application which is required to be recognised in retained earnings at April 1, 2019.
As Lessee
The Company, as lessee has recognised lease liabilities and right-of-use assets, has applied the following approach to
all of its leases (a) measured the lease liability at the date of transition to Ind AS by measuring that lease liability at the present value of the remaining lease payments and discounted using the lessee''s incremental borrowing rate at the date of transition to Ind AS 116. Lease arrangements entered during the year are measured at incremental borrowing rate computed at the beginning of the year. Lease liabilities are re-measured with a corresponding adjustment to the related right of use asset if there is change to its assessment whether it will exercise an extension or a termination option. (b) Right Of Use assets are recognized and measured at cost, consisting of initial measurement of lease liability plus any lease payments made to the lessor at or before the commencement date less any lease incentives received, initial estimate of restoration costs and any initial direct costs incurred by lessee. They are subsequently measured at cost less accumulated depreciation and impairment losses. Right of Use Assets are depreciated from the commencement date on a straight- line basis over the shorter of the lease term or useful life of the underlying asset. They are evaluated for recoverability whenever events or changes indicate that their carrying amounts may not be recoverable.
The Company has not applied Ind AS 116 to Short Term Leases, which are defined as leases with a lease term of 12 months or less and leases of low-value assets. The Company recognises the lease payments associated with these leases as an expense over the lease term.
As a Lessor
Leases for which the company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
When the Company is an intermediate lessor, it accounts for its interest in the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
For operating leases, rental income is recognized on a straight line basis over the term of the relevant lease.
2.5 Functional Currency and Foreign Exchange Transactions
The functional currency of the Company is determined on the basis of the primary economic environment in which it operates. The Company has accordingly assessed INR as its functional currency.
The transactions in currencies other than the entity''s functional currency are recognised at the rate of exchange prevailing at the date when the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when fair value was determined. Non-monetary items measured at historical cost are not translated.
Exchange difference arising on monetary items is recognised in the Statement of Profit and Loss in the year in which they arise.
2.6 Borrowing Costs
Borrowing costs include interest, commission/brokerage on deposits and exchange differences arising from foreign currency borrowings to the extent they are regarded as adjustment to interest cost. Interest expenses are accrued on a timely basis, by reference to the principal outstanding and at the effective interest rate (EIR) applicable. The effective interest method is a method of calculating the amortised cost of a financial liability and allocating interest expenses over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees paid that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
2.7 Employee Benefits
Retirement benefit cost and termination benefits
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each reporting date. Re-measurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the Balance Sheet with a charge or credit recognised in other comprehensive income in the year in which they occur. Re-measurement recognised in other comprehensive income is reflected immediately in retained
earnings and will not be reclassified to profit or loss. Past service cost is recognised in profit or loss in the year of a plan amendment or when the Company recognises corresponding restructuring cost whichever is earlier. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:
service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
net interest expense or income; and
re-measurement
The Company presents the first two components of defined benefit costs in profit or loss in the line item ''Employee benefits expenses''. Curtailment gains and losses are accounted for as past service costs.
The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in the Company''s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
A liability for a termination benefit is recognised at the earlier of when the Company can no longer withdraw the offer of the termination benefit and when the Company recognises any related restructuring costs.
short-term and other long-term employee benefits
A liability is recognised for benefits to employees in respect of wages and salaries, annual leave, sick leave and short-term employee benefits in the year the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date.
Income tax expense represents the sum of current tax and deferred tax.
Current taxes
Current income tax is the amount of expected tax payable based on taxable profit for the year as determined in accordance with the applicable tax rates and the provisions of Income Tax Act, 1961.
Deferred Taxes
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary difference can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary differences arise from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at the end of each reporting year 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 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 by the end of the reporting year.
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.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws in India, which give future economic benefits in the form of adjustment to future income tax liability, is considered as a deferred 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 the future economic benefit associated with it will flow to the Company.
Current and Deferred Tax for the year
Current and Deferred tax are recognised in profit or loss, except when they are relating to items that are recognised in the other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis.
2.9 Property, Plant and Equipment
Property, Plant and Equipment are recorded at their cost of acquisition, net of refundable taxes or levies, less accumulated depreciation and impairment losses, if any. The cost thereof comprises of its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost for bringing the asset to its working condition for its intended use.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the Statement of Profit and Loss. Property, plant and equipment except freehold land held for use for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses, if any.
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation is recognised so as to write off the cost of assets (other than freehold land) less their residual values over their useful lives, using the straight -line method as per the useful life prescribed in the Schedule II to the Companies Act, 2013, except in respect of Vehicles (Motor cars) where useful life is estimated as 5 years based on estimated usage of the assets
|
type of Asset |
useful Lives (in years) |
|
Building |
60 |
|
Furniture & Fixture |
10 |
|
Vehicles |
5 |
|
Office Equipment |
5 |
|
Computers |
3 |
|
Servers And Networks Equipment |
6 |
Depreciation on additions to Fixed Assets is provided on pro-rata basis from the date of acquisition or installation. Depreciation on assets whose cost individually does not exceed ''5,000/- is fully provided in the year of purchase. Depreciation on Assets sold, discarded, demolished or scrapped, is provided upto the date on which the said Asset is sold, discarded, demolished or scrapped.
The Company has applied depreciation requirements as per Ind AS 116 in depreciating the right of use assets. The Right of Use Asset is depreciated for the life of the lease term.
The Company reviews the residual value, useful lives and depreciation method annually and, if expectations differ from previous estimates, the change is accounted for as a change in accounting estimate on a prospective basis.
2.10 Intangible Assets and amortisation thereof
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis based on their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses, if any.
Computer software is amortised over the period of three to five years on a straight-line basis.
An item of Intangible Asset is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition 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.
Capital Work in progress
Capital Work in Progress includes assets not ready for the intended use and are carried at cost, comprising direct cost and related incidental expenses less accumulated impairment losses, if any.
2.11 Impairment of property, plant & Equipment and Intangible Assets
At the end of each reporting year, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
The Company has applied Ind AS 36, Impairment of Assets, to determine whether the right-of-use asset is impaired and to account for any impairment loss identified.
Recoverable amount is the higher of fair value less cost to sell 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 the risks specific to the assets for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the Statement of Profit and Loss.
2.12 provisions and Contingent Liabilities
Provisions involving substantial degree of estimation in measurement are recognised when the Company has a present obligation (legal or constructive), as a result of past events, and it is probable that an outflow of resources, that can be reliably estimated, will be required to settle such an obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
The expense relating to a provision is presented in the Statement of Profit and Loss net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
A Contingent Liability is a possible obligation that arises from past events and the existence of which will be
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one or more uncertain future events not wholly within the control of the company or a present obligation that arises from past events that may, but probably will not, require an outflow of resources.
Both provisions and contingent liabilities are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Contingent Liabilities are not recognised but are disclosed in the notes. A contingent asset is disclosed in the Financial Statements, where an inflow of economic benefits is probable.
Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
2.13 Investment in Subsidiaries and Associates
Investment in subsidiaries and associates are recognized and carried at cost. Where the carrying amount of an investment is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount and the difference is transferred to the Statement of Profit and Loss. On disposal of investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to the Statement of Profit and Loss.
Financial assets and financial liabilities are recognized when an entity becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at Fair Value through Profit or Loss (FVTPL)) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at Fair Value through Profit or Loss are recognised immediately in Statement of Profit and Loss.
A. Financial Assets
a) Recognition and initial measurement
The Company initially recognises loans and advances, deposits and debt securities purchased on the date on which they originate. Purchases and sale of financial assets are recognised on the trade date, which is the
date on which the Company becomes a party to the contractual provisions of the instrument.
All financial assets are recognised initially at fair value except investment in subsidiaries and associates. In the case of financial assets not recorded at FVTPL, transaction costs that are directly attributable to its acquisition are included therein.
b) Classification of Financial Assets and subsequent Measurement
On initial recognition, a financial asset is classified to be measured at -
Amortised cost; or
Fair Value through Other Comprehensive Income (FVTOCI) - debt investment; or
Fair Value through Other Comprehensive Income (FVTOCI) - equity investment; or
Fair Value through Profit or Loss (FVTPL)
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated at FVTPL:
The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A debt instrument is classified as FVTOCI only if it meets both of the following conditions and is not recognised at FVTPL:
The asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognised in the Other Comprehensive Income (OCI). However, the Company recognises 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 equity to Statement of Profit and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are 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-by-instrument 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 recognised in the OCI. There is no recycling of the amounts from OCI to Statement of Profit and Loss, even on sale of investment. However, on sale/disposal 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 recognised in the Statement of Profit and Loss.
All other financial assets are classified as measured at FVTPL.
I n addition, on initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVTOCI as at FVTPL if doing so eliminates or significantly reduces accounting mismatch that would otherwise arise.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains and losses arising on re-measurement recognised in Statement of Profit and Loss. The net gain or loss recognised in Statement of Profit and Loss incorporates any dividend or interest earned on the financial asset and is included in the ''other income'' line item. Dividend on financial assets at FVTPL is recognised when:
The Company''s right to receive the dividends
is established,
It is probable that the economic benefits associated with the dividends will flow to the Company,
The dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
c) Business Model Test
The Company determines its business model at the level that best reflects how it manages a group of financial assets to achieve its business objective.
The Company''s business model is not assessed on instrument to instrument basis, but at a higher level of aggregated portfolios and is based on observable factors such as:
How the performance of the business model and the financial assets held within that business model are evaluated and reported to the Company''s key management personnel;
The risks that affect the performance of the business model (and the financial assets held within that business model) and, in particular, the way in which those risks are managed.
At initial recognition of a financial asset, the Company determines whether newly recognised financial assets are part of an existing business model or whether they reflect a new business model.
d) Solely Payments of Principal and Interest (âSPPIâ) on the principal amount outstanding
The Company assesses the contractual terms of financial assets to identify whether they meet the SPPI test.
''Principal'' for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may change over the life of the financial asset (for example, if there are repayments of principal or amortization of the premium/discount)
The most significant elements of interest within a lending arrangement are typically the consideration for the time value of money and credit risk. To make the SPPI assessment, the Company applies judgement and considers relevant factors.
Contractual terms that introduce exposure to risks or volatility in the contractual cash flows that are unrelated to a basic lending arrangement, such as exposure to changes in equity prices or commodity
prices, do not give rise to contractual cash flows that are SPPI.
e) Derecognition of Financial Assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the asset''s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in Statement of Profit and Loss if such gain or loss would have otherwise been recognised in Statement of Profit and Loss on disposal of that financial asset.
On derecognition of a financial asset other than in its entirety (e.g. when the Company retains an option to repurchase part of a transferred asset), the Company allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss if such gain or loss would have otherwise been recognised in Statement of Profit and Loss on disposal of that financial asset. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.
Modification of contractual cash flows
When the contractual cash flows of a financial asset are renegotiated or otherwise modified, and the renegotiation or modification does not result in the derecognition of that financial asset, the Company recalculates the gross carrying amount of the financial asset and shall recognise a modification gain or loss in profit or loss. The gross carrying amount of the financial asset shall be recalculated as at the present value of the renegotiated or modified contractual cash flows that are discounted at the financial asset''s original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets) or, when applicable, the revised effective interest rate. Any costs or fees incurred adjust the carrying amount of the modified financial asset and are amortised over the remaining term of the modified financial asset.
f) Impairment of Financial Assets
The Company applies the expected credit loss (ECL) model for recognising impairment loss on financial assets. The Company applies a three-stage approach for measuring ECL for the following categories of financial assets that are not measured at Fair Value through Profit or Loss:
debt instruments measured at amortised
cost and Fair Value through Other
Comprehensive Income; and
financial guarantee contracts.
No ECL is recognised on equity investments, classified as FVTPL.
Expected credit losses is the weighted average of credit losses with the respective risks of default occurring as the weights. Credit loss is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). The Company estimates cash flows by considering all contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) through the expected life of that financial instrument.
Financial assets migrate through the following three stages based on the change in credit risk since initial recognition:
Stage 1: 12-months ECL
The Company assesses ECL on exposures where there has not been a significant increase in credit risk since initial recognition and that were not credit impaired upon origination. For these exposures, the Company recognises as a collective provision the portion of the lifetime ECL associated with the probability of default events occurring within the next 12 months. The Company does not conduct an individual assessment of exposures in Stage 1 as there is no evidence of one or more events occurring that would have a detrimental impact on estimated future cash flows.
Stage 2: Lifetime ECL - not credit impaired The Company collectively assesses ECL on exposures where there has been a significant increase in credit risk since initial recognition but are not credit impaired. For these exposures, the Company recognises as a collective provision, a lifetime ECL (i.e. reflecting the remaining lifetime of the financial asset). Similar to Stage 1, the Company does not conduct an individual assessment on Stage 2 exposures as the increase in credit risk is not, of itself, an event that could have a detrimental impact on future cash flows.
Stage 3: Lifetime ECL - credit impaired The Company identifies, both collectively and individually, ECL on those exposures that are assessed as credit impaired based on whether one or more events, that have a detrimental impact on the estimated future cash flows of that asset have occurred. For exposures that have become credit impaired, a lifetime ECL is recognised as a collective or specific provision, and interest revenue is calculated by applying the effective interest rate to the amortised cost (net of provision) rather than the gross carrying amount.
Determining the stage for impairment
At each reporting date, the Company assesses whether there has been a significant increase in credit risk for exposures since initial recognition by comparing the risk of default occurring over the remaining expected life from the reporting date and the date of initial recognition. The Company considers reasonable and supportable information that is relevant and available without undue cost or effort for this purpose. This includes quantitative and qualitative information and also, forward-looking analysis.
An exposure will migrate through the ECL stages as asset quality deteriorates. If, in a subsequent period, asset quality improves and also reverses any previously assessed significant increase in credit risk since origination, then the provision for impairment losses reverts from lifetime ECL to 12-months ECL. Exposures that have not deteriorated significantly since origination are considered to have a low credit risk. The provision for impairment losses for these financial assets is based on a 12-months ECL. When an asset is uncollectible, it is written off against the related provision. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off reduce the amount of the expense in the income statement.
The Company assesses whether the credit risk on an exposure has increased significantly on an individual or collective basis. For the purposes of a collective evaluation of impairment, financial instruments are grouped on the basis of shared credit risk characteristics, taking into account instrument type, class of borrowers, credit risk ratings, date of initial recognition, remaining term to maturity, industry and other relevant factors.
Measurement of ECL
ECL are derived from unbiased and probability-weighted estimates of expected loss, and are measured as follows:
Financial assets that are not credit-impaired at the reporting date: as the present value of all cash shortfalls over the expected life of the financial asset discounted by the effective interest rate. The cash shortfall is the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. 12-month expected credit losses is a portion of the life-time expected credit losses and represents the lifetime cash shortfalls that will result if default occurs within the 12 months after the reporting date and thus, are not cash shortfalls that are predicted over the next 12 months.
Financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the present value of estimated future cash flows discounted by the effective interest rate.
For further details on how the Company calculates ECL including the use of forward looking information, refer to the Credit quality of financial assets in Note 38.4 Financial risk management.
ECL is recognised using a provision for impairment losses in Statement of Profit and Loss. In the case of debt instruments measured at Fair Value through Other Comprehensive Income, the measurement of ECL is based on the three-stage approach as applied to financial assets at amortised cost. The Company recognises the provision charge in profit and loss, with the corresponding amount recognised in other comprehensive income, with no reduction in the carrying amount of the asset in the Balance Sheet.
Further, for the purpose of measuring lifetime expected credit loss allowance for trade receivables, the Company has used a practical expedient as permitted under Ind AS 109. This expected credit loss is computed based on a provision matrix which takes into account historical credit loss experience and adjusted for forward-looking information.
g) Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
I ncome is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL and Interest income is recognised in Statement of Profit and Loss.
h) Reclassification of Financial Assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the
|
change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest. |
||
|
Original classification |
Revised classification |
Accounting treatment |
|
Amortised cost |
FVTPL |
Fair value is measured at reclassification date. Difference between previous amortized cost and fair value is recognised in Statement of Profit and Loss. |
|
FVTPL |
Amortised Cost |
Fair value at reclassification date becomes its new gross carrying amount. EIR is calculated based on the new gross carrying amount. |
|
Amortised cost |
FVTOCI |
Fair value is measured at reclassification date. Difference between previous amortised cost and fair value is recognised in OCI. No change in EIR due to reclassification. |
|
FVTOCI |
Amortised cost |
Fair value at reclassification date becomes its new amortised cost carrying amount. However, cumulative gain or loss in OCI is adjusted against fair value. Consequently, the asset is measured as if it had always been measured at amortised cost. |
|
FVTPL |
FVTOCI |
Fair value at reclassification date becomes its new carrying amount. No other adjustment is required. |
|
FVTOCI |
FVTPL |
Assets continue to be measured at fair value. Cumulative gain or loss previously recognised in OCI is reclassified to Statement of Profit and Loss at the reclassification date. |
B. Financial Liabilities and Equity Instruments
a) Classification as Debt or Equity
Debt and equity instruments issued by a company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
b) Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of directly attributable transaction costs.
c) Financial Liabilities
Financial liabilities are classified as 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 a derivative (that does not meet hedge accounting requirements) or it is designated as such on initial recognition.
A financial liability is classified as held for trading if:
It has been incurred principally for the purpose of repurchasing it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:
such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise;
the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company''s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
i t forms part of a contract containing one or more embedded derivatives, and Ind AS 109 permits the entire combined contract to be designated as at FVTPL in accordance with Ind AS 109.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in Statement of Profit and Loss. The net gain or loss recognised in Statement of Profit and Loss incorporates any interest paid on the financial liability and is included in the ''other gains and losses'' line item in the Statement of Profit and Loss.
d) other Financial Liabilities
Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortised cost using the effective interest method.
e) derecognition of Financial Liabilities
The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired. An exchange with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
The Company physically repossess properties or other assets in retail portfolio to settle outstanding recoverable and the surplus (if any) post auction is refunded to the loanees. These assets are acquired by the company under SARFEASI Act, 2002 has been classified as assets held for sale, as their carrying amounts will be recovered through a sale of asset. In accordance with Ind AS 105, the company is committed to sell these assets under possession, are measured on balance sheet at the lower of carrying value or fair value and no depreciation is charged on them.
The Company uses derivative instruments to manage exposures to interest rate and foreign currency risks.
The hedging transactions entered into by the Company is within the overall scope of the Derivative Policy and within the Risk Management framework of the
company as approved by the Board from time to time and for the risks identified to be hedged in accordance with the same policies. All derivative contracts are recognised on the Balance Sheet and measured at fair value. Hedge accounting is applied to all the derivative instruments as per Ind AS 109. Hedge effectiveness is ascertained periodically on a forward looking basis and is reviewed at each reporting period. Hedge effectiveness is measured by the degree to which changes in the fair value or cash flows of the hedged item that are attributed to the hedged risk are offset by changes in the fair value or cashflows of the hedging instrument.
Hedges that meet the criteria for hedge accounting are accounted for, as described below:
Fair value hedge is a hedge of the exposure to changes in fair value of a recognized asset or liability or unrecognized commitment, or a component of any such item, that is attributable to a particular risk and could affect profit or loss. 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 is recorded as part of the carrying value of the hedged item in the Balance Sheet and is also recognized as net gain on fair value changes in the Statement of Profit and Loss . 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 relationship is 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.
Cash flow hedge is a hedge of the exposure to variability in the cash flows of a specific asset or liability, or of a
forecasted transaction, that is attributable to a particular risk. It is possible to only hedge the risks associated with a portion of an asset, liability, or forecasted transaction, as long as the effectiveness of the related hedge can be measured. The accounting for a cash flow hedge will be to recognize the effective portion of any gain or loss in Other Comprehensive Income (OCI), and recognize the ineffective portion of any gain or loss in Finance cost in the Statement of Profit and Loss. When a hedging instrument expires, is sold, terminated, exercised, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss that has been recognised in OCI at that time remains in OCI and is recognised when the hedged forecast transaction is ultimately recognised in the Statement of Profit and Loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in OCI is immediately transferred to the Statement of Profit and Loss.
Interest rate benchmark reforms:
Hedging relationships that are directly affected by interest rate benchmark reform gives rise to uncertainties about:
a) the interest rate be
Mar 31, 2019
NOTES FORMING PART OF STANDALONE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2019
NOTE 1: CORPORATE INFORMATION:
LIC Housing Finance Limited (âthe Companyâ) is a Public Limited Company, incorporated under the provisions of the Companies Act, 1956 (as amended by the Companies Act, 2013). The shares of the Company are listed on the Bombay Stock Exchange, the National Stock Exchange and the Luxemburg Stock Exchange.
The Company is engaged in the business of providing finance for purchase, construction, repairs, renovation of house/buildings. The Company''s Registered Office and Corporate Office is at Mumbai with the widest network of Operating Offices in India and Representative Offices at Dubai and Kuwait.
The Standalone Financial Statements for the year ended March 31, 2019 were authorized for issuance in accordance with resolution of the Board of Directors on May 04, 2019.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS:
(A) Significant Accounting Policies:
2.1 Statement of Compliance
Standalone Financial Statements of the Company have been prepared in accordance with the accounting principles generally accepted in India including Indian Accounting Standards (âthe IND ASâ) prescribed under section 133 of the Companies Act, 2013 (âthe Actâ) read with rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 as amended and the guidelines issued by the National Housing Bank (âNHBâ) to the extent applicable.
For all periods up to and including the financial year ended March 31, 2018, the Company had prepared its Standalone Financial Statements in accordance with requirements of the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 (âPrevious GAAPâ). These are the first IND AS Standalone Financial Statements of the Company. The date of transition to IND AS is April 01, 2017. Refer Note 4 below for the details of first-time adoption exemptions availed by the Company.
The Balance Sheet, the Statement of Profit and Loss and the Statement of Changes in Equity are prepared and presented in the format prescribed in the Division III of Schedule III to the Act. The Statement of Cash Flows has been prepared and presented as per the requirements of IND AS 7 âStatement of Cash Flowsâ. The Company presents its Balance Sheet in the order of liquidity. A statement regarding maturity within 12 months after the reporting date and more than 12 months after the reporting date is presented in Note 37.5
2.2 Basis of preparation of IND-AS Financial Statements:
In accordance with the notification issued by the Ministry of Corporate Affairs, the Company is required
to prepare its Standalone Financial Statements as per the Indian Accounting Standards (''IND AS'') prescribed under section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 as amended with effect from April 01, 2017. Accordingly, the Company has prepared these Standalone Financial Statements, which comprise the Balance Sheet as at March 31, 2019, the Statement of Profit and Loss, the Statements of Cash Flows and the Statement of Changes in Equity for the year ended March 31, 2019, and accounting policies and other explanatory information (together hereinafter referred to as âStandalone Financial Statementsâ or âFinancial Statementsâ).
The Standalone Financial Statements have been prepared on the historical cost basis except for certain financial instruments and certain employee benefit assets are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
Fair value is the price that would be received on sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/ or disclosure purposes in these financial statements is determined on such a basis, except for leasing transactions that are within the scope of IND AS 17 and measurements that have some similarities to fair value but are not fair value, such as net realizable value in IND AS 2 or value in use in IND AS 36.
In addition, for financial reporting purposes, fair value measurements are categorized within the fair value hierarchy into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurements in its entirety, which are described as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
- Level 2 inputs are inputs, other than quoted prices included within level 1, that are observable for the asset or liability, either directly or indirectly; and
- Level 3 inputs are unobservable inputs for the asset or liability
The financial statements are presented in Indian Rupees (INR) and all values are rounded to the nearest Crore except when otherwise stated.
2.3 Revenue Recognition:
Revenue is to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the amount is received. Revenue is measured at the fair value of the consideration received or receivable taking into account contractually defined terms and excluding taxes collected on behalf of government.
i. Interest Income:
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.
Interest income is accrued on a time basis, by reference to the principal outstanding and at applicable effective interest rate (EIR). The effective interest method is a method of calculating the amortized cost of a financial assets and allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial assets, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
ii. Dividend Income:
Dividend income from investment is recognized when the shareholder''s right to receive the payment has been established (provided that it is probable that economic benefits will flow to the Company and the amount of income can be measured reliably).
iii. Fees and Commission Income:
Fee and commission income include fees other than those that are an integral part of EIR. The Company recognizes the fee and commission income in accordance with the terms of the relevant contracts / agreement and when it is probable that the Company will collect the consideration.
iv. Other Income
Other Income represents income earned from the activities incidental to the business and is recognized when the right to receive the income is established as per the terms of the contract.
2.4 Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
As a Lessee:
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership is classified as a finance lease.
Finance lease is capitalized at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance costs in the Statement of Profit and Loss.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term, unless the payments are structured to increase in line with the expected general inflation to compensate the less or.
As a Less or:
Lease in which the Company does not transfer substantially all the risks and rewards of ownership of an asset is classified as operating lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income.
Contingent rents are recognized as revenue in the period in which they are earned.
Lease is classified as finance lease when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amount due from lessee under finance lease is recorded as receivables at the Company''s net investment in the lease. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
2.5 Functional Currency
The functional currency of the Company is determined on the basis of the primary economic environment in which it operates. The Company has accordingly assessed INR as its functional currency.
The transactions in currencies other than the entity''s functional currency are recognized at the rates of exchange prevailing at the dates of the transactions first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the dates when fair value was determined. Non-monetary items measured at historic cost are not translated.
Exchange difference arising on monetary items are recognized in the statement of profit and loss in the year in which they arise.
2.6 Borrowing Costs
Borrowing costs includes interest, commission/brokerage on deposits and exchange differences arising from foreign currency borrowings to the extent they are regarded as adjustment to interest cost. Interest expenses is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate (EIR) applicable. The effective interest method is a method of calculating the amortized cost of a financial liability and allocating interest expenses over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees paid that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
2.7 Employee Benefits Retirement benefit costs and termination benefits
Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each reporting date. Re-measurement,
comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the statement of financial position with a charge or credit recognized in other comprehensive income in the year in which they occur. Re-measurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Past service cost is recognized in profit or loss in the year of a plan amendment or when the Company recognizes corresponding restructuring cost whichever is earlier. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. Defined benefit costs are categorized as follows:
- service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
- net interest expense or income; and
- re-measurement
The Company presents the first two components of defined benefit costs in profit or loss in the line item ''Employee benefits expenses''. Curtailment gains and losses are accounted for as past service costs.
The retirement benefit obligation recognized in the statement of financial position represents the actual deficit or surplus in the Company''s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
A liability for a termination benefit is recognized at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognizes any related restructuring costs.
Short-term and other long-term employee benefits
A liability is recognized for benefits to employees in respect of wages and salaries, annual leave and sick leave in the year the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
Liabilities recognized in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be
made by the Company in respect of services provided by employees up to the reporting date.
2.8 Taxes
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current Taxes
Current income tax is the amount of expected tax payable based on taxable profit for the year as determined in accordance with the applicable tax rates and the provisions of Income Tax Act, 1961.
Deferred Taxes
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary difference can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at the end of each reporting year 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 recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized, or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting year.
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.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws in India, which give future economic benefits in the form of adjustment to future income tax liability, is considered as a deferred asset if there is convincing evidence that the Company will pay normal income tax.
Accordingly, MAT is recognized as an asset in the Balance Sheet when it is probable that the future economic benefit associated with it will flow to the Company.
Current and Deferred tax for the year
Current and Deferred tax are recognized in profit or loss, except when they are relating to items that are recognized in the other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis.
2.9 Property, Plant and Equipment
Property, Plant and Equipment are recorded at their cost of acquisition, net of refundable taxes or levies, less accumulated depreciation and impairment losses, if any. The cost thereof comprises of its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost for bringing the asset to its working condition for its intended use.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognized in the Statement of Profit or Loss. Property, plant and equipment except freehold land held for use for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses, if any.
The Company has elected to continue with the carrying value for all of its property, plant and equipment as recognized in the financial statements on transition i.e. April 01, 2017 to IND AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition.
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation is recognized so as to write off the cost of assets (other than freehold land) less their residual values over their useful lives, using the straight
- line method as per the useful life prescribed in the Schedule II to the Companies Act, 2013, except in respect of Vehicles (Motor cars) where useful life is estimated as 5 years based on estimated usage of the assets.
Assets held under finance leases are depreciated over their expected useful lives on the basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the lease term, assets are depreciated over the shorter of lease term and their useful lives.
Depreciation on additions to Fixed Assets is provided on pro-rata basis from the date of acquisition or installation. Depreciation on assets whose cost individually does not exceed up to Rs,5,000/- is fully provided in the year of purchase. Depreciation on Assets sold, discarded, demolished or scrapped, is provided up to the date on which the said Asset is sold, discarded, demolished or scrapped.
The Company reviews the residual value, useful lives and depreciation method annually and, if expectations differ from previous estimates, the change is accounted for as a change in accounting estimate on a prospective basis.
2.10 Intangible Assets and amortization thereof:
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis based on their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.
Computer software is amortized over the period of three to five years on a straight-line basis.
An item of Intangible Asset is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition 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 derecognized.
For transition to IND AS, the Company has elected to continue with the carrying value of all its Intangible Assets recognized as on April 01, 2017 (date of transition) measured as per previous GAAP as its deemed cost on the date of transition.
2.11 Impairment of Property, Plant & Equipment and Intangible Assets
At the end of each reporting year, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell 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 the risks specific to the assets for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the Statement of Profit and Loss.
2.12 Provisions and Contingent Liabilities
Provisions involving substantial degree of estimation in measurement are recognized when the Company has a present obligation (legal or constructive), as a result of past events, and it is probable that an outflow of resources, that can be reliably estimated, will be required to settle such an obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
A Contingent Liability is a possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company or a present obligation that arises from past events that may, but probably will not, require an outflow of resources.
Both provisions and contingent liabilities are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Contingent Liabilities are not recognized but are disclosed in the notes. A contingent asset is disclosed in the Financial Statements, where an inflow of economic benefits is probable.
Onerous Contracts
Present obligations arising under onerous contracts are recognized and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
2.13 Investment in Subsidiaries and Associates
Investment in subsidiaries and associates are shown at cost. Where the carrying amount of an investment is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount and the difference is transferred to the Statement of Profit and Loss. On disposal of investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to the Statement of Profit and Loss.
The Company has elected to continue with the carrying value for its investment in subsidiaries and associates as recognized in the financial statements on transition i.e. April 01, 2017 to IND AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition.
2.14 Financial Instruments
Financial assets and financial liabilities are recognized when an entity becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through Profit or Loss (FVTPL)) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit and loss are recognized immediately in Statement of Profit and Loss.
Financial Assets a) Recognition and Initial Measurement
The Company initially recognises loans and advances, deposits and debt securities purchased on the date on which they originate. Purchases and sale of financial assets are recognized on the trade date, which is the date on which the Company becomes a party to the contractual provisions of the instrument.
All financial assets are recognized initially at fair value. In the case of financial assets not recorded at FVTPL, transaction costs that are directly attributable to its acquisition of financial assets are included therein.
b) Classification of Financial Assets and Subsequent Measurement
On initial recognition, a financial asset is classified to be measured at -
- Amortized cost; or
- Fair Value through Other Comprehensive Income (FVTOCI) - debt investment; or
- Fair Value through Other Comprehensive Income (FVTOCI) - equity investment; or
- Fair Value through Profit or Loss (FVTPL)
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated at FVTPL:
- The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
- The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A debt instrument is classified as FVTOCI only if it meets both of the following conditions and is not recognized at FVTPL:
- The asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
- The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
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 recognises 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 recognized 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.
All equity investments in scope of IND AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognized by an acquirer in a business combination to which IND AS 103 applies are 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-by-instrument 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 OCI to Statement of Profit and Loss, even on sale of investment. However, on sale/ disposal 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.
All other financial assets are classified as measured at FVTPL.
In addition, on initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVTOCI as at FVTPL if doing so eliminates or significantly reduces and accounting mismatch that would otherwise arise.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains and losses arising on remeasurement recognized in statement of profit or loss. The net gain or loss recognized in statement of profit or loss incorporates any dividend or interest earned on the financial asset and is included in the ''other income'' line item. Dividend on financial assets at FVTPL is recognized when:
- The Company''s right to receive the dividends is established,
- It is probable that the economic benefits associated with the dividends will flow to the entity,
- The dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably
c) Business Model Test:
The Company determines its business model at the level that best reflects how it manages group of financial assets to achieve its business objective.
The Company''s business model is not assessed on instrument and instrument basis, but at a higher level of aggregated portfolios and is based on observable factors such as:
- How the performance of the business model and the financial assets held within that business model are evaluated and reported to the Company''s key management personnel;
- The risks that affect the performance of the business model (and the financial assets held within that business model) and, in particular, the way in which those risks are managed.
At initial recognition of a financial asset, the Company determines whether newly recognized financial assets are part of an existing business model or whether they reflect a new business model.
d) Solely Payments of Principal and Interest (âSPPIâ) on the principal amount outstanding
The Company assesses the contractual terms of financial assets to identify whether they meet the SPPI test.
''Principal'' for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may change over the life of the financial asset (for example, if there are repayments of principal or amortization of the premium/discount)
The most significant elements of interest within a lending arrangement are typically the consideration for the time value of money and credit risk. To make the SPPI assessment, the Company applies judgment and considers relevant factors.
Contractual terms that introduce exposure to risks or volatility in the contractual cash flows that are unrelated to a basic lending arrangement, such as exposure to changes in equity prices or commodity prices, do not give rise to contractual cash flows that are SPPI.
e) Derecognition of Financial Assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.
On derecognition of a financial asset in its entirety the difference between the asset''s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of that financial asset.
On derecognition of a financial asset other than in its entirety (e.g. when the Company retains an option to repurchase part of a transferred asset), the Company allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of that financial asset. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts.
Modification of contractual cash flows
When the contractual cash flows of a financial asset are renegotiated or otherwise modified, and the renegotiation or modification does not result in the derecognition of that financial asset, the Company recalculate the gross carrying amount of the financial asset and shall recognize a modification gain or loss in profit or loss. The gross carrying amount of the financial asset shall be recalculated as the present value of the renegotiated or modified contractual cash flows that are discounted at the financial asset''s original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets) or, when applicable, the revised effective interest rate. Any costs or fees incurred adjust the carrying amount of the modified financial asset and are amortized over the remaining term of the modified financial asset.
f) Impairment of Financial Assets
The Company applies the expected credit loss (ECL) model for recognizing impairment loss on financial assets. The Company applies a three-stage approach for measuring ECL for the following categories of financial assets that are not measured at fair value through profit or loss:
- debt instruments measured at amortized cost and fair value through other comprehensive income; and
- financial guarantee contracts.
No ECL is recognized on equity investments.
Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights. Credit loss is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). The Company estimates cash flows by considering all contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) through the expected life of that financial instrument.
Financial assets migrate through the following three stages based on the change in credit risk since initial recognition:
Stage 1: 12-months ECL
The Company assesses ECL on exposures where there has not been a significant increase in credit risk since initial recognition and that were not credit impaired upon origination. For these exposures, the Company recognizes as a collective provision the portion of the lifetime ECL associated with the probability of default events occurring within the next 12 months. The Company does not conduct an individual assessment of exposures in Stage 1 as there is no evidence of one or more events occurring that would have a detrimental impact on estimated future cash flows.
Stage 2: Lifetime ECL - not credit impaired
The Company collectively assesses ECL on exposures where there has been a significant increase in credit risk since initial recognition but are not credit impaired. For these exposures, the Company recognises as a collective provision, a lifetime ECL (i.e. reflecting the remaining lifetime of the financial asset). Similar to Stage 1, the Company does not conduct an individual assessment on Stage 2 exposures as the increase in credit risk is not, of itself, an event that could have a detrimental impact on future cash flows.
Stage 3: Lifetime ECL - credit impaired
The Company identifies, both collectively and individually, ECL on those exposures that are assessed as credit impaired based on whether one or more events, that have a detrimental impact on the estimated future cash flows of that asset have occurred. For exposures that have become credit impaired, a lifetime ECL is recognized as a collective or specific provision, and interest revenue is calculated by applying the effective interest rate to the amortized cost (net of provision) rather than the gross carrying amount.
Determining the stage for impairment
At each reporting date, the Company assesses whether there has been a significant increase in credit risk for exposures since initial recognition by comparing the risk of default occurring over the remaining expected life from the reporting date and the date of initial recognition. The Company considers reasonable and supportable information that is relevant and available without undue cost or effort for this purpose. This includes quantitative and qualitative information and also, forward-looking analysis.
An exposure will migrate through the ECL stages as asset quality deteriorates. If, in a subsequent period, asset quality improves and also reverses any previously assessed significant increase in credit risk since origination, then the provision for impairment losses reverts from lifetime ECL to 12-months ECL. Exposures that have not deteriorated significantly since origination are considered to have a low credit risk. The provision for impairment losses for these financial assets is based on a 12-months ECL. When an asset is uncollectible, it is written off against the related provision. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off reduce the amount of the expense in the income statement.
The Company assesses whether the credit risk on an exposure has increased significantly on an individual or collective basis. For the purposes of a collective evaluation of impairment, financial instruments are grouped on the basis of shared credit risk characteristics, taking into account instrument type, class of borrowers, credit risk ratings, date of initial recognition, remaining term to maturity, industry and other relevant factors.
Measurement of ECL
ECL are derived from unbiased and probability-weighted estimates of expected loss, and are measured as follows:
- Financial assets that are not credit-impaired at the reporting date: as the present value
of all cash shortfalls over the expected life of the financial asset discounted by the effective interest rate. The cash shortfall is the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. 12-month expected credit losses are portion of the lifetime expected credit losses and represent the lifetime cash shortfalls that will result if default occurs within the 12 months after the reporting date and thus, are not cash shortfalls that are predicted over the next 12 months.
- Financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the present value of estimated future cash flows discounted by the effective interest rate.
For further details on how the Company calculates ECL including the use of forward looking information, refer to the Credit quality of financial assets in Note 37.4 Financial risk management.
ECL are recognized using a provision for impairment losses in profit and loss. In the case of debt instruments measured at fair value through other comprehensive income, the measurement of ECL is based on the three-stage approach as applied to financial assets at amortized cost. The Company recognizes the provision charge in profit and loss, with the corresponding amount recognized in other comprehensive income, with no reduction in the carrying amount of the asset in the balance sheet.
Further, for the purpose of measuring lifetime expected credit loss allowance for trade receivables, the Company has used a practical expedient as permitted under IND AS 109. This expected credit loss is computed based on
a provision matrix which takes into account historical credit loss experience and adjusted for forward-looking information.
g) Effective Interest Method
The effective interest method is a method of calculating the amortized cost of a debt instrument and allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL and Interest income is recognized in profit or loss.
h) Reclassification of Financial Assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognized gains, losses (including impairment gains or losses) or interest.
A. Financial Liabilities and Equity Instruments
a) Classification as debt or equity
Debt and equity instruments issued by a company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
b) Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of directly attributable transaction costs.
c) Financial Liabilities
Financial liabilities are classified as measured at amortized cost or ''FVTPL''.
A Financial Liability is classified as at FVTPL if it is classified as held-for-trading or it is a derivative (that does not meet hedge accounting requirements) or it is designated as such on initial recognition.
A financial liability is classified as held for trading if:
- It has been incurred principally for the purpose of repurchasing it in the near term; or
- on initial recognition it is part of a portfolio of identified financial instruments that the
Company manages together and has a recent actual pattern of short-term profit-taking; or
- it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:
- such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise;
- the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company''s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
- it forms part of a contract containing one or more embedded derivatives, and IND AS 109 permits the entire combined contract to be designated as at FVTPL in accordance with IND AS 109.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in Statement of Profit and Loss. The net gain or loss recognized in Statement of Profit and Loss incorporates any interest paid on the financial liability and is included in the ''other gains and losses'' line item in the Statement of Profit and Loss.
d) Other Financial Liabilities:
Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortized cost using the effective interest method.
e) Derecognition of Financial Liabilities:
The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired. An exchange with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.
2.15 Cash and Cash Equivalent:
Cash and cash equivalent in balance sheet comprise of cash at bank, cash on hand and short term highly liquid investments and short-term deposits with an original maturity of three months or less which are subject to insignificant risk of changes in value.
2.16 Earnings Per Share:
Basic earnings per share is calculated by dividing the net profit or loss after tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year are adjusted for events including a bonus issue, bonus element in right issue to existing shareholders, share split, and reverse share split (consolidation of shares).
For the purpose of calculating diluted earnings per share, the net profit or loss after tax as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares by weighted average no of equity shares year which are adjusted for the effects of all dilutive potential equity shares.
2.17 Statement of Cash Flow
Cash flows are reported using the indirect method, whereby profit / (loss) before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
2.18 Commitments
Commitments are future liabilities for contractual expenditure. The commitments are classified and disclosed as follows:
i. The estimated amount of contracts remaining to be executed on capital account and not provided for; and
ii. Other non-cancellable commitments, if any, to the extent they are considered material and relevant in the opinion of the Management.
2.19 Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM).
The Managing Director & CEO is identified as the Chief Operating Decision Maker (CODM) by the management of the Company. CODM has identified only one operating segment of providing loans for purchase, construction, repairs renovation etc. and has its operations entirely within India.
2.20 Recent Accounting Pronouncements STANDARDS ISSUED BUT YET NOT EFFECTIVE-
2.20.1. IND AS 116, Leases - On 30 March 2019, the Ministry of Corporate Affairs (MCA) notified IND AS 116, Leases as part of the Companies (Indian Accounting Standards (IND AS)) Amendment Rules, 2019. IND AS 116 replaces existing standard on leases i.e. IND AS 17, Leases with effect from accounting periods beginning on or after 1 April 2019. IND AS 116 introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset. IND AS 17 required to classify leases as finance lease and operating lease, the same in not required under IND AS 116. The Company is currently evaluating the impact of IND AS 116 on its financial statements.
2.20.2. IND AS 12 - Taxes on Income The first amendment requires an entity to create a corresponding liability for Dividend Distribution Tax (DDT) when it recognizes a liability to pay a dividend. The liability for DDT shall be recorded in statement of profit & loss, other comprehensive income or equity, as the case may be.
The second amendment relates to tax consequence of an item whose tax treatment is uncertain. Tax treatment of an item is considered as uncertain when there is uncertainty whether the relevant taxation authority will accept the tax treatment of that item or not.
If there is uncertainty over tax treatment of an item an entity should predict the resolution of the uncertainty. If it is probable that the taxation authority will accept the tax treatment, there will be no impact on the amount of taxable profits/losses, tax bases, unused tax losses/credits and tax rates. In vice-versa case, the entity shall show the effect of the uncertainty for each uncertain tax treatment on amount of related items by using either the most likely outcome or the expected outcome of the uncertainty. The Company does not expect this amendment to have any impact on its financial statements.
2.20.3. IND AS 109 - Financial Instruments The amendments notified to IND AS 109 pertain to classification of a financial instruments with prepayment feature with negative compensation. Negative compensation arises where the terms of the contract of the financial instrument permit the holder to make repayment or permit the lender or issuer to put the instrument to the borrower for repayment before the maturity at an amount less than the unpaid amounts of principal and interest. The Company does not expect this amendment to have any impact on its financial statements.
2.20.4. IND AS 19 - Employee Benefits The amendments relate to effects of plan amendment, curtailment and settlement. When an entity determines the past service cost at the time of plan amendment or curtailment, it shall premeasured the amount of net defined benefit liability/ asset using the current value of plan assets and current actuarial assumptions which should reflect the benefits offered under the plan and plan assets before and after the plan amendment, curtailment and settlement. The Company does not expect this amendment to have any significant impact on its financial statements.
2.20.5. IND AS 23 - Borrowing Costs The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalization rate on general borrowings. The Company does not expect any impact from this amendment.
2.20.6. IND AS 28 - Long-term Interests in Associates and Joint Ventures IND AS 109 excludes interest in associates and joint ventures that are accounted for in accordance with IND AS 28, Investments in Associates and Joint Ventures from its scope. According to the amendments, IND AS 109 should be applied to the financial instruments, including long-term interests in associates and joint venture that, in substance, form part of an entity''s net investment in associate or joint venture, to which the equity method is not applied. The Company applies equity method to all long-term interests in associates and joint ventures.
3. Key Estimates and Judgments:
The preparation of the financial statements in conformity with Indian Accounting Standards (âIND ASâ) requires the management to make estimates, judgmentsâ and assumptions. These estimates, judgmentsâ and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Accounting estimates could change from period to period. Actual results could differ from those estimates. Revisions to accounting estimates are recognized prospectively. 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 recognized in the periods in which the results are known / materialize.
3.1 DETERMINATION OF EXPECTED CREDIT LOSS (âECLâ)
The measurement of impairment losses (ECL) across all categories of financial assets requires judgment, in particular, the estimation of the amount and timing of future cash flows based on Company''s historical experience and collateral values when determining impairment losses along with 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.
Elements of the ECL models that are considered accounting judgmentsâ and estimates include:
- Bifurcation of the financial assets into different portfolios when ECL is assessed on collective basis.
- Company''s criteria for assessing if there has been a significant increase in credit risk.
- Development of ECL models, including choice of inputs / assumptions used.
The various inputs used and process followed by the Company in measurement of ECL has been detailed in Note 37.4.2.3
3.2 Fair Value Measurements
In case of financial assets and financial liabilities recorded or disclosed in financial statements the company uses the quoted prices in active markets for identical assets or based on inputs which are observable either directly or indirectly for determining the fair value. However in certain cases, the Company adopts valuation techniques and inputs which are not based on market data. When Market observable information is not available, the Company has applied appropriate valuation techniques and inputs to the valuation model.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. Information about the valuation techniques and inputs used in determining the fair value of Investments are disclosed in Note 37.3.
3.3 Income Taxes
The Company''s tax jurisdiction is in India. Significant judgmentsâ are involved in determining the provision for income taxes, including amount expected to be paid/ recovered for certain tax positions.
3.4 Evaluation of Business Model
Classification and measurement of financial instruments depends on the results of the solely payments of principal and interest on the principal amount outstanding (âSPPIâ) and the business model test. The Company determines the business model at a level that reflects how the Company''s financial instruments are managed together to achieve a particular business objective.
The Company monitors financial assets measured at amortized cost or fair value through other comprehensive income that are derecognized 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 instruments.
3.5 Provisions and Liabilities
Provisions and liabilities are recognized in the period when they become probable that there will be an outflow of funds resulting from past operations or events that can be reasonably estimated. The timing of recognition requires judgment to existing facts and circumstances which may be subject to change.
4. FIRST TIME ADOPTION OF IND AS
These financial statements, for the year ended 31st March, 2019, are the first financial statements, the Company has prepared in accordance with IND AS. For periods up to and including the year ended 31st March, 2018, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP or previous GAAP) and NHB guidelines.
The Company has prepared the opening Standalone Balance Sheet as per IND AS as of April 1, 2017 (the transition date) by,
- recognizing all assets and liabilities whose recognition is required by IND AS,
- not recognizing items of assets or liabilities which are not permitted by IND AS,
- by reclassifying items from previous GAAP to IND AS
Mar 31, 2018
Note: 27 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS SIGNIFICANT ACCOUNTING POLICIES
a. Basis of preparation of financial statements
The financial statements are prepared under the historical cost convention on accrual basis of accounting and in accordance with accounting principles generally accepted in India. The financial statements comply in all material aspects with the Accounting Standards specified under Section 133 of the Companies Act, 2013 (the Act), read with the Rule 7 of the Companies (Accounting Standards) Rules, 2014, read with amendment rules and relevant provisions of the Companies Act, 2013 (to the extent notified), National Housing Bank Act, 1987 and the Housing Finance Companies (NHB) Directions, 2010 as amended. Accounting Policies not specifically referred to otherwise, followed by the Company are consistent with the generally accepted accounting principles.
b. Use of Estimates
The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported balances of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.
c. Revenue Recognition Interest on Loans
Repayment of Loans is generally by way of Equated Monthly Installments (EMI) comprising of principal and interest or by way of proceeds of Life Insurance Policies where interest is collected in monthly installment. Necessary appropriation is made out of these EMI collections to principal and interest. Interest income is recognized on accrual basis except in case of Non Performing Assets (NPA) where interest is accounted on realization.
Fees and additional interest income on delayed EMI/Pre-EMI are recognized on receipt basis.
Income from Investments
Interest income on debt investments like Non Convertible Debentures (NCD), Inter Corporate Deposits (ICD), Bank Deposits, Government Securities is recognized on accrual basis and Dividend income is accounted for in the year in which the same is declared in Annual General Meeting and Company''s right to receive payment is established.
Other Income
In other cases, income is recognized when there is no significant uncertainty as to determination and realization.
d. Property, Plant and Equipment
Property, Plant and Equipment are stated at cost of acquisition, or construction inclusive of expenses incidental thereto less accumulated depreciation and impairment loss, if any.
Depreciation in respect of assets is provided on the Straight Line Method as per the useful life of the assets as prescribed in Schedule II of the Act, except in respect of Vehicles (Motor cars) where useful life is estimated as 5 years.
Cost of leasehold improvements is amortized over the period of the lease.
Depreciation on assets whose cost individually does not exceed upto '' 5,000/- is fully provided in the year of purchase.
e. Intangible Assets
Intangible assets are stated at cost of acquisition, including any cost attributable to bringing the same to its working condition, less amortization over estimated useful life.
Software is amortized on Straight Line Method over 5 years.
f. Impairment Loss
Impairment loss is provided to the extent the carrying amount of assets exceed their recoverable amounts. Recoverable amount is the higher of an asset''s net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Net selling price is the amount obtainable from sale of the asset in an arm''s length transaction between knowledgeable, willing parties, less the costs of disposal.
g. Loans and Provision thereon
The loans given by the company are initially recorded in the books of account at the principal amounts disbursed to the borrowers and are subsequently adjusted for further disbursements / repayments. The loans are classified as Nonperforming Assets (NPA) under Substandard / Doubtful / Loss categories as per the prudential norms prescribed under the Housing Finance Companies (NHB) Directions, 2010, (the" NHB Directions") as amended. The provision on Standard and NPA loan accounts is made as per the aforesaid prudential norms. Additional provision (over and above the prudential norms), if required, is made as per the guidelines approved by the Board of Directors from time to time. The loans and provisions thereon are classified into current and non-current categories based on the operating cycle of 12 months as identified by the Company.
h. Investments
Investments are classified as Current Investment and Long term Investment. Current investment is an investment that is by its nature readily realizable and is intended to be held for not more than one year from the date on which such investment is made. A Long term investment is an investment other than a current investment.
In accordance with the Guidelines issued by National Housing Bank (NHB) and the Accounting Standard (AS -13) -"Accounting for Investments" notified under the relevant provisions of the Act, current investments are carried at lower of cost & fair value and long-term investments are carried at cost. However, provision is made to recognize decline other than temporary in the carrying amount of long-term investments. Unquoted investments in the units of mutual funds in the nature of current investments are valued at the net asset value declared by mutual funds in respect of each particular scheme as per the guidelines issued by the NHB. The premium paid on acquisition of Investments is written off in the year of purchase.
i. Employee Benefits Defined Contribution Plan Provident Fund
Contribution as required by Statute paid to the Government Provident Fund and also contribution paid to other recognized Provident Fund Trust is debited to the Statement of Profit and Loss.
Defined Benefit Plan Gratuity
- Gratuity liability is a defined benefit obligation for employees. The Company has taken Group Gratuity-cum-Life Insurance Policy from Life Insurance Corporation of India (LIC) for employees other than those are under deputation from LIC. Accordingly, the Company accounts for liability for future gratuity benefits based on actuarial valuation carried out at the end of each financial year and the Contribution paid to LIC is charged to the Statement of Profit and Loss. Actuarial gain or losses arising from changes in actuarial assumptions are immediately recognized in the Statement of Profit and Loss in the period in which they arise.
- In respect of employees under deputation from LIC, an amount equal to five percent of aggregate of basic salary and dearness allowance of such employees, paid / payable to LIC is charged to the Statement of Profit and Loss and is treated as a defined contribution obligation.
Short-Term Employee Benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognized during the year when the employees render the service. These benefits include compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related service.
Long-Term Employee Benefits
Compensated absences which are not expected to occur within twelve months after the end of the period in which employee renders the related service are recognized as a liability at the present value of the defined benefit obligation as at the Balance Sheet date.
j. Foreign Currency Transactions
Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of transactions.
In case of forward exchange contracts or other financial instruments that is in substance a forward exchange contract, other than for trading or speculation purposes, the premium or discount arising at the inception of the contract is amortized as expense or income over the life of the contract.
Gains / losses on settlement of transactions arising on cancellation / renewal of forward exchange contracts are recognized as income or expense.
At the reporting date, monetary assets and liabilities denominated in foreign currency are reported using the closing rate of exchange. Exchange difference arising thereon and on realization / payments of foreign exchange are accounted as income or expense in the relevant year.
k. Derivative Transactions
SWAP transactions are considered off-balance sheet items and the outstanding SWAP trades are disclosed at the fair value on the reporting date. The carrying amount (difference between coupon rate liability and SWAP contract rate) is accounted on an accrual basis and the same is adjusted against the interest cost of the underlying liability. Gain realized on early termination of SWAP is amortized over the balance tenure of the SWAP or underlying liability whichever is less. Loss if any on early termination is charged to the Statement of Profit and Loss in the same year.
l. Borrowing Costs
Borrowing costs include interest and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
m. Zero Coupon Instrument
The difference between the discounted amount mobilized and redemption value of Commercial Papers/ Zero Coupon Bond/ NCD is apportioned on time basis over the life of instrument and charged in the Statement of Profit and Loss.
n. Taxes on Income
Taxes on income are accounted for in accordance with Accounting Standard (AS-22) - "Accounting for Taxes on Income", notified under the relevant provisions of the Act. Income tax comprises both current and deferred tax.
Current tax is measured on the basis of estimated taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961.
The tax effect of the timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a Deferred Tax Asset or Deferred Tax Liability. They are measured using substantially enacted tax rates and tax regulations as of the Balance Sheet date.
In situations where the company has unabsorbed depreciation or carry forward tax losses, all Deferred Tax Assets are recognized, only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits. Deferred Tax Assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization.
o. Provisions and Contingencies
Provisions are recognized when the Company has a legal and constructive obligation as a result of a past event, for which it is probable that cash outflow will be required and a reliable estimate can be made of the amount of the obligation. Contingent liabilities are disclosed when the Company has a possible or present obligation where it is not probable that an outflow of resources will be required to settle it. Contingent assets are neither recognized nor disclosed.
p. Operating Leases
Assets acquired on lease where significant portions of the risks and rewards incidental to the ownership are retained by the lessors are classified as Operating Leases. Lease rentals are charged to the Statement of Profit and Loss on accrual basis.
q. Securitized Assets
Derecognition of Securitized assets in the books of the Company, recognition of gain or loss arising on Securitization and accounting for credit enhancement provided by the company is based on the extant guidelines issued by the Institute of Chartered Accountants of India.
Securitized Assets are derecognized in the books of the Company based on the principal of surrender of control over the assets.
Mar 31, 2017
Note: 27 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS SIGNIFICANT ACCOUNTING POLICIES
a. Basis of preparation of financial statements
The financial statements are prepared under the historical cost convention on accrual basis of accounting and in accordance with accounting principles generally accepted in India. The financial statements comply in all material aspects with the Accounting Standards specified under Section 133 of the Companies Act, 2013 (the Act), read with the Rule 7 of the Companies (Accounting Standards) Rules, 2014, read with amendment rules and relevant provisions of the Companies Act, 2013 (to the extent notified), National Housing Bank Act, 1987 and the Housing Finance Companies (NHB) Directions, 2010 as amended.
Accounting Policies not specifically referred to otherwise are consistent with the generally accepted accounting principles followed by the Company.
b. Use of Estimates
The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported balances of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.
c. Revenue Recognition Interest on Housing Loans
Repayment of Housing Loans is by way of Equated Monthly Installments (EMI) comprising of principal and interest or by way of proceeds of Life Insurance Policies where interest is collected in monthly installment. Necessary appropriation is made out of these EMI collections to principal and interest. Interest income is recognized on accrual basis except in case of Non Performing Assets (NPA) where interest is accounted on realization.
Fees and additional interest income on delayed EMI/Pre-EMI are recognized on receipt basis.
Income from Investments
Interest income on debt investments like Non Convertible Debentures (NCD), Inter Corporate Deposits (ICD), Bank Deposits, Government Securities is recognized on accrual basis and Dividend income is accounted for in the year in which the same is declared in Annual General Meeting and Company''s right to receive payment is established.
Other Income
In other cases, income is recognized when there is no significant uncertainty as to determination and realization.
d. Property, Plant and Equipment
Fixed Assets are stated at cost of acquisition, or construction inclusive of expenses incidental thereto less accumulated depreciation and impairment loss, if any.
Depreciation in respect of assets is provided on the Straight Line Method as per the useful life of the assets as prescribed in Schedule II of the Act, except in respect of Vehicles (Motor cars) where useful life is estimated as 5 years.
Cost of leasehold improvements is amortized over the period of the lease.
Depreciation on assets whose cost individually does not exceed up to Rs, 5,000/- is fully provided in the year of purchase.
e. Intangible
Intangible assets are stated at cost of acquisition, including any cost attributable to bringing the same to its working condition, less amortization over estimated useful life.
Software is amortized on Straight Line Method over 5 years.
f. Impairment Loss
Impairment loss is provided to the extent the carrying amount of assets exceed their recoverable amounts. Recoverable amount is the higher of an asset''s net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Net selling price is the amount obtainable from sale of the asset in an arm''s length transaction between knowledgeable, willing parties, less the costs of disposal.
g. Loans and Provision thereon
The loans given by the company are initially recorded in the books of account at the principal amounts disbursed to the borrowers and are subsequently adjusted for further disbursements / repayments. The loans are classified as Non-performing Assets (NPA) under Substandard / Doubtful / Loss categories as per the prudential norms prescribed under the Housing Finance Companies (NHB) Directions, 2010, (the "NHB Directions") as amended. The provision on Standard and NPA loan accounts is made as per the aforesaid prudential norms. Additional provision (over and above the prudential norms), if required, is made as per the guidelines approved by the Board of Directors from time to time. The loans and provisions thereon are classified into current and non-current categories based on the operating cycle of 12 months as identified by the Company.
h. Investments
Investments are classified as Current Investment and Long term Investment. Current investment is an investment that is by its nature readily realizable and is intended to be held for not more than one year from the date on which such investment is made. A Long term investment is an investment other than a current investment.
In accordance with the Guidelines issued by National Housing Bank (NHB) and the Accounting Standard (AS -13) - "Accounting for Investments" notified under the relevant provisions of the Act, current investments are carried at lower of cost & fair value and long-term investments are carried at cost. However, provision is made to recognize decline other than temporary in the carrying amount of long-term investments. Unquoted investments in the units of mutual funds in the nature of current investments are valued at the net asset value declared by mutual funds in respect of each particular scheme as per the guidelines issued by the NHB. The premium paid on acquisition of Investments is written off in the year of purchase.
i. Employee Benefits Defined Contribution Plan Provident Fund
Contribution as required by Statute paid to the Government Provident Fund and also contribution paid to other recognized Provident Fund Trust is debited to the Statement of Profit and Loss.
Defined Benefit Plan Gratuity
- Gratuity liability is a defined benefit obligation for employees. The Company has taken Group Gratuity-cum-Life Insurance Policy from Life Insurance Corporation of India (LIC) for employees other than those are under deputation from LIC. Accordingly, the Company accounts for liability for future gratuity benefits based on actuarial valuation carried out at the end of each financial year and the Contribution paid to LIC is charged to the Statement of Profit and Loss. Actuarial gain or losses arising from changes in actuarial assumptions are immediately recognized in the Statement of Profit and Loss in the period in which they arise.
- In respect of employees under deputation from LIC, an amount equal to five percent of aggregate of basic salary and dearness allowance of such employees, paid / payable to LIC is charged to the Statement of Profit and Loss and is treated as a defined contribution obligation.
Short-Term Employee Benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognized during the year when the employees render the service. These benefits include compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related service.
Long-Term Employee Benefits
Compensated absences which are not expected to occur within twelve months after the end of the period in which employee renders the related service are recognized as a liability at the present value of the defined benefit obligation as at the Balance Sheet date.
j. Foreign Currency Transactions
Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of transactions.
In case of forward exchange contracts or other financial instruments that is in substance a forward exchange contract, other than for trading or speculation purposes, the premium or discount arising at the inception of the contract is amortized as expense or income over the life of the contract.
Gains / losses on settlement of transactions arising on cancellation / renewal of forward exchange contracts are recognized as income or expense.
At the reporting date, monetary assets and liabilities denominated in foreign currency are reported using the closing rate of exchange. Exchange difference arising thereon and on realization / payments of foreign exchange are accounted as income or expense in the relevant year.
k. Derivative Transactions
SWAP transactions are considered off-balance sheet items and the outstanding SWAP trades are disclosed at the fair value on the reporting date. The carrying amount (difference between coupon rate liability and SWAP contract rate) is accounted on an accrual basis and the same is adjusted against the interest cost of the underlying liability. Gain realized on early termination of SWAP is amortized over the balance tenure of the SWAP or underlying liability whichever is less. Loss if any on early termination is charged to the Statement of Profit and Loss in the same year.
l. Borrowing Costs
Borrowing costs include interest and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
m. Zero Coupon Instrument
The difference between the discounted amount mobilized and redemption value of Commercial Papers/ Zero Coupon Bond/ NCD is apportioned on time basis over the life of instrument and charged in the Statement of Profit and Loss.
n. Taxes on Income
Taxes on income are accounted for in accordance with Accounting Standard (AS-22) - "Accounting for Taxes on Income", notified under the relevant provisions of the Act. Income tax comprises both current and deferred tax.
Current tax is measured on the basis of estimated taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961.
The tax effect of the timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a Deferred Tax Asset or Deferred Tax Liability. They are measured using substantially enacted tax rates and tax regulations as of the Balance Sheet date.
In situations where the company has unabsorbed depreciation or carry forward tax losses, all Deferred Tax Assets are recognized, only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits. Deferred Tax Assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization.
o. Provisions and Contingencies
Provisions are recognized when the Company has a legal and constructive obligation as a result of a past event, for which it is probable that cash outflow will be required and a reliable estimate can be made of the amount of the obligation. Contingent liabilities are disclosed when the Company has a possible or present obligation where it is not probable that an outflow of resources will be required to settle it. Contingent assets are neither recognized nor disclosed.
p. Operating Leases
Assets acquired on lease where significant portions of the risks and rewards incidental to the ownership are retained by the lessors are classified as Operating Leases. Lease rentals are charged to the Statement of Profit and Loss on accrual basis.
q. Securitized Assets
Derecognition of Securitized assets in the books of the Company, recognition of gain or loss arising on Securitization and accounting for credit enhancement provided by the company is based on the extant guidelines issued by the Institute of Chartered Accountants of India.
Securitized Assets are derecognized in the books of the Company based on the principal of surrender of control over the assets.
Mar 31, 2016
A. Basis of preparation of financial statements
The financial statements are prepared under the historical cost
convention on accrual basis of accounting and in accordance with
accounting principles generally accepted in India. The Financial
Statements comply in all material aspects with the Accounting Standards
specified under Section 133 of the Companies Act, 2013 (the Act), read
with the Rules 7 of the Companies (Accounting Standard) Rules, 2014,
the relevant provisions of the Companies Act, 2013 (to the extent
notified), National Housing Bank Act, 1987 and the Housing Finance
Companies (NHB) Directions, 2010 as amended.
Accounting policies not specifically referred to otherwise are
consistent with the generally accepted accounting principles followed
by the Company.
b. Use of Estimates
The preparation of financial statements requires the Management to make
estimates and assumptions considered in the reported balances of assets
and liabilities (including contingent liabilities) as of the date of
the financial statements and the reported income and expenses during
the reporting period. The Management believes that the estimates used
in preparation of the financial statements are prudent and reasonable.
Future results could differ from these estimates.
c. Revenue Recognition Interest on Housing Loans
Repayment of Housing Loans is by way of Equated Monthly Installments
(EMI) comprising of principal and interest or by way of proceeds of
Life Insurance Policies where interest is collected in monthly
installment. Necessary appropriation is made out of these EMI
collections to principal and interest. Interest income is recognized on
accrual basis except in case of Non Performing Assets (NPA) where
interest is accounted on realization.
Fees and additional interest income on delayed EMI /Pre-EMI are
recognized on receipt basis.
Income from Investments
Interest income on debt investments like Non Convertible Debentures
(NCD), Inter Corporate Deposits (ICD), Bank Deposits, Government
Securities is recognized on accrual basis and Dividend income is
accounted for in the year in which the same is declared in Annual
General Meeting and Company''s right to receive payment is established.
Other Income
In other cases, income is recognized when there is no significant
uncertainty as to determination and realization.
d. Fixed Assets Tangible
Fixed Assets are stated at cost of acquisition, or construction
inclusive of expenses incidental thereto less accumulated depreciation
and impairment loss, if any.
Intangible
Intangible assets are stated at cost of acquisition, including any cost
attributable to bringing the same to its working condition, less
amortization over estimated useful life.
e. Depreciation and Amortisation
Depreciation in respect of assets is charged based on the useful life
of the assets as prescribed in Schedule II of the Act, except in
respect of Vehicles (Motor cars) where useful life is estimated as 5
years.
Cost of leasehold improvements is amortized over the period of the
lease.
Depreciation on assets whose cost individually does not exceed upto Rs.
5,000/- is fully provided in the year of purchase.
Software is amortized on straight line basis over five years.
f. Impairment Loss
Impairment loss is provided to the extent the carrying amount of assets
exceeds their recoverable amounts. Recoverable amount is the higher of
an asset''s net selling price and its value in use. Value in use is the
present value of estimated future cash flows expected to arise from the
continuing use of the asset and from its disposal at the end of its
useful life. Net selling price is the amount obtainable from sale of
the asset in an arm''s length transaction between knowledgeable, willing
parties, less the costs of disposal.
g. Investments
In accordance with the Guidelines issued by National Housing Bank (NHB)
and the Accounting Standard (AS -13) - "Accounting for Investments"
notified under the relevant provisions of the Act, current investments
are carried at lower of cost & fair value and long-term investments are
carried at cost. However, provision is made to recognize decline other
than temporary in the carrying amount of long-term investments.
Unquoted investments in the units of mutual funds in the nature of
current investments are valued at the net asset value declared by
mutual funds in respect of each particular scheme as per the guidelines
issued by the NHB. The premium paid on acquisition of Investments is
written of in the year of purchase.
h. Employee Benefits
Defined Contribution Plan Provident Fund
Contribution as required by Statute paid to the Government Provident
Fund and also contribution paid to other recognized Provident Fund
Trust is debited to the Statement of Profit and Loss.
Defined Benefit Plan Gratuity
- Gratuity liability is a defined benefit obligation for employees. The
Company has taken Group Gratuity-cum-Life Insurance Policy from Life
Insurance Corporation of India (LIC) for employees other than those are
under deputation from LIC. Accordingly, the Company accounts for
liability for future gratuity benefits based on actuarial valuation
carried out at the end of each financial year and the Contribution paid
to LIC is charged to the Statement of Profit and Loss. Actuarial gain
or losses arising from changes in actuarial assumptions are immediately
recognized in the Statement of Profit and Loss in the period in which
they arise.
- In respect of employees under deputation from LIC, an amount equal to
five percent of aggregate of basic salary and dearness allowance of
such employees, paid / payable to LIC is charged to the Statement of
Profit and Loss and is treated as a defined contribution obligation.
Short-Term Employee Benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees are recognized
during the year when the employees render the service. These benefits
include compensated absences which are expected to occur within twelve
months after the end of the period in which the employee renders the
related service.
Long-Term Employee Benefits
Compensated absences which are not expected to occur within twelve
months after the end of the period in which employee renders the
related service are recognized as a liability at the present value of
the defined benefit obligation as at the Balance Sheet date.
i. Foreign Currency Transactions
Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of transactions.
In case of forward exchange contracts or other financial instruments
that is in substance a forward exchange contract, other than for
trading or speculation purposes, the premium or discount arising at the
inception of the contract is amortized as expense or income over the
life of the contract.
Gains / losses on settlement of transactions arising on cancellation /
renewal of forward exchange contracts are recognized as income or
expense.
At the reporting date, monetary assets and liabilities denominated in
foreign currency are reported using the closing rate of exchange.
Exchange difference arising thereon and on realization / payments of
foreign exchange are accounted as income or expense in the relevant
year.
j. Derivative Transactions
SWAP transactions are considered of-balance sheet items and the
outstanding SWAP trades are disclosed at the fair value on the
reporting date. The carrying amount (difference between coupon rate
liability and SWAP contract rate) is accounted on an accrual basis and
the same is adjusted against the interest cost of the underlying
liability. Gain realized on early termination of SWAP is amortized over
the balance tenure of the SWAP or underlying liability ,whichever is
less. Loss if any on early termination is charged to the Statement of
Profit and Loss in the same year.
k. Borrowing Costs
Borrowing costs include interest and exchange differences arising from
foreign currency borrowings to the extent they are regarded as an
adjustment to the interest cost.
l. Zero Coupon Instrument
The difference between the discounted amount mobilized and redemption
value of Commercial Papers/ Zero Coupon Bond/ NCD is apportioned on
time basis over the life of instrument and charged in the Statement of
Profit and Loss.
m. Taxes on Income
Taxes on income are accounted for in accordance with Accounting
Standard (AS-22) Â "Accounting for Taxes on Income", notified under the
relevant provisions of the Act. Income tax comprises both current and
deferred tax.
Current tax is measured on the basis of estimated taxable income and
tax credits computed in accordance with the provisions of the Income
Tax Act, 1961.
The tax effect of the timing differences that result between taxable
income and accounting income and are capable of reversal in one or more
subsequent periods are recorded as a deferred tax asset or deferred tax
liability. They are measured using substantially enacted tax rates and
tax regulations as of the Balance Sheet date.
In situations where the company has unabsorbed depreciation or carry
forward tax losses, all deferred tax assets are recognized, only if
there is virtual certainty supported by convincing evidence that they
can be realized against future taxable profits. Deferred tax assets on
account of other timing differences are recognized only to the extent
there is a reasonable certainty of its realization.
n. Provision on Standard and Non Performing Loans
The provision on Standard and Non Performing Loans is made as per the
prudential norms prescribed in the Housing Finance Companies (NHB)
Directions, 2010 as amended. Additional provisions (over and above the
prudential norms) if required is made as per the Guidelines approved by
the Board of Directors from time to time.
o. Provisions and Contingencies
Provisions are recognized when the Company has a legal and constructive
obligation as a result of a past event, for which it is probable that
cash outflow will be required and a reliable estimate can be made of
the amount of the obligation. Contingent liabilities are disclosed when
the Company has a possible or present obligation where it is not
probable that an outflow of resources will be required to settle it.
Contingent assets are neither recognized nor disclosed.
p. Operating Leases
Assets acquired on lease where significant portions of the risks and
rewards incidental to the ownership are retained by the lessors are
classified as operating leases. Lease rentals are charged to the
Statement of Profit and Loss on accrual basis.
q. Securitised Assets
Derecognition of Securitised assets in the books of the Company,
recognition of gain or loss arising on Securitisation and accounting
for credit enhancement provided by the company is based on the extant
guidelines issued by the Institute of Chartered Accountants of India.
Securitised Assets are derecognized in the books of the Company based
on the principle of surrender of control over the assets.
Mar 31, 2015
A. Basis of preparation of financial statements
The financial statements are prepared under the historical cost
convention on accrual basis of accounting and in accordance with
accounting principles generally accepted in India. The Financial
Statements comply in all material aspects with the Accounting Standards
notified under the relevant provisions of the Companies Act, 2013 (the
Act), the National Housing Bank Act, 1987 and the Housing Finance
Companies (NHB) Directions, 2010 as amended.
Accounting policies not specifically referred to otherwise are
consistent with the generally accepted accounting principles followed
by the Company.
b. Use of Estimates
The preparation of financial statements requires the Management to make
estimates and assumptions considered in the reported amounts of assets
and liabilities (including contingent liabilities) as ofthe date ofthe
financial statements and the reported income and expenses during the
reporting period. The Management believes that the estimates used in
preparation ofthe financial statements are prudent and reasonable.
Future results could differ from these estimates.
c. Revenue Recognition
Interest on Housing Loans
Repayment of Housing Loans is by way of Equated Monthly Installments
(EMI) comprising of principal and interest or by way of proceeds of
Life Insurance Policies where interest is collected in monthly
installment. Necessary appropriation is made out of these EMI
collections to principal and interest. Interest income is recognized on
accrual basis except in case of Non Performing Assets (NPA) where
interest is accounted on realization.
Fees and additional interest income on delayed EMI/Pre-EMI are
recognized on receipt basis.
Income from Investments
Interest income on debt investments like Non convertible Debentures
(NCD), Inter Corporate Deposits (ICD), Bank Deposits, Government
Securities is recognized on accrual basis and Dividend income is
accounted for in the year in which the same is declared in Annual
General Meeting and Company''s right to receive payment is established.
Other Income
In other cases, income is recognized when there is no significant
uncertainty as to determination and realization.
d. Fixed Assets
Tangible
FixedAssets are stated at cost of acquisition, or construction
inclusive of expenses incidental thereto less accumulated depreciation
and impairment loss, if any.
Intangible
Intangible assets are stated at cost of acquisition, including any cost
attributable to bringing the same to its working condition, less
amortization over estimated useful life.
e. Depreciation and Amortisation
Depreciation in respect of assets is charged based on the useful life
of the assets as prescribed in Schedule II of the Act, except in
respect of Vehicles (Motor cars) where useful life is estimated as 5
years.
Cost of leasehold improvements is amortized over the period of the
lease.
Depreciation on assets whose cost individually does not exceed upto Rs.
5,000/- is fully provided in the year of purchase. Software is
amortised on straight line basis over five years.
f. Impairment Loss
Impairment loss is provided to the extent the carrying amount of assets
exceeds their recoverable amounts. Recoverable amount is the higher of
an asset''s net selling price and its value in use. Value in use is the
present value of estimated future cash flows expected to arise from the
continuing use of the asset and from its disposal at the end of its
useful life. Net selling price is the amount obtainable from sale of
the asset in an arm''s length transaction between knowledgeable, willing
parties, less the costs of disposal.
g. Investments
In accordance with the Guidelines issued by National Housing Bank (NHB)
and the Accounting Standard (AS -13) - "Accounting for Investments"
notified under the relevant provisions of the Act, current investments
are carried at lower of cost & fair value and long term investments are
carried at cost. However, provision is made to recognize decline other
than temporary in the carrying amount of long term investments.
Unquoted investments in the units of mutual funds in the nature of
current investments are valued at the net asset value declared by
mutual funds in respect of each particular scheme as per the guidelines
issued by the NHB. The premium paid on acquisition of Investments is
written off in the year of purchase.
h. Employee Benefits
Provident Fund
Contribution as required by Statute paid to the Government Provident
Fund as also contribution paid to other recognized Provident Fund Trust
is debited to the Statement of Profit and Loss.
Gratuity
* Gratuity liability is a defined benefit obligation for employees. The
Company has taken Group Gratuity-cum-Life Insurance Policy from Life
Insurance Corporation of India (LIC) for employees other than those are
under deputation from LIC. Accordingly, the Company accounts for
liability for future gratuity benefits based on actuarial valuation
carried out at the end of each financial year and the Contribution paid
to LIC is charged to the Statement of Profit and Loss. Actuarial gain
or losses arising from changes in actuarial assumptions are immediately
recognized in the Statement of Profit and Loss in the period in which
they arise.
* In respect of employees under deputation from LIC, an amount equal to
five percent of aggregate of basic salary and dearness allowance of
such employees, paid / payable to LIC is charged to the Statement of
Profit and Loss and is treated as a defined contribution obligation.
Leave Benefits
Leave Benefits for both short term and long term in the form of vesting
and non vesting compensated absences are accounted for on actuarial
valuation determined as at the year end.
i. Foreign Currency Transactions
Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of transactions.
In case of forward exchange contracts or other financial instruments
that is in substance a forward exchange contract, other than for
trading or speculation purposes, the premium or discount arising at the
inception of the contract is amortized as expense or income over the
life of the contract.
Gains / losses on settlement of transactions arising on cancellation /
renewal of forward exchange contracts are recognized as income or
expense.
At the reporting date, monetary assets and liabilities denominated in
foreign currency are reported using the closing rate of exchange.
Exchange difference arising thereon and on realization / payments of
foreign exchange are accounted as income or expense in the relevant
year.
j. Derivative Transactions
SWAP transactions are considered off-balance sheet items and the
outstanding SWAP trades are disclosed at the fair value on the
reporting date. The carrying amount (difference between coupon rate
liability and SWAP contract rate) is accounted on an accrual basis and
the same is adjusted against the interest cost of the underlying
liability. Gain realized on early termination of SWAP is amortized over
the balance tenure of the SWAP or underlying liability whichever is
less. Loss if any on early termination is charged to the Statement of
Profit and Loss in the same year.
k. Borrowing Costs
Borrowing costs include interest and exchange differences arising from
foreign currency borrowings to the extent they are regarded as an
adjustment to the interest cost.
l. Zero Coupon Instrument
The difference between the discounted amount mobilized and redemption
value of Commercial Papers/ Zero Coupon Bond/ NCD is apportioned on
time basis overthe life of instrument and charged in the Statement of
Profit and Loss.
m. Income Tax
Taxes on income are accounted for in accordance with Accounting
Standard (AS-22) - "Accounting for taxes on income", notified underthe
relevant provisions ofthe Act. Income tax comprises both current and
deferred tax.
Current tax is measured on the basis of estimated taxable income and
tax credits computed in accordance with the provisions of the Income
Tax Act, 1961.
The tax effect of the timing differences that result between taxable
income and accounting income and are capable of reversal in one or more
subsequent periods are recorded as a deferred tax asset or deferred tax
liability. They are measured using substantially enacted tax rates and
tax regulations as of the Balance Sheet date.
In situations where the company has unabsorbed depreciation or carry
forward tax losses, all deferred tax assets are recognized, only if
there is virtual certainty supported by convincing evidence that they
can be realized against future taxable profits. Deferred tax assets on
account of other timing differences are recognized only to the extent
there is a reasonable certainty of its realization.
n. Provision on Standard and Non Performing Loans
The provision on Standard and Non Performing Loans is made as per the
prudential norms prescribed in the Housing Finance Companies (NHB)
Directions, 2010 as amended. Additional provisions (over and above the
prudential norms) if required is made as per the Guidelines approved by
the Board of Directors from time to time.
o. Provisions and Contingencies
Provisions are recognized when the Company has a legal and constructive
obligation as a result of a past event, for which it is probable that
cash outflow will be required and a reliable estimate can be made of
the amount of the obligation. Contingent liabilities are disclosed when
the Company has a possible or present obligation where it is not
probable that an outflow of resources will be required to settle it.
Contingent assets are neither recognized nor disclosed.
p. Operating Leases
Assets acquired on lease where significant portions of the risks and
rewards incidental to the ownership are retained by the lessors are
classified as operating leases. Lease rentals are charged to the
Statement of Profit and Loss on accrual basis.
q. Securitised Assets
Derecognition of Securitised assets in the books of the Company,
recognition of gain or loss arising on Securitisation and accounting
for credit enhancement provided by the company is based on the extant
guidelines issued by the Institute of Chartered Accountants of India.
Securitised Assets are derecognized in the books of the Company based
on the principal of surrender of control over the assets.
Mar 31, 2014
A. Basis of preparation of financial statements
The financial statements are prepared under the historical cost
convention on accrual basis of accounting and in accordance with
accounting principles generally accepted in India. The Financial
Statements comply in all material aspects with the Accounting Standards
notified under the Companies (Accounting Standards) Rules, 2006, the
relevant provisions of the Companies Act, 1956, the National Housing
Bank Act, 1987 and the Housing Finance Companies (NHB) Directions, 2010
as amended.
Accounting policies not specifically referred to otherwise are
consistent with the generally accepted accounting principles followed
by the Company.
All the assets and liabilities have been classified as current or
non-current as per the company''s normal operating cycle and other
criteria set out in the Revised Schedule VI to the Companies Act, 1956.
Based on the nature of products and the time between the acquisition of
assets for processing & their realisation in cash & cash equivalents,
the company had ascertained its operating cycle as 12 months for the
purpose of current or non-current classification of assets and
liabilities.
b. Use of Estimates
The preparation of financial statements requires the Management to make
estimates and assumptions considered in the reported amounts of assets
and liabilities (including contingent liabilities) as of the date of
the financial statements and the reported income and expenses during
the reporting period. The Management believes that the estimates used
in preparation of the financial statements are prudent and reasonable.
Future results could differ from these estimates.
c. Revenue Recognition
Interest on Housing Loans
Repayment of Housing Loans is by way of Equated Monthly Installments
(EMI) comprising of principal and interest or by way of proceeds of
Life Insurance Policies where interest is collected in monthly
installment. Necessary appropriation is made out of these EMI
collections to principal and interest. Interest income is recognized on
accrual basis except in case of Non Performing Assets (NPA) where
interest is accounted on realization.
Fees and additional interest income on delayed EMI/Pre-EMI are
recognized on receipt basis.
Income from Investments
Interest income on debt investments like Non convertible Debentures
(NCD), Inter Corporate Deposits (ICD), Bank Deposits, Government
Securities is recognized on accrual basis and Dividend income is
accounted for in the year in which the same is declared in Annual
General Meeting and Company''s right to receive payment is established.
Other Income
In other cases, income is recognized when there is no significant
uncertainty as to determination and realization.
d. Fixed Assets
Fixed Assets are stated at cost of acquisition, or construction
inclusive of expenses incidental thereto less accumulated depreciation
and impairment loss, if any.
e. Depreciation
Depreciation on Fixed Assets except Vehicles is provided on Straight
Line Method at the rates and in the manner prescribed in Schedule XIV
to the Companies Act, 1956. Depreciation on vehicle is calculated @ 20%
per annum. Cost of leasehold improvements is amortized over the period
of the lease. Depreciation on assets whose cost individually does not
exceed upto Rs. 5,000/- is fully provided in the year of purchase.
f. Impairment Loss
Impairment loss is provided to the extent the carrying amount of assets
exceeds their recoverable amounts. Recoverable amount is the higher of
an asset''s net selling price and its value in use. Value in use is the
present value of estimated future cash flows expected to arise from the
continuing use of the asset and from its disposal at the end of its
useful life. Net selling price is the amount obtainable from sale of
the asset in an arm''s length transaction between knowledgeable, willing
parties, less the costs of disposal.
g. Intangible Assets
Intangible assets are stated at cost of acquisition, including any cost
attributable for bringing the same to its working condition, less
amortization over estimated useful life. Software License is amortized
on straight line basis over five years.
h. Investments
In accordance with the Guidelines issued by National Housing Bank
(NHB), current investments are carried at lower of cost and fair value
and long term investments are carried at cost. However, provision is
made to recognize decline other than temporary in the carrying amount
of long term investments. Unquoted investments in the units of mutual
funds in the nature of current investments are valued at the net asset
value declared by mutual funds in respect of each particular scheme as
per the guidelines issued by the NHB.
i. Employee Benefits
Provident Fund
Contribution as required by Statute paid to the Government Provident
Fund as also contribution paid to other recognized Provident Fund Trust
is debited to the Statement of Profit and Loss.
Gratuity
- Gratuity liability is a defined benefit obligation for employees. The
Company has taken Group Gratuity-cum-Life Insurance Policy from Life
Insurance Corporation of India (LIC) for employees other than those are
under deputation from LIC. Accordingly, the Company accounts for
liability for future gratuity benefits based on actuarial valuation
carried out at the end of each financial year and the Contribution paid
to LIC is charged to the Statement of Profit and Loss. Actuarial gain
or losses arising from changes in actuarial assumptions are immediately
recognized in the Statement of Profit and Loss in the period in which
they arise.
- In respect of employees under deputation from LIC, an amount equal to
five percent of aggregate of basic salary and dearness allowance of
such employees, paid / payable to LIC is charged to the Statement of
Profit and Loss and is treated as a defined contribution obligation.
Leave Benefits
Leave Benefits for both short term and long term in the form of vesting
and non vesting compensated absences are accounted for on actuarial
valuation determined as at the year end.
j. Foreign Currency Transactions
Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of transactions.
In case of forward exchange contracts or other financial instruments
that is in substance a forward exchange contract, other than for
trading or speculation purposes, the premium or discount arising at the
inception of the contract is amortized as expense or income over the
life of the contract.
Gains / losses on settlement of transactions arising on cancellation /
renewal of forward exchange contracts are recognized as income or
expense.
At the year end, monetary assets and liabilities denominated in foreign
currency are reported using the closing rate of exchange. Exchange
difference arising thereon and on realization / payments of foreign
exchange are accounted as income or expense in the relevant year.
k. Derivative Transactions
SWAP transactions are considered off-balance sheet items and the
outstanding SWAP trades are disclosed at the fair value on the
reporting date. The carrying amount (difference between coupon rate
liability and SWAP contract rate) is accounted on an accrual basis and
the same is adjusted against the interest cost of the underlying
liability. Gain realized on early termination of SWAP is amortized over
the balance tenure of the SWAP or underlying liability whichever is
less. Loss if any on early termination is charged to the Statement of
Profit and Loss in the same year.
l. Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes a
substantial period of time to get ready for its intended use. All
other borrowing costs are charged to the Statement of Profit and Loss.
m. Zero Coupon Instrument
The difference between the discounted amount mobilized and redemption
value of Commercial Papers/ Zero Coupon Bond/ NCD is apportioned on
time basis over the life of instrument and charged as interest expense
in the Statement of Profit and Loss.
n. Income Tax
Taxes on income are accounted for in accordance with Accounting
Standard (AS-22) Â "Accounting for taxes on income", notified under the
Companies (Accounting Standards) Rules, 2006. Income tax comprises both
current and deferred tax.
Current tax is measured on the basis of estimated taxable income and
tax credits computed in accordance with the provisions of the Income
Tax Act, 1961.
The tax effect of the timing differences that result between taxable
income and accounting income and are capable of reversal in one or more
subsequent periods are recorded as a deferred tax asset or deferred tax
liability. They are measured using substantially enacted tax rates and
tax regulations as of the Balance Sheet date.
In situations where the company has unabsorbed depreciation or carry
forward tax losses, all deferred tax assets are recognized, only if
there is virtual certainty supported by convincing evidence that they
can be realized against future taxable profits. Deferred tax assets on
account of other timing differences are recognized only to the extent
there is a reasonable certainty of its realization.
o. Provision on Standard and Non Performing Loans
The provision on Standard and Non Performing Loans is made as per the
prudential norms prescribed in the Housing Finance Companies (NHB)
Directions, 2010 as amended. Additional provisions (over and above the
prudential norms) if required is made as per the Guidelines approved by
the Board of Directors from time to time.
p. Provisions and Contingencies
Provisions are recognized when the Company has a legal and constructive
obligation as a result of a past event, for which it is probable that
cash outflow will be required and a reliable estimate can be made of
the amount of the obligation. Contingent liabilities are disclosed
when the Company has a possible or present obligation where it is not
probable that an outflow of resources will be required to settle it.
Contingent assets are neither recognized nor disclosed.
q. Leases
Assets acquired on lease where significant portions of the risks and
rewards incidental to the ownership are retained by the lessors are
classified as operating leases. Lease rentals are charged to the
Statement of Profit and Loss on accrual basis.
r. Securitised Assets
Derecognition of Securitised assets in the books of the Company,
recognition of gain or loss arising on Securitisation and accounting
for credit enhancement provided by the company is based on the extant
guidelines issued by the Institute of Chartered Accountants of India.
Securitised Assets are derecognized in the books of the Company based
on the principal of surrender of control over the assets. Credit
Enhancement provided by the Company by way of investments in
subordinate Class B Pass Through Certificates is included as other
current investments for the previous year.
Mar 31, 2013
A. Basis of preparation of financial statements
The financial statements are prepared under the historical cost
convention on accrual basis of accounting and in accordance with
accounting principles generally accepted in India. The Financial
Statements comply in all material aspects with the Accounting Standards
notified under the Companies (Accounting Standards) Amendment Rules,
2011, the relevant provisions of the Companies Act, 1956, the National
Housing Bank Act, 1987 and the Housing Finance Companies (NHB)
Directions, 2010 as amended.
Accounting policies not specifically referred to otherwise are
consistent with the generally accepted accounting principles followed
by the Company.
All the assets and liabilities have been classified as current or
non-current as per the company''s normal operating cycle and other
criteria set out in the Revised Schedule VI to the Companies Act, 1956.
Based on the nature of products and the time between the acquisition of
assets for processing & their realisation in cash & cash equivalents,
the company had ascertained its operating cycle as 12 months for the
purpose of current or non-current classification of assets and
liabilities.
b. Use of Estimates
The preparation of financial statements requires the Management to make
estimates and assumptions considered in the reported amounts of assets
and liabilities (including contingent liabilities) as of the date of
the financial statements and the reported income and expenses during
the reporting period. The Management believes that the estimates used
in preparation of the financial statements are prudent and reasonable.
Future results could differ from these estimates.
c. Revenue Recognition Interest on Housing Loans
Repayment of Housing Loans is by way of Equated Monthly Installments
(EMI) comprising of principal and interest or by way of proceeds of
Life Insurance Policies where interest is collected in monthly
installment. Necessary appropriation is made out of these EMI
collections to principal and interest. Interest income is recognized on
accrual basis except in case of Non Performing Assets (NPA) where
interest is accounted on realization.
Fees and additional interest income on delayed EMI/Pre-EMI are
recognized on receipt basis.
Income from Investments
Interest income on debt investments like Non convertible Debentures
(NCD), hjterCorporate Deposits (ICD), Bank Deposits, Government
Securities is recognized on accrual basis and Dividend Income is
accounted for in the year in which the same is declared in Annual
General Meeting and Company''s right to receive payment is
established.
Other Income
In other cases, income is recognized when there is no significant
uncertainty as to determination and realization.
d. Fixed Assets
Fixed Assets are stated at cost of acquisition, or construction
inclusive of expenses incidental thereto less accumulated depreciation
and impairment loss, if any.
e. Depreciation
Depreciation on Fixed Assets is provided on Straight Line Method at the
rates and in the manner prescribed in Schedule XIV to the Companies
Act, 1956. Cost of leasehold improvements is amortized over the period
of the lease. Depreciation on assets whose cost individually does not
exceed upto Rs. 5,000.00 is fully provided in the year of purchase.
f. Impairment Loss
Impairment loss is provided to the extent the carrying amount of assets
exceeds their recoverable amounts. Recoverable amount is the higher of
an asset''s net selling price and its value in use. Value in use is
the present value of estimated future cash flows expected to arise from
the continuing use of the asset and from its disposal at the end of its
useful life. Net selling price is the amount obtainable from sale of
the asset in an arm''s length transaction between knowledgeable,
willing parties, less the costs of disposal.
g. Intangible Assets
Intangible assets are stated at cost of acquisition, including any cost
attributable for bringing the same to its working condition, less
amortization over estimated useful life. Software License is amortized
on straight line basis over five years.
h. Investments
In accordance with the Guidelines issued by National Housing Bank
(NHB), current investments are carried at lower of cost and fair value
and long term investments are carried at cost. However, provision is
made to recognize decline other than temporary in the carrying amount
of long term investments. Unquoted investments in the units of mutual
funds in the nature of current investments are valued at the net asset
value declared by mutual funds in respect of each particular scheme as
per the guidelines issued by the NHB.
i. Employee Benefits Provident Fund
Contribution as required by Statute paid to the Government Provident
Fund as also contribution paid to other recognized Provident Fund Trust
is debited to the Statement of Profit and Loss.
Gratuity
- Gratuity liability is a defined benefit obligation for employees.
The Company has taken Group Gratuity-cum-Life Insurance Policy from
Life Insurance Corporation of India (LIC) for employees other than
those are under deputation from LIC. Accordingly, the Company accounts
for liability for future gratuity benefits based on actuarial valuation
carried out at the end of each financial year and the Contribution paid
to LIC is charged to the Statement of Profit and Loss. Actuarial gain
or losses arising from changes in acturial assumptions are immediately
recognized in the Statement of Profit and Loss in the period in which
they arise.
- In respect of employees under deputation from LIC, an amount equal
to five percent of aggregate of basic salary and dearness allowance of
such employees, paid / payable to LIC is charged to the Statement of
Profit and Loss and is treated as a defined contribution obligation.
Leave Benefits
Leave Benefits for both short term and long term in the form of vesting
and non vesting compensated absences are accounted for on actuarial
valuation determined as at the year end.
j. Foreign Currency Transactions .
Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of transactions.
In case of forward exchange contracts or other financial instruments
that is in substance a forward exchange contract, other than for
trading or speculation purposes, the premium or discount arising at the
inception of the contract is amortized as expense or income over the
life of the contract.
Gains / losses on settlement of transactions arising on cancellation /
renewal of forward exchange contracts are recognized as income or
expense.
At the year end, monetary assets and liabilities denominated in foreign
currency are reported using the closing rate of exchange. Exchange
difference arising thereon and on realization / payments of foreign
exchange are accounted as income or expense in the relevant year.
k. Derivative Transactions
SWAP transactions are considered off-balance sheet items and the
outstanding SWAP trades are disclosed at the fair value on the
reporting date. The carrying amount (difference between coupon rate
liability and SWAP contract rate) is accounted on an accrual basis and
the same is adjusted against the interest cost of the underlying
liability. Gain realized on early termination of SWAP is amortized over
the balance tenure of the SWAP or underlying liability which/ever is
less. Loss if any on early termination is charged to the Statement of
Profit and Loss in the same year.
I. Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes a
substantial period of time to get ready for its intended use. All other
borrowing costs are charged to the Statement of Profit and Loss.
m. Zero Coupon Instrument
The difference between the discounted amount mobilized and redemption
value of Commercial Papers/ Zero Coupon Bond/ NCD is apportioned on
time basis over the life of instrument and charged as interest expense
in the Statement of Profit and Loss.
n. Income Tax
Taxes on income are accounted for in accordance with Accounting
Standard (AS)-22 - "Accounting for taxes on income", notified under
the Companies (Accounting Standards) Amendment Rules, 2011. Income tax
comprises both current and deferred tax.
Current tax is measured on the basis of estimated taxable income and
tax credits computed in accordance with the provisions of the Income
Tax Act, 1961.
The tax effect of the timing differences that result between taxable
income and accounting income and are capable of reversal in one or more
subsequent periods are recorded as a deferred tax asset or deferred tax
liability. They are measured using substantially enacted tax rates and
tax regulations as of the Balance Sheet date.
In situations where the company has unabsorbed depreciation or carry
forward tax losses, all deferred tax assets are recognized, only if
there is virtual certainty supported by convincing evidence that they
can be realized against future taxable profits. Deferred tax assets on
account of other timing differences are recognized only to the extent
there is a reasonable certainty of its realization.
o. Provision on Standard and Non Performing Loans
The provision on Standard and Non Performing Loans is made as per the
prudential norms prescribed in the Housing Finance Companies (NHB)
Directions, 2010 as amended. Additional provisions (over and above the
prudential norms) if required is made as per the Guidelines approved by
the Board of Directors from time to time.
p. Provisions and Contingencies
Provisions are recognized when the Company has a legal and constructive
obligation as a result of a past event, for which it is probable that
cash outflow will be required and a reliable estimate can be made of
the amount of the obligation. Contingent liabilities are disclosed
when the Company has a possible or present "Obligation where it is not
probable that an outflow of resources will be required to settle it.
Contingent assets are neither recognized nor disclosed:
q. Leases
Assets acquired on lease where significant portions of the risks and
rewards incidental to the ownership are retained by the lessors are
classified as operating leases. Lease rentals are charged to the
Statement of Profit and Loss on accrual basis.
r. Securitised Assets
Derecognition of Securitised assets in the books of the Company,
recognition of gain or loss arising on Securitisation and accounting
for credit enhancement provided by the company is based on the extant
guidelines isSuedby the Institute of Chartered Accountants of India.
Securitised Assets are derecognized in the books of the Company based
on the principal of surrender of control over the assets. Credit
Enhancement provided by the Company by way of investments in
subordinate Class B Pass Through Certificates is included as other
current investments for the current year.
Mar 31, 2012
A. Basis of preparation of financial statements
The financial statements are prepared under the historical cost
convention on accrual basis of accounting and in accordance with
accounting principles generally accepted in India. The Financial
Statements comply in all material aspects with the Accounting Standards
notified under the Companies (Accounting Standards) Amendment Rules,
2011, the relevant provisions of the Companies Act, 1956, the National
Housing Bank Act, 1987 and the Housing Finance Companies (NHB)
Directions, 2010 as amended.
Accounting policies not specifically referred to otherwise are
consistent with the generally accepted accounting principles followed
by the Company.
All the assets and liabilities have been classified as current or
non-current as per the company's normal operating cycle and other
criteria set out in the Revised Schedule VI to the Companies Act, 1956.
Based on the nature of products and the time between the acquisition of
assets for processing & their realisation in cash & cash equivalents,
the company had ascertained its operating cycle as 12 months for the
purpose of current or non-current classification of assets and
liabilities.
b. Use of Estimates
The preparation of financial statements requires the Management to make
estimates and assumptions considered in the reported amounts of assets
and liabilities (including contingent liabilities) as of the date of
the financial statements and the reported income and expenses during
the reporting period. The Management believes that the estimates used
in preparation of the financial statements are prudent and reasonable.
Future results could differ from these estimates.
c. Revenue recognition Interest on Housing Loans
Repayment of Housing Loans is by way of Equated Monthly Installments
(EMI) comprising of principal and interest or by way of proceeds of
Life Insurance Policies where interest is collected in monthly
installment. Necessary appropriation is made out of these EMI
collections to principal and interest. Interest income is recognized on
accrual basis except in case of Non Performing Assets (NPA) where
interest is accounted on realization.
Fees and additional interest income on delayed EMI/Pre-EMI are
recognized on receipt basis.
Income from Investments
Interest income on debt investments like Non convertible Debentures
(NCD), Inter Corporate Deposits (ICD), Bank Deposits, Government
Securities is recognized on accrual basis and Dividend income is
accounted for in the year in which the same is declared in Annual
General Meeting and Company's right to receive / payment is
established.
Other Income
In other cases, income is recognized when there is no significant
uncertainty as to determination and realization.
d. Fixed Assets
Fixed Assets are stated at cost of acquisition, or construction
inclusive of expenses incidental thereto less accumulated depreciation
and impairment loss, if any.
e. Depreciation
Depreciation on Fixed Assets is provided on Straight Line Method at the
rates and in the manner prescribed in Schedule XIV to the Companies
Act, 1956. Cost of leasehold improvements is amortized over the period
of the lease. Depreciation on assets whose cost individually does not
exceed upto Rs 5,000 is fully provided in the year of purchase.
f. Impairment Loss
Impairment loss is provided to the extent the carrying amount of assets
exceeds their recoverable amounts. Recoverable amount is the higher of
an asset's net selling price and its value in use. Value in use is the
present value of estimated future cash flows expected to arise from the
continuing use of the asset and from its disposal at the end of its
useful life. Net selling price is the amount obtainable from sale of
the asset in an arm's length transaction between knowledgeable, willing
parties, less the costs of disposal.
g. Intangible Assets
Intangible assets are stated at cost of acquisition, including any
cost attributable for bringing the same to its working condition, less
amortization over estimated useful life. Software is amortized on
straight line basis over five years. However old Software booked on
which amortization was done on the basis of three years will continue
to be amortized at same old rate.
h. Investments
In accordance with the Guidelines issued by National Housing Bank
(NHB), current investments are carried at lower of cost and fair value
and long term investments are carried at cost. However, provision is
made to recognize decline other than temporary in the carrying amount
of long term investments. Unquoted investments in the units of mutual
funds in the nature of current investments are valued at the net asset
value declared by mutual funds in respect of each particular scheme as
per the guidelines issued by the NHB.
i. Employee Benefits Provident Fund
Contribution as required by Statute paid to the Government Provident
Fund as also contribution paid to other recognized Provident Fund Trust
is debited to the Profit and Loss Account.
Gratuity
- Gratuity liability is defined benefit obligation for employees. The
Company has taken Group Gratuity-cum-Life Insurance Policy from Life
Insurance Corporation of India (LIC) for employees other than those
under deputation from LIC. Accordingly, the Company accounts for
liability for future gratuity benefits based on actuarial valuation
carried out at the end of each financial year and the Contribution by
way of premium paid to LIC of India is charged to Profit/ Loss Account.
Actuarial gain or losses are immediately recognized in the Profit and
Loss Account.
- In respect of employees under deputation from LIC an amount equal
to five percent of aggregate of basic salary and dearness allowance of
such employees, paid to LIC is charged to the Profit and Loss Account
and is a defined contribution obligation.
Leave Benefits
Benefits for both short term and long term in the form of vesting and
non vesting compensated absences are accounted for on actuarial
valuation determined as at the year end.
j. Foreign Currency Transactions
Transactions in foreign currencies are recorded at the original rates
of exchange in force at the time the transactions are effected.
In case of forward exchange contracts or other financial instruments
that is in substance a forward exchange contract, other than for
trading or speculation purposes, the premium or discount arising at the
inception of the contract is amortized as expense or income over the
life of the contract.
Gains / losses on settlement of transactions arising on cancellation /
renewal of forward exchange contracts are recognized as income or
expense.
At the year end, monetary items denominated in foreign currency are
reported using the closing rate of exchange. Exchange difference
arising thereon and on realization / payments of foreign exchange are
accounted as income or expense in the relevant year.
k. Derivative Transactions
Derivative transactions are considered Off-Balance Sheet items and the
outstanding swap trades are disclosed at the fair value on the
reporting date. The carry (difference between coupon rate liability and
swap contract rate) is accounted on an accrual basis and the same is
adjusted against the interest cost of the underlying liability. Gain
realized on early termination of swap is amortized over the balance
tenure of the swap or underlying liability which/ever is less. Loss if
any on early termination is charged to revenue in the same year.
l. Borrowing costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes a
substantial period of time to get ready for its intended use. All
other borrowing costs are charged to revenue.
m. Zero Coupon Instrument
The difference between the discounted amount mobilized and redemption
value of Commercial Papers/ Zero Coupon Bond/ NCD is apportioned on
time basis over the life of instrument and charged as interest expense.
n. Income Taxes
Income taxes are accounted for in accordance with Accounting Standard
(AS-22) - "Accounting for taxes on income", notified under the
Companies (Accounting Standards) Amendment Rules, 2011. Income tax
comprises both current and deferred tax.
Current tax is measured on the basis of estimated taxable income and
tax credits computed in accordance with the provisions of the Income
Tax Act, 1961.
The tax effect of the timing differences that result between taxable
income and accounting income and are capable of reversal in one or more
subsequent periods are recorded as a deferred tax asset or deferred tax
liability. They are measured using substantially enacted tax rates and
tax regulations as of the Balance Sheet date.
Deferred tax assets arising mainly on account of brought forward losses
and unabsorbed depreciation under tax laws, are recognized, only if
there is virtual certainty of its realization, supported by convincing
evidence. Deferred tax assets on account of other timing differences
are recognized only to the extent there is a reasonable certainty of
its realization.
o. Provision for Non Performing Assets (NPA)
All loans and other credit exposures, where the installments are
overdue for ninety days & above are classified as NPA. Provision is
made in respect of NPA in accordance with the Prudential Norms as per
Housing Finance Companies (NHB) Directions, 2010 as amended. Additional
provisions (over and above the Prudential Norms) if required is made as
per the Guidelines approved by the Board of Directors from time to
time. [Refer Note 27(4)]
p. Provisions and Contingencies
Provisions are recognized when the Company has a legal and constructive
obligation as a result of a past event, for which it is probable that
cash outflow will be required and a reliable estimate can be made of
the amount of the obligation. Contingent liabilities are disclosed
when the Company has a possible or present obligation where it is not
probable that an outflow of resources will be required to settle it.
Contingent assets are neither recognized nor disclosed.
q. Leases
Assets acquired on lease where significant portions of the risks and
rewards incidental to ownership are retained by the lessors are
classified as operating leases. Lease rentals are charged to the Profit
and Loss account on accrual basis.
r. Securitised Assets
Derecognition of Securitised assets in the books of the Company,
recognition of gain or loss arising on Securitisation and accounting
for credit enhancement provided by the company is based on the extant
guidelines issued by the Institute of Chartered Accountants of India.
Securitised Assets are derecognized in the books of the Company based
on the principal of surrender of control over the assets. Credit
Enhancement provided by the Company by way of investments in
subordinate Class B Pass Through Certificates is included as other non
current investments Note 11 (Non-current investments).
Mar 31, 2011
A. Basis of preparation of financial statements
The financial statements are prepared under the historical cost
convention on accrual basis of accounting and in accordance with
accounting principles generally accepted in India. The Financial
Statements comply in all material aspects with the Accounting Standards
notified under the Companies (Accounting Standards) Rules, 2006, the
relevant provisions of the Companies Act, 1956, the National Housing
Bank Act, 1987 and the Housing Finance Companies (NHB) Directions, 2010
as amended from time to time.
Accounting policies not specifically referred to otherwise are
consistent with the generally accepted accounting principles followed
by the Company.
b. Use of Estimates
The preparation of financial statements requires the Management to make
estimates and assumptions considered in the reported amounts of assets
and liabilities (including contingent liabilities) as of the date of
the financial statements and the reported income and expenses during
the reporting period. The Management believes that the estimates used
in preparation of the financial statements are prudent and reasonable.
Future results could differ from these estimates.
c. Revenue recognition
Interest on housing loans
Repayment of Housing Loan is by way of Equated Monthly Installments
(EMI) comprising of principal and interest or by way of proceeds of
Life Insurance Policies where interest is collected in monthly
installment. Necessary appropriation is made out of these EMI
collections to principal and interest. Interest income is recognized on
accrual basis except in case of non-performing assets where interest is
accounted on realization.
Fees and additional interest income on delayed EMI/Pre-EMI are
recognized on receipt basis.
Income from Investment
Interest income on debt investment like Non convertible Debentures
(NCD), Inter Corporate Deposits (ICD), Government Securities is
recognized on accrual basis and Dividend income is accounted for in the
year in which the same is declared in Annual General meeting and
CompanyÃs right to receive / payment is established.
Other Income
In other cases, income is recognized when there is no significant
uncertainty as to determination and realization.
d. Fixed assets
Fixed Assets are stated at cost of acquisition, or construction
inclusive of expenses incidental thereto less accumulated depreciation
and impairment loss, if any.
e. Depreciation
Depreciation on Fixed Assets is provided on Straight Line Method at the
rates and in the manner prescribed in Schedule XIV to the Companies
Act, 1956.
Cost of leasehold improvements is amortized over the period of the
lease.
Depreciation on assets whose cost individually does not exceed upto
Rs.5,000/- is fully provided in the year of purchase.
f. Impairment loss
Impairment loss is provided to the extent the carrying amount of assets
exceeds their recoverable amounts. Recoverable amount is the higher of
an assetÃs net selling price and its value in use. Value in use is the
present value of estimated future
cash flows expected to arise from the continuing use of the asset and
from its disposal at the end of its useful life. Net selling price is
the amount obtainable from sale of the asset in an armÃs length
transaction between knowledgeable, willing parties, less the costs of
disposal.
g. Intangible assets
Intangible assets are stated at cost of acquisition, including any cost
attributable for bringing the same to its working condition, less
amortization over estimated useful life. Software is amortized on
straight line basis over five years. However old Software booked on
which amortization was done on the basis of three years will continue
to be amortized at same old rate.
h. Investments
In accordance with the Guidelines issued by National Housing Bank
(NHB), current investments are carried at lower of cost and fair value
and long term investments are carried at cost. However, provision is
made to recognize decline other than temporary in the carrying amount
of long term investments. Unquoted investments in the units of Mutual
Funds in nature of current investment are valued at the Net Asset Value
declared by Mutual Funds in respect of each particular scheme as per
the guidelines issued by the NHB.
i. Employee benefits
Provident Fund
Contribution as required by Statute paid to the Government Provident
Fund as also contribution paid to other recognized Provident Fund Trust
is debited to the Profit and Loss Account.
Gratuity
- Gratuity liability is defined benefit obligation for employees. The
Company has taken Group Gratuity-cum-Life Insurance Policy from Life
Insurance Corporation of India (LIC) for employees other than those
under deputation from LIC Accordingly, the Company accounts for
liability for future gratuity benefits based on actuarial valuation
carried out at the end of each financial year and the Contribution by
way of premium paid to LIC of India is charged to Profit/Loss Account.
Actuarial gain or losses are immediately recognized in the Profit and
Loss Account.
- In respect of employees under deputation from LIC an amount equal to
five percent of aggregate of basic salary and dearness allowance of
such employees, paid to LIC is charged to the Profit and Loss Account
and is a defined contribution obligation.
Leave Benefits
Benefits for both short term and long term in the form of vesting and
non vesting compensated absences are accounted for on an actuarial
valuation determined as at the year end.
j. Foreign Currency Transactions
Transactions in foreign currencies are recorded at the original rates
of exchange in force at the time the transactions are effected.
In case of forward exchange contracts or other financial instruments
that is in substance a forward exchange contract, other than for
trading or speculation purposes, the premium or discount arising at the
inception of the contract is amortized as expense or income over the
life of the contract.
Gains / losses on settlement of transactions arising on cancellation /
renewal of forward exchange contracts are recognized as income or
expense.
At the year end, monetary items denominated in foreign currency are
reported using the closing rate of exchange. Exchange difference
arising thereon and on realization / payments of foreign exchange are
accounted as income or expense in the relevant year.
k. Derivative Transactions
Derivative transactions are considered Off-Balance Sheet items and the
outstanding swap trades are disclosed at the fair value on the
reporting date. The carry (difference between coupon rate liability and
swap contract rate) is accounted on an
accrual basis and the same is adjusted against the interest cost of the
underlying liability. Gain realized on early termination of swap is
amortized over the balance tenure of the swap or underlying liability
whichever is less. Loss if any on early termination is charged to
revenue in the same year.
l. Borrowing costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes a
substantial period of time to get ready for its intended use. All
other borrowing costs are charged to revenue.
m. Zero Coupon Instrument
The difference between the discounted amount mobilized and redemption
value of Commercial Papers/ Zero Coupon Bond/ NCD is apportioned on
time basis over the life of instrument and charged as interest expense.
n. Income Taxes
Income taxes are accounted for in accordance with Accounting Standard
(AS)-22 Ã ÃAccounting for taxes on incomeÃ, notified under the
Companies (Accounting Standards) Rules, 2006. Income tax comprises both
current and deferred tax.
Current tax is measured on the basis of estimated taxable income and
tax credits computed in accordance with the provisions of the Income
Tax Act, 1961.
The tax effect of the timing differences that result between taxable
income and accounting income and are capable of reversal in one or more
subsequent periods are recorded as a deferred tax asset or deferred tax
liability. They are measured using substantially enacted tax rates and
tax regulations as of the Balance Sheet date.
Deferred tax assets arising mainly on account of brought forward losses
and unabsorbed depreciation under tax laws, are recognized, only if
there is virtual certainty of its realization, supported by convincing
evidence. Deferred tax assets on account of other timing differences
are recognized only to the extent there is a reasonable certainty of
its realization.
o. Provision for non-performing assets (NPA)
All loans and other credit exposures, where the installments are
overdue for ninety days & above are classified as NPA. Provision is
made in respect of NPA in accordance with the Prudential Norms as per
Housing Finance Companies (NHB) Directions, 2010. Additional provisions
(over and above the Prudential Norms) if required is made as per the
Guidelines approved by the Board of Directors from time to time.
p. Provisions and Contingencies
Provisions are recognized when the Company has a legal and constructive
obligation as a result of a past event, for which it is probable that
cash outflow will be required and a reliable estimate can be made of
the amount of the obligation. Contingent liabilities are disclosed
when the Company has a possible or present obligation where it is not
probable that an outflow of resources will be required to settle it.
Contingent assets are neither recognized nor disclosed.
q. Leases
Assets acquired on lease where significant portions of the risks and
rewards incidental to ownership are retained by the lessors are
classified as operating leases. Lease rentals are charged to the Profit
and Loss Account on accrual basis.
r. Securitised Assets
Derecognition of Securitised assets in the books of the Company,
recognition of gain or loss arising on Securitisation and accounting
for credit enhancement provided by the Company is based on the Guidance
Note on Accounting for Securitisation issued by the Institute of
Chartered Accountants of India.
Securitised Assets are derecognized in the books of the Company based
on the principal of surrender of control over the assets. Credit
Enhancement provided by the Company by way of investments in
subordinate Class B Pass Through Certificates is included under
Investments in Pass Through Certificates in Schedule 7.
Mar 31, 2010
A. Basis of preparation of financial statements
The financial statements are prepared under the historical cost
convention on accrual basis of accounting and in accordance with
accounting principles generally accepted in India. The Financial
Statements comply in all material aspects with the Accounting Standards
notified under the Companies (Accounting Standards) Rules 2006, the
relevant provisions of the Companies Act, 1956, the National Housing
Bank Act, 1987 and the Housing Finance Companies, (NHB) Directions,
2001 as amended from time to time.
Accounting policies not specifically referred to otherwise are
consistent with the generally accepted accounting principles followed
by the Company.
b. Use of Estimates
The preparation of financial statements requires the Management to make
estimates and assumptions considered in the reported amounts of assets
and liabilities (including contingent liabilities) as of the date of
the financial statements and the reported income and expenses during
the reporting period. The Management believes that the estimates used
in preparation of the financial statements are prudent and reasonable.
Future results could differ from these estimates
c. Revenue recognition
Interest on housing loans
Repayment of Housing Loan is by way of Equated Monthly Installments
(EMI) comprising of principal and interest or by way of proceeds of
Life Insurance Policies where interest is collected in monthly
installment. Necessary appropriation is made out of these EMI
collections to principal and interest. Interest income is recognized on
accrual basis except in case of non-performing assets where interest is
accounted on realization.
Fees and additional interest income on delayed EMI/Pre-EMI are
recognized on receipt basis.
Income from Investment
Interest income on debt investment like Non convertible Debentures
(NCD), Inter Corporate Deposits ( ICD), Government Securities is
recognized on accrual basis and Dividend income is accounted for in the
year in which the same is declared in Annual General meeting and
Companys right to receive / payment is established.
Other Income
In other cases, income is recognized when there is no significant
uncertainty as to determination and realization.
d. Fixed assets
Fixed Assets are stated at cost of acquisition, or construction
inclusive of expenses incidental thereto less accumulated depreciation
and impairment loss, if any.
e. Depreciation
Depreciation on Fixed Assets is provided on Straight Line Method at the
rates and in the manner prescribed in Schedule XIV to the Companies
Act, 1956.
Cost of leasehold improvements is amortized over the period of the
lease.
Depreciation on assets whose cost individually does not exceed up to
Rs.5,000/- is fully provided in the year of purchase.
f. Impairment loss
Impairment loss is provided to the extent the carrying amount of assets
exceeds their recoverable amounts. Recoverable amount is the higher of
an assets net selling price and its value in use. Value in use is the
present value of estimated future cash flows expected to arise from the
continuing use of the asset and from its disposal at the end of its
useful life. Net selling price is the amount obtainable from sale of
the asset in an arms length transaction between knowledgeable, willing
parties, less the costs of disposal.
g. Intangible assets
Intangible assets are stated at cost of acquisition, including any cost
attributable for bringing the same to its working condition, less
amortization over estimated useful life. Software is amortized on
straight line basis over five years. However old Software booked on
which amortization was done on the basis of three years will continue
to be amortized at same old rate.
h Investments
In accordance with the Guidelines issued by National Housing Bank,
current investments are carried at lower of cost and fair value and
long term investments are carried at cost. However, provision is made
to recognize decline other than temporary in the carrying amount of
long term investments. Unquoted investments in the units of Mutual
Funds in nature of current investment are valued at the Net Asset Value
declared by Mutual Funds in respect of each particular scheme as per
the guidelines issued by the National Housing Bank
i. Employee benefits
Provident Fund
Contribution as required by Statute paid to the Government Provident
Fund as also contribution paid to other recognized Provident Fund Trust
is debited to the Profit and Loss Account.
Gratuity
à Gratuity liability is defined benefit obligation for employees. The
Company has taken Group Gratuity-cum-Life Insurance Policy from Life
Insurance Corporation of India (LIC) for employees other than those
under deputation from LIC. Accordingly, the Company accounts for
liability for future gratuity benefits based on actuarial valuation
carried out at the end of each financial year and the Contribution by
way of premium paid to LIC of India is charged to Profit/Loss Account.
Actuarial gain or losses are immediately recognized in the Profit and
Loss Account.
à In respect of employees under deputation from LIC an amount equal to
five percent of aggregate of basic salary and dearness allowance of
such employees, paid to LIC is charged to the Profit and Loss Account
and is a defined contribution obligation.
Leave Benefits
Benefits for both short term and long term in the form of vesting and
non vesting compensated absences are accounted for on an actuarial
valuation determined as at the year end.
j. Foreign Currency Transactions
Transactions in foreign currencies are recorded at the original rates
of exchange in force at the time the transactions are effected.
In case of forward exchange contracts or other financial instruments
that is in substance a forward exchange contract, other than for
trading or speculation purposes, the premium or discount arising at the
inception of the contract is amortized as expense or income over the
life of the contract.
Gains / losses on settlement of transactions arising on cancellation /
renewal of forward exchange contracts are recognized as income or
expense.
At the year end, monetary items denominated in foreign currency are
reported using the closing rate of exchange. Exchange difference
arising thereon and on realization / payments of foreign exchange are
accounted as income or expense in the relevant year.
k. Derivative Transactions
Derivative transactions are considered off balance sheet items and the
outstanding swap trades are disclosed at the fair value on the
reporting date . The carry (difference between coupon rate liability
and swap contract rate) is accounted on an accrual basis and the same
is adjusted against the interest cost of the underlying liability. Gain
realized on early termination of swap is amortized over the balance
tenure of the swap or underlying liability whichever is less. Loss if
any on early termination is charged to revenue in the same year.
l. Borrowing costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes a
substantial period of time to get ready for its intended use. All other
borrowing costs are charged to revenue. m. Zero Coupon Instrument
The difference between the discounted amount mobilized and redemption
value of Commercial Papers/ Zero Coupon Bond/ NCD is apportioned on
time basis over the life of instrument and charged as interest expense.
n. Income Taxes
Income taxes are accounted for in accordance with Accounting Standard
(AS)-22 - "Accounting for taxes on income", notified under the
Companies (Accounting Standards) Rules 2006. Income tax comprises both
current and deferred tax.
Current tax is measured on the basis of estimated taxable income and
tax credits computed in accordance with the provisions of the Income
Tax Act, 1961.
The tax effect of the timing differences that result between taxable
income and accounting income and are capable of reversal in one or more
subsequent periods are recorded as a deferred tax asset or deferred tax
liability. They are measured using substantially enacted tax rates and
tax regulations as of the Balance Sheet date.
Deferred tax assets arising mainly on account of brought forward losses
and unabsorbed depreciation under tax laws, are recognized, only if
there is virtual certainty of its realization, supported by convincing
evidence. Deferred tax assets on account of other timing differences
are recognized only to the extent there is a reasonable certainty of
its realization.
o. Provision for non-performing assets (NPA)
Ali loans and other credit exposures, where the installments are
overdue for ninety days & above are classified as NPA. Provision is
made in respect of NPA in accordance with the stipulations of
Prudential Norms prescribed by the National Housing Bank (NHB).
Additional provisions (over and above the NHB Guidelines) if required
is made as per the Guidelines approved by the Board of Directors from
time to time.
p. Provisions and Contingencies
Provisions are recognized when the Company has a legal and constructive
obligation as a result of a past event, for which it is probable that
cash outflow will be required and a reliable estimate can be made of
the amount of the obligation. Contingent liabilities are disclosed when
the Company has a possible or present obligation where it is not
probable that an outflow of resources will be required to settle it.
Contingent assets are neither recognized nor disclosed.
q. Leases
Assets acquired on lease where significant portions of the risks and
rewards incidental to ownership are retained by the lessors are
classified as operating leases. Lease rentals are charged to the Profit
and loss account on accrual basis.
r. Securitised Assets
Derecognition of Securitised assets in the books of the Company,
recognition of gain or loss arising on Securitisation and accounting
for credit enhancement provided by the company is based on the Guidance
Note on Accounting for Securitisation issued by the Institute of
Chartered Accountants of India.
Securitised Assets are derecognized in the books of the Company based
on the principal of surrender of control over the assets. Credit
Enhancement provided by the Company by way of investments in
subordinate Class B Pass Through Certificates is included under
Investments in Pass Through Certificates in Schedule 7.
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