a) Basis of Preparation of Financial Statements
The financial statements have been prepared with the Generally Accepted
Accounting Principles in India (Indian GAAP) to comply in all material
respects with the accounting standards notified by Companies
(Accounting Standards) Rules, 2006 (as amended) and the relevant
provisions of the Companies Act, 1956 and the Directions of the
National Housing Bank. The financial statements have been prepared
under the historical cost convention on an accrual basis. The
accountings policies have been consistently applied by the Company and
are consistent with those used in the previous period.
b) Use of Estimates
The preparation of the financial statements requires the management to
take reasonable estimates and assumption that affect the reported
amount of assets, liabilities and disclosure of contingent liabilities
as at the date of the financial statements. Management believes that
these estimates are reasonable and prudent. However, actual results may
differ from estimates.
c) Housing Loans And Investments
Housing loans are classified into Performing and
Non-Performing assets in terms of guidelines laid down by the
National Housing Bank. Non Performing Housing loans are further
classified as sub-standard, doubtful and loss assets based on the
Housing Finance Companies (NHB) Directions, 2001 as amended till 10th
June, 2010. Investments are accounted and valued at cost plus
incidental expenditure incurred in connection with acquisition.
Investments are classified into two categories i.e. Non-Trade
(Long-term investments) and Trade (Current investments).
Provisions for non-performing assets and investments are done on a
yearly review in accordance with the directives/ guidelines laid down
by the National Housing Bank. Permanent diminution in the value of the
non-trade investments is reviewed and necessary provisioning is done in
the accounts in accordance AS-14 on Accounting for Investments.
Trade Investments are valued at lower of cost or market value.
d) Cash Flow Statements
Cash flow statement of the company reports cash flows during the period
classified by operating, investing and financial activities.
e) Revenue Recognition
Repayment of housing loans is by way of Equated Monthly Installments
(EMI) comprising of principal and interest. Interest is calculated on
the outstanding loan balance (including all interest and fees for
defaults) at the beginning of every year and on loan disbursed during
the year from the beginning of the month in which the loan has been
disbursed till year end at applicable slab rates.
Interest on Housing Loans which are classified as Non- performing
assets is recognised on realisation as per the directives/ guidelines
laid down by National Housing Bank.
Fees and other income on loan application and subsequent sanction
thereof and income from investments are recognised on cash basis as and
f) Fixed Assets
Fixed Assets are stated at cost including all incidental expenses
incurred for bringing the asset to its current position, less
depreciation at rates prescribed in Schedule XIV to the Companies Act,
1956, subject to provisions of Accounting Standard 26 Intangible
Depreciation is provided on written down value method in accordance
with section 205(2) of the Companies Act, 1956 at the rates specified
in schedule XIV to the Companies Act, 1956 on pro-rata basis with
reference to the period of put to use of such assets. Assets costing
less than Rs. 5,000/- per item are depreciated at 100% in the year of
h) Employee Benefits
All short-term employee benefits are recognised at their undiscounted
amount in the accounting period in which they are incurred.
Retirement Benefits in the form of gratuity and leave salary is
accounted in the year of payment.
Lease rentals in respect of assets taken under operating leases are
charged to profit and loss account on a straight line basis over the
j) Income Taxes
Provision for current tax is made for the tax liability payable on
taxable income after considering the allowances, deductions and
exemptions and disallowances if any determined in accordance with the
prevailing tax laws.
The differences between the taxable income and the net profit or loss
before tax for the period as per the financial statements are
identified and the tax effect on the timing differences is
recognised as deferred tax asset or deferred tax liability. The tax
effect is calculated on the accumulated timing differences at the end
of the accounting period based on the tax rates and laws, enacted or
substantively enacted as of the balance sheet date.
k) Impairment of Assets
The carrying amounts of assets are reviewed at each Balance Sheet date
to determine whether there is any indication of impairment. If any such
indication exists, the recoverable amount is estimated at the higher of
net realisable value and value in use. Impairment loss is recognised
wherever carrying amount exceeds the recoverable amount.
I) Provisions, Contingent Liabilities & Contingent Assets
The Company creates a provision when there is a present obligation as a
result of an obligating event that probably requires an outflow of
resources and a reliable estimate can be made of the amount of the
Contingent liabilities are disclosed in respect of possible obligations
that arise from past events but their existence is confirmed by the
occurrence or non-occurrence of one or more uncertain future events not
within the control of the company.
Contingent Assets are neither recognised nor disclosed in the Financial
Statements as a matter of prudence.