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Jammu and Kashmir Bank

BSE: 532209|NSE: J&KBANK|ISIN: INE168A01041|SECTOR: Banks - Private Sector
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Mar 16
Accounting Policy Year : Mar '17

1. Basis of preparation of Financial Statements

The accompanying financial statements are prepared on historical cost basis, except as otherwise stated, following the Going Concern concept and conform to the Generally Accepted Accounting Principles (GAAP) in India, applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), applicable mandatory Accounting Standards (AS)/Guidance Notes/ pronouncements issued by the Institute of Chartered Accountants of India (ICAI) and practices prevailing in the banking industry in India.

2. Use of Estimates

The preparation of financial statements requires the management to make estimates and assumptions for considering the reported assets and liabilities (including contingent liabilities) as on the date of financial statements and the income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

3. Transactions involving Foreign Exchange

i. Monetary Assets and Liabilities as on balance sheet date have been translated using closing rate as at year-end announced by Foreign Exchange Dealers Association of India.

ii. Exchange differences arising on settlement of monetary items have been recognized as income or as expense in the period in which they arise.

iii. The premium or discount arising at the inception of a forward exchange contract, which is not intended for trading purpose, has been amortized as expense or income over the period of contract.

4. Investments

i. Investments are classified into Held-to-Maturity, Available-for-Sale and Held-for-Trading categories, in accordance with the guidelines issued by Reserve Bank of India.

ii. Bank decides the category of each investment at the time of acquisition and classifies the same accordingly.

iii. Held-to- Maturity (HTM) category comprises securities acquired by the Bank with the intention to hold them up to maturity. Held-for-Trading (HFT) category comprises securities acquired by the Bank with the intention of trading. Available-for-Sale (AFS) securities are those, which do not qualify for being classified in either of the above categories.

iv. Investments classified as Held-to-Maturity (HTM) category are carried at acquisition cost unless it is more than the face/ redemption value, in which case the premium is amortized over the period remaining to the maturity using straight line method.

v. (a) The individual scrip''s in the Available-for-Sale category are marked to market at quarterly intervals. The net depreciation under each of six classifications under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifications is ignored.

(b) The market value for the purpose of periodical valuation of investments, included in Available for Sale and Held for trading categories is based on the market price available from the trades/quotes on stock exchanges. Central/State Government securities, other approved securities, debentures and Bonds are valued as per the prices/YTM rates declared by FIMMDA.

(c) Unquoted shares are valued at break-up value ascertained from the latest balance sheet (which should not be more than one year prior to the date of valuation) and in case the latest balance sheet is not available the same are valued at Rs. 1/- per Company, as per RBI guidelines.

(d) Security receipts (SRs) issued by Asset Reconstruction Companies (ARCs) are valued at cost or NAV, whichever is lower, declared periodically by the ARCs. Depreciation, if any, in individual SRs is fully provided for. Appreciation, if any, is ignored.

(e) Investment in quoted Mutual Fund Units is valued as per Stock Exchange quotations. An investment in un-quoted Mutual Fund Units is valued on the basis of the latest re-purchase price declared by the Mutual Fund in respect of each particular scheme. In case of Funds with a lock-in period, where repurchase price/market quote is not available, Units are valued at NAV. If NAV is not available, then these are valued at cost, till the end of the lock-in period. Wherever the re-purchase price is not available the Units are valued at the NAV of the respective scheme.

vi. The individual scrip in the held-for-trading category are marked to market at monthly intervals and the net depreciation under each of the six classifications under which investments are presented in the Balance Sheet is accounted for in the Profit and Loss account and appreciation is ignored.

vii. The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non-performing Non-SLR investments are treated applying RBI prudential norms on NPA Classification and appropriate provisions are made as per RBI norms and no income on such investments is recognized.

viii. (a) Profit or Loss on sale of Government Securities is computed on the basis of weighted average cost of the respective security.

(b) Profit or loss on sale of investments in any category is taken to the Profit and Loss account. In case of profit on sale of investments in Held-to-Maturity category, an equivalent amount of profit net of taxes and the amount required to be transferred to Statutory reserve is appropriated to the Capital Reserve Account.

ix. Interest accrued up to the date of acquisition of securities i.e. broken period interest is excluded from the acquisition cost and recognized as interest expense. Broken period interest received on Sale of securities is recognized as interest income.

x. Brokerage paid on securities purchased is charged to revenue account except for equity investment operations the same is added to the cost of purchase of investment.

xi. Investments in J&K Grameen Bank/Sponsored Institutions have been accounted for on carrying cost basis.

xii. Transfer of securities from one category to another is done at the least of the acquisition cost/book value/market value on the date of transfer.

xiii. Repurchase & Reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.

xiv. Bank is following settlement date accounting policy.

In accordance with RBI circular No. IDMD 4135/11.08.43/2009-10 dated 23-03-2010, the Bank has made changes in accounting for Repo/ Reverse Repo transactions (Other than transactions under the liquidity adjustment facility (LAF) with the RBI). Accordingly the securities sold and purchased under Repo/Reverse Repo are accounted for as collateralized lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/purchase transactions and such movement of security is reflected using Repo/Reverse Repo accounts and contra entries. The above entries are reversed on the date of maturity. Cost and revenue are accounted as interest expenditure/Income as the case may be. Balance in Repo account is classified under schedule 4 (Borrowing) and balance in Reverse Repo account is classified under schedule 7 (Balance with Banks & money at call & short notice).

5. Advances

i) Classification of Advances and Provisions thereof have been made as per the Income Recognition and Asset Classification norms formulated by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets and accordingly requisite provisions have been made thereof.

ii) Advances are shown net of provisions required for NPA''s. Provisions for advances classified as Standard Assets is shown under Other Liabilities & Provisions.

iii) Restructuring of Advances and provisioning thereof have been made as per RBI guidelines.

6. Fixed Assets/Depreciation

a) Premises and other fixed assets are accounted for at historical cost.

b) Premises include free hold as well as lease hold properties.

c) Premises include capital work in progress.

d) Depreciation is charged on straight line method as per provisions of Companies Act 2013 based on the useful life of the assets prescribed in Part C of the schedule II of the Companies Act 2013 as given hereunder.

Depreciation on computers (including ATMs) along with software forming integral part of the computers is computed at 33.33% on straight line method in terms of RBI guidelines issued vide letter no BP.1660/21.04.018/2001 dated 01.02.2001.

The expenditure on computer software where it is probable that future benefits attributable to such software will flow to Bank is capitalized and depreciation is charged @33.33% in terms of RBI guidelines on straight line method.

Useful life of the mobile phones is continued to be 2 years and the depreciation is charged on straight line method as per provisions of Companies Act 2013 with no residual value.

e) Premium paid for Leasehold properties is amortized over the period of the lease.

f) In compliance to the directions of RBI, Board of Directors vide resolution no. 47 dated 21-04-2016 approved the policy on Revaluation of Bank''s own properties which covered all the immovable properties owned by the bank including land & office buildings except those fixed assets whose useful life has expired.

In respect of revaluation of the Bank''s own properties/assets, the bank obtained Valuation Reports from two independent valuers, irrespective of the value of the property. As per the policy, the valuation of the property was taken as the average of the two valuations.

7. Employees Benefits

i) Short-term employee benefits are charged to revenue in the year in which the related service is rendered.

ii) Long Term Employee Benefit

a) Defined Contribution Plan

Provident Fund: Provident Fund is a defined contribution scheme as the bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contributions are charged to profit &loss A/C .The bank is paying matching contribution towards those employees who have not opted for the pension.

b) Defined Benefit Plan

Gratuity: Gratuity liability is a defined obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

Pension: Pension liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

Leave Salary: Leave salary is a defined benefit obligation and is provided for on the basis of an actuarial valuation determined on the basis of un-availed privilege leave of an employee at the time of leaving services of the company.

8. Revenue Recognition and Expenditure booking

Income and expenditure is accounted for on accrual basis unless otherwise stated.

a) Interest and other income on advances/ investments classified as Non Performing Advances/ investments are recognized to the extent realized in accordance with the guidelines issued by the Reserve Bank of India.

b) The recovery in Non-Performing Assets has been first appropriated towards amount of principal and thereafter towards amount of interest.

c) Interest on overdue term deposits is provided at Savings Bank Rate of Interest.

d) Fee, commission (other than insurance commission & Government business), exchange, locker rent, insurance claims and dividend on shares and units in Mutual Fund are recognized on realization basis.

e) Income from interest on income tax/other tax refunds is accounted for on the basis of orders passed by the Competent Authorities.

f) Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

g) Stationery issued to branches has been considered as consumed.

9. Credit Card reward Points

The Bank has estimated the probable redemption of reward points by not using actuarial method but has made 100% provision for redemption against the accumulated reward points in respect of standard card holders.

10. Net Profit/Loss

The net profit is disclosed in the profit and loss account after providing for:

i) Income Tax, wealth tax and Deferred Tax.

ii) Provision for Standard Assets, Non Performing Advances/ Investments as per RBI guidelines.

iii) Depreciation/ amortization on Investments.

iv) Transfer to contingency fund, if any.

v) Other usual and necessary provisions.

11. Taxes on Income

Provision for tax is made for both current and deferred taxes in accordance with AS-22 on Accounting for Taxes on Income.

12. Contingency Funds

Contingency Funds have been grouped in the Balance Sheet under the head Other Liabilities and Provisions.

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