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Lakshmi Vilas Bank

BSE: 534690|NSE: LAKSHVILAS|ISIN: INE694C01018|SECTOR: Banks - Private Sector
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Accounting Policy Year : Mar '17

A. BASIS OF ACCOUNTING:

The financial statements are prepared following the going concern concept, on historical cost basis unless otherwise stated and conform to the Generally Accepted Accounting Principles, (GAAP) in India which encompasses applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI) from time to time, Accounting Standards (AS) specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 to the extent applicable and current practices prevailing in the banking industry in India.

B. USE OF ESTIMATES:

The preparation of the financial statements require management to make estimates and assumptions that affect 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 reported period. The Management believes that the estimates and assumptions used in the preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. The differences, if any between estimates and actual will be dealt appropriately in future periods.

C. PRINCIPAL ACCOUNTING POLICIES

1. TRANSACTIONS INVOLVING FOREIGN EXCHANGE:

(a) Foreign Currency Assets and Liabilities are evaluated at the exchange rates prevailing at the close of the year as per the guidelines issued by FEDAI. The resultant profit or loss is accounted for.

(b) Income and Expenditure in foreign currency are translated at the exchange rates prevailing on the date of the respective transaction.

(c) Outstanding forward exchange contracts in each currency are revalued at the Balance Sheet date at the corresponding forward rates for the residual maturity of the contract, in accordance with the guidelines of FEDAI and the provisions of AS-11. The difference between revalued amount and the contracted amount is recognized as profit or loss, as the case may be.

(d) Contingent liabilities on guarantees, letters of credit, acceptances and endorsements are reported at the rates prevailing on the Balance Sheet date.

2. INVESTMENTS:

(a) Investments are categorized under the heads ''Held to Maturity'', Available for Sale, and ''Held for Trading'' and are valued in accordance with the guidelines of the Reserve Bank of India

(b) Brokerage / commission etc, paid in connection with the acquisition of investments is charged to revenue and not included in cost.

(c) Broken period interest paid / received on debt instruments is treated as interest expense / income.

(d) Security receipts are valued at NAV as declared by Securitization Companies

(e) The excess of acquisition cost over the face value of securities under Held to Maturity category is amortized over the remaining period to maturity.

(f) Costs including brokerage and commission pertaining to investments, paid at the time of acquisition, are charged to the profit and loss account. Cost of investments is computed based on the Weighted Average Rate method.

(g) Profit / loss on sale of investments in the ''Held to Maturity'' category is recognized in the profit and loss account and profit is thereafter appropriated (net of applicable taxes and statutory reserve requirements) to capital reserve. Profit / loss on sale of investments in ''Available for Sale'' and ''Held for Trading'' categories is recognised in the profit and loss account.

(h) All Repo and Reverse Repo transactions are accounted for as borrowing and lending transactions respectively in accordance with the extant RBI guidelines.

3. ADVANCES:

3.1 In accordance with the prudential norms issued by RBI:

(a) Advances are classified into standard, sub-standard, doubtful and loss assets borrower-wise;

(b) Provisions are made for loan losses, and

(c) General provision for standard advances is made.

3.2 Advances disclosed are net of provisions made for non-performing assets, ECGC claims settled, part recovery towards

NPA accounts receipts held under sundries, and provision made for sacrifice of interest / diminution in the value of restructured advances measured in present value terms as per RBI guidelines.

4. FIXED ASSETS AND DEPRECIATION:

(a) Fixed assets are accounted for at their historical cost except for Land and Building which are accounted at their revalued cost.

(b) Software is capitalized along with computer hardware and included under Other Fixed Assets.

(c) Depreciation on assets other than computers are provided on Straight Line Method after considering the useful life specified in Schedule II to the Companies Act, 2013 except for hand held communication devices(other than Tablets) which are depreciated in full considering the fast changing technology and obsolescence.

(d) Depreciation on computers and Software are provided for on straight-line method at the rate of 33.33% as per the guidelines issued by the Reserve Bank of India.

(e) Depreciation for premises, in which land cost and construction cost could not be ascertained separately, is provided on the total cost.

5. EMPLOYEE BENEFITS:

(a) Annual contributions to the approved Employees'' Gratuity Fund, Approved Pension Fund and Provision for Leave Encashment benefits are made on actuarial basis and net actuarial gain/loss are recognized as per Accounting Standard 15. Contribution made by the bank to Provident Fund and Contributory Pension Scheme are charged to Profit & Loss account.

(b) The Bank follows the intrinsic value method to account for its employee compensation costs arising from grant of Employee Stock Options.

6. PROVISION FOR TAXATION:

Provision for taxation is made on the basis of the estimated tax liability, after due consideration of the judicial pronouncements and legal opinion, with adjustment for deferred tax in terms of the Accounting Standard 22 (Accounting for Taxes on Income).

7. REVENUE RECOGNITION:

(a) Income is accounted for on accrual basis.

(b) Interest income on non-performing advances/investments are recognized on realization basis, owing to the significant uncertainty in collection thereof:

(c) Interest on tax refund from Income Tax Department is accounted based on assessment orders received.

(d) Dividend Income on Investments is accounted based on declaration basis.

8. SEGMENT REPORTING:

(a) The Bank recognizes the Business Segment as the Primary Reporting Segment and Geographical Segment as the Secondary Reporting Segment, in accordance with the RBI guidelines and in compliance with the Accounting Standard 17.

(b) Business Segment is classified into (a) Treasury (b) Corporate and Wholesale Banking, (c) Retail Banking and (d) Other Banking Operations.

(c) Geographical Segment consists only of the Domestic Segment since the Bank does not have any foreign branches.

9. EARNINGS PER SHARE:

Basic and Diluted earnings per equity share are reported in accordance with the Accounting Standard 20 Earnings per share. Basic earnings per equity share are computed by dividing net profit by the weighted average number of equity shares outstanding for the year. Diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period.

10. IMPAIRMENT OF ASSETS

The Bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceeds their estimated recoverable amount.

11. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:

(a) As per the Accounting Standard 29 Provisions, Contingent Liabilities and Contingent Assets, the Bank recognizes provisions only when it has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

(b) Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

12. NET PROFIT:

The net profit as per the Profit & Loss account is arrived at after necessary provisions towards: -

a) Taxation.

b) Advances and other assets.

c) Shortfall in the value of investments

d) Staff Retirement benefits.

e) Other usual and necessary provisions.

13. CASH AND CASH EQUIVALENTS:

Cash and cash equivalents include cash in hand, Balance with RBI, Balance with other Banks and money at Call and Short Notice.

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