a. Change in accounting policy
Presentation and disclosure of financial statements
During the year ended March 31, 2012, the revised Schedule VI notified
under the Companies Act 1956, has become applicable to the company, for
preparation and presentation of its financial statements. The adoption
of revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it has significant impact on presentation and disclosures made in the
financial statements. The company has also reclassified the figures
for the previous year in accordance with the requirements applicable in
the current year. [Refer note 36]
b. Current / Non-current classification of assets / liabilities
Pursuant to applicability of revised Schedule VI on presentation of
financial statements for the financial year ended March 31, 2012; the
Company has classified all its assets / liabilities into current /
non-current portion based on the time frame of 12 months from the date
of financial statements. Accordingly, assets/liabilities expected to be
realised /settled within 12 months from the date of financial
Statements are classified as current and other assets/ liabilities are
classifies as noncurrent.
c. Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make estimates and assumptions that affect
the reported amounts of revenues, expenses, assets and liabilities and
the disclosure of contingent liabilities, at the date of the financial
statements and results of operations during the reporting year end.
Although these estimates are based on the management''s best knowledge
of current events and actions, actual results could differ from these
estimates. Any revision to the accounting estimates are recognized in
current and future years.
d. Tangible fixed assets
Fixed assets, are stated at cost, less accumulated depreciation and
accumulated impairment losses, if any. The cost comprises of purchase
price and directly attributable cost for bringing the asset to its
working condition for the intended use.
Any trade discounts and rebates are deducted in arriving at the purchase
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day to day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenditure is incurred.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit or
loss when the asset is derecognized.
e. Intangible fixed assets
Intangible fixed assets are stated at cost less accumulated
amortization and impairment losses, if any. Cost comprises the purchase
price and any attributable cost of bringing the asset to its working
condition for its intended use.
f. Depreciation on tangible fixed assets
Depreciation on fixed assets is provided on Straight Line Method (SLM)
by using the rates arrived at based on the useful lives estimated by
the management, which are greater than or equal to the rates prescribed
under the Schedule XIV to the Companies Act, 1956.
Leasehold improvements are amortized on SLM over the primary period of
lease subject to a maximum of 60 months. All fixed assets individually
costing Rs 5,000 or less are fully depreciated in the year of
installation. Depreciation on assets acquired /sold during the year is
recognized on a prorata basis in the statement of profit and loss till
the date of sale or from the date of acquisition.
g. Depreciation on intangible assets
Amortization is provided on Straight Line Method (SLM), which reflects
the management''s estimate of the useful life of the intangible asset.
The company has used the following rate to, provide depreciation on the
Amortization on assets acquired/sold during the year is recognized on
prorate basis in the statement of profit and loss till the date of
h. Impairment of assets
The company assesses at each balance sheet date if there is an
indication of impairment of any asset. If any indication exists, the
company estimates the recoverable amount of the asset. The recoverable
amount of an asset is greater of net selling price and value in use of
the asset. Where the carrying amount of an asset is more than its
recoverable amount, the asset is considered impaired and is written
down to it''s recoverable amount.. The value in use is the estimated
future cash flows discounted to their present value at pre-tax discount
rate which reflects current market assessment of the time value of
money and risk specific to the asset.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
An assessment is made at each Balance Sheet date about existence or
decrease of previously recognized impairment losses. If such
indication exists, the company estimates the asset''s recoverable
amount. A previously recognized impairment loss is increased or
reversed depending on the changes in the circumstances. However, the
carrying value after reversal is not increased beyond the carrying
value that would have prevailed by charging usual depreciation, if there
was no impairment.
i. Capital advance
Capital advances are advances given for procurement of fixed assets.
Company does not expect to realize them in cash and over a period of
time these advances get converted into fixed assets which are
non-current by nature. Therefore irrespective of when the fixed assets
are expected to be received such advances are disclosed under
long-term loans and advances.
j. Borrowing costs
Borrowing cost includes interest and exchange differences arising from
foreign currency borrowings to the extent they are regarded as an
adjustment to the interest cost. Ancillary and other borrowing costs
are charged to statement of profit & loss in the year in which they are
Investments intended to be held for not more than one year from the
date on which such investments are made, are classified as current
investments. All other investments are classified as long-term
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline, other than temporary
in the value of such investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
l. Provision/write off of assets
Nonperforming loans are written off / provided for, as per estimates
of management, subject to the minimum provision required as per Non-
Banking Financial (Deposit Accepting or Holding) Companies Prudential
Norms (Reserve Bank) Directions, 2007.
Provision on standard asset is made as required under Reserve Bank of
India (RBI) notification No. DNBS.222/CGM (US- 2011) dated January
Loans are stated at the amount advanced including finance charges
accrued and expenses recoverable, as reduced by the amounts received
up to the date of balance sheet and loans securitized.
Where the Company is the lessor
Assets given on operating leases are included in fixed assets. Lease
income is recognized in the statement of profit and loss on a
straight-line basis over the lease term. Costs, including depreciation
are recognized as an expense in the statement of profit and loss.
Initial direct costs such as legal costs, brokerage costs, etc. are
recognized immediately in the statement of profit and loss.
Where the Company is the lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased term, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight- line basis over the
o. Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company and the revenue can be
reliably measured. The revenue recognisation are as under:
(i) Income from financing activities is recognized on the basis of
internal rate of return.
(ii) Additional finance charges/additional interest are treated to
accrue on realization due to uncertainty of its realization.
(iii) Gain arising on securitization/direct assignment of assets is
recognized over the tenure of agreements as per guideline on
securitization of standard assets issued by RBI. Loss or expenditure in
respect of securitization /assignment, if any, is recognized upfront.
(iv) The prudential norms for income recognition prescribed under
Non-Banking Financial (Deposit Accepting or Holding) Companies
Prudential Norms (Reserve Bank) Directions 2007 are followed.
(v) Income from services is recognized as per the terms of the contract
on accrual basis.
(vi) Interest Income on deposit accounts with banks is recognized on a
time proportion basis taking into account the amount outstanding and
the rate applicable.
(vii) Dividend is recognized as income when right to receive payment is
established by the date of balance sheet.
(viii) Profit/loss on sale of investments is recognized at the time of
actual sale/ redemption.
p. Foreign currency translation
Foreign currency transactions and balances
Initial recognition: Foreign currency transactions are recorded in
Indian rupee, by applying to the foreign currency amount the exchange
rate between the Indian rupee and the foreign currency at the date of
Conversion : Foreign currency monetary items are retranslated to Indian
rupees by using the exchange rate prevailing at the Balance Sheet date.
Exchange differences: All exchange differences are dealt with in the
statement of profit and loss.
q. Income taxes
Tax expense comprises of current tax and deferred tax. Current income
tax is measured at the amount expected to be paid to the tax
authorities in accordance with the Indian Income Tax Act, 1961.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. Deferred tax assets
are recognized only to the extent there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realised. 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
The carrying cost of the deferred tax assets are reviewed at each
balance sheet date. The company writes down the carrying amount of a
deferred tax asset to the extent it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write down is reversed to the extent it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
The un-recognized deferred tax assets are re-assessed by the company at
each balance sheet date and are recognized to the extent it has become
reasonably certain or virtually certain, as the case may be that
sufficient future taxable income will be available against which such
deferred tax assets can be realized.
r. Segment reporting
The company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the company as a whole. The segments are identified based
on the nature of product & market served. The income /expenses which
are not allocated to any reportable segments are reported as un
s. Employee stock compensation cost
The measurement and disclosure of the employee share based payment
plans is done in accordance with the SEBI (Employee Stock Option Scheme
and Employee Stock Purchase Scheme) Guidelines,1999 and the Guidance
Note on Accounting for Employee Share-based Payments issued by The
Institute of Chartered Accountants of India (ICAI).The company measures
cost relating to employees stock option by intrinsic value method.
Compensation expenses is amortized on straight line method over the
period of vesting of options.
t. Retirement and other employee benefits Provident fund
All the employees of the company are entitled to receive benefits under
the Provident Fund, a defined contribution plan in which both the
employee and the company contribute monthly at a stipulated rate. The
company has no liability for future Provident Fund benefits other than
its annual contribution and recognizes such contributions as an expense
in the year it is incurred.
The company provides for gratuity, a defined benefit retirement plan
covering all employees. The plan provides for lump sum payments to
employees upon death while in employment or on separation from
employment after serving for the stipulated year mentioned under ''The
Payment of Gratuity Act, 1972''. The Company accounts for liability of
future gratuity benefits based on an external actuarial valuation on
projected unit credit method carried out for assessing liability as at
the reporting date.
Accumulated leave, which is expected to be utilized within the next
twelve months, is treated as short-term employee benefit. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
reporting date. Actuarial gains/losses are immediately taken to the
statement of profit and loss and are not deferred.
u. Earnings per share(EPS)
Basic earnings per share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders (after deducting
attributable taxes) by the weighted average number of equity shares
outstanding during the year.
Forth purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
v. Expenses on deposits / debentures
Expenses for private placement of debentures/subordinated debt
bonds/deposits are charged to statement of profit and loss in the year
in which they are incurred.
Expenses incurred on public issue of debentures other than brokerage are
charged off on straight line basis over the weighted average tenor of
the underlying debentures. The brokerage incurred on issue of debenture
is treated as expenditure in the year in which it is incurred.
A provision is recognized when the company has a present obligation as
a result of past event. It is probable that an outflow of resources
will be required to settle the obligation and a reliable estimate can
be made of the amount of the obligation. Provisions are not discounted
to their present value and are determined based on the best estimate
required to settle the obligation at the balance sheet date. These are
reviewed at each balance sheet date and adjusted to reflect the current
x. Cash and cash equivalents
Cash and cash equivalents are held for the purpose of meeting short-term
cash commitments. Cash equivalents are short-term highly liquid
investments that are readily convertible into known amounts of cash and
which are subject to an insignificant risk of changes in value. Cash
and cash equivalents include cash-in-hand, cash at bank, cheque in
hand, remittances in transit and short-term investments with an original
maturity period of three months or less.
y. Derivative instruments
In accordance with the ICAI guidelines and on principle of prudence,
derivative contracts, other than foreign currency forward contracts
covered under AS 11, are marked to market on a portfolio basis, and the
net loss, if any, after considering the offsetting effect of gain on
the underlying hedged item, is charged to the statement of profit and
loss. However net gain, if any, after considering the offsetting effect
of loss on the underlying hedged item, is ignored.
z. Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events, which are beyond
the control of the company. A contingent liability also includes a
present obligation that is not recognized because it is not probable
that an outflow of resources will be required to settle the obligation.
A contingent liability also arises where, a liability cannot be
measured reliably. The company does not recognize a contingent
liability in the accounts but discloses its existence in the financial