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SENSEX NIFTY India | Accounting Policy > Finance - Investments > Accounting Policy followed by PNB Gilts - BSE: 532366, NSE: PNBGILTS

PNB Gilts

BSE: 532366|NSE: PNBGILTS|ISIN: INE859A01011|SECTOR: Finance - Investments
Dec 06, 16:00
-0.65 (-2.21%)
VOLUME 30,949
Dec 06, 15:59
-0.65 (-2.21%)
VOLUME 231,541
Mar 17
Accounting Policy Year : Mar '18



1.1. Basis of Preparation of Financial Statements

The Company follows accrual system of accounting and the financial statements are prepared on historical cost basis. The basis of preparation of Financial Statements is in accordance with generally accepted accounting principles. These statements are also in compliance with the mandatory Accounting Standards as prescribed under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules 2014 and the Reserve Bank of India guidelines as applicable to the Primary Dealers and NBFC.

As the Company is a trader in Government and Fixed Income Securities, the Company buys and sells securities depending upon the market condition. There is no normal fixed period for sale of stock. However, for the purpose of preparing Balance Sheet and Statement of Profit and Loss (as per the revised guidelines), the Company assumes, one year is the operating cycle period.

The preparation of financial statements in conformity with Indian GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities and disclosure of contingent liabilities at the end of the reporting period. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.

The difference, if any, between the actual and the estimate is recognized in the accounting period in which the same is acknowledged or materialized.

1.2. Revenue Recognition

i) The difference between the acquisition cost and maturity value of Certificates of Deposit, Commercial Papers, Bills Re-discounted, Treasury Bills (including Cash Management Bills) and Zero Coupon Bonds is apportioned on time basis. The above is recognised as accrued income and included in the carrying cost of the securities.

ii) Interest accrued on Government Dated Securities, Fixed Deposits and Corporate Bonds and Debentures is recognised at its coupon rate and that of Floating Rate Bonds is recognised on the yield of instruments to which these are linked at the prevailing floating rates.

iii) Purchase and sale price of Fixed Income Securities is bifurcated into cost and accrued interest paid or realised. Accrued interest paid on purchase and received on sale is netted and reckoned as expense/ income.

iv) Profit/loss on sale of securities is accounted on weighted average cost method and is recognised on settlement date. Profit on sale of securities is netted scrip wise with loss on sale of securities.

vi) Brokerage and front-end fee received on subscription of securities is deducted in arriving at the cost of relevant securities. Underwriting fee earned is reduced from the cost of securities devolved/allotted and the remaining amount is directly recognised as income.

vii) For continuing or long term duration activities (e.g. Mutual Fund Distribution), the fee is accrued proportionately as per performance (Proportionate Completion Method). The revenue is recognized only if there is no significant uncertainty regarding the amount of consideration.

viii) For Mutual Fund (MF) Investment, in case of Daily Dividend Reinvestment Plan the income (dividend) is accounted based on the dividend declaration by the Mutual Fund. In case of growth plan, the income is accounted daily on the basis of closing NAV declared by Mutual Fund.

viii) As per Board approval, the Company transfers Stale Cheques outstanding for more than three years to Miscellaneous Income, and if any claim arises thereafter the same is paid by debit of Miscellaneous Expenses in the year in which it is actually paid.

ix) Dividend income is recognized when the shareholders'' right to receive payment is established by the reporting date.

1.3. Expenses Recognition

The brokerage paid in connection with acquisition of securities is added to the cost of acquisition and on sale of securities it is charged to Statement of Profit and Loss. Interest and other expenses are accounted on accrual basis.

Share issue expenditure is charged to Statement of Profit and Loss in the year of occurrence.

1.4. Valuation of Inventories

i) All securities (except securities under HTM category classified as Non-Current Investment) in which the Company deals are regarded as Inventory (Stock-in-Trade) and grouped as hedged and non-hedged portfolio.

ii) The Company has the following categories of securities namely, Treasury Bills, CDs, CPs, Deep Discount Bonds, Dated Government Securities (including Central and State and Repo Stock), Corporate/PSD Bonds & Debentures, Hedging contracts/Swaps, Trading Swaps, Equity, Mutual Fund Units, Interest Rate Futures, Futures & Options.The stock of Central Government Securities, Treasury Bills (including Cash Management Bills), State Development Loans and PSD/Corporate Bonds, Debentures and Equity Shares are valued at weighted average cost or market value, whichever is lower. Market Value is determined by the prices declared by Fixed Income Money Market and Derivatives Association of India (FIMMDA) on last working day of the Financial Year, except for Equity Shares. Market value of Equity Shares is determined by the closing rates provided by the stock exchanges on last working day of the Financial Year. The securities in each category are considered scrip-wise and the cost and market value aggregated for all securities in each category. Net unrealized diminution, if any, for each category of securities is provided for and charged to Statement of Profit and Loss. Net unrealized appreciation, if any, is ignored. The unrealized diminution in one category of securities is not set off against unrealised appreciation in another category.

iii) Certificates of Deposit, Commercial Papers, Bills Re-discounted and Zero Coupon Bonds held on the Balance Sheet date are valued at carrying cost.

iv) In case of units of Mutual Fund, valuation is done on the basis of closing NAV declared by the Mutual Fund.

v) In case of Hedging Contracts, the diminution/appreciation of hedged assets will be netted with diminution/ appreciation of hedging swaps and net diminution if any, is charged to Statement of Profit and Loss and net appreciation if any, is ignored.

vi) In case of Future contracts (i.e IRF, Equity futures & Nifty futures) valuation is done as per the closing prices provided by SHCIL.

vii) The secondary market short sale transactions in Government securities as permitted by RBI Circular No. RBI/2006-2007/243 IDMD.No.711.01.01 (B)/2006-07 are grouped under other liabilities.

viii) All the inventories are recognized in accounts on delivery basis i.e. when the delivery of the same takes place and the same are credited in SQL 1 / Demat account of the company.

1.5. Held To Maturity (HTM) Securities

The securities under HTM category shall be valued as per the guidelines issued by RBI from time to time, and important provisions are under:

• Transfer to/from HTM category shall be done at the acquisition cost/book value/market value on the date of transfer, whichever is the least, and the depreciation if any, on such transfer shall be fully provided for.

• Investments classified under HTM category will be carried at acquisition cost, unless it is more than the face value, in which case the premium should be amortized over the remaining period to maturity. The book value of the security should continue to be reduced to the extent of the amount amortized during the relevant accounting period

• The profit on sale of securities, if any from HTM category shall first be taken to the Statement of Profit and Loss and thereafter be appropriated to the Capital Reserve Account (net of tax). Loss on sale shall be recognized in the Statement of Profit and Loss. The balance in the reserve account shall be utilized strictly as per the regulatory guidelines.

1.6. Accounting for Repo Transactions

Sales / Purchases of Treasury Bills (including Cash Management Bills) and Government Dated Securities, as disclosed in Statement of Profit and Loss do not include Repo/Reverse Repo transactions in accordance with RBI guidelines No. RBI/2009-2010/356/IDMD/4135/11.08.43/2009-10 dated March 23, 2010.

In conformity with RBI guidelines, securities sold under Repo transactions are not excluded from stock-in-trade and the securities purchased under Reverse Repo are not included in the stock-in-trade. Contra heads are used to reflect the transfer of securities.

Repo seller continues to accrue coupon/ discount on securities as the case may be, even during the repo period while the repo buyer shall not accrue the same.

1.7. Interest Rate Swaps (IRS)

Assets and Liabilities in respect of notional principal amount of IRS are nullified. The related interest is recognized on accrual basis.

i) Trading Swaps

Trading Interest rate swaps outstanding at balance sheet date are Marked- to- Market and the resultant loss, if any, is recorded in Statement of Profit and Loss. Any other charges relating to Trading Interest Rate Swaps are charged to Statement of Profit and Loss.

ii) Hedge Swaps

Hedge Swaps are accounted for on accrual basis. A hedge swap designated to an asset/liability is carried at market value. The resulting Marked-to-Market loss/gain on swap is recorded as an adjustment to the market value of designated Asset/Liability. Gains or losses on the termination / redesignation of hedge swaps is recognized against the offsetting gain or loss recognized on the designated Asset or Liability.

On redesignation of a hedge swap from one item of Asset/Liability to another item of Asset/Liability, the Marked-to-market profit/loss of the hedge swap on the day of redesignation is amortized over the shorter of the remaining life of the swap or the remaining life of the Asset/Liability.

1.8. Accounting for Future and Options Transactions

i) Initial Margin payable at the time of entering into Future Contract/sale of Option is adjusted against the deposits with the exchanges in the form of fixed deposits, cash deposits and securities.

ii) Transactions in Future Contracts are done as Purchases and Sales at the notional trade value of the contract.

iii) The difference in the settlement price or exchange closing price of the previous day and exchange closing price of the subsequent day, paid to or received from the exchange is treated as Marked-to- Market Margin (or by whatever name). The balance in the Marked- to- Market Margin Account represents the net amount paid or received on the basis of movement in the prices of open interest in Futures Contracts till the Balance Sheet date. Net debit balance in the Marked- to- Market Margin Account is charged off to revenue, whereas net credit balance is shown under Current Liabilities.

iv) Premium paid or received on purchase and sale of Options and the difference paid or received on exercise of Options is accounted as Purchases or Sales. In case of open interest in Options sold as on the Balance Sheet date, provision is made for the amount by which premium prevailing on the Balance Sheet date exceeds the premium received for those Options. The excess of premium received over the premium prevailing on the Balance Sheet date is not recognized. Similarly, in case of Options bought, provision is made for the amount by which the premium paid for the Option exceeds the premium prevailing on the Balance Sheet date and the excess of premium prevailing on the Balance Sheet date over the premium paid is ignored. In case of multiple open positions, provision is made or excess premiums are ignored after netting off the balance in buy as well as sell positions.

1.9. Dividend and Tax on Dividend

Final Dividends on Shares and Dividend Distribution Tax thereon as per Section 115-O of the Income Tax Act, 1961 are recorded as liability as on the date of approval of dividend. Interim Dividends are recorded as a liability on the date of declaration by the Company''s Board of Directors.

1.10. Retirement Benefits - Provident Fund, Gratuity & Leave Liability (As per Accounting Standard 15)

i) Gratuity contribution made under the Employee Group Gratuity cum life insurance scheme of LIC is charged to revenue. The premium is calculated on actuarial basis by LIC as per Projected Unit Credit Method (PUCM) as per AS-15.

ii) Leave Liability is accounted for on actuarial valuation carried at year-end and actuarial gains/losses are charged to revenue.

iii) Contribution to recognised provident fund is charged to revenue.

1.11. Property,Plant & Equipment And Depreciation

Tangible Fixed Assets are stated at their cost of acquisition or construction alongwith the other directly related costs incurred in acquiring the tangible fixed assets and making it ready for its intended use less depreciation and impairment. Intangible assets are amortized over a useful life of the asset. Intangible assets are stated at cost of acquisition or construction alongwith the other directly related costs incurred in acquiring the intangible fixed assets less depreciation and impairment.

Depreciation on Fixed Assets is charged as per the useful life prescribed in Schedule II of the Companies Act 2013 on Written Down Value (WDV) basis. Residual value of Land & Building and Vehicles is taken as 5 percent of the original cost, whereas for assets other than those specified above the residual value is taken as Re.1/-.

1.12. Impairment of Assets

The management periodically (annually) assesses whether there is any indication that an asset may be impaired. An impairment loss is recognized wherever the carrying value of the asset exceeds its recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.

1.13. Income Taxes And Deferred Taxes

Tax expense comprises of current and deferred taxes. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the provisions of the Income tax Act, 1961 enacted in India.

Deferred tax is recognized in accordance with the provisions of Accounting Standard 22 issued by Institute of Chartered Accountants of India on Accounting for Taxes on Income.

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 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 realized. Unrecognised deferred tax assets of earlier years are re-assessed and recognized to the extent that it has become reasonably certain that future taxable income will be available against which such deferred tax assets can be realized.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the reporting date.

The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually not 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 that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.

1.14. Segment Reporting

The Company''s primary business segments are reflected based on the principal business carried out, i.e. trading in securities.

The risk and returns of the business of the company is not associated with geographical segmentation, hence there is no secondary segment reporting based on geographical segment.

1.15. Cash flow statement

Cash flows are reported using the indirect method as prescribed in AS-3, whereby profit before tax is adjusted for the effect of transactions of a non cash nature, any deferral or accruals of past and future operating cash receipts or payments and items of income associated with investing or financing cash flows.

1.16. Cash and Cash Equivalents

Cash and Cash Equivalents comprise cash at bank and in hand and short term investments with an original maturity of three months or less.

Source : Dion Global Solutions Limited
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