Click it and Unblock the Notifications
ಕಂಪನಿಯ ಅಕೌಂಟಿಗ್ ಪಾಲಿಸಿ Laxmi India Finance Ltd.
Note 1.2 Material Accounting Policies
A summary of the material accounting policies applied
in the preparation of the financial statements are given
below. These accounting policies have been applied
consistently to all periods presented in the financial
statements except where a newly-issued Ind AS initially
adopted or a revision to an existing Ind AS requires a
change in the accounting policy or change is required to
align the accounting policy with general industry practice.
During the period, the entity has changed the accounting
method of certain incomes from accrual basis to cash basis,this
change aligns the entity''s accounting policy with the general
industry practice, thereby enhancing the comparability of
the entity''s financial statements with those of other market
participants within the industry.
A Property Plant & Equipment:
i Initial recognition and measurement
An item of property, plant and equipment is
recognised as an asset if and only if it is probable that
future economic benefits associated with the item will
flow to the Company and the cost of the item can be
measured reliably.
When parts of an item of property, plant and equipment
have different useful lives, they are recognised
separately.
Items of Property, Plant and Equipment are measured
at cost less accumulated depreciation/amortization
and accumulated impairment losses. Cost includes
expenditure that is directly attributable to bringing the
asset, inclusive of non-refundable taxes & duties, to the
location and condition necessary for it to be capable
of operating in the manner intended by management.
Income and Expenses, incidental to the operations,
not necessary in bringing the asset to the location and
condition necessary for it to be capable of operating in
the manner intended by management, are recognised
in statement of profit and loss.
Subsequent expenditure is recognized as an increase
in the carrying amount of the asset when it is probable
that future economic benefits deriving from the cost
incurred will flow to the enterprise and the cost of the
item can be measured reliably.
iii. Depreciation/Amortization
Depreciation for all property, plant and equipment is
being provided on Written Down Value Method as per
the estimates of useful life specified in Schedule II of
the Companies Act, 2013. The Company has estimated
5% residual value for all block of asset at the end of
useful life. The management believes that useful life
are realistic and reflect fair approximation of the
period over which asset likely to be used.
Depreciation on additions to property, plant and
equipment is provided on a pro-rata basis from the
date of acquisition, or installation, or construction,
when the asset is ready for intended use.
Improvements of the lease hold premises are charged
off over the primary period of lease. Depreciation
methods, useful lives and residual values are reviewed
at each reporting date and adjusted if appropriate.
Depreciation on an item of property, plant and
equipment sold, discarded, demolished or scrapped, is
provided unto the date on which the said asset is sold,
discarded, demolished or scrapped.
In respect of an asset for which impairment loss, if any,
is recognised, depreciation is provided on the revised
carrying amount of the asset over its remaining useful
life.
Property, Plant and Equipment are derecognized
when no future economic benefits are expected
from their use or upon their disposal. Gains or losses
on Derecognition of an item of Property, Plant
and Equipment are determined by comparing net
disposable proceeds with the carrying amount of
Property, Plant and Equipment and are recognized in
the statement of profit and loss.
B. Intangible Assets and Intangible Assets under
development :i Initial recognition and measurement
An intangible asset is recognised if and only if it is
probable that the expected future economic benefits
that are attributable to the asset will flow to the
Company and the cost of the asset can be measured
reliably.
Intangible assets are stated at cost of acquisition net
of recoverable taxes, trade discounts and rebates less
accumulated amortisation/depletion and impairment
loss, if any. Such cost includes purchase price,
borrowing costs and any other cost directly attributable
to bringing the asset to its working condition for the
intended use.
Expenditure incurred which are eligible for
capitalizations under intangible assets are carried as
intangible assets under development till they are ready
for their intended use.
Subsequent costs are included in the asset''s
carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future
economic benefits associated with the item will flow
to the entity and the cost can be measured reliably.
iii. Amortization
Intangible assets having definite life are amortized as
per written down value method . If life of any intangible
asset is indefinite then it is not amortized and tested
for impairment at each reporting date. If the expected
useful life of the asset is significantly different from
previous estimates, the amortization period is changed
accordingly.
An intangible asset is derecognized when no future
economic benefits are expected from their use
or upon their disposal. Gains and losses on disposal of an
item of intangible assets are determined by comparing
the proceeds from disposal with the carrying amount of
intangible assets and are recognized in the statement
of profit and loss.
A financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability or
equity instrument of another entity.
C.1 Financial assetsC.1.1 Initial Recognition and Measurement
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs and revenues
that are directly attributable to the acquisition or issue
of financial assets and financial liabilities (other than
financial assets and financial liabilities measured at
FVTPL) are added to or deducted from the fair value of
the financial assets or financial liabilities, as appropriate,
on initial recognition. Transaction costs and revenues
directly attributable to the acquisition of financial assets
or financial liabilities measured at FVTPL are recognised
immediately in the statement of profit and loss.
If the transaction price differs from fair value at initial
recognition, the Company will account for such
difference as follow:
⢠If fair value is evidenced by a quoted price in an
active market for an identical asset or liability or
based on a valuation technique that uses only
data from observable markets, then the difference
is recognised in the statement of profit and loss on
initial recognition;
⢠In all other cases, the fair value will be adjusted
to bring it in line with the transaction price.
After initial recognition, the deferred gain or
loss will be recognised in the statement of profit
and loss on a rational basis, only to the extent
that it arises from a change in a factor (including
time) that market participants would take into
account when pricing the asset or liability.
The Company recognises a financial asset and
Financial Liabilities when it becomes party to the
contractual provisions of the instrument. Financial
assets, with the exception of loans and advances
to customers, are initially recognised on the
transaction date, i.e., the date that the Company
becomes a party to the contractual provisions of
the instrument. Loans and advances to customers
are recognised when funds are disbursed.
The Company''s financial assets include trade
receivables, cash and cash equivalents, other bank
balances, fixed deposits with banks, loans and
advances, other financial assets and investments.
The Company''s financial liabilities include loans and
borrowings including bank overdrafts and trade &
other payables.
The Company classifies financial assets as subsequently
measured at amortised cost, Fair Value through Other
Comprehensive Income ("FVOCI") or Fair Value through
Profit or Loss ("FVTPL") on the basis of following:
(i) The entity''s business model for managing the
financial assets and
(ii) The contractual cash flow characteristics of the
financial asset.
C.1.3 Business Model Assessment
The Company determines its Business Model at the
level that best reflects how it manages groups of
financial assets to achieve its business objectives.
The company considers the frequency, volume and
timing of disbursements in prior years, the reason
for such disbursement, and its expectations about
future business activities. However, information about
business activity is not considered in isolation, but as
part of an holistic assessment of how company''s stated
objective for managing the financial assets is achieved
and how cash flow are realized. Therefore the company
considers information about past disbursement in the
context of the reason for those disbursements, and
the conditions the existed at that time as compared
to current conditions. Based on this assessment
and the future business plans of the company, the
management has measured its financial assets at
amortized cost as the asset is held within a business
model whose objective is to collect contractual cash
flows, and the contractual terms of the financial assets
give rise to cash flows that are solely payments of
principle and interest (the SPPI criterion).
Assessment whether contractual cash flows is solely
payments of principal and interest
For the purposes of this assessment, ''principal'' is
defined as the fair value of the financial asset on initial
recognition. ''Interest'' is defined as consideration for the
time value of money and for the credit risk associated
with the principal amount outstanding during a
particular period of time and for other basic lending
risks and costs, as well as profit margin.
In assessing whether the contractual cash flows are
solely payments of principal and interest, the Company
considers the contractual terms of the instrument. This
includes assessing whether the financial asset contains
a contractual term that could change the timing or
amount of contractual cash flows such that it would
not meet this condition.
C.1.4 Subsequent measurement of financial assets
The Company classifies its financial assets in the
following measurement categories:
i Financial Assets at Amortised Cost
A financial asset is measured at the amortised cost if
both the following conditions are met:
(a) It is held within a business model whose objective
is to hold assets for collecting contractual cash
flows, and
(b) Contractual terms of the asset give rise on specified
dates to cash flows that are solely payments
of principal and interest (SPPI) on the principal
amount outstanding.
After initial measurement, such financial assets are
subsequently measured at amortised cost using the
effective interest rate (EIR) method.
The effective interest rate is the rate that exactly
discounts estimated future cash receipts (including all
fees and points paid or received that form an integral
part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected
life of the debt instrument, or, where appropriate, a
shorter period, to the net carrying amount on initial
recognition.
In case of financial assets classified and measured at
amortised cost, any interest income, foreign exchange
gains or losses and impairment are recognised in the
Statement of Profit and Loss.
ii. Financial Assets at fair value through other
comprehensive income (FVTOCI)
A. Financial Asset is classified as at the FVTOCI if both
of the following criteria are met:
(a) The objective of the business model is
achieved both by collecting contractual cash
flows and selling the financial assets, and
(b) Contractual terms of the asset give rise on
specified dates to cash flows that are solely
payments of principal and interest (SPPI) on
the principal amount outstanding.
Financial Asset included within the FVTOCI category
are measured initially as well as at each reporting date
at fair value. Fair value movements are recognised in
the other comprehensive income (OCI). However, the
Company recognises interest income, impairment
losses and reversals and foreign exchange gain or loss
in the statement of profit and loss. On derecognition of
the asset, cumulative gain or loss previously recognised
in OCI is reclassified from equity to the statement of
profit and loss. Interest earned while holding FVTOCI
debt instrument is reported as interest income using
the EIR method.
For equity instruments not held for trading, the
Company has an irrevocable option to designate
them as FVTOCI. The Company has not designated
investments in any equity instruments as FVTOCI.
iii Financial Assets at fair value through the statement of
profit and loss (FVTPL)
Any financial asset which is not classified in any of the
above categories is subsequently measured at FVTPL.
For financial assets at FVTPL, net gains or losses,
including any interest or dividend income, are
recognised in the Statement of Profit and Loss.
C.1.5 Modification of financial assets
A modification of a financial asset occurs when the
contractual terms governing the cash flows of a
financial asset are renegotiated or otherwise modified
between the initial recognition and maturity of the
financial asset. In accordance with the Company''s
policy, a modification results in derecognition
when it gives rise to substantially different terms.
When the contractual cash flows of a financial asset
are renegotiated or otherwise modified and the
renegotiation or modification does not result in
the derecognition of that financial asset, the entity
recalculate the gross carrying amount of the financial
asset and recognise a modification gain or loss in profit
or loss. The gross carrying amount of the financial asset
is recalculated as the present value of the renegotiated
or modified contractual cash flows that are discounted
at the financial asset''s original effective interest rate
Any costs or fees incurred adjust the carrying amount
of the modified financial asset and are amortised over
the remaining term of the modified financial asset.
C.1.6 Derecognition of financial assets
A financial asset (or, where applicable, a part of a
financial asset or part of a Company of similar financial
assets) is de-recognised when the rights to receive
cash flows from the financial asset have expired. The
Company also de-recognised the financial asset if it has
transferred the financial asset and the transfer qualifies
for de recognition. The Company has transferred the
financial asset if, and only if, either:
⢠It has transferred its contractual rights to receive
cash flows from the financial asset or
⢠It retains the rights to the cash flows, but has
assumed an obligation to pay the received cash
flows in full without material delay to a third party
under a ''pass-through'' arrangement.
Pass-through arrangements are transactions whereby
the Company retains the contractual rights to receive
the cash flows of a financial asset (the''original asset''),but
assumes a contractual obligation to pay those cash
flows to one or more entities (''eventual recipients''),
when all of the following three conditions are met:
⢠The Company has no obligation to pay amounts
to the eventual recipients unless it has collected
equivalent amounts from the original asset
excluding short-term advances with the right
to full recovery of the amount lent plus accrued
interest at market rates.
⢠The Company cannot sell or pledge the original
asset other than as security to the eventual
recipients.
⢠The Company has to remit any cash flows it
collects on behalf of the eventual recipients
without material delay. In addition, the Company is
not entitled to reinvest such cash flows, except for
investments in cash or cash equivalents including
interest earned, during the year between the
collection date and the date of required remittance
to the SPV
A transfer only qualifies for derecognition if either:
⢠The Company has transferred substantially all the
risks and rewards of the asset or
⢠The Company has neither transferred nor retained
substantially all the risks and rewards of the
asset, but has transferred control of the asset.
The Company considers control to be transferred
if and only if, the transferee has the practical ability
to sell the asset in its entirety to an unrelated third
party and is able to exercise that ability unilaterally
and without imposing additional restrictions on
the transfer.
When the Company has neither transferred nor
retained substantially all the risks and rewards and
has retained control of the asset, the asset continues
to be recognised only to the extent of the Company''s
continuing involvement, in which case, the Company
also recognises an associated liability. The transferred
asset and the associated liability are measured on a
basis that reflects the rights and obligations that the
Company has retained.
Continuing involvement that takes the form of a
guarantee over the transferred asset is measured
at the lower of the original carrying amount of the
asset and the maximum amount of consideration
the Company could be required to pay.
If continuing involvement takes the form of a written
or purchased option (or both) on the transferred
asset, the continuing involvement is measured at the
value the Company would be required to pay upon
repurchase. In the case of a written put option on an
asset that is measured at fair value, the extent of the
entity''s continuing involvement is limited to the lower
of the fair value of the transferred asset and the option
exercise price.
On derecognition of a financial asset in its entirety, the
difference between the asset''s carrying amount and
the sum of the consideration received and receivable
and the cumulative gain/loss that had been recognised
in OCI and accumulated in equity is recognised in the
statement of profit and loss, with the exception of
equity investment designated as measured at FVOCI,
where the cumulative gain/loss previously recognised
in OCI is not subsequently reclassified to the statement
of profit and loss.
On derecognition of a financial asset other than
in its entirety (e.g. when the Company retains an
option to repurchase part of a transferred asset), the
Company allocates the previous carrying amount of
the financial asset between the part it continues to
recognise under continuing involvement, and the part
it no longer recognises on the basis of the relative fair
values of those parts on the date of the transfer. The
difference between the carrying amount allocated
to the part that is no longer recognised and the sum
of the consideration received for the part no longer
recognised and any cumulative gain/loss allocated to
it that had been recognised in OCI is recognised in the
statement of profit and loss. A cumulative gain/loss
that had been recognised in OCI is allocated between
the part that continues to be recognised and the part
that is no longer recognised on the basis of the relative
fair values of those parts. This does not apply for equity
investments designated as measured at FVOCI, as the
cumulative gain/loss previously recognised in OCI is
not subsequently reclassified to the statement of profit
and loss.
C.2 Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments issued by the Company
are classified as either financial liabilities or as equity
in accordance with the substance of the contractual
arrangements and the definitions of a financial liability
and an equity instrument.
An equity instrument is any contract that evidences
a residual interest in the assets of an entity after
deducting all of its liabilities. Equity instruments issued
by the company are recognised at the proceeds
received, net of direct issue costs.
Financial liabilities(i) Initial recognition and measurement
The Company recognises a financial liability in
its balance sheet when it becomes party to the
contractual provisions of the instrument. Financial
liabilities are classified and measured at amortised cost
or FVTPL. A financial liability is classified as at FVTPL
if it is classified as held-for trading or it is designated
as on initial recognition. All financial liabilities are
recognised initially at fair value and, in the case of
loans and borrowings and payables, net of directly
attributable transaction costs. Other financial liabilities
are subsequently measured at amortised cost using
the effective interest method. Interest expense are
recognised in Statement of profit and loss. Any gain or
loss on derecognition is also recognised in Statement
of profit and loss.
All financial liabilities are recognised initially at fair value
and, in the case of loans and borrowings and payables,
net of directly attributable transaction costs.
The financial liabilities include trade and other payables,
loans and borrowings including bank overdrafts.
(ii) Subsequent measurement of financial liabilities:
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss or
at amortised cost as appropriate.
Financial liabilities at Amortised Cost :
Financial liabilities that are not held-for-trading
and are not designated as at FVTPL are measured at
amortised cost at the end of subsequent reporting
periods. The carrying amounts of financial liabilities
that are subsequently measured at amortised cost
are determined based on the effective interest rate
method.
(iii) Modification of Financial liabilities
The Company derecognises a financial liability when
its terms are modified and the cash flows of the
modified liability are substantially different. In this
case, a new financial liability based on the modified
terms is recognised at fair value. The difference
between the carrying amount of the financial liability
extinguished and the new financial liability
with modified terms is recognised in Statement
of Profit and Loss (including Other Comprehensive
Income).
(iv) Derecognition of financial liabilities
A financial liability is derecognised when the obligation
under the liability is discharged or cancelled or
expired. When an existing financial liability is replaced
by another from the same lender on substantially
different terms, or the terms of an existing liability
are substantially modified, such an exchange or
modification is treated as the derecognition of the
original liability and the recognition of a new liability.
The difference in the respective carrying amounts is
recognised in the statement of profit and loss.
C.3 Impairment of financial assetsC.3.1 Methodology for computation of Expected Credit
Losses (ECL)
The financial instruments covered within the scope
of ECL include financial assets measured at amortised
cost and FVOCI.
The loss allowance has been measured using lifetime
ECL except for financial assets on which there has
been no significant increase in credit risk since initial
recognition. In such cases, loss allowance has been
measured at 12 month ECL
At each reporting date, the Company assesses whether
any financial asset carried at amortised cost and FVOCI
is credit-impaired. A financial asset is credit- impaired
when one or more events that have a detrimental
impact on the estimated future cash flows of the
financial asset have occurred since initial recognition.
Evidence that a financial asset is credit-impaired
includes the observable data such as Days Past Due
(''DPD'') or default event.
C.3.2 ECL is a probability weighted estimate of credit
losses, measured as follows:
The Company recognises loss allowances for Expected
Credit Losses on the following financial instruments
that are not measured at FVTPL:
- All loans at amortized cost
- Upfront gain on Derecognition of Financial assets
Equity instruments are measured at fair value and not
subject to an impairment loss.
ECL is required to be measured through a loss
allowance at an amount equal to:
⢠12-month ECL, i.e. loss allowance on default events
on the financial instrument that are possible within
12 months after the reporting date, (referred to as
Stage 1); or
⢠Lifetime ECL, i.e. lifetime ECL that results from all
possible default events over the life of the financial
instrument, (referred to as Stage 2 and Stage 3).
The Company presents the ECL charge or reversal
(where the net amount is a negative balance for
a particular period) in the Statement of Profit and
Loss as "Impairment on financial instrumentsâ
A loss allowance for lifetime ECL is required for a
financial instrument if the credit risk on that financial
instrument has increased significantly since initial
recognition. For all other financial instruments, ECL is
measured at an amount equal to the 12-month ECL.
The Company has established a policy to perform
an assessment at the end of each reporting period
whether a financial instrument''s credit risk has
increased significantly since initial recognition by
considering the change in the risk of default occurring
over the remaining life of the financial instruments.
When making the assessment of whether there has
been a SICR since initial recognition, the Company
considers reasonable and supportable information, that
is available without undue cost or effort. If the Company
measured loss allowance as lifetime ECL in the previous
period, but determines in a subsequent period that
there has been no SICR since initial recognition due
to improvement in credit quality, the Company again
measures the loss allowance based on 12-month ECL.
ECL is measured on individual basis for credit impaired
loan assets, and on other loan assets it is generally
measured on collective basis using homogenous
groups.
C.3.3 Criteria used for determination of movement from
stage 1 (12-month ECL) to stage 2 (lifetime ECL)
and stage 3 (Credit impaired)
Ind-AS 109 outlines a three staged model for
measurement of impairment based on changes in
credit risk since initial recognition. For classification of
its borrowers into various stages, the Company uses
the following basis:
Stage 1
When loans are first recognised, the Company
recognises an allowance based on 12 months ECL.. The
company classifies all standard advances and advances
upto 30 days default under this category loans also
include facilities where the credit risk has improved and
the loan has been reclassified from Stage 2 to Stage 1.
When a loan has shown a significant increase in
credit risk since origination, the Company records an
allowance for the life time expected credit losses.30
Days Past Due is considered as significant increase in
credit risk.
When loans are considered credit-impaired, the
Company records an allowance for the life time
expected credit losses.For exposures that have become
credit impaired, a lifetime ECL is recognised and
interest revenue is calculated by applying the effective
interest rate to the amortised cost (net of provision)
rather than the gross carrying amount. 90 Days Past
Due is considered as default for classifying a financial
instrument as credit impaired. If an event (for eg. any
natural calamity) warrants a provision higher than as
mandated under ECL methodology, the Company may
classify the financial asset in Stage 3 accordingly.
The Company considers a financial instrument
defaulted and therefore Stage 3 (credit-impaired)
for ECL calculations in ''all cases when the borrower
becomes 90 days past due on its contractual payments.
As a part of a qualitative assessment of whether a
customer is in default, the Company also considers a
variety of instances that may indicate unlikeliness to
pay. When such events occur, the Company carefully
considers whether the event should result in treating
the customer as defaulted and therefore assessed
as Stage 3 for ECL calculations or whether Stage 2 is
appropriate
The Company calculates ECLs based on probability-
weighted scenarios to measure the expected
cash shortfalls. A cash shortfall is the difference
between the cash flows that are due to the
Company in accordance with the contract and the
cash flows that the Company expects to receive.
ECL is the product of Probability of default (PD), Loss
Given Default (LGD) and Exposure at Default (EAD).
The brief methodology of computation of ECL is as
follows:
(1) Probability of default (PD)
The Probability of Default is an estimate of the
likelihood of default over a given time horizon. A
default may only happen at a certain time over
the assessed period, if the facility has not been
previously derecognised and is still in the portfolio.
PD estimation process is done based on historical
internal data available with the Company. While
arriving at the PD, the Company also ensures that the
factors that affects the macro economic trends are
considered to a reasonable extent, wherever necessary.
For Stage I accounts, 12 months PD is used.
For Stage II significantly increased credit risk accounts,
Lifetime PD is used which is computed based on
survival analysis.
For Stage III credit impaired accounts, 100% PD is taken.
The Loss Given Default is an estimate of the loss arising
in the case where a default occurs at a given time. It
is based on the difference between the contractual
cash flows due and those that the Company would
expect to receive, including from the realisation of any
collateral. It is usually expressed as a percentage of the
EAD. LGD is the loss factor which the Company may
experience in case the default occurs.
The Exposure at Default is an estimate of the
exposure at a future default date. It is outstanding
exposure on which ECL is computed. EAD includes
principal outstanding, Interest overdue and
interest Accrued as on reporting date as reduced
by excess money and Pending disbursement
To calculate the EAD for a Stage 1 loan, the Company
assesses the possible default events within 12
months for the calculation of the 12 months ECL.
For Stage 2 and Stage 3 financial assets, the exposure
at default is considered for events over the lifetime of
the instruments.
In case of undrawn loan commitments, a credit
conversion factor of 100% is applied for expected
drawdown.
Significant increase in credit risk
The Company continuously monitors all assets subject
to ECLs. In order to determine whether an instrument
or a portfolio of instruments is subject to 12m ECL
orLTECL, the Company assesses whether there has
been a significant increase in credit risk since initial
recognition. The Company considers an exposure
to have significantly increased in credit risk when
contractual payments are more than 30 days past due.
While estimating the expected credit losses, the
Company reviews macro-economic developments
occurring in the economy and market it operates in. On
a periodic basis, the Company analyses if there is any
relationship between key economic trends like GDP,
Consumer Price Index, Unemployment rates, inflation
etc. with the estimate of PD, LGD determined by the
Company based on its internal data. While the internal
estimates of PD, LGD rates by the Company may not
be always reflective of such relationships, temporary
overlays are embedded in the methodology to reflect
such macro-economic trends reasonably.
C.4 Net gain on fair value changes
The Company classifies certain financial assets for
subsequent measurement at fair value through profit
or loss (FVTPL) or fair value through other comprehensive
income (FVOCI). The Company recognises
gains on fair value change of financial assets measured
at FVTPL and realised gains on de-recognition
of financial asset measured at FVTPL and FVOCI on net
basis in profit or loss.
Financial assets are written off in their entirety only
when the Company has no reasonable expectation
of recovery. The amount written off recorded as an
expense in the period of write off Any subsequent
recoveries are credited to impairment on financial
instrument on statement of profit and loss.
E Offsetting of Financial Instruments:
Financial assets and financial liabilities are offset and
the net amount is reported in the balance sheet if
there is a currently enforceable legal right to offset
the recognised amounts and there is an intention to
settle on a net basis, to realise the assets and settle the
liabilities simultaneously.
The Company measures some of its financial
instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participation at the
measurement date. The fair value measurement
assumes that transaction to sell the asset or transfer the
liability takes place either:
(a) In the principal market for the assets or liability, or
(b) In the absence of a principal market, in the most
advantages market for the assets or liability.
The fair value of an asset or a liability is measured
using the assumptions that market participants would
use when pricing the asset or liability, assuming that
market participants act in their economic best interest
A fair value measurement of a non-financial asset
takes into account a market participant''s ability to
generate economic benefits by using the asset in its
highest and best use or by selling it to another market
participant that would use the asset in its highest and
best use. The Company uses valuation techniques that
are appropriate in the circumstances and for which
sufficient data are available to measure fair value,
maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured
or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows,
based on the lowest level input that is significant to the
fair value measurement as a whole:
I. Level 1 â Quoted (unadjusted) market prices in
active markets for identical assets or liabilities.
II. Level 2 â Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is directly or indirectly observable.
III. Level 3 â Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is unobservable.
For assets and liabilities that are recognised in the
financial statements on a recurring basis, the Company
determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant to
the fair value measurement as a whole) at the end of
each reporting year.
G Financial Guarantee Contracts:
A financial guarantee contract is a contract that requires
the issuer to make specified payments to reimburse
the holder for a loss it incurs because a specified debtor
fails to make payments when due in accordance with
the terms of a debt instrument.
Financial guarantee contracts issued by the Company
are initially measured at their fair values and, if not
designated as at FVTPL and not arising from a transfer
of a financial asset, are subsequently measured at the
higher of:
⢠the amount of the loss allowance determined in
accordance with Ind AS 109 and
⢠the amount initially recognised less, where
appropriate, cumulative amount of income
recognised inaccordance with the Company''s
revenue recognition policies.
The Company has not designated any financial
guarantee contracts as FVTPL.
H Revenue Recognition:H.1 Interest Income
Interest income, for all financial instruments
measured either at amortised cost or at fair
value through other comprehensive income, is
recorded using the effective interest rate (EIR).
The EIR is the rate that exactly discounts the estimated
future cash payments or receipts over the expected
life of the financial instrument or a shorter year,
where appropriate, to the gross carrying amount of
the financial asset. The calculation of the effective
interest rate takes into account all contractual terms
of the financial instrument (for example, prepayment
options) and includes transaction costs and fees that
are an integral part of the contract but not future credit
losses. Transaction costs include incremental costs that
are directly attributable to the acquisition of financial
asset.
If expectations regarding the cash flows on the financial
asset are revised for reasons other than credit risk,
the adjustment is recorded as a positive or negative
adjustment to the carrying amount of the asset in the
balance sheet with an increase or reduction in interest
income. The adjustment is subsequently amortised
through Interest income in the Statement of profit and
loss.
H.2 Income from Direct Assignment transactions
Income from direct assignment transactions includes
the following-
The difference between the carrying amount
of the asset (or the carrying amount allocated
to the portion of the assets derecognised) and
the consideration received (including any new
asset obtained and any new liability assumed).
Gain arising out of direct assignment transactions
which comprise the difference between the interest
on the loan portfolio and the applicable rate at which
the direct assignment has been entered into with the
assignee, also known as the right of Excess Interest
Spread (EIS). The future EIS basis the scheduled cash
flows, on the execution of the transaction, discounted
at the applicable rate entered into with the assignee is
recorded upfront in the profit and loss.
H.3 Fees and Commission Income
Revenue (other than those to which Ind AS 109 applies)
is measured at the fair value of consideration received
or receivable.
Income from other financial charges are recognized
on accrual basis, except in case of File Cancellation
Charges, Collection Charges, Commission from BC,
Courier service charge, Duplicate document charges,
Pre-Closure Charges, late payment interest, duplicate
document charges, file login charges, Instrument
return charges, seizing charges, Repossesion charges,
legal and notice charges, valuation charges, Document
Verification charges Tele Collection Charge, Penal
charges (LPP), RTGS NEFT Charges, Servicing Fee
Income, statement charges, Other Recoverable
income(new) and ARC Collection fees which are
accounted as and when received.
The new revenue recognition model prescribed by Ind
AS 115 consists of below five steps:
Step 1 - Identify the contract(s) with a customer: A
contract is an agreement between the two or more
parties that creates enforceable right and legal
obligations set out the criteria for every contract that
must be met. A contract can be either oral or written.
However, oral contracts are more challenging to
enforce and should be avoided, if possible.
Step 2 - Identify the separate performance obligations
in the contract: Performance obligations are promises
in a contract to transfer to a customer goods or services
that are distinct.
Step 3 - Determine the transaction price :The
transaction price is the amount of consideration to
which an entity expects to be entitled in exchange for
transferring promised goods or services to a customer.
If the consideration promised in a contract includes a
variable amount, an entity must estimate the amount
of consideration to which it expects to be entitled
in exchange for transferring the promised goods or
services to a customer.
Step 4 - Allocate the transaction price to each
performance obligation on the basis of the relative
stand-alone selling prices of each distinct good or
service promised in the contract.
Step 5 - Recognize revenue when (or as) each
performance obligation is satisfied by transferring
a promised good or service to a customer (which is
when the customer obtains control of that good or
service). A performance obligation may be satisfied at
a point in time (typically for promises to transfer goods
to a customer) or over time (typically for promises to
transfer services to a customer)
For a performance obligation satisfied over time,
an entity would select an appropriate measure of
progress to determine how much revenue should be
recognised as the performance obligation is satisfied.
I Employee Benefits:Short Term Benefits
Short term employee benefits that are expected
to be settled wholly within 12 months after the end
of the period in which the employees render the
related service are recognised as an expense at the
undiscounted amount in the statement of profit and
loss of the year in which the related service is rendered.
Post-Employment benefits
Employee benefit that are payable after the completion
of employment are Post-Employment Benefit (other
than termination benefit). These are of two types:
(i) Defined contribution plans
Defined contribution plans are those plans in which
an entity pays fixed contribution into separate entities
and will have no legal or constructive obligation to
pay further amounts. Provident Fund and Employee
State Insurance are Defined Contribution Plans
in which company pays a fixed contribution and
will have no further obligation. Payments to defined
contribution plans are recognised as an expense when
employees have rendered service entitling them to the
contributions.
Employee benefit that are payable after the completion
of employment are Post-Employment Benefit (other
than termination benefit). These are of two types:
The liability or asset recognized in the Balance Sheet
in respect of defined benefit plans is the present
value of the defined benefit obligation at the end of
the reporting period less the fair value of plan assets.
The Company''s net obligation in respect of defined
benefit plans is calculated separately for each plan by
estimating the amount of future benefit that employees
have earned in the current and prior periods. The
defined benefit obligation is determined annually on
the basis of Actuarial Valuation using the projected unit
credit method. The company does not have any fund
for payment of gratuity.
The present value of the defined benefit plan liability is
calculated using a discount rate which is determined by
reference to market yields at the end of the reporting
period on government bonds.
Past service cost is recognised in the Statement of
Profit and Loss in the period of a plan amendment.
Net interest is calculated by applying the
discount rate at the beginning of the period to
the net defined benefit liability or asset.
The Company recognises the following changes in the
net defined benefit obligation as an expense in the
statement of profit and loss:
Service costs comprising current service costs, past-
service costs, gains and losses on curtailments and
non-routine settlements; and Net interest expense or
income.
Remeasurements of the net defined benefit obligation,
which comprise actuarial gains and losses, the return
on plan assets (excluding interest) and the effect of the
asset ceiling, are recognized in other comprehensive
income. Remeasurement recognized in other
comprehensive income is reflected immediately in
retained earnings and will not be reclassified to the
statement of profit and loss.
The defined benefit obligation recognised in the
Balance Sheet represents the actual deficit or surplus
in the Company''s defined benefit plans. Any surplus
resulting from this calculation is limited to the present
value of any economic benefits available in the form
of refunds from the plans or reductions in future
contributions to the plans.
(iii) Share based payment
Employees Stock Option Scheme C''ESOSâ) - Equity
settled
The ESOS provides for grant of the equity shares of the
Company to employees. The scheme provides that
employees are granted an option to subscribe to the
equity shares of the Company that vest in the graded
manner. The option may be exercised within the
specified period.
Equity-settled share-based payments to employees
are recognised as an expense at the fair value of
equity stock options at the grant date. The fair value
determined at the grant date of the equitysettled
share-based payments is expensed on a straight¬
line basis over the graded vesting period,based on
the Company''s estimate of equity instruments that
will eventually vest, with a corresponding increase in
equity.
A liability for a termination benefit is recognised at the
earlier of when the entity can no longer withdraw the
offer of the termination benefit and when the entity
recognises any related restructuring costs.
I ncome tax expense comprises 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 Income tax Act, 1961 enacted in India and
tax laws prevailing in the respective tax jurisdictions
where the Company operates. The tax rates and tax
laws used to compute the amount are those that are
enacted or substantively enacted and as applicable at
the reporting date and any adjustment to tax payable
in respect of previous years. Current tax expense is
recognized in the profit or loss except to the extent
that it relates to items recognized directly in Other
Comprehensive Income (OCI) or Equity, in which case
it is recognized in OCI or Equity.
Management periodically evaluates positions taken
in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation
and establishes provisions where appropriate.
Current tax assets and current tax liabilities are offset
when there is a legally enforceable right to set off the
recognised amounts and there is an intention to settle
the asset and the liability on a net basis.
Deferred tax is recognised on all temporary differences
at the reporting date between the tax bases of assets
and liabilities used in the computation of taxable profit
and their carrying amounts for financial reporting
purposes, and are accounted for using the balance
sheet approach.
Deferred tax assets and liabilities are measured at the
tax rates that are expected to be applied to temporary
differences when they reverse, based on the laws that
have been enacted or substantively enacted by the
reporting date. Deferred tax assets and liabilities are
offset if there is a legally enforceable right to offset
current tax liabilities and assets and they relate to
income taxes levied by the same tax authority on the
same taxable entity or on different tax entities but they
intend to settle current tax liabilities and assets on a net
basis or their tax assets and liabilities will be realized
simultaneously.
Deferred tax is recognized in profit or loss except to the
extent that it relates to items recognized directly in OCI
or Equity, in which case it is recognized in OCI or Equity.
Deferred tax liabilities are recognized for all taxable
timing differences. Deferred tax assets are recognized
for deductible timing differences only to the extent
that there is reasonable certainty that sufficient future
taxable income will be available against which such
deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed
at each reporting date. The Company writes-down the
carrying amount of deferred tax asset to the extent
that it is no longer reasonably certain, 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, as the case may be, that sufficient
future taxable income will be available.
(iii) Minimum Alternate Tax (MAT)
Company has moved to new tax regime, where MAT
provisions are not applicable.Hence no adjustment
pertaining to MAT was required
The Company as Lessee
The Company''s lease asset classes primarily consist of
leases for land and buildings. The Company assesses
whether a contract contains a lease, at inception
of a contract. A contract is, or contains, a lease if the
contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys
the right to control the use of an identified asset, the
Company assesses whether:
(a) The contract involves the use of an identified asset
(b) The Company has substantially all of the economic
benefits from use of the asset through the period
of the lease and
(c) The Company has the right to direct the use of the
asset.
At the date of commencement of the lease, the
Company recognizes a right-of-use (ROU) asset and a
corresponding lease liability for all lease arrangements
in which it is a lessee, except for leases with a term of
12 months or less (short-term leases) and low value
leases. For these short-term and low-value leases,
the Company recognizes the lease payments as an
operating expense on a straight-line basis over the
term of the lease. Certain lease arrangements include
the options to extend or terminate the lease before the
end of the lease term. ROU assets and lease liabilities
include these options when it is reasonably certain that
they will be exercised.
The ROU assets are initially recognized at cost, which
comprises the initial amount of the lease liability
adjusted for any lease payments made at or prior to the
commencement date of the lease plus any initial direct
costs less any lease incentives. They are subsequently
measured at cost less accumulated depreciation and
impairment losses.
The Company depreciates the right-of-use assets on a
straight-line basis from the lease commencement date
to the earlier of the end of the useful life of the right-of
use asset or the end of the lease term. ROU assets are
evaluated for recoverability whenever events or
changes in circumstances indicate that their carrying
amounts may not be recoverable.
At the commencement date, the Company measures
the lease liability at the present value of the lease
payments unpaid at that date, discounted using the
interest rate implicit in the lease if that rate is readily
available or the Company''s incremental borrowing
rate. Subsequent to initial measurement, the liability
will be reduced for payments made and increased for
interest. It is remeasured to reflect any reassessment or
modification, or if there are changes in in-substance
fixed payments.
Lease liabilities are remeasured with a corresponding
adjustment to the related ROU asset if the Company
changes its assessment of whether it will exercise an
extension or a termination option. When the lease
liability is remeasured, the corresponding adjustment
is reflected in the right-of use asset, or profit and loss if
the right-of-use asset is already reduced to zero.
Lease liability and ROU assets have been separately
presented in the Balance Sheet and lease payments
have been classified as financing cash flows. The
Company has given impact analysis of Lease on
financia
Disclaimer: This is 3rd Party content/feed, viewers are requested to use their discretion and conduct proper diligence before investing, GoodReturns does not take any liability on the genuineness and correctness of the information in this article
Sign in with Google
