Note: 27 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS SIGNIFICANT ACCOUNTING POLICIES
a. Basis of preparation of financial statements
The financial statements are prepared under the historical cost convention on accrual basis of accounting and in accordance with accounting principles generally accepted in India. The financial statements comply in all material aspects with the Accounting Standards specified under Section 133 of the Companies Act, 2013 (the Act), read with the Rule 7 of the Companies (Accounting Standards) Rules, 2014, read with amendment rules and relevant provisions of the Companies Act, 2013 (to the extent notified), National Housing Bank Act, 1987 and the Housing Finance Companies (NHB) Directions, 2010 as amended.
Accounting Policies not specifically referred to otherwise are consistent with the generally accepted accounting principles followed by the Company.
b. Use of Estimates
The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported balances of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.
c. Revenue Recognition Interest on Housing Loans
Repayment of Housing Loans is by way of Equated Monthly Installments (EMI) comprising of principal and interest or by way of proceeds of Life Insurance Policies where interest is collected in monthly installment. Necessary appropriation is made out of these EMI collections to principal and interest. Interest income is recognized on accrual basis except in case of Non Performing Assets (NPA) where interest is accounted on realization.
Fees and additional interest income on delayed EMI/Pre-EMI are recognized on receipt basis.
Income from Investments
Interest income on debt investments like Non Convertible Debentures (NCD), Inter Corporate Deposits (ICD), Bank Deposits, Government Securities is recognized on accrual basis and Dividend income is accounted for in the year in which the same is declared in Annual General Meeting and Company''''s right to receive payment is established.
In other cases, income is recognized when there is no significant uncertainty as to determination and realization.
d. Property, Plant and Equipment
Fixed Assets are stated at cost of acquisition, or construction inclusive of expenses incidental thereto less accumulated depreciation and impairment loss, if any.
Depreciation in respect of assets is provided on the Straight Line Method as per the useful life of the assets as prescribed in Schedule II of the Act, except in respect of Vehicles (Motor cars) where useful life is estimated as 5 years.
Cost of leasehold improvements is amortized over the period of the lease.
Depreciation on assets whose cost individually does not exceed up to Rs, 5,000/- is fully provided in the year of purchase.
Intangible assets are stated at cost of acquisition, including any cost attributable to bringing the same to its working condition, less amortization over estimated useful life.
Software is amortized on Straight Line Method over 5 years.
f. Impairment Loss
Impairment loss is provided to the extent the carrying amount of assets exceed their recoverable amounts. Recoverable amount is the higher of an asset''''s net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Net selling price is the amount obtainable from sale of the asset in an arm''''s length transaction between knowledgeable, willing parties, less the costs of disposal.
g. Loans and Provision thereon
The loans given by the company are initially recorded in the books of account at the principal amounts disbursed to the borrowers and are subsequently adjusted for further disbursements / repayments. The loans are classified as Non-performing Assets (NPA) under Substandard / Doubtful / Loss categories as per the prudential norms prescribed under the Housing Finance Companies (NHB) Directions, 2010, (the "NHB Directions") as amended. The provision on Standard and NPA loan accounts is made as per the aforesaid prudential norms. Additional provision (over and above the prudential norms), if required, is made as per the guidelines approved by the Board of Directors from time to time. The loans and provisions thereon are classified into current and non-current categories based on the operating cycle of 12 months as identified by the Company.
Investments are classified as Current Investment and Long term Investment. Current investment is an investment that is by its nature readily realizable and is intended to be held for not more than one year from the date on which such investment is made. A Long term investment is an investment other than a current investment.
In accordance with the Guidelines issued by National Housing Bank (NHB) and the Accounting Standard (AS -13) - "Accounting for Investments" notified under the relevant provisions of the Act, current investments are carried at lower of cost & fair value and long-term investments are carried at cost. However, provision is made to recognize decline other than temporary in the carrying amount of long-term investments. Unquoted investments in the units of mutual funds in the nature of current investments are valued at the net asset value declared by mutual funds in respect of each particular scheme as per the guidelines issued by the NHB. The premium paid on acquisition of Investments is written off in the year of purchase.
i. Employee Benefits Defined Contribution Plan Provident Fund
Contribution as required by Statute paid to the Government Provident Fund and also contribution paid to other recognized Provident Fund Trust is debited to the Statement of Profit and Loss.
Defined Benefit Plan Gratuity
- Gratuity liability is a defined benefit obligation for employees. The Company has taken Group Gratuity-cum-Life Insurance Policy from Life Insurance Corporation of India (LIC) for employees other than those are under deputation from LIC. Accordingly, the Company accounts for liability for future gratuity benefits based on actuarial valuation carried out at the end of each financial year and the Contribution paid to LIC is charged to the Statement of Profit and Loss. Actuarial gain or losses arising from changes in actuarial assumptions are immediately recognized in the Statement of Profit and Loss in the period in which they arise.
- In respect of employees under deputation from LIC, an amount equal to five percent of aggregate of basic salary and dearness allowance of such employees, paid / payable to LIC is charged to the Statement of Profit and Loss and is treated as a defined contribution obligation.
Short-Term Employee Benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognized during the year when the employees render the service. These benefits include compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related service.
Long-Term Employee Benefits
Compensated absences which are not expected to occur within twelve months after the end of the period in which employee renders the related service are recognized as a liability at the present value of the defined benefit obligation as at the Balance Sheet date.
j. Foreign Currency Transactions
Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of transactions.
In case of forward exchange contracts or other financial instruments that is in substance a forward exchange contract, other than for trading or speculation purposes, the premium or discount arising at the inception of the contract is amortized as expense or income over the life of the contract.
Gains / losses on settlement of transactions arising on cancellation / renewal of forward exchange contracts are recognized as income or expense.
At the reporting date, monetary assets and liabilities denominated in foreign currency are reported using the closing rate of exchange. Exchange difference arising thereon and on realization / payments of foreign exchange are accounted as income or expense in the relevant year.
k. Derivative Transactions
SWAP transactions are considered off-balance sheet items and the outstanding SWAP trades are disclosed at the fair value on the reporting date. The carrying amount (difference between coupon rate liability and SWAP contract rate) is accounted on an accrual basis and the same is adjusted against the interest cost of the underlying liability. Gain realized on early termination of SWAP is amortized over the balance tenure of the SWAP or underlying liability whichever is less. Loss if any on early termination is charged to the Statement of Profit and Loss in the same year.
l. Borrowing Costs
Borrowing costs include interest and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
m. Zero Coupon Instrument
The difference between the discounted amount mobilized and redemption value of Commercial Papers/ Zero Coupon Bond/ NCD is apportioned on time basis over the life of instrument and charged in the Statement of Profit and Loss.
n. Taxes on Income
Taxes on income are accounted for in accordance with Accounting Standard (AS-22) - "Accounting for Taxes on Income", notified under the relevant provisions of the Act. Income tax comprises both current and deferred tax.
Current tax is measured on the basis of estimated taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961.
The tax effect of the timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a Deferred Tax Asset or Deferred Tax Liability. They are measured using substantially enacted tax rates and tax regulations as of the Balance Sheet date.
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 profits. Deferred Tax Assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization.
o. Provisions and Contingencies
Provisions are recognized when the Company has a legal and constructive obligation as a result of a past event, for which it is probable that cash outflow will be required and a reliable estimate can be made of the amount of the obligation. Contingent liabilities are disclosed when the Company has a possible or present obligation where it is not probable that an outflow of resources will be required to settle it. Contingent assets are neither recognized nor disclosed.
p. Operating Leases
Assets acquired on lease where significant portions of the risks and rewards incidental to the ownership are retained by the lessors are classified as Operating Leases. Lease rentals are charged to the Statement of Profit and Loss on accrual basis.
q. Securitized Assets
Derecognition of Securitized assets in the books of the Company, recognition of gain or loss arising on Securitization and accounting for credit enhancement provided by the company is based on the extant guidelines issued by the Institute of Chartered Accountants of India.
Securitized Assets are derecognized in the books of the Company based on the principal of surrender of control over the assets.