2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Statement of compliance
The financial statements are prepared in accordance with and are in compliance, in all material aspects with Indian
Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) read along with
Companies (Indian Accounting Standards) Rules, as amended and other relevant provisions of the Act. The
presentation of the Financial Statements is based on Ind AS Schedule III of the Companies Act, 2013.
2.2 Basis of preparation:
The financial statements have been prepared on the historical cost basis except for certain financial instruments that
are measured at fair values at the end of each reporting period.
Fair value measurements under Ind AS are categorized into Level 1, 2, or 3 based on the degree to which the inputs to
the fair value measurements are observable and the significance of the inputs to the fair value measurement in its
entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the
Company can access at reporting date
• Level 2 inputs are inputs, other than quoted prices included within level 1, that are observable for the asset or
liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the valuation of assets or liabilities
2.3 Use of estimates and judgment's:
The preparation of the financial statements in conformity with Ind AS required management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Difference between the actual results and estimates are recognized in the year in
which results are known/materialized. Although these estimates are based upon management's best knowledge of
current events and actions, actual results could differ from these estimates. Any revision to accounting estimates is
recognized prospectively in the current and future periods.
2.4 Presentation of financial statements:
These financial statements of the Company are prepared and presented in accordance with Indian Accounting
Standards ("Ind AS") notified under the Companies (Indian Accounting Standards) Rules, 2015, as amended and
other relevant provision of the Act as amended from time to time and presentation requirements of Division II of
Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III), as applicable to the financial statements.
Amounts in the financial statements are presented in Indian Rupees rounded off to zero decimal places as permitted
by Schedule III to the Companies Act, 2013. Per share data are presented in Indian Rupee to two decimal places.
2.5 Revenue Recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the
revenue can be reliably measured and there exists reasonable certainty of its recovery. Revenue is measured at the
fair value of the consideration received or receivable as reduced for estimated customer credits and other similar
allowances.
i. Interest income is recognised in the Statement of Profit and Loss and for all financial instruments except for
those classified as held for trading or those measured or designated as at fair value through profit or loss
(FVTPL) is measured using the effective interest method (EIR).
The calculation of the EIR includes all fees and points paid or received between parties to the contract that are
incremental and directly attributable to the specific lending arrangement, transaction costs, and all other
premiums or discounts. For financial assets at FVTPL transaction costs are recognised in profit or loss at initial
recognition.
The interest income is calculated by applying the EIR to the gross carrying amount of non-credit impaired
financial assets (i.e. at the amortised cost of the financial asset before adjusting for any expected credit loss
allowance).
For credit-impaired financial assets the interest income is calculated and recognised only where the Company
expects reasonable certainty with regard to the recovery of interest income.
ii. Dividend income is recognised when the Company's right to receive dividend is established by the reporting
date and no significant uncertainty as to collectability exists.
iii. Fee and commission income and expense include fees other than those that are an integral part of EIR. The fees
included in the Company statement of profit and loss include among other things fees charged for servicing a
loan, non-utilisation fees relating to loan commitments when it is unlikely that these will result in a specific
lending arrangement and loan advisory fees.
iv. Profit / loss on FNO Segment and Commodity transactions is accounted for as explained below:
Initial and additional margin paid over and above initial margin for entering into contracts for Equity Index /
Stock Futures / Commodity Spot Trading/ Currency Futures and or Equity Index / Stock Options / Currency
Options, which are released on final settlement / squaring-up of underlying contracts, are disclosed under
"Other current assets". Mark-to-market margin-Equity Index / Stock Futures / Currency Futures representing the
amounts paid in respect of mark to market margin is disclosed under "Other current assets".
"Equity Index / Stock Option / Currency Option Premium Account" represents premium paid or received for
buying or selling the Options, respectively.
On final settlement or squaring up of contracts for Equity Index / Stock Futures / Currency Future, the realized
profit or loss after adjusting the unrealized loss already accounted, if any, is recognized in the Statement of
Profit and Loss. On settlement or squaring up of Equity Index / Stock Options / Currency Option, before expiry,
the premium prevailing in "Equity Index / Stock Option / Currency Option Premium Account" on that date is
recognized in the Statement of Profit and Loss.
As at the Balance Sheet date, the Mark to Market / Unrealized Profit / (Loss) on all outstanding arbitrage
portfolio comprising of Securities and Equity / Currency Derivatives positions is determined on scrip basis with
net unrealized losses on scrip basis being recognized in the Statement of Profit and Loss and the net unrealized
gains on scrip basis are ignored.
v. Other operational revenue represents income earned from the activities incidental to the business and is
recognised when the right to receive the income is established as per the terms of the contract.
2.6 Fair value measurement:
The Company measures certain financial instruments at fair value at each reporting date.
Fair value is the price that would be received to sell an asset or paid to settle a liability in an ordinary transaction
between market participants at the measurement date. The fair value of an asset or a liability is measured using the
assumption that market participants would use when pricing an asset or liability acting in their best economic
interest. The Company uses valuation techniques, which are appropriate in circumstances and for which sufficient
data is available considering the expected loss/ profit in case of financial assets or liabilities.
2.7 Property, Plant and Equipments
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical
cost less depreciation less impairment loss, if any. Historical cost comprises of purchase price, including non¬
refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of bringing the
item to its working condition for its intended use.
Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only
when 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. The carrying amount of any component accounted for as a separate asset is
derecognized when replaced. All other repairs and maintenance are charged to statement of profit or loss during the
reporting period in which they are incurred.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted
for as separated items (major components) of property, plant and equipment.
Depreciation methods, estimated useful lives and residual value:
Depreciation is provided on the written down value method over the estimated useful lives of the assets which in
certain cases may be different than the rate prescribed in Schedule II to the Companies Act, 2013, in order to reflect
the actual usages of the assets.
The asset's residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting
period. The asset's residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period.
The assets' residual values, useful lives and method of depreciation are reviewed, and adjusted if appropriate, at the
end of each reporting period.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is
greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognized as
income or expense in the statement of profit and loss.
2.8 Impairment of tangible and intangible assets other than goodwill
As at the end of each accounting year, the Company reviews the carrying amounts of its PPE and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If such indication
exists, the PPE, investment property and intangible assets are tested for impairment so as to determine the
impairment loss, if any. Goodwill and the intangible assets with indefinite life are tested for impairment each year.
Impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount. Recoverable
amount is determined in the case of an individual asset, at the higher of the net selling price and the value in use.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future
cash flows have not been adjusted.
If recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, such
deficit is recognised immediately in the Statement of Profit and Loss as impairment loss and the carrying amount of
the asset (or cash generating unit) is reduced to its recoverable amount. For this purpose, the impairment loss
recognised in respect of a cash generating unit is allocated first to reduce the carrying amount of any goodwill
allocated to such cash generating unit and then to reduce the carrying amount of the other assets of the cash
generating unit on a pro-rata basis.
When an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit), except
for allocated goodwill, is increased to the revised estimate of its recoverable amount, but so that the increased
carrying amount does not exceed the carrying amount that would have been determined had no impairment loss is
recognised for the asset (or cash generating unit) in prior years. A reversal of an impairment loss (other than
impairment loss allocated to goodwill) is recognised immediately in the Statement of Profit and Loss.
2.9 Employee benefits:
i. Short term employee benefits:
Employee benefits falling due wholly within twelve months of rendering the service are classified as short term
employee benefits and are expensed in the period in which the employee renders the related service. Liabilities
recognised in respect of short-term employee benefits are measured at the undiscounted amount of the
benefits expected to be paid in exchange for the related service.
ii. Defined employment benefits:
The Company does not have employees crossing the thresholds for applicability of PF / ESIC or Gratuity laws
and accordingly, Ind-AS 19 to that extent is not applicable on the Company. Therefore, the Company has not
recognised / provided for any defined employee benefits in the financial statements as on date.
2.10 Financial instruments:
Financial assets and financial liabilities are recognised in the Company's balance sheet when the Company becomes a
party to the contractual provisions of the instrument.
Recognised financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets
and financial liabilities 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 directly attributable to the acquisition of financial
assets or financial liabilities at FVTPL are recognised immediately in profit or loss.
A financial asset and a financial liability is offset and presented on net basis in the balance sheet when there is a
current legally enforceable right to set-off the recognised amounts and it is intended to either settle on net basis or to
realise the asset and settle the liability simultaneously.
2.11 Write off:
Loans and debt securities are written off when the Company has no reasonable expectations of recovering the
financial asset (either in its entirety or a portion of it). This is the case when the Company determines that the
borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts
subject to the write-off. A write-off constitutes a de-recognition event. The Company may apply enforcement
activities to financial assets written off. Recoveries resulting from the Company's enforcement activities will result in
impairment gains.
2.12 Impairment of Financial Assets:
The Company recognises loss allowances for ECLs on the following financial instruments that are not measured at
FVTPL:
o Loans and advances given;
o Debt investment securities;
o Trade and other receivable;
o Irrevocable loan commitments issued; and
o Other Financial Assets.
2.13 Measurement of ECL
At each reporting date, as an annual exercise, the Company recognizes a loss allowance for expected credit losses on
the relevant financial assets.
ECL is measured in a manner that reflects:
An unbiased and probability-weighted amount, determined by evaluating a range of possible outcomes.
The time value of money (by discounting estimated future cash flows at the asset's original effective interest rate).
Reasonable and supportable information about past events, current conditions, and forecasts of future economic
conditions.
Staging and Recognition
Stage 1 (Non-Credit Impaired):
For financial assets where credit risk has not increased significantly since initial recognition, the Company measures
the loss allowance at an amount equal to 12-month ECL and recognizes interest income on the gross carrying
amount.
Stage 2 (Significant Increase in Credit Risk):
If the credit risk has increased significantly since initial recognition, the loss allowance is calculated for lifetime
ECL, and interest income continues to be recognized on the gross carrying amount.
Stage 3 (Credit Impaired):
If a financial asset is credit-impaired, the Company measures the loss allowance for lifetime ECL and calculates
interest income on the net carrying amount (gross carrying amount less loss allowance).
Management of ECL Model & Monitoring
The ECL model and assumptions are periodically reviewed and updated to reflect current and forward-looking
information. Any changes or management overlays to the model require approval from the Audit Committee.
The amount of ECL provision is shown as net-off against respective financial asset
Note: A loan is considered credit-impaired when a concession is granted to the borrower due to a deterioration in the
borrower's financial condition, unless there is evidence that as a result of granting the concession the risk of not
receiving the contractual cash flows has reduced significantly and there are no other indicators of impairment. For
financial assets where concessions are contemplated but not granted the asset is deemed credit impaired when there
is observable evidence of credit-impairment including meeting the definition of default. The definition of default (see
below) includes unlikeliness to pay indicators and a back-stop if amounts are overdue for 90 days or more.
2.14 Cash and bank balances:
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand,
deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of
three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant
risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the
balance sheet.
2.15 Securities premium account:
Securities premium includes:
The difference between the face value of the equity shares and the consideration received in respect of shares
issued is recognised as 'Securities Premium Reserve' under other equity.
The issue expenses of securities which qualify as equity instruments are written off against securities premium
account.
2.16 Borrowing costs:
Borrowing costs include interest expense calculated using the effective interest method, finance charges in respect of
assets acquired on finance lease and exchange differences arising from foreign currency borrowings, to the extent
they are regarded as an adjustment to interest costs.
Borrowing costs net of any investment income from the temporary investment of related borrowings that are
attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of cost of such
asset till such time the asset is ready for its intended use or sale. A qualifying asset is an asset that necessarily
requires a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognised
in profit or loss in the period in which they are incurred.
2.17 Accounting and reporting of information for Operating Segments:
Operating segments are those components of the business whose operating results are regularly reviewed by the
chief operating decision making body in the Company to make decisions for performance assessment and resource
allocation. The reporting of segment information is the same as provided to the management for the purpose of the
performance assessment and resource allocation to the segments. Segment accounting policies are in line with the
accounting policies of the Company.
2.18 Taxation:
Current Tax:
Tax on income for the current period is determined on the basis of taxable income (or on the basis of book profits
wherever minimum alternate tax is applicable) and tax credits computed in accordance with the provisions of the
Income Tax Act, 1961 and based on the expected outcome of assessments/appeals.
Deferred Tax:
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the
Company's financial statements and the corresponding tax bases used in computation of taxable profit and
quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date.
Deferred tax assets are generally recognised for all taxable temporary differences to the extent that is probable that
taxable profit will be available against which those deductible temporary differences can be utilized. The carrying
amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets relating to unabsorbed depreciation/business losses/losses under the head "capital gains" are
recognised and carried forward to the extent of available taxable temporary differences or where there is convincing
other evidence that sufficient future taxable income will be available against which such deferred tax assets can be
realized. Deferred tax assets in respect of unutilized tax credits which mainly relate to minimum alternate tax are
recognised to the extent it is probable of such unutilized tax credits will get realized.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the
manner in which the Company expects, at the end of reporting period, to recover or settle the carrying amount of its
assets and liabilities.
Transaction or event which is recognised outside profit or loss, either in other comprehensive income or in equity, is
recorded along with the tax as applicable.
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