2. Significant accounting policies
2.1 Basis of accounting and preparation of financial statements
The accompanying financial statements are prepared and presented in accordance with Indian Accounting Standards
('Ind AS') as per the Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time and notified
under section 133 of the Companies Act, 2013 (the Act) along with guidelines issued by the Securities and Exchange
Board of India (SEBI) and the guidelines issued by the Reserve Bank of India ('RBI') as applicable to a Non Banking
Finance Company ('NBFC'). The financial statements have been prepared on a going concern basis. The Company uses
accrual basis of accounting except in case of significant uncertainties. The accounting policies have been consistently
applied by the Company and are consistent with those used in the previous year. The financial statements are presented
in Indian rupees.
2.2 Presentation of financial statements
The Company presents its Balance Sheet in order of liquidity. The Company reports financial assets and financial liabilities
on a gross basis in the Balance Sheet. They are offset and reported net only when Ind AS specifically permits the same
or it has an unconditional legally enforceable right to offset the recognised amounts without being contingent on a future
event. Similarly, the Company offsets incomes and expenses and reports the same on a net basis when permitted by Ind
AS specifically unless they are material in nature.
Critical accounting estimates and judgments
The preparation of the Company's financial statements requires Management to make use of estimates and judgments.
In view of the inherent uncertainties and a level of subjectivity involved in measurement of items, it is possible that the
outcomes in the subsequent financial years could differ from those on which the Management's estimates are based.
Accounting estimates and judgments are used in various line items in the financial statements for e.g.:
• Fair value of financial instruments [Refer note no.2.15, 31]
• Effective Interest Rate (EIR) [Refer note no. 2.4 ]
• Impairment on financial assets [Refer note no.2.14(i), 30]
• Provisions and other contingent liabilities [Refer note no. 2.7, 34]
• Provision for tax expenses [Refer note no. 2.9, 28]
• Residual value and useful life of property, plant and equipment [Refer note no.2.5]
2.3 Current/ Non-current classification
All assets and liabilities are classified into current and non-current.
Assets
An asset is classified as current when it satisfies any of the following criteria:
(a) it is expected to be realized in, or is intended for sale or consumption in, the Company's normal operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is expected to be realized within 12 months after the reporting date; or
(d) it is cash or a cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12
months after the reporting date.
All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any of the following criteria:
(a) it is expected to be settled in, the company's normal operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is due to be settled within 12 months after the reporting date; or
(d) the Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the
reporting date.
All other liabilities are classified as non-current.
Operating cycle
Based on the nature of activities of the Company and the normal time between acquisition of assets and their realization
in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification
of its assets and liabilities as current and non-current.
2.4 Revenue recognition
Interest income
The Company recognises interest income using Effective Interest Rate (EIR) on all financial assets subsequently measured
at amortised cost or fair value through other comprehensive income (FVOCI). EIR is calculated by considering all costs
and incomes attributable to acquisition of a financial asset or assumption of a financial liability and it represents a rate that
exactly discounts estimated future cash payments/receipts through the expected life of the financial asset/financial liability
to the gross carrying amount of a financial asset or to the amortised cost of a financial liability.
The Company recognises interest income by applying the EIR to the gross carrying amount of financial assets other than
credit-impaired assets. In case of credit-impaired financial assets regarded as 'stage 3', the Company recognises interest
income on the amortised cost net of impairment loss of the financial asset at EIR. If the financial asset is no longer credit-
impaired, the Company reverts to calculating interest income on a gross basis.
Delayed payment interest (penal interest) levied on customers for delay in repayments/non-payment of contractual cash
flows is recognised on realisation.
Interest on financial assets subsequently measured at fair value through profit or loss (FVTPL) is recognised at the
contractual rate of interest.
2.5 Property, Plant and Equipment
Property, plant and equipment are carried at historical cost of acquisition less accumulated depreciation and impairment
losses, consistent with the criteria specified in Ind AS 16 'Property, Plant and Equipment'
Depreciation on property, plant and equipment
Depreciation / amortisation are provided over the useful life of the assets, pro rata for the period of use, on a straight-line
method. The useful life estimates prescribed in Part C of Schedule II to the 2013 Act have been considered as useful life
for tangible assets. Acquired intangible assets are amortised over a period as per management estimates of their useful
life. Depreciation is provided on a pro-rata basis i.e. from the month in which asset is ready for use.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each
financial year end and adjusted prospectively, if appropriate.
Gains / losses on disposal of assets
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or
when no future economic benefits are expected from its use or disposal.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds
and the carrying amount of the asset) is included under other income in the Statement of Profit and Loss when the asset
is derecognised.
2.6 Impairment of non- financial assets
An assessment is done at each Balance Sheet date to ascertain whether there is any non-financial assets indication that
may be impaired. If any such indication exists, an estimate of the recoverable amount is determined. If the carrying value
of relevant asset is higher than the recoverable amount, the carrying value is written down accordingly.
2.7 Provisions and contingent liabilities
The Company creates a provision when there is present obligation as a result of a past event that probably requires an
outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent
liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an
outflow of resources. The Company also discloses present obligations for which a reliable estimate cannot be made.
When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is
remote, no provision or disclosure is made.
2.8 Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders
by the weighted average number of equity shares outstanding at end of the year.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders
and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential
equity shares.
2.9 Taxes
i) Current tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation
authorities, in accordance with the Income Tax Act, 1961 and the Income Computation and Disclosure Standards
(ICDS) prescribed therein. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted, at the reporting date. Current tax relating to items recognised outside profit or loss is recognised
in correlation to the underlying transaction either in OCI or directly in other 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.
ii) Deferred tax
Deferred tax is provided using the Balance Sheet approach on temporary differences between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax
liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for deductible
temporary differences to the extent that it is probable that taxable profits will be available against which the deductible
temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized.
Unrecognized deferred tax assets, if any, are reassessed at each reporting date and are recognised to the extent that
it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset
is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted
at the reporting date. Deferred tax relating to items recognised outside profit or loss is recognised either in OCI or in
other equity. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off
current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same
taxation authority.
2.10 Employee benefits
i) Short Term Employee Benefits: (i.e. benefits payable within one year) are recognized in the period in which employee
services are rendered.
ii) Contributions towards provident fund are recognized as expense. Provident Fund contributions in respect of all
employees are made to Provident Fund Authorities.
iii) Provision for gratuity payable has been made in accordance with the period of qualifying service put in by each
employee of the Company from the date of joining and up to the end of the financial year.
iv) Contribution to Central Government Employees State Insurance Scheme for eligible employees is recognized as
charge for the year.
2.11 Finance costs
Borrowing costs on financial liabilities are recognised using the effective interest rate (EIR).
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