Note 2: Material accounting policies
The principal accounting policies applied in the preparation of these
financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise
stated.
2.1 Basis of preparation
(i) Compliance with Ind AS
The financial statements of the Company comply in all
material aspects with Indian Accounting Standards (Ind
AS) notified under Section 133 of the Companies Act,
2013 (“the Act”) read with Companies (Indian Accounting
Standards) Rules, 2015 and other relevant provisions of
the Act.
The financial statements have been prepared using the
material accounting policies and measurement bases
summarized as below. These accounting policies have
been applied consistently over all the periods presented
in these financial statements, except where the Company
has applied certain accounting policies and exemptions
upon transition to Ind AS.
(ii) Historical cost convention
The financial statements have been prepared on a
historical cost basis, except for the following:
• Certain Financial instruments are measured at fair
value.
• Assets held for sale - measured at fair value less
incidental cost to sell.
(iii) Preparation of financial statements
The Company is covered in the definition of Non-Banking
Financial Company as defined in Companies (Indian
Accounting Standards) (Amendment) Rules, 2016. As
per the format prescribed under Division III of Schedule
III to the Companies Act, 2013, the Company presents
the Balance Sheet, the Statement of Profit and Loss
and the Statement of Changes in Equity in the order of
liquidity.
(iv) Use of estimates and judgments
The preparation of financial statements in conformity
with Ind AS requires management to make estimates,
judgments, and assumptions that affect the application
of accounting policies and the reported amounts of
assets and liabilities (including contingent liabilities)
and disclosures as of the date of financial statements
and the reported amounts of revenue and expenses
for the reporting period. Actual results could differ from
these estimates. Accounting estimates and underlying
assumptions are reviewed on an ongoing basis and
could change from period to period. Appropriate
changes in estimates are recognized in the period in
which the Company becomes aware of the changes in
circumstances surrounding the estimates. Any revisions
to accounting estimates are recognized prospectively
in the period in which the estimate is revised and
future periods. The estimates and judgments that have
significant impact on carrying amount of assets and
liabilities at each balance sheet date are discussed at
Note 3.
2.2 Revenue Recognition
The Company recognizes revenue from contracts with
customers based on a five step model as set out in Ind AS
115, Revenue from Contracts with Customers, to determine
when to recognize revenue and at what amount. Revenue
is measured based on the consideration specified in the
contract with a customer. Revenue from contracts with
customers is recognized when services are provided and it
is highly probable that a significant reversal of revenue is not
expected to occur. Revenue is measured at fair value of the
consideration received or receivable. Revenue is recognized
when (or as) the Company satisfies a performance obligation
by transferring a promised service (i.e. an asset) to a
customer. An asset is transferred when (or as) the customer
obtains control of that asset. When (or as) a performance
obligation is satisfied, the Company recognizes as revenue
the amount of the transaction price (excluding estimates of
variable consideration) that is allocated to that performance
obligation. The Company applies the five-step approach for
recognition of revenue:
• Identification of contract(s) with customers;
• Identification of the separate performance obligations in
the contract;
• Determination of transaction price;
• Allocation of transaction price to the separate
performance obligations; and
• Recognition of revenue when (or as) each performance
obligation is satisfied.
(i) Brokerage fee income
It is recognized on trade date basis and is exclusive of
goods and service tax and securities transaction tax
(STT) wherever applicable.
(ii) Interest income
Interest income is recognised on financial assets, that
are not credit-impaired, on accrual basis provided there
is reasonable certainty of collection.
(iii) Dividend income
Dividend income is recognized in the statement of profit
or loss on the date that the Company's right to receive
payment is established.
(iv) Gain / losses on dealing in securities
Gains / losses on dealing in securities are recognized on
a trade date basis.
2.3 Income Tax
The income tax expense or credit for the period is the tax
payable on the current period's taxable income based on the
applicable income tax rate for each jurisdiction adjusted by
changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses. Current and
deferred tax is recognized in profit or loss, except to the extent
that it relates to items recognized in “other comprehensive
income” or directly in “other equity”. In this case, the tax is
also recognized in “other comprehensive income” or directly
in “other equity”, respectively.
2.3.1Current Tax
Current tax is measured at the amount of tax expected
to be payable on the taxable income for the year as
determined in accordance with the provisions of the
Income Tax Act, 1961.
2.3.2 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
utilised. 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
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 realised. 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 “other equity”, is recorded along with the tax as
applicable.
Current and deferred tax for the year: Current and
deferred tax are recognised in the Statement of Profit
and Loss, except when they relate to items that are
recognised in “other comprehensive income” or directly
in “other equity”, in which case, the current and deferred
tax are also recognised in “other comprehensive
income” or directly in “other equity” respectively.
2.4 Cash and cash equivalents
For the purpose of presentation in the statement of cash flows,
cash and cash equivalents includes cash on hand, cash at
banks, deposits held at call with financial institutions, other
short-term, highly liquid investments with original maturities
of three months or less and investment in liquid mutual funds
that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
2.5 Cash flow statement
Cash flows are reported using the indirect method, whereby
profit / (loss) before extraordinary items and tax is adjusted for
the effects of transactions of non-cash nature and any deferrals
or accruals of past or future cash receipts or payments. The
cash flows from operating, investing and financing activities
of the Company are segregated in the Cash flow statement.
2.6 Financial instruments
(i) Initial recognition and measurement:
Financial assets and financial liabilities are recognized
when the entity becomes a party to the contractual
provisions of the instrument. In regular way, purchases
and sales of financial assets are recognized on trade-
date, the date on which the Company commits to
purchase or sell the asset.
At initial recognition, the Company measures a financial
asset or financial liability which are not carried through
profit and loss statement at its fair value plus or minus,
transaction costs that are incremental and directly
attributable to the acquisition or issue of the financial
asset or financial liability, such as fees and commissions.
Transaction costs of financial assets and financial
liabilities carried at fair value through profit or loss
are expensed in profit or loss. Immediately after initial
recognition, an expected credit loss allowance (ECL) is
recognized for financial assets measured at amortized
cost.
When the fair value of financial assets and liabilities
differs from the transaction price on initial recognition,
the entity recognizes the difference as follows:
a) When the fair value is evidenced by a quoted price in
an active market for an identical asset or liability (i.e. a
Level 1 input) or based on a valuation technique that
uses only data from observable markets, the difference
is recognized as a gain or loss.
b) In all other cases, the difference is deferred and the
timing of recognition of deferred day one profit or loss
is determined individually. It is either amortized over
the life of the instrument, deferred until the instrument's
fair value can be determined using market observable
inputs, or realized through settlement.
When the Company revises the estimates of future cash
flows, the carrying amount of the respective financial
assets or financial liability is adjusted to reflect the new
estimate discounted using the original effective interest
rate. Any changes are recognized in profit or loss.
(ii) Fair value of financial instruments:
Some of the Company's assets and liabilities are
measured at fair value for financial reporting purpose.
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 participants at the measurement date
regardless of whether that price is directly observable or
estimated using another valuation technique.
Information about the valuation techniques and inputs
used in determining the fair value of various assets and
liabilities are disclosed in Note 42.
2.6.1 Financial assets
(i) Classification and subsequent measurement
The Company has applied Ind AS 109 and classifies
its financial assets in the following measurement
categories:
• Fair value through profit or loss (FVTPL):
Instruments that do not meet the amortised cost or
FVTOCI criteria are measured at FVTPL. Financial
assets at FVTPL are measured at fair value at the
end of each reporting period, with any gains or losses
arising on remeasurement recognised in profit and loss
statement. The gain or loss on disposal is recognised
in the profit and loss statement. Interest income is
recognised in the profit and loss statement for FVTPL
debt instruments. Dividend on financial assets at FVTPL
is recognised when the Company's right to receive
dividend is established.
• Fair value through other comprehensive income
(FVTOCI):
Debt instruments that meet the following criteria are
measured at fair value through other comprehensive
income (except for debt instruments that are designated
as at fair value through profit or loss on initial
recognition)
- the asset is held within a business model whose
objective is achieved both by collecting contractual
cash flows and selling financial assets; and
- the contractual terms of the instrument give rise
on specified dates to cash flows that are solely
payments of principal and interest on the principal
amount outstanding.
Interest income is recognised in profit or loss for
FVTOCI debt instruments. Other changes in fair
value of FVTOCI financial assets are recognised in
other comprehensive income. When the investment
is disposed of, the cumulative gain or loss previously
accumulated in FVTOCI is transferred from FVTOCI to
Retained Earnings.
• Amortised cost:
Financial asset is measured at the amortised cost if both
the following conditions are met:
- The asset is held within a business model whose
objective is to hold assets for collecting contractual
cash flows, and
- 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. Amortised cost is calculated by
taking into account any discount or premium on
acquisition and fees or costs that are an integral
part of the EIR. The EIR amortisation is included
in interest income in the Statement of Profit and
Loss.
(ii) Equity instruments
Equity instruments are instruments that meet the
definition of equity from the issuer's perspective; that is,
instruments that do not contain a contractual obligation
to pay and that evidence a residual interest in the
issuer's net assets.
All investments in equity instruments classified under
financial assets are initially measured at fair value, the
Company may, on initial recognition, elect to measure the
same either at FVTOCI or FVTPL. The Company makes
such election on an instrument-by-instrument basis. Fair
value changes on an equity instrument is recognised as
revenue from operations in the Statement of Profit and
Loss unless the Company has elected to measure such
instrument at FVTOCI. Fair value changes excluding
dividends, on an equity instrument measured at FVTOCI
are recognized in OCI for its fair value changes. Amounts
recognized in OCI are not subsequently reclassified to
the Statement of Profit and Loss. When the investment
is disposed of, the cumulative gain or loss previously
accumulated in FVTOCI is transferred from FVTOCI to
Retained Earnings. Dividend income on the investments
in equity instruments are recognized as ‘Revenue from
operations' in the Statement of Profit and Loss.
The investments in equity instruments of the subsidiary
company and associates are measured at amortized
cost.
(iii) Investments in mutual funds
Investments in mutual funds are measured at fair value
through other comprehensive income (FVTOCI)/ at fair
value through profit and loss (FVTPL).
(iv) Impairment
The Company recognizes impairment allowances using
Expected Credit Losses (“ECL”) method on all the
financial assets that are not measured at FVTPL:
ECL are probability-weighted estimate of credit losses.
They are measured as follows:
• Financials assets that are not credit impaired (the
present value of all cash shortfalls that are possible
within 12 months after the reporting date).
• Financials assets with significant increase in credit
risk (the present value of all cash shortfalls that
result from all possible default events over the
expected life of the financial assets).
• Financials assets that are credit impaired (the
difference between the gross carrying amount and
the present value of estimated cash flows).
Financial assets are written off / fully provided for when
there is no reasonable expectation of recovering a
financial asset in its entirety or a portion thereof.
However, financial assets that are written off could still be
subject to enforcement activities under the Company's
recovery procedures, taking into account legal advice
where appropriate. Any recoveries made are recognised
in the Statement of Profit and Loss.
(v) Derecognition
A financial asset is derecognised only when:
The Company has transferred the rights to receive cash
flows from the financial asset or retains the contractual
rights to receive the cash flows of the financial asset, but
assumes a contractual obligation to pay the cash flows
to one or more party/parties.
Where the Company has transferred an asset,
the Company evaluates whether it has transferred
substantially all risks and rewards of ownership of
the financial asset. In such cases, the financial asset
is derecognised. Where the entity has not transferred
substantially all risks and rewards of ownership
of the financial asset, the financial asset is not
derecognised.
Where the Company has neither transferred a financial
asset nor retains substantially all risks and rewards of
ownership of the financial asset, the financial asset is
derecognised if the Company has not retained control
of the financial asset. Where the Company retains
control of the financial asset, the asset is continued to
be recognised to the extent of continuing involvement in
the financial asset.
!.7 Financial liabilities
(i) Initial recognition and measurement
Financial liabilities are classified at amortised cost or
FVTPL. A financial liability is classified as at FVTPL if
it is classified as held for trading, or it is a derivative or
it is designated as such on initial recognition. Financial
liabilities at FVTPL are measured at fair value and net
gains and losses, including any interest expense, are
recognised in profit or loss. Other financial liabilities
are subsequently measured at amortised cost using
the effective interest method. Interest expense and
foreign exchange gains and losses are recognised in
profit or loss. Any gain or loss on derecognition is also
recognised in Statement of Profit or loss.
(ii) Subsequent measurement
Financial liabilities are subsequently measured at
amortised cost using the EIR method. Financial liabilities
carried at fair value through profit or loss is measured at
fair value with all changes in fair value recognised in the
Statement of Profit and Loss.
(iii) Derecognition
A financial liability is derecognised when the obligation
specified in the contract is discharged, cancelled or
expires.
Offsetting financial instruments
Financial assets and liabilities are offset and the net
amount is reported in the balance sheet where there
is a legally enforceable right to offset the recognised
amounts and there is an intention to settle on a
net basis or realise the asset and settle the liability
simultaneously. The legally enforceable right must not
be contingent on future events and must be enforceable
in the normal course of business and even in the event
of default, insolvency or bankruptcy of the Company or
the counterparty.
2.8 Property, plant and equipment
(i) Property, plant and equipment are stated at cost of
acquisition less accumulated depreciation. Cost includes
expenditure that is directly attributable to the acquisition
and installation of the assets. 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 profit or loss during the
reporting period in which they are incurred.
(ii) Depreciation methods, estimated useful lives and
residual value
Deprecation is calculated as per WDV method by
company. Under this method, the depreciation is
calculated at a certain fixed percentage each year on
the decreasing book value commonly known as WDV
of the asset (book value less depreciation).
The Company follows a procedure of writing off all
capital expenses which do not exceed Rs.1000/- in
each case.
(iii) Assets Useful life
The economic useful life of the asset is ascertained
by the management as per Schedule II (Part-c) of the
Companies Act, 2013.
Furniture and Fixtures:10 years
Office Equipments years
Computers: 3 years/Servers:6 years
Vehicles: 8 to 10 years
Buildings: 30 to 60 years
Leasehold Improvements- Over the primary lease
period or useful life, whichever is less.
The Company, based on technical assessment made by
technical expert and management estimate, depreciates
the certain items of building, plant and equipment over
estimated useful life which are different from the useful
life prescribed in Schedule II to the Companies Act,
2013. The management believes that these estimated
useful life are realistic and reflect a fair approximation of
the period over which the assets are likely to be used.
(iv) Derecognition:
The carrying amount of an item of property, plant and
equipment is derecognized on disposal or when no
future economic benefits are expected from its use or
disposal. Gains and losses on disposals are determined
by comparing proceeds with carrying amount and are
recognized in the statement of profit and loss when the
asset is derecognized.
2.9 Intangible Assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible
assets are carried at cost less accumulated amortization.
Development expenditure on software is capitalized as
part of the cost of the resulting intangible asset only if the
expenditure can be measured reliably, the product or process
is technically and commercially feasible, future economic
benefits are probable, and the Company intends to and has
sufficient resources to complete development and to use
or sell the asset. Otherwise it is recognized in the profit or
loss as incurred. Subsequent to initial recognition, the asset
is measured at cost less accumulated amortization and any
accumulated impairment losses.
Amortisation
Amortisation is calculated using the WDV method to write
down the cost of intangible assets to their residual values over
their estimated useful lives and is included in the depreciation
and amortization in the statement of profit and loss.
Intangible asset Useful life / amortization period
Computer Software 5 Years
2.10 Investment Property
Property that is held for long-term rental yields or for capital
appreciation or both, and that is not used by the group for
business purposes, is classified as investment property.
Investment property is measured initially at its cost, including
related transaction costs. Subsequent expenditure is
capitalized to the asset's carrying amount only when it is
probable that future economic benefits associated with the
expenditure will flow to the Company and the cost of the item
can be measured reliably. All other repairs and maintenance
costs are expensed when incurred. When part of an
investment property is replaced, the carrying amount of the
replaced part is derecognized.
The Company depreciates the building component of
investment properties over 30 -60 years from the date of
original construction/purchase.
Depreciation on investment property is calculated using
the WDV method to write down the cost of property to their
residual values over their estimated useful life in the manner
prescribed in Schedule II of the Act.
The company, based on technical assessment made by
technical expert and management estimate, depreciates the
building over estimated useful life which are different from the
useful life prescribed in Schedule II to the Companies Act,
2013. The management believes that these estimated useful
life are realistic and reflect a fair approximation of the period
over which the assets are likely to be used.
2.11 Impairment of non-financial assets
At each reporting date, the Company assesses whether
there is any indication based on internal / external factors,
that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of
the asset. The recoverable amount of asset is the higher
of its fair value or value in use. Value in use is based
on the estimated future cash flows, discounted to their
present value using a pre-tax discount rate that reflects
the current market assessment of time value of money and
the risks specific to it. If such recoverable amount of the
asset or the recoverable amount of the cash generating
unit to which the asset belongs is less than its carrying
amount, the carrying amount is reduced to its recoverable
amount and the reduction is treated as an impairment loss
and is recognised in the statement of profit and loss. All
assets are subsequently reassessed for indications that
an impairment loss previously recognised may no longer
exist. An Impairment loss is reversed if there has been a
change in estimates used to determine the recoverable
amount. Such a reversal is made only to the extent that
the assets carrying amount would have been determined,
net of depreciation or amortization, had no impairment loss
been recognised.
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