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.
2.2.11. Foreign currency translation
The Company's financial statements are presented in Indian Rupee, which is also the Company's functional currency.
Initial recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the
exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Conversion
Foreign currency monetary items are re-translated using the exchange rate prevailing at the reporting date. Non¬
monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using
the exchange rate at the date of the transaction.
Exchange differences
All exchange differences are accounted in the Statement of Profit and Loss.
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 [as set out in note no. 2.2.4] 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.
Interest on financial assets subsequently measured at fair value through profit or loss (FVTPL) is recognised at the
contractual rate of interest.
Dividend income
Dividend income on equity shares is recognised when the Company's right to receive the payment is established, which
is generally when shareholders approve the dividend.
Other revenue from operations
The Company recognises revenue from contracts with customers (other than financial assets to which Ind AS 109
'Financial Instruments' is applicable) based on a comprehensive assessment model as set out in Ind AS 115 'Revenue
from contracts with customers'. The Company identifies contract(s) with a customer and its performance obligations
under the contract, determines the transaction price and its allocation to the performance obligations in the contract and
recognises revenue only on satisfactory completion of performance obligations. Revenue is measured at fair value of
the consideration received or receivable.
Net gain on fair value changes
Financial assets are subsequently measured at fair value through profit or loss (FVTPL) or fair value through other
comprehensive income (FVOCI), as applicable. The Company recognises gains/losses on fair value change of financial
assets measured as FVTPL and realised gains/losses on derecognition of financial asset measured at FVTPL and
FVOCI.
Sale of services
The Company, on de-recognition of financial assets where a right to service the derecognised financial assets for a fee
is retained, recognises the fair value of future service fee income over service obligations cost on net basis as service
fee income in the statement of profit or loss and, correspondingly creates a service asset in Balance Sheet. Any
subsequent increase in the fair value of service assets is recognised as service income and any decrease is recognised
as an expense in the period in which it occurs. The embedded interest component in the service asset is recognised as
interest income in line with Ind AS 109 'Financial instruments'.
Other revenues on sale of services are recognised as per Ind AS 115 'Revenue From Contracts with Customers' as
articulated above in 'other revenue from operations'.
Taxes
Incomes are recognised net of the Goods and Services Tax/Service Tax, wherever applicable.
Expenditures
Finance costs
Borrowing costs on financial liabilities are recognised using the EIR [refer note no. 2.2.1].
Fees and commission expenses
Fees and commission expenses which are not directly linked to the sourcing of financial assets, such as
commission/incentive incurred on value added services and products distribution, recovery charges and fees payable
for management of portfolio etc., are recognised in the Statement of Profit and Loss on an accrual basis.
Taxes
Expenses are recognised net of the Goods and Services Tax, except where credit for the input tax is not statutorily
permitted.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, 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.
Financial instruments
A financial instrument is defined as any contract that gives rise to a financial asset of one entity and a financial liability
or equity instrument of another entity. Trade receivables and payables, loan receivables, investments in securities and
subsidiaries, debt securities and other borrowings, preferential and equity capital etc. are some examples of financial
instruments.
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