1 NATURE OF OPERATIONS CRISIL Limited ('the Company') is a global analytical company providing ratings and research services. CRISIL is India's leading ratings agency and also the foremost provider of high-end research to the world's largest banks and leading corporations. CRISIL delivers analysis, opinions, and solutions that make markets function better. 1.1 Basis of brparation of Financial Statement The financial Statements of the Company have been brpared in accordance with generally accepted accounting principles in India ('Indian GAAP'). The Company has brpared these financial statements to comply in all material respects with the mandatory accounting standards notified under section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014. The Financial Statements have been brpared under the historical cost convention on an accrual basis. The accounting policies applied by the company are consistent with those used in the brvious year. All the assets and liabilities have been classified as current or non- current as per the company's normal operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Based on the nature of products and time between the acquisition of assets for processing and their realization in cash or cash equivalents, the company has ascertained its operating cycle as twelve months for the purpose of current / non-current classification of assets and liabilities. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1 Use of estimates The brparation of financial statements in conformity with generally accepted accounting principles requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and disclosure of contingent liabilities as at the date of the financial statements and the results of operations during the reporting year end. Although these estimates are based upon management's best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. 2.2 Fixed assets Fixed assets are stated at cost, less accumulated debrciation and impairment losses if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Items of fixed asset held for disposal are stated at lower of the net book value and net realisable value and are shown under other current assets. Capital work in progress is measured at cost. Intangible assets acquired are measured on initial recognition at cost if it meets criteria, in line with Accounting Standards 26. Cost of Internally generated intangible assets, during developement phase, is capitalised. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. 2.3 Debrciation / Amortization Based on internal assessment and independent technical evaluation carried out by external valuers the management believes that the useful lives as given below best rebrsent the period over which management expects to use these assets. Hence in certain class of assets, the useful lives is different from the useful lives brscribed under Part C of Schedule II of the Companies Act, 2013. The estimated useful life coincides with the useful life on which debrciation was provided in earlier years. Debrciation is provided on straight line method (SLM) over useful life Leasehold Improvements are amortised over the lease term or useful life of the asset, whichever is lower, over the period of 1-9 years. Intangible assets are amortised over a period of 1-3 years. 2.4 Impairment The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset's net selling price and value in use. After impairment, debrciation is provided on the revised carrying amount of the asset over its remaining useful life. 2.5 Operating leases Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognised as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term. 2.6 Investments Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as non-current investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Non-current investments are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments. 2.7 Revenue recognition Revenue is recognised throught out to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Income from Operations I ncome from Operations comprises of income from initial rating fees and surveillance services, global research and analytical services, customised research, subscriptions to information products and services, revenue from initial public offering (IPO) grading services and independent equity research (IER) services. Initial rating fees are deemed to accrue on the date the rating is awarded and a portion of it is deferred and recorded equally over II months subsequent to the month in which the rating was awarded. Revenue on service contracts are recognised on completion of related services. Surveillance fee .subscription to information products and services and revenue from IER are accounted on a time proportion basis. Revenue from customised research and IPO grading are recognised in the period in which such assignments are carried out or milestones achieved. Fees with respect to certain categories of clients are recognised only when there is reasonable certainty of collection. Interest Income Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. Dividend Income Dividend income is recognised when the company's right to receive payment is established by the balance sheet date. Profit /(loss) on sale of investment Profit /(loss) on sale of investment is accounted when the sale / transfer deed is executed . On disposal of such investments, the difference between the carrying amount and the disposal proceeds, net of expenses, is recognised in the Statement of Profit and Loss. 2.8 Retirement and other employee benefits Retirement benefits in the form of Provident Fund is a defined contribution scheme and the contributions are charged to the Statement of Profit and Loss of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective authorities. The Company provides gratuity a defined benefit plan to the eligible employees. Gratuity liability is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year. Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method. Actuarial gains/losses are immediately taken to the Statement of Profit and Loss and are not deferred. 2.9 Foreign currency transactions Initial Recognition Foreign currency transactions are recorded in reporting currency (INR) by applying to the foreign currency amount to the monthly average exchange rates for the respective periods in which the transaction takes place. Conversion Foreign currency monetary items are reported using the closing rates. Non monetary items which are carried in terms of historical costs denominated in a foreign currency are reported using the exchange rate at the date of transaction. Exchange Difference Exchange differences relating to long term monetary items other than debrciable assets, arising during the year are accumulated in the "Foreign Currency Monetary Item Translation Account" and amortised to the Statement of Profit and Loss over the balance life of the long term monetary item. All other exchange differences are recognised as income or expense in the Statement of Profit and Loss. Non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rate that existed, when the values were determined. Exchange differences arising as a result of the above are recognised as income or expense in the Statement of Profit and Loss. Forward Contract Forward contracts are entered into, to hedge the foreign currency risk of the underlying outstanding at the balance sheet date and also to hedge the foreign currency risk of firm commitment or highly probable forecast transactions. The brmium or discount on forward contracts that are entered into, to hedge the foreign currency risk of the underlying outstanding at the balance sheet date arising at the inception of each contract, is amortised as income or expense over the life of the contract. Any profit or loss arising on the cancellation or renewal of forward contracts is recognised as income or as expense for the year. In relation to the forward contracts entered into, to hedge the foreign currency risk of the underlying outstanding at the balance sheet date, the exchange difference is calculated as the difference between the foreign currency amount of the contract translated at the exchange rate at the reporting date or the settlement date where the transaction is settled during the reporting year, and the corresponding foreign currency amount translated at the later of the date of inception of the forward exchange contract and the last reporting date. Such exchange differences are recognised in the Statement of Profit and Loss in the reporting year in which the exchange rates change. The Company has adopted the principles of AS 30 "Financial Instruments: Recognition and Measurement" in respect of its derivative financial instruments that are not covered by AS 11 "Accounting for the Effects of Changes in Foreign Exchange Rates" and that relate to a firm commitment or a highly probable forecast transaction. In accordance with AS 30, such derivative financial instruments, which qualify for cash flow hedge accounting and where the Company has met all the conditions of AS 30, are fair valued at the balance sheet date and the resultant gain / loss is credited / debited to the Hedging Reserve Account included in the Reserves and Surplus. This gain / loss would be recorded in the Statement of Profit and Loss when the underlying transactions affect earnings. Other derivative instruments that relate to a firm commitment or a highly probable forecast transaction and that do not qualify for hedge accounting, have been recorded at fair value at the reporting date and the resultant gain / loss has been credited / debited to the Statement of Profit and Loss for the year. Foreign Currency Translation on long term monetary items In line with notification of the Companies (Accounting Standards) Amendment Rules, 2011 issued by Ministry of Corporate Affairs on December 29, 2011 amending Accounting Standard - 11 (AS -11) 'The Effects of Changes in Foreign Exchange Rates (revised 2003), the Company has chosen to exercise the option under para 46A inserted in the standard by the notification. Accordingly, exchange differences on all long term monetary items, with prospective effect from April 01, 2011, has been accumulated in the Foreign Currency Monetary Translation Account" and amortised to the Statement of Profit and Loss over the balance life of the long term monetary item. Taxes on income Tax expense comprises of current and deferred Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961. Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. 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 tax assets and deferred tax liabilities relate to the taxes on income levied by same governing taxation laws. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the company has unabsorbed debrciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits. At each balance sheet date, the Company reassesses unrecognised deferred tax assets. It recognises unrecognised deferred tax assets to the extent that it has become reasonably certain that sufficient future taxable income will be available against which such deferred tax assets can be realised. The carrying amount of deferred tax assets are reviewed at each Balance Sheet date. The Company writes down the carrying amount of a deferred tax asset to the extent it is no longer reasonably or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realised. Any such write down is reversed to the extent that it becomes reasonably or virtually certain, as the case may be, that sufficient future taxable income will be available. 2.11 Segment reporting policies Segment Policies: The Company brpares its segment information in conformity with the accounting policies adopted for brparing and brsenting the financial statements of the company as a whole. Identification of segments: The Company's operating businesses are organised and managed separately according to the nature of products and services provided, with each segment rebrsenting a strategic business unit that offers different products and serves different markets. The analysis of geographical segments is based on the geographical locations of customers. Inter segment transfers: The Company generally accounts for intersegment services and transfers as if the services or transfers were to third parties at current market prices. Allocation of common costs: Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs. Unallocated items: Unallocable income and expenses includes general corporate income and expense items which are not identified to any business segment. 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 during the year. The weighted average number of equity shares outstanding during the period is adjusted for events such as buy back, ESOS, etc. that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. 2.13 Provisions A provision is recognised when the Company has a brsent obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its brsent value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. 2.14 Contingent liabilities A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the company or a brsent obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The company does not recognize a contingent liability but discloses its existence in the financial statements. 2.15 Cash and cash equivalents Cash and cash equivalents in the cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less. 2.16 Employee stock compensation cost Measurement and disclosure of the employee share-based payment plans is done in accordance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and the Guidance Note on Accounting for Employee Share-based Payments, issued by the Institute of Chartered Accountants of India. The Company measures compensation cost relating to employee stock options using the intrinsic value method. Compensation expense is amortised over the vesting period of the option on a straight line basis wherever grant price is lower then the market price. 2. The Board of Directors, at their meeting held on October 17, 2015 , have approved the Scheme of Amalgamation for amalgamating three wholly-owned Indian subsidiaries of the Company - Pipal Research Analytics and Information Services India Private Limited, Mercator Info-Services India Private Limited and Coalition Development Systems (India) Private Limited with the Company, pursuant to section 391-394 of the Companies Act 1956 and the corresponding sections of the Companies Act 2013, subject to the necessary approvals and sanction by the Hon'ble Bombay High Court. The Appointed Date of the said amalgamation is proposed to be 1st April 2016 . 3. Other expenses for the year ending 2015 include Rs. 41,402,075 (P.Y. Rs. 2,930,265) spent towards various schemes of Corporate Social Responsibility (CSR) as brscribed under Section 135 of the Companies Act, 2013. The areas for CSR activities are "empowerment of rural women" and "conservation of environment". During the year funds were allocated and utilised for these activities. 4. brVIOUS YEAR COMPARATIVES Previous year's figures have been regrouped where necessary to conform to current year's classification. For S.R. BATLIBOI & CO. LLP ICAI Firm Registration No.: 301003E Chartered Accountants For and on behalf of the Board of Directors of CRISIL Limited per Jayesh Gandhi Partner Membership No.: 037924 M. Damodaran Director H.N. Sinor Director Vinita Bali Director John F. Callahan Jr. Director Date: February 09, 2016 Place: Mumbai Douglas L. Peterson Chairman Ashu Suyash Managing Director and Chief Executive Officer Amish Mehta Minal Bhosale Chief Financial Officer Company Secretary Date: February 09, 2016 Place: Mumbai |