SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS SIGNIFICANT ACCOUNTING POLICIES a. Basis of brparation of financial statements The financial statements are brpared under the historical cost convention on accrual basis of accounting and in accordance with accounting principles generally accepted in India. The Financial Statements comply in all material aspects with the Accounting Standards notified under the relevant provisions of the Companies Act, 2013 (the Act), the National Housing Bank Act, 1987 and the Housing Finance Companies (NHB) Directions, 2010 as amended. Accounting policies not specifically referred to otherwise are consistent with the generally accepted accounting principles followed by the Company. b. Use of Estimates The brparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The Management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Future results could differ from these estimates. c. Revenue Recognition Interest on Housing Loans Repayment of Housing Loans is by way of Equated Monthly Installments (EMI) comprising of principal and interest or by way of proceeds of Life Insurance Policies where interest is collected in monthly installment. Necessary appropriation is made out of these EMI collections to principal and interest. Interest income is recognized on accrual basis except in case of Non Performing Assets (NPA) where interest is accounted on realization. Fees and additional interest income on delayed EMI/Pre-EMI are recognized on receipt basis. Income from Investments Interest income on debt investments like Non convertible Debentures (NCD), Inter Corporate Deposits (ICD), Bank Deposits, Government Securities is recognized on accrual basis and Dividend income is accounted for in the year in which the same is declared in Annual General Meeting and Company's right to receive payment is established. Other Income In other cases, income is recognized when there is no significant uncertainty as to determination and realization. d. Fixed Assets Tangible Fixed Assets are stated at cost of acquisition, or construction inclusive of expenses incidental thereto less accumulated debrciation and impairment loss, if any. Intangible Intangible assets are stated at cost of acquisition, including any cost attributable to bringing the same to its working condition, less amortization over estimated useful life. e. Debrciation and Amortisation Debrciation in respect of assets is charged based on the useful life of the assets as brscribed in Schedule II of the Act, except in respect of Vehicles (Motor cars) where useful life is estimated as 5 years. Cost of leasehold improvements is amortized over the period of the lease. Debrciation on assets whose cost individually does not exceed upto Rs. 5,000/- is fully provided in the year of purchase. Software is amortised on straight line basis over five years. . Impairment Loss Impairment loss is provided to the extent the carrying amount of assets exceeds their recoverable amounts. Recoverable amount is the higher of an asset's net selling price and its value in use. Value in use is the brsent value of estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Net selling price is the amount obtainable from sale of the asset in an arm's length transaction between knowledgeable, willing parties, less the costs of disposal. g. Investments In accordance with the Guidelines issued by National Housing Bank (NHB) and the Accounting Standard (AS -13) -"Accounting for Investments" notified under the relevant provisions of the Act, current investments are carried at lower of cost & fair value and long term investments are carried at cost. However, provision is made to recognize decline other than temporary in the carrying amount of long term investments. Unquoted investments in the units of mutual funds in the nature of current investments are valued at the net asset value declared by mutual funds in respect of each particular scheme as per the guidelines issued by the NHB. The brmium paid on acquisition of Investments is written off in the year of purchase. h. Employee Benefits Provident Fund Contribution as required by Statute paid to the Government Provident Fund as also contribution paid to other recognized Provident Fund Trust is debited to the Statement of Profit and Loss. Gratuity Gratuity liability is a defined benefit obligation for employees. The Company has taken Group Gratuity-cum-Life Insurance Policy from Life Insurance Corporation of India (LIC) for employees other than those are under deputation from LIC. Accordingly, the Company accounts for liability for future gratuity benefits based on actuarial valuation carried out at the end of each financial year and the Contribution paid to LIC is charged to the Statement of Profit and Loss. Actuarial gain or losses arising from changes in actuarial assumptions are immediately recognized in the Statement of Profit and Loss in the period in which they arise. In respect of employees under deputation from LIC, an amount equal to five percent of aggregate of basic salary and dearness allowance of such employees, paid / payable to LIC is charged to the Statement of Profit and Loss and is treated as a defined contribution obligation. Leave Benefits Leave Benefits for both short term and long term in the form of vesting and non vesting compensated absences are accounted for on actuarial valuation determined as at the year end. i. Foreign Currency Transactions Transactions in foreign currencies are recorded at the exchange rates brvailing on the date of transactions. In case of forward exchange contracts or other financial instruments that is in substance a forward exchange contract, other than for trading or speculation purposes, the brmium or discount arising at the inception of the contract is amortized as expense or income over the life of the contract. Gains / losses on settlement of transactions arising on cancellation / renewal of forward exchange contracts are recognized as income or expense. At the reporting date, monetary assets and liabilities denominated in foreign currency are reported using the closing rate of exchange. Exchange difference arising thereon and on realization / payments of foreign exchange are accounted as income or expense in the relevant year. j. Derivative Transactions SWAP transactions are considered off-balance sheet items and the outstanding SWAP trades are disclosed at the fair value on the reporting date. The carrying amount (difference between coupon rate liability and SWAP contract rate) is accounted on an accrual basis and the same is adjusted against the interest cost of the underlying liability. Gain realized on early termination of SWAP is amortized over the balance tenure of the SWAP or underlying liability whichever is less. Loss if any on early termination is charged to the Statement of Profit and Loss in the same year. k. Borrowing Costs Borrowing costs include interest and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. I. Zero Coupon Instrument The difference between the discounted amount mobilized and redemption value of Commercial Papers/ Zero Coupon Bond/ NCD is apportioned on time basis over the life of instrument and charged in the Statement of Profit and Loss. m. Income Tax Taxes on income are accounted for in accordance with Accounting Standard (AS-22) - "Accounting for taxes on income", notified under the relevant provisons of the Act. Income tax comprises both current and deferred tax. Current tax is measured on the basis of estimated taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961. The tax effect of the timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. They are measured using substantially enacted tax rates and tax regulations as of the Balance Sheet date. In situations where the company has unabsorbed debrciation or carry forward tax losses, all deferred tax assets are recognized, only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits. Deferred tax assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization. n. Provision on Standard and Non Performing Loans The provision on Standard and Non Performing Loans is made as per the prudential norms brscribed in the Housing Finance Companies (NHB) Directions, 2010 as amended. Additional provisions (over and above the prudential norms) if required is made as per the Guidelines approved by the Board of Directors from time to time. o. Provisions and Contingencies Provisions are recognized when the Company has a legal and constructive obligation as a result of a past event, for which it is probable that cash outflow will be required and a reliable estimate can be made of the amount of the obligation. Contingent liabilities are disclosed when the Company has a possible or brsent obligation where it is not probable that an outflow of resources will be required to settle it. Contingent assets are neither recognized nor disclosed. p. Operating Leases Assets acquired on lease where significant portions of the risks and rewards incidental to the ownership are retained by the lessors are classified as operating leases. Lease rentals are charged to the Statement of Profit and Loss on accrual basis. q. Securitised Assets Derecognition of Securitised assets in the books of the Company, recognition of gain or loss arising on Securitisation and accounting for credit enhancement provided by the company is based on the extant guidelines issued by the Institute of Chartered Accountants of India. Securitised Assets are derecognized in the books of the Company based on the principal of surrender of control over the assets. 1. a) Estimated amounts of contracts remaining to be executed on capital account and not provided for (net of advances) are Rs. 554.40 Lacs (Previous year Rs. 1,564.20 Lacs). b) Other Commitments: Uncalled liability of Rs. 3125 Lacs (Previous Year Rs. 3565 Lacs) in respect of commitment made for contribution to LICHFL Urban development fund by subscription of 50000 units (brvious year 50,000 units) of Rs. 10,000/- face value each, paid up value being Rs. 3750/-(brvious year Rs. 2,870/-) each. 2. Contingent liabilities in respect of: a) Claims against the Company not acknowledged as debts Rs. 289.04 Lacs (Previous Year Rs. 35.44Lacs). b) On completion of income tax assessment, the Company had received a demand of Rs. 347.76 Lacs- (including interest of Rs. 20.39 Lacs) for A.Y. 2003-04, Rs. 2,217.31 Lacs (including interest of Rs. 721.90 Lacs) forA.Y. 2004-05 against which the Company received refund of Rs. 220.38 Lacs, Rs. 3,571.94 Lacs (including interest of Rs. 667.94 Lacs) against which Rs. 1,951.62 Lacs was paid under protest for A.Y. 2005-06, Rs. 2,385.58 Lacs (including interest of Rs. 138.71 Lacs against which the Company received refund of Rs. 137.47 forA.Y. 2006-07 and Rs. 1,503.40 Lacs (including interest of Rs. 633.94 Lacs) for A.Y. 2007-08. The said amounts are disputed and the Company has brferred an appeal against the same. The amounts for the respective years have been paid to the credit of the Central Govt, under protest. 3. (i) Retail / Project Loans are secured by any or all of the following as applicable, based on their categorisation : a) Equitable / Registered Mortgage of Property. b) Assignment of Life Insurance Policies, NSC, KVP, FD of Nationalized Bank. c) Assignment of Lease Rent Receivables. d) Company guarantees or personal guarantees. e) Negative lien. f) Undertaking to create a security. (ii) Loans to employees other than for Housing are secured by lien over Provident Fund balances and / or Hypothecation of Vehicles. 4. Housing Loans include loans amounting to Rs. 3,643.06 Lacs (Previous year Rs. 2378.65 Lacs) against which the company has taken possession of the properties under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and held such properties for disposal. The fair value of assets possessed against the loan is f 3427.77 Lacs (Previous year Rs. 2,362.53 Lacs), being lower of the fair value of the asset possessed and the outstanding due under the loans as at March 31, 2015. 5. Movement in Provision for contingencies and diminution in the value of investments are as under: a) Provision includes: i. Provision for untapped corporate undertaking given for securitization of housing loans. The outflows in respect of untapped corporate undertaking would arise in the event of a shortfall, if any, in the cash flows of the pool of the securitized receivables, and ii. Provision for doubtful advances and provision for probable loss on account of bank reconciliation differences. 2. Disclosure regarding penalty or adverse comments as per Housing Finance Companies (NHB) Directions, 2010. During the current year, the Company has: a. neither been imposed any penalty by National Housing Bank b. nor received any adverse comments in writing from National Housing Bank on regulatory compliances. 3. The additional Information pursuant to Schedule III to the Companies Act, 2013 are either Nil or Not Applicable. 4. The brvious year figures have been reclassified / regrouped / restated to conform to current year's classification. As per our attached report of even date For Shah Gupta & Co. Chartered Accountants FRN 109574W Heneel K Patel Partner M.No. 114103 For Chokshi & Chokshi LLP Chartered Accountants FRN 101872W/W100045 For and on behalf of the Board of Directors Mitil Chokshi Partner M No.47745 Surya Kumar Roy Chairman S. B. Mainak S. Ravi Director Director Sunita Sharma Managing Director & Chief Executive Officer Nitin K. Jage General Manager (Tax.) & Company Secretary P. Narayanan CFO & General Manager Accounts Place: Mumbai Date: April 18, 2015 |