| Disclosure of accounting policies, change in accounting policies and changes in estimates explanatory Notes forming part of the Financial Statements for the year ended 31 March 2015 1. General Information 2. Significant Accounting Policies: a) General Basis of accounting and brparation of financial statements Principles of consolidation Central Depository Services (India) Limited (CDSL) was set up with the objective of providing convenient, dependable and secure depository services at affordable cost to all market participants. A depository facilitates holding of securities in the electronic form and enables securities transactions to be processed by book entry by a Depository participants (DP) who as an agent of the depository, offers depository services to investors. The financial statements of the Company have been brpared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 (“the 2013 Act”) / Companies Act, 1956 (“the 1956 Act”), as applicable. The consolidated financial statements relate to Central Depository Services (India) Limited (“the Company”) and its subsidiary company CDSL Ventures Limited and Central Insurance Repository Limited have been brpared on the following basis: a) The financial statements of the Company and its subsidiary company are combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses, after fully eliminating intragroup balances and intra-group transactions resulting in unrealised profits or lossed in accordance with Accounting Standard (AS) 21- “Consolidated Financial Statements” issued by the Institute of Chartered Accountants of India. b) The consolidated financial statements are brpared using uniform accounting policies for like transactions and other events in similar circumstances and are brsented in the same manner as the Company’s separate financial statements. The subsidiary companies considered in the consolidated financial statements are:- Name of Subsidiary Country of Proportion of Incorporation Ownership Interest CDSL Ventures Limited India 100.00 % Central Insurance Repository Limited India 54.25 % - On its own name 51.00 % - Through CDSL Venture Ltd. 3.25 % CDSL Your Depository Annual Report 2014-2015 www.cdslindia.com 105 Use of Estimates: a) Fixed Assets b) Software Costs c) Debrciation/Amotization/Impairment Loss The brparation of financial statements requires management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including current liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in brparation of the financial statements are prudent and reasonable and results however are not likely to differ from these estimates materially. Any revision to accounting estimates is recognised prospectively Fixed assets are shown at their original cost of acquisition including taxes, duties, freights and other incidental expenses relating to acquisition and installation, incurred until the asset is ready to put to use for its intended purpose, less accumulated debrciation and accumulated impairment losses, if any. Subsequent expenditures related to an item of fixed asset are added to its book value only if they increase the future benefits for the existing asset beyond its brviously assessed standard of performance. Losses arising from the retirement of, and gains or losses arising from disposal of fixed assets which are carried at. cost are recognised in the Statement of Profit and Loss. Cost of development and production of internally developed or purchased Systems Software, Application Software and additions of new modules thereto are capitalized and any expenses for modifications/changes thereto are charged to the Statement of Profit and Loss. Debrciation on tangible fixed assets has been provided on the straight-line method as per the useful life brscribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.: CDSL Your Depository Annual Report 2014-2015 www.cdslindia.com 106 Useful life used (No. of years) Description of asset Useful life as per the Schedule II (No. of years) Building 60 10 Computer Hardware/software 3 2 Office Equipment 5 3-5 Furniture and Fixtures 10 5 Vehicles 8 4 The carrying amounts of assets are reviewed at each Balance Sheet date if there is an indication of impairment based on internal and external factors. The asset is treated as impaired when its carrying cost exceeds the recoverable amount. Impairment loss, if any, is charged to the Statement of Profit and Loss for the period in which the asset is identified as impaired. Reversal of impairment loss recognized in the prior years is recorded when there is an indication that impairment losses recognized for the asset, no longer exist or have decreased. Investments that are readily realisable and are intended to be held for not more than one year from the date, on which such investments are made, are classified as current investments. All other investments are classified as long term investments. i. Long term investments are stated at cost. A provision for diminution is made to recognise a decline, other than temporary, in the value of long-term investments. ii. Current investments are stated at lower of cost and fair value on individual investment basis Employee benefits are accrued in accordance with Accounting Standard- 15 (Revised) “Employee Benefits” Short term Employee Benefits are estimated and provided for. Performance linked bonus is provided as and when the same is approved by the management. Post Employment Benefits and Other Long term Employee Benefits are treated as follows: Provident Fund: The Provident fund plan is operated by Regional Provident Fund Commissioner (RPFC) and the contribution thereof are paid/provided for. Contributions to the defined contribution plans are charged to Statement of Profit and Loss for the respective financial year as and when services are rendered by the employees. a) Investments b) Employees Benefits (i) Defined Contribution Plans: CDSL Your Depository Annual Report 2014-2015 www.cdslindia.com 107 a) Gratuity: Gratuity for employees is covered by Gratuity Scheme with Life Insurance Corporation of India and the contribution thereof is paid / provided for. Provision for Gratuity is made on the basis of actuarial valuation on Projected Unit Credit Method as at the end of the period. b) Long term compensated absences: Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year are treated as short term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end. Accumulated compensated absences, which are expected to be availed or encashed beyond 12months from the end of the year are treated as other long term employee benefits. The Company's liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial gains/losses at the end of the period accrued to the defined benefit plans are taken to Statement of Profit and Loss for the respective financial year. Provision for current tax is made on the basis of relevant provisions of the Income Tax Act, 1961. The deferred tax for timing differences between the book and tax profits for the year is accrued for, using the tax rates and laws those have been substantively enacted as of the balance sheet date. Deferred tax assets arising from differences are recognised to the extent that there is reasonable certainty that these would be realised in future. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities rebrsenting current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws. All foreign currency transactions are recorded at exchange rate brvailing on the date of the transaction. All foreign currency current assets/liabilities are translated at the rates brvailing on the date of the Balance Sheet. Foreign exchange rate difference arising on settlement/ conversion is recognized in the Statement of Profit and Loss. In contracts involving the rendering of services, revenue is measured using the proportionate completion method and are recognised net of service tax provided that at the time of performance it is not unreasonable to expect ultimate collection. If at the time of raising of any claim it is unreasonable to expect ultimate collection, revenue recognition is postponed till the time the ultimate collection is made. (ii) Defined Benefits Plans: f) Current tax and deferred tax g) Foreign Currency Translation h) Revenue Recognition CDSL Your Depository Annual Report 2014-2015 www.cdslindia.com 108 Discount or brmium on debt securities / discounted Money Market Instruments is accrued over the period of remaining maturity. Interest is recognized on a time proportionate basis taking into account the amount outstanding and the rate applicable. Dividend is recognized when the unconditional right to receive payment is established. A provision is recognised when the Group has a brsent obligation as a result of past events and 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 (excluding retirement benefits) are not discounted to their brsent value and are determined based on the 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. Contingent liabilities are disclosed in the Notes. Contingent assets are not recognised in the financial statements. Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. 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 Group are segregated based on the available information. Basic earnings per share are computed by dividing the profit for the year by the weighted average number of equity shares outstanding during the year. Based on the nature of products / activities of the Group and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Group has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current. Notes forming part of the Financial Statements for the year ended 31 March 2015 1. General Information 2. Significant Accounting Policies: a) General Basis of accounting and brparation of financial statements Principles of consolidation Central Depository Services (India) Limited (CDSL) was set up with the objective of providing convenient, dependable and secure depository services at affordable cost to all market participants. A depository facilitates holding of securities in the electronic form and enables securities transactions to be processed by book entry by a Depository participants (DP) who as an agent of the depository, offers depository services to investors. The financial statements of the Company have been brpared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 (“the 2013 Act”) / Companies Act, 1956 (“the 1956 Act”), as applicable. The consolidated financial statements relate to Central Depository Services (India) Limited (“the Company”) and its subsidiary company CDSL Ventures Limited and Central Insurance Repository Limited have been brpared on the following basis: a) The financial statements of the Company and its subsidiary company are combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses, after fully eliminating intragroup balances and intra-group transactions resulting in unrealised profits or lossed in accordance with Accounting Standard (AS) 21- “Consolidated Financial Statements” issued by the Institute of Chartered Accountants of India. b) The consolidated financial statements are brpared using uniform accounting policies for like transactions and other events in similar circumstances and are brsented in the same manner as the Company’s separate financial statements. The subsidiary companies considered in the consolidated financial statements are:- Name of Subsidiary Country of Proportion of Incorporation Ownership Interest CDSL Ventures Limited India 100.00 % Central Insurance Repository Limited India 54.25 % - On its own name 51.00 % - Through CDSL Venture Ltd. 3.25 % CDSL Your Depository Annual Report 2014-2015 www.cdslindia.com 105 Use of Estimates: a) Fixed Assets b) Software Costs c) Debrciation/Amotization/Impairment Loss The brparation of financial statements requires management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including current liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in brparation of the financial statements are prudent and reasonable and results however are not likely to differ from these estimates materially. Any revision to accounting estimates is recognised prospectively Fixed assets are shown at their original cost of acquisition including taxes, duties, freights and other incidental expenses relating to acquisition and installation, incurred until the asset is ready to put to use for its intended purpose, less accumulated debrciation and accumulated impairment losses, if any. Subsequent expenditures related to an item of fixed asset are added to its book value only if they increase the future benefits for the existing asset beyond its brviously assessed standard of performance. Losses arising from the retirement of, and gains or losses arising from disposal of fixed assets which are carried at. cost are recognised in the Statement of Profit and Loss. Cost of development and production of internally developed or purchased Systems Software, Application Software and additions of new modules thereto are capitalized and any expenses for modifications/changes thereto are charged to the Statement of Profit and Loss. Debrciation on tangible fixed assets has been provided on the straight-line method as per the useful life brscribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.: CDSL Your Depository Annual Report 2014-2015 www.cdslindia.com 106 Useful life used (No. of years) Description of asset Useful life as per the Schedule II (No. of years) Building 60 10 Computer Hardware/software 3 2 Office Equipment 5 3-5 Furniture and Fixtures 10 5 Vehicles 8 4 The carrying amounts of assets are reviewed at each Balance Sheet date if there is an indication of impairment based on internal and external factors. The asset is treated as impaired when its carrying cost exceeds the recoverable amount. Impairment loss, if any, is charged to the Statement of Profit and Loss for the period in which the asset is identified as impaired. Reversal of impairment loss recognized in the prior years is recorded when there is an indication that impairment losses recognized for the asset, no longer exist or have decreased. Investments that are readily realisable and are intended to be held for not more than one year from the date, on which such investments are made, are classified as current investments. All other investments are classified as long term investments. i. Long term investments are stated at cost. A provision for diminution is made to recognise a decline, other than temporary, in the value of long-term investments. ii. Current investments are stated at lower of cost and fair value on individual investment basis Employee benefits are accrued in accordance with Accounting Standard- 15 (Revised) “Employee Benefits” Short term Employee Benefits are estimated and provided for. Performance linked bonus is provided as and when the same is approved by the management. Post Employment Benefits and Other Long term Employee Benefits are treated as follows: Provident Fund: The Provident fund plan is operated by Regional Provident Fund Commissioner (RPFC) and the contribution thereof are paid/provided for. Contributions to the defined contribution plans are charged to Statement of Profit and Loss for the respective financial year as and when services are rendered by the employees. a) Investments b) Employees Benefits (i) Defined Contribution Plans: CDSL Your Depository Annual Report 2014-2015 www.cdslindia.com 107 a) Gratuity: Gratuity for employees is covered by Gratuity Scheme with Life Insurance Corporation of India and the contribution thereof is paid / provided for. Provision for Gratuity is made on the basis of actuarial valuation on Projected Unit Credit Method as at the end of the period. b) Long term compensated absences: Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year are treated as short term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end. Accumulated compensated absences, which are expected to be availed or encashed beyond 12months from the end of the year are treated as other long term employee benefits. The Company's liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial gains/losses at the end of the period accrued to the defined benefit plans are taken to Statement of Profit and Loss for the respective financial year. Provision for current tax is made on the basis of relevant provisions of the Income Tax Act, 1961. The deferred tax for timing differences between the book and tax profits for the year is accrued for, using the tax rates and laws those have been substantively enacted as of the balance sheet date. Deferred tax assets arising from differences are recognised to the extent that there is reasonable certainty that these would be realised in future. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities rebrsenting current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws. All foreign currency transactions are recorded at exchange rate brvailing on the date of the transaction. All foreign currency current assets/liabilities are translated at the rates brvailing on the date of the Balance Sheet. Foreign exchange rate difference arising on settlement/ conversion is recognized in the Statement of Profit and Loss. In contracts involving the rendering of services, revenue is measured using the proportionate completion method and are recognised net of service tax provided that at the time of performance it is not unreasonable to expect ultimate collection. If at the time of raising of any claim it is unreasonable to expect ultimate collection, revenue recognition is postponed till the time the ultimate collection is made. (ii) Defined Benefits Plans: f) Current tax and deferred tax g) Foreign Currency Translation h) Revenue Recognition CDSL Your Depository Annual Report 2014-2015 www.cdslindia.com 108 Discount or brmium on debt securities / discounted Money Market Instruments is accrued over the period of remaining maturity. Interest is recognized on a time proportionate basis taking into account the amount outstanding and the rate applicable. Dividend is recognized when the unconditional right to receive payment is established. A provision is recognised when the Group has a brsent obligation as a result of past events and 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 (excluding retirement benefits) are not discounted to their brsent value and are determined based on the 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. Contingent liabilities are disclosed in the Notes. Contingent assets are not recognised in the financial statements. Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. 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 Group are segregated based on the available information. Basic earnings per share are computed by dividing the profit for the year by the weighted average number of equity shares outstanding during the year. Based on the nature of products / activities of the Group and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Group has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.
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