Significant accounting policies

a. Basis of brparation

The financial statements of the Company have been brpared in accordance with generally accepted accounting principles in India (Indian GAAP) with the accounting standards notified by The Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of The Companies Act, 1956. The financial statements have been brpared on an accrual basis under the historical cost convention. The accounting policies adopted in the brparation of the financial statements are consistent with those followed in the brvious year.

b. Use of estimates

The Company adopts the accrual concept in the brparation of the accounts. The brparation of financial statements in conformity with Indian GAAP  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 due to these estimates and the difference between the actual results and the estimates are recongnised in the period in which the results are known/materalise.

c. Revenue recognition

 (a) Income from brokerage activities is recognised on trade date basis and is net of statutory payments.

 (b) Interest income is recognised on an accrual basis.

 (c) Advisory fees are recognised when reasonable right of recovery is established, the revenue can be reliably measured and there is no uncertainty regarding recoverability.

 (d) Dividend is recognised when the right to receive is established as at the Balance sheet date.

d. Fixed assets and intangible assets

Fixed assets are stated at cost of acquisition, including any cost attributable for bringing the asset to its working condition, less accumulated debrciation. Intangible assets comprising of system software are stated at cost of acquisition, including any cost attributable for bringing the asset to its working condition, less accumulated amortisation. Any technology support cost or annual maintenance cost for such software is charged annually to the Statement of Profit and Loss. Consideration paid for transfer of tenancy rights is capitalised as an intangible asset.

Capital work-in-progress: Project under which tangible fixed assets are not yet ready for their intended use are carried at cost.

The Company has regular programme of evaluating useful life of its assets.

e. Debrciation and Amortisation

 Tangible assets

 Debrciation on fixed assets, excluding certain electronic items, is provided on the written down value method, at the rates brscribed by Schedule XIV of the Companies Act, 1956. Certain electronic items are debrciated over a period of two years on straight-line method based on the management’s estimate of the useful life of assets. Debrciation on additions during the year is provided on a pro-rata basis. Assets costingless than Rs. 5,000 each are written off in the year of capitalisation.

 Intangible assets

 Computer software is amortised over a period of 3 years and tenancy rights are amortised over a period of 10 years by using straight-line method.

f. Investments

Investments which are readily realisable and intended to be held for not more than one year from the date on which such investments are made are classified as current investments in accordance with the RBI guidelines and Accounting Standard 13 on ‘Accounting for Investments’ as notified by the Companies (Accounting Standards) Rules, 2006. All other investments are classified as long-term investments.

All investments are initially recorded at cost. The cost of an investment includes purchase price, directly attributable acquisition charges and reduced by recovery of costs, if any. On disposal of an investment, the difference between its carrying amount and the net disposal proceeds is charged or credited to the Statement of Profit and Loss.

·          Long Term Investments are carried at acquisition cost. A provision is made for diminution other than temporary on an individual basis.

·          Current Investments' are carried at the lower of cost or fair value on an individual basis.

g. Cash and cash equivalents (for purposes of Cash Flow Statement)

Cash comprises cash on hand, Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition) that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

h. Misdeal stock

Misdeal stock comprises of stock that has devolved on the Company due to erroneous execution of trades on behalf of the institutional clients in the normal course of business. These securities are valued at lower of cost or market value/ realisable value on an individual basis. Any valuation loss based on the above is debited to the Statement of Profit and Loss.

i. Employee benefits

 Defined contribution plans

·          The Company’s contribution to provident fund is deposited with the Regional Provident Fund Commissioner and is charged to the Statement of Profit and Loss every year.

·          The Company participates in the holding company’s superannuation policy for future payments of superannuation and the Company’s contribution paid / payable during the year is charged to the Statement of Profit and Loss every year.

 Defined benefit plan

·          The net brsent value of the Company’s obligation towards gratuity to employees is funded and actuarially determined as at the Balance Sheet date based on the projected unit credit method. Actuarial gains and losses are recognised in the Statement of Profit and Loss.

 Other benefits

·          Based on the leave rules of the Company, employees are not permitted to accumulate leave. Any unavailed privilege leave to the extent encashable is paid to the employees and charged to the Statement of Profit and Loss for the year.

j. Income - tax

The provision for tax in the accounts comprises both, current tax and deferred tax. Current tax is the amount payable on taxable income for the year as determined in accordance with the provisions of Income-tax Act 1961. The accounting treatment for income-tax in respect of the Company's income is based on Accounting Standard 22 on 'Accounting for Taxes on Income' as notified by the Companies (Accounting Standards) Rules, 2006. The deferred tax assets and liabilities for the year arising on account of timing differences are recognised in the Statement of Profit and Loss and the cumulative effect thereof is reflected in the Balance Sheet.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax asset is 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 carried forward losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that the same can be realised against future taxable profits.

k. Earnings per share

Basic earnings per share is computed by dividing the profit / (loss) after tax by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax as adjusted for expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.

l. Provisions and contingencies

A provision is recognised when the Company 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 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 if any are disclosed in the notes.

m. Foreign currency transactions

Foreign currency transactions are accounted at the exchange rates brvailing on the date of the transaction. Foreign currency monetary items outstanding as at the Balance Sheet date are reported using the closing rate. Gains and losses resulting from the settlement of such transactions and translation of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Profit and Loss.

n. Insurance Claims

Insurance claims are accounted for on the basis of claims admitted/expected to be admitted and to the extent that there is no uncertainty in receiving the claims.

o. Service tax input credit

Service tax input credit is accounted in the period in which the underlying services are received and when there is no uncertainty in availing/utilising the credits.

p. Operating cycle

Based on the nature of products / activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.

Employee benefits

 Defined contribution plans

·          The Company’s contribution to provident fund is deposited with the Regional Provident Fund Commissioner and is charged to the Statement of Profit and Loss every year.

·          The Company participates in the holding company’s superannuation policy for future payments of superannuation and the Company’s contribution paid / payable during the year is charged to the Statement of Profit and Loss every year.

 Defined benefit plan

·          The net brsent value of the Company’s obligation towards gratuity to employees is funded and actuarially determined as at the Balance Sheet date based on the projected unit credit method. Actuarial gains and losses are recognised in the Statement of Profit and Loss.

 Other benefits

·          Based on the leave rules of the Company, employees are not permitted to accumulate leave. Any unavailed privilege leave to the extent encashable is paid to the employees and charged to the Statement of Profit and Loss for the year.

In accordance with Accounting Standard –15 on “Employee Benefits”, notified by the Companies(Accounting Standards) Rules 2006, the following disclosures have been made:

The Company has recognised the following amounts in the Statement of Profit and Loss towards contribution to defined contribution plans which are included under contribution to provident and other funds:

Particulars	As at 31 March,2013 ( in Rs.)	As at 31 March,2012 ( in Rs.)
Provident fund	9,889,959	12,264,427
Superannuation fund	360,775	453,532
Pension fund	726,098	798,501

The details of the company’s post-retirement benefit plans for gratuity for its employees are given below which is certified by the actuary and relied upon by the auditors:

Particulars	As at 31.03.13	As at 31.03.12
Change in the benefit obligations:
Liability at the beginning of the year	28,599,509	23,006,622
Current service cost	7,599,349	8,036,058
Interest cost	2,865,757	2,507,714
Actuarial loss /(gain)	(3,280,817)	3,088,094
Past service cost	-	-
Benefits paid	(8,064,354)	(8,038,979)
Liability at the end of the year	27,719,444	28,599,509
Fair value of plan assets:
Fair value of plan assets at the beginning of the year	11,955,878	19,205,340
Expected return on plan assets	836,368	1,790,086
Contributions	17,892,487	-
Actuarial gain /(loss) on plan assets	4,900,618	(1,000,569)
Benefits paid	(8,064,354)	(8,038,979)
Fair value of plan assets at the end of the year	27,520,997	11,955,878
Total actuarial gain to be recognized	8,181,435	4,088,663
Actual return on plan assets:
Expected return on plan assets	836,368	1,790,086
Actuarial gain /(loss) on plan assets	4,900,618	(1,000,569)
Actual return on plan assets	5,736,986	789,517
Amount recognised in the balance sheet:
Liability at the end of the year	27,719,444	28,599,509
Fair value of plan assets at the end of the year	27,520,997	11,955,878
Unrecognized past service cost	-	336,904
Amount recognised in the balance sheet under “Payable to gratuity fund”	198,447	16,306,727
Expenses recognised in the profit and loss account under employee benefits expenses
Current service cost	7,599,349	8,036,058
Interest cost	2,865,757	2,507,714
Expected return on plan assets	(836,368)	(1,790,086)
Net actuarial gain to be recognised	(8,181,435)	4,088,663
Past service cost	336,904	673,808
Expense recognised in the profit and loss account under Employee benefits expenses	1,784,207	13,516,157
Reconciliation of the liability recognised in the balance sheet
Opening net liability	16,306,727	2,790,570
Expense recognised	1,784,207	13,516,157
Contribution by the company	17,892,487	-
Amount recognised in the balance sheet under “Payable to gratuity fund”	198,447	16,306,727
Expected employer’s contribution next year	6,000,000	1,000,000

Particulars	As at 31    March, 2013	As at 31 March, 2012	As at 31 March, 2011	As at 31 March, 2010	As at 31 March, 2009
Experience adjustments
Defined benefit obligation	27,719,444	28,599,509	23,006,622	10,993,766	8,745,683
Plan assets	27,520,997	11,955,878	19,205,340	5,736,494	4,828,911
Deficit	(198,447)	(16,643,631)	(3,801,282)	(5,257,273)	(3,916,772)
Experience adjustment on plan liabilities	(4,187,437)	1,884,005	(3,007,273)	(5,986,757)	(383,113)
Experience adjustment on plan assets	4,900,618	(1,000,569)	(567,142)	(202,914)	(12,514)

Particulars	As at 31 March,2013	As at 31 March,2012
Investment pattern	%	%
Insurer managed fund	100	100
Principal assumptions
Discount rate	8.05	8.38
Return on plan assets	8.00	8.00
Salary escalation rate	8.00	8.00

As the Gratuity fund is managed by Life Insurance Company details of investments are not available with the Company.

The estimates of future salary increase, considered in the actuarial valuation takes account of inflation, seniority, promotion and other relevant factors.

The Company’s business is to provide broking services to its clients in the capital market in India. All other activities of the Company revolve around the main business. As such, there are no reportable segments as per the Accounting Standard 17 relating to "Segment Reporting" as notified by the Companies (Accounting Standards) Rules, 2006.

IDFC Securities Limited ('the Company') is a wholly owned subsidiary of IDFC Limited (formerly Infrastructure Development Finance Company Limited ), (the 'Holding Company') incorporated in India and regulated by the Securities Exchange Board of India (SEBI) as a stock broking company.