Notes to the Financial Statement 1. Summary of Significant Accounting Policies a. Basis of Preparation of Financial Statements The financial statements have been brpared in accordance with generally accepted accounting principles in India (Indian GAAP) under the historical cost convention on the accrual basis of accounting and comply with the Accounting Standard notified under section 133 of the Companies Act, 2013 read with General Circular 8/2014 dated April 4, 2014, issued by the Ministry of Corporate Affairs to the extent applicable. The accounting policies have been consistently followed by the Company. All 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 the Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as upto twelve months for the purpose of current/non-current classification of assets and liabilities. b. Use of Estimates The financial statements are brpared in accordance with generally accepted accounting principles (GAAP) in India which requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the period. Management believes that the estimates made in the brparation of the financial statements are prudent and reasonable. Actual results may differ from those estimates. Any revision to accounting estimates is recognized prospectively in current and future periods. c. Change in Accounting Estimates Till the year ended March 31, 2014, Schedule XIV to the Companies Act, 1956, brscribed requirements concerning debrciation of fixed assets. From the current year, Schedule XIV has been replaced by Schedule II to the Companies Act, 2013. Effective from 1st April, 2014, the Company has provided debrciation on fixed assets based on useful lives as provided in Schedule II of the Companies Act, 2013 or as re-assessed by the Company. The management believes that debrciation rates currently used fairly reflect its estimate of the useful lives and residual values of fixed assets. Based on transitional provision given in Schedule II to the Companies Act, 2013, the carrying value of assets whose useful lives are already exhausted amounting to Rs.70,72,328/-(net of deferred tax of Rs.36,41,670/-) has been charged to opening balance of retained earnings. Had there been no change in useful lives of fixed assets, the charge to the Statement of Profit & Loss would have been lower by Rs. 2,43,55,018/-. d. Revenue Recognition Revenue from Operation Income from operations comprises income from initial rating and surveillance services and subscription to information services exclusive of service tax. Initial rating fee is recognized as income on assignment of rating by the Rating Committee. The company recognizes a portion of surveillance fees as income, commensurate with the efforts involved, on the date the surveillance activity is completed. The balance surveillance fee is recorded equally over the twelve months surveillance period which commences one year after the date of assigning a rating. Fee for technical know-how is accounted for on accrual basis. Income on subscription to information services primarily pertains to sale of research reports and the income thereon is recognized on sale of such reports. As a matter of prudent policy and on the basis of past experience of recoverability of income, fees in respect of certain defined categories of clients are recognized when there is reasonable certainty of ultimate collection. Other Income Dividends on investments are recognised as income as and when the right to receive the same is established. Interest income is recognised on accrual basis. Profit or loss on redemption / sale of investment is recognized on accrual basis on trade date of transaction. e. Fixed Assets Fixed assets are stated at cost less accumulated debrciation and impairment if any. f. Debrciation Debrciation is provided based on useful lives as provided in Schedule II of the Companies Act, 2013. g. Operating Leases Leases of assets under which all the risks and benefits of ownership are effectively retained by lessor are classified as operating leases. Payments made under operating leases are charged to the statement of profit & loss account, on a straight line basis, over the lease term. h. Investments Investments are classified into current and long term investments. Long Term Investments are carried at cost. Provision for diminution, if any, is made if the decline in value is other than temporary in nature. Current investments are stated at lower of cost and fair value. Any reduction in fair value and reversals of such reduction are included in Statement of Profit & Loss. Investments in Commercial Paper are stated at carrying cost. i. Foreign Currency Translation Foreign currency transactions are recorded, on initial recognition in the reporting currency, at the brvailing rates as at the date of such transactions. 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 differences, arising on settlement of monetary items at rates different from those at which they were initially recorded during the year, or reported in brvious financial statements, are recognised as income or as expense in the year in which they arise. j. Retirement Benefits i. The Company provides retirement benefits to its employees in the form of Provident Fund, Superannuation and Gratuity. ii. Contribution to the Provident Fund is made at the brscribed rates to the Provident Fund Trust / Commissioner. Contribution to Provident Fund is charged to Statement of Profit & Loss. iii. Superannuation benefit is contributed by the Company to Life Insurance Corporation of India (LIC) @ 10% of basic salary of the employees with respect to certain employees. Contribution to Superannuation Fund is charged to Statement of Profit & Loss. iv. The Company accounts for the liability of future gratuity benefits based on actuarial valuation. The company has created a trust for future payment of gratuities which is funded through gratuity-cum-life insurance scheme of LIC of India (Defined Benefit Plan) v. Long term compensated absences are determined on the basis of actuarial valuation made at the end of each financial year using the projected unit credit method. Short term compensated absences are provided for based on estimates. vi. Actuarial gain and losses are recognized immediately in the Statement of Profit and Loss as income or expenses. k. Accounting for taxes i. Current Tax : Current tax is provided on the taxable income in accordance with the provisions of the Income Tax Act, 1961. ii. Deferred Tax : The Deferred tax is accounted in accordance with the Accounting Standard 22 "Accounting for Taxes on Income" issued by The Institute of Chartered Accountants of India. The Deferred tax for the year on timing differences are accounted at tax rates that have been enacted by the Balance Sheet date. Deferred tax assets arising from the timing difference are recognized to the extent that there is reasonable certainty that sufficient future taxable income will be available. In case of unabsorbed losses and unabsorbed debrciation, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profit. At each Balance Sheetdate the Company re-assesses unrecognized deferred tax assets. l. Impairment of Asset In accordance with AS 28 on 'Impairment of Assets"" where there is an indication of impairment of the Company's assets, the carrying amounts of the company's assets are reviewed at the Balance Sheet date to determine whether there is any impairment. The recoverable amount of the assets (or where applicable that of the cash generating unit to which the asset belongs) is estimated as the higher of its net selling price and its value in use. An impairment loss is recognised whenever the carrying amount of an asset or the cash generating unit to which it belongs, exceeds its recoverable amount. Impairment loss is recognised in the Statement of profit and loss or against revaluation surplus, where applicable. If at the Balance Sheet date, there is an indication that a brviously asessed impairment loss no longer exists, the recoverable amount is re-assessed and the asset is reflected at the recoverable amount subject to a maximum of the debrciated historical cost. Value in use is the brsent value of estimated future cash flows expected to arise from the continuing use of the assets and from its disposal at the end of its useful life, or a reasonable estimate thereof. m. Earnings per share ('EPS) The basic earnings per equity share are computed by dividing the net profit or loss attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding during the reporting year. Diluted EPS is computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average of equity and dilutive equity equivalent shares outstanding during the reporting year. n. Provisions and Contingent Liabilities The Company creates a provision where there is brsent obligation as a result of 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 brsent obligation that may, but probably will not require an outflow of resources. When there is a possible obligation or a brsent obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. o. Employee Stock Options The stock options granted are accounted for as per the accounting treatment brscribed by Employee Stock Options Scheme, Employee Stock Purchase Guidelines, 1999, issued by Securities and Exchange Board of India and the Guidance Note on Accounting for Employee Share-based Payments, issued by the ICAI, whereby the fare value of the option is recognised as deferred employee compensation. The deferred employee compensation is charged to the Statement of Profit and Loss on the straight-line basis over the vesting period of the option. The options that lapse are reversed by a credit to employee compensation expense, equal to the amortised portion of the value of lapsed portion and credit to deferred employee compensation expense equal to the unamortised portion 1. The brvious year's figures have been reclassified / regrouped to confirm to this year's classification. As per our attached Report of even date For Khimji Kunverji & Co. Chartered Accountants FRN: 105146 W Gautam V Shah Partner (F-117348) For and on behalf of the Board of Directors Credit Analysis & Research Limited Anil Kumar Bansal Chairman DIN No. 06752578 Chandresh M Shah Chief Financial Officer D R Dogra Managing Director & CEO DIN No. 00226775 Navin K Jain Company Secretary ACS 10703 Rajesh Mokashi Deputy Managing Director DIN No.02781355 Place Mumbai Date: May 12, 2015 |