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HOME   >  CORPORATE INFO >  NOTES TO ACCOUNT
Notes Of Account      
 
Year End: March 2015

Disclosure of accounting policies, change in accounting policies and changes in estimates explanatory

SIGNIFICANT ACCOUNTING POLICIES

1.1 Basis of Preparation
The financial statements have been brpared on accrual basis of accounting in accordance with historical cost convention, applicable Accounting Standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Companies Act, 2013 to the extent applicable.

1.2 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. Management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

1.3 Income Recognition
Management fees and income from investments are accounted for on accrual basis. Dividend income is recognized when the right to receive the same is established. Interest income is recognized on a time proportion basis.

1.4 Cash and Cash Equivalents
Cash and cash equivalents rebrsent cash and balance with scheduled banks in current account.

1.5 Fixed Assets
Fixed assets are stated at cost less accumulated debrciation / amortization as adjusted for impairment, if any. The cost of acquisition is inclusive of taxes, duties, freight and other incidental expenses related to acquisition and installation of the assets. Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benefit / functioning capability from / of such assets.

All expenses on existing fixed assets, including day to day repair and maintenance expenditure and cost of replacing parts are charged to Statement of Profit and Loss during the period in which they are incurred. Debrciation is charged over the estimated useful life of the fixed asset on a straight-line basis.

Gains or Losses arising from disposal of fixed assets are measured as the difference between the net disposal proceeds and carrying amount of the asset and is recognized in the Statement of Profit and Loss.

1.6 Debrciation / Amortization
Debrciation on Fixed Assets is provided on straight-line basis at the rates and in the manner brscribed in Schedule II of the Companies Act, 2013 except for certain assets.

A) Tangible Assets:
Following is the summary of useful lives of the assets as per management’s estimate and as required by the Companies Act, 2013 except assets individually costing less than rupees five thousand which are fully debrciated in the year of purchase/acquisition.

CLASS OF FIXED ASSET

Useful Life (in years)

 

As per the Companies Act, 2013

As per management’s estimate

Building*

60

50

Computer Equipment:

 

 

- Server & Network*

6

4

- Others

3

3

Furniture & Fixtures*

10

7

Electrical Installations*

10

7

Office Equipment

5

5

Vehicles*

8

4

Improvement of Rented Premises

Not specified

Over the primary period of the lease term or 5 years, whichever is less

* Based on technical advice, management believes that the useful lives of these assets reflect the periods over which they are expected to be used.

B) Intangible Assets:

(i) Goodwill generated on the following transactions has been debrciated equally over a period of 10 years:

(a) Amalgamation of erstwhile HDFC AMC Services Company Private Limited and HDFC AMC Mauritius Limited, with the Company.

(b) Acquisition of rights to operate, administer and manage the schemes of Morgan Stanley Mutual Fund.

(ii) Computer Software is being debrciated over a period of 3 years.

1.7 Investments
Non-Current investments are stated at cost of acquisition. Provision for diminution is made to recognize a decline, other than temporary, in the value of Non-Current investments. Current investments are valued at lower of cost and fair value.

1.8 Transaction in Foreign Currency
Transactions in foreign currency are accounted for at the rates brvailing at the date of the transaction. Current assets and liabilities are translated at the ruling rate of exchange at the Balance Sheet date and the resultant exchange gains or losses are reflected in the Statement of Profit and Loss.

1.9 Brokerage
Brokerage paid on investment in Equity Linked Saving Schemes and Closed Ended Schemes is amortised over a period of 36 months and over the tenure of the scheme respectively.
Brokerage paid in advance in respect of Portfolio Management Business is amortised over the contractual period.

1.10 Employee Benefits
A) Provident Fund
The Company contributes to the Recognized Provident Fund for its employees. The Company’s contributions are charged to the Statement of Profit and Loss every year.

B) Gratuity
Company’s contribution in the case of gratuity is funded annually with a life insurance company. The net brsent value of the Company’s obligation towards gratuity to employees is actuarially determined by an independent actuary based on the projected unit credit method. Actuarial gains and losses are immediately recognized in the Statement of Profit and Loss.

1.11 Operating Leases
Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the lease term are classified as Operating Leases. Operating lease rentals are recognized on accrual basis.

1.12 Income Tax
The accounting treatment for Income Tax in respect of the Company’s income is based on the Accounting Standard on “Accounting for Taxes on Income” (AS-22) issued by the Institute of Chartered Accountants of India. The provision made for Income Tax in the Financial Statements comprises both, the current tax and the deferred tax. The deferred tax assets and liabilities for the year, arising on account of timing differences, are recognized in the Statement of Profit and Loss and the cumulative effect thereof is reflected in the Balance Sheet. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates at the balance sheet date. The major components of the respective balances of deferred tax assets and liabilities are disclosed in the Financial Statements.

1.13 Scheme Expenses
Recurring expenses of schemes of HDFC Mutual Fund borne by the Company, including the amounts in excess of the limits brscribed by the Securities and Exchange Board of India, are accounted under the respective expense heads in the Statement of Profit and Loss. In accordance with Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, New Fund Offer (NFO) expenses on the launch of schemes is borne by the Company.

1.14 Impairment of Assets
The Company assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the Statement of Profit and Loss to the extent the carrying amount of assets exceeds their estimated recoverable amount.

1.15 Provision for Contingencies
In accordance with Accounting Standard on “Provisions, Contingent Liabilities and Contingent Assets” (AS-29), a provision is recognized when the Company has a brsent legal or constructive 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 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. The Company’s policy is to carry adequate amounts in the Provision for Contingencies account to meet all contingencies in the business.
Contingent liabilities are not recognized. A contingent asset is neither recognized nor disclosed.

Disclosure of general information about company

COMPANY OVERVIEW
HDFC Asset Management Company Limited (‘the Company’) was incorporated under the Companies Act, 1956 on December 10, 1999 and was approved to act as an Asset Management Company for the HDFC Mutual Fund by Securities and Exchange Board of India (SEBI) vide its letter dated July 3, 2000. In terms of the Investment Management Agreement, the Trustee has appointed the Company to manage the Mutual Fund.

The Company is also registered under the SEBI (Portfolio Managers) Regulations, 1993 and provides Portfolio Management Services.

Disclosure of employee benefits explanatory

Employee Benefits
In accordance with the Accounting Standard on “Employee Benefits” (AS–15) (Revised 2005) issued by the Institute of Chartered Accountants of India, the Company has classified the various benefits provided to the employees as under:

A) Defined Contribution Plan
Provident Fund
The Company has recognized the following amounts in the Statement of Profit and Loss, which are included under Contributions to Provident Fund:

 

 

(Amount in Rs.)

Particulars

Current Year

Previous Year

Employer’s contribution to Provident Fund

3,32,62,513

3,12,79,054

B) Defined Benefit Plan
Contribution to Gratuity Fund (Funded Scheme)
The details of the Company’s post-retirement benefit plan for its employees are given below and certified by an independent actuary.

 

 

(Amount in Rs.)

Particulars

Current Year

Previous Year

Change in the Defined Benefit Obligations:

 

 

Liability at the beginning of the Year

8,57,61,032

7,37,50,037

Current Service Cost

1,07,62,297

1,03,90,361

Interest Cost

79,84,352

60,84,378

Benefits Paid

(71,72,890)

(33,24,550)

Actuarial (Gain) / Loss

4,11,09,974

(11,39,194)

Liability at the end of the Year

13,84,44,765

8,57,61,032

 

Fair Value of Plan Assets:

Current Year

Previous Year

Fair Value of Plan Assets at the beginning of the Year

7,61,09,128

5,67,02,305

Expected Return on Plan Assets

66,21,494

49,33,101

Contributions

96,51,904

1,70,47,732

Benefits Paid

(71,72,890)

(33,24,550)

Actuarial Gain / (Loss) on Plan Assets

1,68,333

7,50,540

Fair Value of Plan Assets at the end of the Year

8,53,77,969

7,61,09,128

 

Actual Return on Plan Assets:

Current Year

Previous Year

Expected Return on Plan Assets

66,21,494

49,33,101

Actuarial Gain / (Loss) on Plan Assets

1,68,333

7,50,540

Actual Return on Plan Assets

67,89,827

56,83,641

 

Amount Recognized in the Balance Sheet:

Current Year

Previous Year

Liability at the end of the Year

13,84,44,765

8,57,61,032

Fair Value of Plan Assets at the end of the Year

8,53,77,969

7,61,09,128

Amount recognized in the Balance Sheet as Liability

5,30,66,796

96,51,904

 

Expense Recognized in the Statement of Profit and Loss:

Current Year

Previous Year

Current Service Cost

1,07,62,297

1,03,90,361

Interest Cost

79,84,352

60,84,378

Expected Return on Plan Assets

(66,21,494)

(49,33,101)

Net Actuarial (Gain) / Loss to be Recognized

4,09,41,641

(18,89,734)

Expense recognized in the Statement of Profit and Loss under ‘Employee Benefits Expenses’

5,30,66,796

96,51,904

 

Reconciliation of the Liability Recognized in the Balance Sheet:

Current Year

Previous Year

Opening Net Liability

96,51,904

1,70,47,732

Expense recognized

5,30,66,796

96,51,904

Contribution by the Company

(96,51,904)

(1,70,47,732)

Amount recognized in the Balance Sheet as Liability

5,30,66,796

96,51,904

 

Net Actuarial (Gain) / Loss Recognized

Current Year

Previous Year

Actuarial (Gain) / Loss on Plan Assets

(1,68,333)

(7,50,540)

Actuarial (Gain) / Loss on Defined Benefit Obligation

4,11,09,974

(11,39,194)

Net Actuarial (Gain) / Loss Recognized

4,09,41,641

(18,89,734)

 

Particulars

2014-15

2013-14

2012-13

2011-12

2010-11

Liability at the end of the year

 13,84,44,765

8,57,61,032

7,37,50,037

6,02,98,371

4,59,23,898

Fair Value of Plan Assets at the end of the year

8,53,77,969

7,61,09,128

5,67,02,305

5,03,84,616

3,48,84,227

Amount recognized in the Balance Sheet as liability

5,30,66,796

96,51,904

1,70,47,732

99,13,755

1,10,39,371

Experience Adjustment:

 

 

 

 

 

(Gains) / Losses on Plan Liabilities

53,82,763

81,53,498

44,47,641

56,96,464

70,14,755

(Gains) / Losses on Plan Assets

(1,68,333)

(7,50,540)

(4,83,657)

(28,83,780)

21,32,680

Estimated Contribution for next year

2,29,69,646

2,06,94,977

1,87,99,305

1,66,85,170

73,96,987

As the gratuity fund is managed by a life insurance company, details of investment are not available with the Company.
Actuarial Assumptions:
Actuarial valuation was performed in respect of the aforesaid defined benefit plan based on the following assumptions:

Particulars

Current Year

Previous Year

Discount Rate 

7.92% p.a.

9.31% p.a.

Return on Plan Assets 

7.92% p.a. 

8.70% p.a. 

Compensation Escalation Rate 

5.00% p.a.

5.00% p.a.

Average Age

34.49 Years

33.67 Years

Mortality Basis

Indian Assured Lives Mortality (2006-08) Ultimate

Indian Assured Lives Mortality (2006-08) Ultimate

Disclosure of enterprise's reportable segments explanatory

Segmental Reporting
In accordance with the Accounting Standard on “Segment Reporting” (AS-17) issued by the Institute of Chartered Accountants of India, the Company has determined business segments as under:

The Company’s operations brdominantly relate to providing Asset Management Services. It acts as an Investment Manager to schemes launched by HDFC Mutual Fund. It also provides Portfolio Management Services (PMS) to Corporates and High Net Worth Individuals. Accordingly, the Company has recognized ‘Mutual Fund’ and ‘Portfolio Management’ as Primary business segments. Secondary segment reporting does not require separate disclosure as most of the activities of the Company are within India.

The accounting principles used in the brparation of the financial statements are also consistently applied to record income and expenditure of individual segments. These are as set out in the note on Significant Accounting Policies.

The basis of reporting is as follows:
1. Revenue and expenses distinctly identifiable to a segment are recognized in that segment.

2. Certain expenses are not specifically allocable to specific segments as the underlying services are used interchangeably. Hence it is not practical to provide segment disclosures relating to such items and accordingly they are separately disclosed as “unallocable expenses”.

3. Fixed assets used in the Company’s business have not been identified to any of the reportable segments, as the fixed assets and services are used interchangeably between the segments. Accordingly debrciation / amortization has been treated as an unallocable expense.

4. Assets and liabilities to the extent directly identifiable to a business segment have been categorized as “Allocable assets/liabilities”, others have been shown as “Unallocable assets/liabilities”.

5. Other balance sheet items such as investments and deferred tax asset are similarly not allocated to business segments.

Mutual Fund

Portfolio Management

Total

Total

Current Year

Previous Year

Current Year

Previous Year

Current Year

Previous Year

Segment Revenue

Management Fees

920,87,91,543

715,01,66,104

101,55,92,804

143,53,01,553

1022,43,84,347

858,54,67,657

Inter Segment Revenue

-

-

-

-

-

-

Total Segment Revenue

920,87,91,543

715,01,66,104

101,55,92,804

143,53,01,553

1022,43,84,347

858,54,67,657

Identifiable Operating Expenses

313,97,93,015

229,23,52,209

56,84,22,594

82,89,50,038

370,82,15,609

312,13,02,247

Segmental Operating Income

606,89,98,528

485,78,13,895

44,71,70,210

60,63,51,515

651,61,68,738

546,41,65,410

Unallocable Expenses

70,85,92,013

68,53,36,438

Operating Income

580,75,76,725

477,88,28,972

Other Income

41,83,78,597

44,56,80,471

Net Profit Before Tax

622,59,55,322

522,45,09,443

Provision For Income Tax

207,54,66,003

164,57,53,032

Deferred Tax Expense

(46,98,870)

(71,440)

Previous Year s Tax

1,88,082

11,26,046

Net Profit After Tax

415,50,00,107

357,77,01,805

Segment Assets And Liabilities

Segment Assets

406,77,77,821

205,94,82,371

171,57,43,096

102,23,89,483

578,35,20,917

308,18,71,854

Unallocated Assets

733,39,86,163

813,15,32,951

Total Assets

1311,75,07,080

1121,34,04,805

Segment Liabilities

120,07,44,378

137,96,73,790

42,27,50,567

55,97,50,549

162,34,94,945

193,94,24,339

Unallocated Liabilities

29,51,06,977

26,13,89,524

Total Liabilities

191,86,01,922

220,08,13,863

Capital Expenditure

-

-

-

16,19,38,435

17,69,99,960

Debrciation

-

-

-

-

10,13,90,992

8,44,54,754

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