NOTES TO ACCOUNTS Note 1: a. Overview HDB Financial Services Ltd. ("the Company"), incorporated in Ahmedabad, India is a non deposit taking Non Banking Financial Corporation ("NBFC") as defined under section 45-IA of the Reserve Bank of India ("RBI") Act, 1934 and is engaged in the business of financing, collection & insurance services. b. Basis of brparation The financial statements have been brpared and brsented under the historical cost convention and accrual basis of accounting, unless otherwise stated, and in accordance with the generally accepted accounting principles in India ("Indian GAAP") and conform to the statutory requirements, circulars and guidelines issued by the RBI from time to time to the extent that they have an impact on the financial statements and current practices brvailing in India. The financial statements comply in all material respects with the Accounting Standards ("AS") notified by the Companies (Accounting Standards) Rules, 2006 and relevant provisions of the Companies Act, 1956 ("the Act"), to the extent applicable. c. Use of Estimates The brparation of financial statements in conformity with the Indian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. The estimates and assumptions used in the accompanying financial statements are based upon management's evaluation of the relevant facts and circumstances as of the date of financial statements. Actual results could differ from these estimates. Any revisions to accounting estimates are recognized prospectively in the current and future periods. d. Significant Accounting Policies i. Advances Advances are classified as standard, sub - standard and non - performing assets as per the company policy approved by the Board which are more stringent than the relevant RBI guidelines. Interest on non-performing advances is transferred to an interest suspense account and not recognized in the Statement of Profit and Loss until received. ii. Fixed Assets and Debrciation Tangible Fixed asset Fixed assets are stated at cost less accumulated debrciation and impairment, if any. Cost includes cost of purchase and all other expenditure in relation to site brparation, installation costs and professional fees incurred on the asset before it is ready for intended use. Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benefit / functioning capability from / of such assets. Debrciation is charged over the estimated useful life of the fixed asset on a straight-line basis. The rates of debrciation for certain key fixed assets used in arriving at the charge for the year are as under: • Improvements to lease hold brmises are charged off over the primary period of lease or its useful life, whichever is shorter. • Office equipment at 16.21% per annum. • Computers at 33.33% per annum. • Immovable Property @ 1.63% per annum • Motors cars @ 20% per annum • Furniture & fixtures @ 9.5% per annum • Items costing less than Rs 5,000/- are fully debrciated in the year of purchase. • All other assets are debrciated as per the rates specified in Schedule XIV of the Companies Act, 1956. For assets purchased and sold during the year, debrciation is being provided on pro rata basis by the Company. Intangible asset Software and System development expenditure are capitalised at cost of acquisition including cost attributable to bring the same in working condition & the debrciation is charged @ 33.33% per annum on straight-line basis. Any expenses on such software for support and maintenance payable annually are charged to statement of Profit & Loss. iii. Impairment of Assets The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset or the cash generating unit ("CGU"). If such recoverable amount of the asset or the recoverable amount of the CGU to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit and Loss. If at the balance sheet date there is an indication that a brviously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the revised recoverable amount, subject to maximum of the debrciated historical cost. iv. Investments Investments are expected to mature after twelve months are taken as non current/ long term investment & are stated at cost. Provisions are made only in case of diminution, which are not temporary in nature, in the value of Investment. Investments maturing within three months from the date of acquisition are classified as cash equivalents if they are readily convertible into cash. All other investment are taken as Current investments/short term and are valued at lower of cost and net realizable value. v. Employee Benefits Short term employee benefits Short term employees benefits are recognized as an expense at the undiscounted amounts in the Statement of Profit and Loss for the year in which the related services are rendered. Long term employee benefits a) Gratuity The Company provides for gratuity to all employees. The benefit is in the form of lump sum payments to vested employees on resignation, retirement, on death while in employment or on termination of employment of an amount equivalent to 15 days basic salary payable for each completed year of service. Vesting occurs upon completion of five years of service. The Company makes annual contributions to funds administered by trustees and managed by insurance companies for amounts notified by the said insurance companies. The defined gratuity benefit plans are valued by an independent external actuary as at the balance sheet date using the projected unit credit method to determine the brsent value of defined benefit obligation and the related service costs. Under this method, the determination is based on actuarial calculations, which include assumptions about demographics, early retirement, salary increases and interest rates. Actuarial gain or loss is recognized in the Statement of Profit and Loss. b) Provident fund In accordance with the applicable law, all employees of the Company are entitled to receive benefits under the provident fund. The Company contributes an amount, on a monthly basis, at a determined rate (currently 12% of employee's basic salary) to the Pension Scheme administered by the Regional Provident Fund Commissioner (RPFC) and the Company has no liability for future provident fund benefits other than its annual contribution. Since it is a defined contribution plan, the contributions are accounted for on an accrual basis and recognized in the Statement of Profit and Loss. c) Compensated Absences The Company does not have a policy of encashment of unavailed leaves for its employees. The Company provides for compensated absences in accordance with AS 15 (revised 2005) Employee Benefits. The provision is based on an independent external actuarial valuation at the balance sheet date. vi. Lease Accounting Lease payments for assets taken on operating lease are recognized in the Statement of Profit and Loss over the lease term in accordance with AS 19, Leases, issued by the Institute of Chartered Accountants of India. vii. Revenue Recognition Interest income is recognized in the profit or loss account on an accrual basis. In case of Non Performing Assets interest income is recognised upon realisation as per the RBI Guidelines. Interest accrued and not realised before the classification of the asset as an NPA is reversed and credited to the interest suspense account. • BPO Services and other financial charges are recognised on an accrual basis, except in case of cheque bouncing charges, late payment charges, foreclosure charges and application money, which are accounted as and when received. • Income from dividend is recognised in the Statement of Profit and Loss when the right to receive is established. • Gains arising on assignment of assets are not recognised due to uncertainity over future receivables & principle of conservatism ,while loss, if any is recognised upfront. Gain arising on securitisation transaction is recognised as per RBI Guidelines. viii. Taxation Tax expenses are the aggregate of current tax and deferred tax charged or credited in the statement of profit and loss for the period. a) Current Tax The current charge for income tax is calculated in accordance with the relevant tax regulations applicable to the company. b) Deferred Tax Deferred tax charge or credit reflects the tax effects of timing differences between accounting income and taxable income for the period. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed debrciation or carry forward of losses, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each balance sheet date. Deferred Tax Asset & Liability are netted off and disclosed in the balance sheet under the Head "Deferred Tax Asset / Liability". ix. Earnings per share The Company reports basic and diluted earnings per equity share in accordance with AS 20, Earnings Per Share issued, by the Institute of Chartered Accountants of India. Basic earnings per equity share have been computed by dividing net profit / loss attributable to the equity share holders for the year by the weighted average number of equity shares outstanding during the year. Diluted earnings per equity share have been computed by dividing the net profit attributable to the equity share holders for the year by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year, except where the results are anti dilutive. x. Accounting for Provisions, Contingent Liabilities and Contingent Assets The Company recognizes provision when there is brsent obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. In cases where the available information indicates that the loss on the contingency is reasonably possible but the amount of loss cannot be reasonably estimated, a disclosure is made in the financial statements. Provisions are reviewed at each balance sheet date and adjusted to reflect the current management estimates. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed. A disclosure of 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 likelihood of outflow of resource is remote, no provision or disclosure is made. Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an economic benefit will arise, the asset and related income are recognised in the period in which the change occurs. xi. Interest on borrowings: Interest on borrowings is recognised in Statement of Profit and Loss on an accrual basis. Costs associated with borrowings are grouped under financial charges along with the interest costs. Costs associated with borrowings are grouped under financial charges along with the interest costs. xii. The company has been following the policy of crediting the customer's account only on receipt of amount in bank and as such no cheques in hand are taken into consideration. Note 2 Investments Profit / (loss) on disposal of current investments Rs. 1.43 Cr (Previous year: Rs. 0.02 Cr). Note 3 Capital commitments as at Balance Sheet date is Rs. 1.64 Cr net of advances (Previous Year Rs. 1.77 Cr) Note 4 Loan against gold portfolio to Total portfolio is 0.56% (Previous year 0.13%) Note 5 The company has placed fixed deposit of Rs. 2.26 Cr with HDFC Bank pursuant to Securitisation transaction entered during the year. Also a sum of Rs. 4.55 Cr(brvious year Rs. 4.55 Cr) has been placed as fixed deposit on account of assignment transaction entered brvious year. HDFC bank has right to recover overdue amount from this fixed deposits alongwith interest on fixed deposit and excess interest sbrad on assignment agreements in case of default in assigned contracts Note 6 Previous year figures have been regrouped/ rearranged, where necessary. For and on behalf of the Board G Subramanian -Chairman Kaizad Bharucha -Director G Ramesh Managing Director Anil Jaggia- Director Rakesh Pathak -Company Secretary Haren Parekh- Head Finance Place: Mumbai Date: April 17, 2013 |
