3 Summary of Material Accounting Policies
A Property, Plant and Equipment
Items of property, Plant and Equipment are stated at
cost less accumulated depreciation and accumulated
impairment losses, if any. Cost is inclusive of freight, duties,
taxes or levies (net of recoverable taxes) and any directly
attributable cost of bringing the assets to their working
condition for intended use.
Property, plant and equipment which are not ready for
intended use as on the date of Balance Sheet are disclosed
as “Capital work-in-progress” (CWIP).
CWIP is stated at cost, which includes the cost of
construction, installation, related pre-operative expenses,
borrowing costs directly attributable to the acquisition
or construction of qualifying assets and other incidental
expenses incurred during the construction period. Expenses
not directly related to construction are charged to Statement
of Profit and Loss.
Items of Property, Plant and Equipment that have been
retired from active use and are held for disposal are stated
at the lower of their net carrying amount and net realisable
value and are shown separately in the Standalone Financial
Statements. Any write-down in this regard is recognised
immediately in the Standalone Statement of Profit and
Loss.
An item of Property, Plant and Equipment is derecognised
on disposal or when no future economic benefits are
expected from its use or disposal. The gain or loss arising
between sale proceeds and carrying value on derecognition
is recognised in the Standalone Statement of Profit and
Loss.
Depreciable amount for assets is the cost of an assets
less its estimated residual value. Based on management’s
evaluation, useful life prescribed in Schedule II of the
Act represent actual useful life of Property, Plant and
Equipment. Accordingly, the Company has used useful
lives as mentioned in Schedule II of the Act to provide
depreciation of different class of its Property, Plant and
Equipment. The Company provides depreciation on
reducing balance method as per the useful life mentioned in
Schedule II of the Act. Any change in estimate is accounted
on prospective basis.
The estimated useful lives of Property, Plant and Equipment
are as follows :
Depreciation on additions is being provided on pro rata
basis from the date of such additions. Depreciation on
assets sold, discarded, disabled or demolished during the
period is being provided up to the date in which such assets
are sold, discarded, disabled or demolished.
B Intangibles assets
Intangible assets are stated at acquisition cost, net of
accumulated amortization and accumulated impairment
losses, if any. Intangible assets arising on acquisition of
business are measured at fair value as at date of acquisition.
Intangible assets are amortised on a straight line basis
over their estimated useful lives. The amortisation period
and the amortisation method are reviewed at least at
each financial period end. If the expected useful life of the
asset is significantly different from previous estimates, the
amortisation period is changed accordingly.
Gains or losses arising from the retirement or disposal of an
intangible asset are determined as the difference between
the net disposal proceeds and the carrying amount of
the asset and recognised as income or expense in the
Standalone Statement of Profit and Loss.
In case the Asset Acquisition involves variable payments
initially it is included in the cost of the intangible asset
with the fair value of all variable payments and recognise
a liability for the same amount. Subsequently, liability is
generally remeasured at fair value.
If the variable payments relate to the cost of the asset,
subsequent changes in the liability (regardless of whether
the liability is initially recognised at fair value or not) are
recognised as an adjustment to the cost of the related asset.
If the variable payments are dependent on the purchaser’s
future activity, subsequent changes in the liability (including
initial recognition if the variable payments have not been
recognised previously) will generally be recognised in profit
or loss in the period in which they arise.
C Impairment of non-financial assets
At the end of each reporting period, the Company reviews
the carrying amounts of non-financial assets, other than
deferred tax assets to determine whether there is any
indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount
of such asset is estimated in order to determine the extent
of the impairment loss (if any). When it is not possible to
estimate the recoverable amount of an individual asset, the
Company estimates the recoverable amount of the cash¬
generating unit (CGU) to which the asset belongs. Each CGU
represents the smallest group of assets that generates cash
inflows that are largely independent of the cash inflows of
other assets or CGUs. When a reasonable and consistent
basis of allocation can be identified, corporate assets
are also allocated to individual CGUs, or otherwise they
are allocated to the smallest group of CGUs for which a
reasonable and consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs
of disposal and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the
risks specific to the asset or CGU for which the estimates of
future cash flows have not been adjusted.
If the recoverable amount of an asset (or CGU ) is estimated
to be less than its carrying amount, the carrying amount
of the asset (or CGU) is reduced to its recoverable amount.
An impairment loss is recognised immediately in the
Standalone Statement of Profit and Loss. Impairment loss
recognised in respect of a CGU is allocated to reduce the
carrying amounts of the other assets of the CGU (or group of
CGUs) on a pro rata basis.
Reversal of impairment losses recognised in earlier years is
recorded when there is an indication that the impairment
losses recognised for the asset/cash generating unit no
longer exist or have decreased. However, the increase in
carrying amount of an asset due to reversal of an impairment
loss is recognised to the extent it does not exceed the
carrying amount that would have been determined (net of
depreciation) had no impairment loss been recognised for
that asset/cash generating unit in earlier years. Reversal of
impairment loss is directly recognised in the Standalone
Statement of Profit and Loss.
D Borrowing Costs
Borrowing costs are interest and other costs incurred in
connection with the borrowing of funds. Borrowing costs
directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for
their intended use or sale, are added to the cost of those
assets, until such time as the assets are substantially ready
for their intended use or sale. Interest income earned on
the temporary investment of specific borrowings pending
their expenditure on qualifying assets is deducted from the
borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in the Standalone
Statement of Profit and Loss in the period in which they are
incurred.
E Financial Instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity. The financial instruments
are recognised in the balance sheet when the Company
becomes a party to the contractual provisions of the financial
instrument. The Company determines the classification of
its financial instruments at initial recognition.
(1) Initial Recognition and Measurements
A financial asset and financial liability is initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial
assets and financial liabilities (other than financial
assets and financial liabilities at fair value through
profit and loss) are added to or deducted from the fair
value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financial
assets or financial liabilities at fair value through profit
and loss are recognised immediately in the Standalone
Statement of Profit and Loss.
Where the fair value of a financial asset or financial
liability at initial recognition is different from its
transaction price, the difference between the fair value
and the transaction price is recognized as a gain or
loss in the Standalone Statement of Profit and Loss at
initial recognition if the fair value is determined through
a quoted market price in an active market for an
identical asset (i.e. level 1 input) or through a valuation
technique that uses data from observable markets (i.e.
level 2 input).
In case the fair value is not determined using a level
1 or level 2 input as mentioned above, the difference
between the fair value and transaction price is deferred
appropriately and recognized as a gain or loss in the
Standalone Statement of Profit and Loss only to the
extent that such gain or loss arises due to a change in
factor that market participants take into account when
pricing the financial assets or financial liability.
Trade receivables that do not contain a significant
financing component are measured at transaction
price.
(2) Subsequent Measurements
(a) Financial Assets
For purposes of subsequent measurement,
financial assets are classified based on assessment
of business model in which they are held. This
assessment is done for portfolio of the financial
assets. The relevant categories are as below:
(i) At amortised cost:
A financial asset is measured at amortised cost if it
meets both of the following conditions and is not
designated as at fair value through profit or loss
(FVTPL):
- the asset is held within a business model
whose objective is to hold assets to collect
contractual cash flows; and
- the contractual terms of the financial asset
give rise on specified dates to cash flows that
are solely payments of principal and interest
on the principal amount outstanding.
(ii) At fair value through Other comprehensive
income (FVTOCI)
A financial asset is measured at FVTOCI if it
meets both of the following conditions and is not
designated as at FVTPL:
• the asset is held within a business model
whose objective is achieved by both
collecting contractual cash flows and selling
financial assets; and
• the contractual terms of the financial asset
give rise on specified dates to cash flows that
are solely payments of principal and interest
on the principal amount outstanding.
(iii) At fair value through profit and loss (FVTPL)
Financial assets which are not measured at
amortised cost or OCI and are held for trading are
measured at FVTPL. Fair value changes related
to such financial assets are recognised in the
Standalone Statement of Profit and Loss.
Based on the Company’s business model, the
Company has classified its securities held for
trade,Investment in Equity Shares and Investment
in Mutual Funds at FVTPL.
(iv) Investment in Equity Instruments
Investment in Subsidiaries, Associates and Joint
ventures are out of scope of Ind AS 109 and hence,
the Company has accounted for its investment in
Subsidiaries at cost.
All other equity investments in scope of Ind AS
109, are measured at fair value. Equity instruments
which are held for trading are classified as at FVTPL.
For equity instruments other than held for trading,
the Company has irrevocable option to present
in Other Comprehensive Income subsequent
changes in the fair value. The Company makes such
election on an instrument-by-instrument basis.
The classification is made on initial recognition
and is irrevocable.
Where the Company classifies equity instruments
as at FVTOCI, then all fair value changes on the
instrument, excluding dividends, are recognized
in the OCI. There is no recycling of the amounts of
profit or loss from OCI to Standalone Statement of
Profit and Loss, even on sale of investment.
Equity instruments included within the FVTPL
category are measured at fair value with all
changes recognized in the Standalone Statement
of Profit and Loss.
(v) Impairment of Financial assets
The Company assesses on a forward looking basis
the expected credit losses associated with its
assets carried at amortised cost. The impairment
methodology applied depends on whether there
has been a significant increase in credit risk since
initial recognition. If credit risk has not increased
significantly, twelve month ECL is used to provide
for impairment loss, otherwise lifetime ECL is used.
However, only in case of trade receivables, the
Company applies the simplified approach which
requires expected lifetime losses to be recognised
from initial recognition of the receivables.
Expected credit losses rate the weighted average
of credit losses with the respective risks of default
occurring as the weights. Credit loss is the difference
between all contractual cash flows that are due
to the Company in accordance with the contract
and all the cash flows that the Company expects
to receive (i.e. all cash shortfalls), discounted at
the original effective interest rate. The Company
estimates cash flows by considering all contractual
terms of the financial instrument through the
expected life of that financial instrument.
Loss allowances for financial assets measured
at amortised cost are deducted from the gross
carrying amount of the assets.
(vi) Derecognition of Financial Assets
The Company derecognises a financial asset when
the contractual rights to the cash flows from the
financial asset expire, or it transfers the rights to
receive the contractual cash flows in a transaction
in which substantially all of the risks and rewards
of ownership of the financial asset are transferred
or in which the Company neither transfers nor
retains substantially all of the risks and rewards
of ownership and does not retain control of the
financial asset.
On derecognition of a financial asset in its entirety,
the difference between the asset’s carrying amount
and the sum of the consideration received and
receivable and the cumulative gain or loss that had
been recognised in other comprehensive income
and accumulated in equity is recognised in the
Standalone Statement of Profit and Loss if such
gain or loss would have otherwise been recognised
in the Standalone Statement of Profit and Loss on
disposal of that financial asset.
(b) Financial Liabilities
All financial liabilities of the Company are
subsequently measured at amortized cost using
the effective interest method or at FVTPL.
(i) At amortised cost:
Financial liabilities that are not held-for-trading
and are not designated as at FVTPL are measured
at amortised cost at the end of subsequent
accounting periods. The carrying amounts of
financial liabilities that are subsequently measured
at amortised cost are determined based on the
effective interest method. Under the effective
interest method, the future cash payments are
exactly discounted to the initial recognition value
using the effective interest rate. The cumulative
amortization using the effective interest method
of the difference between the initial recognition
amount and the maturity amount is added to
the initial recognition value (net of principal
repayments, if any) of the financial liability over the
relevant period of the financial liability to arrive
at the amortized cost at each reporting date. The
corresponding effect of the amortization under
effective interest method is recognized as interest
expense over the relevant period of the financial
liability. The same is included under finance cost
in the Standalone Statement of Profit and Loss.
Trade and other payables are recognised at
the transaction cost, which is its fair value, and
subsequently measured at amortised cost.
(ii) At Fair Value through Profit and Loss:
A financial liability may be designated as at FVTPL
upon initial recognition if:
• such designation eliminates or significantly
reduces a measurement or recognition
inconsistency that would otherwise arise;
• the financial liability whose performance is
evaluated on a fair value basis, in accordance
with the Company’s documented risk
management.
Fair value changes related to such financial
liabilities are recognised in the Standalone
Statement of Profit and Loss.
(iii) Derecognition of Financial Liabilities
The Company derecognises financial liabilities
when, and only when, the Company’s obligations
are discharged, cancelled or have expired. An
exchange with a lender of debt instruments with
substantially different terms is accounted for as
an extinguishment of the original financial liability
and the recognition of a new financial liability.
Similarly, a substantial modification of the terms
of an existing financial liability is accounted for as
an extinguishment of the original financial liability
and the recognition of a new financial liability.
The difference between the carrying amount
of the financial liability derecognised and the
consideration paid and payable is recognised in the
Standalone Statement of Profit and Loss.
(iv) Offsetting of financial assets and financial
liabilities
Financial assets and financial liabilities are offset
when the Company has a legally enforceable right
(not contingent on future events) to off-set the
recognised amounts either to settle on a net basis,
or to realise the assets and settle the liabilities
simultaneously.
(3) Equityinstruments
An equity instrument is any contract that evidences a
residual interest in the assets of an entity after deducting
all of its liabilities. Equity instruments issued by the
Company are recognised at the proceeds received, net
of direct issue costs.
Debt and equity instruments issued by the Company
are classified as either financial liabilities or as equity
in accordance with the substance of the contractual
arrangements and the definitions of a financial liability
and an equity instrument as per the relevant standards.
Ordinary shares are classified as Equity when the
Company has an un-conditional right to avoid delivery
of cash or another financial asset, that is, when the
dividend and repayment of capital are at the sole and
absolute discretion of the Company and there is no
contractual obligation whatsoever to that effect.
(4) Derivative Financial Instruments
Derivative financial instruments are initially recognised
at fair value on the date on which a derivative contract is
entered into and are subsequently re-measured at fair
value at the end of each reporting period. The resulting
gain or loss is recognised in Standalone Statement of
Profit and Loss immediately.
F Foreign currency transactions
Foreign currency transactions are recorded at the rates
of exchange prevailing on the date of the transactions.
Monetary assets and liabilities outstanding at the period-
end are translated at the rate of exchange prevailing at
the period-end and the gain or loss, is recognised in the
Standalone Statement of Profit and Loss.
Foreign currency monetary items (other than derivative
contracts) of the Company, outstanding at the Balance Sheet
date are restated at the period-end rates. Non-monetary
items of the Company are carried at historical cost.
Exchange differences arising on settlement/restatement
of foreign currency monetary assets and liabilities of the
Company are recognised as income or expense in the
Standalone Statement of Profit and Loss.
Non-monetary items that are measured in terms of historical
cost in a foreign currency are translated using the exchange
rates at the dates of the initial transactions.
G Revenue Recognition
Revenue (other than for those items to which Ind AS 109
Financial Instruments are applicable) is measured at fair
value of the consideration received or receivable. Ind AS 115
Revenue from contracts with customers outlines a single
comprehensive model of accounting for revenue arising
from contracts with customers.
The Company recognises revenue from contracts with
customers based on a five step model as set out in Ind AS
115:
Step 1: Identify contract(s) with a customer: A contract is
defined as an agreement between two or more parties that
creates enforceable rights and obligations and sets out the
criteria for every contract that must be met.
Step 2: Identify performance obligations in the contract:
A performance obligation is a promise in a contract with a
customer to transfer a good or service to the customer.
Step 3: Determine the transaction price: The transaction
price is the amount of consideration to which the Company
expects to be entitled in exchange for transferring promised
goods or services to a customer, excluding amounts
collected on behalf of third parties.
Step 4: Allocate the transaction price to the performance
obligations in the contract: For a contract that has more
than one performance obligation, the Company allocates
the transaction price to each performance obligation in
an amount that depicts the amount of consideration to
which the Company expects to be entitled in exchange for
satisfying each performance obligation.
Step 5: Recognise revenue when (or as) the Company
satisfies a performance obligation
Revenue from contracts with customers is recognised when
control of the services are transferred to the customer which
can be either at a point in time or over time, at an amount
that reflects the consideration to which the Company
expects to be entitled in exchange for those services.
Revenue recognized are exclusive of goods and service tax,
stamp duties and other levies by Security Exchange Board of
India (SEBI) and exchanges.
The Company recognises revenue from the following major
sources:
(i) Commission and Fees Income from distribution of
financial products (i.e. Mutual Funds, Bonds, Fixed
Deposits, Non-convertible Debentures, Portfolio
Management Services, AIF, Insurance etc.)
(ii) Brokerage Income from stock broking business.
(iii) Commission Income from Sale of Properties.
Commission and Fees Income relating to Distribution
of Financial Products: Fees on distribution services are
recognized at a point in time when the service obligations
are completed and when the terms of contracts are fulfilled.
Brokerage Income relating to Stock Broking : Revenue
from contract with customer is recognised point in time
when performance obligation is satisfied. Income from
broking activities is accounted for on the trade date of
transactions.
Commission Income from Sale of Properties: Brokerage
income from sale of non-financial properties is recognised
at the point the sale when the performance obligation
which gives rise to the commission income is satisfied and
when the right to receive the income is established. The
date of the agreement is considered as point in time when
the performance obligation is satisfied.
Interest Income
Interest income on financial assets is recognised using the
Effective Interest Rate (EIR) method. The EIR is the rate
that exactly discounts estimated future cash flows of the
financial asset through the expected life of the financial
asset or, where appropriate, a shorter period, to the net
carrying amount of the financial instrument.
Dividend Income
Dividend income is recognised when the right to receive
payment of the dividend is established, it is probable that
the economic benefits associated with the dividend will
flow to the Company and the amount of the dividend can be
measured reliably.
H Employees Benefit
Employee benefits include short term employee benefits,
provident fund, employee’s state insurance, gratuity and
compensated absences.
Short term Employee Benefits
All employee benefits payable wholly within twelve
months of rendering the service are classified as short term
employee benefits and they are recognized in the period
in which the employee renders the related service. The
Company recognizes the undiscounted amount of short
term employee benefits expected to be paid in exchange
for services rendered as a liability (accrued expense) after
deducting any amount already paid.
Defined Contribution Plan
The Company’s contribution to Provident Fund , Employee
State Insurance Scheme and National Pension Scheme are
considered as defined contribution plans and are charged as
an expense based on the amount of contribution required to
be made and when services are rendered by the employees.
The Company does not carry any further obligations, apart
from the contributions made on a monthly basis.
Defined Benefit Plan
“The Company provides for the gratuity, a defined benefit
plan (the “’’Gratuity Plan””) covering eligible employees
in accordance with the Payment of Gratuity Act, 1972.
The Gratuity Plan provides a lump sum payment to
vested employees at retirement, death, incapacitation or
termination of employment, of an amount based on the
respective employee’s salary and the tenure of employment.
The Company’s liability is actuarially determined (using the
Projected Unit Credit method) at the end of each year. The
Company contributes Gratuity liabilities to the Prudent
Corporate Advisory Services Limited Employee Group
Gratuity Fund (the Trust). Trustees administer contributions
made to the Trusts and contributions are invested in Insurer
Managed Funds. Net Obligation is recognised as asset/liability.
Re-measurements of the net defined benefit liability
comprising actuarial gains and losses (excluding amounts
included in net interest on the net defined benefit liability)
and, are recognized in Other Comprehensive Income. Such
re-measurements are not reclassified to the Standalone
Statement of Profit and Loss in the subsequent year. The
actual return of the portfolio of plan assets, in excess of
the yields computed by applying the discount rate used
to measure the defined benefit obligation is recognized in
other comprehensive income.
Long-term employee benefits
Accumulated compensated absences, which are expected
to be availed or encashed beyond 12 months from the
end of the period are treated as other long term employee
benefits and is unfunded. The Company’s liability is
actuarially determined (using the Projected Unit Credit
method) at the end of the each period. Actuarial losses/
gains are recognised in the Standalone Statement of Profit
and Loss in the period in which they arise.
Current and deferred tax
Tax on Income comprises current and deferred tax.
Current tax
Current tax comprises the expected tax payable or receivable
on the taxable income or loss for the reporting period in
accordance with the Income-tax Act, 1961 enacted in India
and any adjustment to the tax payable or receivable in
respect of previous years. The amount of current tax reflects
the best estimate of the tax amount expected to be paid or
received after considering the uncertainty, if any, related to
income taxes. It is measured using tax rates (and tax laws)
enacted or substantially enacted by the reporting date.
Current tax assets and current tax liabilities are offset only if
there is a legally enforceable right to set off the recognised
amounts, and it is intended to realise the asset and settle
the liability on a net basis or simultaneously.
Deferred tax
Deferred tax is recognised for the future tax consequences
of temporary differences between the carrying values of
assets and liabilities in Standalone Financial Statements
and their respective tax bases at the reporting date, using
the tax rates and laws that are enacted or substantially
enacted as on reporting date. The measurement of deferred
tax reflects the tax consequences that would follow from
the manner in which the Company expects, at the reporting
date, to recover or settle the carrying amount of its assets
and liabilities. Deferred tax is also recognised in respect
of carried forward tax losses and tax credits subject to the
assessment of reasonable certainty of recovery. Deferred tax
assets and deferred tax liabilities are offset when there is a
legally enforceable right to set off assets against liabilities
representing 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.
Deferred tax relating to items recognised outside the
standalone Statement of Profit and Loss is recognised
outside with the underlying items i.e. either in the statement
of other comprehensive income or directly in equity as
relevant.
|